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12 Property, plant and equipment

Property, plant and equipment (“PP&E”) is mainly composed of filling lines that are deployed at customers’ sites under contracts that qualify to be accounted for as operating leases (see note 5.5.2) and the Group’s plant and production equipment. PP&E also includes work in progress, which relates to construction of filling machines and to filling lines under installation at customers’ sites as well as to construction of various types of production equipment used by the Group in its manufacturing and assembly facilities. The Group is a lessor only in respect of its filling lines deployed with its customers.

Composition of PP&E

(In € million)

 

Land

 

Buildings

 

Plant and equipment

 

Work in progress

 

Filling lines

 

Total

Cost

 

40.1

 

181.6

 

620.7

 

156.0

 

854.2

 

1,852.6

Accumulated depreciation and impairment losses

 

 

(47.0)

 

(399.6)

 

 

(332.9)

 

(779.5)

Carrying amount as of 31 December 2019

 

40.1

 

134.6

 

221.1

 

156.0

 

521.3

 

1,073.1

Cost

 

38.1

 

173.2

 

610.2

 

187.0

 

875.2

 

1,883.7

Accumulated depreciation and impairment losses

 

(9.5)

 

(64.4)

 

(443.7)

 

(8.5)

 

(371.0)

 

(897.1)

Carrying amount as of 31 December 2020

 

28.6

 

108.8

 

166.5

 

178.5

 

504.2

 

986.6

Carrying amount as of 1 January 2019

 

39.3

 

148.2

 

250.2

 

170.0

 

461.1

 

1,068.8

Additions

 

 

0.5

 

3.5

 

167.7

 

6.5

 

178.2

Additions through business combination

 

 

 

6.4

 

2.8

 

4.7

 

13.9

Reclassification to right-of-use assets

 

 

(14.3)

 

(13.3)

 

 

 

(27.6)

Disposals

 

 

 

(4.3)

 

 

(5.4)

 

(9.7)

Depreciation

 

 

(9.2)

 

(75.5)

 

 

(92.5)

 

(177.2)

Impairment losses

 

 

 

 

 

(2.8)

 

(2.8)

Transfers

 

 

7.6

 

49.3

 

(186.6)

 

129.7

 

Effect of movements in exchange rates

 

0.8

 

1.8

 

4.8

 

2.1

 

20.0

 

29.5

Carrying amount as of 31 December 2019

 

40.1

 

134.6

 

221.1

 

156.0

 

521.3

 

1,073.1

Carrying amount as of 1 January 2020

 

40.1

 

134.6

 

221.1

 

156.0

 

521.3

 

1,073.1

Additions

 

 

0.8

 

2.4

 

191.7

 

4.4

 

199.3

Disposals

 

 

 

(0.1)

 

 

(0.4)

 

(0.5)

Depreciation

 

 

(9.1)

 

(62.3)

 

 

(88.8)

 

(160.2)

Impairment losses

 

(9.2)

 

(11.6)

 

(13.1)

 

(8.6)

 

(1.3)

 

(43.8)

Transfers

 

 

1.6

 

34.7

 

(149.3)

 

110.7

 

(2.3)

Effect of movements in exchange rates

 

(2.3)

 

(7.5)

 

(16.2)

 

(11.3)

 

(41.7)

 

(79.0)

Carrying amount as of 31 December 2020

 

28.6

 

108.8

 

166.5

 

178.5

 

504.2

 

986.6

Notes 7 and 11 include further information about the Group’s capital expenditure with regard to its production equipment and filling lines.

Depreciation and impairment of PP&E

Depreciation of PP&E is recognised in the following components in the statement of profit or loss and other comprehensive income.

(In € million)

 

Year ended
31 Dec. 2020

 

Year ended
31 Dec. 2019

Cost of sales

 

154.3

 

170.9

Selling, marketing and distribution expenses

 

1.0

 

1.2

General and administrative expenses

 

4.9

 

5.1

Total depreciation

 

160.2

 

177.2

The impairment losses recognised in the year ended 31 December 2020 primarily relate to production-related assets of Whakatane, the Group’s paper mill in New Zealand. Out of the total amount of impairment losses of €43.8 million, €32.5 million relate to the paper mill (see further note 4). The remaining amount mainly relates to impairment losses resulting from the reallocation of production within the APAC segment. The recoverable amounts of the impaired assets are not material. The impairment losses are recognised as part of cost of sales in the statement of profit or loss and other comprehensive income.

Capital expenditure commitments

As of 31 December 2020, the Group had entered into contracts to incur capital expenditure of €62.0 million (€99.7 million as of 31 December 2019) for the acquisition of PP&E. The commitments relate to filling machine assembly, certain downstream equipment and equipment for the Group’s sleeves manufacturing facilities, including some remaining investments in relation to the second sleeves manufacturing facility in China that became operational in December 2020, which explains the decrease in commitments between the two periods. The new facility is leased by the Group (see note 13).

Accounting policy, significant judgements and estimates

Items of PP&E are measured at cost less accumulated depreciation and accumulated impairment losses. Gains and losses on disposals of items of PP&E are recognised in profit or loss as part of other income or expenses.

The cost of an acquired or self-constructed item of PP&E includes any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset. The cost of the Group’s filling lines also includes the estimated cost of dismantling to the extent such an amount is recognised as a provision. Subsequent expenditure is capitalised only if it is probable that the future economic benefits associated with the expenditure will flow to the Group and the cost can be measured reliably. The costs of the day-to-day servicing of PP&E are recognised in profit or loss as incurred.

Items of PP&E are depreciated on a straight-line basis over their estimated useful lives, with depreciation generally recognised in profit or loss. Land is not depreciated. The estimated useful lives for the current and comparative periods are as follows:

  • Buildings 15 to 40 years
  • Plant and equipment:
    • Production-related equipment and machinery 4 to 12 years
    • Furniture and fixtures 3 to 8 years
  • Filling lines (leased assets, SIG as the lessor) 10 years

The Group as a lessor – filling lines

The Group mainly deploys filling lines under contracts that qualify to be accounted for as operating leases (see note 5.5.2 for additional details). As further described in this accounting policy section, the filling lines are measured at cost and depreciated over their estimated useful life of ten years and tested for impairment when there is an impairment indicator.

Impairment of PP&E

Items of PP&E are reviewed regularly and at least annually to identify whether there is an indication of impairment. If an impairment indicator exists, the asset’s recoverable amount is estimated. See note 5.5.3 for further details about impairment testing of non-financial assets.

A change in the Group’s intended use of certain assets, such as a decision to rationalise manufacturing locations, may trigger a future impairment. Value in use calculations require management to estimate the future cash flows expected to arise from an individual asset or cash generating unit and to determine a suitable discount rate to calculate present value.