Linde plc (NASDAQ:LIN)

The short-term operating activity ratios exhibit several notable trends over the observed period. Generally, a decline in efficiency metrics is apparent from 2022 through 2025, although some indicators show stabilization or slight improvement in the most recent periods. Inventory management, accounts receivable collection, and accounts payable management all demonstrate shifts worthy of attention.

Inventory Turnover

Inventory turnover decreased consistently from 10.36 in March 2022 to a low of 8.06 in September 2025, before recovering slightly to 8.46 in December 2025. This suggests a lengthening of the time inventory is held, potentially indicating slower sales, overstocking, or obsolescence. The decline warrants further investigation into inventory management practices.

Receivables Turnover

Receivables turnover also experienced a downward trend, moving from 6.56 in March 2022 to 6.28 in September 2025, with a partial recovery to 6.84 in December 2025. This indicates a slowing in the rate at which the company collects its receivables, potentially signaling issues with credit policies or collection efforts. The recent uptick may suggest improved collection strategies.

Payables Turnover

Payables turnover showed more fluctuation. It increased from 5.40 in March 2022 to 6.50 in September 2022, then decreased to 5.79 in December 2022. It continued to fluctuate, reaching a low of 6.19 in December 2025. This suggests variability in the company’s payment practices and potentially its ability to negotiate favorable terms with suppliers.

Average Inventory Processing Period

The average inventory processing period lengthened from 35 days in March 2022 to 45 days in September 2025, before decreasing to 43 days in December 2025. This aligns with the declining inventory turnover and reinforces concerns about inventory management efficiency.

Average Receivable Collection Period

The average receivable collection period increased from 56 days in March 2022 to 58 days in September 2025, then decreased to 53 days in December 2025. This mirrors the trend in receivables turnover, indicating a slower collection of outstanding invoices.

Average Payables Payment Period

The average payables payment period decreased from 68 days in March 2022 to 56 days in September 2022, then fluctuated, ending at 59 days in December 2025. This suggests a generally shorter timeframe for paying suppliers, although the recent increase warrants monitoring.

Operating and Cash Conversion Cycles

The operating cycle increased from 91 days in March 2022 to 103 days in September 2025, before decreasing to 96 days in December 2025. The cash conversion cycle increased from 23 days in March 2022 to 47 days in September 2025, then decreased to 37 days in December 2025. These trends indicate that the company is taking longer to convert its investments in inventory and receivables into cash, potentially impacting liquidity. The recent decreases in both cycles suggest some improvement in working capital management.

Overall, the observed trends suggest a gradual decrease in the efficiency of working capital management. While some indicators show signs of stabilization or improvement in the most recent quarter, continued monitoring and potential corrective actions are recommended to optimize inventory levels, accelerate receivables collection, and maintain healthy supplier relationships.

Inventory turnover exhibited a generally declining trend over the observed period, though with some fluctuation. Initial values were relatively strong, but decreased consistently through 2023 and into 2024 before showing a slight recovery towards the end of the period.

Initial Period (Mar 31, 2022 – Sep 30, 2022)

The inventory turnover ratio began at 10.36 and increased to 10.75 over this period. This suggests efficient inventory management and a relatively quick conversion of inventory into sales during the first half of 2022. The values remained consistently above 10, indicating a healthy rate of inventory utilization.

Decline (Dec 31, 2022 – Sep 30, 2023)

A consistent downward trend was observed from December 31, 2022, through September 30, 2023. The ratio decreased from 9.83 to 8.27. This decline could indicate slowing sales, increased inventory levels, or a combination of both. The rate of decline accelerated during this period.

Stabilization and Recovery (Oct 31, 2023 – Dec 31, 2025)

The ratio reached its lowest point of 8.06 in September 2025. However, a slight stabilization and recovery were evident in the latter part of the period. The ratio increased to 8.46 by December 31, 2025, suggesting a potential stabilization of sales or improved inventory management practices. The values remained below the initial levels observed in 2022.

Inventory and Cost of Sales Relationship

Cost of sales, exclusive of depreciation and amortization, remained relatively stable throughout the period, fluctuating between approximately US$4.3 billion and US$5.3 billion. Inventories generally increased from US$1.766 billion in March 2022 to US$2.128 billion in September 2025. The combined effect of relatively stable cost of sales and increasing inventory levels contributed to the observed decline in inventory turnover.

Overall, the observed trend suggests a gradual decrease in the efficiency of inventory management. While a slight recovery is noted towards the end of the period, the ratio remains below its initial levels, warranting further investigation into the underlying causes of the decline.

The receivables turnover ratio exhibits fluctuations over the observed period, generally remaining within a relatively narrow range. An initial upward trend is noted from March 31, 2022, to September 30, 2022, followed by a period of relative stability before a slight decline and subsequent recovery.

Overall Trend

The ratio demonstrates a cyclical pattern. It begins at 6.56 in March 2022, increases to a peak of 7.34 in September 2022, then experiences a slight decrease to 7.32 in December 2022. A further decline is observed through June 2023 (6.90), followed by a modest increase through December 2023 (6.96). A more noticeable decrease occurs in the first half of 2024, reaching a low of 6.54 in March 2024, before recovering to 6.84 by December 2025.

Peak and Trough Values

The highest recorded receivables turnover ratio is 7.34, occurring on September 30, 2022. The lowest value is 6.36, recorded on June 30, 2024. This represents a range of approximately 1.16 between the peak and trough values.

Recent Performance

From September 30, 2024, to December 31, 2025, the ratio shows an improving trend, increasing from 6.78 to 6.84. This suggests a potential improvement in the efficiency of collecting receivables in the most recent quarter.

Relationship to Sales

While the receivables turnover fluctuates, it generally moves in a manner consistent with sales. Periods of higher sales do not always directly correlate with higher turnover, and vice versa, suggesting factors beyond sales volume influence collection efficiency. For example, sales decreased from September 30, 2022, to December 31, 2022, but the receivables turnover remained relatively stable.

In summary, the receivables turnover ratio indicates a generally efficient collection process, although subject to periodic variations. The recent upward trend warrants continued monitoring to determine if it represents a sustained improvement in receivables management.

The accounts payable turnover ratio exhibits fluctuations over the observed period, generally indicating the efficiency with which the company manages its short-term liabilities relative to its cost of sales. An initial increase is followed by a period of relative stability and then a notable shift towards the end of the period.

Overall Trend

The ratio generally increased from March 31, 2022, to September 30, 2022, before stabilizing and then declining towards December 31, 2025. The highest values were observed in the September 2022 and March 2025 periods.

Initial Increase (Mar 31, 2022 – Sep 30, 2022)

The payables turnover ratio increased from 5.40 in March 2022 to 6.50 in September 2022. This suggests an improved ability to pay off suppliers within this timeframe, potentially due to more efficient purchasing practices or faster inventory conversion. The increase indicates the company was able to utilize credit terms more effectively.

Period of Stability (Sep 30, 2022 – Jun 30, 2023)

Following the peak in September 2022, the ratio experienced a slight decrease but remained relatively stable, fluctuating between 5.79 and 6.61 through June 2023. This suggests a consistent, though not improving, management of accounts payable during this period.

Subsequent Decline (Jun 30, 2023 – Dec 31, 2025)

From June 2023 onwards, a downward trend is observed, with the ratio decreasing from 6.61 to 6.19 by December 2025. This could indicate a lengthening of the payment cycle, potentially due to negotiating extended payment terms with suppliers, or a shift in purchasing strategy. It is also possible that the cost of sales growth outpaced the changes in accounts payable.

Recent Performance (Mar 31, 2024 – Dec 31, 2025)

The most recent data points show a continued decline, although the rate of decline appears to be moderating. The ratio moved from 6.02 in March 2024 to 6.19 in December 2025. This suggests that while the trend is still downward, the impact may be lessening.

Overall, the observed fluctuations in the payables turnover ratio warrant further investigation to determine the underlying causes and assess their impact on the company’s financial health and operational efficiency.

The working capital turnover ratio exhibits a notable pattern of fluctuation over the observed period. Initially, working capital is negative across all quarters, indicating a financing strategy where short-term liabilities exceed short-term assets. The magnitude of the negative working capital decreases over time, suggesting a shift in the company’s short-term financial position.

Working Capital Trend

From March 31, 2022, to December 31, 2022, negative working capital decreases from US$2,249 million to US$3,432 million, then fluctuates between US$3,141 million and US$4,881 million through the first half of 2023. A consistent reduction in the magnitude of negative working capital is then observed, reaching US$661 million by June 30, 2024. This trend continues into 2025, with values ranging from US$888 million to US$2,861 million.

Sales Trend

Sales demonstrate relative stability throughout the period, generally fluctuating between US$7,899 million and US$8,797 million. A slight increase in sales is observed from March 31, 2024, through December 31, 2025, moving from US$8,100 million to US$8,764 million. The overall sales pattern does not exhibit strong seasonality or a clear directional trend.

Working Capital Turnover Ratio

Due to the negative working capital values, the working capital turnover ratio cannot be meaningfully calculated. A negative working capital position implies that the company is financing its operations with more short-term liabilities than short-term assets. Consequently, the traditional interpretation of the working capital turnover ratio – measuring how efficiently working capital is used to generate sales – is not applicable. The trend in the absolute value of working capital, however, provides insight into the company’s short-term financing practices. The decreasing magnitude of negative working capital suggests a move towards a more balanced short-term financial structure.

The observed reduction in the magnitude of negative working capital, coupled with relatively stable sales, suggests the company is becoming less reliant on short-term financing to fund its operations. Further investigation into the composition of working capital – specifically, changes in accounts receivable, inventory, and accounts payable – would provide a more detailed understanding of these trends.

The average inventory processing period exhibited a generally increasing trend over the observed timeframe. Initially, the period remained relatively stable before demonstrating a consistent rise, followed by a slight moderation towards the end of the period.

Overall Trend

From March 31, 2022, to December 31, 2023, the average inventory processing period increased from 35 days to 44 days. This represents a 25.7% increase over this period, indicating a lengthening in the time required to convert inventory into sales. A slight decrease was observed in the following quarters, but the period remained elevated compared to the initial values.

Initial Stability (Q1 2022 - Q3 2022)

The average inventory processing period remained consistent at 34-35 days for the first three quarters of 2022. This suggests a stable operational efficiency in managing inventory during this time.

Increasing Trend (Q4 2022 - Q2 2023)

Beginning in the fourth quarter of 2022, the average inventory processing period began to increase, reaching 37 days, 39 days, and 41 days sequentially through the first two quarters of 2023. This indicates a potential slowdown in inventory turnover or an increase in inventory levels.

Peak and Moderation (Q3 2023 - Q4 2025)

The period peaked at 45 days in both the third and fourth quarters of 2023, and the second quarter of 2025. While remaining elevated, the period decreased to 43 days by the end of 2025, suggesting a possible stabilization or slight improvement in inventory management. The period fluctuated between 41 and 44 days during this time.

Correlation with Inventory Turnover

The observed increase in the average inventory processing period corresponds with a decrease in the inventory turnover ratio. As inventory turnover declined from 10.36 in March 2022 to a low of 8.22 in June 2024, the average processing period increased, reinforcing the relationship between these two metrics. The slight increase in inventory turnover in the final quarters is mirrored by a slight decrease in the processing period.

In summary, the average inventory processing period generally lengthened over the analyzed period, potentially indicating challenges in inventory management efficiency. While some moderation occurred towards the end of the period, the period remained higher than initial levels.

The average receivable collection period exhibited a generally stable pattern over the observed period, with fluctuations within a relatively narrow range. An initial decreasing trend is followed by periods of stability and slight increases, ultimately concluding with a return towards the earlier values.

Overall Trend

The average collection period began at 56 days in March 2022 and decreased to a low of 50 days by the end of 2022. It then experienced a slight increase, reaching 53 days in June 2023, before remaining relatively consistent through September 2023. A subsequent rise to 58 days occurred by September 2025, but decreased to 53 days by December 2025.

Short-Term Fluctuations

From March 2022 to December 2022, a consistent decline in the average collection period is apparent, suggesting improved efficiency in collecting receivables. The period from March 2023 to September 2023 demonstrates stability, indicating consistent collection practices. A gradual increase is then observed from June 2023 to September 2025, potentially indicating a lengthening of the time required to collect receivables, before a final decrease.

Recent Performance

The most recent two periods, September 2025 and December 2025, show a decrease from 58 days to 53 days. This recent decline suggests a potential improvement in collection efficiency or a change in customer payment terms towards the end of the observation period.

Range

Throughout the analyzed timeframe, the average receivable collection period fluctuated between a low of 50 days and a high of 58 days. This indicates a relatively controlled range, suggesting consistent credit and collection policies, despite the observed fluctuations.

The operating cycle exhibited a generally increasing trend over the observed period, with some fluctuations. Analysis of the component ratios reveals the drivers behind this overall pattern.

Average Inventory Processing Period

The average inventory processing period demonstrated a gradual increase from 35 days in March 2022 to 45 days in June 2025. While there were minor quarterly variations, the overall trend indicates a lengthening time required to convert inventory into finished goods and make them available for sale. A slight decrease to 43 days was observed in December 2025, but this does not negate the broader upward trajectory. The period remained relatively stable between March 2022 and December 2022, before beginning a more consistent climb.

Average Receivable Collection Period

The average receivable collection period also showed an increasing trend, though with more pronounced quarterly volatility. Starting at 56 days in March 2022, it generally rose to 58 days by September 2025, before decreasing to 53 days in December 2025. The period fluctuated between 50 and 56 days throughout 2022 and the first half of 2023. The latter half of 2023 and the first half of 2024 saw a period of higher collection times, peaking at 58 days. The final quarter of 2025 showed a return to a shorter collection period.

Operating Cycle

The operating cycle, calculated as the sum of the average inventory processing period and the average receivable collection period, increased from 91 days in March 2022 to 103 days in September 2025. This increase reflects the combined effect of the lengthening times for both inventory processing and receivable collection. A slight decrease to 96 days was noted in December 2025, coinciding with decreases in both component periods. The operating cycle remained relatively stable between March 2022 and September 2022, before beginning a more consistent increase. The highest values were observed in the latter half of 2023 and the first three quarters of 2024, consistently above 98 days.

The observed increases in both the inventory processing and receivable collection periods contributed to the extended operating cycle. Management should investigate the underlying causes of these increases to identify potential areas for improvement in working capital management. The decrease in the operating cycle in December 2025 suggests that focused efforts on these areas can yield positive results.

The average payables payment period exhibited a generally decreasing trend from March 31, 2022, through December 31, 2023, followed by some fluctuation before stabilizing. A subsequent slight increase is observed in the most recent period.

Overall Trend

Beginning at 68 days in March 2022, the average payables payment period decreased to a low of 56 days by December 2022 and remained at that level through March 2023. A slight increase to 59 days occurred in June 2023, followed by a return to 57 days in September 2023, and then a rise to 63 days by the end of 2023. The period then stabilized around 60-61 days for the first three quarters of 2024 before decreasing to 53 days in December 2024. The period then increased to 59 days by June 2025.

Short-Term Fluctuations

The period experienced minimal fluctuation between June and September 2023, remaining within a narrow range of 57 to 59 days. A more pronounced fluctuation occurred between December 2023 and December 2024, with an increase followed by a significant decrease. The most recent two periods show a slight increase from 52 days to 59 days.

Recent Performance

The most recent period, ending June 30, 2025, shows an average payables payment period of 59 days. This represents a slight increase from the 56 days observed in September 2025 and the 52 days in March 2025, but remains within the range observed throughout 2024.

The observed trends suggest a generally improving efficiency in managing payables, with a shorter payment period indicating quicker settlement of obligations. However, the recent fluctuations warrant continued monitoring to determine if they represent a shift in payment practices or are simply temporary variations.

The short-term operating activity of the company, as measured by its cash conversion cycle and component ratios, exhibits several notable trends over the observed period. Generally, the company experienced increasing durations in inventory processing and receivable collection, offset to varying degrees by changes in payables payment periods. These shifts collectively impacted the overall cash conversion cycle.

Average Inventory Processing Period

The average time to process inventory generally increased from 35 days in March 2022 to 45 days in June 2025. While fluctuations occurred, a clear upward trend is evident, peaking at 44 days in the first half of 2024 before decreasing slightly to 43 days in December 2025. This suggests a potential lengthening in the production or sales cycle, or an increase in inventory levels.

Average Receivable Collection Period

The average number of days to collect receivables also demonstrated an increasing trend. Starting at 56 days in March 2022, the collection period rose to 58 days by September 2025, with intermediate peaks at 56 days in March 2023 and June 2023. This indicates a potential slowdown in collecting payments from customers, which could be due to changes in credit terms, customer payment behavior, or collection efficiency.

Average Payables Payment Period

The average payables payment period showed more variability. It decreased from 68 days in March 2022 to 56 days in December 2022, then increased to 63 days by December 2023. A subsequent decline to 52 days was observed in March 2024, followed by a rise to 59 days in December 2025. This suggests the company strategically managed its payment terms with suppliers, potentially taking advantage of early payment discounts or extending payment terms to conserve cash.

Cash Conversion Cycle

The cash conversion cycle initially remained relatively stable, fluctuating between 23 and 31 days from March 2022 to December 2022. However, it increased to 35 days in March 2023 and remained at that level through June 2023. A peak of 39 days was reached in September 2023, followed by a decrease to 33 days in December 2023. The cycle then increased again, reaching 47 days in June 2025 before decreasing to 37 days in December 2025. The overall trend indicates a lengthening of the cash conversion cycle, suggesting the company is taking longer to convert its investments in inventory and receivables into cash. The increase in the cycle is primarily driven by the increases in inventory processing and receivable collection periods, despite some offsetting effects from changes in payables payment periods.

The observed trends suggest a potential need to review inventory management practices and credit policies to optimize working capital and improve cash flow efficiency. Further investigation into the reasons behind the lengthening collection period and inventory processing period is warranted.