Analysis of Property, Plant and Equipment
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- Statement of Comprehensive Income
- Analysis of Short-term (Operating) Activity Ratios
- Analysis of Long-term (Investment) Activity Ratios
- DuPont Analysis: Disaggregation of ROE, ROA, and Net Profit Margin
- Enterprise Value to FCFF (EV/FCFF)
- Present Value of Free Cash Flow to Equity (FCFE)
- Net Profit Margin since 2005
- Return on Equity (ROE) since 2005
- Return on Assets (ROA) since 2005
- Analysis of Revenues
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Property, Plant and Equipment Disclosure
Trane Technologies plc, balance sheet: property, plant and equipment
US$ in thousands
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
- Land
- The value of land shows fluctuations over the analyzed period. It increased from 53,200 thousand USD in 2018 to a peak of 60,600 thousand USD in 2019. After this, there was a significant decrease to 40,700 thousand USD in 2020, followed by a further decline in 2021 to 35,100 thousand USD, before a modest recovery to 36,800 thousand USD in 2022.
- Buildings
- The value attributed to buildings generally declined from 870,700 thousand USD in 2018 to 676,700 thousand USD in 2020. However, from 2020 onwards, there is a steady increase, reaching 737,700 thousand USD in 2022. The values indicate some volatility and potential asset disposals or revaluations in the early years, followed by stabilization and growth.
- Machinery and Equipment
- This category exhibits a similar pattern to buildings, beginning with a rise from 2,079,900 thousand USD in 2018 to 2,210,000 thousand USD in 2019. A marked decrease occurs in 2020 to 1,749,300 thousand USD. Subsequent years show gradual recovery with values increasing to 1,824,900 thousand USD in 2021 and 1,996,800 thousand USD in 2022. This pattern suggests significant disposals or impairments in 2020, followed by reinvestment or asset additions.
- Software
- The software asset values remain relatively stable between 2018 and 2022 but show a notable decline in 2020 to 638,000 thousand USD from 847,900 thousand USD the previous year. From 2020 onward, the values slightly increase, reaching 677,300 thousand USD in 2022. This step-down and gradual rise may reflect changes in capitalization policies or amortization practices affecting software assets.
- Property, Plant, and Equipment, Gross
- The gross property, plant, and equipment total sustained an upward trend from 2018 peaking in 2019 at 4,039,700 thousand USD before a steep reduction in 2020 to 3,104,700 thousand USD. Thereafter, the gross value slightly recovers to 3,448,600 thousand USD by 2022, suggesting a period of asset disposals or revaluation in 2020 with a gradual build-up of assets in subsequent years.
- Accumulated Depreciation
- The accumulated depreciation figures follow a decreasing absolute magnitude pattern in line with the reduced gross asset base. From -2,103,400 thousand USD in 2018, the balance increases in magnitude to -2,233,500 thousand USD in 2019 but drops significantly to -1,755,200 thousand USD in 2020. It then increases modestly over the next two years to -1,912,500 thousand USD by 2022. This aligns with the observed asset disposals or impairments in 2020 and subsequent capital expenditures.
- Property, Plant, and Equipment, Net
- The net book value reduced sharply from 1,806,200 thousand USD in 2019 to 1,349,500 thousand USD in 2020, reflecting the declines in gross asset values and accumulated depreciation. However, there is a recovery phase visible in 2021 and 2022 with net values rising to 1,398,800 thousand USD and 1,536,100 thousand USD, respectively. This trend points to improved asset capitalizations or reductions in disposals, enhancing the net asset base after a period of contraction.
Asset Age Ratios (Summary)
Trane Technologies plc, asset age ratios
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
- Average Age Ratio
- The average age ratio demonstrates a slight upward trend from 55.64% in 2018, peaking at 57.28% in 2020, before marginally decreasing to 56.06% in 2022. This suggests a period of gradual aging of property, plant, and equipment until 2020, followed by a modest decrease in age proportion relative to the total useful life.
- Estimated Total Useful Life
- The estimated total useful life of the assets has progressively increased over the five-year period, starting at 17 years in 2018 and reaching 19 years by 2021, remaining stable thereafter. This reflects an upward revision in the expected lifespan of the assets, potentially indicating improvements in asset quality or maintenance practices.
- Estimated Age (Time Elapsed Since Purchase)
- The estimated age of the assets remained constant at 10 years from 2018 through 2020, then increased to 11 years in 2021 and 2022. This pattern aligns logically with the passage of time, indicating that the assets have aged consistently year by year.
- Estimated Remaining Life
- The estimated remaining useful life stayed steady at 8 years throughout the entire period analyzed. This constancy, coupled with the increase in estimated total useful life and asset age, suggests recalibrations in useful life assumptions that balance out the aging assets, thereby maintaining a stable estimated remaining lifespan.
Average Age
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
2022 Calculations
1 Average age = 100 × Accumulated depreciation ÷ (Property, plant and equipment, gross – Land)
= 100 × ÷ ( – ) =
- Accumulated Depreciation
- The accumulated depreciation shows a fluctuating trend over the years. It increased from 2,104,400 thousand USD at the end of 2018 to 2,233,500 thousand USD by the end of 2019. However, it then declined significantly to 1,755,200 thousand USD in 2020 before rising again in subsequent years to reach 1,912,500 thousand USD by the end of 2022. This pattern suggests some adjustments or asset disposals occurred around 2020, followed by moderate increases in depreciation expenses.
- Property, Plant, and Equipment, Gross
- The gross value of property, plant, and equipment decreased sharply from 4,039,700 thousand USD at the end of 2019 to 3,104,700 thousand USD at the end of 2020, after a modest increase from 3,835,200 thousand USD in 2018 to 4,039,700 thousand USD in 2019. Following the 2020 drop, there was a steady recovery with values rising to 3,216,100 thousand USD in 2021 and 3,448,600 thousand USD in 2022. This decline and subsequent recovery could indicate asset sales or impairments in 2020, with reinvestments or acquisitions thereafter.
- Land
- The value of land assets shows variability but on a smaller scale. It increased from 53,200 thousand USD in 2018 to 60,600 thousand USD in 2019, then dropped significantly to 40,700 thousand USD in 2020. The value continued to decline to 35,100 thousand USD in 2021 before slightly increasing to 36,800 thousand USD in 2022. This trend may reflect land disposals or revaluations impacting the company’s land holdings.
- Average Age Ratio
- The average age ratio, expressed as a percentage, remained relatively stable during the period. It increased slightly from 55.64% in 2018 to a peak of 57.28% in 2020, indicating a marginal aging of the asset base. Thereafter, it slightly declined to 56.06% by the end of 2022. The minor fluctuations suggest consistent asset renewal or replacement policies, maintaining a stable balance between older and newer assets.
Estimated Total Useful Life
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
2022 Calculations
1 Estimated total useful life = (Property, plant and equipment, gross – Land) ÷ Depreciation expense
= ( – ) ÷ =
- Property, Plant and Equipment, Gross
- The gross value of property, plant, and equipment experienced a general decline from 2018 to 2020, falling from approximately 3.84 billion to 3.10 billion US dollars. Subsequently, there was a gradual recovery, increasing to about 3.22 billion in 2021 and 3.45 billion in 2022. Despite the recovery, the 2022 value remained below the 2018 peak.
- Land
- The recorded value of land showed a downward trend over the period observed. Starting at 53.2 million US dollars in 2018, it increased slightly in 2019 to 60.6 million, then declined sharply to 40.7 million in 2020. It continued to decrease moderately in the following years, reaching approximately 36.8 million by 2022. This pattern may indicate disposals or revaluations affecting land holdings.
- Depreciation Expense
- Depreciation expense remained relatively stable from 2018 to 2019, around 217.4 million and 221.2 million US dollars, respectively. It then decreased significantly to 172.8 million in 2020, followed by a slight decline to 170.5 million in 2021, and a modest increase to 176.5 million in 2022. This decrease aligns with the reduction in gross property, plant, and equipment value noted in 2020, suggesting lower historical cost basis or asset retirements.
- Estimated Total Useful Life
- The estimated total useful life of the assets increased gradually from 17 years in 2018 to 19 years in 2021 and remained stable at 19 years in 2022. This extension suggests a reassessment of asset longevity, possibly driven by maintenance practices, improved asset quality, or changes in accounting estimates.
- Overall Insights
- The financial data indicate a contraction in the asset base during 2020, possibly due to asset disposals, impairments, or business restructuring initiatives, followed by a cautious recovery in subsequent years. The declining land value could reflect strategic asset management decisions. The decreasing depreciation expense in 2020 corresponds with the reduced asset base and longer useful life estimates, which may improve future earnings by lowering periodic depreciation costs. The extension of asset useful life estimates points to a more conservative or optimistic outlook on the persistence of asset utility, which could influence asset management strategies going forward.
Estimated Age, Time Elapsed since Purchase
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
2022 Calculations
1 Time elapsed since purchase = Accumulated depreciation ÷ Depreciation expense
= ÷ =
- Accumulated Depreciation
- The accumulated depreciation shows a general downward trend from 2,104,400 thousand US dollars at the end of 2018 to 1,755,200 thousand US dollars at the end of 2020. Following this decline, there is a gradual increase observed over the next two years, reaching 1,912,500 thousand US dollars by the end of 2022. This pattern suggests an initial significant reduction, possibly due to asset disposals or revaluations, followed by renewed depreciation accumulation.
- Depreciation Expense
- Depreciation expense follows a similar trend to the accumulated depreciation. It starts at 217,400 thousand US dollars in 2018 and decreases steadily to 172,800 thousand US dollars in 2020. Afterwards, depreciation expense remains relatively stable but shows a slight increase to 176,500 thousand US dollars by the end of 2022. This indicates a period of reduced depreciation charges, possibly due to a lower asset base or changes in depreciation methods, with a modest rise in later years.
- Time Elapsed Since Purchase
- The average time elapsed since purchase remains constant at 10 years from 2018 through 2020 and increases marginally to 11 years in 2021 and 2022. This suggests that the property, plant, and equipment portfolio is aging slowly, with minimal recent acquisitions significantly affecting the average age within the observed period.
Estimated Remaining Life
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
2022 Calculations
1 Estimated remaining life = (Property, plant and equipment, net – Land) ÷ Depreciation expense
= ( – ) ÷ =
- Property, Plant and Equipment, Net
- The net value of property, plant, and equipment experienced minor fluctuations over the observed period. Starting at 1,730,800 thousand USD at the end of 2018, it increased slightly to 1,806,200 thousand USD by the end of 2019. However, it saw a notable decrease in 2020, dropping to 1,349,500 thousand USD. Following this decline, a gradual recovery occurred, with values rising to 1,398,800 thousand USD in 2021 and further to 1,536,100 thousand USD in 2022. Overall, the net book value showed a trough in 2020, followed by a steady upward trend but remained below the 2019 peak by the end of 2022.
- Land
- The recorded value for land demonstrated a declining trend over the period. It started at 53,200 thousand USD in 2018, peaked slightly at 60,600 thousand USD in 2019, and then markedly decreased to 40,700 thousand USD in 2020. The downward trend persisted into 2021, with the value reaching 35,100 thousand USD, and then marginally increased to 36,800 thousand USD in 2022. The overall trend suggests possible disposals or revaluations leading to a reduction in land holdings.
- Depreciation Expense
- Depreciation expense showed a consistent decline between 2018 and 2021, starting at 217,400 thousand USD in 2018, rising slightly to 221,200 thousand USD in 2019, then decreasing significantly to 172,800 thousand USD in 2020 and continuing downward to 170,500 thousand USD in 2021. In 2022, a slight increase to 176,500 thousand USD was observed. This pattern may reflect changes in asset base, asset disposals, or accelerated depreciation policies during this period.
- Estimated Remaining Life
- The estimated remaining useful life of the property, plant, and equipment remained constant at 8 years throughout the five-year span, indicating no changes in depreciation schedules or asset life assumptions during the period analyzed.