Is Luka Koper d.d (LJSE:LKPG) Using Too Much 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.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. As with many other companies Luka Koper d.d. (LJSE:LKPG) makes use of debt. But the more important question is: how much risk is that debt creating?

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When Is Debt A Problem?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. When we think about a company's use of debt, we first look at cash and debt together.

What Is Luka Koper d.d's Net Debt?

You can click the graphic below for the historical numbers, but it shows that Luka Koper d.d had €90.2m of debt in March 2025, down from €105.4m, one year before. But on the other hand it also has €136.0m in cash, leading to a €45.9m net cash position.

A Look At Luka Koper d.d's Liabilities

We can see from the most recent balance sheet that Luka Koper d.d had liabilities of €90.1m falling due within a year, and liabilities of €147.1m due beyond that. Offsetting these obligations, it had cash of €136.0m as well as receivables valued at €70.7m due within 12 months. So it has liabilities totalling €30.5m more than its cash and near-term receivables, combined.

Since publicly traded Luka Koper d.d shares are worth a total of €770.0m, it seems unlikely that this level of liabilities would be a major threat. However, we do think it is worth keeping an eye on its balance sheet strength, as it may change over time. Despite its noteworthy liabilities, Luka Koper d.d boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for Luka Koper d.d

Also positive, Luka Koper d.d grew its EBIT by 25% in the last year, and that should make it easier to pay down debt, going forward. There's no doubt that we learn most about debt from the balance sheet. But you can't view debt in total isolation; since Luka Koper d.d will need earnings to service that debt. 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.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. Luka Koper d.d may have net cash on the balance sheet, but it is still interesting to look at how well the business converts its earnings before interest and tax (EBIT) to free cash flow, because that will influence both its need for, and its capacity to manage debt. Over the most recent three years, Luka Koper d.d recorded free cash flow worth 59% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This free cash flow puts the company in a good position to pay down debt, when appropriate.

Summing Up

We could understand if investors are concerned about Luka Koper d.d's liabilities, but we can be reassured by the fact it has has net cash of €45.9m. And it impressed us with its EBIT growth of 25% over the last year. So is Luka Koper d.d's debt a risk? It doesn't seem so to us. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately, every company can contain risks that exist outside of the balance sheet. These risks can be hard to spot. Every company has them, and we've spotted 2 warning signs for Luka Koper d.d you should know about.

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.