Element Solutions Inc (ESI)
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 | 63.23 | 77.12 | 66.45 | 69.60 | 69.43 |
| Days of sales outstanding (DSO) | days | 65.31 | 72.24 | 65.26 | 74.86 | 79.43 |
| Number of days of payables | days | 31.15 | 36.28 | 16.55 | 35.10 | 32.68 |
| Cash conversion cycle | days | 97.38 | 113.09 | 115.16 | 109.36 | 116.18 |
December 31, 2024 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 63.23 + 65.31 – 31.15
= 97.38
The analysis of Element Solutions Inc.'s cash conversion cycle (CCC) over the period from December 31, 2020, to December 31, 2024, reveals insights into the company's operational efficiency and liquidity management.
At the end of 2020, the CCC stood at approximately 116.18 days, indicating that, on average, the company took around 116 days to convert inventory and receivables into cash, after accounting for the payable period. This figure suggests that the company's working capital cycle was relatively prolonged at that time.
By the end of 2021, the CCC decreased to approximately 109.36 days, reflecting a modest improvement in the company's ability to manage its inventory, receivables, or payables. The reduction indicates a trend towards greater operational efficiency, possibly through faster inventory turnover, shorter receivables collection period, or extended payables.
In 2022, the CCC experienced a slight increase to approximately 115.16 days, reversing some of the previous year's gains. This uptick could result from slower receivables collection, increased inventory levels, or shorter payable periods, which may point to some operational challenges or shifts in working capital management.
By the end of 2023, the CCC marginally declined to approximately 113.09 days, continuing the trend towards shortening the working capital cycle. This slight improvement suggests ongoing efforts to optimize receivables, inventory, and payables, even if the cycle remained somewhat elevated.
Most notably, at the close of 2024, the CCC decreased further to approximately 97.38 days, representing a significant reduction compared to previous years. This suggests a substantial enhancement in liquidity management, with the company now able to convert its inventory and receivables into cash more efficiently, and/or extend its payables period to a more favorable level.
Overall, the trend from 2020 through 2024 indicates a gradual and consistent reduction in the cash conversion cycle. This downward trend reflects improvements in working capital efficiency, which can contribute to enhanced liquidity and potentially lower financing costs, signaling a positive development in Element Solutions Inc.'s operational performance over this period.
Peer comparison
Dec 31, 2024