Specialty Masterbatch Producers: Inventory Turnover

Goals

To provide the inventory turnover benchmarks for related producers of specialty masterbatch. This will be used for benchmarking purposes.

Early Findings

Brief Overview

  • "Inventory turnover shows how many times a company has sold and replaced inventory during a given period. This helps businesses make better decisions on pricing, manufacturing, marketing, and purchasing new inventory. A low turnover implies weak sales and possibly excess inventory, while a high ratio implies either strong sales or insufficient inventory."
  • According to Investopedia, the inventory turnover formulas are:
    • Inventory Turnover = Sales / Average Inventory
    • Inventory Turnover = Cost of Goods Sold / Average Inventory
        • Where Average Inventory = (Beginning Inventory + Ending Inventory) / 2
  • Companies can then divide the days in the period by the inventory turnover formula to calculate the days it takes to sell the inventory on hand.

Industry Averages

  • According to Ready Ratios, the inventory turnover for the average rubber and miscellaneous plastics manufacturing industry was 55 days in 2019, 172 days in 2018, and 75 days in 2017.
  • CSI Market also provides that the 'Chemicals - Plastics & Rubber Industry's' inventory turnover ratio sequentially decreased to 6.05 or 60 days (i.e., 365/6.05) in terms of sales and 3.9 or 93.5 days (i.e., 365/3.9) in terms of the cost of goods and services.

Avient (PolyOne Corporation)

  • In 2019, Avient (formerly PolyOne Corporation) completed the acquisition of the color masterbatch businesses of Clariant and Clariant Chemicals India Ltd for $1.44 billion in 2020. "The Clariant Masterbatch business includes 46 manufacturing operations and technology centers in 29 countries and approximately 3,500 employees, who will join Avient's Color, Additives, and Inks segment." "The segment offers specialized custom color and additive concentrates in solid and liquid form for thermoplastics, dispersions for thermosets, as well as specialty inks, plastisols, and vinyl slush molding solutions."
  • According to Stock Analysis, Avient's inventory turnover ratio was 8.09 or 45 days (i.e., 365/8.09) in 2019 and 7.37 or 49.5 days (i.e., 365/7.37) in 2018.

Summary

  • During our preliminary research, the research team covered the meaning and the formula of inventory turnover, and the inventory turnover industry averages for the relevant/related industries in the polymer/plastic space. However, it appears that there's no pureplay producer of specialty masterbatch, as available producers also operate in other segments.
  • Also, it appears that such a data point is mostly available for only public companies, hence, public companies with significant operations in the production of masterbatch, specialty masterbatch, and dye and ink additives for plastic coloration are likely candidates to have such metric. This can be seen in the example provided for Avient.

Proposed next steps:

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