ONEOK Inc. (NYSE:OKE)

The operational activity ratios exhibit a period of volatility between 2019 and 2020, followed by a consistent trend toward increased efficiency and faster asset turnover through 2022. A general acceleration in the movement of inventory, receivables, and payables is evident in the final two years of the analyzed period.

Inventory and Receivables Management

Inventory turnover experienced a notable decline from 21.52 in 2018 to a low of 13.40 in 2019, before rising sharply to a peak of 30.84 by 2022. This is mirrored by the average inventory processing period, which extended to 27 days in 2019 but contracted to 12 days by 2022, indicating significantly improved inventory throughput. Receivables turnover followed a similar U-shaped trajectory, bottoming at 10.29 in 2020 before recovering to 14.61 in 2022. The average receivable collection period peaked at 35 days in 2020 and subsequently decreased to 25 days, suggesting a return to more efficient credit collection practices.

Payables Dynamics

Payables turnover showed a steady increase from 5.61 in 2019 to 13.17 in 2022. Correspondingly, the average payables payment period saw a significant contraction, dropping from a high of 65 days in 2019 to 28 days in 2022. This trend indicates a shift toward more rapid settlement of obligations to suppliers.

Operating and Cash Conversion Cycles

The operating cycle lengthened considerably from 41 days in 2018 to a peak of 61 days in 2020, before contracting to 37 days in 2022. This fluctuation was driven by the combined delays in inventory processing and receivable collection during the 2019-2020 period. The cash conversion cycle transitioned from a negative position in 2018 (-2 days) and 2019 (-8 days)—where supplier financing effectively funded operations—to a positive position starting in 2020. The cycle stabilized at 9 days in 2021 and 2022, indicating that the company now requires a short window of working capital to bridge the gap between cash outflows for supplies and cash inflows from sales.

The inventory turnover performance between 2018 and 2022 exhibits significant volatility, characterized by a mid-period contraction followed by a substantial acceleration in operational velocity. The overall trend indicates a period of reduced throughput in 2019 and 2020, succeeded by a sharp increase in the efficiency of inventory movement through 2022.

Cost of Sales and Fuel Trends

A notable U-shaped trajectory is observed in the cost of sales and fuel. Expenditures decreased from 9.4 billion US$ in 2018 to a low of 5.1 billion US$ in 2020. This was followed by a rapid escalation, with costs rising to 12.3 billion US$ in 2021 and reaching a peak of 17.9 billion US$ in 2022, indicating a significant expansion in throughput or an increase in the cost of fuel and materials.

Inventory Level Analysis

Inventory balances remained relatively constrained despite the volatility in cost of sales. Values fluctuated between 371 million US$ in 2020 and 581 million US$ in 2021 and 2022. The relative stability of these balances, particularly between 2021 and 2022, suggests that the company maintained a consistent level of stock while processing a much higher volume of goods.

Inventory Turnover Ratio Dynamics

The turnover ratio experienced a sharp decline from 21.52 in 2018 to 13.40 in 2019, remaining nearly flat at 13.77 in 2020. A strong recovery occurred in 2021, with the ratio returning to 21.10, and ending with a five-year high of 30.84 in 2022. This progression reflects a marked increase in the efficiency of inventory utilization, as the company achieved significantly higher turnover rates relative to the average inventory held on the balance sheet.

An analysis of the five-year period from 2018 to 2022 reveals a U-shaped trajectory in receivables turnover efficiency, closely mirroring the volatility in total revenues. A period of contraction between 2018 and 2020 was followed by a phase of significant growth in both top-line revenue and the volume of outstanding receivables.

Revenue Volatility and Receivables Growth

Revenues experienced a steady decline from 2018 to 2020, falling from 12.59 billion USD to a trough of 8.54 billion USD. During this decline, net accounts receivable remained relatively stable, fluctuating minimally between 819 million USD and 835 million USD. However, starting in 2021, a sharp reversal occurred, with revenues surging to 16.54 billion USD and further increasing to 22.39 billion USD by 2022. This expansion was accompanied by a substantial increase in net accounts receivable, which reached 1.53 billion USD by the end of 2022.

Receivables Turnover Trends

The receivables turnover ratio exhibited a downward trend during the initial period of revenue contraction, decreasing from 15.38 in 2018 to a low of 10.29 in 2020. This indicates a slower rate of collection relative to sales during the downturn. Following the 2020 trough, the ratio began to recover, rising to 11.47 in 2021 and accelerating to 14.61 in 2022. This recovery suggests that while the absolute volume of receivables increased, the efficiency of converting those receivables into cash improved in tandem with the rapid growth in revenues.

Operational Efficiency Analysis

The convergence of the 2022 turnover ratio (14.61) toward the 2018 level (15.38) indicates a return to historical norms of collection efficiency. The data suggests that the increase in net accounts receivable from 2021 onward was a function of increased business volume rather than a deterioration in credit quality or collection processes, as the turnover ratio improved concurrently with the rise in revenue.

The analysis of short-term operating activity reveals a significant escalation in payables turnover over the observed five-year period, characterized by a period of volatility followed by a sharp upward trend through 2022.

Cost of Sales and Accounts Payable Dynamics

Cost of sales and fuel exhibited a U-shaped trajectory, declining from $9.42 billion in 2018 to a low of $5.11 billion in 2020, before experiencing a rapid surge to $17.91 billion by 2022. During the same period, accounts payable remained relatively stable, fluctuating between a low of $719.3 million in 2020 and a peak of $1.36 billion in 2022.

Payables Turnover Trend

The payables turnover ratio decreased from 8.44 in 2018 to 5.61 in 2019, indicating a slower payment cycle during that interval. However, a consistent recovery followed, with the ratio climbing to 7.10 in 2020, 9.20 in 2021, and reaching a period high of 13.17 in 2022.

Analysis of Efficiency and Liquidity

The substantial increase in the turnover ratio from 2020 to 2022 is primarily attributable to the exponential growth in cost of sales, which far outpaced the marginal increase in accounts payable. This pattern suggests that the company has accelerated its payment of obligations to suppliers. The shift to a ratio of 13.17 in 2022 indicates a much higher frequency of payables settlement relative to the annual cost of sales compared to the start of the period.

Analysis of the short-term operating activity reveals a significant divergence between revenue growth and working capital management between 2018 and 2022.

Revenue Performance

A U-shaped trend is observed, with revenues declining from US$ 12.59 billion in 2018 to a low of US$ 8.54 billion in 2020. Subsequently, a period of rapid expansion occurred, with revenues increasing to US$ 16.54 billion in 2021 and reaching US$ 22.39 billion by the end of 2022.

Working Capital Volatility

The working capital position remained negative for the majority of the analyzed period, specifically in 2018, 2019, 2021, and 2022. This indicates a consistent operational structure where current liabilities exceed current assets. A notable anomaly occurred in 2020, where working capital turned positive at US$ 525.23 million, coinciding with the lowest revenue levels of the five-year period.

Working Capital Turnover Interpretation

The working capital turnover ratio is only reported for 2020, recorded at 16.26. This indicates that during the only year of positive working capital, the organization generated approximately US$ 16.26 in revenue for every dollar of working capital. The absence of the ratio in other years is attributable to the negative working capital values, which render the standard turnover calculation non-meaningful for traditional efficiency analysis.

The correlation between the surge in revenues from 2021 to 2022 and the return to negative working capital suggests that the organization scaled its top-line growth without requiring a corresponding increase in net current assets, potentially indicating a strategic reliance on short-term liabilities to fund operational expansion.

An analysis of the operating activity ratios reveals a cyclical pattern in inventory efficiency, characterized by a notable slowdown between 2019 and 2020, followed by a sharp acceleration in processing speed through 2022.

Inventory Turnover

The inventory turnover ratio exhibited significant volatility over the five-year period. After starting at 21.52 in 2018, the ratio declined to 13.40 in 2019 and remained relatively stagnant at 13.77 in 2020. A strong recovery followed, with the ratio increasing to 21.10 in 2021 and reaching a peak of 30.84 by the end of 2022.

Average Inventory Processing Period

The average inventory processing period mirrored the turnover trends inversely. The time required to process inventory rose from 17 days in 2018 to 27 days in 2019, remaining elevated at 26 days in 2020. A subsequent contraction in the processing cycle is observed, with the period returning to 17 days in 2021 and dropping to a five-year low of 12 days in 2022.

Operational Efficiency Correlation

The correlation between the increase in turnover and the decrease in the processing period indicates a substantial improvement in inventory management efficiency in the latter half of the observed period. The reduction of the processing cycle from 27 days in 2019 to 12 days in 2022 suggests an optimized operational flow and an enhanced ability to convert inventory into cash or cost of goods sold more rapidly.

The company's short-term operating activity related to receivables demonstrates a cyclical trend characterized by a decline in collection efficiency through 2020, followed by a consistent recovery through 2022.

Receivables Turnover Trends

A downward trajectory was observed from 2018 to 2020, with the turnover ratio decreasing from 15.38 to 10.29. This indicates a reduction in the frequency with which average receivables were collected during this period. A recovery phase began in 2021, with the ratio rising to 11.47 and further accelerating to 14.61 by the end of 2022, nearly returning to the initial 2018 efficiency level.

Average Receivable Collection Period

The time required to collect outstanding receivables increased from 24 days in 2018 to a peak of 35 days in 2020. This extension indicates a period of slower cash conversion and a lengthening of the operating cycle. This trend reversed after 2020, with the collection period shortening to 32 days in 2021 and improving further to 25 days in 2022.

Overall Operational Insight

The inverse relationship between the turnover ratio and the collection period is consistent across the analyzed timeframe. The peak in the collection period in 2020 coincides with the lowest turnover ratio, representing the point of lowest liquidity efficiency for receivables. The subsequent improvement through 2022 suggests a successful optimization of credit management or improved customer payment behavior, resulting in a more streamlined cash flow cycle.

The operating cycle exhibits a bell-shaped trend over the analyzed five-year period, characterized by an expansion in duration that peaked in 2020, followed by a consistent contraction through 2022.

Average Inventory Processing Period

A period of volatility is observed in inventory management, with the processing period increasing from 17 days in 2018 to a peak of 27 days in 2019. After remaining relatively stable in 2020, the duration declined sharply to 17 days in 2021 and reached a period low of 12 days by December 31, 2022, indicating a significant acceleration in inventory turnover.

Average Receivable Collection Period

Collection efficiency experienced a gradual decline between 2018 and 2020, as the time required to collect receivables extended from 24 days to 35 days. This trend reversed after 2020, with the collection period shortening to 32 days in 2021 and further improving to 25 days in 2022, reflecting a return to near-baseline collection efficiency.

Overall Operating Cycle

The total operating cycle reached its maximum duration of 61 days in 2020, driven by the concurrent peaking of both inventory processing and receivable collection periods. By 2022, the cycle compressed to 37 days, which is lower than the 2018 starting point of 41 days. This downward trend in the latter years suggests an overall improvement in short-term operational efficiency and a more rapid conversion of operating assets into cash.

The analysis of short-term operating activity reveals a significant shift in the management of accounts payable between 2018 and 2022. Following an initial extension of the payment cycle in 2019, the subsequent years demonstrate a consistent and accelerating trend toward the more rapid settlement of obligations to suppliers.

Payables Turnover

A fluctuating but ultimately upward trend is observed in the turnover ratio. After declining from 8.44 in 2018 to a five-year low of 5.61 in 2019, the ratio grew steadily to 7.10 in 2020 and 9.20 in 2021, culminating in a peak of 13.17 by the end of 2022. This increase signifies a higher frequency of clearing accounts payable throughout the fiscal year.

Average Payables Payment Period

The duration required to settle obligations peaked in 2019 at 65 days, a notable increase from the 43 days recorded in 2018. From 2020 through 2022, a continuous downward trajectory is evident, with the period shortening to 51 days, then 40 days, and finally reaching 28 days. This represents a substantial reduction in the average time elapsed before suppliers are paid.

The correlation between the increasing turnover ratio and the diminishing payment period indicates a strategic acceleration of cash outflows related to payables. The transition from a 65-day payment cycle in 2019 to a 28-day cycle in 2022 suggests a reduction in the reliance on spontaneous supplier financing and an increase in the speed of liability resolution.

The operational efficiency of the working capital cycle experienced significant volatility between 2018 and 2022, transitioning from a negative cash conversion cycle to a stabilized positive position. This shift reflects changing dynamics in inventory management, credit collection, and supplier payment strategies.

Average Inventory Processing Period

Inventory turnover exhibited a fluctuating trend, peaking at 27 days in 2019 before entering a consistent decline. By December 31, 2022, the processing period reached a five-year low of 12 days, indicating an acceleration in the movement of goods and improved inventory efficiency.

Average Receivable Collection Period

The time required to collect receivables increased steadily from 24 days in 2018 to a peak of 35 days in 2020. Subsequent years showed a gradual recovery in collection efficiency, with the period returning to 25 days by the end of 2022, nearly aligning with the baseline established in 2018.

Average Payables Payment Period

A pronounced downward trend is observed in the payment of obligations to suppliers. After reaching a maximum of 65 days in 2019, the payment period declined sharply every year thereafter, ending at 28 days in 2022. This represents a significant reduction in the company's reliance on supplier financing to fund operations.

Cash Conversion Cycle (CCC)

The overall cash conversion cycle shifted from a negative position in 2018 (-2 days) and 2019 (-8 days) to a positive position starting in 2020. While the negative cycle in the early period indicated that suppliers were effectively financing the operational cycle, the cycle shifted to a positive 10 days in 2020 and stabilized at 9 days through 2022. This transition was primarily driven by the contraction of the payables payment period, which offset the efficiency gains achieved in inventory processing and receivable collections.