An Analysis of Capital Efficiency and Operational Resilience Among 33 Listed Chinese Agrochemical Companies (2020–2024)

How many days does it take for an agrochemical company—from purchasing raw materials to receiving payment from customers? This seemingly simple question holds the most candid insight into the true quality of a company’s operations.

In financial analysis, the metric used to measure this process is called " Cash Conversion Cycle “(CCC, Cash Conversion Cycle). It consists of three components:”

• How long does it take for a company to receive payment after selling goods? Days Sales Outstanding (DSO) , DSO)

• How long does it take for inventory to go from receipt to sale? ( Days of inventory turnover , DIO)

• And how long after a company receives the raw materials does it have to make payment? Days payable outstanding , DPO)

The relationship among the three is: CCC = DSO + DIO - DPO.

The shorter the CCC (cash conversion cycle), the faster a company’s cash is turning over and the higher its capital‑use efficiency. Conversely, a longer CCC means that more capital is “frozen” in operating activities, requiring the company to rely on additional external financing to sustain day-to-day operations.

We selected 33 A-share‑listed agrochemical companies, spanning key business segments such as active ingredients, formulations, and intermediates. Leveraging five years of publicly available financial data from 2020 to 2024, we conducted a systematic analysis of these firms’ capital efficiency and operational resilience. This five-year period coincides with a complete industry cycle—moving from the boom driven by pandemic‑related tailwinds, through a price collapse triggered by overcapacity, to a recovery from the bottom—providing a natural “stress test.”

I. Industry Overview — Five-Year ECG Trends

If the average CCC (cash conversion cycle) of 33 companies is plotted as a curve, it exhibits a textbook‑perfect “V‑shaped” trend.

The 2020–2021 period marked an improvement phase. With industry conditions on the upswing, product supply fell short of demand, bolstering firms’ pricing power and reducing the cash conversion cycle from 90 days to 84 days. More than 60% of companies reported accelerated cash turnover.

2022 marked a turning point. While active‑ingredient prices peaked and began to decline, many companies continued to stock up at those elevated levels. The cash conversion cycle (CCC) edged up to 89 days, and the share of firms reporting improved cash flow fell to below 40%—an early signal that is often overlooked.

2023 was a year of pervasive pressure. The industry faced simultaneous declines in both volume and prices, with the cash conversion cycle (CCC) surging from 89 days to 110 days—an increase of 20 days within a single year. This means that, at comparable revenue levels, nearly three additional weeks of working capital are tied up across the sector. Only 27% of companies continued to improve; the remaining over 70% saw conditions deteriorate.

2024 marks a recovery phase. The cash conversion cycle (CCC) has fallen back to 90 days, essentially returning to 2020 levels. Seventy percent of companies have shown improvement, and the industry as a whole has emerged from its trough.

Figure 2 vividly illustrates the shift between “hot” and “cold” conditions across industries. In 2021, blue‑coded indicators (improvement) held an overwhelming advantage; by 2023, nearly all sectors had turned red (deterioration); and in 2024, blue once again took the lead—though roughly 30% of firms still lagged behind the pace of the industry’s recovery, making this group worthy of particular attention.

II. An Analysis of the “Complete Collapse” in 2023

The 2023 shock warrants separate analysis because its breadth and depth of impact are unprecedented over the past five years. By dissecting each of the three components of the CCC (cash conversion cycle), we find that this represents a rare scenario in which all three elements simultaneously faltered.

Accounts Receivable (DSO): 94% of companies have seen a slowdown in their receivables collection, with average payment terms extending by 17 days. This reflects the contraction in downstream demand and the inventory‑clearing pressures faced by distributors, forcing agrochemical firms to extend credit terms to maintain shipment volumes. Customers are holding onto the goods but are reluctant to pay promptly, as they, too, are struggling to sell.

Inventory (DIO): Eighty-eight percent of companies are experiencing slower inventory turnover, with an average delay of 22 days. This is the most pressing issue in 2023. Many firms have yet to destock the high‑priced inventories accumulated during the 2022 price surge, while simultaneously confronting declining market prices, resulting in a double squeeze of “high‑cost inventory in a low‑price environment.” For some companies, inventory turnover days have doubled.

Accounts payable (DPO) : 91% of companies have extended their payment terms to suppliers, by an average of 19 days. At first glance, this may seem like a “positive” development—delaying payments allows firms to retain cash for a longer period. In reality, however, this is largely a reactive measure: when a company’s own cash flow is tight, deferring supplier payments is the easiest option—but also the most risky, as it signals that financial strain is being passed upstream.

The key lesson of 2023: When an industry enters a downturn and accounts receivable, inventory, and accounts payable all deteriorate simultaneously, it signals that the shock is systemic rather than confined to individual firms. This also implies that companies able to maintain stability in such conditions demonstrate genuine operational resilience.

III. Three Warning Signs

The industry’s overall CCC (cash conversion cycle) has returned to 2020 levels, giving the impression that the crisis is behind us. However, three key signals in the data suggest that we should not let our guard down too soon.

Signal 1: Delayed Recovery of Accounts Receivable

In 2024, improvements in the CCC (Cash Conversion Cycle) were driven primarily by faster inventory turnover, with DIO declining by 12 days and 79% of companies reporting progress. By contrast, days sales outstanding (DSO) fell by only 2 days, with just 55% of firms showing improvement. This suggests that nearly half of companies have yet to see a meaningful turnaround in their collections—more concerning still, the industry‑wide average DSO in 2024 remains 14 days higher than in 2020, indicating that liquidity pressures across the entire supply chain are far from having returned to pre‑crisis levels.

Signal Two: The Sustainability of Extended Accounts Payable

In 2023, DPO (Days Payable Outstanding) increased significantly, with the average rising from 56 days to 76 days, and in 2024 it did not decline but instead climbed further to 81 days. Over the past five years, the average DPO has grown by a cumulative 18 days, and seven companies now have DPOs exceeding 100 days. Large enterprises continue to delay payments, placing mounting pressure on the cash flow of small and medium-sized suppliers. Should upstream firms tighten their credit policies, the resulting ripple effect could undermine the entire supply chain.

Signal Three: The gap between enterprises is widening at an accelerating pace.

In 2024, the gap between the companies with the highest and lowest cash conversion cycles (CCC) reached 240 days. Yet these extremes represent only the tip of the iceberg—the real divergence lies in the middle: the interquartile range (IQR) across industries widened from 71 days in 2020 to 96 days in 2024, with the internal dispersion among the middle 60% of firms expanding by 35%. The most efficient firms boast negative CCCs—meaning they don’t need to pay suppliers until after they’ve collected receivables—while the least efficient enterprises have CCCs exceeding 200 days. Against a backdrop of tightening credit conditions, highly efficient firms enjoy easier access to low‑cost financing, whereas less efficient firms face higher funding costs, signaling that the Matthew effect has already taken hold.

IV. Password Recovery in 2024 — Who Will Be the First to Climb Out?

In the face of industry disruptions in 2023, firms have exhibited markedly different responses. Through cluster analysis of recovery patterns, we have identified several prototypical firm profiles—hereafter referred to by their characteristic profiles rather than specific company names, to avoid undue commentary on individual entities.

V-shaped rebounders—account for approximately 30%

These companies saw their CCC (cash conversion cycle) deteriorate by more than 10 days in 2023, but then rebounded sharply by over 10 days in 2024, demonstrating strong self‑recovery capabilities. A common trait among them is highly responsive inventory management: once prices bottom out, they swiftly destock, with DIO (days of inventory outstanding) declining by more than 20 days across the board. Some firms also concurrently accelerate accounts‑receivable collection, achieving simultaneous improvements in both DSO (days sales outstanding) and DIO. Although these companies were hit during the downturn, their operational systems exhibit remarkable resilience.

Those with continued deterioration—accounting for approximately 20%

The CCC (cash conversion cycle) of these companies has deteriorated for two consecutive years, with both 2023 and 2024 showing longer cycles than the previous year. The challenges they face are often structural rather than cyclical: either their inventories contain large quantities of slow-moving legacy products, or declining customer quality is hindering receivables collection, or they rely heavily on external markets where payment cycles are inherently long. Unless these firms undertake proactive adjustments, the gap between them and their peers could continue to widen.

Stable operators—accounting for approximately 30%

Over a five-year period, these companies exhibit CCC (cash conversion cycle) fluctuations of no more than 30 days, maintaining relatively stable cash‑turnover efficiency regardless of industry conditions. They typically possess one or more of the following characteristics: a high degree of vertical integration across the value chain—ensuring end‑to‑end control from raw materials to finished products; a substantial share of the domestic market with stable customer relationships; or exposure to a sub‑sector characterized by relatively muted cyclicality. For investors, such firms offer the highest degree of operational predictability.

An interesting finding: among the companies with the largest cumulative improvements over five years—three of which reduced their CCC by more than 50 days—the primary driver of improvement was a systematic enhancement in inventory management, rather than short-term adjustments to accounts receivable or accounts payable. This suggests that reducing inventory is the most sustainable and controllable lever for improving capital efficiency.

V. Who Is More Resilient?

Before discussing resilience, it’s important to clarify one key point: resilience is not simply equivalent to a low absolute value of the cash conversion cycle (CCC). For instance, a company with a CCC of just 30 days might experience a sharp spike to 150 days during a shock and then gradually recover—yet its resilience could still be lower than that of a company whose CCC remains stable around 100 days without significant deviations.

At the heart of resilience is “maintaining stability in the face of adversity.”

Based on five years of data, we assess operational resilience across three dimensions:

First, the volatility of the CCC (Cash Conversion Cycle).

Over the five-year period, nine companies—accounting for 28% of the sample—exhibited a CCC extreme range (the difference between the highest and lowest values) of no more than 30 days. Even during the industry’s downturn in 2023, these firms did not experience a significant deterioration in their CCC, demonstrating exceptional operational stability. Their common characteristics include a high degree of vertical integration within the value chain, strong focus on core business activities, and a relatively concentrated yet stable customer base.

Second, the speed of recovery following the shock.

In 2023, approximately 11 companies saw their cash conversion cycle (CCC) lengthen by more than 10 days, but by 2024 they had already returned to 2022 levels or even improved further. Although these firms were hit during the downturn, their operational systems demonstrated strong “self‑healing” capabilities, typically supported by agile inventory management practices and robust channel‑level bargaining power.

Third, the degree of balance in the cash conversion cycle (CCC).

Some companies may boast a seemingly favorable CCC (cash conversion cycle), but they rely excessively on a single factor—such as significantly extending their DPO (days payable outstanding) to keep the CCC low. While this approach can work in the short term, it quickly backfires when suppliers tighten credit terms, causing the CCC to surge. A truly healthy company maintains all three key metrics—DSO (days sales outstanding), DIO (days inventory outstanding), and DPO—at reasonable levels, with sufficient cushioning among them.

Operational resilience is not an innate trait; it is the result of long-term, systematic improvements in business operations. During periods of industry upturns, all companies appear to perform well; it is only under stress‑testing conditions that true operational disparities come to light. For China’s agrochemical sector, the years 2020–2024 represented just such a stress test.

Conclusion

In 2024, the industry‑average CCC (cash conversion cycle) for 33 companies returned to 90 days, matching the level of 2020. Over a five‑year cycle, the figure appears to have reverted to its starting point, yet the competitive landscape among firms has quietly shifted: some have leveraged this period to markedly improve their capital efficiency, while others now face operating conditions even more challenging than five years earlier.

For industry managers and investors, the cash conversion cycle (CCC) and its constituent metrics serve as a mirror reflecting the quality of a company’s operations. While less eye‑catching than revenue or profit, they provide a more accurate picture of a firm’s ability to manage its supply chain, inventory, and customer relationships. As the next industry cycle approaches, companies that revealed weaknesses in capital efficiency during this round of stress testing may need to make adjustments without delay.

Disclaimer

All data in this article are derived from the publicly disclosed annual reports of 33 A-share‑listed agrochemical companies for the years 2020–2024, independently compiled and calculated by AgroPages (World Agrochemical Network). The CCC index and its constituent metrics are computed using standard financial formulas; variations in calculation methodologies—such as employing year‑end values versus average beginning‑and‑ending‑year figures, or using operating revenue versus operating costs as the denominator—may result in slight differences in the outcomes.

This article provides only industry trend analysis and data insights and does not constitute investment advice, operational assessment, or credit rating for any specific company. The corporate classifications and characteristic descriptions presented herein are based on statistical clustering results and do not reflect judgments about companies’ business strategies. The varying CCC ratings of individual firms are influenced by multiple factors, including their business models, position in the value chain, customer mix, and degree of internationalization, and should not be subject to simplistic cross‑company comparisons.

If you wish to cite the data or conclusions presented in this article, please credit AgroPages (AgroPages World Agrochemical Network).

AgroPages World Agrochemical Network Exclusive article; please credit the copyright when reprinting!

Source: AgroPages (World Agrochemical Network)