Hershey Co. (NYSE:HSY)

Inventory Turnover

The inventory turnover ratio showed a slight decline from 5.37 in 2018 to 4.61 in 2020, indicating slower inventory movement during this period. However, it improved moderately in the subsequent years, reaching 5.05 by 2022, suggesting a recovery in inventory management efficiency.

Receivables Turnover

Receivables turnover increased overall from 13.11 in 2018 to 14.65 in 2022, with a noticeable dip in 2020. This trend indicates improvement in the company's ability to collect receivables more quickly over time, especially after 2020.

Payables Turnover

There was a consistent decrease in payables turnover ratio from 8.39 in 2018 to 6.10 in 2022. This pattern suggests the company took longer to pay its suppliers over time, which may reflect changes in payment policies or cash management strategies.

Working Capital Turnover

The available data for working capital turnover shows extreme fluctuation, with a very high ratio of 73.74 in 2019 followed by a sharp drop to 7.5 in 2020, and missing values for other years. This inconsistency limits meaningful trend analysis but indicates volatility in the use of working capital during the observed years.

Average Inventory Processing Period

Days inventory remained fairly stable with a slight increase from 68 days in 2018-2019 to a peak of 79 days in 2020. It then decreased to 72 days by 2022. This suggests inventory was held longer during 2020 but improved subsequently.

Average Receivable Collection Period

The average collection period declined gradually from 28 days in 2018 to 25 days in 2022, indicating improved efficiency in collecting outstanding customer payments over the five-year period.

Operating Cycle

The operating cycle lengthened from 96 days in 2018 to a high of 107 days in 2020, then contracted back to 97 days by 2022. This pattern reflects increased time tied up in operating assets during 2020 but a return toward earlier levels afterward.

Average Payables Payment Period

The payables payment period consistently extended from 43 days in 2018 to 60 days in 2022. This indicates the company has taken longer to settle its supplier obligations, suggesting a shift toward utilizing payables as a financing source.

Cash Conversion Cycle

The cash conversion cycle showed a decrease from 53 days in 2018 to a low of 37 days in 2022, despite some volatility including an increase to 59 days in 2020. The reduction in recent years indicates an overall improvement in cash flow efficiency, shortening the time between cash outflow and inflow.

Cost of Sales

The cost of sales showed a consistent upward trend over the five-year period. Starting at approximately 4.22 billion US dollars in 2018, it increased each year to reach about 5.92 billion US dollars by 2022. This represents a notable overall increase, suggesting either higher production costs or increased sales volume.

Inventories

Inventories also increased steadily from 784.9 million US dollars in 2018 to 1.17 billion US dollars in 2022. The growth in inventory levels indicates accumulating stock, which could be due to higher production or possibly slower turnover at certain points.

Inventory Turnover

The inventory turnover ratio experienced some fluctuation during the period. It started at 5.37 in 2018 and slightly declined to 5.35 in 2019, followed by a more significant decrease to 4.61 in 2020. Subsequently, it recovered to 4.98 in 2021 and further increased to 5.05 in 2022. This pattern shows a dip in the efficiency of inventory usage in 2020, with partial recovery in the following years, though it did not fully return to the initial level observed in 2018.

Net Sales

Net sales exhibit a consistent upward trend over the five-year period, increasing from approximately $7.79 billion in 2018 to about $10.42 billion in 2022. This represents a steady growth trajectory, with a notable acceleration between 2021 and 2022.

Accounts Receivable, Trade, Net

Accounts receivable also show growth over the analyzed years, rising from around $594 million in 2018 to approximately $711 million in 2022. The increase is gradual but steady, indicating an expanding customer base or longer collection periods.

Receivables Turnover Ratio

The receivables turnover ratio fluctuates slightly but generally remains in a narrow range from 13.11 to 14.65. It reached its lowest point in 2020 at 13.25 and peaked in 2022 at 14.65. The overall ratio trend suggests efficiency in collecting receivables has been maintained or modestly improved over time.

Cost of Sales

The cost of sales showed a consistent increase over the five-year period. Starting at approximately 4.22 billion US dollars in 2018, it rose steadily each year to reach around 5.92 billion US dollars by the end of 2022. This indicates a rising cost base, which could be attributed to factors such as increased production volume, higher raw material prices, or expansion activities.

Accounts Payable

Accounts payable also increased significantly from 502 million US dollars in 2018 to 970 million US dollars in 2022. This upward trend mirrors the increase in cost of sales but at a proportionally higher rate, suggesting extended payment terms or greater reliance on supplier financing over the period.

Payables Turnover Ratio

The payables turnover ratio declined steadily from 8.39 in 2018 to 6.1 in 2022. A decreasing payables turnover ratio implies that the company is taking longer to pay its suppliers. This trend aligns with the observed growth in accounts payable and may indicate effective cash management strategies by extending payables, or potential liquidity constraints that require longer payment periods.

The financial data reveals several notable trends and fluctuations over the periods examined. Net sales demonstrate a consistent upward trajectory, increasing from approximately 7.79 billion in 2018 to over 10.42 billion in 2022. This steady growth indicates expanding revenue streams and potentially improving market penetration or pricing power.

Working capital exhibits significant volatility during the same timeframe. Initially, it was negative at around -179 million in 2018, then turned positive in 2019 to approximately 108 million and surged dramatically to over 1.08 billion in 2020. However, this trend reversed in subsequent years, with working capital falling back into negative territory at approximately -247 million in 2021 and further decreasing to -637 million in 2022. Such variability suggests potential challenges in managing short-term assets and liabilities, possibly reflecting changes in inventory levels, receivables, or payables management.

The working capital turnover ratio, available for 2019 and 2020, shows a stark decrease from 73.74 in 2019 to 7.5 in 2020. This decline implies a reduced efficiency in utilizing working capital to generate sales during 2020, despite the significant increase in working capital itself. Data for the remaining years are not provided, limiting the ability to assess turnover trends comprehensively.

Net Sales

Consistently increase year-over-year, reflecting robust revenue growth.

Working Capital

Exhibits pronounced fluctuations, with a peak in 2020 followed by substantial negative values in subsequent years, indicating instability in short-term financial resources.

Working Capital Turnover

Available for two years showing a marked decrease, suggesting reduced efficiency in converting working capital to sales during 2020.

Overall, while net sales steadily improve, the volatility and decline in working capital, coupled with reduced turnover efficiency in 2020, may warrant further investigation into operational or financial management practices affecting liquidity and asset utilization.

An analysis of the inventory management metrics over the five-year period reveals several noteworthy trends. The inventory turnover ratio experienced a decline from 5.37 in 2018 to a low of 4.61 in 2020, indicating a slower rate of inventory sales relative to inventory levels during this period. Following 2020, the ratio showed a recovery trend, increasing to 4.98 in 2021 and further to 5.05 in 2022, suggesting an improvement in inventory efficiency.

Correspondingly, the average inventory processing period, measured in number of days, increased from 68 days in 2018 and 2019 to 79 days in 2020, reflecting a lengthening of the time inventory is held before being sold. This elongation aligns with the observed dip in the inventory turnover ratio during the same year. Subsequently, the processing period decreased to 73 days in 2021 and further to 72 days in 2022, moving closer to levels seen prior to 2020 but still slightly elevated compared to 2018 and 2019.

Inventory Turnover Ratio

Displayed a decrease from 2018 through 2020, followed by a gradual recovery through 2022.

Average Inventory Processing Period

Increased notably in 2020, indicating longer inventory holding times, then moderately decreased in the subsequent years but did not fully return to the initial period length observed in 2018 and 2019.

Overall, the data suggests that inventory management somewhat deteriorated around 2020, with slower turnover and longer holding periods, possibly due to external factors impacting sales or supply chain efficiency. However, the improvement from 2021 onwards points to corrective measures or stabilization in operational aspects related to inventory control.

Receivables Turnover

The receivables turnover ratio exhibits a generally positive trend over the five-year period. Starting at 13.11 in 2018, it increased to 14.05 in 2019, declined slightly to 13.25 in 2020, then showed a marginal increase to 13.36 in 2021, followed by a noticeable rise to 14.65 in 2022. This pattern indicates an overall improvement in the efficiency with which receivables are collected, particularly highlighted by the strong increase in 2022.

Average Receivable Collection Period

The average receivable collection period, measured in number of days, shows an improving trend in terms of a shorter collection cycle. It decreased from 28 days in 2018 to 26 days in 2019, increased slightly to 28 days in 2020, then slightly decreased to 27 days in 2021, and further improved to 25 days in 2022. This variation aligns with the receivables turnover ratio, reflecting overall improved cash collection efficiency, especially in the latest period.

Summary of Trends and Insights

Both metrics suggest enhanced efficiency in managing accounts receivable over the observed periods, with 2022 standing out as a particularly strong year. The fluctuations in 2020 and 2021 may suggest temporary impacts on collection processes, potentially due to external factors, but the general direction is towards quicker collection and higher turnover. The reduction in collection period alongside increased turnover indicates more effective credit management or stronger customer payment behavior.

Average inventory processing period

The average inventory processing period exhibited a fluctuating trend over the examined years. It remained steady at 68 days during 2018 and 2019, increased notably to 79 days in 2020, before declining to 73 days in 2021 and slightly further to 72 days in 2022. This pattern suggests increased inventory holding duration in 2020, potentially due to supply chain or demand variations, followed by an improvement in inventory turnover in subsequent years.

Average receivable collection period

The average receivable collection period showed a slight overall decrease during the period. It started at 28 days in 2018, decreased to 26 days in 2019, rose back to 28 days in 2020, decreased to 27 days in 2021, and further decreased to 25 days by 2022. The general downward trend indicates improved efficiency in collecting receivables, despite minor fluctuations.

Operating cycle

The operating cycle mirrors the dynamics observed in inventory and receivable periods. It remained relatively consistent at 96 and 94 days in 2018 and 2019 respectively, spiked to 107 days in 2020, then shortened to 100 days in 2021, and further decreased to 97 days in 2022. The increase in 2020 corresponds to a longer inventory period, while the subsequent reductions reflect enhanced operational efficiency and possibly better working capital management.

Payables Turnover

The payables turnover ratio shows a consistent declining trend over the examined period. Starting at 8.39 in 2018, it steadily decreased each year to reach 6.1 by the end of 2022. This decline indicates that the company is taking longer to pay its suppliers over time, suggesting a lengthening in the payment cycle.

Average Payables Payment Period

The average payables payment period, expressed in number of days, moves inversely to the payables turnover ratio. It increased annually, from 43 days in 2018 to 60 days in 2022. This increase confirms that the company is extending the duration it takes to settle its outstanding payables, which may provide short-term liquidity benefits but could also reflect changed supplier payment terms or financial strategy adjustments.

Overall Insights

The simultaneous decrease in payables turnover and increase in payment period suggests a deliberate shift in payment practices. The company appears to manage its cash outflows by delaying payments, which might improve working capital but could affect supplier relationships. It is important to monitor whether this trend affects operational efficiency or credit terms in the future.

Average Inventory Processing Period

The average inventory processing period increased from 68 days in 2018 and 2019 to a peak of 79 days in 2020, followed by a decline to 73 days in 2021 and further to 72 days in 2022. This indicates that inventory turnover slowed significantly in 2020 but began to improve thereafter, suggesting better inventory management or changes in sales patterns after 2020.

Average Receivable Collection Period

The average receivable collection period remained relatively stable over the five-year period, fluctuating slightly between 25 and 28 days. It decreased from 28 days in 2018 to 25 days in 2022, indicating a gradual improvement in collecting receivables faster, which may enhance cash flow efficiency.

Average Payables Payment Period

The average payables payment period showed a steady and notable increase from 43 days in 2018 to 60 days in 2022. This trend suggests the company is taking longer to pay its suppliers, which could be a strategic move to optimize working capital by extending payment terms.

Cash Conversion Cycle

The cash conversion cycle experienced considerable variation, decreasing from 53 days in 2018 to 48 days in 2019, then rising sharply to 59 days in 2020. After that, it declined to 49 days in 2021 and further dropped to 37 days in 2022. The overall downward trend in recent years indicates improved efficiency in managing the cash conversion process, possibly through faster collections and extended payment terms, contributing to better liquidity management.