Elevated Leverage Despite ImprovementAlthough leverage has improved from earlier extremes, a ~3.5x debt-to-equity ratio remains elevated, constraining financial flexibility. High leverage increases interest and refinancing risk, limiting capacity to fund growth or absorb demand shocks over the next several quarters.
Thin Margins And Earnings VolatilityNet margins near 4% provide a limited buffer against cost inflation or revenue dips. Coupled with a history of volatile earnings, thin margins raise the probability that short-term adverse trends could quickly erode profitability and limit reinvestment or deleveraging options over a 2–6 month horizon.
Suboptimal Cash Conversion And Working-capital NeedsFCF at ~45% of net income indicates earnings do not fully convert to cash, implying working-capital or reinvestment drains. Persistent conversion gaps reduce the pace of debt reduction and limit discretionary spending, keeping balance-sheet vulnerability elevated in the medium term.