Return on Capital (ROC)
Return on capital (ROC) is after tax rate of return on net business assets. ROIC is unaffected by changes in interest rates or company debt and equity structure. It measures business productivity performance.
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Albemarle Corp. pages available for free this week:
- Cash Flow Statement
- Common-Size Balance Sheet: Liabilities and Stockholders’ Equity
- Analysis of Short-term (Operating) Activity Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Enterprise Value to FCFF (EV/FCFF)
- Return on Assets (ROA) since 2005
- Current Ratio since 2005
- Debt to Equity since 2005
- Price to Sales (P/S) since 2005
- Aggregate Accruals
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Return on Invested Capital (ROIC)
Albemarle Corp., ROIC calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| ROIC3 | ||||||
| Benchmarks | ||||||
| ROIC, Competitors4 | ||||||
| Linde plc | ||||||
| Sherwin-Williams Co. | ||||||
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 NOPAT. See details »
2 Invested capital. See details »
3 2022 Calculation
ROIC = 100 × NOPAT ÷ Invested capital
= 100 × ÷ =
4 Click competitor name to see calculations.
The financial data over the five-year period reveals significant fluctuations in key performance indicators. Net operating profit after taxes (NOPAT) exhibited a declining trend from 2018 through 2021, falling from approximately 827 million USD to a low of about 230 million USD. However, in 2022, there was a dramatic increase, with NOPAT reaching over 3 billion USD, the highest figure in the analyzed time frame.
Invested capital showed an overall upward trend, growing from around 5.4 billion USD in 2018 to more than 10 billion USD by 2022. Despite a slight dip in 2021, the general trajectory indicates increased investment in the company's operations over the period.
Return on invested capital (ROIC) mirrors the trends observed in NOPAT. The ratio declined steadily from 15.23% in 2018 to a low of 3.39% in 2021, indicating decreasing efficiency in generating returns from invested capital. However, the ROIC surged to 30.06% in 2022, signifying a remarkable improvement in profitability relative to the capital invested.
- Net operating profit after taxes (NOPAT)
- Declined from 827 million USD in 2018 to 230 million USD in 2021, then sharply increased to over 3 billion USD in 2022.
- Invested capital
- Increased overall from 5.4 billion USD in 2018 to over 10 billion USD in 2022, with a slight reduction in 2021.
- Return on invested capital (ROIC)
- Decreased progressively from 15.23% in 2018 to 3.39% in 2021, then sharply rose to 30.06% in 2022.
In summary, the data indicates a period of declining profitability and efficiency from 2018 to 2021, followed by a significant rebound in 2022. The substantial recovery in NOPAT and ROIC in the final year suggests an improved operational performance and better utilization of invested capital, which may reflect strategic or market changes positively impacting financial outcomes.
Decomposition of ROIC
Albemarle Corp., decomposition of ROIC
| ROIC | = | OPM1 | × | TO2 | × | 1 – CTR3 | |
|---|---|---|---|---|---|---|---|
| Dec 31, 2022 | = | × | × | ||||
| Dec 31, 2021 | = | × | × | ||||
| Dec 31, 2020 | = | × | × | ||||
| Dec 31, 2019 | = | × | × | ||||
| Dec 31, 2018 | = | × | × |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 Operating profit margin (OPM). See calculations »
2 Turnover of capital (TO). See calculations »
3 Effective cash tax rate (CTR). See calculations »
The data reflects significant changes in the company's financial efficiency and profitability over the analyzed period from 2018 to 2022.
- Operating Profit Margin (OPM)
- The operating profit margin exhibits a fluctuating trend with a notable decline from 27.7% in 2018 to 9.39% in 2021, indicating reduced operational profitability during these years. However, there is a substantial recovery in 2022, where the margin rises sharply to 45.71%, surpassing the levels observed at the beginning of the period, signifying a strong improvement in operational efficiency or favorable market conditions.
- Turnover of Capital (TO)
- The turnover of capital indicates how effectively the company is using its capital to generate revenue. It decreases from 0.62 in 2018 to a low of 0.42 in 2020, suggesting diminished capital utilization efficiency. Following 2020, there is a steady increase reaching 0.73 in 2022, which suggests that capital use efficiency improved, aligning with the rise observed in operating profit margin in the final year.
- 1 – Effective Cash Tax Rate (CTR)
- This measure ranges between approximately 73.75% and 90.31%, showing relatively high and stable values throughout, with a slight dip in 2021. The high ratios imply that the company is incurring significant cash tax expenses, although the dip in 2021 could indicate some temporary tax relief or adjustments during that year.
- Return on Invested Capital (ROIC)
- The return on invested capital reflects the efficiency of generating returns from the capital invested in the business. The trend shows a consistent decline from 15.23% in 2018 to a low of 3.39% in 2021, indicating decreasing effectiveness in generating profit from invested capital. However, a pronounced rebound to 30.06% in 2022 signals a substantial turnaround, suggesting improved profitability and capital allocation effectiveness in the last year of the period.
Overall, the period from 2018 to 2021 was characterized by declining operational and capital efficiency, as seen in both the operating profit margin and ROIC metrics. The year 2022 marks a strong recovery across key profitability and efficiency indicators, implying positive changes in business operations or market environment that enhanced the company’s financial performance significantly.
Operating Profit Margin (OPM)
Albemarle Corp., OPM calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Net sales | ||||||
| Profitability Ratio | ||||||
| OPM3 | ||||||
| Benchmarks | ||||||
| OPM, Competitors4 | ||||||
| Linde plc | ||||||
| Sherwin-Williams Co. | ||||||
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2022 Calculation
OPM = 100 × NOPBT ÷ Net sales
= 100 × ÷ =
4 Click competitor name to see calculations.
The financial data demonstrates distinct trends over the five-year period under review. The net operating profit before taxes (NOPBT) shows a declining pattern from 2018 through 2021, followed by a substantial increase in 2022. Specifically, NOPBT decreased from approximately $935 million in 2018 to about $312 million in 2021, then markedly surged to over $3.3 billion in 2022.
Similarly, net sales experienced moderate fluctuations before a significant increase in the final year. Initially, net sales rose modestly from $3.37 billion in 2018 to $3.59 billion in 2019, then declined to around $3.13 billion in 2020. Sales slightly recovered in 2021 to $3.33 billion, before more than doubling to $7.32 billion in 2022.
The operating profit margin (OPM) reflects these changes in profitability relative to sales. The margin decreased steadily from 27.7% in 2018 to 9.39% in 2021, indicating a reduction in operational efficiency or increased costs relative to sales. However, in 2022, the OPM dramatically increased to 45.71%, highlighting a significant improvement in profitability and operational performance.
- Net Operating Profit Before Taxes (NOPBT)
- Exhibited a downward trend from 2018 to 2021, followed by a sharp increase in 2022.
- Net Sales
- Experienced minor fluctuations between 2018 and 2021, then showed a substantial rise in 2022, more than doubling compared to the previous year.
- Operating Profit Margin (OPM)
- Declined consistently from 27.7% in 2018 to 9.39% in 2021, indicating worsening operating efficiency, before a pronounced rebound to 45.71% in 2022.
Overall, the data points to a period of declining profitability and sales stability, followed by a pronounced recovery in the most recent year. This pattern may suggest strategic changes, market shifts, or other significant factors influencing both revenue generation and cost management in 2022.
Turnover of Capital (TO)
Albemarle Corp., TO calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net sales | ||||||
| Invested capital1 | ||||||
| Efficiency Ratio | ||||||
| TO2 | ||||||
| Benchmarks | ||||||
| TO, Competitors3 | ||||||
| Linde plc | ||||||
| Sherwin-Williams Co. | ||||||
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 Invested capital. See details »
2 2022 Calculation
TO = Net sales ÷ Invested capital
= ÷ =
3 Click competitor name to see calculations.
The financial data demonstrates several notable trends over the five-year period under review. Net sales experienced a generally fluctuating pattern with an initial increase from 3,374,950 thousand US dollars in 2018 to 3,589,427 thousand US dollars in 2019. This was followed by a decline in 2020 to 3,128,909 thousand US dollars and a subsequent recovery in 2021 to 3,327,957 thousand US dollars. The year 2022 exhibited a significant surge in net sales, reaching 7,320,104 thousand US dollars, more than doubling the previous year's figure.
Invested capital also underwent a series of changes that align with the variations in net sales to some extent. The invested capital rose from 5,433,093 thousand US dollars in 2018 to a peak of 7,383,741 thousand US dollars in 2020. After a slight decrease in 2021 to 6,792,146 thousand US dollars, there was a substantial increase in 2022 to 10,052,399 thousand US dollars, marking the highest value recorded in the timeframe.
The turnover of capital ratio, which measures the efficiency of using invested capital to generate sales, exhibited an inverse relationship relative to changes in invested capital and sales until the final year. It declined steadily from 0.62 in 2018 to its lowest point at 0.42 in 2020, reflecting reduced efficiency possibly due to increased capital and decreased sales. The ratio then showed improvement in 2021 to 0.49 and a more pronounced increase in 2022 to 0.73, indicating enhanced utilization of capital during the year of highest sales.
Overall, the data suggests that while the company faced some challenges in the 2019 to 2021 period with fluctuating sales and a rising but somewhat volatile invested capital base, the year 2022 marked a strong recovery and growth phase. This was characterized by both a substantial increase in net sales and invested capital, coupled with improved capital turnover efficiency, signaling a more effective use of resources during that period.
Effective Cash Tax Rate (CTR)
Albemarle Corp., CTR calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Net operating profit after taxes (NOPAT)1 | ||||||
| Add: Cash operating taxes2 | ||||||
| Net operating profit before taxes (NOPBT) | ||||||
| Tax Rate | ||||||
| CTR3 | ||||||
| Benchmarks | ||||||
| CTR, Competitors4 | ||||||
| Linde plc | ||||||
| Sherwin-Williams Co. | ||||||
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 NOPAT. See details »
2 Cash operating taxes. See details »
3 2022 Calculation
CTR = 100 × Cash operating taxes ÷ NOPBT
= 100 × ÷ =
4 Click competitor name to see calculations.
- Cash Operating Taxes
- The cash operating taxes show a fluctuating trend over the five-year period. Beginning at 107,671 thousand US$ in 2018, the amount decreased each year to reach a low of 72,906 thousand US$ in 2020. In 2021, there was a slight increase to 82,002 thousand US$, followed by a substantial spike to 324,092 thousand US$ in 2022.
- Net Operating Profit Before Taxes (NOPBT)
- The net operating profit before taxes experienced a downward trend from 2018 to 2021. Starting at 934,887 thousand US$ in 2018, it decreased progressively to 312,396 thousand US$ in 2021. However, in 2022, NOPBT surged significantly to 3,346,119 thousand US$, representing a dramatic recovery and growth compared to prior years.
- Effective Cash Tax Rate (CTR)
- The effective cash tax rate showed relative stability in the initial three years, with values between approximately 11.5% and 12.6% for 2018 through 2020. In 2021, the rate more than doubled to 26.25%, indicating a considerable increase in tax burden relative to operating profit. In 2022, the rate sharply declined to 9.69%, the lowest in the observed period.
- Overall Analysis
- The data indicates a period of declining profitability through 2021, accompanied by a varying tax environment. The sizeable increase in cash operating taxes in 2022 corresponds with the sharp increase in net operating profit, although the effective cash tax rate fell to its lowest level, suggesting potential changes in tax strategy or benefits. The substantial rebound in 2022's profitability and tax payments reflects a marked shift in financial performance and tax obligations compared to earlier years.