16.Property, Plant and Equipment
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Land and buildings |
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Plant installations and machinery |
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Furniture, fixtures and other equipment |
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Construction in progress and advance payments |
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Total |
|---|---|---|---|---|---|---|---|---|---|---|
|
|
€ million |
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€ million |
|
€ million |
|
€ million |
|
€ million |
Cost of acquisition or construction, |
|
3,427 |
|
11,856 |
|
766 |
|
1,188 |
|
17,237 |
Changes in scope of consolidation |
|
– |
|
– |
|
– |
|
– |
|
– |
Acquisitions |
|
– |
|
– |
|
– |
|
– |
|
– |
Capital expenditures |
|
105 |
|
199 |
|
90 |
|
451 |
|
845 |
Retirements |
|
(41) |
|
(115) |
|
(71) |
|
(1) |
|
(228) |
Transfers |
|
127 |
|
637 |
|
15 |
|
(779) |
|
– |
Transfers (IFRS 5) |
|
(12) |
|
(3) |
|
(1) |
|
– |
|
(16) |
Exchange differences |
|
(107) |
|
(390) |
|
(30) |
|
(15) |
|
(542) |
Cost of acquisition or construction, |
|
3,499 |
|
12,184 |
|
769 |
|
844 |
|
17,296 |
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|
|
|
|
|
|
|
|
|
|
Accumulated depreciation, impairment losses and impairment loss reversals, |
|
2,101 |
|
9,519 |
|
500 |
|
1 |
|
12,121 |
Carrying amounts, |
|
1,398 |
|
2,665 |
|
269 |
|
843 |
|
5,175 |
Depreciation and impairment losses in fiscal 2020 |
|
163 |
|
507 |
|
82 |
|
2 |
|
754 |
Depreciation |
|
150 |
|
504 |
|
81 |
|
– |
|
735 |
Impairment losses |
|
13 |
|
3 |
|
1 |
|
2 |
|
19 |
Impairment loss reversals in fiscal 2020 |
|
– |
|
– |
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– |
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– |
|
– |
In the fourth quarter of 2020, Covestro completed construction of the new Group headquarters in Leverkusen. The construction in progress and advance payments item totaling €76 million was therefore reclassified as land and buildings.
No impairment losses were reversed for property, plant, and equipment in the reporting year (previous year: €1 million).
Borrowing costs of €8 million were capitalized in property, plant, and equipment in the reporting year as part of the cost of qualifying assets (previous year: €6 million). The capitalization rate applied amounted to 2.1% on average (previous year: 1.4%).
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|
|
|
|
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Land and buildings |
|
Plant installations and machinery |
|
Furniture, fixtures and other equipment |
|
Construction in progress and advance payments |
|
Total |
|---|---|---|---|---|---|---|---|---|---|---|
|
|
€ million |
|
€ million |
|
€ million |
|
€ million |
|
€ million |
Cost of acquisition or construction, |
|
3,098 |
|
11,486 |
|
533 |
|
850 |
|
15,967 |
Changes in scope of consolidation |
|
– |
|
(73) |
|
– |
|
– |
|
(73) |
Initial application IFRS 16 |
|
268 |
|
154 |
|
238 |
|
– |
|
660 |
Acquisitions |
|
5 |
|
7 |
|
1 |
|
2 |
|
15 |
Capital expenditures |
|
63 |
|
165 |
|
56 |
|
698 |
|
982 |
Retirements |
|
(46) |
|
(253) |
|
(75) |
|
– |
|
(374) |
Transfers |
|
28 |
|
321 |
|
17 |
|
(366) |
|
– |
Transfers (IFRS 5) |
|
(39) |
|
(81) |
|
(11) |
|
(1) |
|
(132) |
Exchange differences |
|
50 |
|
130 |
|
7 |
|
5 |
|
192 |
Cost of acquisition or construction, |
|
3,427 |
|
11,856 |
|
766 |
|
1,188 |
|
17,237 |
|
|
|
|
|
|
|
|
|
|
|
Accumulated depreciation, impairment losses and impairment loss reversals, |
|
2,026 |
|
9,425 |
|
500 |
|
– |
|
11,951 |
Carrying amounts, |
|
1,401 |
|
2,431 |
|
266 |
|
1,188 |
|
5,286 |
Depreciation and impairment losses in fiscal 2019 |
|
149 |
|
499 |
|
84 |
|
1 |
|
733 |
Depreciation |
|
138 |
|
485 |
|
83 |
|
– |
|
706 |
Impairment losses |
|
11 |
|
14 |
|
1 |
|
1 |
|
27 |
Impairment loss reversals in fiscal 2019 |
|
– |
|
(1) |
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– |
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– |
|
(1) |
Leasing
Covestro as lessee
The reported right-of-use assets from leases are recorded under property, plant and equipment.
The following table shows the changes in carrying amounts of right-of-use assets from January 1, 2020, to December 31, 2020.
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Land and buildings |
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Plant installations and machinery |
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Furniture, fixtures and other equipment |
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Total |
|---|---|---|---|---|---|---|---|---|
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|
€ million |
|
€ million |
|
€ million |
|
€ million |
Carrying amounts, January 1, 2020 |
|
329 |
|
250 |
|
178 |
|
757 |
Additions |
|
31 |
|
57 |
|
67 |
|
155 |
Retirements |
|
(19) |
|
(3) |
|
(5) |
|
(27) |
Depreciation and impairment losses |
|
(63) |
|
(52) |
|
(46) |
|
(161) |
Other changes |
|
(11) |
|
(11) |
|
(13) |
|
(35) |
Carrying amounts, December 31, 2020 |
|
267 |
|
241 |
|
181 |
|
689 |
Right-of-use assets relate mainly to leases for production and logistics infrastructure and real estate leases. Leases for production and logistics infrastructure are mainly related to the rental of tanks and containers as well as rail cars. For tanks and containers, the average lease term is 15 years and for rail cars, 12 years. Leases for renting real estate, particularly buildings, are for an average lease term of 10 years. Some of the underlying leases include variable lease payments as well as options to extend or terminate the lease.
The following table shows the amounts for all leases shown in the statement of cash flows and income statement:
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2019 |
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2020 |
|---|---|---|---|---|
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€ million |
|
€ million |
Amounts reported in the statement of cash flows |
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Total cash outflow for leases |
|
196 |
|
196 |
Amounts reported in the income statement |
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|
|
|
Depreciation and impairment losses |
|
157 |
|
161 |
Interest expense |
|
33 |
|
28 |
Expenses relating to short-term leases |
|
16 |
|
11 |
Expenses relating to leases of low-value assets |
|
3 |
|
3 |
Expenses relating to variable lease payments not included in the lease liability |
|
1 |
|
2 |
The lease commitments for current leases not recognized on the balance sheet amount to €3 million (previous year: €2 million).
Further information on the lease liabilities arising from leases and details on payments from leases are described in the following notes:
Covestro as lessor
In the reporting year, leasing income generated from lease contracts under IFRS 16 (Leases) was €14 million (previous year: €12 million). These are mainly related to real estate. In addition, lease payments from rentals of €7 million (previous year: €8 million) are expected to be received in the following year, not including the investment property as outlined below. Lease payments totaling €7 million are expected to be received in 2022–2025, and lease payments totaling €4 million after the year 2025.
At Covestro, risks from renting real estate are usually limited by building insurance policies and by the contractual obligation of the renter to return the real estate to its original condition. In addition, price adjustments based mainly on the consumer price index mechanisms are contractually agreed.
Investment property
Internal valuations are used as the primary basis for determining the fair values of investment property. The income approach is used for buildings and developed sites, and the market comparison approach is used for undeveloped sites.
The total carrying amount of investment property as of December 31, 2020, amounted to €24 million (previous year: €31 million), and its fair value totaled €210 million (previous year: €211 million). The rental income from investment property was €17 million (previous year: €17 million) and the operating expenses directly allocable to this property amounted to €14 million (previous year: €14 million). In the reporting period and in the previous year, there were no operating expenses recognized for investment property not generating any rental income.
Rental income generated from the leasing of properties classified as investment properties stemmed in part from contracts for hereditary building rights and leases granted by the Covestro Group. These contracts with a weighted average remaining term of 35 years relate to space used by companies and contractual partners in the chemical industry at production sites in Germany. Based on current rental prices, around €5 million in compensation will be received annually from these long-term contracts for the use of this space in the coming years.