Linde plc (NASDAQ:LIN)

The financial ratios related to inventory turnover exhibit fluctuating trends over the observed period. Starting at 8.9 in 2020, the inventory turnover increased to a peak of 10.12 in 2021, followed by a gradual decline to 8.27 in 2023, and a slight recovery to 8.81 by the end of 2024. This pattern suggests an initial improvement in inventory efficiency, with a subsequent decrease indicating a potential slowdown in inventory movement, before stabilizing toward the later period.

Receivables turnover demonstrated a generally positive trend. Beginning at 6.54 in 2020, it increased consistently to reach 7.32 in 2022, dipped slightly to 6.96 in 2023, and then climbed again to 7.14 in 2024. This indicates improved effectiveness in collecting receivables over most years, with only a minor setback in 2023.

Payables turnover showed a considerable increase over the period. From 4.97 in 2020, the ratio edged up slightly to 5.01 in 2021, then increased significantly to 6.49 in 2022, followed by a modest decline to 5.79 in 2023 before a rise to 6.84 in 2024. This suggests the company has progressively accelerated payments to suppliers, particularly notable in 2022 and 2024.

Regarding average processing periods, inventory processing days decreased from 41 in 2020 to a low of 36 in 2021, then slightly increased to 37 in 2022, spiked to 44 in 2023, and returned to 41 in 2024. This indicates a general tendency toward quicker inventory turnover early on, but less efficiency during 2023, before reverting to earlier levels.

The average receivable collection period decreased steadily from 56 days in 2020 to 50 days in 2022, followed by a slight increase to 52 days in 2023 and a decrease again to 51 days in 2024. This points to an improvement in collecting receivables, with some minor fluctuations after 2022.

The operating cycle contracted from 97 days in 2020 to 87 days in 2022, expanded back to 96 days in 2023, and then reduced to 92 days in 2024. This suggests an initial efficiency gain in the overall conversion of inventory and receivables into cash, followed by some operational slowdowns and partial recovery thereafter.

The average payables payment period remained stable at 73 days during 2020 and 2021, shortened sharply to 56 days in 2022, rebounded to 63 days in 2023, and decreased further to 53 days in 2024. This indicates a notable acceleration in paying creditors starting from 2022, with some moderation in 2023 and further payment expediency by 2024.

Lastly, the cash conversion cycle experienced fluctuating trends. It improved markedly from 24 days in 2020 to 16 days in 2021, then lengthened significantly to 31 days in 2022, and increased further to 33 days in 2023, before reaching 39 days in 2024. This elongation of the cash conversion cycle during recent years could point to a worsening liquidity position, highlighting potential challenges in maintaining the efficiency of cash flow management.

Overall, the company's turnover ratios and processing periods reflect varying operational efficiencies throughout the analyzed timeframe. While there were periods of improved inventory and receivables management coupled with expedited payables payments, the recent increase in the cash conversion cycle warrants attention as it may affect short-term liquidity and operational cash flows.

Cost of Sales, Exclusive of Depreciation and Amortization

The cost of sales showed an increasing trend from 2020 through 2022, rising from 15,383 million US dollars to 19,450 million US dollars. However, this upward trajectory reversed in 2023 and 2024 with costs decreasing to 17,492 million and then further to 17,143 million US dollars. This indicates a peak in operational expenditures in 2022, followed by a notable reduction over the next two years.

Inventories

Inventory levels have generally increased from 1,729 million US dollars at the end of 2020 to a peak of 2,115 million US dollars by the end of 2023. In 2024, inventories slightly decreased to 1,946 million US dollars. This pattern suggests a build-up of stock over the initial four-year period, followed by a modest reduction in the latest year, potentially reflecting adjustments in inventory management or sales demand.

Inventory Turnover Ratio

The inventory turnover ratio experienced fluctuation over the five-year period. It increased from 8.9 in 2020 to a high of 10.12 in 2021, indicating improved efficiency in inventory usage. This was followed by a decline to 9.83 in 2022, and a more pronounced dip to 8.27 in 2023, before a slight recovery to 8.81 in 2024. The overall trend suggests varying efficiency levels, with the ratio peaking in 2021 and diminishing thereafter, which may point to slower inventory movement or increased inventory holding periods.

Overall Insights

The data reveals that while the cost of sales peaked in 2022 and then declined, inventory levels generally increased until 2023 before a small decrease. The inventory turnover ratio's peak in 2021 followed by a downward trend aligns with the increase in inventory holding, suggesting a potential slowdown in operational efficiency related to inventory management during the latter part of the period.

Sales

The sales figures demonstrate a consistent upward trend from 2020 through 2022, increasing from 27,243 million US dollars to 33,364 million US dollars. However, there is a slight decline observed in 2023, where sales fell to 32,854 million US dollars, followed by a marginal recovery in 2024 to 33,005 million US dollars. Overall, the sales growth over the five-year period reflects positive momentum with minor fluctuations toward the end of the period.

Accounts receivable, net

Net accounts receivable increased steadily from 4,167 million US dollars in 2020 to 4,718 million US dollars in 2023, suggesting a gradual accumulation of outstanding customer payments. In 2024, however, a minor decrease occurred, with accounts receivable declining to 4,622 million US dollars. This pattern indicates effective management of receivables, with a small improvement in collection efficiency in the final year under review.

Receivables turnover ratio

The receivables turnover ratio grew from 6.54 in 2020 to a peak of 7.32 in 2022, indicating improving efficiency in collecting receivables as the company was able to turn over its accounts receivable more frequently. A slight dip to 6.96 in 2023 was recorded, followed by an increase to 7.14 in 2024. This trend suggests the company largely maintained effective credit and collection policies, with some variances likely due to external factors or cyclical business changes.

The financial data reveals several trends in cost management and payable activities over the five-year period.

Cost of Sales, Exclusive of Depreciation and Amortization

The cost of sales increased steadily from 15,383 million US dollars in 2020 to a peak of 19,450 million US dollars in 2022. Subsequently, it declined to 17,492 million in 2023 and further to 17,143 million in 2024. This pattern indicates an initial growth in the cost base, possibly linked to higher sales volumes or rising input costs, followed by a reduction over the last two years, which could reflect cost containment efforts or changes in operational scale.

Accounts Payable

The accounts payable balance showed variability, rising from 3,095 million US dollars in 2020 to 3,503 million in 2021, then dropping to 2,995 million in 2022. It stabilized around 3,020 million in 2023 before decreasing notably to 2,507 million in 2024. This downward trend in 2022 and afterward suggests a possible strategic shift toward faster settlement of liabilities or reduced purchasing on credit terms.

Payables Turnover Ratio

The payables turnover ratio strengthened from 4.97 in 2020 to 5.01 in 2021, increased significantly to 6.49 in 2022, decreased slightly to 5.79 in 2023, and reached a high of 6.84 in 2024. The overall increase in payables turnover over the period implies more efficient management of payables or a faster payment cycle to suppliers. The fluctuations between 2022 and 2023 indicate some variability in payment practices but the high ratio in 2024 points to an acceleration in payment frequency.

Overall, these data points depict a pattern where costs initially rose and then moderated, while accounts payable and payables turnover suggest improving efficiency in managing supplier payments. The reduction in accounts payable combined with an increasing payables turnover ratio by the end of the period is indicative of a tightening control over payables and a strategic focus on optimizing working capital.

The financial data reveals several insights regarding the company's operational and liquidity performance over the five-year period ending in 2024.

Working Capital

The working capital exhibited a consistent negative balance throughout the period, indicating that current liabilities exceeded current assets each year. Although the working capital was negative every year, the deficit decreased from -2,816 million US$ in 2020 to -1,599 million US$ in 2024. This improvement suggests a gradual enhancement in short-term liquidity management and a reduced reliance on current liabilities to finance current assets.

Sales

The sales figures demonstrated a generally positive growth trend over the period. Starting at 27,243 million US$ in 2020, revenue increased each year until 2022, reaching 33,364 million US$. In 2023, sales slightly declined to 32,854 million US$, but rebounded marginally to 33,005 million US$ in 2024. Despite the slight fluctuation in the last two years, overall sales growth from 2020 to 2024 was steady and moderate.

Working Capital Turnover

No data was provided for the working capital turnover ratio, which limits the ability to analyze the relationship between sales and working capital directly.

Overall, the data suggests incremental improvement in liquidity as indicated by a shrinking negative working capital while maintaining solid sales growth. The negative working capital position might reflect operational characteristics or deliberate financial strategies, such as extended payables or efficient inventory management. The slight dip in sales in 2023, followed by a recovery, may warrant attention but does not indicate a significant change in revenue trajectory.

Inventory Turnover

The inventory turnover ratio demonstrates some fluctuations over the observed period. Starting at 8.9 in 2020, it increased to a peak of 10.12 in 2021, indicating enhanced efficiency in managing inventory during that year. However, the ratio then declined to 9.83 in 2022, followed by a further decrease to 8.27 in 2023, which could suggest slower inventory movement or increased stock levels. By 2024, there was a partial recovery to 8.81, though it did not reach the earlier peak observed in 2021.

Average Inventory Processing Period

The average inventory processing period, expressed in number of days, exhibited an inverse relationship with the inventory turnover ratio, consistent with expected operational dynamics. Beginning at 41 days in 2020, the processing period shortened to 36 days in 2021, reflecting quicker turnover. It slightly increased to 37 days in 2022 before substantially rising to 44 days in 2023, indicating slower inventory processing. By 2024, the duration reduced back to 41 days, suggesting a return toward a more normalized inventory cycle.

Overall Trends and Insights

There is a discernible trend of improved inventory efficiency in 2021, as evidenced by rising turnover and decreasing processing days. The subsequent period through 2023 shows a reversal, with turnover ratios declining and processing periods increasing, potentially indicating challenges in inventory management or shifts in market demand. The partial recovery in 2024 suggests some corrective measures or market stabilization. Monitoring these metrics can provide valuable insights into operational efficiency and inventory control strategies.

The analysis of the provided financial ratios over the five-year period reveals certain notable trends in the company's receivables management. The receivables turnover ratio shows a generally upward trajectory, indicating an improvement in the frequency with which the company collects its receivables within a year.

Receivables Turnover Ratio

The ratio increased from 6.54 in 2020 to 7.14 in 2024, peaking at 7.32 in 2022. This suggests that the company has been increasingly efficient at converting its receivables into cash over the period, reflecting potentially stronger credit policies or enhanced collection mechanisms.

Average Receivable Collection Period

The average collection period shows a declining trend, moving from 56 days in 2020 down to 51 days in 2024, with a slight increase in 2023 to 52 days after hitting a low of 50 days in 2022. This decrease is consistent with the increase in receivables turnover and signifies that the company is collecting payments faster on average, thereby improving cash flow efficiency.

Overall, the trend suggests progressive improvements in managing accounts receivable, with the company reducing the time customers take to pay and increasing the number of times receivables are collected annually. These developments may contribute positively to the company's liquidity position and working capital management.

Average Inventory Processing Period

The average inventory processing period decreased from 41 days in 2020 to a low of 36 days in 2021, indicating an improvement in inventory turnover during that year. However, it slightly increased to 37 days in 2022, followed by a notable rise to 44 days in 2023, suggesting a slowing in inventory processing. In 2024, this period reduced back to 41 days, returning to the initial level observed in 2020.

Average Receivable Collection Period

This metric shows a consistent decline from 56 days in 2020 to 50 days in 2022, reflecting enhanced efficiency in collecting receivables over these years. There was a minor uptick to 52 days in 2023, and a slight improvement to 51 days in 2024, maintaining a generally improved collection timeframe compared to 2020.

Operating Cycle

The operating cycle shortened from 97 days in 2020 to 89 days in 2021 and further to 87 days in 2022, indicating overall operational efficiency gains during this period. However, it increased again to 96 days in 2023, nearly reverting to the original 2020 level, before slightly improving to 92 days in 2024. This pattern suggests some volatility in operational turnaround times after initial improvement.

Overall Analysis

The data depicts an initial trend of improving operational efficiency from 2020 through 2022, marked by shorter inventory processing and receivable collection periods, resulting in a reduced operating cycle. This positive trajectory was interrupted in 2023 with increases in the inventory processing and operating cycle durations, indicating a possible slowdown in operational throughput and cash conversion. Subsequently, some recovery is observed in 2024, though not fully reverting to the best performance periods. The fluctuations imply external or internal factors affecting inventory and receivables management in recent years.

Payables Turnover

The payables turnover ratio demonstrates a generally increasing trend over the five-year period. Starting at 4.97 in 2020, the ratio slightly increased to 5.01 in 2021, followed by a more pronounced rise to 6.49 in 2022. Although there was a moderate decline to 5.79 in 2023, the ratio surged again to reach the highest value of 6.84 in 2024. This pattern suggests progressively more efficient management of payables, with a higher number of payables being settled throughout the year in the later periods.

Average Payables Payment Period

The average number of days taken to pay payables shows a decreasing trend overall, reflecting a quicker payment cycle. The period remained stable at 73 days for 2020 and 2021 but decreased sharply to 56 days in 2022. There was a slight increase to 63 days in 2023, followed by another decrease to its lowest point of 53 days in 2024. This reduction in payment period corresponds inversely with the increase in payables turnover, further indicating improved efficiency in settling obligations.

Overall Analysis

The inverse relationship between the payables turnover ratio and the average payables payment period is evident and consistent with typical financial dynamics. The company's trend toward higher payables turnover and shorter payment periods implies enhanced operational cash management and a potential strengthening of supplier relationships due to more prompt payments. The data suggest a focus on optimizing working capital and possibly leveraging payment terms to maintain liquidity and financial flexibility.

Average Inventory Processing Period

The average inventory processing period demonstrated some fluctuation during the observed timeline. Starting at 41 days in 2020, there was a decline to 36 days in 2021, indicating improved efficiency in inventory turnover. This was followed by a slight increase to 37 days in 2022, a notable rise to 44 days in 2023, and then a decrease back to 41 days in 2024. Overall, the period remained close to the initial value, but mid-period increases suggest some variability in inventory management efficiency.

Average Receivable Collection Period

This period shows a gradual improvement over the years. From 56 days in 2020, it decreased steadily to 53 days in 2021 and further to 50 days in 2022, indicating quicker collection of receivables. A minor increase followed in 2023 to 52 days and a slight reduction to 51 days in 2024. The overall trend points to enhanced effectiveness in receivables collection with small reversals in the latter years.

Average Payables Payment Period

The average payables payment period exhibited a generally decreasing trend. It held steady at 73 days in both 2020 and 2021, then sharply dropped to 56 days in 2022. There was a moderate increase to 63 days in 2023, followed by a decrease to 53 days in 2024, the lowest value in the period analyzed. This indicates a tendency toward faster payment to suppliers over the years, which may impact cash outflows.

Cash Conversion Cycle

The cash conversion cycle has shown variability and an overall upward trend. It declined from 24 days in 2020 to 16 days in 2021, suggesting improved liquidity management. However, it increased to 31 days in 2022 and rose slightly more to 33 days in 2023, reaching 39 days in 2024. This trend signals a lengthening of the time taken to convert investments in inventory and receivables back into cash, which may affect working capital efficiency.