Danfoss Continues the Positive Development Despite Increasing Headwinds in the Global Economy

With our 2023 results, the positive development of Danfoss continued with bold investments in our green growth strategy, Core & Clear 2025. Despite market headwinds in the second half of the year, Danfoss reported financial results within the range of guidance.

Sales grew 7% in local currency compared to 2022, with the EBITA margin reaching 12.6% in 2023. This is combined with a record-level free operating cash flow after financial items and tax of EUR 692 million, an increase of 49% compared to 2022. EBITA increased 10% to EUR 1,345 million compared to 2022.

"We are entering a new era where the future energy system is electric, and improving energy efficiency in machines, infrastructure, and industry is critical to delivering an affordable, secure, and decarbonized future. In 2023, we continued with bold investments in expanding our offering of competitive and innovative solutions for our core business and high-growth opportunities like data centers, the electrification of heating systems, EVs, on- and off-highway vehicles, as well as marine vessels, and hydrogen production," says Kim Fausing, President & CEO of Danfoss.

Besides the significant investments in our core business and new high-growth opportunities, we continued to invest in building a more resilient supply chain by further regionalization and adding new capacity.

In 2023, the integration of our recent acquisitions continued to be on track.

With the acquisition of Eaton's hydraulics business in 2021, we built a leading position within mobile and industrial hydraulics. We are targeting a leading position in power semiconductor modules and assemblies with Semikron Danfoss, established in 2022. With the acquisition of BOCK® Compressors in 2023, Danfoss now offers one of the most comprehensive compressor portfolios in the cooling industry.

"During the second half of 2023, high inflation and interest rates impacted the market. The more challenging business environment has continued into 2024, but we remain focused on implementing our green growth strategy and delivering strong value to our customers and partners around the world," says Kim Fausing, President & CEO of Danfoss.

Danfoss has a clear plan to decarbonize operations by 2030, and we already have agreements in place that ensure a 30% reduction in emissions. These agreements include two long-term power purchase agreements in China and North America, effective from 2024 and 2025, respectively. In 2023, we continued to decarbonize our own operations. Scope 1 and 2 emissions decreased by 18% (before acquisitions), decoupled from organic sales growth of 2%.

"I am excited to see how our global teams continued to implement our green growth strategy and at the same time decouple our organic growth from our own emissions," says Kim Fausing.

Financial outlook 2024

Danfoss has a continued ambition to expand or maintain market share. Sales are expected to be in the range of EUR 10.0-11.5 billion for the full year. The EBITA margin is expected to be in the range of 11.8-13.3%, following the continued integration of already-acquired businesses as well as investments in the development of new products and solutions. The expected growth and profitability performance is dependent on the development of global supply chain stability, the geopolitical environment, and inflation, as well as general global growth rates.

Key figures for 2023

• Sales in 2023 up 7% in local currency and 4% reported to EUR 10.7bn (2022: 10.3bn).
• Scope 1 and 2 emissions decreased 18%, adjusted for the acquisition of Semikron and BOCK® Compressors.
• Investments in innovation (R&D) increased 7% to EUR 487m (2022: 457m), corresponding to 4.6% of sales (2022: 4.5%).
• Investments (CapEx) excluding M&A increased 12% to EUR 596 million (2022: 531m).
• Operating profit (EBITA) increased 10% to EUR 1,345 million (2022: 1,224m), leading to an EBITA margin of 12.6% (2022: 11.9%).
• Net profit increased 20% to EUR 819 million (2022: 683m).
• Free operating cash flow (after financial items and tax) amounted to EUR 692 million (2022: 465m).
• Lost Time Injury Frequency (LTIF) at record low 1.2 (2022: 1.6).
• 42,054 employees (2022: 41,928).

Read more about the financial results for 2023 here.

About Danfoss A/S:
Danfoss engineers solutions that increase machine productivity, reduce emissions, lower energy consumption, and enable electrification. Our solutions are used in such areas as refrigeration, air conditioning, heating, power conversion, motor control, industrial machinery, automotive, marine, and off- and on-highway equipment. We also provide solutions for renewable energy, such as solar and wind power, as well as district-energy infrastructure for cities. Our innovative engineering dates back to 1933. Danfoss is family- and foundation-owned, employing more than 42,000 people, serving customers in more than 100 countries through a global footprint of 100 factories.

www.danfoss.com