Analysis of Property, Plant and Equipment
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Property, Plant and Equipment Disclosure
3M Co., balance sheet: property, plant and equipment
US$ in millions
Based on: 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), 10-K (reporting date: 2017-12-31).
- Land
- The value of land held shows a gradual decline over the period, decreasing from 348 million US dollars at the end of 2017 to 312 million US dollars at the end of 2021. This reflects a consistent but moderate reduction in land assets.
- Buildings and leasehold improvements
- The carrying amount of buildings and leasehold improvements exhibited slight fluctuations initially but generally increased over the five-year period. Starting at 7,681 million US dollars in 2017, it dipped slightly in 2018 before rising steadily to reach 8,086 million US dollars by 2021, indicating ongoing investments and improvements in these fixed assets.
- Machinery and equipment
- Machinery and equipment values showed an overall upward trend, rising from 15,907 million US dollars in 2017 to 17,305 million US dollars in 2021. The increase was somewhat steady, with no significant declines, suggesting continuous capital expenditure or acquisition of machinery and equipment.
- Construction in progress
- The construction in progress account grew consistently over the reviewed period, increasing from 843 million US dollars in 2017 to 1,510 million US dollars in 2021. This upward trend indicates ongoing capital projects and investments that have not yet been completed and capitalized.
- Capital leases
- Capital leases were reported only in 2017 at 135 million US dollars, with no subsequent values noted for later years, possibly reflecting a change in accounting treatment or disposition of leased assets.
- Gross property, plant and equipment
- Gross property, plant, and equipment showed a gradual increase throughout the period, moving from 24,914 million US dollars in 2017 to 27,213 million US dollars in 2021. This suggests overall growth in the company's fixed asset base, driven primarily by investments in buildings, machinery, and construction in progress despite the reduction in land.
- Accumulated depreciation
- Accumulated depreciation consistently increased from -16,048 million US dollars in 2017 to -17,784 million US dollars in 2021. The steady rise in accumulated depreciation reflects the aging of the fixed asset base and ongoing consumption of asset value over time.
- Property, plant and equipment, net
- Net property, plant, and equipment demonstrated some variability but generally increased over the period. It decreased slightly from 8,866 million US dollars in 2017 to 8,738 million US dollars in 2018, then rose progressively to 9,429 million US dollars by 2021. This pattern indicates effective asset management whereby asset growth and depreciation are balanced, resulting in a stable and slightly growing asset net book value.
Asset Age Ratios (Summary)
3M Co., asset age ratios
Based on: 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), 10-K (reporting date: 2017-12-31).
The average age ratio of property, plant, and equipment exhibits a relatively stable trend over the five-year period under consideration. The ratio fluctuates slightly but maintains a level consistently above 65%, indicating that a significant portion of the company's fixed assets remains on the older side.
- 2017 to 2018
- There is a marginal increase from 65.33% to 65.77%, reflecting a slight aging of the asset base.
- 2018 to 2019
- A small decline to 65.15% occurs, suggesting some asset renewal or additions which temporarily reduced the average age.
- 2019 to 2020
- The ratio rises again slightly to 65.48%, indicating a stabilization and further aging of the assets.
- 2020 to 2021
- The highest value in the period, 66.11%, is observed, pointing to a continuing trend of an aging fixed asset base without significant new investments to offset depreciation or retirement of older assets.
Overall, the data implies a consistent asset aging profile with limited rejuvenation. The company’s property, plant, and equipment appear to be increasingly composed of older assets, which may have implications for maintenance costs and operational efficiency if the trend continues without substantial reinvestment.
Average Age
Based on: 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), 10-K (reporting date: 2017-12-31).
2021 Calculations
1 Average age = 100 × Accumulated depreciation ÷ (Gross property, plant and equipment – Land)
= 100 × ÷ ( – ) =
- Gross Property, Plant, and Equipment
- The gross value of property, plant, and equipment shows a generally increasing trend over the period analyzed. It rose from $24,914 million at the end of 2017 to $27,213 million at the end of 2021, indicating ongoing investment or asset additions over these years, despite minor fluctuations.
- Accumulated Depreciation
- Accumulated depreciation increased steadily throughout the period, from $16,048 million in 2017 to $17,784 million in 2021. The incremental rise each year reflects continual asset usage and aging, which is consistent with the growth in gross property, plant, and equipment.
- Land
- The value of land shows a slight declining pattern, decreasing from $348 million in 2017 to $312 million in 2021. This trend may indicate disposals or revaluation impacts during the period, distinguishing it from the overall growth observed in gross property, plant, and equipment.
- Average Age Ratio
- The average age ratio, which measures the proportion of accumulated depreciation to gross property, plant, and equipment, remains relatively stable, fluctuating narrowly between 65.15% and 66.11%. This stability suggests a consistent asset aging profile and depreciation policy throughout the time frame.