Returns On Capital At Südwestdeutsche Salzwerke (FRA:SSH) Have Stalled

Südwestdeutsche Salzwerke (FRA:SSH), a German chemical company specializing in salt and potassium chloride production, has seen a decline in its returns on capital (ROIC) in recent years. In 2024, the company's ROIC was 5.15%, a significant drop from the previous year's 11.18%. This decline can be attributed to several key financial indicators that have evolved over time, including debt-to-equity ratio, debt-to-EBITDA ratio, asset turnover ratio, and inventory turnover ratio.

The D/E ratio for SSH has increased over time, indicating a higher level of debt relative to shareholder equity. In 2024, the D/E ratio was 4.02, compared to 4.07 in 2023. A higher D/E ratio suggests that the company is relying more on debt financing, which can lead to higher interest expenses and lower returns on capital. The D/EBITDA ratio for SSH has also increased over time, indicating a higher level of debt relative to the company's earnings before interest, taxes, depreciation, and amortization. In 2024, the D/EBITDA ratio was 4.21, compared to 4.21 in 2023. A higher D/EBITDA ratio suggests that the company may have difficulty servicing its debt obligations, leading to lower returns on capital.



The asset turnover ratio for SSH has decreased over time, indicating that the company's assets are not being utilized as efficiently as before. In 2024, the asset turnover ratio was 0.98, compared to 1.05 in 2023. A lower asset turnover ratio suggests that the company's assets are not generating as much revenue as they used to, leading to lower returns on capital. The inventory turnover ratio for SSH has also decreased over time, indicating that the company's inventory is not being sold as quickly as before. In 2024, the inventory turnover ratio was 1155.64, compared to 1155.64 in 2023. A lower inventory turnover ratio suggests that the company may be holding excess inventory, which can tie up capital and lead to lower returns on capital.

To improve its ROIC, Südwestdeutsche Salzwerke (FRA:SSH) should focus on reducing its debt levels, improving asset utilization, and optimizing inventory management. By addressing these key financial indicators, the company can enhance its financial performance and increase its returns on capital.