Trane Technologies plc (TT)

Activity ratios

Short-term

Turnover ratios

	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	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020
Inventory turnover	1.91	2.15	1.81	1.48	1.46	1.69	1.39	1.25	1.35	1.88	1.69	1.54	1.68	8.02	8.43	8.17	9.28	9.76	9.46	9.55
Receivables turnover	6.41	5.69	5.44	6.13	5.89	5.43	5.18	6.16	5.67	5.32	5.29	5.86	5.72	5.55	5.24	5.82	5.54	5.69	6.05	7.36
Payables turnover	1.75	2.00	1.83	1.76	1.55	1.76	1.51	1.50	1.29	1.78	1.59	1.49	1.44	6.76	6.37	6.97	7.26	8.22	9.36	9.66
Working capital turnover	15.62	13.12	16.66	22.95	21.34	11.29	15.32	12.91	22.75	20.23	29.50	9.91	8.08	5.04	5.08	5.14	4.75	4.70	5.57	6.64

Trane Technologies plc's inventory turnover has been steadily declining from around 9.5 in early 2020 to about 1.5 at the end of 2024. This suggests that the company is holding onto its inventory for a longer period, which could indicate inefficiencies in managing inventory levels or potential issues with sales.

On the other hand, the receivables turnover ratio has been relatively stable over the period, ranging from 5 to 6.5. This indicates that Trane Technologies plc is collecting its receivables in a reasonable time frame, without significant fluctuations.

The payables turnover ratio shows a significant decrease from over 9 in early 2020 to around 1.5 by the end of 2024. This decline could imply that the company is taking longer to pay its suppliers, which could strain relationships or indicate potential cash flow problems.

The working capital turnover ratio demonstrates significant fluctuations over the years, with a spike in mid-2022 to almost 30, indicating that the company was generating a high level of revenue relative to its working capital at that time. However, the ratio dropped back to around 15 by the end of 2024, implying a potential decrease in revenue generation efficiency or the company's utilization of working capital.

In conclusion, Trane Technologies plc should address the declining inventory turnover and payables turnover ratios to improve operational efficiency and maintain healthy relationships with suppliers. The stability in receivables turnover reflects effective management of receivables. The fluctuating working capital turnover ratio may require further analysis to identify underlying factors impacting the company's revenue generation efficiency.

Average number of days

		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	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020
Days of inventory on hand (DOH)	days	191.34	169.43	201.94	246.64	249.89	216.60	261.95	291.27	270.11	193.87	216.44	237.63	217.42	45.53	43.32	44.69	39.33	37.41	38.57	38.22
Days of sales outstanding (DSO)	days	56.93	64.17	67.07	59.54	61.94	67.17	70.49	59.24	64.43	68.64	68.97	62.30	63.83	65.78	69.66	62.68	65.90	64.12	60.35	49.59
Number of days of payables	days	208.47	182.88	199.80	207.89	235.16	206.86	242.05	243.91	283.36	205.02	229.44	245.16	253.85	53.97	57.29	52.36	50.27	44.39	39.00	37.78

Trane Technologies plc's activity ratios provide insights into how efficiently the company manages its inventory, collects receivables, and pays its suppliers.

1. Days of Inventory on Hand (DOH): Trane's inventory management has shown fluctuations over the periods analyzed. In recent years, there has been an increasing trend, with the DOH peaking at 291.27 days on March 31, 2023, before fluctuating and then stabilizing around 200-250 days by December 31, 2024. High DOH values may indicate excess or slow-moving inventory that could tie up capital and affect liquidity.

2. Days of Sales Outstanding (DSO): Trane's DSO has varied over the years, hovering between 50-70 days. A decreasing trend in recent periods indicates improved efficiency in collecting receivables, with DSO declining to 56.93 days by December 31, 2024. Lower DSO values suggest better cash flow management and a faster conversion of sales into cash.

3. Number of Days of Payables: The number of days Trane takes to pay its suppliers has also shown fluctuations. The company's payables period increased significantly over time, reaching 283.36 days on December 31, 2022, before adjusting to around 200-250 days by December 31, 2024. Extending payables could improve cash flow in the short term, but excessively long payment periods may strain supplier relationships.

Analyzing these activity ratios collectively can provide a holistic view of Trane Technologies' operational efficiency and working capital management. Monitoring these ratios over time can help stakeholders assess the company's ability to optimize inventory levels, collect receivables promptly, and manage payables effectively to support sustainable growth and financial health.

Long-term

	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	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020
Fixed asset turnover	9.79	10.12	10.22	10.08	9.83	10.14	10.01	10.15	10.25	10.65	10.24	10.01	9.93	10.10	10.01	9.47	9.04	10.02	10.66	11.61
Total asset turnover	0.98	0.92	0.92	0.93	0.90	0.90	0.88	0.90	0.87	0.86	0.83	0.81	0.77	0.74	0.72	0.71	0.67	0.73	0.81	0.87

Trane Technologies plc's Fixed Asset Turnover ratio, which measures the efficiency of the company in generating sales from its investments in fixed assets, has shown a relatively stable trend over the period analyzed. The ratio ranged from 9.04 to 11.61 in the initial years but seemed to stabilize around 10 in the latter years. This indicates that the company is efficiently utilizing its fixed assets to generate revenue.

On the other hand, the Total Asset Turnover ratio, reflecting the company's ability to generate sales from its total assets, also showed a generally increasing trend over the period. Starting at 0.67 in December 31, 2020, the ratio consistently improved, reaching 0.98 by December 31, 2024. This suggests that Trane Technologies plc has been effectively utilizing all its assets, not just fixed assets, to produce revenue.

Overall, the trends in both ratios suggest that Trane Technologies plc has been successful in efficiently generating sales from its investments in fixed assets as well as its total assets over the analyzed period. However, further analysis in conjunction with other financial metrics would provide a more comprehensive assessment of the company's operational efficiency and asset management.