Valero Energy Corp. (NYSE:VLO)

Inventory Turnover

The inventory turnover ratio shows a general decline from early 2020 through the end of 2020, dropping from 28.3 to 10.87. This suggests slower inventory movement during this period. Starting in 2021, the ratio improved steadily, peaking around 23.64 in late 2022. However, a declining trend resumed through 2023, falling to approximately 17.39 by the end of that year. The initial stabilization and later decline observed in 2024 indicates a moderate recovery in turnover efficiency but with some volatility.

Payables Turnover

Payables turnover shows a somewhat volatile pattern. It began with higher ratios around 17.61 to 18.19 in early 2020, dropping significantly to 6.88 by March 2021, indicating slower payment to suppliers. Through the remainder of 2021 and into 2022, the turnover ratio recovered, reaching highs of about 14.75 by early 2023. During 2023 and into 2024, the ratio declined again to levels near 9 to 11, reflecting fluctuations in payment cycles and potentially longer payment periods.

Working Capital Turnover

Working capital turnover exhibited a sharp decline during 2020, falling from 38.84 to under 10 by the end of the year, demonstrating reduced efficiency in using working capital to generate sales. From 2021 onwards, it steadily increased, peaking at over 37 in early 2022, indicating a significant improvement in operational efficiency. However, after this peak, turnover ratios declined gradually over 2023 and into 2024 to around 15.5, suggesting that working capital efficiency has moderated but remains above pre-2021 lows.

Average Inventory Processing Period

The average inventory processing period increased from 13 days at the start of 2020 to a high of 34 days by the end of that year, indicating slower inventory turnover consistent with the inventory turnover ratio trends. Through 2021 and 2022, days decreased progressively to 15 days, reflecting faster inventory processing. In 2023, the period extended slightly again to around 20-22 days, with a minor reduction to 20 days by mid-2024, suggesting some deceleration in inventory movement but still relatively efficient compared to 2020.

Average Payables Payment Period

The average payables payment period lengthened significantly between 2020 and early 2021, reaching a peak of 53 days in March 2021. This points to delayed payments to suppliers during that timeframe. Subsequently, payment periods shortened steadily through 2022, reaching about 25-29 days, signaling quicker payments. Throughout 2023 and into 2024, the payment period showed some variability, generally fluctuating between 33 and 41 days, indicating moderate and variable supplier payment cycles.

The analysis of the financial trends for the company reveals several key insights concerning the cost of sales, inventory levels, and inventory turnover across multiple quarters from March 2020 through September 2024.

Cost of Sales

The cost of sales exhibits notable volatility over the observed period. Initially, the figure starts at a high point of US$24,187 million in March 2020, plunging sharply to US$8,424 million by June 2020. Following this low, there is a gradual recovery with fluctuations, reaching a peak of US$45,162 million in June 2022. After this peak, the cost of sales demonstrates a moderately declining trend interspersed with minor rebounds, closing near US$32,122 million by September 2024. This pattern indicates periods of significant cost variations likely influenced by market conditions or operational adjustments, with overall elevated costs in the later periods compared to early 2020 except for specific troughs.

Inventories

Inventory levels show a general upward trend throughout the timeline. Starting at US$3,675 million in March 2020, inventory levels increase steadily to a high of approximately US$8,028 million by June 2024, before a slight decline to US$7,048 million in September 2024. This growth in inventory values suggests an expansion in stockholding, possibly in response to demand expectations or supply chain strategies. The relatively stable or increasing inventories despite fluctuations in cost of sales may imply longer holding periods or strategic accumulation of supplies.

Inventory Turnover

Inventory turnover reflects the rate at which inventory is sold and replaced over the period. Initially, turnover is quite high at 28.3 in March 2020, but declines steeply to around 10.66 by March 2021, indicating slower movement of inventory during this period. Subsequently, a recovery phase follows, with turnover improving to about 23.64 by December 2022, implying enhanced efficiency or faster sales cycles at that time. Thereafter, turnover ratios gradually decline again to around 16.32 by June 2024, before a slight rebound to 18.23 in September 2024. The fluctuations in inventory turnover suggest varying operational efficiencies and demand cycles, with periods of both accelerated and decelerated inventory movement.

In summary, the company experienced significant initial disruption in cost of sales and inventory management around early 2020, followed by periods of recovery and adjustment. Cost of sales trends indicate cyclical influences with peaks mid-period and subsequent moderation, while inventory steadily increased reflecting strategic stockpiling or supply considerations. Inventory turnover ratios corroborate these dynamics, revealing shifts in operational efficiency and sales velocity over time. These patterns collectively suggest a business adapting to changing market and operational conditions with fluctuating cost pressures and inventory management approaches.

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

Cost of Sales

The cost of sales exhibits substantial fluctuations throughout the periods. Starting from a high value of approximately $24.2 billion in March 2020, it plummeted sharply in the following quarter to below $8.5 billion, reflecting a significant reduction likely due to external market conditions. Thereafter, it showed a rising trend, reaching a peak near $45.2 billion in June 2022. This peak was followed by a gradual decline toward the end of 2022 and some volatility in 2023 and 2024, with amounts oscillating between $29.8 billion and $34.6 billion. The pattern suggests reactionary cost adjustments aligned with market demand or supply chain variations.

Accounts Payable

Accounts payable figures generally trended upwards over the period analyzed. Beginning at about $5.9 billion in March 2020, the balance increased steadily to exceed $15.2 billion by the first quarter of 2022, indicating an accumulation of short-term liabilities. Following this peak, a decrease occurred during the remainder of 2022 into early 2023, with payables falling back to the $10.5 billion–$13.3 billion range. The amounts then experienced moderate fluctuations through 2023 and into 2024, ending around $11.5 billion in the third quarter of 2024. Overall, this trend points to increased reliance on trade credit during the earlier periods followed by partial normalization or improved payment management later.

Payables Turnover

The payables turnover ratio, which measures how frequently the company settles its accounts payable, decreased markedly from 17.61 in March 2020 to a low of 6.88 in March 2021. This decline suggests that payables were being settled more slowly during this period. Subsequently, the ratio recovered to values between 8 and 14.75 during 2021 and 2022, indicating a more rapid payment cycle compared to the low point. In 2023 and early 2024, the turnover ratio displayed some volatility but generally remained between approximately 9 and 14, implying a moderate pace of settling payables. The variability in this ratio reflects shifting creditor payment policies or changes in working capital management strategies.

In summary, the data indicates a period of adjustment in cost structures and liabilities during the pandemic onset, with a subsequent recovery phase characterized by increasing cost of sales and accounts payable, accompanied by fluctuations in payment cycles. The observed trends point to adaptive management responses to external economic conditions and evolving operational requirements.

Working Capital

The working capital shows a fluctuating trend over the entire period. Initially, there was a significant increase from approximately 2.7 billion USD at the end of Q1 2020 to a peak near 7.3 billion USD around Q3 2020. This was followed by a decline through 2021, reaching a low point near 4.3 billion USD by the end of 2021. Throughout 2022 and into early 2023, working capital began to rise steadily again, reaching a high point of about 9.5 billion USD in Q4 2023. In 2024, there is a slight decline but the level remains elevated close to 8.7 billion USD in Q3 2024.

Revenues

Revenues demonstrate a pronounced volatility, with notable peaks and troughs. In early 2020, revenues started around 22.1 billion USD but dropped sharply in Q2 2020 to approximately 10.4 billion USD, likely related to external economic factors affecting that period. A recovery phase ensued, with revenues climbing steadily and peaking near 51.6 billion USD by mid-2022. However, following this peak, revenues trended downwards with some fluctuations, falling to about 32.9 billion USD in Q3 2024. This indicates cyclical challenges or market pressures impacting top-line growth post-2022 peak.

Working Capital Turnover

The working capital turnover ratio shows an inverse relationship with working capital levels. It started extremely high at nearly 39 times in Q1 2020, then declined sharply to below 10 times during the last quarter of 2020 when working capital was at its peak. From 2021 onwards, the turnover ratio generally increased, reaching around 37 times again in early 2022—corresponding with a dip in working capital. Subsequently, turnover declined gradually through 2023 and 2024, stabilizing in the range of 14.7 to 16 times. This pattern suggests more efficient use of working capital during periods of lower capital balances, while elevated working capital levels correspond with decreased turnover efficiency.

Overall Observations

The company’s working capital levels and revenues exhibit notable volatility, reflecting external economic conditions or operational adjustments. Elevated working capital coincides with periods of lower turnover, implying potential overcapitalization or inventory buildup. Revenue swings suggest sensitivity to market or demand shifts, with recovery phases followed by downturns. The interplay between working capital and turnover ratios highlights dynamic management of resources and operational efficiency across fluctuating market conditions.

The inventory turnover ratio demonstrates notable fluctuations over the analyzed periods. Beginning with a robust ratio of 28.3 at the end of Q1 2020, it experiences a significant decline reaching its lowest point around 10.66 to 10.87 between Q1 and Q4 2020. Subsequently, the turnover ratio recovers gradually, ascending to approximately 23.6 during late 2022. However, the turnover exhibits a downward trend once more in 2023, settling around 17 to 18 by mid-2024.

Corresponding to these changes, the average inventory processing period moves inversely, as expected from its relationship with inventory turnover. It starts at a low of 13 days early in 2020, then increases sharply to 34 days by late 2020, implying slower inventory movement during this period. Following this peak, the processing period shortens steadily to about 15 days at the end of 2022, indicating improved efficiency and faster inventory turnover.

During 2023 and into mid-2024, the average inventory processing period lengthens again, rising from 18 to 22 days, aligning with the observed reduction in inventory turnover. The increase suggests a deceleration in inventory turnover rates or changes in inventory management practices that may have impacted stock liquidity.

Overall, the data reflects cyclical trends in inventory management efficiency, with distinct periods of contraction and expansion in inventory turnover. The sharp decline in 2020 could be attributed to external factors affecting operations or supply chain disruptions, while the rebound in 2021 and 2022 indicates recovery phases. The moderate decline in turnover ratio and corresponding increase in processing days in recent periods signal potential challenges or strategic shifts in managing inventory levels more conservatively.

Inventory Turnover Ratio

Displays significant volatility, plummeting in 2020 then recovering by late 2022, and slightly declining thereafter.

Average Inventory Processing Period

Inversely mirrors turnover trends, increasing notably in 2020 to 34 days, then reducing to 15 days by 2022, followed by a gradual lengthening through 2024.

Implications

The trends suggest operational disruptions impacting inventory flow in 2020, with subsequent recovery phases and recent signs of slower inventory turnover that may warrant strategic attention.

The analysis of the payables turnover ratio over the observed periods reveals considerable fluctuations, reflecting changes in the company's efficiency in managing its payables. Initially, the ratio remains relatively high, starting at 17.61 and peaking at 18.19 in the second quarter of 2020, indicating a faster payment cycle. However, there is a notable decline toward the end of 2020 and the beginning of 2021, where the ratio drops to a low of 6.88 in the first quarter of 2021, suggesting slower payments to suppliers during this period.

Following this low point, the turnover ratio gradually improves throughout 2021 and into early 2022, reaching values above 12 by the fourth quarter of 2022. This improvement implies better payment efficiency as the company likely optimized its payables management. However, the ratio again experiences a decline in late 2023 and mid-2024 with some recovery in the third quarter of 2024, indicating periodic variability in payment pacing.

Correspondingly, the average payables payment period in days exhibits an inverse pattern relative to the turnover ratio, consistent with the expected relationship between these metrics. The payment period starts relatively low at 21 days in the first quarter of 2020, rises steadily to a peak of 53 days in the first quarter of 2021, reflecting an extension in the time taken to settle payables. This peak aligns with the lowest turnover ratio observed, reinforcing the interpretation of a slower payment cycle during this period.

Post this peak, the payment period decreases gradually through 2021 and 2022, reaching its shortest durations around 25 to 29 days in several quarters. This reduction corresponds with the enhanced payables turnover, indicating improved payment practices. Towards 2023 and 2024, the payment period fluctuates between roughly 28 and 41 days, suggesting periodic adjustment but remaining generally longer than the earliest period in 2020.

Overall, the data shows alternating periods of quicker and slower payables payments, with a significant elongation of payment terms during early 2021, followed by recovery, and then moderate fluctuations later on. These changes may reflect varying liquidity management strategies or external factors affecting supplier payment dynamics.

Payables Turnover Ratio

Exhibits a decline from early 2020 to early 2021, reaching a minimum, followed by a recovery through 2021 and 2022, and subsequent fluctuations in 2023-2024.

Average Payables Payment Period

Increases steadily until early 2021, peaking at 53 days, then declines through 2022, with moderate variability in 2023 and 2024, generally maintaining longer periods compared to the earliest quarter.