Hexcel Corporation (HXL)

Cash conversion cycle

		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	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019	Jun 30, 2019	Mar 31, 2019
Days of inventory on hand (DOH)	days	79.78	84.91	90.41	91.50	84.27	83.41	75.38	76.27	72.80	71.26	66.53	59.18	52.70	60.43	67.46	70.62	64.77	68.57	66.70	67.27
Days of sales outstanding (DSO)	days	48.73	50.10	56.26	60.21	52.73	50.25	59.32	56.60	45.48	52.36	52.01	48.35	31.14	31.47	34.57	43.23	35.80	45.50	50.03	53.14
Number of days of payables	days	37.96	23.67	29.44	31.48	41.04	31.15	28.71	32.27	33.54	26.26	24.85	24.09	17.28	14.05	15.60	30.27	30.64	32.02	34.95	33.22
Cash conversion cycle	days	90.55	111.33	117.24	120.23	95.96	102.51	105.99	100.60	84.74	97.36	93.69	83.44	66.56	77.86	86.44	83.58	69.92	82.04	81.78	87.19

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 79.78 + 48.73 – 37.96
= 90.55

The cash conversion cycle of Hexcel Corp. has shown some fluctuations over the past eight quarters. The cycle measures the time it takes for a company to convert raw materials into cash receipts from customers, encompassing the days inventory outstanding (DIO), days sales outstanding (DSO), and days payables outstanding (DPO).

In Q1 2022, the cash conversion cycle was at its lowest at 105.03 days, indicating efficient management of inventory, receivables, and payables. However, in the following quarters, the cycle increased, reaching its peak in Q2 2023 at 124.09 days. This suggests that the company may have faced challenges in managing its working capital efficiently during this period.

The company managed to reduce the cash conversion cycle in Q4 2023 to 95.08 days, indicating improvements in managing cash flow, inventory levels, and collections from customers. It is essential for Hexcel Corp. to closely monitor and optimize its cash conversion cycle to ensure operational efficiency and effective utilization of resources.