13. Right-of-use assets
The Group generally purchases its production-related buildings and equipment (see note 12). However, it also enters into lease contracts. Right-of-use assets relate to lease contracts that the Group has entered into as lessee. The contracts mainly cover leases of assets such as office buildings, production-related buildings and equipment, warehouses and cars.
Composition of right-of-use assets
(In € million) |
|
Land and |
|
Plant and equipment |
|
Cars |
|
Total |
|---|---|---|---|---|---|---|---|---|
Cost |
|
156.7 |
|
65.8 |
|
9.6 |
|
232.1 |
Accumulated depreciation and impairment losses |
|
(26.9) |
|
(24.8) |
|
(5.8) |
|
(57.5) |
Carrying amount as of 31 December 2021 |
|
129.8 |
|
41.0 |
|
3.8 |
|
174.6 |
Cost |
|
219.2 |
|
107.7 |
|
11.8 |
|
338.7 |
Accumulated depreciation and impairment losses |
|
(44.0) |
|
(42.8) |
|
(8.3) |
|
(95.1) |
Carrying amount as of 31 December 2022 |
|
175.2 |
|
64.9 |
|
3.5 |
|
243.6 |
Carrying amount as of 1 January 2021 |
|
100.5 |
|
36.7 |
|
3.9 |
|
141.1 |
Additions |
|
5.8 |
|
13.7 |
|
2.2 |
|
21.7 |
Additions through business combination |
|
26.5 |
|
0.2 |
|
– |
|
26.7 |
Depreciation |
|
(13.6) |
|
(11.5) |
|
(2.3) |
|
(27.4) |
Impairment losses |
|
– |
|
(0.1) |
|
(0.1) |
|
(0.2) |
Effect of movements in exchange rates |
|
10.6 |
|
2.0 |
|
0.1 |
|
12.7 |
Carrying amount as of 31 December 2021 |
|
129.8 |
|
41.0 |
|
3.8 |
|
174.6 |
Carrying amount as of 1 January 2022 |
|
129.8 |
|
41.0 |
|
3.8 |
|
174.6 |
Additions |
|
39.2 |
|
33.7 |
|
2.2 |
|
75.1 |
Additions through business combinations |
|
23.7 |
|
5.8 |
|
– |
|
29.5 |
Depreciation |
|
(16.9) |
|
(17.3) |
|
(2.5) |
|
(36.7) |
Effect of movements in exchange rates |
|
(0.6) |
|
1.7 |
|
– |
|
1.1 |
Carrying amount as of 31 December 2022 |
|
175.2 |
|
64.9 |
|
3.5 |
|
243.6 |
The increase in right-of-use assets since 31 December 2021 is mainly due to new leases of production equipment for closures and the commencement in October 2022 of the 15-year lease of the Group’s first aseptic carton sleeves production plant in Mexico (the building). The production equipment for the plant has been invested in directly by the Group. Commercial production started in February 2023. A purchase option, exercisable by the Group after 15 years, has been considered when estimating the lease term and the lease liability (with an impact also on the related right-of-use asset). In addition, a right-of-use asset relating to a pre-paid land right-of-use in China was recognised in connection with the Evergreen Asia acquisition accounting in 2022 (see note 27).
The Group’s most significant leases relate to its aseptic carton sleeves production plants in China (the second plant), Saudi Arabia and Mexico as well as the lease of the SIG Tech Centre in China. These leases, with a remaining lease term of between 11 and 18 years, make up the larger part of the carrying amount of leased land and buildings. Another significant lease is the pre-paid land right-of-use right in China, with a remaining lease term of 22 years. The larger part of the plant and equipment category relates to leases of production equipment for closures with a lease term of four to six years. The lease term of other assets is most commonly in the range of three to five years.
Depreciation of right-of-use assets
Depreciation of right-of-use assets is recognised in the following components in the statement of profit or loss and other comprehensive income.
(In € million) |
|
Year ended |
|
Year ended |
|---|---|---|---|---|
Cost of sales |
|
27.7 |
|
19.7 |
Selling, marketing and distribution expenses |
|
5.5 |
|
4.4 |
General and administrative expenses |
|
3.5 |
|
3.3 |
Total depreciation |
|
36.7 |
|
27.4 |
Lease commitments
The Group has entered into lease contracts that have not yet commenced. The present value of estimated future lease payments under these lease contracts is approximately €106 million as of 31 December 2022 (€77 million as of 31 December 2021).
These contracts mainly relate to leases of production equipment for closures that are expected to commence within the next twelve months. As of 31 December 2022, the committed lease payments also concern leases of production-related buildings in APAC that are expected to commence within the next eight to eighteen months (see also note 12). As of 31 December 2021, the committed lease payments also concerned the lease of the Group’s first aseptic carton sleeves production plant in Mexico, which commenced in October 2022.
Accounting policy
At the lease commencement date, the Group recognises a lease liability and a related right-of-use asset. The accounting for lease liabilities is described in note 22.
The right-of-use asset represents the Group’s right to use the leased asset. A right-of-use asset is initially measured at cost, which in many cases will equal the amount recognised as a lease liability. However, adjustments are required for any lease payments made at or before the lease commencement date and any initial direct costs incurred. The cost also includes the estimated cost to dismantle and remove the leased asset, to restore it to the condition required under the lease contract or to restore the site on which it is located, to the extent such an amount is recognised as a provision.
Subsequent to initial recognition, a right-of-use asset is measured at cost less accumulated depreciation and impairment losses. A right-of-use asset is subsequently also adjusted for certain remeasurements of the related lease liability.
Right-of-use assets are depreciated on a straight-line basis from the lease commencement date over the shorter of the lease term and their useful lives, unless it is reasonably certain that the Group will obtain ownership by the end of the lease term.
As for PP&E, right-of-use assets 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 details about impairment testing of non-financial assets.