A Company Can Report a Profit and Still Run Out of Cash. How to Read Free Cash Flow
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6 min read
In the first half of 2026, Krakatau Steel (KRAS) reported a net profit of about US$10.94 million. In the same six months, its operating cash flow was reported at about minus US$156.9 million. A profit on one line. Cash flowing out on another.
How can both be true? The answer is the gap between net profit and free cash flow. This post explains both in plain words, shows the gap with a simple example, and gives you three checks you can run on any listed company. It does not say any stock is a good or bad buy.
Net profit is what is left after a company subtracts its costs from its sales. It is the bottom line of the income statement.
But accountants record a sale when the sale is made, not when the money arrives. If a customer says "I will pay in 60 days", the sale still counts as profit today. The cash comes later, if it comes at all.
That is why a company can show a profit and have an empty bank account. The profit is real on paper. The cash is not in hand yet.
Think of a warung that sells Rp10 million of goods on credit this month. Its books say it earned money. Its owner still cannot pay the supplier.
Free cash flow (FCF) is the cash a company has left after it pays to run the business and to keep its equipment going. It is built in two steps from the cash flow statement.
The cash flow statement is one of the three main reports a listed company files. In Indonesia it follows the PSAK 2 standard and splits cash into three groups: operating, investing and financing activities (BINUS Accounting).
Common finance guides use this same formula: operating cash flow less capital expenditure (Chase). Some analysts adjust it, for example for interest, so always check how a source defines it.
Let us use an invented company, "PT Maju Jaya". It is not a real issuer. All numbers are NetWort arithmetic, in rupiah billions.
| Line | Rp billions | What it means |
|---|---|---|
| Net profit | 100 | Shown on the income statement |
| Add back depreciation | +20 | A cost on paper, no cash left the door |
| Unpaid sales (receivables rose) | −90 | Sold, but customers have not paid yet |
| Operating cash flow | 30 | Cash actually earned from the business |
| Capex | −50 | New machines bought for cash |
| Free cash flow | −20 | Cash left over: negative |
Look at what happened. The company reports Rp100 billion of profit. Yet after the customers who have not paid and the new machines, it is Rp20 billion short.
To cover that hole, it must use savings or borrow. That is why a growing company with a nice profit can still end up in a cash squeeze.
The most common cause of a gap is receivables (piutang usaha). This is money customers owe. When it rises faster than sales, profit is being booked but not collected.
A rising receivables line is not always bad. A fast-growing company often sells more on credit. But if cash never catches up, you need to ask why.
Two other lines can also widen the gap:
Now back to Krakatau Steel. These figures come from Indonesian media reports, found through search on 12 October 2026. We could not open the company filing itself, so treat the numbers as reported, not audited by us.
| Item (H1 2026, reported) | Amount |
|---|---|
| Net profit | About US$10.94 million (up from a net loss of US$105.38 million in H1 2025) |
| Operating cash flow | About −US$156.9 million |
| Revenue | About US$622.74 million, up 35.1% |
| Gain from a debt haircut | About US$27.19 million |
Sources: IDX Channel via RCTI+ and Kontan.
Two cautions. First, one outlet's headline used a different profit figure (US$9.17 million, about Rp160 billion), so the reports are not fully consistent. Second, the minus US$156.9 million operating cash figure reached us from a single outlet.
What the reports say is this. Profit turned positive, and part of it came from a one-off gain on restructured debt, which is not cash from selling steel. At the same time, operating cash was negative because payments to suppliers were larger than receipts from customers.
That is the lesson in one real case. A profit headline and a cash headline can point in different directions. Open the cash flow statement before you judge the result.
You can look at the price history of the stock on its KRAS page. Note that trading in KRAS was suspended by the exchange from 7 July 2025 (IDN Financials). We found no source on whether it has since resumed, so check the IDX for current status.
Open any company's latest financial report and look at these:
None of these checks gives you a verdict. They give you better questions. Our post on PE ratios across IDX sectors covers the profit side of valuation. Free cash flow is the cash side.
Open the Explore screener and pick two or three IDX companies from the same sector. Then open each company's latest report and compare net profit with operating cash flow. Write down which ones show a gap, and ask what caused it.