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 buildings |
|
Plant and equipment |
|
Cars |
|
Total |
|---|---|---|---|---|---|---|---|---|
Cost |
|
228.5 |
|
153.4 |
|
16.5 |
|
398.4 |
Accumulated depreciation and impairment losses |
|
(58.3) |
|
(62.1) |
|
(10.7) |
|
(131.1) |
Carrying amount as of Dec. 31, 2023 |
|
170.2 |
|
91.3 |
|
5.8 |
|
267.3 |
Cost |
|
290.6 |
|
174.2 |
|
21.1 |
|
485.9 |
Accumulated depreciation and impairment losses |
|
(76.6) |
|
(73.4) |
|
(13.9) |
|
(163.9) |
Carrying amount as of Dec. 31, 2024 |
|
214.0 |
|
100.8 |
|
7.2 |
|
322.0 |
Carrying amount as of Jan. 1, 2023 |
|
175.2 |
|
64.9 |
|
3.5 |
|
243.6 |
Additions |
|
16.4 |
|
44.4 |
|
4.8 |
|
65.6 |
Depreciation |
|
(18.5) |
|
(22.3) |
|
(2.7) |
|
(43.5) |
Effect of movements in exchange rates |
|
(2.9) |
|
4.3 |
|
0.2 |
|
1.6 |
Carrying amount as of Dec. 31, 2023 |
|
170.2 |
|
91.3 |
|
5.8 |
|
267.3 |
Carrying amount as of Jan. 1, 2024 |
|
170.2 |
|
91.3 |
|
5.8 |
|
267.3 |
Additions |
|
81.7 |
|
36.1 |
|
5.0 |
|
122.8 |
Depreciation |
|
(19.8) |
|
(24.6) |
|
(3.3) |
|
(47.7) |
Impairment loss |
|
(8.8) |
|
(0.4) |
|
– |
|
(9.2) |
Transfer to assets held for sale |
|
(8.0) |
|
– |
|
– |
|
(8.0) |
Effect of movements in exchange rates |
|
(1.3) |
|
(1.6) |
|
(0.3) |
|
(3.2) |
Carrying amount as of Dec. 31, 2024 |
|
214.0 |
|
100.8 |
|
7.2 |
|
322.0 |
The increase in right-of-use assets since December 31, 2023 is mainly due to the starts in 2024 of the 20-year lease of the Group’s new chilled carton production plant in China (see also note 9), the 25-year lease of the Group’s first aseptic carton production plant in India and new leases of production equipment for closures (mainly for tethered caps). The production equipment for the two new production plants has been invested in directly by the Group.
See note 9 for information about a pre-paid land right-of-use in Shanghai that is classified as held for sale as of December 31, 2024.
The Group’s most significant leases relate to its production plants in China (two of its plants), Saudi Arabia, India (one of its plants) and Mexico as well as its technology center in China. These six leases, with a remaining lease term of between 10 and 25 years, make up the larger part of the carrying amount of leased land and buildings. A purchase option, exercisable by the Group after 15 years, has been considered when estimating the lease term and the lease liability for the production plant in Mexico.
The larger part of the plant and equipment category relates to leases of production equipment for closures with a lease term of four to five years. The lease term of other assets is most commonly in the range of three to five years.
Depreciation and impairment of right-of-use assets
Depreciation of right-of-use assets is recognized in the following components in the statement of profit or loss and other comprehensive income.
(In € million) |
|
Year ended |
|
Year ended |
|---|---|---|---|---|
Cost of sales |
|
37.8 |
|
33.6 |
Selling, marketing and distribution expenses |
|
6.0 |
|
6.0 |
General and administrative expenses |
|
3.9 |
|
3.9 |
Total depreciation |
|
47.7 |
|
43.5 |
See note 9 for information about an impairment loss of €9.2 million recognized as part of cost of sales in the year ended December 31, 2024 in connection with the transfer of the Group’s chilled carton production in China to a new location.
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 was approximately €28 million as of December 31, 2024 (€100 million as of December 31, 2023).
These contracts relate to leases of production equipment for closures that are expected to commence within the next twelve months. As of December 31, 2023, the committed lease payments also concerned the leases of Group’s new chilled carton production plant in China and its first aseptic carton production plant in India (see above).
Accounting policy
At the lease commencement date, the Group recognizes a lease liability and a related right-of-use asset. The accounting for lease liabilities is described in note 23.
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 recognized 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 recognized 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.
Right-of-use assets are reviewed regularly and at least annually to identify whether there is an impairment indicator. See note 5.5.3 for further details.