Is Albemarle (NYSE:ALB) Using Too Much Debt?

David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the 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 note that Albemarle Corporation (NYSE:ALB) does have debt on its balance sheet. But is this debt a concern to shareholders?

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When Is Debt Dangerous?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we think about a company's use of debt, we first look at cash and debt together.

How Much Debt Does Albemarle Carry?

The chart below, which you can click on for greater detail, shows that Albemarle had US$3.42b in debt in March 2025; about the same as the year before. However, it also had US$1.52b in cash, and so its net debt is US$1.90b.

How Healthy Is Albemarle's Balance Sheet?

The latest balance sheet data shows that Albemarle had liabilities of US$1.94b due within a year, and liabilities of US$4.78b falling due after that. Offsetting these obligations, it had cash of US$1.52b as well as receivables valued at US$807.9m due within 12 months. So its liabilities total US$4.40b more than the combination of its cash and short-term receivables.

This deficit isn't so bad because Albemarle is worth US$7.37b, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. But it's clear that we should definitely closely examine whether it can manage its debt without dilution. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Albemarle 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.

View our latest analysis for Albemarle

Over 12 months, Albemarle made a loss at the EBIT level, and saw its revenue drop to US$5.1b, which is a fall of 39%. That makes us nervous, to say the least.

Caveat Emptor

While Albemarle's falling revenue is about as heartwarming as a wet blanket, arguably its earnings before interest and tax (EBIT) loss is even less appealing. To be specific the EBIT loss came in at US$435m. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. So we think its balance sheet is a little strained, though not beyond repair. However, it doesn't help that it burned through US$140m of cash over the last year. So to be blunt we think it is risky. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. Be aware that Albemarle is showing 1 warning sign in our investment analysis , you should know about...

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.