Analysis of Property, Plant and Equipment
Property, Plant and Equipment Disclosure
Johnson Controls International plc, balance sheet: property, plant and equipment
US$ in millions
Based on: 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-09-30), 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30).
A significant structural shift in the asset base occurred between 2018 and 2019, characterized by a sharp reduction in total gross property, plant, and equipment. Following this contraction, the asset base entered a phase of gradual expansion, with gross values recovering from 5,844 million USD in 2019 to 7,121 million USD by September 30, 2023.
- Gross Asset Composition and Trends
- Machinery and equipment constitutes the primary component of the asset portfolio. After a substantial decrease from 6,049 million USD in 2018 to 2,969 million USD in 2019, this category demonstrated a consistent recovery trend, reaching 4,227 million USD by 2023. Conversely, buildings and improvements and land experienced a sustained decline; buildings decreased from 2,537 million USD to 1,337 million USD, while land holdings dropped from 363 million USD to 194 million USD over the six-year period.
- Strategic Investment Patterns
- Subscriber systems showed a consistent upward trajectory, growing annually from 573 million USD in 2018 to 823 million USD in 2023. Construction in progress saw a significant drop after 2018, remaining relatively stable between 327 million USD and 540 million USD from 2019 through 2023, indicating a transition toward more measured capital project deployments.
- Net Book Value and Depreciation Analysis
- Net property, plant, and equipment contracted sharply from 6,171 million USD in 2018 to 3,348 million USD in 2019, subsequently stabilizing with minor fluctuations to end at 3,136 million USD in 2023. Accumulated depreciation followed a similar pattern of initial reduction in 2019, followed by a steady increase to 3,985 million USD by 2023, reflecting the ongoing depreciation of the current asset base alongside new acquisitions.
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Asset Age Ratios (Summary)
Johnson Controls International plc, asset age ratios
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | Sep 30, 2018 | ||
|---|---|---|---|---|---|---|---|
| Average age ratio | 57.53% | 53.31% | 52.31% | 50.47% | 44.62% | 44.60% |
Based on: 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-09-30), 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30).
The average age ratio for property, plant, and equipment demonstrates a persistent upward trajectory over the analyzed period, indicating a gradual increase in the proportion of accumulated depreciation relative to the gross value of fixed assets.
- Trend Progression
- The ratio remained relatively stable between September 30, 2018, and September 30, 2019, holding at approximately 44.6%. From 2020 onward, a consistent increase is observed, culminating in a peak of 57.53% by September 30, 2023. This represents a total increase of 12.93 percentage points over the six-year window.
- Analysis of Growth Phases
- A significant acceleration occurred between 2019 and 2020, during which the ratio rose by 5.85 percentage points. Following a period of moderate growth between 2020 and 2022, another sharp increase of 4.22 percentage points was recorded in the final year, suggesting a shift in the asset lifecycle or a reduction in the rate of new capital investments relative to asset depreciation.
- Operational Implications
- The steady rise in the average age ratio suggests an aging asset base. This pattern indicates that existing property, plant, and equipment are being utilized for longer durations without sufficient replacement or modernization, which may lead to increased maintenance costs or a heightened requirement for future capital expenditures to maintain operational efficiency.
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Average Age
Based on: 10-K (reporting date: 2023-09-30), 10-K (reporting date: 2022-09-30), 10-K (reporting date: 2021-09-30), 10-K (reporting date: 2020-09-30), 10-K (reporting date: 2019-09-30), 10-K (reporting date: 2018-09-30).
2023 Calculations
1 Average age = 100 × Accumulated depreciation ÷ (Property, plant and equipment, gross – Land)
= 100 × 3,985 ÷ (7,121 – 194) = 57.53%
An analysis of the asset base reveals a significant structural shift between 2018 and 2019, followed by a period of gradual asset expansion and increasing portfolio maturity. The overall trajectory indicates a trend toward an aging asset base relative to its estimated useful life.
- Average Age Ratio
- The average age ratio exhibits a consistent upward trend, rising from 44.60% in 2018 to 57.53% by September 30, 2023. After remaining stagnant between 2018 and 2019, the ratio increased sharply to 50.47% in 2020 and continued to climb annually thereafter. This progression suggests that the company's fixed assets are aging more rapidly than they are being replaced, indicating a potential need for future capital expenditures to modernize infrastructure.
- Gross Property, Plant and Equipment and Accumulated Depreciation
- Gross property, plant and equipment experienced a substantial contraction between 2018 and 2019, falling from 10,846 million USD to 5,844 million USD. A corresponding decline occurred in accumulated depreciation, which dropped from 4,675 million USD to 2,496 million USD during the same period. Since 2019, gross assets have trended upward, reaching 7,121 million USD in 2023, while accumulated depreciation has risen more aggressively to 3,985 million USD. The fact that accumulated depreciation grew faster than gross PP&E in the later years supports the conclusion that the asset base is maturing.
- Land Holdings
- A persistent downward trend is observed in land valuations, which decreased from 363 million USD in 2018 to 194 million USD in 2023. This steady contraction reflects a gradual reduction in the company's landed asset holdings over the analyzed period.
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