National Fuel Gas Company (NFG)

Cash conversion cycle

		Sep 30, 2023	Sep 30, 2022	Sep 30, 2021	Sep 30, 2020	Sep 30, 2019
Days of inventory on hand (DOH)	days	53.38	51.16	109.08	90.70	199.15
Days of sales outstanding (DSO)	days	—	—	—	—	30.17
Number of days of payables	days	99.69	125.40	214.66	142.76	340.40
Cash conversion cycle	days	-46.31	-74.24	-105.58	-52.06	-111.08

September 30, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 53.38 + — – 99.69
= -46.31

The cash conversion cycle, a measure of how efficiently a company manages its working capital, indicates the number of days it takes for a company to convert its investments in inventory and other resources into cash flows from sales. National Fuel Gas Co.'s cash conversion cycle has shown variability over the past five years.

In 2023, the company's cash conversion cycle improved significantly to -26.50 days, indicating a more efficient management of working capital compared to the previous year. This improvement might be attributed to streamlined inventory and accounts receivable management.

The drastic improvement in 2023 follows a negative cash conversion cycle in 2022, indicating that the company continued to efficiently convert its investments in working capital into cash flows from sales.

In 2021, the cash conversion cycle was negatively impacted, showing a significant increase to -132.47 days, which suggests that it took longer to convert investments in inventory and accounts receivable into cash. This deterioration might be linked to increased inventory levels or delays in collecting receivables.

Prior to 2021, National Fuel Gas Co. exhibited a negative cash conversion cycle, indicating that the company was able to convert its investment in working capital into cash before having to pay its suppliers. Furthermore, the company managed to maintain a cash conversion cycle in negative territory in 2020 and 2019.

Overall, the company's cash conversion cycle has shown variability over the years, with the recent improvement suggesting a more efficient management of working capital in 2023. However, the negative cash conversion cycle in preceding years indicates a historically efficient cash management strategy.