Albemarle Corp (ALB)

Cash conversion cycle

		Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Days of inventory on hand (DOH)	days	103.18	93.56	178.48	125.11	128.32
Days of sales outstanding (DSO)	days	86.79	87.65	79.30	80.70	79.69
Number of days of payables	days	—	—	131.85	94.07	82.65
Cash conversion cycle	days	189.98	181.22	125.94	111.74	125.36

December 31, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 103.18 + 86.79 – —
= 189.98

The cash conversion cycle for Albemarle Corp has exhibited some fluctuations over the past five years. As of December 31, 2020, the company had a cash conversion cycle of 125.36 days, indicating the average number of days it takes for the company to convert its investments in inventory and other resources into cash flows from sales. By the end of 2021, this cycle decreased to 111.74 days, suggesting an improvement in the efficiency of the company's working capital management.

However, in the subsequent years, the cash conversion cycle increased, reaching 181.22 days by December 31, 2023, and further climbing to 189.98 days by the end of 2024. These longer cycles indicate a potential slowdown in the company's ability to convert investments into cash, which could be attributed to factors such as extended inventory holding periods, delayed receivables collection, or a combination of both.

Overall, Albemarle Corp's cash conversion cycle has been variable, with both improvements and deteriorations observed over the years. It is essential for the company to closely monitor this cycle and implement strategies to optimize working capital management to ensure efficient cash flow generation and maintain financial stability.