These 4 Measures Indicate That Concejo (STO:CNCJO B) Is Using Debt Reasonably Well

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. As with many other companies Concejo AB (publ) (STO:CNCJO B) makes use of debt. But should shareholders be worried about its use of debt?

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What Risk Does Debt Bring?

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. If things get really bad, the lenders can take control of the business. 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. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does Concejo Carry?

The image below, which you can click on for greater detail, shows that Concejo had debt of kr17.3m at the end of September 2025, a reduction from kr58.3m over a year. But on the other hand it also has kr126.1m in cash, leading to a kr108.8m net cash position.

How Healthy Is Concejo's Balance Sheet?

According to the last reported balance sheet, Concejo had liabilities of kr154.5m due within 12 months, and liabilities of kr40.5m due beyond 12 months. Offsetting these obligations, it had cash of kr126.1m as well as receivables valued at kr173.2m due within 12 months. So it actually has kr104.3m more liquid assets than total liabilities.

This surplus suggests that Concejo is using debt in a way that is appears to be both safe and conservative. Because it has plenty of assets, it is unlikely to have trouble with its lenders. Succinctly put, Concejo boasts net cash, so it's fair to say it does not have a heavy debt load!

View our latest analysis for Concejo

It was also good to see that despite losing money on the EBIT line last year, Concejo turned things around in the last 12 months, delivering and EBIT of kr4.2m. When analysing debt levels, the balance sheet is the obvious place to start. But it is Concejo's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. Concejo 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 last year, Concejo saw substantial negative free cash flow, in total. While that may be a result of expenditure for growth, it does make the debt far more risky.

Summing Up

While it is always sensible to investigate a company's debt, in this case Concejo has kr108.8m in net cash and a decent-looking balance sheet. So we don't have any problem with Concejo's use of debt. When analysing debt levels, the balance sheet is the obvious place to start. 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 Concejo you should know about.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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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.