14.Property, Plant and Equipment

Changes in property, plant and equipment in fiscal 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

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, December 31, 2020

 

3,499

 

12,184

 

769

 

844

 

17,296

Acquisitions

 

112

 

271

 

24

 

47

 

454

Capital expenditures

 

90

 

324

 

54

 

497

 

965

Retirements

 

(47)

 

(190)

 

(23)

 

 

(260)

Transfers

 

84

 

385

 

16

 

(487)

 

(2)

Transfers (IFRS 5)

 

(9)

 

(1)

 

(2)

 

 

(12)

Exchange differences

 

142

 

570

 

43

 

19

 

774

Cost of acquisition or construction, December 31, 2021

 

3,871

 

13,543

 

881

 

920

 

19,215

 

 

 

 

 

 

 

 

 

 

 

Accumulated depreciation, impairment losses and impairment loss reversals, December 31, 2021

 

2,282

 

10,309

 

590

 

2

 

13,183

Carrying amounts, December 31, 2021

 

1,589

 

3,234

 

291

 

918

 

6,032

Depreciation and impairment losses in 2021

 

142

 

539

 

80

 

2

 

763

Depreciation

 

141

 

537

 

80

 

1

 

759

Impairment losses

 

1

 

2

 

 

1

 

4

Impairment loss reversals in 2021

 

(3)

 

 

 

 

(3)

The acquisition of the Resins & Functional Materials (RFM) business from Koninklijke DSM N.V., Heerlen (Netherlands), led to significant additions of property, plant and equipment.

In the reporting year impairment losses of €4 million (previous year: €19 million) were recognised and €3 million (previous year: €0 million) impairment loss reversals for the property, plant and equipment.

Borrowing costs of €3 million (previous year: €8 million) were capitalized in property, plant, and equipment in the reporting year as part of the cost of qualifying assets. The capitalization rate applied amounted to 1.8% on average (previous year: 2.1%).

Changes in property, plant and equipment in fiscal 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

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, December 31, 2019

 

3,427

 

11,856

 

766

 

1,188

 

17,237

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, December 31, 2020

 

3,499

 

12,184

 

769

 

844

 

17,296

 

 

 

 

 

 

 

 

 

 

 

Accumulated depreciation, impairment losses and impairment loss reversals, December 31, 2020

 

2,101

 

9,519

 

500

 

1

 

12,121

Carrying amounts, December 31, 2020

 

1,398

 

2,665

 

269

 

843

 

5,175

Depreciation and impairment losses in 2020

 

163

 

507

 

82

 

2

 

754

Depreciation

 

150

 

504

 

81

 

 

735

Impairment losses

 

13

 

3

 

1

 

2

 

19

Impairment loss reversals in 2020

 

 

 

 

 

Leasing

Covestro as Lessee

The reported right-of-use assets from leases are recorded under property, plant and equipment.

Changes in right-of-use assets in 2021

 

 

 

 

 

 

 

 

 

 

 

Land and buildings

 

Plant installations and machinery

 

Furniture, fixtures and other equipment

 

Total

 

 

€ million

 

€ million

 

€ million

 

€ million

Carrying amounts, January 1, 2021

 

267

 

241

 

181

 

689

Additions

 

60

 

122

 

41

 

223

Retirements

 

(9)

 

(10)

 

(3)

 

(22)

Depreciation, impairment losses and impairment loss reversals

 

(42)

 

(54)

 

(47)

 

(143)

Other changes

 

9

 

15

 

11

 

35

Carrying amounts, December 31, 2021

 

285

 

314

 

183

 

782

Changes in right-of-use assets in 2020

 

 

 

 

 

 

 

 

 

 

 

Land and buildings

 

Plant installations and machinery

 

Furniture, fixtures and other equipment

 

Total

 

 

€ million

 

€ million

 

€ million

 

€ million

Carrying amounts, January 1, 2020

 

329

 

250

 

178

 

757

Additions

 

31

 

57

 

67

 

155

Retirements

 

(19)

 

(3)

 

(5)

 

(27)

Depreciation, impairment losses and impairment loss reversals

 

(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 16 years (previous year: 15 years) and for rail cars, 12 years (previous year: 12 years). Leases for renting real estate, particularly buildings, are for an average lease term of 14 years (previous year: 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:

Expenses and cash outflows for leases

 

 

 

 

 

 

 

2020

 

2021

 

 

€ million

 

€ million

Amounts reported in the statement of cash flows

 

 

 

 

Total cash outflow for leases

 

196

 

184

Amounts reported in the income statement

 

 

 

 

Depreciation, impairment losses and impairment loss reversals

 

161

 

143

Interest expense

 

28

 

26

Expenses relating to short-term leases

 

11

 

14

Expenses relating to leases of low-value assets

 

3

 

2

Expenses relating to variable lease payments not included in the lease liability

 

2

 

2

As of December 31, 2021, the lease commitments for short-term leases not recognized on the balance sheet amount to €6 million (previous year: €3 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  16 (Leases) was €8 million (previous year: €11 million). These are mainly related to real estate. In addition, lease payments from rentals of €4 million (previous year: €7 million) are expected to be received in the following year, not including the investment property as outlined below. Lease payments totaling €5 million are expected to be received in the period from 2023–2026, and lease payments totaling €4 million after the year 2026.

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, 2021, amounted to €23 million (previous year: €24 million), and its fair value totaled €223 million (previous year: €210 million). The rental income from investment property was €13 million (previous year: €17 million) and the operating expenses directly allocable to this property amounted to €10 million (previous year: €14 million). In the reporting period and in the previous year, there were no material 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 34 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.

IFRSs/International Financial Reporting Standards
International accounting standards as endorsed by the European Union respectively published by the IASB or the IFRS IC