Linde plc (NASDAQ:LIN)

Inventory Turnover

Starting from a ratio of 8.9 in March 2020, inventory turnover improved steadily to peak around 10.75 by December 2021. Thereafter, a declining trend is observed, reaching approximately 8.08 by June 2025. This suggests initial efficiency gains in inventory management followed by a gradual slowdown in turnover rates.

Receivables Turnover

The receivables turnover ratio shows moderate fluctuations, rising from approximately 6.54 in March 2020 to a peak near 7.34 in December 2021. Following this peak, the ratio declines slightly and stabilizes between 6.36 and 7.14 over the subsequent quarters, indicating relative consistency in collection efficiency with periods of minor variability.

Payables Turnover

The payables turnover ratio generally increases from about 4.97 in March 2020 to a high of nearly 6.98 by June 2025, with minor fluctuations. This trend implies a tendency towards faster payment of obligations over time, reflecting potential changes in credit terms or payment policies.

Average Inventory Processing Period

The average number of days inventory is held decreased from 41 days in March 2020 to a low of 34 days around September 2021, corresponding with the increase in inventory turnover. From that point onward, the period lengthens again, reaching approximately 45 days by June 2025, indicating slower inventory processing in the later periods.

Average Receivable Collection Period

The collection period for receivables exhibits slight variability, decreasing from 56 days in March 2020 to around 50 days by December 2021, aligning with improved receivables turnover. Subsequently, it experiences a moderate increase to approximately 57 days by June 2025, suggesting a modest lengthening in collection timeframes.

Operating Cycle

The operating cycle shortens from 97 days in March 2020 to 84 days by September 2021, reflecting enhanced operational efficiency. However, it then gradually extends again, peaking at 102 days by June 2025, indicating a lengthening of the time taken to convert inventory and receivables into cash.

Average Payables Payment Period

This period decreases significantly from 73 days in March 2020 to 52 days by June 2025, suggesting a shift towards quicker payments to suppliers. This reduction in payment duration may impact liquidity and demonstrates a more aggressive payment strategy over time.

Cash Conversion Cycle

The cash conversion cycle fluctuates around mid-20s days initially, minimizes at 16 days in March 2021, then steadily increases from 28 days in December 2021 to a high of 47 days by June 2025. The overall increase indicates a growing lag between cash outflows and inflows, potentially reflecting slower cash realization despite faster payables payments.

Cost of Sales, Exclusive of Depreciation and Amortization

The cost of sales initially decreased from 3,843 million US$ in March 2020 to 3,619 million US$ in June 2020, indicating a short-term reduction. Subsequently, there was a steady increase reaching a peak of 4,927 million US$ by December 2021.

Following this peak, values generally stabilized with fluctuations ranging between approximately 4,306 million US$ and 5,285 million US$ until the end of 2022. Throughout 2023, the figures showed a mild declining trend from 4,431 million US$ in March to 4,314 million US$ in September, before rising again towards the end of the year and into early 2024.

Towards the later periods, the cost of sales exhibits moderate volatility with no clear upward or downward long-term trajectory, fluctuating around a range of roughly 4,100 million to 4,400 million US$.

Inventories

Inventories have shown a consistent growth trend over the entire period. Starting at 1,689 million US$ in March 2020, the inventory levels increased gradually, surpassing 2,000 million US$ by early 2023.

This steady rise reflects an ongoing accumulation of inventory over the observed quarters, reaching the highest level of 2,122 million US$ by June 2025. Few minor short-term dips are present but do not alter the overall upward movement.

Inventory Turnover Ratio

The inventory turnover ratio, reported from September 2020 onwards, shows a generally declining trend. It started at 8.9 and gradually increased to a high of 10.75 by December 2021, indicating a faster rate of inventory movement during this period.

Following the peak, the ratio declined steadily to 8.22 by June 2024, suggesting a slowing inventory turnover rate. A slight recovery was observed in some of the most recent quarters, though the ratio remained below earlier peak levels.

Overall, the decreasing trend in turnover ratio corresponds with the increasing inventory levels, potentially indicating slower inventory movement relative to cost of sales in the latter years.

Summary of Observations

The data indicates that while the cost of sales has experienced variability and some volatility without a definitive long-term trend, inventories have steadily increased throughout the period. The increasing inventory levels coupled with the decreasing inventory turnover ratio suggest a potential buildup of stock or slower sales relative to inventory levels after 2021.

This could imply changes in supply chain dynamics, demand patterns, or inventory management efficiency. The initial improvement in inventory turnover until late 2021, followed by a reversal, highlights shifting operational factors affecting the company's inventory utilization.

Sales

The sales figures exhibit a generally upward trend over the observed periods from March 2020 to June 2025. Starting at approximately 6739 million US dollars in March 2020, sales experienced some fluctuations but maintained growth, reaching a peak of around 8797 million US dollars by September 2022. Following that peak, there was a slight decline and stabilization, with sales fluctuating around the 8100 to 8300 million US dollars range through the subsequent quarters up to June 2025. Periodic dips, such as during December 2022 (7899 million US dollars) and March 2025 (8112 million US dollars), suggest some cyclicality but no clear long-term downturn.

Accounts Receivable, Net

The net accounts receivable values show an increasing trend over the timeframe. From 4084 million US dollars in March 2020, the figures rose steadily to surpass the 5000 million US dollars mark by March 2024, hitting 5230 million US dollars by June 2025. Despite some minor fluctuations, the overall increase suggests a growing volume of credit sales or extended collection periods. The trend aligns broadly with the increase in sales, indicating that receivables are expanding in relative scale as revenue grows.

Receivables Turnover Ratio

This ratio, available from the third quarter of 2020 onwards, fluctuates within a relatively narrow range between 6.36 and 7.34 times. The turnover ratio generally hovers around 6.5 to 7.3, indicating moderate stability in the efficiency of collecting receivables. Peaks in turnover, such as in December 2021 (7.34) and March 2023 (7.14), suggest periods of improved collection effectiveness, while troughs near 6.36 (September 2024) indicate slower collections. Overall, the receivables turnover does not exhibit a strong upward or downward trajectory but reflects some variability consistent with operational cyclicality.

Summary

The data reveals a pattern of sales growth accompanied by a corresponding rise in net accounts receivable. However, the receivables turnover ratio remains relatively stable, underscoring consistent collection practices despite higher receivable amounts. The periodic fluctuations in both sales and turnover ratios suggest the presence of cyclical industry or economic factors influencing performance. There is no indication of deteriorating credit management or sales decline over the reported quarters, but continuous monitoring of the receivables turnover will be important to ensure that rising receivables do not lead to liquidity issues.

Cost of Sales Trend

The cost of sales, excluding depreciation and amortization, demonstrates fluctuations over the observed quarterly periods. Starting at 3,843 million US$ in March 2020, there is a slight decrease in the following quarter to 3,619 million US$, followed by an overall upward trend peaking at 5,285 million US$ in September 2022. Subsequently, the cost fluctuates but generally remains in the 4,300 to 4,400 million US$ range towards the end of the series. This pattern indicates periods of increased production or sales activity around late 2021 to late 2022, with a modest correction or stabilization in more recent quarters.

Accounts Payable Trend

Accounts payable values start at 2,965 million US$ in March 2020 and experience a decline over the initial quarters, reaching approximately 2,750 million US$ by September 2023. There is a moderate level of variability with values mostly fluctuating between 2,400 and 3,500 million US$ during the timeline. The decline becoming more evident toward the end of 2024 and into 2025, where values reduce to around 2,446 million US$ to 2,593 million US$. This suggests a tightening in payment obligations or improved payable management in recent periods.

Payables Turnover Analysis

The payables turnover ratio shows a generally increasing trend from 4.97 in March 2021 to a peak of 6.98 in June 2025. The ratio rises steadily through the periods, with some minor fluctuations but maintaining an upward trajectory. This increase indicates an improvement in the efficiency of payables management, with the company paying its suppliers faster or managing its liabilities more effectively across these quarters.

Overall Financial Insights

Over the examined quarters, the company exhibits a rising cost of sales especially through 2021 and 2022, corresponding with possible increased operational activity or inflationary factors. Despite this, accounts payable reduce gradually from mid-2023 onward, and the payables turnover ratio improves notably, suggesting enhanced cash flow management and supplier payment practices. This combination points to a strategic shift or operational improvement towards more efficient working capital management in the most recent periods.

The analysis of the quarterly financial data reveals several notable trends in the company's working capital, sales, and working capital turnover over the presented periods.

Working Capital

The working capital figures, expressed in millions of US dollars, exhibit a consistently negative value across all quarters, indicating a working capital deficit throughout the entire period. From the first quarter of 2020 through mid-2021, the deficit fluctuates between approximately -$2,500 million and -$4,200 million, with the lowest working capital recorded at -$4,881 million in the first quarter of 2023. There are instances of notable improvements, such as the reduction of the deficit to -$2,425 million in the third quarter of 2023. In later periods, particularly from 2024 onwards, the magnitude of the deficit appears to diminish systematically, decreasing to approximately -$589 million by the third quarter of 2024, though a slight increase is observed in the fourth quarter of 2024 and mid-2025. This overall trend suggests a gradual effort to manage liabilities or optimize current assets over time, improving working capital but not entirely eliminating the deficit.

Sales

Sales, also measured in millions of US dollars, demonstrate a general upward trend over the analyzed quarters. The values start from $6,739 million in the first quarter of 2020 and rise to purchase peaks in the vicinity of $8,357 million by late 2024. Sales show some seasonal variability but maintain steady growth, with occasional drops, such as a decline in the fourth quarter of 2022, dipping below previous quarter highs. Despite some quarter-to-quarter fluctuations, the overall trajectory is positive, reflecting increasing revenue generation. This rise may be partially attributed to broader market expansion, pricing adjustments, or volume growth.

Working Capital Turnover

The working capital turnover ratio is not provided numerically; however, it can be inferred that since the working capital remains negative throughout the periods, calculating or interpreting this ratio traditionally would be problematic or not meaningful in a standard sense. Negative working capital typically inverts or skews turnover calculations, potentially leading to misleading interpretations without further context on accounting policies or operational specifics.

Summary of Correlations and Implications

While sales are on a rising trend, the persistent negative working capital indicates potential short-term liquidity constraints or a business model reliant on payable cycles and inventory management strategies that maintain working capital deficits. The gradual reduction in the magnitude of the working capital deficit post-2023 suggests some improvement in liquidity management. The increase in sales, alongside declining deficits, could signify operational efficiency gains or strategic financial restructuring. Stakeholders should monitor whether the downward working capital deficit trend persists and how it impacts the company's operational capabilities and financial health.

The inventory turnover ratio exhibits a clear fluctuation pattern over the observed periods. Initially, the ratio increases from 8.9 to a peak of 10.75 by the end of 2021, indicating an improvement in the efficiency of inventory management during this timeframe. Following this peak, a downward trend is observed, with the ratio declining steadily to a low of 8.22 in the first half of 2024. Toward the end of the timeline, a slight recovery occurs, with the ratio rising again to 8.81 before trending slightly downward by mid-2025.

The average inventory processing period, expressed in number of days, inversely mirrors the inventory turnover ratio's behavior. From an initial duration of 41 days, the period shortens consistently to a low of 34 days by December 2021, signaling faster inventory turnover. Subsequently, the period lengthens progressively back up to 44 days through the 2023-2024 interval, denoting slower inventory processing. Some minor variability is present around the end of the series, with days fluctuating slightly but generally remaining elevated compared to the earlier peak efficiency period.

Inventory Turnover Ratio Trend

Shows an initial increase to a peak of 10.75 in late 2021, followed by a steady decline to around 8.22 by mid-2024, with a moderate rebound toward early 2025.

Average Inventory Processing Period Trend

Decreases from 41 to 34 days by late 2021, then gradually increases to approximately 44 days in 2023-2024, with mild fluctuations thereafter.

Relationship Between Metrics

These two metrics demonstrate an inverse relationship as expected; improvements in inventory turnover correspond with shorter processing periods and vice versa.

Operational Insight

The initial improvement in inventory efficiency suggests effective inventory management possibly driven by optimized supply chain or demand forecasting. The subsequent deterioration indicates potential challenges during 2022-2024, which may reflect changes in market conditions, supply disruptions, or strategic shifts.

Recent Developments

The slight improvement in turnover ratio at the end of the period could point to early signs of operational adjustments or recovery efforts addressing the prior downward trend.

Receivables Turnover

The receivables turnover ratio demonstrates some fluctuations over the observed quarters, generally oscillating between approximately 6.3 and 7.3 times. Starting at 6.54 in March 2020, this ratio shows a gradual increase, reaching a peak of 7.34 in December 2022. After this peak, a slight decline is observed, followed by minor variations around the mid-6 to low-7 range toward the end of the period, ending at 6.36 in June 2025. This pattern suggests moderate improvements in the efficiency of receivables collection in certain periods, with a peak efficiency toward late 2022, but no consistent sustained improvement thereafter.

Average Receivable Collection Period

The average receivable collection period, expressed in days, inversely mirrors the trend in receivables turnover. Beginning at 56 days in March 2020, it decreases to a low of 50 days in December 2022, indicating faster collection of receivables during this period. Subsequently, the collection period increases slightly, moving back towards the mid-50 days range, ending at 57 days in June 2025. This dynamic indicates that while there were periods of improved collection efficiency (shorter collection periods), these gains were not maintained in the longer term, with collection duration lengthening again in the final quarters.

Overall Insights

The inverse relationship between the receivables turnover and collection period is consistent with normal financial operations, where a higher turnover ratio often correlates with a shorter collection period. The data shows that the company experienced some improvement in receivables management efficiency, particularly around late 2022, but this trend was not sustained through to mid-2025. The variability suggests that operational or market factors may have influenced the company's credit and collection processes over time, warranting attention to maintain or enhance receivables management practices.

Average inventory processing period

The average inventory processing period displays a notable downward trend beginning in March 2021, decreasing steadily from 41 days to a low of 34 days by September 2022. This indicates an improvement in inventory management efficiency during this period. However, starting in the last quarter of 2022, the period gradually increased again, reaching 45 days by September 2024 before showing a slight decrease to 42 days in June 2025. This suggests that after a phase of enhanced efficiency, inventory turnover slowed and fluctuated somewhat in the most recent quarters.

Average receivable collection period

The average receivable collection period remained relatively stable, fluctuating slightly between 50 and 57 days across the entire timeline. Initially around 56 days, it dipped to a low of 50 days at the end of 2021 and the beginning of 2022, indicating more rapid collection during that phase. However, it then increased again, oscillating near the mid-50s without a clear directional trend. The stability suggests consistent credit and collection policies with moderate variability possibly influenced by seasonal or market factors.

Operating cycle

The operating cycle trended downward from 97 days in March 2021 to a minimum of 84 days in December 2021. This denotes an overall improvement in the combined inventory and receivable management, shortening the time between acquisition and cash collection. Following this improvement, the operating cycle increased again steadily to reach 102 days by December 2024, before a minor reduction to 97 days by June 2025. These shifts reflect the combined effects of changes in both inventory processing and receivables collection periods over time, indicating periods of efficiency improvement followed by a reversal towards longer cycles.

The analysis of the payables-related financial ratios over the observed periods reveals notable trends and fluctuations. The payables turnover ratio, which measures how many times a company pays off its suppliers during a period, displays an upward trajectory overall, indicating improved efficiency in managing payables.

Payables Turnover Ratio

The ratio started at 4.97 and experienced a general increase over time, reaching values above 6.0 in most recent periods. Peaks around 6.84 and 6.98 suggest a significant acceleration in payment frequency during those quarters. This suggests the company has increasingly paid its suppliers more frequently, potentially reflecting improved cash flow management or favorable supplier terms.

Average Payables Payment Period

The number of days to pay suppliers shows a declining trend, moving from approximately 73 days initially to values around the mid-50 days by the latest period. This reduction in payment days aligns with the rise in the payables turnover ratio. The trend indicates that the company is paying its suppliers faster over time, which can enhance supplier relationships but may also affect cash reserves.

Overall, the data indicates a strategic shift toward faster payment of liabilities, reflected in the increasing payables turnover and decreasing payment period. This pattern could signal strengthened liquidity positions or a deliberate choice to optimize supplier relationships. However, the variability within some quarters suggests periodic adjustments or responses to external factors influencing payment cycles.

Average Inventory Processing Period

The average inventory processing period shows a general trend of improvement from March 2021 to March 2023, decreasing from 41 days to a low of 34 days by December 2022. However, starting in the first quarter of 2023, the period begins to increase again, reaching 45 days by the third quarter of 2025. This indicates that inventory turnover improved steadily initially but has slowed down and reversed in recent quarters.

Average Receivable Collection Period

The receivable collection period exhibits moderate fluctuations over the observed timeframe. It started at 56 days in March 2021, experienced small variations mainly between 50 and 56 days through to June 2024, and increased to 57 days by September 2025. Overall, the period remains relatively stable, with a slight lengthening observed in the later periods, implying some challenges in receivables management toward the end of the period.

Average Payables Payment Period

The payables payment period trends downward from 73 days in March 2021 to a low of 52 days by June 2025, indicating the company is paying its suppliers faster over time. A decrease occurred particularly between March 2022 and June 2025, dropping from 73 to 52 days. This suggests improved payment terms or a strategic decision to reduce payables duration.

Cash Conversion Cycle

The cash conversion cycle shows a variable pattern over the period analyzed. It initially decreased from 24 days in March 2021 to a low of 16 days in March 2022, indicating improvement in liquidity and operational efficiency. However, from the second quarter of 2022 onward, the cycle lengthens considerably, reaching 47 days by September 2025. This indicates that working capital efficiency has declined, potentially driven by the increase in inventory days and a stable but slightly increasing receivables period, despite the reductions in payables duration.