10. PROPERTY, PLANT AND EQUIPMENT

At December 31, 2011 the breakdown and changes are as follows:

(in thousands of euro)
  12/31/2011 12/31/2010
  Gros amount Acumulated
depreciation
Net amount Gros amount Acumulated
depreciation
Net amounto
Land 93,647 - 93,647 86,826 - 86,826
Buildings 970,824 (391,114) 579,710 822,873 (369,371) 453,502
Plant and machinery 3,322,727 (1,891,612) 1,431,115 3,142,269 (1,911,773) 1,230,496
Industrial and
commercial equipment
650,694 (499,602) 151,092 645,340 (510,293) 135,047
Other assets 272,422 (171,370) 101,052 216,489 (145,254) 71,235
  5,310,314 (2,953,698) 2,356,616 4,913,797 (2,936,691) 1,977,106
GROSS AMOUNT
(in thousands of euro)
  12/31/2010 HYPERINFL. EFFECT RUSSIA ACQUIS. TRANSLAT. DIFF. INCREASE DECREASE RECLAS. OTHER 12/31/2011
Land 86,826 - 965 (2,191) 3,048 (306) 4,509 796 93,647
Buildings 822,873 8,684 2,937 (18,243) 123,392 (920) 16,233 15,868 970,824
Plant and machinery 3,142,269 9,419 16,680 (112,168) 357,650 (66,198) 5,293 (30,218) 3,322,727
Industrial and commercial equipment 645,340 2,669 452 (28,612) 40,220 (22,919) 15,539 (1,995) 650,694
Other assets 216,489 8,822 506 (4,989) 93,476 (3,943) (41,574) 3,635 272,422
 4,913,79729,59421,540(166,203)617,786(94,286)-(11,914)5,310,314
ACCUMULATED DEPRECIATION
(in migliaia di euro)
  12/31/2010 Hyperinfl.
effect
Russia
acquis.
Trans.
diff.
Reclas. Decr. Deprec. Other 12/31/2011
Buildings (369,371) (7,501) (285) 10,518 (21) 1,047 (25,245) (254) (391,114)
Plant and machinery (1,911,773) (7,072) (2,556) 77,849 19,159 61,041 (141,173) 12,913 (1,891,612)
Industrial and
commercial equipment
(510,293) (2,402) (54) 23,425 11,623 19,942 (44,327) 2,484 (499,602)
Other assets (145,254) (1,594) (159) 3,784 (30,761) 6,222 (10,632) 7,024 (171,370)
  (2,936,691) (18,569) (3,054) 115,576 - 88,251 (221,377) 22,167 (2,953,698)
NET AMOUNT
(in thousands of euro)
  12/31/2010 Hyperinfl.
effect
Russia
acquis.
trans.
dif.
INCR. DECR. RECLAS. Deprec. Other 12/31/2011
Land 86,826 - 965 (2,191) 3,048 (306) 4,509 - 796 93,647
Buildings 453,502 1,183 2,652 (7,725) 123,392 127 16,212 (25,245) 15,613 579,710
Plant and machinery 1,230,496 2,347 14,124 (34,319) 357,650 (5,157) 24,452 (141,173) (17,305) 1,431,115
Industrial and
commercial equipment
135,047 267 398 (5,187) 40,220 (2,977) 27,162 (44,327) 489 151,092
Other assets 71,235 7,228 347 (1,205) 93,476 2,279 (72,335) (10,632) 10,659 101,052
  1,977,106 11,025 18,486 (50,627) 617,786 (6,035) - (221,377) 10,252 2,356,616

 

The changes at December 31, 2010 were as follows:

GROSS AMOUNT
(in thousands of euro)
  12/31/2009 discont.
operat.
change in
scope
Hyperinfl.
effect
trans.
dif.
INCR. DECR. RECLAS. Other 12/31/2010
Land 87,458 (1,530) - - 2,851 2,558 (4,869) 279 79 86,826
Buildings 735,295 (15,286) (23,579) 6,454 29,283 85,298 1,430 3,582 396 822,873
Plant and machinery 2,791,177 (3,081) 2,196 6,903 140,070 266,813 (44,253) (10,686) (6,871) 3,142,269
Industrial and
commercial equipment
598,038 (4,745) (4,767) 2,073 30,802 37,596 (24,478) 15,311 (4,490) 645,340
Other assets 230,698 (26,223) 1,374 256 7,154 40,804 (25,548) (8,487) (3,539) 216,489
  4,442,666 (50,865) (24,776) 15,686 210,160 433,069 (97,718) - (14,425) 4,913,798
ACCUMULATED DEPRECIATION
(in thousands of euro)
  12/31/2009 discont.
operat.
Change in
scope
hyperinfl.
effect
trans.
diff.
RECLAS. DECR. deprec. Other 31/12/2010
Buildings (337,542) 7,751 982 (5,513) (14,299) (248) 1,577 (22,785) 706 (369,371)
Plant and machinery (1,731,094) 2,193 (873) (5,003) (76,998) (1,246) 36,429 (140,018) 4,837 (1,911,773)
Industrial and
commercial equipment
(471,172) 2,952 2,881 (1,714) (24,751) 4,752 16,880 (43,860) 3,739 (510,293)
Other assets (175,467) 17,747 (886) (224) (5,760) (3,258) 24,879 (10,200) 7,915 (145,254)
  (2,715,275) 30,643 2,104 (12,454) (121,808) - 79,765 (216,863) 17,197 (2,936,691)
NET AMOUNT
(in thousands of euro)  
  12/31/2009 discont.
operat.
change in
scope
hyperinfl.
effect
trans.
diff.
INCR. DECR. RECLAS. deprec. OTHER 12/31/2010
Land 87,458 (1,530) - - 2,851 2,558 (4,869) 279 - 79 86,826
Buildings 397,753 (7,535) (22,597) 941 14,984 85,298 3,007 3,334 (22,785) 1,102 453,502
Plant and machinery 1,060,083 (888) 1,323 1,900 63,072 266,813 (7,824) (11,932) (140,018) (2,034) 1,230,496
Industrial and
commercial equipment
126,866 (1,793) (1,886) 359 6,051 37,596 (7,598) 20,063 (43,860) (751) 135,047
Other assets 55,231 (8,476) 488 32 1,394 40,804 (669) (11,745) (10,200) 4,376 71,235
  1,727,391 (20,222) (22,672) 3,232 88,352 433,069 (17,953) - (216,863) 2,772 1,977,106

 

The increases in 2011 mainly involved the Tyre segment and were mainly dedicated to growth projects in South America, Romania and China, completing construction of new car tyre plants in Mexico and radial motorcycle tyres in China. These are in addition to the capital expenditure on the other production sites, made to increase the production mix, improve the qualitative capability of plants, and optimise occupational health and safety and environmental management of factories.

The ratio of increases of property, plant and equipment to depreciation in 2011 was 2.80 (in 2010 the ratio was 2).

Construction in progress at December 31, 2011, included in the individual categories of property, plant and equipment, totalled euro 373,611 thousand (euro 220,361 thousand at December 31, 2010).

The impairment losses for 2011, included in the “gross amount – decrease” column in the above table, totalled euro 1,122 thousand (euro 7,369 thousand at December 31, 2010). They are accounted for in the income statement under the item “Amortisation, depreciation and impairment” (note 33).

In regard to restrictions on the ownership of assets, note that:

  • the subsidiary Pirelli Tyres Alexandria Co. posted the value of plant and machinery totalling euro 6,900 thousand (euro 8,206 thousand at December 31, 2010) as collateral for loans granted by the National Bank of Egypt;
  • the subsidiary Pirelli Pneus Ltda. pledged its machinery and land as collateral for a total of euro 55,760 thousand (euro 62,403 thousand at December 31, 2010) against bank loans granted by BNDES (Banco Nacional de Desenvolvimento) and litigation with the national social security institution INSS (Instituto nacional de seguridade social) .
  • the subsidiary Pirelli Neumaticos SAIC pledged its own land and buildings for a total of euro 12,839 thousand as collateral for a loan granted by Banco de la Nacion Argentina.

No borrowing costs were capitalised on property, plant and equipment.

 

10.1. Finance Leases

The value of land, buildings, plant, machinery and other assets for which the Group has entered into a financial leasing agreement is included in the respective categories of property, plant, and equipment.
The breakdown is shown as follows:

(in thousands of euro)
  12/31/2011 12/31/2010
  COST ACCUMULATED DEPRECIATION NET AMOUNT COST ACCUMULATED DEPRECIATION NET AMOUNT
Leased land 10,348 - 10,348 10,184 - 10,184
Leased buildings 56,344 (10,492) 45,852 46,158 (8,338) 37,820
Other leased assets 464 (93) 371 454 (115) 339
Leased plant and machinery 98 (98) - 95 (95) -
 67,254(10,683)56,57156,891(8,548)48,343

 

The value of leased land and leased buildings mainly refers to:

  • the lease made by Pirelli & C. S.p.A. with a pool of banks (SG LEASING S.p.A. and UniCredit Leasing S.p.A.) for the building that hosts the structures and buildings of the Tyre Segment in Italy.
    The agreement, in place since May 2000, has a term of 13 years and includes a purchase option on expiry. The lease instalments are indexed to 3-month Euribor. The net carrying amount of the building is euro 35,962 thousand (euro 36,925 thousand at December 31, 2010) and the carrying amount for the land is euro 10,348 thousand (euro 10,184 thousand at December 31, 2010);
  • three agreements made by Solar Utility S.p.A. and UBI Leasing S.p.A. in place since August 2011;
  • an agreement made between Solar Utility S.p.A. and Leasint S.p.A. in place since December 2011.
    The object of these lease agreements are properties consisting of photovoltaic plants. The agreements have a term of 18 years and include a purchase option on expiry. The lease instalments are indexed to 3-month Euribor. The agreement with Leasint S.p.a. commits Pirelli to maintain its equity investment in Solar Utility S.p.A. for the entire duration of the lease agreement. In the event of default on this clause, Pirelli jointly guarantees with Solar Utility S.p.A. all obligations resulting from the lease agreement.

The increase in leased buildings from the previous year is related to the aforementioned agreements made by Solar Utility S.p.A. in 2011.

The payables for finance leases are included in financial payables (note 25). The change in finance lease payables from the previous year stems from the change in finance lease agreements in effect at December 31, 2011 as compared with the previous year.

The minimum payments due (or the payments required of the lessee during the remaining term of the lease) can be broken down as follows:

(in thousands of euro)
  12/31/2011 12/31/2010
up to 1 year 4,253 4,537
from 1 to 5 years 16,204 16,835
over 5 years
7,586 370
Total 28,043 21,742
Future financial expenses (4,941) (2,276)
Amount of leasing payables (note 25) 23,102 19,466

 

The table below shows the amount of financial lease payables broken down by due date:

(in thousands of euro)
  12/31/2011 12/31/2010
up to 1 year 3,152 3,234
from 1 to 5 years
14,384 15,963
over 5 years
5,566 269
Total (note 25) 23,102 19,466