Hikma Pharmaceuticals (LON:HIK): A Balance Sheet Breakdown

Hikma Pharmaceuticals (LON:HIK) Introduction

Hikma Pharmaceuticals PLC (LON:HIK) is a British multinational pharmaceutical company that develops, manufactures, and markets a broad range of generic and branded pharmaceutical products. The company has a significant presence in the United States, Europe, and the Middle East and North Africa (MENA) region.

Hikma Pharmaceuticals has a healthy balance sheet, with a debt-to-equity ratio of 56.4% and a net debt-to-EBITDA ratio of 1.2x. The company also has a strong interest coverage ratio of 9.3x.

However, there are a few things to be aware of when assessing Hikma Pharmaceuticals’s balance sheet. First, the company’s free cash flow conversion ratio is relatively weak at 49%. This means that the company is not generating as much cash from its operations as it could be. Second, Hikma Pharmaceuticals’s EBIT has been declining in recent quarters. This could make it more difficult for the company to service its debt in the future.

Overall, Hikma Pharmaceuticals has a healthy balance sheet, but there are a few things to be aware of. Investors should monitor the company’s free cash flow conversion ratio and EBIT growth in the coming quarters.

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Debt Levels

Hikma Pharmaceuticals had US$1.24b of debt in June 2023, down from US$1.47b, one year before. However, because it has a cash reserve of US$294.0m, its net debt is less, at about US$949.0m.

This means that Hikma Pharmaceuticals has a debt-to-equity ratio of 56.4%. This is a relatively healthy level of debt, but it is important to note that the company’s debt levels have increased in recent years.

Debt Servicing Ability

Hikma Pharmaceuticals has a strong interest coverage ratio of 9.3x. This means that the company is generating more than enough earnings to cover its interest expenses.

However, it is important to note that Hikma Pharmaceuticals’s EBIT has been declining in recent quarters. This could make it more difficult for the company to service its debt in the future.

Free Cash Flow

Hikma Pharmaceuticals’s free cash flow conversion ratio is relatively weak at 49%. This means that the company is not generating as much cash from its operations as it could be.

This could make it more difficult for the company to pay down its debt or invest in new growth opportunities.

Conclusion

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Q: Is Hikma Pharmaceuticals’s debt a concern?

A: Hikma Pharmaceuticals has a healthy debt-to-equity ratio of 56.4% and a strong interest coverage ratio of 9.3x. However, it is important to note that the company’s debt levels have increased in recent years and its EBIT has been declining in recent quarters. Investors should monitor the company’s financial performance in the coming quarters to assess whether its debt levels are sustainable.

Q: Is Hikma Pharmaceuticals generating enough cash flow?

A: Hikma Pharmaceuticals’s free cash flow conversion ratio is relatively weak at 49%. This means that the company is not generating as much cash from its operations as it could be. This could make it more difficult for the company to pay down its debt or invest in new growth opportunities.