Colgate-Palmolive Co. (NYSE:CL)

Inventory Turnover

The inventory turnover ratio shows a declining trend from early 2019 through late 2022, dropping from approximately 4.94 to a low near 3.62. However, it shows a modest recovery in early 2023, reaching about 3.95. This pattern indicates a gradual slowdown in inventory movement over the years, with some improvement recently, implying potential challenges in inventory management or changes in sales dynamics.

Receivables Turnover

Receivables turnover has exhibited fluctuations, ranging between approximately 9.7 and 13.4. Notably, there was an increase during mid-2020, peaking above 13. This suggests an improvement in collection efficiency during that period. From 2021 onward, turnover stabilized around 11 to 12, reflecting consistent collection performance but with a slight decline in mid-2023, signifying a possible easing in credit collection speed.

Payables Turnover

The payables turnover remained relatively stable, fluctuating mostly between 4.5 and 5.5. A lower point occurred around late 2020 and early 2022 when the ratio dipped towards 4.5, indicating slower payment to suppliers. Recent data show a return to higher turnover near 5.2, suggesting a resumption of faster payments or improved supplier terms.

Working Capital Turnover

This metric shows significant volatility, with extremes such as a peak near 131 in late 2019 and another dramatic spike approaching 697 in early 2021. Such large swings may be due to data irregularities or exceptional changes in working capital components. Apart from these outliers, the ratio generally trends downward post-2021, indicating reduced efficiency in generating sales from working capital.

Average Inventory Processing Period

The average number of days inventory is held increased steadily from 74 days in early 2019 to a peak of around 101 days by late 2022, before slightly reducing to around 92 days in mid-2023. This trend aligns with the decline in inventory turnover and points to slower inventory movement.

Average Receivable Collection Period

Days sales outstanding remained relatively stable, fluctuating mainly between 27 and 38 days over the period. There was a noticeable improvement in collection period in mid-2020 lowering to around 28 days, consistent with the increased receivables turnover at that time. Recent periods show minor lengthening to about 32 days.

Operating Cycle

The operating cycle lengthened over the period, rising from about 111 days in early 2019 to a maximum of approximately 130 days in 2022, before a slight reduction to 124 days by mid-2023. This lengthening indicates a longer duration between inventory acquisition and cash collection, largely influenced by increased inventory holding periods.

Average Payables Payment Period

This metric varied between approximately 67 and 81 days. Notable increases occurred during late 2020 and early 2022, where the payment period peaked above 75 days, indicating extended payment terms or delayed payments to suppliers. It shortened again to around 70 days in mid-2023, reflecting a return towards quicker payments.

Cash Conversion Cycle

The cash conversion cycle exhibited oscillations, generally hovering between 38 and 56 days. It reached its lowest point around 38 days in late 2021, suggesting efficient cash flow management at that time. Conversely, it increased to around 56 days by late 2022 and remained stable into 2023, signaling a longer time to convert investments back into cash.

The analyzed financial data of Colgate-Palmolive Co. over multiple quarters reveals several notable trends regarding cost of sales, inventories, and inventory turnover ratios.

Cost of Sales

The cost of sales exhibits a generally upward trajectory over the observed period. Starting at US$1,597 million in March 2019, it fluctuates slightly but shows a persistent increase towards the later quarters, reaching US$2,035 million by June 2023. This increase indicates rising expenses related to production or procured goods over time, which may reflect inflationary pressures, higher raw material prices, or expanded sales volumes.

Inventories

Inventories increased substantially from US$1,278 million in March 2019 to a peak of US$2,110 million by March 2023, followed by a slight decline to US$2,039 million in June 2023. The steady accumulation suggests either a buildup in stock possibly due to higher demand anticipation or slower inventory turnover. Inventory levels rose steadily without sharp declines, indicating consistent procurement or production decisions maintaining higher inventory bases.

Inventory Turnover Ratio

The inventory turnover ratio demonstrates a declining trend from 4.94 in March 2019 to a low of approximately 3.62 in September 2022, implying that inventory was being sold and replenished less frequently over time. A slight recovery is observed thereafter, with the ratio increasing to 3.95 by June 2023. This decrease in turnover rate, in conjunction with rising inventory levels, may suggest potential inefficiencies in inventory management or changes in demand dynamics. The recent uptick could indicate efforts to improve inventory utilization or a normalization of sales patterns.

Overall, the data suggest that while the company’s cost of sales is on an increasing trend, it is also holding higher inventory levels, which has resulted in a generally declining inventory turnover ratio with signs of improvement toward the end of the period. These patterns may merit attention to inventory strategies and cost control measures to optimize working capital and operational efficiency going forward.

The analysis of the quarterly financial data reveals several trends in sales, receivables, and receivables turnover for the observed periods. The net sales demonstrate a general upward trend from the beginning of the period to the most recent quarters. Starting at US$3,884 million in March 2019, net sales show some fluctuations but maintain growth, peaking around US$4,822 million by June 2023. There is a notable dip in mid-2020, possibly reflecting external economic challenges during that time, but sales quickly recovered and continued growing thereafter.

Receivables, net of allowances, display more variability throughout the quarters. Initial values were around US$1,547 million in March 2019, with fluctuations that correspond somewhat to changes in net sales. A significant drop is observed around mid-2020 (June 2020) where receivables decreased to US$1,231 million, possibly due to collection efforts or credit policy adjustments during uncertain economic conditions. After this decline, receivables oscillate but generally remain within a range of US$1,400 to US$1,650 million through 2023, with a slight upward movement in the most recent quarters.

The receivables turnover ratio, which measures how efficiently receivables are collected, shows an increasing trend from 2019 into 2020, rising from about 9.97 to over 13.0 in the last quarter of 2020. This indicates an improvement in collection efficiency during that period. However, from 2021 onward, the ratio exhibits a moderate downward trend, declining from a peak of approximately 13.43 at the end of 2021 to around 11.28 by mid-2023. This decrease suggests that while the company maintained relatively efficient receivable collections, the pace may have slowed slightly in more recent periods.

Net Sales

Overall growth with minor fluctuations; low point in mid-2020 likely linked to external challenges; recovery and steady increase up to mid-2023.

Receivables, net of allowances

Variable with a notable dip in mid-2020; general stabilization and slight increase in recent quarters, aligning with sales trends.

Receivables Turnover Ratio

Improvement observed through early 2020, peaking at about 13.43; subsequent gradual decrease indicating a moderate slowdown in collection efficiency after 2021.

In summary, the financial data suggest that the company successfully navigated a period of external volatility around 2020, managing to restore sales growth and maintain receivables management at a generally effective level. The recent softening in receivables turnover may warrant monitoring but does not currently indicate substantial deterioration. The overall financial performance reveals resilience and steady expansion in the reported timeframe.

The analysis of the quarterly financial data reveals several trends and insights regarding cost of sales, accounts payable, and payables turnover over the examined periods.

Cost of Sales

The cost of sales displays a generally upward trajectory throughout the quarters. Starting at approximately $1,597 million in the first quarter of 2019, it experienced fluctuations within a narrow range during 2019 and early 2020 but showed more consistent increases beginning in the third quarter of 2020. The figure peaked around $2,055 million in the third quarter of 2022 before slightly declining to approximately $2,035 million by mid-2023. This pattern reflects an overall increase of roughly 27% over the full period, indicating rising expense levels potentially linked to greater sales volume or increasing input costs.

Accounts Payable

Accounts payable figures fluctuated moderately but generally moved upward over the observed timeframe. Initial values near $1,215 million in early 2019 showed gradual increases and periods of small declines. Significant elevation is observed in late 2020 and again in early 2022, with accounts payable reaching levels close to $1,609 million by mid-2023. The trend suggests both growing short-term liabilities and possibly extended payment terms or increased purchasing activity.

Payables Turnover Ratio

The payables turnover ratio ranged between approximately 4.5 and 5.5 times per year over the period. Notably, this ratio experienced a decline in late 2020 and early 2022, corresponding with spikes in accounts payable, before recovering somewhat in subsequent quarters. Toward mid-2023, the turnover ratio rose to over 5.2, reflecting a quicker payment rate or reduced reliance on trade credit. The fluctuations in this ratio imply dynamic supplier payment practices or cash management strategies aligned with evolving operational conditions.

In summary, cost of sales has steadily increased over the period, while accounts payable generally trended upward with episodic surges. The payables turnover ratio exhibited some variability, indicating changing payment behaviors. Together, these trends may reflect both growth in operational scale and adjustments in working capital management.

The financial data reveals several notable trends relating to working capital, net sales, and working capital turnover over the examined periods.

Working Capital

Working capital displayed significant volatility across the quarters. Initially, it started at 268 million US dollars in March 2019, reached a peak at 473 million in June 2019, then sharply declined to negative values from March 2020 through December 2020, indicating potential liquidity strains or increased current liabilities during this period. From March 2021 onwards, a recovery trend is observed with working capital turning positive again and steadily growing, peaking at 1109 million US dollars in December 2022 before slightly decreasing but remaining robust at 805 million in June 2023.

Net Sales

Net sales exhibited a general upward trend over the analyzed timeframe. Starting at approximately 3.9 billion US dollars in March 2019, sales increased gradually by the end of 2019. Despite some fluctuations, the overall trajectory remained positive through 2020 to mid-2023. Sales reached their highest levels toward early 2023, with reported values exceeding 4.8 billion US dollars. This steady increase suggests sustained demand or successful market positioning despite external challenges like the pandemic period.

Working Capital Turnover

The working capital turnover ratio, which measures how efficiently working capital is used to support sales, shows strong fluctuations. Initially, the ratio was very high in March 2019, indicating efficient use of working capital. However, during parts of 2020, data is missing, limiting insights for those periods. In 2021 and beyond, the ratio stabilizes within a range of approximately 16 to 41, reflecting moderate efficiency levels. The exceptional high turnover ratio in March 2021 (around 697) likely corresponds to unusually low working capital coupled with sustained sales, indicating a temporary distortion rather than normal performance.

Overall, the data suggests that while the company experienced a dip in liquidity during early 2020, it managed to recover working capital levels substantially thereafter. Sales growth was consistent despite disruptions, contributing to improved operational performance. The efficiency of working capital use, as reflected by turnover ratios, became more stable and moderate in recent periods compared to earlier sharp fluctuations.

Inventory Turnover Analysis

The inventory turnover ratio demonstrates a general declining trend from early 2019 through 2022, dropping from approximately 4.94 to around 3.62 at the end of September 2022, indicating a gradual reduction in the frequency with which inventory is sold and replaced within the periods analyzed. However, there is a slight recovery observed in the early quarters of 2023, with the ratio increasing to 3.95 by June 2023. This suggests a possible improvement in inventory management or sales velocity in the most recent quarters.

Average Inventory Processing Period

The average inventory processing period shows an inverse pattern relative to the inventory turnover ratio. Beginning at 74 days in March 2019, it steadily increases, peaking around 101 days in September 2022. This reflects that inventory remains on hand for a longer period before being sold. A modest decrease is noted into the first half of 2023, dropping back to 92 days by June 2023, which aligns with the improvement seen in the inventory turnover ratio.

Overall Insights

The observed trends reveal increasing challenges in inventory movement through most of the timeframe, possibly influenced by external factors affecting supply chains or demand fluctuations. The longer holding periods suggest either slower sales or excess inventory accumulation. The recent quarter improvements imply adjustments may have been made to enhance inventory efficiency or respond to changing market conditions, though the turnover ratio and processing period have not fully reverted to early 2019 levels.

Receivables Turnover

The receivables turnover ratio exhibited a generally positive trend from the first quarter of 2019 through mid-2021, increasing from 9.97 to a peak of 13.43 by the end of 2021. This indicates an improvement in effectiveness in collecting receivables over this period. However, starting in early 2022, the ratio declined, falling to 11.28 by mid-2023. Despite this decrease, the turnover rate remains higher than the early 2019 levels, signifying relatively efficient receivables management compared to the initial periods.

Average Receivable Collection Period

The average receivable collection period inversely mirrored the trend in receivables turnover. It decreased steadily from 37 days in March 2019 to a low of 27 days by December 2021, reflecting faster collection of receivables. From early 2022 onwards, the collection period showed mild fluctuations but generally increased, reaching 32 days by June 2023. Although there is a slight lengthening in the collection cycle in recent quarters, the collection period remains lower than it was in early 2019, indicating an overall improvement in the efficiency of converting receivables into cash over the entire timeframe.

Overall Analysis

The company demonstrated enhanced efficiency in receivables management from 2019 through 2021, with increased turnover and a decreased collection period suggesting more rapid cash conversion cycles. Beginning in 2022, there were signs of a modest decline in this efficiency, as turnover ratios decreased and collection periods lengthened slightly. Nonetheless, performance levels continued to surpass those observed at the start of the examined period, indicating sustained operational improvements despite recent moderate regression.

Average Inventory Processing Period

The average inventory processing period exhibited a fluctuating trend over the observed quarters. Starting at 74 days in March 2019, it gradually increased to a peak of 101 days in September 2022. Notable increments occurred during 2020, reaching as high as 95 days by December and continuing upward throughout 2022. In the first half of 2023, this period showed a slight reduction to 92 days by June, indicating some improvement in inventory turnover efficiency compared to the previous peak.

Average Receivable Collection Period

This metric demonstrated moderate variability but generally remained within a range of 27 to 38 days. It began at 37 days in March 2019, briefly decreased to a low of 27 days in December 2021, and then stabilized around the low 30s into mid-2023. This stability suggests consistent effectiveness in the receivables collection process over time, despite minor fluctuations.

Operating Cycle

The operating cycle mirrored the inventory processing trends, starting at 111 days in March 2019 and increasing to a peak of approximately 130 days during 2022. There was an observable lengthening of the cycle during 2020 through 2022, coinciding with increased inventory holding periods. However, in early 2023, the operating cycle showed a modest decline to 124 days by June, implying a slight improvement in overall operational efficiency. This duration indicates the combined impact of both inventory management and receivables collection on the company's operating liquidity.

The analysis of payables management metrics over the observed periods reveals several notable trends and shifts in payment efficiency.

Payables Turnover

The payables turnover ratio fluctuated between approximately 4.5 and 5.5 times over the periods. Initially, the ratio exhibited moderate stability, maintaining around 5.2 to 5.3 times during 2019. A decline is evident in the fourth quarter of 2020, dropping to 4.63, indicating a slower turnover of payables, potentially reflecting extended payment cycles or supplier terms. This lower level persisted into 2021 with some rebound but then declined again in early 2022 to about 4.53 before gradually increasing back toward 5.2 by mid-2023. Overall, the data suggests periods of both efficient and slower payables turnover, with a tendency towards longer payment cycles in late 2020 and early 2022.

Average Payables Payment Period

The average number of days to pay payables inversely mirrors the payables turnover movement. It consistently ranged from roughly 67 to 81 days. Early 2019 values hovered around 69-71 days, indicating relatively stable payment timing. The average payment period increased significantly by the end of 2020, peaking at 79 days, confirming slower payments during this time frame. This elevated payment duration continued into 2021 and was highest around March 2022 at 81 days. Subsequently, this period trended downward toward 70 days by mid-2023, demonstrating a return to quicker payment practices.

In summary, the data reflects cyclical variations in payables management, with pronounced lengthening of payment periods during late 2020 and early 2022, correspondingly reducing the payables turnover ratio. The most recent periods indicate efforts to improve payment efficiency, as evidenced by shortened average payment periods and increased turnover ratios. These trends may be influenced by changing supplier payment terms, operational cash management strategies, or external economic conditions affecting liquidity and procurement timing.

The financial data demonstrates several notable trends regarding inventory management, receivables, payables, and cash conversion cycles over the analyzed periods.

Average Inventory Processing Period

This metric shows a general upward trend over time, increasing from 74 days at the beginning of 2019 to a peak of 101 days in the third quarter of 2022. After this peak, it slightly decreases but remains elevated around the high 90s by mid-2023. This indicates a lengthening time for inventory turnover, suggesting either slower sales, stocking of more inventory, or both.

Average Receivable Collection Period

The average collection period remains relatively stable and somewhat volatile, fluctuating mostly between 27 and 38 days throughout the period. There is no significant upward or downward long-term trend, but some short-term fluctuations are evident. This consistency suggests that the company's credit and collection policies have remained relatively stable despite period-to-period variations.

Average Payables Payment Period

The payables period fluctuates modestly, with values ranging from 67 to 81 days. There is no clear trend of consistent increase or decrease, but periods of elongation are followed by reductions, indicating active management of supplier payments. Despite some variability, the period mainly centers around the low to mid-70s.

Cash Conversion Cycle

The cash conversion cycle (CCC) reveals more variability and some increase over time, starting at 41 days in early 2019 and reaching values consistently in the mid-50s by 2023. The CCC peaks at 56 days during multiple quarters in 2022 and 2023. This reflects the combined effect of increasing inventory days and relatively stable receivables and payables periods, leading to a longer duration for cash to be tied up in operations.

Overall, the data suggests a lengthening inventory processing period as the primary driver of the extended cash conversion cycle. Receivables collection efficiency remains steady, and payables management shows variability without a clear directional trend. The increasing cash conversion cycle indicates that working capital is tied up for longer durations, potentially impacting liquidity and operational flexibility.