Element Solutions Inc (ESI)

Short-term

Turnover ratios

The activity ratios for Element Solutions Inc. from June 30, 2020, through March 31, 2025, reveal varied trends in operational efficiency with respect to inventory management, receivables collection, payables settlement, and working capital utilization.

Inventory turnover ratios demonstrate a pattern of fluctuations, generally reflecting periods of efficiency improvement and subsequent moderation. Starting at 4.75 times in June 2020, the ratio experienced a peak of 5.49 in December 2022, indicating effective inventory management during this period. Afterward, it declined to 4.13 in June 2024 but recovered somewhat to 4.92 in September 2024 before reaching 5.31 in March 2025. This overall upward trend suggests periods of improved inventory utilization, although the fluctuations indicate variable inventory management practices or adjustments to sales and supply chain factors.

Receivables turnover ratios, which measure the effectiveness in collecting accounts receivable, exhibit relative stability over the period. Beginning at 5.68 times in June 2020, the ratio dipped to lows around 4.51 in September 2021. Subsequently, it generally increased, reaching peaks of approximately 5.61 in September 2022 and 5.59 in December 2024, indicating more efficient receivables collection over time. The slight fluctuations suggest consistent efforts in managing receivables, with marginal improvements evident in recent periods.

Payables turnover ratios indicate the frequency with which the company settles its accounts payable. Initially high at 12.56 times in June 2020, the ratio declined significantly, reaching a low of 8.14 in September 2021. The ratio then surged notably to 22.05 in December 2022, reflecting a period of accelerated payment cycles, before stabilizing around 9.88 to 11.72 in subsequent periods. Such peaks and troughs imply variations in payment priorities, possibly influenced by cash flow management, supplier negotiations, or strategic payment scheduling.

Working capital turnover ratios, which measure how efficiently the company utilizes its working capital to generate sales, have remained relatively stable with a modest upward trend. Starting at 2.96 in June 2020, the ratio declined to around 2.44 in March 2025, with periodic fluctuations. This indicates a consistent but gradually decreasing efficiency in leveraging working capital to support sales, potentially reflecting changes in operational scale or working capital management strategies.

In summary, Element Solutions Inc.'s activity ratios over this period reveal a pattern of improving than fluctuating operational efficiency. Inventory and receivables management appear to have become somewhat more effective in recent years, whereas payables management reflects strategic variability. Working capital utilization has remained relatively stable but shows a subtle trend toward decreased efficiency. These ratios collectively suggest a company actively managing its operational cycles, with recent years indicating strides toward optimized activity levels.

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Average number of days

The analysis of Element Solutions Inc.'s activity ratios over the specified period reveals several noteworthy trends and patterns:

Days of Inventory on Hand (DOH):
The company's inventory turnover cycle has experienced fluctuations throughout the period. Initial DOH values hovered around 76.77 days in June 2020, with slight increases and decreases over the subsequent periods. Notably, a peak was observed in September 2021 at 86.00 days, indicating a longer inventory holding period. Post this peak, DOH generally declined, reaching a low of approximately 66.45 days at the end of 2022, suggesting improved inventory management and faster inventory turnover. However, there was a subsequent increase in early 2023, with DOH rising above 83 days, before trending downward towards the end of 2024, reaching as low as 63.23 days before slightly rising again. The most recent data indicates some cyclical variation but an overall trend towards shorter inventory holding periods, notably settling around 63.23 days in December 2024.

Days of Sales Outstanding (DSO):
The receivables collection period demonstrated variability but maintained a general range that indicates a moderate level of receivables management efficiency. Initially, DSO was approximately 64.28 days in June 2020. It increased over the following quarters, peaking near 80.84 days in September 2021, implying slower collections during that period. Subsequently, the DSO decreased and stabilized around the mid-60s to low-70s days from late 2022 onwards, with the most recent quarter showing a DSO of approximately 67.04 days in March 2025. This pattern suggests an overall improvement in receivables collection efficiency following the earlier peaks, reflecting enhanced credit and collection policies or improved customer payment behaviors.

Number of Days of Payables:
The accounts payable period has shown some fluctuations but generally remained within a range of approximately 16.55 days (December 2022) to about 44.85 days (September 2021). Notably, in late 2022, payables decreased to their lowest levels, indicating a faster payment cycle, which may reflect increased payment pressures or changes in supplier credit terms. In contrast, periods in 2021 and parts of 2023 saw longer payable days, exceeding 36 days, which could indicate delayed payments or strategic extension of payment terms. As of the most recent data (March 2025), the payables period is around 36.95 days, suggesting a relatively balanced approach to managing payables relative to other activity ratios.

In summary, the activity ratios of Element Solutions Inc. demonstrate a pattern of improving inventory turnover, stabilization in receivables collection, and a generally balanced accounts payable cycle. These patterns suggest ongoing efforts toward operational efficiency, with periods of variance likely reflecting strategic adjustments or external market influences. The overall trend indicates a move towards tighter inventory management and more efficient receivables collection, complemented by manageable payables, which collectively support the company's operational and liquidity positions.

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Long-term

The analysis of Element Solutions Inc.'s long-term activity ratios indicates a consistent trend of enhanced efficiency in asset utilization over the analyzed period.

The Fixed Asset Turnover ratio demonstrates an upward trajectory from 6.92 as of June 30, 2020, reaching a peak of 9.96 by September 30, 2022. This progressive increase suggests that the company has become increasingly effective at generating sales from its fixed assets, reflecting optimized asset deployment and possibly improved operational processes. After reaching this peak, the ratio experienced a slight decline to 8.80 by March 31, 2023, and further to 8.33 by June 30, 2023, indicating a modest reduction in fixed asset efficiency but still maintaining a relatively high level compared to earlier years.

The Total Asset Turnover ratio exhibits relatively stable performance within a narrow range, starting at 0.42 on June 30, 2020, and gradually increasing to 0.52 by March 31, 2025. Throughout this period, the ratio has remained within the 0.41 to 0.54 band, suggesting steady utilization of total assets to generate sales, with incremental improvements reflective of operational stability and potential strategic asset management.

Overall, Element Solutions Inc. has displayed significant improvement in fixed asset productivity, particularly during the 2020-2022 period, indicative of effective asset management and operational efficiencies. The steady but modest rise in total asset turnover further supports a consistent capacity to generate sales relative to total assets, emphasizing a balanced approach to asset utilization over the evaluated timeframe. The slight declines after the peak in fixed asset turnover suggest some level of normalization or adjustment but do not negate the overall positive trend in asset activity efficiency.