Is Luka Koper d.d (LJSE:LKPG) Using Too Much Debt?

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. Importantly, Luka Koper d.d. (LJSE:LKPG) does carry debt. But should shareholders be worried about its use of debt?

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What Risk Does Debt Bring?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. 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. 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. When we examine debt levels, we first consider both cash and debt levels, together.

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

The image below, which you can click on for greater detail, shows that Luka Koper d.d had debt of €82.6m at the end of September 2025, a reduction from €97.8m over a year. But it also has €108.4m in cash to offset that, meaning it has €25.8m net cash.

A Look At Luka Koper d.d's Liabilities

Zooming in on the latest balance sheet data, we can see that Luka Koper d.d had liabilities of €103.0m due within 12 months and liabilities of €146.7m due beyond that. Offsetting this, it had €108.4m in cash and €66.5m in receivables that were due within 12 months. So its liabilities total €74.7m more than the combination of its cash and short-term receivables.

Since publicly traded Luka Koper d.d shares are worth a total of €994.0m, 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!

See our latest analysis for Luka Koper d.d

In addition to that, we're happy to report that Luka Koper d.d has boosted its EBIT by 44%, thus reducing the spectre of future debt repayments. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Luka Koper d.d can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While Luka Koper d.d has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. In the last three years, Luka Koper d.d's free cash flow amounted to 40% of its EBIT, less than we'd expect. That's not great, when it comes to paying down debt.

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 €25.8m. And it impressed us with its EBIT growth of 44% over the last year. So is Luka Koper d.d's debt a risk? It doesn't seem so to us. When analysing debt levels, the balance sheet is the obvious place to start. However, not all investment risk resides within the balance sheet - far from it. Case in point: We've spotted 2 warning signs for Luka Koper d.d you should be aware of, and 1 of them is concerning.

If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet.

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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.