Phillips 66 (NYSE:PSX)

Inventory Turnover

The inventory turnover ratio displayed variability across the examined periods, with notable peaks in December quarters of 2016 (21.19), 2017 (24.77), 2018 (29.02), and 2019 (26.64). These spikes suggest accelerated inventory movement during year-end periods. Between these peaks, the turnover ratios generally hovered between approximately 16 and 20, indicating moderate fluctuations in inventory efficiency throughout other quarters.

Receivables Turnover

Receivables turnover exhibited a decreasing trend over time, with values starting higher in early 2016 (23.45 in Q1) and generally declining through the periods, including the lower end noted in December 2019 (14.55). The ratio saw some interim fluctuations but trended downward, which could indicate a lengthening of collection periods and potential challenges in receivables management.

Payables Turnover

The payables turnover ratio varied moderately, showing a decline from the first quarter of 2016 (14.39) to lower mid-period values around 10-12 in late 2016 and early 2017. Later periods reveal some recovery with peaks near 16.82 in December 2018 but generally stabilized around 12-13 in the final quarters. This implies some changes in payment practices or supplier agreements over time.

Working Capital Turnover

The working capital turnover ratio experienced notable volatility. Starting at 24.65 in early 2016, it increased sharply to 44.41 in Q3 2016, followed by a decline and then a general rise again, with peaks at 39.03 in Q4 2019. This suggests fluctuations in the efficiency of utilizing working capital, potentially driven by changes in operational management or seasonal effects.

Average Inventory Processing Period

The average inventory processing period showed a clear inverse pattern relative to inventory turnover, with shorter periods during December quarters, particularly low at 13 days in Q4 2018 and 14 days in Q4 2019. Generally, the period remained around 20-22 days in other quarters, reflecting efficient inventory handling that improves seasonally at year-ends.

Average Receivable Collection Period

The collection period for receivables demonstrated a gradual increase, starting around 16 days in early 2016 and reaching up to 25 days in the final quarter of 2019. This increment indicates a slight deterioration in the speed of collecting receivables, consistent with the observed decline in receivables turnover.

Operating Cycle

Operating cycle durations remained relatively stable, fluctuating between 31 to 42 days. The lower end was recorded in Q4 2018 (31 days), while the upper range was seen in several quarters around 40-42 days. These values reflect the combined effect of inventory and receivables periods, suggesting moderately consistent operational timing.

Average Payables Payment Period

The average payables payment periods demonstrated variability, with longer payment durations notably in mid-2016 (up to 35 days), shortening toward the end of 2018 (down to 22 days), and then stabilizing around 26-31 days in later periods. This pattern could indicate changes in supplier payment strategies or cash flow management approaches.

Cash Conversion Cycle

The cash conversion cycle showed relatively low values, mostly in the single-digit to low teens range, fluctuating between 6 and 13 days. There is no clear upward or downward trend, indicating an overall consistent efficiency in converting investments in inventory and receivables back into cash over the periods.

Cost of Operating Revenues

Over the examined periods, the cost of operating revenues demonstrated a generally upward trend with some fluctuations. From March 31, 2016, to December 31, 2016, costs increased from 12,953 million US dollars to 19,576 million US dollars, indicating a strong growth in operating expenses within that year. In 2017, costs continued to rise, reaching a peak of 25,072 million US dollars in December. The year 2018 showed sustained high costs, fluctuating between approximately 22,384 million US dollars and 27,591 million US dollars, with a slight decrease in the last quarter to 25,945 million. In 2019, costs remained elevated, with values ranging from 22,362 million US dollars to 27,510 million US dollars, peaking again in the final quarter. This pattern suggests increasing operational activity or cost pressures over time, with seasonal or quarterly variability being evident.

Inventories

Inventory levels showed considerable volatility across the periods. Initially, inventory decreased from 4,108 million US dollars at the end of March 2016 to 3,150 million US dollars by December 2016, suggesting a possible inventory reduction strategy or improved inventory management in that timeframe. However, in 2017, inventory levels increased again, peaking at 4,455 million US dollars in September before falling to 3,395 million in December. A similar pattern of rise and fall is observable in 2018 and 2019, with inventory values often rising in mid-year periods and declining toward year-end. This cyclic pattern may reflect operational or seasonal factors influencing inventory accumulation and depletion.

Inventory Turnover

Inventory turnover ratios exhibited a fluctuating but generally increasing trend, indicating changes in how efficiently inventory is managed relative to costs. Beginning at 17.74 in March 2016, the ratio declined slightly through the first nine months before sharply increasing to 21.19 by year-end 2016. In 2017, the ratio showed variability, with a notable peak of 24.77 in December. The pattern continued in 2018 and 2019, with turnover ratios reaching high points of 29.02 and 26.64, respectively, in the fourth quarters. These spikes suggest improved efficiency in inventory utilization at year-ends, potentially as a result of strategic efforts to optimize inventory levels or higher operational demand driving faster inventory turnover. The overall rising trend in turnover ratio implies enhanced inventory management effectiveness over the periods under review.

The analysis of the quarterly financial data reveals several notable trends across the presented periods.

Sales and other operating revenues

The revenue exhibited a general upward trend from the first quarter of 2016 through the end of 2017, increasing from approximately 17.4 billion to nearly 29.7 billion US dollars. This growth peaked in the fourth quarter of 2017, followed by a decline in early 2018 to around 23.6 billion, then rising again to fluctuate between approximately 27.2 billion and 29.1 billion in subsequent periods. The data indicate a cyclical pattern with significant increases at year-end quarters, suggesting possible seasonality or periodic business cycles.

Accounts and notes receivable, net of allowances

Receivables followed a generally rising trajectory over the quarters, starting near 4.0 billion US dollars in early 2016 and reaching about 7.3 billion by the final quarter of 2019. Noteworthy is the sharp rise seen between late 2017 and mid-2018, where receivables surged above 6.8 billion, though a decline followed in late 2018 before increasing again in 2019. This pattern indicates an overall expansion of credit extended to customers or longer collection periods during these years.

Receivables turnover ratio

This ratio, which measures how efficiently receivables are collected, displayed significant volatility. Starting at above 23 times in early 2016, turnover decreased sharply to lows around 15 times by the end of 2016 and late 2017. Despite some recovery in 2018, the ratio mostly remained below the early 2016 levels, ending at around 14.5 times in the last quarter of 2019. The overall declining trend in turnover ratio suggests a slowing in the collection efficiency or elongation of the average receivables collection period over the time frame evaluated.

In summary, while sales revenues have grown overall with noticeable seasonal peaks, the increase in receivables along with a declining receivables turnover ratio suggests that the company is extending more credit to customers or experiencing slower payments. These trends warrant attention towards credit management and cash conversion cycles to optimize working capital.

The cost of operating revenues exhibited a general upward trend over the examined quarters, beginning at approximately 12.95 billion US dollars and reaching as high as around 27.59 billion US dollars by the end of the period. There were some fluctuations within this overall increase, with notable peaks and troughs corresponding to seasonal or market variations. The rise from the end of 2016 through 2018 suggests growing operational scale or rising costs associated with revenue generation.

Accounts payable values showed variability over the quarters, ranging from about 5.06 billion US dollars to a peak exceeding 8.4 billion US dollars. This volatility indicates fluctuating short-term obligations to suppliers. Despite some increases in accounts payable, the amount did not always correspond directly with the cost of operating revenues, implying possible changes in payment terms or vendor relationships.

The payables turnover ratio displayed variability without a clear long-term upward or downward trend, fluctuating roughly between 10.4 and 16.8 times per year. Higher turnover values generally indicate faster payment to suppliers. Variations in this ratio suggest changes in how quickly the company settled its payables relative to its purchasing activities, possibly reflecting shifts in liquidity management or credit terms. Notably, an elevated turnover ratio near the end of 2018 implies a period of accelerated payments to vendors.

In summary, the data reveal that the company experienced increasing operating costs over time, with fluctuating accounts payable balances and variable payment speeds to suppliers. The patterns suggest adjustments in operational scale, supplier credit terms, and cash management practices during the analyzed period.

Working Capital

The working capital exhibits fluctuations throughout the analyzed periods. Initially, it decreased from 3797 million USD in March 2016 to a low of 1864 million USD in September 2016. This was followed by a recovery phase, reaching a peak of 4283 million USD in December 2017. Subsequent quarters show oscillations, with values generally ranging between approximately 2749 million USD and 3534 million USD during 2018 and 2019, indicating variability but no clear linear trend in either direction.

Sales and Other Operating Revenues

Sales and other operating revenues generally demonstrate an upward trend during the timeframe. From 17,409 million USD in the first quarter of 2016, they increased steadily with minor fluctuations to a high of 29,746 million USD in the fourth quarter of 2017. Afterward, revenues show some variability but maintain an elevated level between roughly 23,000 million and 29,700 million USD. This suggests that the company experienced revenue growth with some seasonal or cyclical variations.

Working Capital Turnover

The working capital turnover ratio, measuring efficiency in using working capital to generate sales, reveals notable fluctuations. It peaked at about 44.41 in September 2016 following a decline in working capital and high revenue levels, indicating high efficiency. Subsequently, the ratio declined significantly to approximately 23.9 in December 2017, corresponding with peak working capital values that may have diluted turnover efficiency. The ratio fluctuates between 26 and 39 from 2018 through 2019, indicating variable but generally high turnover efficiency during these periods.

Insights

The data suggests a dynamic balance between working capital levels and sales performance. Periods of lower working capital coupled with strong sales have resulted in higher working capital turnover, signaling efficient capital use. Conversely, increases in working capital, especially notable at the end of 2017, correspond with a decrease in turnover efficiency, which may reflect inventory accumulation or receivables build-up. Sales growth over the analyzed period underlines positive revenue momentum despite the variability in working capital and turnover measures.

Inventory Turnover Trend

The inventory turnover ratio demonstrates a fluctuating pattern across the periods analyzed. Initially, the ratio decreases slightly from 17.74 to 16.42 in the first three quarters of 2016 before surging to 21.19 at the end of 2016. This trend repeats in each year with a marked increase in the last quarter compared to earlier quarters. For example, in 2017, ratios increase from a range of approximately 16.5 to 17.7 during the first three quarters to 24.77 in the last quarter. A similar pattern is observed in 2018 and 2019, with the ratio peaking in December each year, reaching as high as 29.02 and 26.64, respectively. The interim turnover ratios remain within the range of approximately 16 to 20.

Average Inventory Processing Period Trend

The average inventory processing period, expressed in days, shows an inverse relation to the inventory turnover ratio, as expected. The number of days generally decreases in the fourth quarter of each year, signaling faster inventory processing during that time. Specifically, the processing period decreases from the low twenties in the early quarters to mid-teens or lower in the last quarter of each year (from 21-22 days to 13-15 days). This seasonal reduction suggests operational efficiency improvements or increased sales demand at year-end periods.

Seasonality and Operational Insights

The data reveals a clear seasonal pattern in inventory management, with the highest inventory turnover and shortest processing periods occurring in the final quarter of each year. This pattern may indicate increased sales volumes or inventory optimization efforts corresponding to seasonal demand cycles. Conversely, the first three quarters exhibit relatively stable but lower turnover rates and longer inventory processing durations, suggesting steadier inventory levels and possibly lower sales activity or different operational strategies during these periods.

Overall Evaluation

Overall, the company's inventory management displays responsiveness to seasonal fluctuations, achieving higher efficiency toward year-end. The consistent pattern of increased turnover and reduced processing times in the last quarter of each year reflects effective inventory control or demand-driven acceleration in inventory movement. However, the variance between quarters points to opportunities for smoothing inventory performance throughout the year to potentially improve consistent operational efficiency.

Receivables Turnover

The receivables turnover ratio exhibits a fluctuating trend over the analyzed quarters. Initially, it starts relatively high at 23.45 in the first quarter of 2016, then declines notably to 15.37 by the end of 2016. There is a moderate recovery during the first three quarters of 2017, peaking at 19.37 before declining again towards the end of 2017 to 15.93. In 2018, the ratio shows some variability, with a low of 16.39 in the third quarter followed by an increase to 20.59 in the last quarter. In 2019, the turnover ratio again fluctuates and overall trends downward, ending at 14.55 in the final reported quarter. This variability indicates inconsistent efficiency in collecting receivables over the period.

Average Receivable Collection Period

The average collection period reveals an inverse pattern relative to the receivables turnover, as expected. Beginning at 16 days in early 2016, the collection period lengthens to a peak of 24 days by the end of 2016. Through 2017, this period sees some improvement, generally hovering around 19 to 21 days, but ends near 23 days in the last quarter. In 2018, the days to collect receivables slightly decrease to 18 by year-end after some fluctuations. In 2019, the collection period shows more volatility and a longer trend, ultimately increasing to 25 days by the last quarter. This indicates a gradual decline in receivables management efficiency in recent quarters.

Overall Insights

The analyzed metrics suggest that the company's efficiency at collecting receivables has been inconsistent and somewhat deteriorating, especially toward the end of the period. The receivables turnover ratio's decline and the concurrent rise in the average collection period by late 2019 underscore potential challenges in cash flow management and possibly increased credit risk. Management may need to address receivables policies to improve collection speed and reduce the risk of overdue accounts.

Average Inventory Processing Period

The average inventory processing period shows a fluctuating but generally declining trend over the analyzed quarters. Initially, the period oscillated around 21-22 days in early 2016, then notably dropped to as low as 13 days by the end of 2018. However, some increases occurred intermittently, for example, rising back to around 20 days in certain quarters of 2019. This pattern suggests efforts to improve inventory turnover efficiency with some variability across periods.

Average Receivable Collection Period

The receivable collection period displays greater variability compared to inventory days. Starting around 16 days in early 2016, it increased to peaks above 23 days in late 2016 and late 2017, then experienced fluctuations between 18 and 25 days through 2018 and 2019. The data indicates challenges in maintaining consistent collections, with periodic extensions in the time taken to collect receivables, particularly noticeable in the final quarter of 2019 at 25 days.

Operating Cycle

The operating cycle, which aggregates inventory processing and receivable collection periods, remained relatively stable with minor ups and downs, ranging from low 30s to low 40s in days. Noteworthy is a decline to 31 days at the end of 2018, suggesting a temporary improvement in overall operating efficiency. However, in subsequent quarters, the cycle reverted to the high 30s to low 40s range, indicating a return to previous levels of operating duration. This cyclical behavior reflects the combined influence of changes in inventory and receivables management practices.

Overall Insights

There is a discernible focus on improving inventory processing times as evidenced by the downward trend in related days, potentially enhancing inventory management efficiency. Conversely, variability in receivable collection suggests fluctuating effectiveness in credit policy enforcement or changes in customer payment behaviors. The operating cycle’s stability amidst these opposing trends highlights a balancing effect between inventory and receivables management, resulting in moderate fluctuations but no dramatic shifts in total operating cycle length.

Payables Turnover

The payables turnover ratio exhibits fluctuations throughout the observed quarters. Initially, it decreases from 14.39 in the first quarter of 2016 to a lower range around 10.44 to 11.12 during the following three quarters of the same year. Starting in early 2017, the ratio improves, ranging between 11.61 and 12.74, with a notable peak at 16.82 in the last quarter of 2018. Following this peak, the ratio decreases again to values around 12.37 to 13.92 in 2019 before stabilizing near 12.51 by the end of 2019. This suggests periods of accelerated payments interspersed with more extended payment cycles over time.

Average Payables Payment Period

The average payables payment period inversely correlates with the payables turnover, fluctuating between 22 and 35 days. It starts at 25 days in the first quarter of 2016, peaks at 35 days twice within 2016, then reduces to 29-31 days during most of 2017. There is a significant decrease to 22 days in the last quarter of 2018, corresponding with the peak in payables turnover, indicating faster payments in that period. In 2019, the period varies between 26 and 30 days, showing a tendency towards moderate payment terms.

Overall Insights

The data indicates dynamic management of payables with variable liquidity strategies over the examined quarters. The significant reduction in the payment period in late 2018 suggests a temporary acceleration of payables settlement. Aside from this, the company maintains moderate and relatively stable payment periods mostly within the 25 to 35-day range. The payables turnover ratio supports these observations, fluctuating in a manner consistent with changing payment durations and possibly reflecting changes in supplier negotiation tactics or cash flow management practices during the periods.

Average Inventory Processing Period

The average inventory processing period exhibits a decreasing trend over the observed timeframe. Starting from around 21–22 days in early 2016, there is a noticeable drop by the end of each year, reaching lows of approximately 13 to 15 days in late 2017 and 2018. Although some fluctuations are present, the overall pattern suggests improved efficiency in inventory turnover, with shorter holding times in more recent periods.

Average Receivable Collection Period

The average receivable collection period remains relatively stable, fluctuating mostly within a range of 16 to 25 days. There is a slight upward tendency toward the end of the timeline, particularly in late 2019, where the period extends to around 25 days. This indicates a mild increase in the time taken to collect receivables, which may warrant monitoring for potential impacts on cash flow.

Average Payables Payment Period

The payables payment period shows variability but does not indicate a clear long-term trend. Initially increasing from 25 days in early 2016 to peaks around 35 days during 2016, it later fluctuates mainly between 22 and 32 days. The periods oscillate without sustained directional movement, suggesting stable supplier payment practices with periodic adjustments.

Cash Conversion Cycle

The cash conversion cycle generally remains positive but modestly fluctuates between 6 and 13 days throughout the periods. The shorter cycles observed in late 2016 and late 2017 imply more rapid conversion of investments in inventory and receivables into cash. However, slight increases toward the latter quarters, including late 2019, may indicate a small extension in the working capital cycle, requiring attention to maintain liquidity efficiency.