Ecolab Inc. (NYSE:ECL)

The analysis of the property, plant, and equipment data over the period from 2017 to 2021 reveals several notable trends in asset composition and valuation.

Land

The value of land assets showed a slight decline over the five-year period, decreasing from $224.1 million in 2017 to $159.2 million in 2021. The most significant reduction occurred between 2019 and 2020, indicating potential disposals or revaluations during that time.

Buildings and leasehold improvements

Values for buildings and leasehold improvements increased steadily from $1.207 billion in 2017 to a peak of $1.363 billion in 2019, followed by a decline to approximately $1.134 billion by 2021. The decrease after 2019 may suggest asset sales, impairments, or a slowdown in investment in this category.

Machinery and equipment

This category saw growth from 2017 to 2019, rising from $2.281 billion to $2.468 billion, then a pronounced decrease to $1.831 billion in 2020 before partially recovering to $1.969 billion in 2021. The sharp drop in 2020 aligns with a broader reduction in asset holdings, possibly linked to operational adjustments or economic factors affecting capital expenditure.

Merchandising and customer equipment

Values increased consistently from $2.399 billion in 2017 to $2.788 billion in 2019, with a slight decline in 2020 to $2.691 billion and marginal uptick to $2.708 billion in 2021. This relatively stable trend suggests sustained investment or steady usage in customer-facing equipment despite fluctuations in other asset categories.

Capitalized software

Capitalized software exhibited steady growth throughout the period, rising from $585.8 million in 2017 to $884.6 million in 2021. This increase reflects ongoing investments in technology and intangible asset development.

Construction in progress

The amount capitalized as construction in progress decreased from $438.7 million in 2017 to $325.0 million in 2021, with a notable dip to $219.8 million in 2020. The reduction suggests either completion of projects and capitalization into fixed assets or a slowdown in new construction activities.

Property, plant and equipment, gross

The total gross property, plant, and equipment increased from $7.136 billion in 2017 to a peak of $8.020 billion in 2019 and then decreased sharply to $6.781 billion in 2020, followed by a recovery to $7.180 billion in 2021. This overall pattern indicates fluctuations in asset acquisition and possible disposals or impairments, with 2020 representing a year of contraction.

Accumulated depreciation

Accumulated depreciation increased in absolute value from -$3.429 billion in 2017 to a peak of -$4.065 billion in 2019, declined to -$3.656 billion in 2020, and rose again to -$3.891 billion in 2021. The decrease in 2020 may be associated with asset write-offs or adjustments, while the subsequent increase suggests resumed depreciation expenses aligned with asset base recovery.

Property, plant and equipment, net

The net property, plant, and equipment value grew modestly from $3.707 billion in 2017 to $3.955 billion in 2019, then experienced a sharp decline to $3.125 billion in 2020, with a slight recovery to $3.289 billion in 2021. This reflects the combined impact of asset disposals, depreciation, and new investments, highlighting 2020 as a year of significant contraction.

Overall, the data shows a period of asset growth until 2019, followed by a notable contraction in 2020, likely due to operational or economic challenges, with partial recovery in 2021. Investment in capitalized software consistently increased, signaling a strategic emphasis on intangible assets. The fluctuation in construction in progress and net property, plant, and equipment values underscores variability in capital projects and asset management strategies during this timeframe.

Average Age Ratio

The average age ratio shows a consistent upward trend over the five-year period. Beginning at 49.61% in 2017, it increased steadily to reach 55.43% by the end of 2021. This indicates a gradual aging of the property, plant, and equipment assets.

Estimated Total Useful Life

The estimated total useful life remained relatively stable, predominantly fixed at 12 years across the years 2017 through 2019 and in 2021. Notably, there was a slight reduction to 11 years in 2020, suggesting a reassessment or change in asset longevity assumptions during that year, which reverted back the following year.

Estimated Age (Time Elapsed Since Purchase)

The estimated age of the assets stayed constant at 6 years throughout the entire period. This consistency implies either a fixed reference point for asset age or a rolling average methodology that maintains stable estimation over time.

Estimated Remaining Life

The estimated remaining life of the assets was constant at 6 years from 2017 to 2019, but it decreased to 5 years starting in 2020 and continued at that level through 2021. This decline is coherent with the increase in average age ratio and possibly aligns with the temporary reduction in total useful life observed in 2020.

Overall Insights

The data collectively illustrate a maturing asset base with a modest increase in average age ratio, stable estimated ages, and a slight decrease in remaining useful life in the latter years. The temporary dip in total useful life in 2020 might reflect an adjustment in asset longevity evaluation, potentially influenced by external factors or internal reassessment processes. These trends underscore the importance of monitoring asset aging for maintenance planning and capital expenditure forecasting.

Gross Property, Plant, and Equipment

The gross value of property, plant, and equipment showed an overall increasing trend from 2017 through 2019, rising from $7,136,300 thousand to $8,020,200 thousand. However, in 2020, there was a notable decline to $6,781,400 thousand, followed by a modest recovery in 2021 to $7,179,800 thousand. This pattern suggests a significant asset disposals or revaluation in 2020, possibly related to strategic adjustments or external factors impacting capital assets.

Accumulated Depreciation

Accumulated depreciation grew steadily from $3,429,200 thousand in 2017 to $4,065,300 thousand in 2019, indicating ongoing asset usage and aging. In 2020, this figure decreased to $3,656,500 thousand before rising again to $3,891,300 thousand in 2021. The decline in 2020 is unusual and may reflect asset disposals, impairment, or changes in depreciation policies that reduced the book value of accumulated depreciation for that year.

Land

The carrying value of land remained relatively stable but showed a decreasing trend over the five-year period. It declined from $224,100 thousand in 2017 to $159,200 thousand in 2021, with the most significant drop between 2019 and 2020. Since land is not subject to depreciation, this reduction likely reflects sales or reclassification of land assets.

Average Age Ratio

The average age ratio increased consistently from 49.61% in 2017 to 55.43% in 2021. This rising ratio indicates that the asset base is aging, implying that a larger proportion of the property, plant, and equipment is accumulating depreciation and may be approaching the end of its useful life. This trend warrants attention for potential future capital expenditures or replacements.

Summary Insights

The data reveals an overall aging asset base, as highlighted by the rise in average age ratio and accumulated depreciation trends. The decrease in gross property, plant, and equipment in 2020, along with the corresponding dip in accumulated depreciation, suggests significant asset disposals or revaluations. The decline in land value supports this observation of asset portfolio adjustment. Going forward, these patterns suggest a need for potential reinvestment in fixed assets to maintain operational capacity and efficiency.

Property, Plant, and Equipment, Gross

The gross value of property, plant, and equipment experienced fluctuations over the analyzed period. It demonstrated an initial growth from approximately $7.14 billion in 2017 to about $8.02 billion in 2019. However, a notable decrease occurred in 2020, dropping to roughly $6.78 billion, followed by a partial rebound to approximately $7.18 billion in 2021. This pattern suggests potential asset disposals or impairments in 2020, with subsequent reinvestments or acquisitions in 2021.

Land

The value of land showed a declining trend across the period. Starting at $224.1 million in 2017, it slightly decreased to $214.5 million in 2018 and remained almost stable in 2019 at $215.1 million. Thereafter, a significant reduction was observed in 2020 and 2021, with land valued at $159.7 million and $159.2 million respectively. This decline could indicate disposals or revaluations of land holdings during the latter years.

Depreciation Expense

Depreciation expense generally increased from $585.7 million in 2017 to a peak of $654.1 million in 2019, reflecting growth in depreciable assets or changes in depreciation methods. However, it decreased to $594.3 million in 2020 and slightly increased again to $604.4 million in 2021. These variations align with changes in the gross property, plant, and equipment values, possibly indicating asset retirements or changes in asset base.

Estimated Total Useful Life

The reported estimated total useful life remained relatively stable, mostly at 12 years, except for 2020 where it was slightly reduced to 11 years. This minor fluctuation suggests a possible adjustment in asset longevity assessments, which may impact depreciation calculations for that year.

Summary

Overall, the data shows a pattern of growth in property, plant, and equipment up to 2019, followed by a reduction in 2020 and partial recovery in 2021. The decline in land values and depreciation expense in 2020 suggests asset disposals or revaluations coinciding with that year. The consistency in estimated useful life, except for a slight dip in 2020, indicates stable asset life assumptions. These trends may reflect strategic asset management decisions or external economic impacts influencing asset valuation and depreciation.

Accumulated Depreciation

The accumulated depreciation shows a generally increasing trend over the five-year period, rising from 3,429,200 thousand USD at the end of 2017 to 3,891,300 thousand USD at the end of 2021. However, there is a notable deviation in 2020 when accumulated depreciation decreased to 3,656,500 thousand USD from 4,065,300 thousand USD in 2019. This decrease interrupts the otherwise steady upward progression, indicating a possible adjustment or asset disposal during that year. By 2021, the accumulated depreciation resumed its increase, though not reaching the 2019 peak.

Depreciation Expense

The depreciation expense reflects the annual charge against asset value and exhibits moderate fluctuations across the years. Starting at 585,700 thousand USD in 2017, it increased steadily to 654,100 thousand USD in 2019. A decline follows in 2020, dropping to 594,300 thousand USD, before a slight increase to 604,400 thousand USD in 2021. The dip in 2020 parallels the decline observed in accumulated depreciation, suggesting a correlation possibly due to changes in asset base or revised depreciation policies.

Time Elapsed Since Purchase

The time elapsed since purchase remained constant at six years throughout the data series, indicating that the assets under consideration have a uniform age profile without significant additions or retirements affecting the average age.

Property, Plant and Equipment, Net

The net value of property, plant, and equipment shows a generally increasing trend from 2017 to 2019, rising from approximately $3.71 billion to nearly $3.95 billion. However, there is a notable decline in 2020 to about $3.12 billion, followed by a modest recovery in 2021 to roughly $3.29 billion. This pattern indicates a significant reduction in net assets in 2020, potentially reflecting disposals, impairments, or changes in asset valuation, with partial rebound the following year.

Land

The reported value of land remains relatively stable but slightly decreases over the period. It starts at approximately $224.1 million in 2017, slightly declines through 2018 and 2019, and then experiences a more noticeable reduction in 2020 to about $159.7 million, remaining nearly flat in 2021. This suggests some divestment or revaluation of land assets particularly during 2020.

Depreciation Expense

Depreciation expense steadily increases from $585.7 million in 2017 to $654.1 million in 2019, indicating increased asset base or accelerated asset usage. In 2020, depreciation expense decreases to $594.3 million and then slightly rises to $604.4 million in 2021. The decrease in 2020 aligns with the drop in net property, plant, and equipment values, suggesting a reduction in depreciable assets that year.

Estimated Remaining Life

The estimated remaining life of assets remains constant at 6 years from 2017 through 2019, before declining to 5 years in 2020 and maintaining at 5 years in 2021. This change may indicate a reassessment of asset longevity, possibly reflecting accelerated aging or a shift in asset composition towards younger or shorter-lived assets.