Johnson Controls International plc (NYSE:JCI)

Inventory Turnover

The inventory turnover ratio experienced noticeable fluctuation over the analyzed period. It peaked at 8.97 in 2019, indicating more efficient inventory management that year. From 2020 onwards, the ratio displayed a declining trend, decreasing to 6.42 by 2023, suggesting a slowing pace in inventory turnover and potential challenges in inventory management efficiency.

Receivables Turnover

Receivables turnover remained relatively stable throughout the years, varying slightly between 4.15 and 4.58. This indicates a consistent ability to collect receivables, with a minor increase in 2022 implying a somewhat faster collection process during that period.

Payables Turnover

The payables turnover ratio gradually decreased from 4.74 in 2018 to a low of 4.00 in 2022, followed by a slight rebound to 4.18 in 2023. This suggests the company took longer to settle its payables over time, potentially utilizing vendor credit more extensively in recent years.

Working Capital Turnover

Working capital turnover exhibited significant volatility. After a steep drop from 54.8 in 2018 to 7.21 in 2019, it rose steadily to 56.72 in 2022, indicating periods of both inefficient and highly efficient use of working capital. The absence of data in 2023 limits further trend assessment.

Average Inventory Processing Period

The average inventory processing period decreased from 53 days in 2018 to a low of 41 days in 2019, indicating improved inventory management efficiency. However, it then increased steadily each year to reach 57 days in 2023, reflecting slower inventory turnover and potential buildup of stock.

Average Receivable Collection Period

The average receivable collection period varied modestly between 80 and 88 days. After peaking at 88 days in 2019, the period shortened to 80 days in 2022, suggesting an improvement in collections, before slightly increasing again to 82 days in 2023, maintaining a relatively consistent collection timeframe overall.

Operating Cycle

The operating cycle remained mostly stable, fluctuating narrowly between 129 and 139 days. This stability indicates that the sum of inventory and receivable turnover periods has not experienced significant changes, reflecting consistent operational timing over the years.

Average Payables Payment Period

There was a gradual increase in the average payables payment period from 77 days in 2018 to a peak of 91 days in 2022, followed by a slight reduction to 87 days in 2023. This trend suggests the company extended the time taken to pay its suppliers, potentially optimizing cash flow.

Cash Conversion Cycle

The cash conversion cycle displayed a downward trend from 58 days in 2018 to 43 days in 2022, indicating an improvement in the efficiency of converting resources into cash. However, it widened again to 52 days in 2023, showing some setback but still below the initial value in 2018.

An analysis of the provided financial data reveals distinct trends across various financial metrics over the period from September 30, 2018, to September 30, 2023.

Cost of Sales

The cost of sales exhibits a significant decline from 22,020 million US dollars in 2018 to a low of 14,906 million in 2020. Following this low point, there is a steady increase each subsequent year, reaching 17,822 million in 2023. This suggests a reduction in production or procurement costs during the initial years, possibly reflecting operational efficiencies or reduced production volume, followed by a gradual recovery or expansion in business activity.

Inventories

Inventories show a marked decrease from 3,224 million US dollars in 2018 to 1,773 million in 2020. From 2020 onwards, there is a notable upward trend, with inventories increasing steadily each year to reach 2,776 million in 2023. This pattern may indicate a strategic stockpiling or preparation for increased sales activity after 2020, reflecting either anticipated demand growth or changes in supply chain management.

Inventory Turnover Ratio

The inventory turnover ratio peaked in 2019 at 8.97, indicating a high rate of inventory being sold and replaced. After 2019, the ratio declines progressively each year, falling to 6.42 in 2023. The decrease in turnover ratio suggests that inventory is being held longer before sale, which may imply slower movement of goods, excess stock, or changes in inventory management practices.

Overall, the data illustrates a period of contraction in cost of sales and inventory levels until 2020, followed by a recovery phase with gradual increases in both. The declining inventory turnover ratio over the latter years points to a slower inventory movement despite the increasing inventory levels. This combination of trends may warrant further investigation into operational efficiency, demand forecasts, and supply chain dynamics.

The analysis of the annual financial data over the period from September 30, 2018, to September 30, 2023, reveals several notable trends related to net sales, accounts receivable, and receivables turnover.

Net Sales

Net sales experienced a significant decrease from 31,400 million US dollars in 2018 to 23,968 million in 2019, indicating a sharp decline of approximately 23.6%. This downward trend continued in 2020, reaching 22,317 million, the lowest in the period analyzed. Subsequently, a recovery phase is observable as net sales gradually increased each year from 2021 onwards, rising to 23,668 million in 2021, 25,299 million in 2022, and reaching 26,793 million in 2023. Despite this recovery, net sales in 2023 remain below the 2018 peak, suggesting partial restoration of sales volume post-decline.

Accounts Receivable, Less Allowance for Expected Credit Losses

Accounts receivable showed a parallel decline from 7,065 million US dollars in 2018 to 5,770 million in 2019 and further down to 5,294 million in 2020. A slight recovery exists in 2021, increasing to 5,613 million, followed by a minor decline in 2022 to 5,528 million. The balance rose again in 2023 to 6,006 million. This pattern indicates a contraction in outstanding receivables coinciding with the reduction in sales during the earlier years, followed by a moderate increase that aligns with the improvement in net sales.

Receivables Turnover Ratio

The receivables turnover ratio demonstrates relative stability with minor fluctuations. It declined slightly from 4.44 in 2018 to 4.15 in 2019, reflecting slower collection or increased credit terms during a period of declining sales. The ratio stabilized at approximately 4.22 for both 2020 and 2021. In 2022, a notable increase to 4.58 suggests enhanced efficiency in collecting receivables or tighter credit control. The ratio slightly decreased to 4.46 in 2023 but remained above the levels of 2019-2021, indicating maintained improvements in receivables management.

Overall, the data reveals that the company experienced a pronounced drop in sales and corresponding receivables during 2019 and 2020, likely due to adverse market or economic conditions. Following this period, a gradual recovery is evident in net sales and accounts receivable. The improvement in the receivables turnover ratio in the last two years points to more effective management of credit and collections, which may contribute to improved cash flow and financial stability.

Cost of Sales

The cost of sales reveals a marked fluctuation over the examined period. Initially, there is a significant decline from 22,020 million US dollars in 2018 to 16,275 million in 2019, followed by a continuing downward trend reaching its lowest at 14,906 million in 2020. However, the subsequent years show a reversal with costs increasing steadily, rising to 15,609 million in 2021, 16,956 million in 2022, and 17,822 million in 2023. This pattern suggests a recovery or expansion phase after a period of contraction or cost optimization.

Accounts Payable

Accounts payable follow a somewhat similar trend to cost of sales but show less volatility. The payable amount decreases from 4,644 million in 2018 to 3,582 million in 2019, reaching a low of 3,120 million in 2020. From 2021 onwards, payables increase gradually to 3,746 million, then 4,241 million, and slightly to 4,268 million by 2023. The incremental rise in payables in the last three years aligns with the increase in cost of sales, suggesting higher purchases or extended credit terms.

Payables Turnover Ratio

The payables turnover ratio, which indicates the frequency of paying off suppliers, started at 4.74 times in 2018 and slightly declined to 4.54 in 2019. It rose again to 4.78 in 2020, followed by a steady decline over the next two years to 4.17 and 4.00 times in 2021 and 2022, respectively. A small uptick to 4.18 occurred in 2023. This fluctuation indicates variability in payment efficiency, with slower turnover noted in 2021 and 2022 which may reflect extended payment periods or cash flow management strategies during these years.

Working Capital

The working capital showed significant volatility over the observed periods. Starting at 573 million US dollars in 2018, it sharply increased to 3,323 million in 2019, indicating a substantial improvement in short-term liquidity. However, after 2019, the working capital experienced a declining trend, falling to 1,805 million in 2020, then further down to 900 million in 2021 and 446 million in 2022. By 2023, it turned negative, reaching -347 million, suggesting potential liquidity constraints or increased current liabilities relative to current assets.

Net Sales

Net sales demonstrated a fluctuating yet overall upward pattern from 2018 to 2023. Beginning at 31,400 million US dollars in 2018, sales dropped noticeably to 23,968 million in 2019 and further to 22,317 million in 2020. From 2020 onward, net sales gradually increased each year, reaching 23,668 million in 2021, 25,299 million in 2022, and 26,793 million in 2023. This rebound aligns with possible recovery efforts or market improvements after an initial decline.

Working Capital Turnover

The working capital turnover ratio showed considerable fluctuation corresponding to the changes in working capital and net sales. It started very high at 54.8 in 2018, dropped significantly to 7.21 in 2019, and then increased moderately to 12.36 in 2020. Subsequently, the ratio peaked at 26.3 in 2021 and sharply rose again to 56.72 in 2022. The absence of data for 2023 limits analysis for the last year. High volatility in this ratio indicates varying efficiency in utilizing working capital to generate sales, possibly affected by the shifts in liquidity and operational dynamics observed.

Inventory Turnover

The inventory turnover ratio shows a fluctuating trend over the six-year period. Starting at 6.83 in 2018, it increased significantly to a peak of 8.97 in 2019. Subsequently, there was a gradual decline to 8.41 in 2020, followed by further decreases in the subsequent years to 7.59 in 2021, 6.76 in 2022, and finally reaching 6.42 in 2023. This indicates that the frequency at which inventory was sold and replaced diminished steadily after 2019.

Average Inventory Processing Period

The average inventory processing period exhibited an inverse pattern relative to the inventory turnover. Beginning at 53 days in 2018, it dropped to a low of 41 days in 2019, reflecting faster inventory movement. Following 2019, the processing period lengthened progressively, rising to 43 days in 2020, then increasing further each year to 48 days in 2021, 54 days in 2022, and peaking at 57 days in 2023. This suggests that, on average, inventory was held for a longer duration before sale or use as time progressed.

Overall Insights

The trends observed in inventory turnover and average inventory processing period are consistent with each other, showing that inventory management efficiency improved notably in 2019 but deteriorated gradually over the following four years. The rise in the processing period and the drop in turnover ratio in recent years may indicate challenges in inventory management, possibly related to changes in demand, supply chain disruptions, or shifts in operational strategy. Continuous monitoring and analysis would be advisable to determine the underlying causes and to optimize inventory levels and turnover rates moving forward.

Receivables Turnover Ratio

The receivables turnover ratio showed a slight decline from 4.44 in 2018 to 4.15 in 2019, indicating a marginal reduction in the efficiency of collecting receivables. This ratio then stabilized and slightly improved, recording 4.22 in both 2020 and 2021. In 2022, the ratio increased to 4.58, suggesting enhanced receivables management and faster collection. However, in 2023, it slightly decreased again to 4.46, still remaining above earlier years except for the 2018 figure.

Average Receivable Collection Period

The average collection period, expressed in days, exhibited an opposing trend to the turnover ratio as expected. It increased from 82 days in 2018 to 88 days in 2019, implying a slower collection process. Between 2019 and 2021, it remained relatively constant at 87 days. In 2022, the collection period improved significantly to 80 days, complementing the rise in turnover ratio for the same period. This positive trend slightly reversed in 2023, with the average number of days increasing to 82, but still shorter than in the years 2019 to 2021.

Summary of Trends

Overall, the data reflects moderate fluctuations in receivables management efficiency over the six-year period. After a dip in 2019, there was a gradual recovery and improvement in 2022, followed by minor regressions in 2023. The improvements in 2022, indicated by a higher receivables turnover and shorter collection period, may point to more effective credit policies or collections efforts during that year. The slight decline in 2023 requires monitoring to understand whether this is an isolated event or the beginning of a downward trend in receivables collection efficiency.

Average Inventory Processing Period

The average inventory processing period has shown variability over the years. It decreased from 53 days in 2018 to 41 days in 2019, indicating an improvement in inventory turnover. However, from 2019 onwards, the period increased gradually, reaching 57 days in 2023. This upward trend from 2019 to 2023 suggests slower inventory processing, potentially indicating challenges in inventory management or changes in product mix.

Average Receivable Collection Period

The receivable collection period exhibits relative stability with minor fluctuations. It increased from 82 days in 2018 to a peak of 88 days in 2019 and remained mostly steady around 87 days during 2020 and 2021. In 2022, it decreased to 80 days, suggesting improved credit management or faster customer payments, but slightly increased again to 82 days in 2023. Overall, the collection period has remained within a narrow range, indicating consistent management of receivables.

Operating Cycle

The operating cycle, combining inventory processing and receivables collection periods, shows modest fluctuations throughout the analyzed period. It started at 135 days in 2018, decreased to 129 days in 2019, then hovered close to 130-135 days in the following years. By 2023, it slightly increased to 139 days, reflecting the increasing trend seen in the inventory processing period. This suggests that overall operational efficiency has slightly deteriorated in recent years, with the company tying up cash in working capital for longer durations.

Payables Turnover

The payables turnover ratio exhibits some fluctuations over the analyzed periods. Starting at 4.74 in 2018, it decreased slightly to 4.54 in 2019, then increased to 4.78 in 2020. Following this, there was a noticeable decline to 4.17 in 2021 and further to 4.00 in 2022, before experiencing a modest recovery to 4.18 in 2023. Overall, the trend suggests variability with a general decrease in the turnover ratio during the latter years, indicating a potential lengthening of the payment cycle or changes in purchasing dynamics.

Average Payables Payment Period

The average payables payment period reveals an inverse trend relative to the payables turnover ratio. It began at 77 days in 2018, increasing gradually to 80 days in 2019 and then reducing slightly to 76 days in 2020. Subsequently, there was a sharp rise to 88 days in 2021, continuing upwards to 91 days in 2022, before declining marginally to 87 days in 2023. This indicates that the company has generally taken longer to settle its payables in recent years, particularly from 2021 onwards, which may reflect strategic payment management or cash flow considerations.

Overall Insights

The reciprocal movement between payables turnover and average payment period is consistent with standard financial dynamics, where a lower turnover ratio corresponds to a longer payment period. The data suggests a shift towards longer supplier payment cycles starting in 2021, which might relate to operational or financial strategic adjustments. This pattern could impact supplier relationships and should be monitored alongside other liquidity and cash management metrics.

The financial data indicates several trends related to the company's working capital management over the six-year period.

Average Inventory Processing Period

This metric shows a fluctuating but overall increasing trend. It decreased from 53 days in 2018 to a low of 41 days in 2019, but then generally rose each subsequent year, reaching 57 days by 2023. This suggests that the time taken to process inventory has lengthened after an initial improvement, potentially indicating slower inventory turnover or changes in inventory management practices.

Average Receivable Collection Period

The receivable collection period remained relatively stable, fluctuating narrowly between 80 and 88 days. The highest was 88 days in 2019, and the lowest was 80 days in 2022, before a slight increase back to 82 days in 2023. This consistency indicates that the company maintained steady efficiency in collecting receivables over this timeframe.

Average Payables Payment Period

The payables payment period increased overall from 77 days in 2018 to a peak of 91 days in 2022 before slightly declining to 87 days in 2023. This suggests the company extended the time it took to pay its suppliers, which could be interpreted as an effort to optimize cash flow and hold onto cash longer within the operating cycle.

Cash Conversion Cycle

The cash conversion cycle exhibited a generally decreasing trend from 58 days in 2018 to a low of 43 days in 2022, reflecting an improvement in overall working capital efficiency. However, it increased again to 52 days in 2023, which may reflect the impact of the increasing inventory processing period and slightly longer receivable collection period observed in that year.

In summary, the company demonstrated an overall effort to optimize its cash conversion cycle by managing the timing of payables and receivables effectively. However, the recent increases in inventory processing days and cash conversion cycle suggest potential challenges or a strategic shift impacting operational efficiency.