9. Property, plant and equipment

The year-over-year increase in costs as well as in depreciation, amortization, or impairment losses on property, plant and equipment largely arises from the initial application of IFRS 16 using the modified retrospective method as of April 1, 2019.

The reconciliation of the carrying amounts of the property, plant and equipment for the periods presented in the Consolidated Financial Statements as of March 31, 2020, is as follows:

As of March 31, 2020, restrictions on the disposal of property, plant and equipment were EUR 0.6 million (March 31, 2019: EUR 0.6 million). Furthermore, as of March 31, 2020, commitments for the purchase of property, plant and equipment were EUR 389.4 million (March 31, 2019: EUR 439.3 million).

Borrowing costs related to qualifying assets in the amount of EUR 3.5 million (2018/19: EUR 3.8 million) were capitalized in the reporting period. The calculation was based on an average borrowing rate of 1.8% (2018/19: 2.0%).

In the business year 2018/19, the Management Board resolved and the Supervisory Board approved the sale of undeveloped properties in Meerbusch, Germany, with a carrying amount of EUR 13.3 million, not required for operating purposes. This led to negotiations with several interested parties. The sale is in line with the strategy of selling assets not required for operating purposes. These properties were sold in the past financial year with sales proceeds of EUR 25.8 million. The properties were allocable to the High Performance Metals Division and were shown separately in the statement of financial position.

Right-of-use assets as per IFRS 16

The Group leases mainly land, buildings, and manufacturing facilities as well as vehicle fleets including locomotives. Most of the leases contain renewal options and rights to terminate, some of which are also stipulated in conjunction with non-cancelable lease terms.

In some cases, the Group has the option to purchase the assets at the end of the contractually agreed period.

The lease payments typically are either fixed or based on market interest rates or indices (e.g., the consumer price index (CPI)). A few leases provide for variable lease payments (e.g., usage-based leases).

The carrying amount of each class of right-of-use assets pursuant to IFRS 16, which are shown in property, plant and equipment, is as follows:

Lease expenses in the consolidated income statement

The total cash outflows for leases are EUR 74.2 million. This includes cash outflows related to short-term leases, low-value asset leases, and variable lease payments.

The Group expects variable lease payments to remain largely unchanged in the coming years.

As of March 31, 2020, there were no material leases that had not yet been made available and thus had not yet been recognized.

The effect of the measurement of residual value guarantees and purchase options on the carrying amount is deemed negligible.

Effect of renewal and termination options

Renewal and termination options can be exercised without the lessor’s approval. The fact that leases contain termination and renewal options gives the operating units of the voestalpine Group, which are responsible for utilizing the assets, a high degree of operational flexibility. The resulting flexibility and thus the range of potential future lease payments that have not yet been recognized in the statement of financial position is high. voestalpine generally assumes that renewal options will be exercised.

As regards the maturity analysis of lease liabilities, see Note 20. Financial liabilities.

Prior-year comparative information pursuant to IAS 17

The carrying amount for each asset class under finance leases included in property, plant and equipment is as follows:

The terms and present value of the minimum finance lease payments are as follows:

The most significant finance leases for buildings and production plants have a remaining term of five years. The Group has the option in this connection to purchase the plants at the end of a contractually agreed period or to exercise the given contract renewal option.

In addition to finance leases, obligations also exist under operating leases for property, plant and equipment that are not reported in the statement of financial position. These obligations have the following terms:

In the business year 2018/19, payments of EUR 64.3 million under operating leases have been recognized as expenses.

The most significant operating leases concern land and buildings with minimum lease terms of up to 50 years subject, in some cases, to termination options on the part of voestalpine companies and, in certain cases, to renewal options. Purchase options at fair value are available at the end of the lease term. There are no restrictions concerning dividends, additional debt, and further leases.