Linde plc (NASDAQ:LIN)

The analysis of short-term operating activity ratios reveals a general trend of declining efficiency in working capital management from early 2022 through mid-2025, followed by a period of stabilization and marginal recovery toward the end of 2026.

Inventory Management

Inventory turnover experienced a steady decline from a peak of 10.75 in September 2022 to a low of 8.06 by June 2025. This deterioration is reflected in the average inventory processing period, which extended from 34-35 days in early 2022 to a peak of 45 days in mid-2025. A recovery phase began in late 2025, with the turnover ratio improving to 8.87 and the processing period contracting back to 41 days by September 2026.

Receivables Management

The receivables turnover ratio exhibited volatility with an overall downward trajectory. After peaking at 7.34 in September 2022, the ratio declined to a low of 6.28 in September 2025. Consequently, the average receivable collection period lengthened from 50 days in late 2022 to 58 days in mid-2025. By the end of the observed period, the collection period stabilized at 56 days, suggesting a persistent increase in the time required to collect payments compared to 2022 levels.

Payables Management

Payables turnover increased from 5.40 in March 2022 to a peak of 6.98 in March 2024, indicating a trend toward faster payment of obligations. This is corroborated by the average payables payment period, which dropped from 68 days in March 2022 to a low of 52 days in March 2024. In the subsequent periods, the payment period slightly extended, settling at 55 days by September 2026.

Operating and Cash Conversion Cycles

The operating cycle, driven by the combined lengthening of inventory and receivable periods, increased from 91 days in March 2022 to a peak of 103 days in September 2025, before settling at 97 days. The cash conversion cycle followed a similar upward trend, expanding from 23 days in March 2022 to a peak of 47 days in mid-2025. This indicates a significant increase in the amount of time capital remained tied up in the operating process. While the cycle contracted to 42 days by September 2026, the duration remains substantially higher than the baseline established in early 2022.

The analysis of inventory turnover reveals a period of volatility followed by a stabilization phase, characterized by an initial decline and a subsequent gradual recovery. The turnover ratio peaked in the third quarter of 2022 at 10.75 before entering a prolonged downward trajectory that lasted until early 2024.

Inventory Turnover Cycle

A significant contraction in inventory efficiency is observed from September 30, 2022, to March 31, 2024, where the turnover ratio fell from 10.75 to 8.23. This decline indicates a slower movement of inventory relative to the cost of sales. Following this trough, the ratio exhibited a period of fluctuation, reaching a secondary low of 8.06 in September 2025, before trending upward to 8.87 by September 30, 2026.

Inventory Level Dynamics

There is a clear correlation between rising inventory levels and the decreasing turnover ratio during the first half of the observed period. Inventories grew steadily from 1,766 million USD in March 2022 to a peak of 2,115 million USD by December 2023. While inventory levels remained relatively plateaued between 1,946 million USD and 2,129 million USD from 2024 through 2026, the initial accumulation contributed to the reduction in the turnover rate.

Cost of Sales Influence

Fluctuations in the cost of sales, exclusive of depreciation and amortization, heavily influenced the turnover metrics. A peak in costs during the third quarter of 2022 (5,285 million USD) supported the highest turnover ratios. A subsequent decline in costs, reaching a low of 4,157 million USD in March 2025, pressured the turnover ratio downward. The recovery observed in 2026 coincides with a rise in the cost of sales, which climbed to 4,962 million USD by September 30, 2026, thereby improving the turnover ratio.

Overall, the operational data suggests a transition from a highly lean inventory model in 2022 to a higher baseline of inventory holdings. The most recent quarters indicate an improvement in operating efficiency as cost of sales increases while inventory levels are maintained at a consistent ceiling.

An analysis of the operational activity ratios from March 31, 2022, through September 30, 2026, reveals a general decline in the efficiency of receivables collection, despite a consistent growth trend in overall sales volume.

Sales Volume Trends

Quarterly sales exhibited a stable trajectory with a gradual upward trend. Starting at 8,211 million USD in March 2022, revenue peaked at 9,404 million USD by September 30, 2026. This growth indicates a sustained increase in top-line activity over the analyzed period.

Accounts Receivable Dynamics

The net accounts receivable balance fluctuated between 4,559 million USD and 5,632 million USD. A notable increase in the balance is observed starting in 2024, moving from a low of 4,622 million USD in December 2024 to a peak of 5,632 million USD in June 2026. This indicates that the growth in receivables has largely kept pace with, or occasionally exceeded, the growth in sales.

Receivables Turnover Efficiency

The receivables turnover ratio peaked at 7.34 in September 2022, signaling a high velocity of cash collection. Following this peak, the ratio experienced periodic volatility, maintaining a range between 6.90 and 7.02 throughout much of 2023. However, a downward trend became more pronounced in 2025 and 2026, with the ratio dipping to 6.28 in September 2025 and ending at 6.48 in September 2026.

Correlation Analysis

The divergence between rising sales and a declining turnover ratio suggests that the average collection period has lengthened. While sales grew by approximately 14.5% from the start of the period to the end, the turnover ratio decreased from 6.56 to 6.48, reaching lows of 6.28-6.29 during 2025 and 2026. This pattern indicates that the increase in revenue is being accompanied by a slower conversion of credit sales into cash.

An analysis of the short-term operating activity indicates a general increase in the efficiency of payables management over the period from March 2022 through September 2026. The payables turnover ratio exhibits an upward trajectory, suggesting a faster settlement of obligations to suppliers and a reduction in the average time accounts payable remain outstanding.

Payables Turnover Ratio Trends

The payables turnover ratio rose from a low of 5.40 in March 2022 to 6.62 by September 2026. A period of relative stability was observed throughout 2023 and 2024, with the ratio fluctuating between 5.79 and 6.84. A significant peak was reached in March 2025, where the ratio hit 6.98, marking the highest efficiency in supplier payment cycles within the analyzed timeframe. Subsequent quarters show the ratio stabilizing in the 6.45 to 6.68 range.

Accounts Payable Dynamics

There is a notable contraction in the total accounts payable balance. From a peak of 3,387 million USD in March 2022, the balance trended downward, reaching a minimum of 2,446 million USD in March 2025. While a modest recovery in payable levels occurred between June 2025 and September 2026, ending at 2,854 million USD, the overall balance remained significantly lower than the 2022 baseline.

Cost of Sales Correlation

The cost of sales, exclusive of depreciation and amortization, showed volatility during the first half of the period, peaking at 5,285 million USD in September 2022 before stabilizing between 4,157 million USD and 4,431 million USD for much of 2023 and 2024. An upward trend in costs emerged in 2026, culminating in 4,962 million USD by September 2026. The simultaneous increase in costs and the reduction in average payables contributed to the overall acceleration of the turnover ratio.

Operational Implications

The combination of declining accounts payable balances and stable-to-rising costs of sales suggests a shift toward more rapid payment cycles. This pattern may indicate a strategic decision to reduce supplier credit reliance or the utilization of early payment discounts to optimize procurement costs.

An analysis of the short-term operating activity reveals a persistent state of negative working capital throughout the evaluated period from March 2022 to September 2026. This indicates a consistent operational model where current liabilities exceed current assets, suggesting an aggressive management of short-term financing or a high degree of efficiency in utilizing supplier credit to fund operations.

Working Capital Trends

Working capital exhibited significant volatility, reaching a peak deficit of -4,881 million US$ in March 2023. A period of relative recovery occurred during 2024, where the deficit narrowed to its lowest point of -589 million US$ in June 2024. However, the deficit widened again during 2025 and 2026, fluctuating between -1,087 million US$ and -2,861 million US$.

Sales Performance

Revenue remained relatively stable for the first several quarters, fluctuating between 7,899 million US$ and 8,797 million US$. A sustained upward trend emerged starting in 2025, with sales growing from 8,112 million US$ in March 2024 to a peak of 9,404 million US$ by September 2026, representing a steady increase in top-line performance.

Working Capital Turnover Dynamics

The working capital turnover ratio remains mathematically negative due to the persistent negative working capital. The relationship between sales and working capital suggests that the company does not rely on net current assets to generate revenue. Instead, the widening gap between increasing sales and the fluctuating negative working capital in 2025 and 2026 indicates an increased reliance on spontaneous financing to support higher sales volumes.

The analysis of operational activity ratios reveals a distinct cyclical pattern in inventory management efficiency from March 2022 through September 2026. A clear inverse correlation is observed between the inventory turnover ratio and the average inventory processing period, reflecting shifts in the speed of inventory throughput.

Inventory Turnover Trends

Inventory turnover reached its peak in the third quarter of 2022 at 10.75. Following this period, a consistent downward trajectory was observed, with the ratio declining to a low of 8.22 by June 2024. This decline suggests a reduction in the frequency of inventory replacement. Starting in the second half of 2024, the ratio began a gradual recovery, trending upward to reach 8.87 by September 2026.

Average Inventory Processing Period

The processing period began at 35 days in March 2022 and reached a minimum of 34 days by September 2022. This was followed by a prolonged expansion of the processing cycle, which peaked at 44 days between December 2023 and June 2024. After a brief fluctuation that saw the period extend to 45 days in the first half of 2025, the processing time contracted, returning to 41 days by September 2026.

Operational Efficiency Analysis

The data indicates a period of diminished inventory efficiency between late 2022 and mid-2024, as the processing period extended by approximately 10 days while the turnover ratio dropped by roughly 23%. The subsequent stabilization and improvement observed from 2025 to 2026 suggest a realignment of inventory levels relative to the cost of goods sold, resulting in a more streamlined processing cycle toward the end of the analyzed period.

The analysis of short-term operating activity indicates a period of relative stability in credit management, characterized by cyclical fluctuations in both the efficiency of receivable conversions and the average time required to collect outstanding payments.

Receivables Turnover Trends

The receivables turnover ratio exhibited a peak in late 2022, reaching a high of 7.34 in September 2022. Following this peak, the ratio experienced a gradual decline, stabilizing between 6.90 and 7.02 throughout much of 2023. A secondary peak occurred in December 2024 at 7.14, before a downward trend emerged in 2025, where the ratio reached its lowest point of 6.28 in September 2025. The period concludes with the ratio fluctuating between 6.29 and 6.51 in 2026, suggesting a slight decrease in the velocity of receivable collections compared to the 2022 high.

Average Receivable Collection Period

The collection period demonstrates an inverse correlation with the turnover ratio, oscillating within a range of 50 to 58 days. The most efficient collection window was observed between September and December 2022, when the period dropped to 50 days. A similar improvement occurred in December 2024, with the period decreasing to 51 days. Conversely, collection efficiency weakened in 2025 and 2026, with the collection period expanding to 58 days in June 2025 and June 2026, indicating a slower conversion of receivables into cash during these intervals.

Operational Efficiency and Correlation

A consistent inverse relationship is maintained between the turnover ratio and the collection period across all quarterly observations. The data reveals a pattern of periodic tightening and loosening of credit collection efficiency. While the organization successfully reduced the collection cycle to 50 days in 2022, the subsequent trend shows a shift toward a longer average collection cycle, typically averaging between 54 and 57 days in the latter half of the analyzed period.

An analysis of the operating cycle indicates a gradual expansion in the duration of the cash-to-cash cycle between March 2022 and September 2026. The operating cycle reached its minimum of 84 days in September 2022 and its maximum of 103 days in June 2025, reflecting a period of decreased operational velocity in asset conversion before stabilizing at 97 days by the end of the period.

Average Inventory Processing Period

The time required to process inventory shifted from 35 days in March 2022 to a peak of 45 days in mid-2025. A subsequent moderate decline is observed, with the period ending at 41 days in September 2026. This suggests a general increase in the time assets remain in inventory, particularly between 2023 and 2025.

Average Receivable Collection Period

The collection period demonstrated relative stability, fluctuating within a narrow range between 50 days in late 2022 and 58 days in 2025 and 2026. The data indicates a slight upward trend in the duration required to collect payments from customers, contributing to the overall lengthening of the operating cycle.

Operating Cycle Correlation

The operating cycle exhibits a direct correlation with both inventory and receivable periods. The expansion of the cycle from 91 days in early 2022 to 97 days by late 2026 is predominantly driven by the increase in inventory processing times, complemented by a marginal rise in the receivable collection timeframe.

The analysis of short-term operating activity reveals a general tightening of the payables cycle over the observed period. The average time taken to settle obligations to suppliers decreased from an initial high of 68 days in March 2022 to a more stabilized range between 52 and 60 days through September 2026.

Payables Turnover Trends

The payables turnover ratio exhibited an overall upward trajectory, moving from 5.40 in March 2022 to 6.62 by September 2026. A notable peak occurred on December 31, 2024, where the ratio reached 6.84, indicating a more rapid cycling of accounts payable. This upward movement suggests an increase in the frequency with which supplier obligations are settled relative to the average balance of payables.

Average Payables Payment Period Fluctuations

A distinct downward trend in the payment period is observed during 2022, where the duration dropped from 68 days to 56 days. Following this initial decline, the period entered a phase of relative stability throughout 2023, fluctuating between 56 and 63 days. The shortest payment cycle was recorded on December 31, 2024, at 52 days, which corresponds with the peak in turnover. For the remaining periods leading into 2026, the payment period remained consistent, fluctuating narrowly between 55 and 59 days.

Correlation and Operational Insight

A strong inverse correlation is maintained between the turnover ratio and the payment period. The reduction in the average payment period from 68 days to a baseline of approximately 55 days suggests a shift toward faster settlement of liabilities. This pattern indicates a consistent approach to working capital management and suggests that supplier payment terms have either been tightened or there has been a strategic decision to accelerate payments to optimize supplier relationships.

The cash conversion cycle exhibits a general expansion over the analyzed period, increasing from 23 days in March 2022 to 42 days by September 2026. This upward trend indicates a lengthening of the operational window required to convert investments in inventory and receivables back into cash, suggesting a higher requirement for working capital to support operations.

Average Inventory Processing Period

The inventory processing period demonstrated a gradual increase from 35 days in early 2022 to a peak of 45 days during the middle of 2025. A slight correction occurred toward the end of the period, with the metric returning to 41 days by September 2026. This pattern reflects a period of slowing inventory turnover followed by a moderate improvement in efficiency.

Average Receivable Collection Period

Receivable collections remained relatively stable, fluctuating between a minimum of 50 days in late 2022 and a maximum of 58 days in mid-2025. The cycle concluded at 56 days, indicating that the time taken to collect payments from customers has remained largely consistent with historical averages despite minor periodic variances.

Average Payables Payment Period

A significant downward trend is observed in the payables payment period, which decreased from 68 days in March 2022 to a low of 52 days in March 2025. While there was a modest recovery to 55 days by September 2026, the overall reduction in the payment window suggests that cash is exiting the organization more rapidly than in the initial period of analysis.

Cash Conversion Cycle Dynamics

The expansion of the cash conversion cycle, which peaked at 47 days in mid-2025, was primarily driven by the contraction of the payables payment period and a moderate increase in inventory processing time. The reduction in the ability to defer supplier payments acted as the primary catalyst for the overall increase in the cycle length, offsetting the relatively stable performance of receivable collections.