Linde plc (NASDAQ:LIN)

The analysis of short-term operating activity reveals a general lengthening of the cash conversion cycle and a decline in asset turnover efficiency over the observed period. There is a visible trend toward slower inventory movement and extended receivable collection periods, which, combined with a reduction in the payables payment window, has increased the overall liquidity pressure on the operating cycle.

Inventory Management Efficiency

A consistent downward trend in inventory turnover is observed from the beginning of 2022, where the ratio stood at 10.36, declining to a low of 8.06 by June 2025. Correspondingly, the average inventory processing period expanded from 35 days to a peak of 45 days. While some stabilization occurred toward the end of the period, the inventory processing time remained elevated compared to early 2022 levels, indicating a slower conversion of raw materials and finished goods into sales.

Receivables Collection Performance

Receivables turnover exhibited volatility but trended generally lower, moving from a peak of 7.34 in September 2022 to 6.29 by June 2026. The average receivable collection period mirrored this trend, shifting from a low of 50 days in late 2022 to a high of 58 days by June 2026. This suggests a moderate degradation in the efficiency of credit collection processes or a strategic shift in credit terms offered to customers.

Operating Cycle and Payables Strategy

The operating cycle, reflecting the combined time to process inventory and collect receivables, increased from 91 days in March 2022 to a peak of 103 days in September 2025, ending the period at 100 days. Simultaneously, the average payables payment period contracted from 68 days to approximately 57 days. The reduction in the time taken to settle obligations with suppliers has further accelerated the cash outflow relative to cash inflows.

Cash Conversion Cycle (CCC)

The cumulative effect of slower inventory turnover, slower receivable collections, and faster payables payments is evident in the cash conversion cycle. The CCC expanded significantly from 23 days in March 2022 to a peak of 47 days in mid-2025, ultimately settling at 43 days by June 2026. This nearly twofold increase in the CCC indicates that more working capital is tied up in operations, requiring a higher level of liquidity to support the same volume of business activity.

The inventory turnover ratio exhibits a distinct shift from a period of high efficiency in 2022 to a stabilized, lower plateau from 2023 through mid-2026.

Inventory Turnover Efficiency

A peak efficiency was recorded in September 2022 with a ratio of 10.75. Following this peak, a sustained downward trend is observed, with the ratio declining to 8.23 by March 2024. This represents a reduction in the velocity of inventory movement. From March 2024 through June 2026, the ratio stabilizes, fluctuating within a narrow range between 8.06 and 8.81, suggesting the establishment of a new operational baseline.

Inventory Asset Trends

Inventories showed a consistent upward trajectory from March 2022 (1,766 million US$) through December 2023 (2,115 million US$). A temporary contraction occurred in December 2024, where levels fell to 1,946 million US$, before returning to a range between 2,055 and 2,122 million US$ for the remainder of the analyzed period. The growth in inventory holdings during 2022 and 2023 contributed significantly to the compression of the turnover ratio.

Correlation with Cost of Sales

The turnover ratio's movement is closely tied to the relationship between the cost of sales (exclusive of depreciation and amortization) and the inventory held. In 2022, higher cost of sales values, peaking at 5,285 million US$ in September, supported the higher turnover ratios. Subsequently, as the cost of sales moderated to a range between 4,157 and 4,547 million US$ while inventories remained elevated, the turnover ratio experienced its primary decline. A slight recovery in the ratio toward June 2026 coincides with a corresponding increase in the cost of sales to 4,861 million US$.

The receivables turnover ratio exhibits a non-linear trajectory over the analyzed period, characterized by an initial increase in efficiency followed by a gradual downward trend. While sales volumes have remained relatively stable with a modest upward trend toward the end of the period, the collection efficiency has fluctuated, indicating changes in the speed at which outstanding invoices are converted into cash.

Receivables Turnover Trends

An initial improvement in turnover efficiency is observed throughout 2022, with the ratio peaking at 7.34 by September 30, 2022. This was followed by a period of relative stability during 2023, where the ratio consistently hovered around 6.9. However, starting in 2024, a general decline is evident, with the ratio reaching a low of 6.28 by September 30, 2025, and ending at 6.29 as of June 30, 2026.

Correlation Between Sales and Accounts Receivable

Analysis of the underlying components reveals that while quarterly sales increased from 8,211 million USD in March 2022 to 9,289 million USD in June 2026, net accounts receivable grew at a disproportionate rate during the latter half of the period. The increase in receivables from approximately 4,845 million USD to 5,632 million USD has contributed to the compression of the turnover ratio, suggesting a slower collection cycle relative to revenue growth.

Operational Efficiency Insights

The decrease in the turnover ratio toward the end of the period indicates a lengthening of the average collection period. The decline from a high of 7.34 to 6.29 suggests that a larger portion of sales is remaining tied up in receivables for longer durations. This trend is particularly notable between December 31, 2024, and June 30, 2026, where the ratio shifted from 7.14 to 6.29, marking a period of reduced operational efficiency in managing short-term credit.

An evaluation of short-term operating activity reveals a general increase in payables turnover from March 2022 through June 2026. The trend indicates an acceleration in the rate at which obligations to suppliers are settled, reflecting a shift in working capital management strategies over the observed period.

Payables Turnover Ratio Trends

The turnover ratio began at 5.40 in March 2022 and experienced a gradual upward trajectory, reaching a peak of 6.98 by March 2025. Following this peak, the ratio underwent a slight correction and stabilization, fluctuating between 6.19 and 6.68 through the first half of 2026. This overall increase suggests that the company is settling its short-term liabilities more frequently than in the previous period.

Dynamics of Accounts Payable

A notable downward trend is observed in the absolute value of accounts payable, which decreased from 3,387 million USD in March 2022 to a low of 2,446 million USD in March 2025. Although a slight recovery in the payables balance occurred toward the end of the period, reaching 2,837 million USD by June 2026, the average balance remained significantly lower than the initial 2022 levels. This reduction in outstanding liabilities acted as the primary driver for the higher turnover ratios.

Cost of Sales Correlation

Costs of sales, exclusive of depreciation and amortization, showed an initial peak of 5,285 million USD in September 2022 before stabilizing. For the remainder of the period, these costs generally fluctuated between 4,157 million USD and 4,861 million USD. Because the cost of sales remained relatively consistent while accounts payable declined, the resulting increase in the turnover ratio is attributable to a more aggressive payment schedule rather than a reduction in operational procurement volume.

The analysis of short-term operating activity reveals a consistent pattern of negative working capital paired with steady revenue generation. The company operates with a current liability position that systematically exceeds its current assets, a characteristic often associated with high operational efficiency and the ability to fund operations through supplier credit.

Working Capital Trends

Working capital remained negative throughout the entire period from March 2022 to June 2026. Significant volatility is observed, with the deficit peaking at -4,881 million USD in March 2023. A period of recovery followed, where the negative position narrowed substantially, reaching its lowest deficit of -589 million USD by September 2024. However, the trend reversed again in 2025 and 2026, with working capital fluctuating between -1,087 million USD and -2,861 million USD.

Sales Performance

Revenue demonstrates a stable upward trajectory with minimal volatility. Sales fluctuated between 7,899 million USD and 8,797 million USD during 2022 and 2023. A period of consolidation occurred throughout 2024, followed by a growth phase in 2025 and 2026, culminating in a peak of 9,289 million USD by June 30, 2026. This indicates a robust demand environment and consistent top-line growth.

Working Capital Turnover Dynamics

The working capital turnover is characterized by negative values due to the persistent negative working capital. The magnitude of this ratio shifted significantly as the working capital deficit fluctuated. The period between March 2024 and September 2024 represents the most acute shift, where the reduction in the working capital deficit caused the turnover ratio to move toward more extreme negative values relative to the sales volume. The subsequent increase in the working capital deficit throughout 2025 and 2026 suggests a return to a more aggressive funding strategy using current liabilities to support an expanding revenue base.

The analysis of operating activity ratios reveals a general trend of declining inventory efficiency over the observed period. An inverse correlation is evident between the inventory turnover ratio and the average inventory processing period, where a reduction in turnover velocity has led to a corresponding increase in the duration of the inventory cycle.

Inventory Turnover Trends

A consistent downward trajectory in inventory turnover is observed from March 2022, where the ratio stood at 10.36, reaching a relative low of 8.06 by September 2025. The most significant contraction occurred throughout 2023, as the ratio fell from 9.29 in March to 8.27 by December. Subsequent periods show a stabilization phase, with the ratio fluctuating within a narrow band between 8.06 and 8.81, eventually closing at 8.63 in June 2026.

Average Inventory Processing Period

The time required to process inventory expanded from 34 to 35 days in the first half of 2022 to a peak of 45 days in mid-2025. A period of sustained inefficiency is noted between March 2024 and September 2024, during which the processing period remained stagnant at 44 days. While a brief improvement to 41 days occurred in December 2024, the metric returned to its peak of 45 days by June 2025 before moderating to 42 days by June 2026.

Operational Efficiency Synthesis

The expansion of the inventory processing period by approximately 7 to 10 days compared to early 2022 levels indicates a slower conversion of inventory into sales. The stabilization observed in late 2025 and early 2026 suggests a potential correction in inventory management strategies, as the turnover ratio began to recover and the processing period started to contract from its peak levels.

The analysis of the company's short-term operating activity reveals a fluctuating yet generally stable trend in receivables management over the period from March 2022 through June 2026. The relationship between the receivables turnover ratio and the average receivable collection period demonstrates a consistent inverse correlation, reflecting the efficiency of the credit-to-cash cycle.

Efficiency Peaks (2022)

A period of peak operational efficiency was observed during the latter half of 2022. The receivables turnover ratio reached its highest points in September and December 2022 at 7.34 and 7.32, respectively. Correspondingly, the average receivable collection period dropped to its lowest level of 50 days, indicating an accelerated conversion of credit sales into cash.

Stability Phase (2023 – 2024)

During 2023 and 2024, the collection cycle entered a phase of relative stability with moderate volatility. The turnover ratio generally fluctuated between 6.54 and 7.14, while the collection period remained largely within a range of 51 to 56 days. A temporary improvement occurred in late 2024, where the collection period decreased to 51 days by December 31, 2024, coinciding with a turnover ratio increase to 7.14.

Recent Trends (2025 – 2026)

A gradual decline in collection efficiency is observable throughout 2025 and into the first half of 2026. The average receivable collection period trended upward, reaching a peak of 58 days in June 2025 and again in June 2026. This expansion of the collection window is mirrored by a downward trend in the receivables turnover ratio, which fell to its lowest recorded value of 6.29 by June 30, 2026.

Overall, the data indicates that while the company maintains a consistent collection cycle, there has been a marginal increase in the time required to collect outstanding receivables over the long term. The transition from a 50-day low in late 2022 to a 58-day high in mid-2026 suggests a slight loosening of credit terms or a decrease in the speed of customer payments.

The operating cycle exhibits a general expansion over the period from March 2022 to June 2026. After reaching a minimum of 84 days in September 2022, the cycle trended upward, eventually stabilizing around the 100-day mark by mid-2026. This indicates a gradual increase in the time required to convert raw materials and inventory into cash from sales.

Average Inventory Processing Period

A gradual upward trend is observed in the inventory processing period, which rose from 35 days in early 2022 to a peak of 45 days in mid-2025. Although a slight reduction to 42 days occurred by June 2026, the period remained consistently higher after December 2023 than it was during the 2022 baseline, reflecting a slowing in inventory turnover.

Average Receivable Collection Period

The collection period demonstrated moderate volatility throughout the analyzed timeframe. An initial decline from 56 days to 50 days in late 2022 was followed by a steady increase, with the period fluctuating between 51 and 58 days from 2024 through 2026. The movement toward 58 days in the final quarters suggests a slight extension in the time taken to collect payments from customers.

Operating Cycle Dynamics

The overall operating cycle was influenced by the simultaneous lengthening of both the inventory and receivable periods. The cycle peaked at 103 days in September 2025, coinciding with the highest observed values for both sub-components. The transition from a sub-90-day cycle in 2022 to a consistent 100-day cycle in 2026 points to a systemic increase in the duration of the short-term operating activity.

An analysis of short-term operating activity reveals a general contraction and subsequent stabilization of the average payables payment period, inversely mirrored by an increase in the payables turnover ratio over the observed timeframe.

Initial Payment Cycle Reduction

A marked decrease in the average payables payment period is observed during 2022, falling from 68 days in March to 56 days by December. This trend indicates an acceleration in the settlement of supplier obligations, coinciding with a rise in payables turnover from 5.40 to 6.49.

Mid-Period Fluctuations

Throughout 2023, the payment period experienced moderate volatility, shifting from a low of 56 days in March to a peak of 63 days in December. This suggests a temporary extension of the credit period utilized from vendors during the latter half of the year.

Attainment of Operational Minimum and Stabilization

The payment cycle reached its lowest point of 52 days in June 2024. Following this minimum, the period entered a phase of relative stability, oscillating between 55 and 59 days from March 2025 through June 2026. This suggests the establishment of a consistent baseline for vendor payment terms.

Payables Turnover Correlation

The payables turnover ratio demonstrates a strong inverse correlation with the payment period. The ratio increased from an initial 5.40 to a peak of 6.98 in March 2024, reflecting a more efficient or rapid clearing of accounts payable. In the final quarters of the analysis, the turnover ratio stabilized between 6.19 and 6.68, aligning with the stabilization of the payment period around the 57-day mark.

The cash conversion cycle exhibits a general upward trend over the analyzed period, expanding from 23 days in March 2022 to 43 days by June 2026. This indicates a gradual increase in the time required to convert resource inputs into cash flows from sales, reflecting changes in working capital management efficiency.

Average Inventory Processing Period

A gradual increase is observed in the duration required to process inventory, rising from 35 days in early 2022 to a peak of 45 days in mid-2025. While there is some fluctuation, the period stabilizes between 42 and 45 days toward the end of the sequence, suggesting a slower inventory turnover compared to the start of the period.

Average Receivable Collection Period

The collection period demonstrates relative stability with moderate volatility, fluctuating primarily between 50 and 58 days. A period of improved collection efficiency was noted between September and December 2022, where the period dropped to 50 days. However, the cycle gradually drifted upward, ending at 58 days in June 2026, indicating a slight lengthening of the time taken to collect payments from customers.

Average Payables Payment Period

A notable downward trend is evident in the payment period for payables, which decreased from a high of 68 days in March 2022 to a low of 52 days in March 2025. This reduction suggests a shift toward faster settlement of obligations to suppliers, which removes a significant source of spontaneous financing that previously helped offset the cash conversion cycle.

Cash Conversion Cycle Dynamics

The expansion of the cash conversion cycle, which peaked at 47 days in mid-2025, is the result of a compounding effect: the inventory processing period lengthened and the payables payment period shortened. The reduction in the payables period acted as a primary driver for the increase in the overall cycle, as the company ceased to defer payments as long as it had in early 2022. The cycle ended at 43 days, maintaining a higher baseline than the initial 23 days.