Analysis of Long-term (Investment) Activity Ratios
Activity ratios measure how efficiently a company performs day-to-day tasks, such us the collection of receivables and management of inventory.
Long-term Activity Ratios (Summary)
Air Products & Chemicals Inc., long-term (investment) activity ratios
Based on: 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30).
The analyzed financial ratios indicate notable trends in asset and equity utilization over the period from 2015 to 2020.
- Net fixed asset turnover
- This ratio exhibits a declining trend, starting at 1.03 in 2015, peaking slightly at 1.08 in 2016, and then continuously decreasing to 0.74 by 2020. The inclusion of operating lease right-of-use assets shows a very similar pattern, suggesting that lease assets did not significantly alter the turnover efficiency of fixed assets over time.
- Total asset turnover
- The total asset turnover ratio declines steadily overall, starting at 0.57 in 2015 and decreasing to 0.35 in 2020. A minor fluctuation is observed in 2018 and 2019 where it remains stable at 0.47, indicating a temporary halt in the downward trend before resuming its decline. The consistent decrease reflects a decline in the company’s ability to generate sales from its total asset base.
- Equity turnover
- Equity turnover declines markedly from 1.37 in 2015 to 0.73 in 2020. A sharp drop occurs after 2016, falling to approximately 0.81 by 2017 and maintaining a range between 0.73 and 0.82 thereafter, indicating a reduction in the efficiency of equity use for generating revenues with some stabilization in later years.
Overall, the observed trends suggest diminishing efficiency in utilizing fixed assets, total assets, and equity to generate sales over the time frame analyzed. The downward movements hint at potential increases in asset base or equity without proportional growth in sales, which may warrant further investigation into operational and capital investment decisions.
Net Fixed Asset Turnover
Air Products & Chemicals Inc., net fixed asset turnover calculation, comparison to benchmarks
| Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | Sep 30, 2016 | Sep 30, 2015 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Sales | 8,856,300) | 8,918,900) | 8,930,200) | 8,187,600) | 9,524,400) | 9,894,900) | |
| Plant and equipment, net | 11,964,700) | 10,337,600) | 9,923,700) | 8,440,200) | 8,852,700) | 9,636,900) | |
| Long-term Activity Ratio | |||||||
| Net fixed asset turnover1 | 0.74 | 0.86 | 0.90 | 0.97 | 1.08 | 1.03 | |
| Benchmarks | |||||||
| Net Fixed Asset Turnover, Competitors2 | |||||||
| Linde plc | 0.94 | — | — | — | — | — | |
| Sherwin-Williams Co. | 10.01 | — | — | — | — | — | |
| Net Fixed Asset Turnover, Sector | |||||||
| Chemicals | 1.49 | — | — | — | — | — | |
| Net Fixed Asset Turnover, Industry | |||||||
| Materials | 0.99 | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30).
1 2020 Calculation
Net fixed asset turnover = Sales ÷ Plant and equipment, net
= 8,856,300 ÷ 11,964,700 = 0.74
2 Click competitor name to see calculations.
- Sales Trend
- Sales exhibited a declining trend from 2015 to 2017, decreasing from approximately 9.89 billion US dollars to 8.19 billion US dollars. This decline moderated in 2018, with sales recovering slightly to 8.93 billion, but then remained relatively stable yet slightly declining through 2019 and 2020, ending at 8.86 billion US dollars. Overall, sales showed a downward trajectory over the six-year period.
- Plant and Equipment Net Value
- The net value of plant and equipment demonstrated a decreasing trend from 2015 to 2017, falling from about 9.64 billion to 8.44 billion US dollars. However, from 2018 onwards, there was a notable increase, rising to approximately 9.92 billion in 2018 and continuing upward to 10.34 billion in 2019 and 11.96 billion in 2020. This indicates significant investment and growth in fixed assets after 2017.
- Net Fixed Asset Turnover Ratio
- The net fixed asset turnover ratio showed a steady decline throughout the period. Starting at 1.03 in 2015, it increased slightly to 1.08 in 2016 but then steadily decreased each subsequent year, reaching 0.74 by 2020. This suggests that the efficiency of using fixed assets to generate sales reduced over time, possibly impacted by the rising asset base not being fully leveraged to increase sales volume.
- Summary Insights
- The data reflects a business scenario where investments in plant and equipment increased significantly after 2017, while sales did not experience similar growth and instead trended downward slightly. The decreasing net fixed asset turnover ratio indicates diminishing operational efficiency or underutilization of fixed assets. This may suggest the company is in a phase of asset expansion with a lag in proportional sales growth, which warrants attention from management to improve asset productivity or stimulate sales growth to better leverage the investments.
Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset)
Air Products & Chemicals Inc., net fixed asset turnover (including operating lease, right-of-use asset) calculation, comparison to benchmarks
| Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | Sep 30, 2016 | Sep 30, 2015 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Sales | 8,856,300) | 8,918,900) | 8,930,200) | 8,187,600) | 9,524,400) | 9,894,900) | |
| Plant and equipment, net | 11,964,700) | 10,337,600) | 9,923,700) | 8,440,200) | 8,852,700) | 9,636,900) | |
| Operating lease right-of-use assets | 376,800) | —) | —) | —) | —) | —) | |
| Plant and equipment, net (including operating lease, right-of-use asset) | 12,341,500) | 10,337,600) | 9,923,700) | 8,440,200) | 8,852,700) | 9,636,900) | |
| Long-term Activity Ratio | |||||||
| Net fixed asset turnover (including operating lease, right-of-use asset)1 | 0.72 | 0.86 | 0.90 | 0.97 | 1.08 | 1.03 | |
| Benchmarks | |||||||
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Competitors2 | |||||||
| Linde plc | 0.91 | — | — | — | — | — | |
| Sherwin-Williams Co. | 5.11 | — | — | — | — | — | |
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Sector | |||||||
| Chemicals | 1.37 | — | — | — | — | — | |
| Net Fixed Asset Turnover (including Operating Lease, Right-of-Use Asset), Industry | |||||||
| Materials | 0.95 | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30).
1 2020 Calculation
Net fixed asset turnover (including operating lease, right-of-use asset) = Sales ÷ Plant and equipment, net (including operating lease, right-of-use asset)
= 8,856,300 ÷ 12,341,500 = 0.72
2 Click competitor name to see calculations.
- Sales Trend
- Over the six-year period, sales exhibited a generally declining trend. Starting from approximately $9.89 billion in 2015, sales decreased to around $8.19 billion in 2017, which represents the lowest point within the dataset. Although there was a slight recovery in 2018 and 2019 with sales close to $8.9 billion, the sales figure again declined marginally in 2020 to approximately $8.86 billion. This pattern indicates a contraction in revenue over time, with some intermittent periods of stabilization.
- Plant and Equipment, Net
- The net value of plant and equipment, including operating lease right-of-use assets, showed a steady increase across the reported years. Beginning with $9.64 billion in 2015, this asset base declined slightly up to 2017, reaching about $8.44 billion. Thereafter, the value rose significantly, reaching $9.92 billion in 2018 and continuing upward to approximately $12.34 billion by 2020. This upward movement suggests ongoing capital investments or asset revaluation in the latter years.
- Net Fixed Asset Turnover Ratio
- The net fixed asset turnover ratio decreased consistently over the period, moving from a ratio of 1.03 in 2015 to 0.72 in 2020. This metric, which reflects efficiency in utilizing fixed assets to generate sales, indicates diminishing productivity of these assets year over year. The ratio's decline, particularly notable from 2017 onwards, corresponds with the expansion in asset base juxtaposed with stagnant or declining sales.
- Summary Insights
- The analysis reveals a divergence between asset growth and sales performance. While the company invested in or expanded its plant and equipment substantially from 2017 to 2020, sales did not exhibit a corresponding increase; rather, they remained flat or decreased slightly. This has resulted in a marked decline in asset turnover efficiency, suggesting that the increased capital investments have not yet translated into higher revenue generation. Such a trend may warrant further investigation into asset utilization, operational efficiency, or market conditions affecting sales.
Total Asset Turnover
Air Products & Chemicals Inc., total asset turnover calculation, comparison to benchmarks
| Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | Sep 30, 2016 | Sep 30, 2015 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Sales | 8,856,300) | 8,918,900) | 8,930,200) | 8,187,600) | 9,524,400) | 9,894,900) | |
| Total assets | 25,168,500) | 18,942,800) | 19,178,300) | 18,467,200) | 18,055,300) | 17,438,100) | |
| Long-term Activity Ratio | |||||||
| Total asset turnover1 | 0.35 | 0.47 | 0.47 | 0.44 | 0.53 | 0.57 | |
| Benchmarks | |||||||
| Total Asset Turnover, Competitors2 | |||||||
| Linde plc | 0.31 | — | — | — | — | — | |
| Sherwin-Williams Co. | 0.90 | — | — | — | — | — | |
| Total Asset Turnover, Sector | |||||||
| Chemicals | 0.42 | — | — | — | — | — | |
| Total Asset Turnover, Industry | |||||||
| Materials | 0.40 | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30).
1 2020 Calculation
Total asset turnover = Sales ÷ Total assets
= 8,856,300 ÷ 25,168,500 = 0.35
2 Click competitor name to see calculations.
- Sales Trends
- Sales figures demonstrate a declining trend over the six-year period. Starting at approximately $9.89 billion in 2015, sales decreased steadily to around $8.19 billion by 2017. Although there was a slight recovery in 2018 and 2019, sales plateaued near $8.9 billion during these years and then experienced a minor decrease to roughly $8.86 billion in 2020.
- Total Assets Trends
- Total assets exhibit a consistent upward trajectory across the years. Beginning at about $17.44 billion in 2015, assets steadily increased with some fluctuations, reaching approximately $19 billion by 2019. Notably, in 2020, there was a significant jump to about $25.17 billion, indicating a considerable expansion of the company's asset base in the most recent year.
- Total Asset Turnover Trends
- The total asset turnover ratio shows a declining pattern throughout the period. It started at 0.57 in 2015, indicating that the company generated $0.57 in sales for every dollar of assets. This ratio decreased steadily and reached a low of 0.35 by 2020. The consistent decline suggests that while assets increased, sales growth did not keep pace, leading to less efficient utilization of assets over time.
- Overall Insights
- The data reveals a scenario where sales have declined or remained relatively flat while the asset base expanded substantially. This divergence is reflected in the falling total asset turnover ratio, which points to reduced efficiency in converting assets into sales. The significant increase in total assets in 2020 may warrant further investigation to understand its nature—whether it is due to acquisitions, capital investments, or other factors—and how it aligns with the company's sales strategy.
Equity Turnover
Air Products & Chemicals Inc., equity turnover calculation, comparison to benchmarks
| Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2018 | Sep 30, 2017 | Sep 30, 2016 | Sep 30, 2015 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||||
| Sales | 8,856,300) | 8,918,900) | 8,930,200) | 8,187,600) | 9,524,400) | 9,894,900) | |
| Total Air Products shareholders’ equity | 12,079,800) | 11,053,600) | 10,857,500) | 10,086,200) | 7,079,600) | 7,249,000) | |
| Long-term Activity Ratio | |||||||
| Equity turnover1 | 0.73 | 0.81 | 0.82 | 0.81 | 1.35 | 1.37 | |
| Benchmarks | |||||||
| Equity Turnover, Competitors2 | |||||||
| Linde plc | 0.58 | — | — | — | — | — | |
| Sherwin-Williams Co. | 5.09 | — | — | — | — | — | |
| Equity Turnover, Sector | |||||||
| Chemicals | 0.90 | — | — | — | — | — | |
| Equity Turnover, Industry | |||||||
| Materials | 0.98 | — | — | — | — | — | |
Based on: 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30), 10-K (reporting date: 2017-09-30), 10-K (reporting date: 2016-09-30), 10-K (reporting date: 2015-09-30).
1 2020 Calculation
Equity turnover = Sales ÷ Total Air Products shareholders’ equity
= 8,856,300 ÷ 12,079,800 = 0.73
2 Click competitor name to see calculations.
- Sales Trend
- Sales figures exhibit a declining trend over the six-year period from September 30, 2015, to September 30, 2020. Sales peaked in 2015 at approximately 9.89 billion US dollars and decreased overall to about 8.86 billion US dollars by 2020. Notably, there was a significant drop in sales between 2016 and 2017, after which sales showed some recovery in 2018 but subsequently stabilized at a lower level through to 2020.
- Total Shareholders' Equity Trend
- The total shareholders’ equity shows a consistent upward trend throughout the period. Beginning at roughly 7.25 billion US dollars in 2015, equity increased annually, reaching approximately 12.08 billion US dollars by 2020. This indicates an overall strengthening of the company's equity base despite the declining sales.
- Equity Turnover Analysis
- The equity turnover ratio, which measures the efficiency of the company in generating sales from equity, declined steadily from 1.37 in 2015 to 0.73 in 2020. This decline reflects that while equity increased significantly, sales have not kept pace, leading to lower turnover ratios. The substantial drop after 2016, remaining under 1.0 thereafter, indicates reduced effectiveness in leveraging shareholder equity to generate sales.
- Overall Interpretation
- The data suggests the company has been growing its equity base consistently but is experiencing challenges in translating this growth into increased sales revenue. The declining equity turnover ratio points to a potential efficiency concern, where increased capital is not proportionally contributing to sales generation. Management may need to investigate operational or market factors contributing to the declining sales and assess strategies to improve the utilization of equity capital.