Valero Energy Corp. (NYSE:VLO)

The financial data reveals several key trends in inventory components over the five-year period ending December 31, 2023.

Refinery Feedstocks

There is a general decline from 2019 to 2022, with values decreasing from 2,399 million USD in 2019 to 1,949 million USD in 2022. However, a rebound occurs in 2023, increasing to 2,223 million USD. This suggests a reduction in refinery feedstock inventories during the early period, followed by a partial recovery in the most recent year.

Refined Petroleum Products and Blendstocks

The inventory values show a downward trend from 2019 (4,034 million USD) to 2020 (3,425 million USD), followed by a slight recovery and stabilization in 2021 and 2022 around 3,567 to 3,579 million USD. An increase is observed again in 2023, reaching 3,790 million USD. This pattern indicates fluctuating inventory levels with a moderate overall decrease relative to 2019 levels but recent growth in the final year.

Renewable Diesel Feedstocks and Products

A notable growth trend is evident, starting from a low base of 46 million USD in 2019, progressing steadily to 50 million in 2020, then increasing substantially to 135 million in 2021, 583 million in 2022, and reaching 913 million in 2023. This reflects a significant expansion in renewable diesel inventories, possibly indicating increased production or stockpiling aligned with strategic or market shifts.

Ethanol Feedstocks and Products

The ethanol-related inventories show modest fluctuations, rising from 260 million USD in 2019 to 297 million in 2020, then slightly decreasing to 273 million in 2021, followed by an increase to 328 million in 2022 before a minor decline to 313 million in 2023. Overall, this highlights relatively stable ethanol inventory levels with marginal variation year over year.

Materials and Supplies

The values depict a consistent upward progression from 274 million USD in 2019 to 344 million USD in 2023. This steady increase suggests a gradual buildup in materials and supplies over the period analyzed.

Total Inventories

The aggregate inventory figures illustrate a decline from 7,013 million USD in 2019 to 6,038 million USD in 2020, potentially reflecting market or operational disruptions. Following this, inventories rise steadily each year, reaching 7,583 million USD by 2023, which surpasses the 2019 level, indicating stronger inventory accumulation in recent years.

The analysis of the financial data over the five-year period reveals several notable trends and adjustments when considering the LIFO reserve impact on reported figures.

Inventories

Reported inventories show a moderate fluctuation, beginning at $7.0 billion in 2019, decreasing to $6.0 billion in 2020, then gradually increasing to $7.6 billion by 2023. In contrast, adjusted inventories, which include the LIFO reserve, present a more volatile pattern with a significant dip in 2020 followed by a notable increase peaking at $13.1 billion in 2022 before slightly declining to $12.0 billion in 2023. This suggests that LIFO adjustments significantly affect inventory valuation and reveal higher inventory levels particularly evident in the post-2020 years.

Current Assets

Reported current assets mirror the trend in reported inventories, starting from about $19.0 billion in 2019, declining in 2020, then steadily rising to reach $26.2 billion by 2023. Adjusted current assets consistently exceed reported figures by a wide margin and follow an upward trajectory from $21.5 billion in 2019 to a peak of $30.4 billion in 2022, slightly tapering to $30.6 billion in 2023. The increasing gap between reported and adjusted current assets over time indicates the growing influence of the LIFO reserve on current asset valuation.

Total Assets

Reported total assets show a dip in 2020 from $53.9 billion to $51.8 billion, then recover and increase to $63.1 billion in 2023. Adjusted total assets follow a similar pattern but are consistently higher, reflecting the inventory LIFO adjustments. The adjusted total assets increase notably from $56.4 billion in 2019 to $67.3 billion in 2022, before a slight decline to $67.5 billion in 2023. This indicates that total asset base benefits from inventory adjustment, with the LIFO reserve significantly enhancing asset valuation in recent years.

Stockholders' Equity

Reported stockholders’ equity declines from $21.8 billion in 2019 to $18.8 billion in 2020 and remains relatively flat through 2021, then rises sharply to $26.3 billion by 2023. The adjusted stockholders' equity starts higher at $24.3 billion in 2019 and experiences a similar dip in 2020 but rebounds more strongly, increasing to $29.9 billion in 2022 and slightly decreasing to $30.7 billion in 2023. The adjustment for inventory LIFO reserve significantly enhances equity values, showing a more robust equity position than reported figures alone.

Net Income (Loss)

Reported net income exhibits substantial volatility: a strong profit of $2.4 billion in 2019 turns to a loss of $1.4 billion in 2020, followed by recovery and substantial profit growth to $11.5 billion in 2022 before declining to $8.8 billion in 2023. Adjusted net income is consistently lower than the reported in good years and more negative in 2020, showing a loss of $2.6 billion that year compared to the $1.4 billion reported. It recovers to $4.8 billion in 2021, peaks at $12.6 billion in 2022, then decreases sharply to $6.9 billion in 2023. This indicates that LIFO reserve adjustments tend to reduce net income during profitable periods and exacerbate losses during downturns, reflecting the cost flow assumptions' effect on profitability measurement.

Overall, the LIFO reserve adjustment substantially affects the valuation of inventories, current assets, total assets, stockholders' equity, and net income, revealing a more conservative income and equity position during down years but higher asset and equity values during growth periods. The data indicate that LIFO accounting has an increasing impact over time on the financial metrics, important for comprehensive financial analysis and decision-making.

Current Ratio Trends

The reported current ratio experienced fluctuations, starting at 1.44 in 2019, increasing to a peak of 1.71 in 2020, followed by a decrease to 1.26 in 2021, and then a steady recovery to 1.56 by 2023. The adjusted current ratio, which accounts for inventory LIFO reserve adjustments, consistently remained higher than the reported ratio for all periods. It showed a similar pattern but with less pronounced dips, starting at 1.63 in 2019 and gradually increasing to 1.82 in 2023, indicating improving short-term liquidity when adjustments are considered.

Net Profit Margin Analysis

The reported net profit margin demonstrated volatility, with a positive margin of 2.24% in 2019, turning negative to -2.19% in 2020, slight recovery to 0.82% in 2021, then notable improvements to 6.54% in 2022 and 6.10% in 2023. Adjusted net profit margins followed the same trend but showed wider swings, reflecting a deeper loss in 2020 at -4.04%, a stronger rebound to 4.24% in 2021, and a peak at 7.16% in 2022 before moderating to 4.79% in 2023. This suggests that inventory adjustments impacted profitability measurement, especially during the downturn period.

Total Asset Turnover Behavior

The reported total asset turnover ratio declined sharply from 2.01 in 2019 to 1.25 in 2020, then rebounded to 1.97 in 2021, followed by a significant increase to 2.89 in 2022, before easing to 2.30 in 2023. Adjusted figures were generally somewhat lower but followed the same directional changes, starting at 1.92 in 2019, dipping to 1.22 in 2020, recovering to 1.81 in 2021, peaking at 2.62 in 2022, and ending at 2.15 in 2023. This indicates asset utilization efficiency deteriorated in 2020 but improved strongly thereafter.

Financial Leverage Developments

The reported financial leverage increased from 2.47 in 2019 to a high of 3.14 in 2021, then declined notably to 2.39 by 2023. The adjusted leverage ratio was generally lower and more stable, rising modestly from 2.32 in 2019 to 2.67 in 2021, before decreasing to 2.19 in 2023. This suggests that the company’s reliance on debt or liabilities to finance assets peaked in 2021 and has since moderated, with inventory adjustments providing a more conservative leverage perspective.

Return on Equity (ROE) Insights

Reported ROE demonstrated high volatility, beginning at 11.11% in 2019, dropping sharply to -7.56% in 2020, recovering to 5.05% in 2021, and then surging to 48.93% in 2022 before declining to 33.53% in 2023. The adjusted ROE presented a wider range: 14.08% in 2019, falling to -13.04% in 2020, rebounding strongly to 20.44% in 2021, peaking at 42.29% in 2022, and retreating to 22.56% in 2023. These fluctuations reflect a significant impact of inventory valuation on profitability and equity returns, with a marked recovery and strong profitability post-2020.

Return on Assets (ROA) Patterns

Reported ROA fell from 4.5% in 2019 to -2.74% in 2020, then increased steadily to 1.61% in 2021, surged to 18.9% in 2022, and decreased to 14.01% in 2023. The adjusted ROA was consistently higher in absolute terms, showing 6.07% in 2019, decreasing to -4.94% in 2020, climbing to 7.66% in 2021, peaking at 18.77% in 2022, and settling at 10.28% in 2023. This indicates that asset profitability improved significantly after the downturn year, with the adjusted data suggesting a stronger performance when inventory effects are factored in.

The analysis of the annual financial data reveals notable trends in both reported and LIFO reserve adjusted figures for current assets and current ratios over the five-year period.

Current Assets (Reported vs Adjusted)

Reported current assets exhibit fluctuations over the period, starting at $18,969 million at the end of 2019, declining to $15,844 million in 2020, then increasing steadily to $26,221 million in 2023. This reflects an initial contraction followed by a robust recovery and growth phase.

Adjusted current assets, which account for LIFO reserve adjustments, show a similar pattern but at consistently higher levels. Beginning at $21,469 million in 2019, the adjusted values decline in 2020 to $17,144 million, then experience significant growth through 2021 to 2023, reaching $30,621 million. This suggests that inventory valuation adjustments contribute positively to the current asset base, especially in the latter years.

Current Ratios (Reported vs Adjusted)

The reported current ratio starts at 1.44 in 2019, improves to 1.71 in 2020 despite the drop in reported current assets, before declining to 1.26 in 2021. It then improves steadily again to 1.56 by 2023. These fluctuations indicate varying liquidity conditions but an overall trend toward strengthening liquidity in the most recent years.

Adjusted current ratios are consistently higher than reported ratios across all years, beginning at 1.63 in 2019 and rising to 1.82 in 2023. The adjusted ratios also show a drop from 1.85 in 2020 to 1.56 in 2021 but recover thereafter. The persistently higher adjusted ratios suggest that incorporating LIFO reserve adjustments provides a more favorable view of liquidity, underscoring the value of inventory adjustments in liquidity assessment.

Overall, the data suggests that the company has strengthened its liquidity position over the examined period, with LIFO reserve adjustments providing a more optimistic and arguably more accurate portrayal of its current asset base and short-term financial health. The steady rise in both reported and adjusted current assets post-2020 points towards improved operational or market conditions.

Over the analyzed period, the reported net income attributable to stockholders exhibited significant volatility. Starting from a positive value in 2019, it declined sharply into negative territory in 2020, before recovering modestly in 2021 and surging strongly in 2022. However, there was a notable decline in 2023 despite remaining positive and considerably higher than pre-pandemic levels.

The adjusted net income figures, which account for inventory LIFO reserve adjustments and other factors, follow a parallel trajectory but demonstrate more pronounced swings. The adjusted results show a deeper loss in 2020 compared to the reported figures, a strong rebound in 2021 with income more than five times the reported figure, continued growth reaching a peak in 2022, and a subsequent decrease in 2023.

The net profit margins, both reported and adjusted, reflected these income trends. The reported net profit margin declined from a modest positive margin in 2019 to a negative margin in 2020, then gradually improved through 2021 and 2022, reaching the highest margin in 2022 before slightly decreasing in 2023. The adjusted net profit margin mirrored this pattern but showed a more pronounced negative dip in 2020 and generally higher margins in the recovery years, peaking at a higher level in 2022 before retreating in 2023.

Income Volatility

There was a sharp decline in both reported and adjusted net income in 2020, associated with the impact of external market and economic factors during that year. The recovery phase began in 2021, with significant improvement by 2022. Despite still positive results in 2023, income figures decreased compared to the previous year, indicating potential market headwinds or operational challenges.

Difference Between Reported and Adjusted Figures

Adjusted net income consistently reshaped the financial picture, reflecting deeper losses during the downturn and stronger profitability during recovery years, thereby highlighting the impact of inventory accounting adjustments on profitability measurement.

Profitability Margins

The net profit margins followed similar trends to net income. Negative margins in 2020 reflect the losses incurred, with improvement thereafter into positive territory. The adjusted margins were generally higher in recovery periods, underscoring the influence of LIFO reserve adjustments on reported profitability.

Overall Insight

The pattern highlights considerable sensitivity of reported results to underlying inventory valuation methods, especially in periods of economic distress and recovery. The strong earnings rebound post-2020 suggests operational resilience, but the decline in 2023 signals that favorable conditions may have moderated. Continuous monitoring of these trends and adjustments is essential for accurate financial performance assessment.

Total Assets

Reported total assets demonstrated a generally increasing trend from 2019 to 2023, starting at approximately $53.9 billion and rising to about $63.1 billion. However, a slight dip was observed in 2020, corresponding with broader economic disruptions, before assets resumed growth in subsequent years.

Adjusted total assets, accounting for the LIFO reserve, followed a similar upward trajectory but at a higher base level throughout the period. These values started near $56.4 billion in 2019 and increased steadily to approximately $67.5 billion by 2023, reflecting an ongoing accumulation of inventory reserves that impact asset valuation.

Total Asset Turnover

Reported total asset turnover exhibited variability, initially moving downward from 2.01 in 2019 to 1.25 in 2020, indicating reduced efficiency in asset utilization during that year. Following the dip, turnover improved substantially, peaking at 2.89 in 2022 before slightly declining to 2.3 in 2023. This pattern suggests fluctuating operational efficiency likely influenced by market conditions and asset base changes.

Adjusted total asset turnover mirrored the reported trend but consistently showed lower values across all periods, beginning at 1.92 in 2019, decreasing to 1.22 in 2020, rising to 2.62 in 2022, and settling at 2.15 in 2023. The lower turnover ratios reflect the increased asset base when factoring in LIFO reserves, which dilutes turnover measures based on higher adjusted assets.

Overall Observations

The increase in both reported and adjusted total assets over the analyzed period indicates ongoing investment and growth in asset base. The fluctuations in total asset turnover ratios reveal sensitivity to economic and operational factors, with a notable downturn in 2020 followed by recovery and moderate fluctuations.

The consistent gap between reported and adjusted figures highlights the significance of inventory valuation methods on financial metrics. Adjusting for the LIFO reserve leads to higher asset valuations and consequently lower turnover ratios, underscoring the impact of accounting policies on perceived operational efficiency.

The analysis reveals discernible trends in both reported and inventory LIFO reserve adjusted financial data over the five-year period.

Total Assets

Reported total assets exhibit moderate fluctuation, starting at 53,864 million US dollars in 2019, decreasing slightly to 51,774 million in 2020, and then increasing steadily each subsequent year to reach 63,056 million by 2023. Adjusted total assets, which account for inventory LIFO reserves, consistently exceed reported assets by a noticeable margin across all years. The adjusted assets mirror the reported trend but show a more pronounced increase, rising from 56,364 million in 2019 to 67,456 million in 2023. This suggests an increasing impact of inventory accounting adjustments on the asset base.

Stockholders’ Equity

Reported stockholders’ equity declines from 21,803 million in 2019 to a low of 18,430 million in 2021, followed by a strong recovery and growth to 26,346 million by 2023. The adjusted stockholders’ equity, reflecting the LIFO reserve adjustments, also follows a similar trajectory but shows consistently higher values. It drops from 24,303 million in 2019 to 23,630 million in 2021, then substantially increases to 30,746 million by 2023. The divergence between reported and adjusted equity widens notably in later years, indicating that inventory valuation adjustments are increasingly enhancing the equity position.

Financial Leverage

Reported financial leverage, defined as the ratio of total assets to stockholders’ equity, begins at 2.47 in 2019 and rises to a peak of 3.14 in 2021, indicating greater use of debt relative to equity during that period. Thereafter, it decreases to 2.39 by 2023, suggesting a deleveraging trend. The adjusted financial leverage shows a similar pattern but remains consistently lower than the reported figures each year, decreasing from 2.32 in 2019 to 2.19 in 2023. This lower adjusted leverage ratio implies that considering LIFO reserve adjustments portrays a stronger equity base and somewhat reduced reliance on debt financing.

Overall, the data indicate a phase of increased leverage and reduced equity in the earlier years, followed by recovery and strengthening of the financial position in later years. The LIFO reserve adjustments have a material effect on the valuation of assets and equity, leading to lower leverage ratios when accounted for, and reflecting potentially more conservative financial strength assessments.

The financial performance over the five-year period exhibits significant volatility with a notable recovery in recent years after a substantial downturn.

Net Income

The reported net income shows a drastic decline from a positive $2,422 million in 2019 to a loss of $1,421 million in 2020, followed by a gradual recovery to $930 million in 2021, and then a sharp increase to $11,528 million in 2022 before declining to $8,835 million in 2023. The adjusted net income follows a similar pattern but reflects deeper losses and higher gains, starting at $3,422 million in 2019, dropping to a loss of $2,621 million in 2020, rebounding strongly to $4,830 million in 2021, reaching $12,628 million in 2022, and then decreasing to $6,935 million in 2023.

Stockholders’ Equity

Reported total stockholders’ equity declined from $21,803 million in 2019 to $18,801 million in 2020 and slightly further to $18,430 million in 2021, then increased notably to $23,561 million in 2022 and continued to grow to $26,346 million in 2023. Adjusted equity consistently exceeds reported figures, reflecting higher underlying equity values, increasing from $24,303 million in 2019 to $30,746 million in 2023, despite a dip in 2020.

Return on Equity (ROE)

Reported ROE was positive in 2019 at 11.11%, turned negative in 2020 (-7.56%), returned to positive but modest levels in 2021 (5.05%), then surged to very high levels in 2022 (48.93%) before moderating to 33.53% in 2023. Adjusted ROE values tend to be more volatile, with a more pronounced negative return in 2020 (-13.04%), a stronger recovery in 2021 (20.44%), followed by high returns in 2022 (42.29%) and a significant decrease to 22.56% in 2023.

Overall, the data reveal a period of significant stress in 2020, likely driven by external or operational challenges, followed by a strong recovery phase in 2021 and peak performance in 2022. The decline in net income and ROE in 2023 suggests some normalization after exceptional profitability. Adjusted figures, which account for inventory LIFO reserves and other adjustments, generally show a more conservative and volatile profile but align with the overall trends seen in reported data. The growth in equity alongside profit recovery implies strengthened financial stability in the latter part of the period.

Net Income (Loss) Attributable to Stockholders

Reported net income exhibited significant volatility over the observed period. Starting with a positive figure of 2422 million USD in 2019, it sharply fell to a negative 1421 million USD in 2020. Recovery began in 2021, with a positive 930 million USD, followed by a substantial increase to 11,528 million USD in 2022, before decreasing to 8,835 million USD in 2023. Adjusted net income followed a similar pattern but showed more pronounced fluctuations, beginning at 3422 million USD in 2019 and dropping to a deeper loss of 2621 million USD in 2020. It rebounded strongly to 4830 million USD in 2021, peaked at 12,628 million USD in 2022, and then declined sharply to 6935 million USD in 2023.

Total Assets

The reported total assets demonstrated a gradual upward trend. Starting at 53,864 million USD in 2019, assets slightly decreased in 2020 to 51,774 million USD but then increased steadily through 2021 (57,888 million USD), 2022 (60,982 million USD), and 2023 (63,056 million USD). The adjusted total assets, which account for inventory LIFO reserve impacts, consistently remained higher than the reported totals, suggesting an ongoing inventory reserve adjustment effect. Adjusted assets started at 56,364 million USD in 2019, showed a mild dip to 53,074 million USD in 2020, and then increased markedly through 2021 (63,088 million USD), 2022 (67,282 million USD), and 2023 (67,456 million USD).

Return on Assets (ROA)

Reported ROA mirrored net income trends, beginning at a healthy 4.5% in 2019 before turning negative at -2.74% in 2020. It recovered to 1.61% in 2021 and surged to a high of 18.9% in 2022, followed by a decline to 14.01% in 2023. Adjusted ROA, which incorporates the LIFO reserve adjustments, showed a more volatile pattern: starting higher at 6.07% in 2019, declining substantially to -4.94% in 2020, then rising significantly to 7.66% in 2021 and peaking at 18.77% in 2022 before tapering to 10.28% in 2023.

Summary of Trends and Insights

The financial data indicates that the company experienced a considerable downturn in 2020, likely reflecting challenging market conditions, followed by a strong recovery in 2021 and 2022 with elevated profitability and asset growth. The adjusted figures, which reflect inventory LIFO reserve adjustments, accentuate the income and asset swings, suggesting that inventory accounting methods significantly impact reported results. While profitability metrics improved markedly post-2020, there is a noticeable moderation in 2023 across most measures. The difference between reported and adjusted assets points to an increasing inventory reserve adjustment over time, which consequently affects performance ratios such as ROA.