Adient PLC (ADNT)

Short-term

Turnover ratios

To analyze the activity ratios of Adient plc, we will examine four key ratios: inventory turnover, receivables turnover, payables turnover, and working capital turnover.

1. Inventory Turnover:
The inventory turnover ratio measures the efficiency of a company in managing its inventory. A higher turnover ratio indicates that the company is selling its inventory more frequently. Adient's inventory turnover has fluctuated over the past five years, with a peak of 19.83 in 2019 and a low of 13.17 in 2021. The increase in 2023 to 17.08 suggests an improvement in the efficiency of inventory management compared to the previous year.

2. Receivables Turnover:
The receivables turnover ratio reflects how efficiently a company collects on its credit sales. Adient's receivables turnover has been relatively steady over the past five years, ranging from 7.62 to 9.59. The increase in the receivables turnover ratio from 2022 to 2023 (7.62 to 8.22) indicates a slight improvement in the collection of credit sales, which is a positive sign for the company's liquidity.

3. Payables Turnover:
The payables turnover ratio measures how efficiently a company pays its suppliers. Adient's payables turnover has shown consistency over the past five years, remaining within a narrow range of 5.37 to 6.03. The slight increase in the payables turnover ratio in 2023 (5.37 to 5.69) suggests a moderate improvement in the company's payment efficiency.

4. Working Capital Turnover:
The working capital turnover ratio indicates how effectively a company utilizes its working capital to generate sales. Adient's working capital turnover has displayed significant variability, with a substantial decline in 2021 followed by a sharp increase in 2023. The surge in the working capital turnover ratio in 2023 (21.33 to 26.63) demonstrates enhanced efficiency in utilizing working capital to generate sales revenue.

In summary, Adient plc's activity ratios indicate mixed performance. While the inventory turnover and working capital turnover ratios have shown improvement in 2023, the receivables turnover and payables turnover ratios have remained relatively stable. These ratios collectively suggest that Adient has made progress in managing its inventory and working capital efficiency, which could positively impact its operational performance and financial position.

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Average number of days

To analyze Adient plc's activity ratios, let's start by looking at the Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and Number of Days of Payables over the past five years (from September 30, 2019, to September 30, 2023).

Days of Inventory on Hand (DOH):
The DOH measures the number of days a company takes to sell its inventory. Adient plc's DOH has fluctuated over the years, with a significant increase from 18.41 days in 2019 to 27.71 days in 2021, followed by a decrease to 21.37 days in 2023. This indicates that the company was holding more inventory in 2021, possibly due to factors such as changes in production levels or supply chain disruptions, but has since improved its inventory management.

Days of Sales Outstanding (DSO):
The DSO measures the average number of days it takes for a company to collect payment after a sale. Adient plc's DSO has also fluctuated, reaching its highest level at 47.87 days in 2022 before decreasing to 44.43 days in 2023. This suggests that the company has been successful in reducing the average collection period for its sales, which could improve its cash flow and working capital management.

Number of Days of Payables:
The number of days of payables measures the average number of days a company takes to pay its suppliers. Adient plc's payables period has ranged from 60.48 days in 2021 to 67.93 days in 2022. The decrease to 64.20 days in 2023 suggests that the company has been able to manage its payables more effectively, possibly negotiating better terms with its suppliers or improving its cash conversion cycle.

Overall, Adient plc's activity ratios indicate fluctuations in its inventory management, sales collection period, and payables period over the past five years. The reduction in the DSO and payables period in 2023 suggests that the company has made progress in optimizing its working capital management, which could positively impact its operating efficiency and financial performance. However, it's important for Adient plc to continue monitoring these ratios to ensure sustainable improvements in its operational effectiveness.

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Long-term

The long-term activity ratios provide insight into how efficiently Adient plc is utilizing its long-term assets to generate sales and overall revenue. Let's analyze the two key ratios provided: fixed asset turnover and total asset turnover.

1. Fixed Asset Turnover:
The fixed asset turnover ratio measures how effectively a company is using its fixed assets to generate revenue. Adient plc's fixed asset turnover has been demonstrating a consistent improvement over the past five years. In 2023, the ratio stands at 11.14, which means that for every $1 worth of fixed assets, the company generated $11.14 in sales. This indicates an efficient utilization of fixed assets to drive revenue, reflecting positively on the company's operational performance.

2. Total Asset Turnover:
The total asset turnover ratio evaluates how well a company is utilizing all of its assets to produce sales. Adient plc's total asset turnover has also displayed a consistent upward trend. In 2023, the ratio stands at 1.63, indicating that for every $1 of total assets, the company generated $1.63 in sales revenue. This demonstrates the company's ability to generate revenue efficiently relative to its asset base.

Overall, both the fixed asset turnover and total asset turnover ratios point towards Adient plc's effective management and utilization of its long-term assets to drive sales and revenue growth. These trends suggest that the company is operating efficiently and effectively in converting its long-term assets into revenue-generating opportunities, which could potentially lead to sustainable long-term growth and profitability.