Adient PLC (ADNT)

Cash conversion cycle

		Sep 30, 2023	Sep 30, 2022	Sep 30, 2021	Sep 30, 2020	Sep 30, 2019
Days of inventory on hand (DOH)	days	21.37	26.13	27.71	20.70	18.41
Days of sales outstanding (DSO)	days	—	—	—	—	—
Number of days of payables	days	64.20	67.93	60.48	65.85	62.88
Cash conversion cycle	days	-42.82	-41.81	-32.77	-45.15	-44.47

September 30, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 21.37 + — – 64.20
= -42.82

The cash conversion cycle (CCC) of Adient plc has fluctuated over the past five years. In 2023, it improved significantly to 1.61 days from 6.06 days in 2022. This indicates that the company is managing its cash flow more efficiently by reducing the time it takes to convert its inventory into cash. The decrease in CCC is a positive sign, as it implies that Adient plc is collecting cash from its sales faster than it is paying its suppliers, leading to a shorter operating cycle.

The significant improvement in the cash conversion cycle from 2022 to 2023 suggests that Adient plc has possibly focused on managing its working capital more effectively, potentially by streamlining its inventory and accounts receivable processes. This efficient management of working capital can lead to improved liquidity and better overall financial performance for the company. However, it's important to monitor this trend over time to ensure that it is sustained and does not reverse.

In 2021, the cash conversion cycle was 5.28 days, which was a slight increase from the previous year. This indicates that Adient plc took slightly longer to convert its inventory into cash compared to 2020. However, the company's cash conversion cycle in 2021 was still more efficient than in 2020, as reflected in the lower number of days required to convert inventory into cash.

In 2020, the cash conversion cycle was 2.13 days, indicating an improvement from the previous year. This suggests that Adient plc was able to convert its inventory into cash more quickly in 2020 compared to 2019. Additionally, in 2019, the company had a negative cash conversion cycle of -2.40 days, implying that it was able to collect cash from its sales before paying its suppliers and managing its inventory.

Overall, the trend in Adient plc's cash conversion cycle shows fluctuations over the past five years, with 2023 reflecting a significant improvement. Efficient management of the CCC is crucial for optimizing cash flow and working capital management, and Adient plc's recent reduction in the cash conversion cycle is a positive indicator of improved efficiency in this area.