Linde plc (NASDAQ:LIN)

Analysis of the operating activity ratios reveals a general trend toward a lengthening of the working capital cycle between March 2022 and March 2026. The overall efficiency of short-term asset utilization has experienced a moderate decline, characterized by slower inventory turnover and extended collection periods, which has collectively increased the duration of the cash conversion cycle.

Inventory Management

Inventory turnover has exhibited a downward trajectory, decreasing from a peak of 10.75 in September 2022 to a low of 8.06 in September 2025, before recovering slightly to 8.54 by March 2026. This is reflected in the average inventory processing period, which expanded from 35 days in early 2022 to a peak of 45 days in mid-2025. The data suggests a reduction in the speed at which inventory is converted into sales.

Receivables and Collection Efficiency

Receivables turnover remained relatively stable but showed a slight downward drift, moving from a range of 6.56 to 7.34 in 2022 to a range of 6.28 to 6.51 in the 2025-2026 period. Consequently, the average receivable collection period increased from 56 days in March 2022 to a maximum of 58 days in September 2025, indicating a marginal slowing in the recovery of credit sales.

Payables and Funding Strategy

The average payables payment period has generally tightened since March 2022, where it stood at 68 days. The period reached a low of 52 days in March 2024 before stabilizing between 55 and 59 days through early 2026. This shortening of the payment window suggests a more rapid outflow of cash to suppliers compared to the beginning of the analyzed period.

Operating and Cash Conversion Cycles

The operating cycle, which combines inventory and receivable periods, expanded from 91 days in March 2022 to a peak of 103 days in September 2025, concluding at 99 days in March 2026. Because the payables payment period simultaneously decreased, the cash conversion cycle saw a marked increase, rising from 23 days in March 2022 to 44 days in March 2026. This trend indicates that more working capital is required to support the company's operational activities than was necessary at the start of the period.

The inventory turnover ratio exhibits a distinct cyclical pattern, characterized by an initial period of high efficiency, a sustained decline throughout 2023, and a subsequent period of stabilization through early 2026. This trajectory reflects a shift in the relationship between the cost of sales and the volume of inventory held.

Cost of Sales Dynamics

A peak in cost of sales, exclusive of depreciation and amortization, occurred in September 2022 at 5,285 million USD. Following this peak, figures generally moderated, fluctuating between approximately 4,157 million USD in March 2024 and 4,547 million USD in December 2025. This stabilization in spending on sales suggests a more consistent operational output following the volatility observed in 2022.

Inventory Level Trends

Inventories demonstrated a steady upward trend during the first half of the analyzed period, rising from 1,766 million USD in March 2022 to a peak of 2,115 million USD by December 2023. While a temporary contraction to 1,946 million USD occurred in December 2024, levels remained elevated overall, ending at 2,079 million USD in March 2026. The increase in inventory levels without a proportional increase in cost of sales contributed to the compression of the turnover ratio.

Inventory Turnover Ratio Performance

The efficiency of inventory management peaked in September 2022 with a ratio of 10.75. A progressive decline was observed throughout 2023, reaching 8.27 by December 31, 2023. This downward trend indicates a slowing of inventory movement relative to sales. From March 2024 through March 2026, the ratio entered a stabilization phase, oscillating within a narrow band between 8.06 and 8.81. The most recent figures indicate a slight recovery, with the ratio rising to 8.54 by March 31, 2026, suggesting a return to a steady-state operational equilibrium.

The analysis of receivables turnover from March 2022 through March 2026 reveals a period of initial efficiency gains followed by a gradual deceleration in the collection cycle and a subsequent period of volatility.

Turnover Efficiency Trends (2022-2023)

Between March 2022 and December 2022, a positive trajectory is observed, with the receivables turnover ratio peaking at 7.34 in September 2022. This indicates an improvement in the velocity at which credit sales were converted into cash. Throughout 2023, the ratio maintained a high degree of stability, oscillating within a narrow range between 6.90 and 7.02, suggesting a consistent application of credit and collection policies.

Performance Deceleration and Volatility (2024-2026)

A general downward trend emerged starting in early 2024, with the turnover ratio declining to its lowest point of 6.28 in September 2025. This deceleration reflects a slower conversion of receivables into cash relative to the volume of sales generated. A brief recovery is evident in December 2025, where the ratio rose to 6.84, before returning to 6.51 by March 2026.

Correlation Between Asset Levels and Sales

The fluctuations in the turnover ratio are closely linked to the growth of net accounts receivable. While sales remained relatively stable—ranging between 7.9 billion and 8.8 billion US dollars—net accounts receivable increased from a low of 4.56 billion US dollars in December 2022 to a peak of 5.33 billion US dollars in September 2025. The expansion of the receivables balance without a commensurate increase in sales volume contributed directly to the compression of the turnover ratio during the 2024-2025 period.

The analysis of short-term operating activity reveals a general increase in the payables turnover ratio over the observed period, indicating an acceleration in the rate at which supplier obligations are settled. While the cost of sales remained relatively stable with moderate fluctuations, a consistent reduction in the total balance of accounts payable served as the primary driver for the overall upward trajectory of the turnover ratio.

Payables Turnover Ratio Trends

The ratio began at 5.40 in March 2022 and experienced an initial increase to 6.50 by September 2022. Following a period of stability, a decline to 5.79 was recorded in December 2023. A subsequent and significant ascent occurred, peaking at 6.98 in March 2025, before moderating to 6.68 by March 2026. This pattern suggests periodic shifts in the timing of payments or changes in credit terms provided by suppliers.

Accounts Payable Balance Analysis

A sustained downward trend is evident in the accounts payable balance, which decreased from 3,387 million US dollars in March 2022 to a low of 2,446 million US dollars in March 2025. The reduction of these liabilities, while procurement costs remained relatively constant, explains the increase in the turnover ratio, reflecting a strategy of maintaining lower outstanding payables.

Cost of Sales Influence

Cost of sales, exclusive of depreciation and amortization, fluctuated between a high of 5,285 million US dollars in September 2022 and a low of 4,157 million US dollars in March 2025. Because the turnover ratio increased even during periods when the cost of sales declined, it is concluded that the ratio's movement was driven by the contraction of the payables balance rather than changes in the volume of operational expenditures.

An analysis of short-term operating activity reveals a consistent negative working capital position maintained throughout the observed period, paired with stable and slightly growing revenue generation.

Working Capital Volatility

The working capital deficit exhibited significant fluctuations. A deepening of the negative position was observed through early 2023, reaching a peak deficit of 4,881 million USD in March 2023. This was followed by a period of contraction in the deficit, which narrowed considerably to a minimum of 589 million USD by June 2024. However, a subsequent widening of the deficit occurred throughout 2025, returning to 2,640 million USD by March 2026.

Sales Stability and Growth

Revenue remained resilient, fluctuating within a range of approximately 7,899 million USD to 8,781 million USD. After a period of relative stagnation between 2022 and 2024, a gradual upward trend in sales emerged starting in early 2025 and continued through the first quarter of 2026.

Working Capital Turnover Dynamics

Because working capital remained negative throughout the entire duration, the working capital turnover ratio is mathematically negative. This indicates a negative working capital model where current liabilities are used to finance current assets and operational growth. The ability to sustain high sales volumes while maintaining a negative net current asset position suggests an aggressive efficiency in managing short-term liabilities and a strong reliance on spontaneous financing, such as accounts payable.

The analysis of inventory management efficiency from March 2022 through March 2026 reveals a general deceleration in the movement of goods, characterized by a decline in turnover ratios and a corresponding increase in the average inventory processing period.

Inventory Turnover Trends

A period of peak efficiency was observed in the first three quarters of 2022, with the turnover ratio reaching its maximum of 10.75 in September 2022. Following this peak, a consistent downward trend occurred throughout 2023 and early 2024, with the ratio bottoming at 8.22 in June 2024. Between late 2024 and March 2026, the ratio exhibited moderate volatility, fluctuating between 8.06 and 8.81, suggesting a stabilization at a lower efficiency level compared to the 2022 baseline.

Average Inventory Processing Period

The time required to process inventory showed an inverse correlation with the turnover ratio. The processing period remained relatively lean between March and September 2022, averaging 34 days. A steady increase in the processing duration began in early 2023, rising from 39 days in March 2023 to a plateau of 44 days maintained throughout much of 2024. This duration peaked at 45 days in mid-2025 before settling at 43 days by the end of the analysis period in March 2026.

Operational Efficiency Analysis

The transition from a 34-day processing cycle to a 43-day cycle represents a measurable extension of the operating cycle. The data indicates a structural shift in inventory management where the speed of inventory conversion decreased by approximately 23% from the 2022 lows to the 2025 highs. The recent stabilization observed in 2025 and 2026 suggests that the inventory processing cycle has reached a new equilibrium, albeit at a slower pace than historically recorded at the start of the period.

The analysis of short-term operating activity reveals a cyclical pattern in receivables management from March 2022 through March 2026. The relationship between the receivables turnover ratio and the average collection period remains inversely proportional, with collection efficiency fluctuating within a defined range over the observed period.

Receivables Turnover Trends

The turnover ratio exhibited an upward trajectory during 2022, peaking at 7.34 in September before stabilizing around 6.90 throughout 2023. A period of increased volatility occurred between 2024 and 2025, where the ratio reached a low of 6.28 in September 2025. A consistent recovery pattern is observed in the fourth quarter of each calendar year, with the ratio typically rising toward December before moderating in the first quarter of the following year.

Average Receivable Collection Period Analysis

The collection period experienced a notable reduction in 2022, decreasing from 56 days to a low of 50 days. This level of efficiency remained relatively stable throughout 2023, with values oscillating between 52 and 53 days. Beginning in 2024, the collection period showed higher variance, reaching a maximum of 58 days in September 2025. A recurring seasonal contraction in the collection period is evident every December, indicating an acceleration in the conversion of receivables to cash at the end of each fiscal year.

Overall, the operational cycle for receivables indicates a stable but variable collection process. The consistency of the collection period, which generally remained between 50 and 58 days, suggests that credit and collection policies are maintained within a consistent operational envelope despite periodic fluctuations in turnover efficiency.

The operating cycle exhibits a general upward trend over the analyzed period, indicating a gradual expansion in the time required to convert current assets into cash. Starting at 91 days in March 2022, the cycle reached a peak of 103 days by September 2025, before settling at 99 days by March 2026.

Average Inventory Processing Period

A consistent increase is observed in the time required to process inventory. From a baseline of 35 days in March 2022, the period climbed steadily, peaking at 45 days during the middle of 2025. Although a slight contraction occurred toward the end of the period, ending at 43 days in March 2026, the overall trend reflects a slowing of inventory turnover relative to the start of the analysis.

Average Receivable Collection Period

The collection period demonstrates moderate volatility but remains within a defined range of 50 to 58 days. A period of improved efficiency was noted between September 2022 and December 2023, where the period dipped to as low as 50 days. However, this efficiency diminished throughout 2024 and 2025, peaking at 58 days in September 2025 before returning to 56 days by March 2026.

Operating Cycle Dynamics

The expansion of the overall operating cycle is primarily driven by the lengthening of the inventory processing period. While the receivable collection period contributed to the peak in late 2025, the structural increase in inventory days represents the more significant long-term shift. The cycle experienced a temporary contraction to 84 days in September 2022, but subsequently trended upward for several consecutive quarters, reflecting a slower movement of goods and collections throughout the operational chain.

The analysis of short-term operating activity indicates a general trend toward more accelerated payments to suppliers over the observed period. The efficiency of payables management has fluctuated, but an overall contraction in the payment cycle is evident when comparing the baseline of early 2022 to the subsequent years.

Average Payables Payment Period

A significant reduction in the payment cycle occurred during 2022, where the period dropped from a peak of 68 days in March to 56 days by September. Throughout 2023 and 2024, the period remained relatively volatile but generally lower than the initial baseline, reaching its lowest point of 52 days in December 2024. By March 2026, the payment period stabilized at 55 days, representing a sustained decrease in the time taken to settle obligations with creditors compared to the start of the analyzed timeframe.

Payables Turnover

The payables turnover ratio exhibits an inverse correlation with the payment period, showing an upward trajectory as payment cycles shortened. The ratio increased from 5.40 in March 2022 to a peak of 6.98 in March 2025. While periodic fluctuations are observed—such as the dip to 5.79 in December 2023—the turnover ratio consistently remained above the 6.0 threshold for the majority of the period between 2023 and 2026, indicating a higher frequency of supplier payments.

Operating Activity Correlation

The synchronization between the turnover ratio and the payment period demonstrates consistent operational patterns. The most aggressive payment phase occurred between December 2024 and March 2025, characterized by the highest turnover rates (6.84 to 6.98) and the shortest payment durations (52 to 55 days). This suggests a strategic shift toward faster liquidation of accounts payable, which may reflect improved liquidity positions or a desire to optimize supplier relationships through prompt settlement.

The operational efficiency regarding working capital management shows a general trend of deterioration over the analyzed period, characterized by a significant expansion of the cash conversion cycle. The duration required to convert resource inputs into cash has increased from 23 days in March 2022 to 44 days by March 2026, indicating a greater reliance on liquidity to fund short-term operations.

Average Inventory Processing Period

A gradual upward trend is observed in inventory holding times. Starting at 35 days in March 2022, the period increased steadily, peaking at 45 days during mid-2025. This suggests a slowdown in inventory turnover or a strategic decision to maintain higher stock levels, which contributes directly to the lengthening of the cash conversion cycle.

Average Receivable Collection Period

The collection period has remained relatively stable, though it exhibits minor fluctuations within a range of 50 to 58 days. While there were periods of improvement, such as the dip to 50 days in late 2022, the period trended slightly upward toward 58 days in September 2025 before settling at 56 days in March 2026. This indicates a consistent, though not aggressively worsening, performance in credit collection.

Average Payables Payment Period

There is a noticeable contraction in the time taken to settle obligations with suppliers. The payment period declined from a high of 68 days in March 2022 to a low of 52 days in March 2025. By reducing the time that cash is held before payment, the company has decreased its ability to use spontaneous financing from suppliers to offset the costs of inventory and receivables.

Cash Conversion Cycle Synthesis

The widening of the cash conversion cycle is the result of a dual negative impact: increasing inventory processing times and decreasing payables payment periods. The peak CCC of 47 days observed in mid-2025 aligns with the maximum inventory holding period and a compressed payment window. Although there was a temporary contraction to 37 days in December 2025, the cycle returned to 44 days by the end of the period, confirming a long-term shift toward a more cash-intensive operating cycle.