SLB N.V. (NYSE:SLB)

The analysis of the annual financial data reveals several notable trends in the company’s operational efficiency and liquidity management over the observed period.

Inventory Turnover

The inventory turnover ratio shows a slight initial decline from 6.26 in 2020 to 5.73 in 2022, indicating a slower rate of inventory being sold or used. However, this trend reverses in the last two years, with a recovery to 6.59 in 2024, suggesting improved inventory management or increased sales efficiency.

Receivables Turnover

The receivables turnover ratio follows a similar pattern, decreasing from 4.5 in 2020 to 3.99 in 2022, indicating slower collection of receivables. It then rises modestly to 4.53 by 2024, pointing to a gradual enhancement in credit management and collection processes.

Payables Turnover

The payables turnover ratio declines from 7.15 in 2020 to 5.76 in 2023, reflecting a lengthening in payment cycles to suppliers. The ratio rebounds to 6.82 in 2024, suggesting a return to quicker payments or better management of payable accounts.

Working Capital Turnover

This ratio exhibits a downward trajectory from a high of 9.99 in 2021 to 6.3 in 2024, representing reduced efficiency in the use of working capital to generate sales. The consistent decrease over the last three years indicates potential challenges in managing short-term assets and liabilities effectively.

Average Inventory Processing Period

The average inventory processing period, expressed in days, increases from 58 days in 2020 to 64 days in 2022, implying slower inventory turnover. The subsequent reduction to 55 days in 2024 aligns with the improving inventory turnover ratio, signaling more efficient inventory handling.

Average Receivable Collection Period

The days required to collect receivables extend from 81 days in 2020 to a peak of 91 days in 2022, indicating slower collection efforts. This period declines back to 81 days in 2024, consistent with improvements in receivables turnover.

Operating Cycle

The operating cycle lengthens from 139 days in 2020 to 155 days in 2022, reflecting extended durations between inventory acquisition and cash collection from sales. A decrease to 136 days by 2024 suggests improved overall operational efficiency.

Average Payables Payment Period

The payment period to suppliers extends from 51 days in 2020 to 63 days in 2023, indicating delayed supplier payments possibly to conserve cash. The figure decreases to 54 days in 2024, implying a normalization of payment timing.

Cash Conversion Cycle

The cash conversion cycle, which measures the net time between cash outflows for inventory and cash inflows from receivables, remains relatively stable but shows some fluctuations. From 88 days in 2020, it slightly decreases to 86 days in 2021, increases to 93 days in 2022, then improves to 82 days by 2024. This suggests fluctuating but ultimately improving efficiency in managing cash flows over the period.

Cost of Revenue

The cost of revenue shows an overall upward trend over the five-year period. Starting at 21,000 million USD in 2020, it decreased slightly in 2021 to 19,271 million USD. However, it then increased substantially each subsequent year, reaching 28,829 million USD by the end of 2024. This indicates rising expenses related to production or services delivered, possibly reflective of growth in sales volume or increased input costs.

Inventories

Inventory levels exhibited some fluctuations but generally increased over the period. Inventories decreased slightly from 3,354 million USD in 2020 to 3,272 million USD in 2021, followed by a steady increase to peak at 4,387 million USD in 2023. In 2024, there was a marginal decline to 4,375 million USD. The rising inventory levels in recent years may suggest accumulation of stock or preparation for anticipated demand expansion.

Inventory Turnover

The inventory turnover ratio declined from 6.26 in 2020 to a low of 5.73 in 2022, signaling that inventory was being sold more slowly relative to prior years. Thereafter, the ratio improved, climbing to 6.06 in 2023 and further to 6.59 in 2024, which is the highest in the period. This recovery indicates enhanced efficiency in managing and selling inventory, despite the higher inventory volumes maintained.

Overall Analysis

The data suggests that the company experienced rising cost of revenue alongside increasing inventory levels after 2021. While inventory turnover initially weakened, the improvement in the last two years points to better inventory and sales management. The combination of higher costs and inventory accumulation may reflect strategic positioning for growth or faced operational challenges that are being addressed.

Revenue Trends

The revenue demonstrates a generally upward trajectory over the five-year period. Starting at US$ 23,601 million in 2020, there was a slight decline in 2021 to US$ 22,929 million. However, from 2021 onwards, revenue grew significantly, reaching US$ 28,091 million in 2022, US$ 33,135 million in 2023, and further increasing to US$ 36,289 million in 2024. This indicates strong growth momentum in the latter three years, reflecting increased sales or market demand.

Receivables Performance

The accounts receivable balance, net of allowance for doubtful accounts, exhibited a steady increase throughout the period. The balance rose from US$ 5,247 million in 2020 to US$ 8,011 million in 2024. This aligns with the revenue growth, suggesting an expansion in credit sales or timing differences in cash collections.

Receivables Turnover Ratio

The receivables turnover ratio, which measures how efficiently the company collects receivables, showed some fluctuation. It started at 4.5 in 2020, declining to 4.31 in 2021 and further to 3.99 in 2022, indicating a slower collection period during those years. Thereafter, the ratio improved, increasing to 4.24 in 2023 and rising further to 4.53 in 2024, surpassing the initial level. This suggests an improvement in collection efficiency in the last two years, potentially enhancing working capital management.

Overall Assessment

The data reveals that the company experienced robust revenue growth, particularly from 2021 onwards, accompanied by an increase in receivables consistent with higher sales. While receivables turnover initially declined indicating prolonged collection periods, it improved in recent years, implying better management of receivables and possibly contributing to stronger cash flow dynamics. The trends indicate positive operational performance and effective credit management improvements over the analyzed period.

Cost of Revenue

The cost of revenue exhibited an overall increasing trend from 2020 to 2024. Starting at $21,000 million in 2020, it decreased to $19,271 million in 2021 but subsequently rose to $22,930 million in 2022, then further increased to $26,572 million in 2023, and finally reached $28,829 million in 2024. This progression indicates a recovery and accelerated growth in cost expenditure after a dip in 2021.

Trade Accounts Payable

Trade accounts payable demonstrated a consistent upward movement from 2020 through 2023, increasing from $2,937 million to $4,613 million. However, in 2024, the figure slightly declined to $4,230 million. This pattern suggests expanding credit purchases or extended payment terms up to 2023, followed by a modest contraction in payables in the last year.

Payables Turnover Ratio

The payables turnover ratio decreased from 7.15 in 2020 to a low of 5.76 in 2023, before rebounding to 6.82 in 2024. The declining ratio indicates that the company took longer to pay its suppliers during the period 2020–2023, with a subsequent improvement in payment efficiency in 2024. The upward movement in 2024 points to a faster rate of payment compared to previous years.

Summary Insights

The data reveals that while the company managed to reduce cost of revenue in 2021, it faced increasing costs thereafter, possibly due to expanded operations or higher input prices. The growth in trade accounts payable up to 2023 aligns with an extended credit period, as indicated by a falling payables turnover ratio. The reversal in 2024—with a reduction in payables and increase in turnover ratio—may reflect efforts to accelerate supplier payments or changes in credit terms. Overall, the financial trends suggest dynamic management of payables in response to evolving cost structures over the five-year period.

The financial data reveals several notable trends regarding working capital, revenue, and working capital turnover over the analysed five-year period.

Working Capital

There is a consistent and significant increase in working capital, starting from US$2,428 million at the end of 2020 and reaching US$5,759 million by the end of 2024. This more than doubling of working capital suggests a substantial growth in the company’s short-term assets relative to its short-term liabilities, indicating enhanced liquidity and operational capacity over time.

Revenue

Revenue shows an overall upward trajectory, increasing from US$23,601 million in 2020 to US$36,289 million in 2024. Despite a slight dip between 2020 and 2021, revenue rebounds strongly in subsequent years with consistent year-over-year growth. This growth indicates expanding sales or service delivery and improving market performance.

Working Capital Turnover

The working capital turnover ratio demonstrates a declining trend, decreasing from 9.72 in 2020 to 6.3 in 2024. This decline suggests that while sales have grown, the company is generating less revenue per unit of working capital employed. The reduction in turnover could indicate an increase in working capital relative to sales, possibly due to higher inventory levels, accounts receivable, or other short-term assets increasing faster than revenue.

In summary, the company has expanded both working capital and revenue substantially over the period. However, the efficiency with which working capital is used to generate revenue has declined, signaling a potential area requiring management attention to optimize asset utilization and working capital management.

The financial data reveals trends in inventory management efficiency over the examined period from the end of 2020 through the end of 2024.

Inventory Turnover Ratio

The inventory turnover ratio experienced a decrease from 6.26 in 2020 to 5.73 in 2022, indicating a slowdown in inventory turnover during this interval. Subsequently, the ratio improved, rising to 6.06 in 2023 and further to 6.59 in 2024. This suggests enhanced effectiveness in managing inventory towards the later years, surpassing the initial 2020 level.

Average Inventory Processing Period

The average inventory processing period, expressed in days, increased from 58 days at the end of 2020 to 64 days by the end of 2022, which aligns with the observed reduction in the inventory turnover ratio, indicating that inventory remained in stock longer. After 2022, this period shortened progressively to 60 days in 2023 and 55 days in 2024, reflecting accelerated inventory processing and an improvement in turnover efficiency.

Overall, the data portray an initial deterioration in inventory handling between 2020 and 2022, followed by a notable recovery and improvement in 2023 and 2024. The enhanced turnover ratio and reduced processing period in the latter years suggest better operational control of inventory, potentially contributing positively to working capital management.

Receivables Turnover

The receivables turnover ratio exhibited a declining trend from 4.5 in 2020 to a low of 3.99 in 2022, indicating a slowdown in the rate at which receivables were collected during that period. Subsequently, there was a recovery in 2023 and 2024, with the ratio increasing to 4.24 and then to 4.53, surpassing the initial 2020 level. This suggests an improvement in collection efficiency in the last two reported years.

Average Receivable Collection Period

The average collection period mirrored the inverse of the receivables turnover trend. Beginning at 81 days in 2020, the collection period lengthened each year until it peaked at 91 days in 2022, highlighting a worsening liquidity position related to receivables. In 2023 and 2024, there was a notable reduction in days outstanding, returning to 86 and then back to 81 days respectively, indicating a positive shift towards faster collection.

Overall Analysis

The data reveals that between 2020 and 2022, there was a deterioration in the efficiency of receivables management, as evidenced by both the decline in turnover and the increase in collection days. However, from 2023 onwards, the company showed significant improvements, enhancing liquidity and cash flow management by reducing the collection period and raising turnover rates above the levels observed at the beginning of the period. This recovery suggests either better credit control or improved customer payment behavior in the most recent years.

The financial data reveals notable trends over the five-year period from 2020 to 2024 concerning the company's inventory management, receivables collection, and overall operating cycle.

Average Inventory Processing Period

This period experienced a gradual increase from 58 days in 2020 to a peak of 64 days in 2022. Subsequently, it declined to 60 days in 2023 and further improved to 55 days by 2024. This pattern indicates an initial slowdown in inventory processing efficiency, followed by enhanced management or operational improvements leading to a shorter processing time than at the start of the timeline.

Average Receivable Collection Period

The collection period increased steadily from 81 days in 2020 to a high of 91 days in 2022, indicating a lengthening period for recovering receivables. Afterward, it decreased back to 86 days in 2023 and further to 81 days in 2024, returning to the level observed at the beginning of the period. This suggests initially weakening collection effectiveness which later improved, restoring the company's capability to collect receivables in a timely manner.

Operating Cycle

The operating cycle, which combines inventory processing and receivables collection periods, followed a similar trend. It lengthened from 139 days in 2020 to 155 days in 2022, reflecting a deterioration in operating efficiency. This was followed by a reduction to 146 days in 2023 and an even greater improvement to 136 days in 2024, indicating a shortened cash conversion cycle and improved working capital management by the end of the period.

Overall, the analysis shows an initial decline in operational efficiency between 2020 and 2022, followed by a recovery and improvements during 2023 and 2024. The company appears to have effectively addressed the challenges related to inventory management and receivables collection post-2022, resulting in a more streamlined operating cycle by 2024.

Payables Turnover

The payables turnover ratio exhibits a declining trend from 7.15 in 2020 to 5.76 in 2023, indicating that the company was settling its payables at a slower pace during this period. However, in 2024, the ratio increased to 6.82, suggesting an improved efficiency in managing payables compared to the previous year.

Average Payables Payment Period

The average payables payment period shows an inverse relationship to the payables turnover. It increased steadily from 51 days in 2020 to 63 days in 2023, reflecting a longer duration taken to pay suppliers. This trend reversed in 2024, when the period shortened to 54 days, aligning with the higher payables turnover observed in that year.

Summary of Trends

Overall, the data points to a gradual elongation of the payables payment cycle from 2020 through 2023, potentially indicating a deliberate extension of payment terms or liquidity management strategies. The reversal in 2024 suggests a strategic shift toward faster payments or improved working capital management. The close correlation between the payables turnover ratio and the average payment period supports consistent changes in payables management during this timeframe.

Inventory Processing Period

The average inventory processing period showed a general upward trend from 58 days in 2020 to a peak of 64 days in 2022. However, this was followed by a decline to 60 days in 2023 and further down to 55 days in 2024, indicating improved efficiency in inventory handling towards the end of the period.

Receivable Collection Period

The receivable collection period increased steadily from 81 days in 2020 to 91 days in 2022, reflecting a lengthening of the time taken to collect receivables. This trend reversed after 2022, with the period decreasing to 86 days in 2023 and returning to 81 days by 2024, suggesting an improvement in collection processes or credit management.

Payables Payment Period

The average payables payment period experienced a significant increase from 51 days in 2020 to 63 days in 2023, suggesting an extended time to settle obligations with suppliers. However, there was a quick decline to 54 days in 2024, indicating a shift towards faster payment cycles.

Cash Conversion Cycle

The cash conversion cycle exhibited some fluctuations, starting at 88 days in 2020, slightly decreasing to 86 days in 2021, then spiking to 93 days in 2022. This was followed by a notable reduction over the subsequent two years, reaching 82 days in 2024. The overall trend in the latter years reflects enhanced operational efficiency and improved working capital management.

Summary of Trends

Overall, the data reflects initial expansions in operational and collection periods up to 2022, which may have pressured the company's liquidity and working capital. However, from 2023 onwards, there is clear evidence of improvements in inventory turnover, receivables collection, and payment practices. The resulting contraction in the cash conversion cycle in the last two years points to more effective cash flow management and potentially stronger financial health.