Linde plc (NASDAQ:LIN)

The analysis of the financial ratios over the reported periods reveals several notable trends and patterns concerning the company's operational efficiency and liquidity management.

Inventory Turnover

The inventory turnover ratio showed a rising trend from 8.9 in March 2020 to a peak of 10.75 in December 2022, indicating an improvement in inventory management and sales efficiency. However, from early 2023 onward, the ratio declined steadily, reaching 8.61 by March 2025, which suggests a slowing down in inventory turnover and possibly a buildup of stock or slower sales.

Receivables Turnover

The receivables turnover ratio started at 6.54 in March 2020 and generally fluctuated within a narrow band around 6.5 to 7.3 throughout the period. Peaks were observed around December 2022 (7.34) and March 2025 (7.14), while slight dips appeared in mid-2024 and early 2023. This indicates relatively stable efficiency in collecting receivables with mild variability.

Payables Turnover

Payables turnover demonstrated an overall increasing trajectory from 4.97 in March 2020 to 6.98 at the end of the data series in March 2025, reflecting a tendency towards quicker payment to suppliers. Notably, a pronounced increase occurred between September 2021 (5.66) and December 2022 (6.5), signaling enhanced payment activity during this interval.

Average Inventory Processing Period

The average inventory processing period shortened from 41 days in March 2020 to a low of 34 days between September and December 2021, confirming improvements in inventory turnover efficiency. Subsequently, the period elongated to 44 days in late 2023 and early 2024, then slightly decreased to 41-42 days by March 2025, indicating some reversal of earlier gains in inventory holding time.

Average Receivable Collection Period

This metric remained fairly stable, fluctuating in the range of 50 to 56 days. A slight improvement (shortening) was seen around late 2021 and early 2022 (50 days), but the period extended again to peaks of 56 days in mid-2020 and repeatedly during 2024. Overall, collection practices maintained consistency with modest variations.

Operating Cycle

The operating cycle depicted a decreasing trend from 97 days in March 2020 to a minimum of 84 days in late 2021, indicating enhanced overall operational efficiency. However, beginning in 2022, the cycle lengthened again, reaching 100 days in mid-2024 before slightly improving to 92-97 days by early 2025. This suggests some cyclical volatility in operational effectiveness over time.

Average Payables Payment Period

The average period for paying suppliers decreased from 73 days in March 2020 to as low as 52-53 days in late 2024 to early 2025. The trend shows accelerated payment practices, especially notable between mid-2022 to the end of the dataset. There were fluctuations in earlier periods, with payment durations ranging from 56 to 73 days, indicating variable cash flow management with suppliers.

Cash Conversion Cycle

The cash conversion cycle exhibited variability over the years. Starting at 24 days in March 2020, it briefly dropped to 16 days by March 2022, reflecting an improvement in cash flow efficiency. However, the cycle lengthened consistently from that low point, peaking at 45 days in March 2025, indicating a slower conversion of investments in inventory and receivables into cash. This extension suggests increased working capital requirements and potential liquidity pressure in the later periods.

In summary, the operational efficiency showed signs of improvement through late 2021 and into 2022, as evidenced by shortened inventory and operating cycles and higher turnover ratios. However, from 2023 onward, there is a reversal of some of these trends, with slower inventory turnover, longer operating and cash conversion cycles, and variability in receivables collection. The accelerated payments to suppliers indicate a strategic shift in payables management, potentially to secure supplier relationships or better terms. Overall, the data reflects a dynamic environment with efficiency gains partially offset by emerging challenges in working capital management.

Cost of sales, exclusive of depreciation and amortization

The cost of sales displayed fluctuations over the observed quarters, with values ranging approximately between $3,619 million and $5,285 million. There was an initial decline from March to June 2020, followed by a gradual increase peaking in the fourth quarter of 2020. Subsequently, a rising trend continued through 2021, reaching a maximum in the final quarter of that year. In 2022, the costs fluctuated, showing a peak in the third quarter before a noticeable drop in the fourth quarter. Through 2023 and into early 2024, the cost of sales predominantly declined, with some quarters exhibiting slight increases but maintaining an overall downward tendency towards the end of the period.

Inventories

Inventory levels showed a generally steady increase throughout the examined periods. Starting around 1,689 million USD, inventories experienced incremental growth, with minor fluctuations, peaking near 2,115 million USD in the fourth quarter of 2023. From late 2023 onward, inventories slightly declined but remained above the initial levels, indicating a general buildup of stock over time until a moderate reduction in recent quarters.

Inventory turnover ratio

The inventory turnover ratio exhibited an overall downward trend during the available data range. Initial turnover values in early 2021 were high, close to 10 or above, indicating efficient inventory management relative to sales. However, the ratio declined steadily, decreasing from around 10.75 in late 2021 to a low near 8.22 by mid-2024. A slight recovery is observable in the last quarter of 2024 and early 2025, reaching approximately 8.61. This decreasing trend suggests that inventory was turning over more slowly relative to cost of sales in recent periods compared to earlier periods.

Sales Trend Analysis

Sales figures, measured in millions of US dollars, exhibit a general upward trend from March 31, 2020 to December 31, 2021, rising from 6,739 to a peak of 8,298. This increase reflects progressive growth over this period. However, from the first quarter of 2022 onwards, sales show volatility with fluctuations around 8,000 million. Notably, after a peak of 8,797 in September 2022, sales declined to 7,899 by December 2022. Subsequent quarters exhibit relative stability with values oscillating slightly above and below 8,200 million. Towards the end of the analyzed period, sales marginally decreased, ending at 8,112 million in March 2025. This indicates an overall stabilization after earlier growth, with moderate variability in recent quarters.

Accounts Receivable, Net Trend

The net accounts receivable figures also increased from 4,084 million in March 2020 to a high of 4,845 million by March 2022. Following that peak, the value experienced some decline and fluctuations, ranging from approximately 4,559 million in December 2022 to 5,009 million in June 2024, with occasional decreases in intervening quarters. The data suggests an expansion in credit extended to customers initially, followed by periods of adjustment and reconsolidation. Despite these changes, the net receivables remain elevated compared to early 2020 levels, indicating sustained credit exposure relative to sales.

Receivables Turnover Ratio Analysis

The receivables turnover ratio, an indicator of how efficiently the company collects its receivables, remained relatively stable throughout the available periods, fluctuating between roughly 6.54 and 7.34. The ratio showed a slight improvement during the year 2021, reaching its peak at 7.34 in December 2021, implying more efficient collections at that time. However, subsequent quarters reveal minor declines and recoveries, demonstrating consistent but moderate variation. By March 2025, the ratio is recorded at 6.67, indicating a modest decrease in turnover efficiency from the recent peak but still within a comparable range.

Overall Insights

The combined analysis of sales and accounts receivable data suggests that growth in sales up to the end of 2021 was accompanied by increasing accounts receivable balances, which is typical as revenue expands. The receivables turnover ratio supports this, showing relatively efficient collection practices with slight fluctuations. Post-2021, sales entered a plateau phase with moderate volatility, while accounts receivable levels remained relatively high but variable. This pattern may highlight challenges in maintaining previous growth momentum or shifts in credit policies and payment behaviors. The consistency of the receivables turnover ratio suggests ongoing efforts to manage credit risk effectively despite changing conditions.

The analysis of the quarterly financial data reveals several observable trends in cost of sales, accounts payable, and payables turnover over the periods presented.

Cost of Sales, Exclusive of Depreciation and Amortization

The cost of sales exhibited some fluctuations throughout the observed time frame. From March 2020 to December 2020, values increased gradually from 3,843 million to 4,086 million US dollars. In 2021, the cost of sales continued a generally upward trend, peaking at 4,927 million in the last quarter. During 2022, the figure remained relatively high but showed some volatility, reaching down to 4,427 million in December. In 2023, costs generally declined slightly and stabilized around the mid-4,300 million range. The first quarter of 2024 indicated a moderately lower cost of sales at 4,216 million, which continued with minor fluctuations towards the end of 2025, ending at 4,157 million. Overall, the trend suggests some cyclical variation with a peak in late 2021 followed by a modest decline and stabilization in subsequent periods.

Accounts Payable

Accounts payable followed a trend showing some variability over the reported quarters. Initially, in early 2020, accounts payable were at 2,965 million and showed a slight decline mid-year, with a decrease to 2,816 million in June 2020. It then experienced a moderate increase toward the end of 2020, peaking near 3,503 million in December. Throughout 2021, accounts payable fluctuated, mostly within the 3,000 to 3,500 million range, before trending downward in 2022 and continuing to decline through 2023 and 2024. By the first quarter of 2025, accounts payable decreased to 2,446 million, suggesting a gradual reduction in payables over recent quarters.

Payables Turnover Ratio

Payables turnover ratio data, available from the first quarter of 2021 onward, shows an overall increasing trend. Beginning around 4.97 in March 2021, the ratio increased steadily with minor fluctuations, reaching 6.5 by December 2021. Throughout 2022 and into 2023, the ratio stabilized between approximately 6.2 and 6.5, indicating more efficient management or faster payment cycles. Further quarters show a generally positive progression, reaching a peak of 6.98 by the first quarter of 2025. This upward trend in payables turnover suggests improved operational efficiency in settling accounts payable over time.

In summary, the data indicates that while costs of sales experienced some volatility with a peak in late 2021 followed by a modest decline, accounts payable showed a downward trend after peaking in 2020-2021. Concurrently, the increasing payables turnover ratio reflects enhanced efficiency in managing supplier payments during the recent periods.

The analysis of the quarterly financial data reveals the following patterns and insights regarding the working capital, sales, and working capital turnover ratio for the periods from March 31, 2020, through March 31, 2025.

Working Capital

The working capital figures, expressed in millions of US dollars, generally exhibit a negative trend throughout the entire period, indicating that current liabilities consistently exceed current assets. From March 31, 2020, the working capital starts at -3,977 million and fluctuates with several decreases and partial recoveries. Significant negative spikes are evident on March 31, 2023 (-4,881 million) and June 30, 2022 (-4,023 million). Towards the later quarters, from March 31, 2024, the negative values appear to reduce somewhat, reaching a less negative value of -888 million on June 30, 2024, but again showing some volatility with values such as -1,599 million on December 31, 2024, and -888 million on June 30, 2024. This pattern suggests challenges in managing short-term assets and liabilities, with persistent working capital deficits despite some periods of improvement.

Sales

Sales figures, also in millions of US dollars, show a generally upward trend with some variability. Starting at 6,739 million in March 31, 2020, sales increase overall to peak around 8,797 million in September 30, 2022. Following this peak, sales show some fluctuations but largely stabilize around the 8,000 million mark, with values such as 8,302 million on December 31, 2023, and maintaining close to that level through the reported periods, ending at 8,112 million by March 31, 2025. The data indicate steady sales growth over time with some minor declines or plateaus, but the general trajectory is positive, reflecting potential growth or stabilization in revenue generation capacity.

Working Capital Turnover

The working capital turnover ratio is not provided numerically in the data, as all values are missing. This lack of data limits the ability to assess how efficiently the company utilizes its working capital to generate sales. However, given the consistently negative working capital figures combined with increasing sales, one might infer complexities in the company's operational efficiency or capital structure that would merit further detailed investigation if data were available.

Overall, the data highlights persistent working capital challenges indicated by negative values that vary in magnitude, contrasted with generally increasing sales figures. The combination suggests the company experiences liquidity management difficulties despite sales growth. The absence of working capital turnover ratios prevents a more precise efficiency assessment, but the trends call attention to potential areas for improving short-term financial management and operational effectiveness.

Inventory Turnover

The inventory turnover ratio demonstrates an overall declining trend from the first reported quarter in March 2021 through to the subsequent quarters. Starting at 8.9 in March 2021, the ratio peaked gradually to 10.75 by December 2022, indicating improved efficiency in inventory management during this period. However, beginning in March 2023, the turnover ratio decreased steadily, reaching a low of 8.22 in December 2024. There was a slight recovery observed in early 2025, with the ratio rising to 8.81 in March 2025 before a minor dip to 8.61 in the same quarter. This pattern reflects an initial improvement in inventory utilization followed by a period of softness in turnover, suggesting either expanding inventory levels or slower sales activity.

Average Inventory Processing Period

The average inventory processing period inversely mirrors the inventory turnover ratio, as expected. Beginning at 41 days in March 2021, the processing period steadily decreased to a low of 34 days by September and December 2022, indicating faster inventory movement. From early 2023 onwards, there was a gradual increase in the processing period, peaking at 44 days between December 2023 and December 2024. This rise in the number of days inventory is held corresponds to the reduction in turnover ratio and may suggest increased inventory holding times or slower sales cycles in the latter periods analyzed. A modest improvement appears in early 2025, with the processing period easing slightly back to 41 and 42 days, respectively, showing some improvement in inventory efficiency.

Receivables Turnover

The receivables turnover ratio demonstrates a generally stable pattern over the observed periods, with values fluctuating moderately within a narrow range. Starting from 6.54 in March 2021, the ratio exhibits incremental increases and decreases but mostly remains above 6.5. Peak points are noted around December 2022 (7.34) and September 2024 (7.14), indicating periods where the company collected receivables faster. Conversely, some dips occur, such as in March 2024 (6.54) and March 2025 (6.67), but these are not significantly lower than other periods. Overall, the turnover ratio suggests consistent efficiency in managing accounts receivable with minor variations.

Average Receivable Collection Period

The average receivable collection period, expressed in days, inversely corresponds to the receivables turnover trends, remaining relatively stable throughout the timeline. Beginning at 56 days in March 2021, it slightly decreases to the lower 50s by late 2022, reaching a minimum of 50 days in December 2022 and March 2023. After this, the period marginally lengthens again, returning near the mid-50s by March 2024 and March 2025. Fluctuations between 50 and 56 days indicate steady control over the time taken to collect receivables, with no drastic changes suggesting deteriorating or significantly improving collection processes.

Average Inventory Processing Period

The average inventory processing period shows an initial decreasing trend from 41 days in March 2021 to a low of 34 days in November 2022. Following this period, there is a reversal with a gradual increase, reaching 44 days by December 2024. A slight decrease is observed at the end, with the figure moving down to 42 days by March 2025. This pattern suggests improvements in inventory management efficiency up to late 2022, followed by a gradual slowdown in processing speed in subsequent periods.

Average Receivable Collection Period

The receivable collection period fluctuates within a relatively narrow range throughout the analyzed quarters. Starting at 56 days in March 2021, it decreases temporarily to 50 days by November 2022, indicating an improvement in collections. However, this is followed by a gradual increase back to 56 days by December 2024, before slightly declining to 55 days in March 2025. These variances imply some challenges in maintaining consistent collections efficiency over time.

Operating Cycle

The operating cycle shows a downward trend from 97 days in March 2021 to a minimum of 84 days in November 2022, reflecting improvements in overall operational efficiency, combining inventory processing and receivable collection times. Subsequently, the cycle lengthens gradually, peaking at 100 days by December 2024, before receding slightly to 97 days in March 2025. This pattern indicates that operational efficiency gains may have been partially offset by slower inventory turnover or receivables collection in later periods.

Overall Insights

Between early 2021 and late 2022, the company demonstrated a notable improvement in managing both inventory and receivables, contributing to a shorter operating cycle. After this phase, the metrics suggest a reversal or stabilization, with incremental increases in processing and collection durations, potentially signaling emerging operational challenges. Close monitoring and potential strategic adjustments might be required to sustain efficiency and manage working capital effectively going forward.

Payables Turnover

The payables turnover ratio shows a generally increasing trend from Q1 2021 through Q1 2025. Starting at 4.97 in March 2021, the ratio rises steadily, reaching peaks above 6.8 in the final quarters of the provided data. This increase indicates an acceleration in the rate at which the company is paying off its suppliers, suggesting improved efficiency in managing payables over time.

Average Payables Payment Period

The average payables payment period, measured in days, exhibits a declining trend over the examined periods, moving from 73 days in March 2021 down to 52 days by March 2025. This reduction in days implies that the company is taking less time to settle its payables, aligning with the increasing payables turnover ratio. Notably, there is some fluctuation within intermediate quarters, but the overall direction is toward shorter payment periods.

Overall Insight

The data suggests enhanced efficiency in accounts payable management. A rising payables turnover ratio alongside a decreasing average payment period often reflects stronger cash flow management and may improve supplier relationships or credit terms. The consistent patterns over multiple years reinforce the indication of systematic improvements in payment processes.

The analysis of the quarterly financial data reveals several noteworthy trends related to the company's inventory, receivables, payables, and cash conversion cycle over the observed periods.

Average Inventory Processing Period

This metric shows a general declining trend from 41 days in March 2021 to a low of 34 days in late 2022, indicating improved efficiency in inventory management. However, starting from early 2023, the period begins to increase again, reaching 44 days by the end of 2024, which suggests a slowdown in inventory turnover during this latter period before slightly decreasing to 41-42 days in early 2025.

Average Receivable Collection Period

The receivable collection period fluctuates moderately throughout the timeline. Initially, the period decreases from 56 days in March 2021 to 50 days by the end of 2021, denoting better receivables management. Subsequently, it rises again, reaching approximately 53-56 days during 2023 and 2024, before a slight improvement to 51-55 days near the end of the dataset. This indicates some instability in the efficiency of receivables collection, with no clear long-term trend of improvement or deterioration.

Average Payables Payment Period

There is a notable decline in the payables payment period from 73 days in March 2021 to a low of 53 days by early 2025. This reduction indicates the company is paying its suppliers more quickly over time. The most rapid decrease occurs toward the end of the observed period, highlighting a tightening in payment terms or a strategic shift in working capital management.

Cash Conversion Cycle

The cash conversion cycle experiences fluctuations but exhibits an overall increasing pattern from 24 days in March 2021 to 45 days by the end of the period in March 2025. This increase suggests that the company is taking longer to convert its investments in inventory and other resources into cash flows from sales. The rise is particularly marked during 2023 and 2024, potentially reflecting the combined effects of increasing inventory days and fluctuating receivables collection periods, despite the shortening payables period.

In summary, while inventory management initially improved, it deteriorated mid to late in the period. Receivable collection showed variable performance without a sustained trend. The payables payment period consistently shortened, signaling quicker supplier payments. These combined movements contributed to an increasingly extended cash conversion cycle, which could imply rising working capital requirements and a possible liquidity concern if this trend persists.