Zoetis Inc. (NYSE:ZTS)

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Zoetis Inc., asset age ratios

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Average age ratio	44.93%	45.72%	46.33%	47.24%	47.52%
Estimated total useful life (years)	19	18	18	20	21
Estimated age, time elapsed since purchase (years)	8	8	8	9	10
Estimated remaining life (years)	10	10	10	10	11

Based on: 10-K (reporting date: 2023-12-31), 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).

An analysis of the asset age metrics from 2019 to 2023 reveals a consistent trend toward a younger asset base. The overall profile of the property, plant, and equipment indicates a strategic modernization or replacement of assets, as evidenced by the steady decline in the average age ratio and the reduction in the estimated time elapsed since purchase.

Average Age Ratio: A consistent downward trend is observed, with the ratio decreasing from 47.52% in 2019 to 44.93% in 2023. This indicates that the accumulated depreciation as a percentage of total potential depreciation is declining, suggesting that newer assets are being integrated into the operational mix.
Estimated Total Useful Life: The estimated total useful life experienced a general decrease from 21 years in 2019 to 18 years by 2022, followed by a slight increase to 19 years in 2023. This fluctuation suggests periodic adjustments in the depreciation schedules or shifts in the types of capital assets acquired.
Estimated Age (Time Elapsed Since Purchase): The time elapsed since purchase decreased from 10 years in 2019 to 8 years by 2021, remaining stable at 8 years through 2023. This reduction confirms the acquisition of newer equipment, which has lowered the weighted average age of the asset portfolio.
Estimated Remaining Life: The estimated remaining life saw a marginal decrease from 11 years in 2019 to 10 years in 2020, remaining constant at 10 years through the end of 2023. This stability indicates a balanced cycle of asset retirement and replacement.

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	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Selected Financial Data (US$ in millions)
Accumulated depreciation	2,594)	2,297)	2,072)	1,952)	1,737)
Property, plant and equipment, gross carrying amount	5,798)	5,050)	4,494)	4,154)	3,677)
Land	25)	26)	22)	22)	22)
Asset Age Ratio
Average age¹	44.93%	45.72%	46.33%	47.24%	47.52%

Based on: 10-K (reporting date: 2023-12-31), 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).

2023 Calculations

¹ Average age = 100 × Accumulated depreciation ÷ (Property, plant and equipment, gross carrying amount – Land)
= 100 × 2,594 ÷ (5,798 – 25) = 44.93%

The financial data indicates a period of sustained capital investment and asset expansion between 2019 and 2023. While both the gross carrying amount of property, plant, and equipment and the accumulated depreciation increased in absolute terms, the rate of asset acquisition exceeded the rate of depreciation, leading to a gradual reduction in the relative age of the asset base.

Gross Carrying Amount and Land: The gross value of property, plant, and equipment grew steadily from 3,677 million US$ in 2019 to 5,798 million US$ in 2023. This represents a significant expansion of the physical asset base. Land holdings remained relatively stagnant throughout the period, fluctuating minimally between 22 million US$ and 26 million US$, indicating that the growth in gross assets was driven primarily by investments in depreciable assets such as buildings, machinery, or equipment rather than real estate acquisition.
Accumulated Depreciation: Accumulated depreciation rose from 1,737 million US$ in 2019 to 2,594 million US$ in 2023. This increase is consistent with the aging of existing assets and the continuous recognition of depreciation expenses over the five-year period.
Average Age Ratio: The average age ratio exhibited a consistent downward trend, declining from 47.52% in 2019 to 44.93% in 2023. This decline signifies that the company is investing in new capital assets at a pace that outweighs the depreciation of its older assets. A decreasing ratio typically suggests a modernization of the production infrastructure or a strategic expansion of capacity using new equipment.

The convergence of increasing gross assets and a decreasing average age ratio suggests a proactive capital expenditure strategy. The systematic reduction in the average age ratio indicates that the asset base is becoming younger on average, which may contribute to improved operational efficiency and reduced maintenance costs over time.

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	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Selected Financial Data (US$ in millions)
Property, plant and equipment, gross carrying amount	5,798)	5,050)	4,494)	4,154)	3,677)
Land	25)	26)	22)	22)	22)
Depreciation expense	306)	272)	244)	211)	175)
Asset Age Ratio (Years)
Estimated total useful life¹	19	18	18	20	21

Based on: 10-K (reporting date: 2023-12-31), 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).

2023 Calculations

¹ Estimated total useful life = (Property, plant and equipment, gross carrying amount – Land) ÷ Depreciation expense
= (5,798 – 25) ÷ 306 = 19

Analysis of the property, plant, and equipment indicates a sustained period of capital expenditure and asset growth between 2019 and 2023.

Asset Base Expansion: The gross carrying amount of property, plant, and equipment grew consistently from 3,677 million US dollars in 2019 to 5,798 million US dollars by 2023. This represents a significant increase in the company's investment in long-term physical assets. In contrast, land holdings remained relatively stagnant, fluctuating minimally between 22 and 26 million US dollars, suggesting that the primary growth was driven by the acquisition of depreciable assets such as machinery, equipment, or facilities.
Depreciation Trends: Depreciation expense followed a steady upward trajectory, increasing from 175 million US dollars in 2019 to 306 million US dollars in 2023. This rise correlates with the expanding asset base, as the total volume of depreciable property increased over the five-year period.
Estimated Total Useful Life: The estimated total useful life of assets experienced a slight overall decline, moving from 21 years in 2019 to 19 years in 2023, with a low of 18 years recorded in 2021 and 2022. This downward shift suggests a more aggressive depreciation schedule or the introduction of new assets with shorter expected operational lifespans.
Operational Insights: The combination of increasing gross asset values and a generally decreasing estimated useful life indicates a trend toward asset modernization. The growth in carrying amounts, paired with a reduction in the average useful life, suggests that investments are being directed toward technology or equipment with faster obsolescence cycles, requiring more rapid capital turnover.

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	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Selected Financial Data (US$ in millions)
Accumulated depreciation	2,594)	2,297)	2,072)	1,952)	1,737)
Depreciation expense	306)	272)	244)	211)	175)
Asset Age Ratio (Years)
Time elapsed since purchase¹	8	8	8	9	10

Based on: 10-K (reporting date: 2023-12-31), 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).

2023 Calculations

¹ Time elapsed since purchase = Accumulated depreciation ÷ Depreciation expense
= 2,594 ÷ 306 = 8

The financial data indicates a period of steady asset expansion and systematic depreciation between 2019 and 2023. A consistent upward trajectory is observed in both accumulated depreciation and annual depreciation expenses, while the average time elapsed since purchase has decreased and subsequently stabilized, suggesting a strategic cycle of capital investment and asset renewal.

Accumulated Depreciation Trends: Accumulated depreciation grew consistently from 1,737 million USD in 2019 to 2,594 million USD by the end of 2023. This steady increase reflects the ongoing allocation of the cost of tangible assets over their useful lives and indicates a significant base of aging assets within the company's portfolio.
Depreciation Expense Analysis: Annual depreciation expenses exhibited a continuous year-over-year increase, rising from 175 million USD in 2019 to 306 million USD in 2023. The acceleration of this expense suggests the acquisition of additional depreciable assets over the five-year period, as the annual charge to the income statement increased by approximately 75%.
Asset Age and Investment Cycle: The average time elapsed since purchase decreased from 10 years in 2019 to 8 years in 2021, remaining constant at 8 years through 2023. This downward trend in the estimated age of assets, occurring simultaneously with rising depreciation expenses, implies that newer assets were integrated into the property, plant, and equipment base, effectively lowering the weighted average age of the asset portfolio.

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	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Selected Financial Data (US$ in millions)
Property, plant and equipment, less accumulated depreciation	3,204)	2,753)	2,422)	2,202)	1,940)
Land	25)	26)	22)	22)	22)
Depreciation expense	306)	272)	244)	211)	175)
Asset Age Ratio (Years)
Estimated remaining life¹	10	10	10	10	11

Based on: 10-K (reporting date: 2023-12-31), 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).

2023 Calculations

¹ Estimated remaining life = (Property, plant and equipment, less accumulated depreciation – Land) ÷ Depreciation expense
= (3,204 – 25) ÷ 306 = 10

A consistent upward trajectory in net property, plant, and equipment is observed from 2019 through 2023. The net book value of these assets increased from 1,940 million US dollars to 3,204 million US dollars, representing a total growth of approximately 65% over the five-year period. This expansion suggests a sustained period of capital investment in the company's productive capacity.

Net Asset Growth and Composition: The steady rise in net property, plant, and equipment is primarily driven by investments in depreciable assets rather than land. Land holdings remained relatively stagnant, fluctuating between 22 million and 26 million US dollars, which indicates that the increase in the asset base is concentrated in machinery, facilities, or other equipment.
Depreciation Expense Trends: Depreciation expenses grew in tandem with the asset base, rising from 175 million US dollars in 2019 to 306 million US dollars in 2023. This near-linear increase reflects the addition of new assets subject to depreciation and the ongoing cost of utilizing the existing asset pool.
Estimated Remaining Useful Life: The estimated remaining life of the assets has remained remarkably stable, holding at 10 years from 2020 through 2023, following a slight decrease from 11 years in 2019. The consistency of this metric indicates a standardized accounting approach and suggests that new capital expenditures are being integrated with useful life expectations consistent with the existing portfolio.
Asset Turnover Dynamics: The relationship between the depreciation expense and the total net asset value has remained proportional. In 2019, the depreciation expense represented approximately 9% of the net asset value, and by 2023, it represented approximately 9.5%, confirming that the rate of asset consumption is keeping pace with the rate of investment.

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