Does SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft (HMSE:NEP) Have A Healthy Balance Sheet?
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.' 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. We note that SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft (HMSE:NEP) does have debt on its balance sheet. But should shareholders be worried about its use of debt?
When Is Debt A Problem?
Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. 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. 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 SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft's Net Debt?
You can click the graphic below for the historical numbers, but it shows that SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft had €61.1m of debt in June 2025, down from €73.6m, one year before. But on the other hand it also has €84.9m in cash, leading to a €23.8m net cash position.
How Healthy Is SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft's Balance Sheet?
According to the last reported balance sheet, SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft had liabilities of €20.8m due within 12 months, and liabilities of €66.6m due beyond 12 months. On the other hand, it had cash of €84.9m and €6.07m worth of receivables due within a year. So it actually has €3.61m more liquid assets than total liabilities.
This short term liquidity is a sign that SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft could probably pay off its debt with ease, as its balance sheet is far from stretched. Succinctly put, SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft boasts net cash, so it's fair to say it does not have a heavy debt load!
Check out our latest analysis for SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft
Importantly, SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft's EBIT fell a jaw-dropping 91% in the last twelve months. If that decline continues then paying off debt will be harder than selling foie gras at a vegan convention. The balance sheet is clearly the area to focus on when you are analysing debt. But it is SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft'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.
But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft 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. Happily for any shareholders, SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft 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.
Summing Up
While it is always sensible to investigate a company's debt, in this case SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft has €23.8m in net cash and a decent-looking balance sheet. The cherry on top was that in converted 169% of that EBIT to free cash flow, bringing in €37m. So we are not troubled with SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft's debt use. 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. Be aware that SLOMAN NEPTUN Schiffahrts-Aktiengesellschaft is showing 2 warning signs in our investment analysis , you should know about...
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.