Health Check: How Prudently Does T&T Proenergy (WSE:TNT) Use Debt?

Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We can see that T&T Proenergy S.A. (WSE:TNT) does use debt in its business. But is this debt a concern to shareholders?

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When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

How Much Debt Does T&T Proenergy Carry?

The image below, which you can click on for greater detail, shows that T&T Proenergy had debt of zł6.14m at the end of March 2025, a reduction from zł6.54m over a year. However, it also had zł1.22m in cash, and so its net debt is zł4.92m.

How Healthy Is T&T Proenergy's Balance Sheet?

We can see from the most recent balance sheet that T&T Proenergy had liabilities of zł13.9m falling due within a year, and liabilities of zł7.68m due beyond that. Offsetting this, it had zł1.22m in cash and zł2.97m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by zł17.4m.

Given this deficit is actually higher than the company's market capitalization of zł12.2m, we think shareholders really should watch T&T Proenergy's debt levels, like a parent watching their child ride a bike for the first time. Hypothetically, extremely heavy dilution would be required if the company were forced to pay down its liabilities by raising capital at the current share price. There's no doubt that we learn most about debt from the balance sheet. But it is T&T Proenergy's earnings that will influence how the balance sheet holds up in the future. So if you're keen to discover more about its earnings, it might be worth checking out this graph of its long term earnings trend.

See our latest analysis for T&T Proenergy

In the last year T&T Proenergy had a loss before interest and tax, and actually shrunk its revenue by 70%, to zł5.1m. That makes us nervous, to say the least.

Caveat Emptor

While T&T Proenergy's falling revenue is about as heartwarming as a wet blanket, arguably its earnings before interest and tax (EBIT) loss is even less appealing. Its EBIT loss was a whopping zł2.7m. Considering that alongside the liabilities mentioned above make us nervous about the company. It would need to improve its operations quickly for us to be interested in it. Not least because it burned through zł2.0m in negative free cash flow over the last year. That means it's on the risky side of things. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. Case in point: We've spotted 4 warning signs for T&T Proenergy you should be aware of, and 3 of them can't be ignored.

If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.