Danfoss demonstrates strong performance in a toughening market

Danfoss continues to push high investments in innovation and has acquired technology within electrification. In the first half of 2019, Group sales grew by four per cent, but the second quarter was characterised by a market growth slowdown in several industries.

In the first half of 2019, Group sales reached 3.2 billion euro, up 125 million euro on the same period last year. Growth was driven by demand for energy-efficient and low-emission solutions in Europe and North America, while China was impacted by economic slowdown – which also spread to Europe and North America towards the end of the second quarter. Danfoss’ earnings (EBIT) amounted to 351 million euro, which is close to the very strong results from the first half of last year, when adjusted for the gains from last year’s divestment of the heat pump business Thermia. The EBIT margin was 11.1 per cent.

“We’ve delivered a strong performance in a toughening market. We provide a wide range of technologies and solutions, which play a crucial role in solving climate change. At the same time, energy efficiency and low-emission solutions have moved high up on the agenda in the green transition. However, the uncertainty created by the trade conflict between the US and China and other geopolitical conflicts have spread to the rest of the world, and we are prepared for the global economy entering a phase of little or no growth where market growth could turn negative in the most cyclical industries,” says Kim Fausing, President & CEO of Danfoss.

The Danfoss Group’s first six months of 2019 were characterised by continued strong focus on developing and strengthening the four core businesses; most evident through the 140-million-euro investment in the research and development of new products – an 11 per cent increase on last year.

“We will continue to invest to strengthen Danfoss in the long term and secure future growth. That is the core of our strategy and the way we can remain at the forefront and be the most attractive technology partner for our customers,” Kim Fausing explains.

In July, Danfoss completed the acquisition of the American company UQM Technologies, Inc., which is a leading supplier of propulsion systems for electric commercial and off-highway vehicles. With the rising demand for electric solutions, Danfoss has invested heavily in this area and is today a world leader in electric solutions for vehicles and maritime vessels.

Key figures from the first half of 2019:

  • Sales grew by four per cent to EUR 3,166 million (First half 2018: 3,041m), corresponding to 2 per cent growth in local currency.
  • Operating profit (EBIT) totalled EUR 351 million (first half 2018: 370m). The EBIT margin was 11.1 per cent (first half 2018: 12.2 per cent).
  • Net profit for the first half was EUR 242 million (first half 2018: 253m).
  • Innovation spend increased by 11 per cent to EUR 140 million (first half 2018: 126m), corresponding to 4.4 per cent of sales (first half 2018: 4.1 per cent).

Outlook for 2019 confirmed
The outlook for 2019, as published in the Annual Report 2018, is maintained: Danfoss expects to expand or maintain its market share, while increasing the profitability measured as margin compared with the 2018 level, following continued investments in digitalisation and electrification.

However, the risk associated with the outlook has increased due to the current geopolitical environment – in particular the ongoing trade conflict between the US and China and other conflicts, which have created a high level of uncertainty and are negatively impacting market growth in cyclical industries.