Avantor Inc (AVTR)

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 59.28 65.66 67.91 65.18 62.59
Days of sales outstanding (DSO) days 55.66 60.26 59.20 60.39 63.56
Number of days of payables days 53.71 49.63 56.37 56.44 57.45
Cash conversion cycle days 61.23 76.29 70.74 69.13 68.69

December 31, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 59.28 + 55.66 – 53.71
= 61.23

The cash conversion cycle (CCC) is a measure of how long it takes for a company, in this case Avantor Inc, to convert its investments in inventory and other resources into cash flows from sales. Looking at the data provided, we observe that Avantor Inc's cash conversion cycle has fluctuated over the years.

As of December 31, 2020, the cash conversion cycle stood at 68.69 days, indicating that, on average, it took the company around 68.69 days to convert its investment in inventory into sales and then into cash receipts. By December 31, 2021, the CCC had slightly increased to 69.13 days, suggesting a slightly longer period to complete the cash cycle.

Moving on to December 31, 2022, the cash conversion cycle further extended to 70.74 days, implying that the company took even longer to convert its invested resources into cash. By December 31, 2023, the CCC increased noticeably to 76.29 days, indicating a longer duration to complete the cycle compared to previous years.

However, there was a significant improvement by December 31, 2024, where the cash conversion cycle decreased to 61.23 days. This suggests that Avantor Inc was more efficient in managing its working capital and converting its investments into cash flows.

In conclusion, analyzing the trend of Avantor Inc's cash conversion cycle over the years provides insights into the company's effectiveness in managing its working capital and operational efficiency. It is essential for the company to further optimize its cash conversion cycle to enhance liquidity and profitability.