ESAB Corp (ESAB)
Cash conversion cycle
| Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 85.73 | 88.01 | 88.22 | 83.32 | 80.97 | 88.08 | 93.63 | 95.09 | 89.08 | 97.04 | 103.70 | 102.61 | 96.42 |
| Days of sales outstanding (DSO) | days | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Number of days of payables | days | — | — | — | — | — | — | — | — | — | — | — | — | — |
| Cash conversion cycle | days | 85.73 | 88.01 | 88.22 | 83.32 | 80.97 | 88.08 | 93.63 | 95.09 | 89.08 | 97.04 | 103.70 | 102.61 | 96.42 |
December 31, 2024 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 85.73 + — – —
= 85.73
The cash conversion cycle of ESAB Corp has exhibited fluctuations over the period from December 31, 2021, to December 31, 2024. The cash conversion cycle represents the time it takes for a company to convert its investment in inventory and other resources into cash flows from sales.
ESAB Corp's cash conversion cycle started at 96.42 days on December 31, 2021, and increased to 102.61 days by March 31, 2022. This increase indicates a lengthening of the cycle, suggesting that ESAB Corp may be taking longer to sell its inventory and collect cash from customers. This trend continued as the cycle further extended to 103.70 days by June 30, 2022, and remained relatively high at 97.04 days on September 30, 2022.
However, from December 31, 2022, to December 31, 2023, ESAB Corp managed to bring down its cash conversion cycle consistently. There was a noticeable improvement in efficiency as the cycle decreased from 89.08 days on December 31, 2022, to 80.97 days by December 31, 2023. This reduction in the cycle duration indicates that ESAB Corp was able to streamline its operations, manage inventory levels effectively, and collect receivables more efficiently during this period.
Although there was a slight increase in the cash conversion cycle to 83.32 days on March 31, 2024, it decreased to 88.22 days by June 30, 2024, before falling again to 85.73 days by December 31, 2024. Overall, the trend of the cycle has been somewhat volatile, with periodic improvements and fluctuations in efficiency in managing cash flows from operations.
Analyzing the cash conversion cycle is essential for ESAB Corp to assess its operational efficiency in managing working capital. By focusing on optimizing inventory levels, streamlining accounts receivable processes, and managing accounts payable effectively, ESAB Corp can potentially further reduce its cash conversion cycle, leading to improved liquidity and profitability.
Peer comparison
Dec 31, 2024