We Think Elvalhalcor Hellenic Copper and Aluminium Industry (ATH:ELHA) Can Stay On Top Of Its 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.' 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. Importantly, Elvalhalcor Hellenic Copper and Aluminium Industry S.A. (ATH:ELHA) does carry debt. But is this debt a concern to shareholders?

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Why Does Debt Bring Risk?

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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Having said that, the most common situation is where a company manages its debt reasonably well - and to its own advantage. When we think about a company's use of debt, we first look at cash and debt together.

What Is Elvalhalcor Hellenic Copper and Aluminium Industry's Net Debt?

You can click the graphic below for the historical numbers, but it shows that Elvalhalcor Hellenic Copper and Aluminium Industry had €686.0m of debt in September 2025, down from €788.8m, one year before. On the flip side, it has €43.1m in cash leading to net debt of about €643.0m.

How Healthy Is Elvalhalcor Hellenic Copper and Aluminium Industry's Balance Sheet?

We can see from the most recent balance sheet that Elvalhalcor Hellenic Copper and Aluminium Industry had liabilities of €797.7m falling due within a year, and liabilities of €618.5m due beyond that. Offsetting this, it had €43.1m in cash and €292.1m in receivables that were due within 12 months. So it has liabilities totalling €1.08b more than its cash and near-term receivables, combined.

This deficit is considerable relative to its market capitalization of €1.41b, so it does suggest shareholders should keep an eye on Elvalhalcor Hellenic Copper and Aluminium Industry's use of debt. This suggests shareholders would be heavily diluted if the company needed to shore up its balance sheet in a hurry.

See our latest analysis for Elvalhalcor Hellenic Copper and Aluminium Industry

We use two main ratios to inform us about debt levels relative to earnings. The first is net debt divided by earnings before interest, tax, depreciation, and amortization (EBITDA), while the second is how many times its earnings before interest and tax (EBIT) covers its interest expense (or its interest cover, for short). The advantage of this approach is that we take into account both the absolute quantum of debt (with net debt to EBITDA) and the actual interest expenses associated with that debt (with its interest cover ratio).

Elvalhalcor Hellenic Copper and Aluminium Industry has a debt to EBITDA ratio of 2.6 and its EBIT covered its interest expense 4.7 times. This suggests that while the debt levels are significant, we'd stop short of calling them problematic. Importantly, Elvalhalcor Hellenic Copper and Aluminium Industry grew its EBIT by 37% over the last twelve months, and that growth will make it easier to handle its debt. When analysing debt levels, the balance sheet is the obvious place to start. But it is Elvalhalcor Hellenic Copper and Aluminium Industry'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.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. So the logical step is to look at the proportion of that EBIT that is matched by actual free cash flow. Happily for any shareholders, Elvalhalcor Hellenic Copper and Aluminium Industry actually produced more free cash flow than EBIT over the last three years. That sort of strong cash generation warms our hearts like a puppy in a bumblebee suit.

Our View

Happily, Elvalhalcor Hellenic Copper and Aluminium Industry's impressive conversion of EBIT to free cash flow implies it has the upper hand on its debt. But truth be told we feel its level of total liabilities does undermine this impression a bit. Looking at all the aforementioned factors together, it strikes us that Elvalhalcor Hellenic Copper and Aluminium Industry can handle its debt fairly comfortably. On the plus side, this leverage can boost shareholder returns, but the potential downside is more risk of loss, so it's worth monitoring the balance sheet. 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. For example, we've discovered 3 warning signs for Elvalhalcor Hellenic Copper and Aluminium Industry that you should be aware of before investing here.

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.