Who paid ROMOTOP's CZK 10.0m interest bill in a year its operations lost money?

Higher sales, an operating loss and an interest bill on top

ROMOTOP, the Czech maker of stoves and fireplaces from Suchdol nad Odrou, closed its financial year at the end of March 2026 with revenue of CZK 1.1bn, up 3.3% or CZK 34.5m on the previous year. In the same year its operations lost CZK 18.2m. A year earlier they had earned CZK 34.5m. On top of that operating loss sat interest costs of CZK 10.0m.

That is the tension. The company still services its debt, but its business produced nothing to service it with. Interest cover, operating profit divided by the interest bill, is the simplest test a lender runs. At ROMOTOP it is negative for the year: all of the interest had to come from somewhere other than the year's operating result.

ROMOTOP is an s.r.o., the Czech limited liability company, and its financial year runs from April to March, so the year described here is April 2025 to March 2026.

The net result followed the operating one. A net profit of CZK 20.3m in the previous year became a net loss of CZK 21.2m, a swing of CZK 41.6m. The operating margin, the share of revenue left after running the business, went from 3.3% to -1.7%.

The loss came from running the business, not from one-off charges

A net loss can look worse than it is. A write-down or another one-off charge can push a company into the red without any change in how it earns money. Here the operating result itself shows that this is not the main story.

Depreciation and amortisation, the yearly cost of wear on machines and buildings, barely moved: CZK 48.9m against CZK 47.0m a year earlier. Strip it out and what remains is EBITDA, the operating result before depreciation, a rough measure of what the business earns before it pays for its past investments. EBITDA fell 62.4%, from CZK 81.5m to CZK 30.7m. The margin on that measure dropped from 7.7% to 2.8%.

So the damage happened above the depreciation line, in the everyday costs of making and selling. Operating profit fell by CZK 52.7m in a year when revenue rose by CZK 34.5m. Costs, in other words, grew by more than the extra sales brought in.

In a manufacturer that pattern usually has one of a few causes. Materials, energy or wages rise faster than the company can raise its prices. Extra sales come from discounts or lower-margin products, so turnover grows while each sale earns less. Or the company spends ahead of demand on people and capacity. The accounts do not break costs down finely enough to say which of these drove ROMOTOP's year; the change in material and personnel costs against revenue would settle it.

The interest bill does not care which cause applies. It stays where it was while operating profit moves. That is why interest cover tends to collapse not when borrowing jumps, but when the earnings underneath it drop and the debt stays put. ROMOTOP's EBITDA of CZK 30.7m was still larger than its interest costs, so the business still generated some earnings before depreciation. But the machines that produce those earnings wear out, and once that wear is counted, nothing was left for the lenders.

A strong balance sheet with very little cash in it

What absorbs a year like this is the balance sheet. Equity stood at CZK 877m at the end of March 2026, down CZK 22.2m from CZK 899m. The equity ratio, the share of the company's assets financed by its owners rather than by creditors, slipped from 60.7% to 59.6%, down 1.0 pp. That is still a solidly owner-financed company, and a single loss-making year does not change it.

The cash line is a different matter. ROMOTOP ended the year with CZK 3.1m in cash, down from CZK 4.7m, a fall of 33.5%. For a company with total assets of CZK 1.5bn, that is a thin cushion, and it is smaller than the year's interest bill. When operations do not cover interest and the cash at hand would not cover it either, the money comes from credit lines, from stretching payments to suppliers or from the owners.

The company also changed hands. A change of control was recorded in late October 2026. The accounts do not say what the new owner intends, and I would not read the loss as the reason for the sale or the sale as the cure for the loss. What it does mean is that whoever decides how the next interest bill is paid is now someone new.

What to check in your own company

Open your last income statement and do the lender's sum yourself. Divide operating profit by interest costs. The comfortably higher the result, the calmer your bank will be. When operating profit barely exceeds the interest bill, almost all of it is already spoken for. When the result is negative, as at ROMOTOP this year, the business is not paying for its debt at all.

Then run it again under pressure. Raise the rate on your floating loans by a few percentage points and cut operating profit by a fifth, which is not a dramatic bad year in manufacturing. If operating profit then only just covers the interest, you know how much room you really have.

Finally, put the interest bill next to your cash balance at the year end. If cash is smaller, ask your finance team a plain question: in a year when operations earn nothing, which line pays the lenders, and has anyone agreed to that in advance? A credit line that the bank can review is not the same answer as an owner who has promised to put in money.

ROMOTOP did not have a bad sales year. It had a year in which more sales earned less, and the interest still had to be paid. The equity can absorb that once. It is the operating line, not the balance sheet, that has to pay the next interest bill.