MAKING MODERN LIVING POSSIBLE Q Danfoss delivers solid Q1 performance.

Transcription

1 MAKING MODERN LIVING POSSIBLE Q Danfoss delivers solid Q1 performance

2 Contents Highlights from the first quarter Financial highlights...4 Danfoss delivers solid Q1 performance...5 Financial review...5 Balance sheet...6 Cash flows...6 Innovation...6 Employees...7 Events occurring after March 31, Corporate citizenship...9 Outlook for Danfoss Climate & Energy Sauer-Danfoss Income statement Balance sheet Cash flow statement Specification of equity Notes Accounting policies Exchange rates applied Quarterly financial highlights Page 2

3 Danfoss delivered a solid performance in the first quarter. In a subdued market, we successfully seized growth opportunities, in Russia and Brazil, for instance, while also maintaining profitability at a high level and improving our cash flows. Our Q1 results were generally in line with last year, with the exception of the solar inverter business. Like the rest of the European solar energy industry, our solar inverter business is facing a challenge in terms of renewed uncertainty about the framework conditions for solar energy in Europe and changes to German and Danish subsidy schemes. Overall, we continue to pursue our long-term investment plans and growth ambitions. We are very pleased to have gained full ownership of Sauer-Danfoss with the ensuing opportunities for taking a long-term approach and for developing our overall business. Niels B. Christiansen President & CEO Q highlights Q1 net sales were DKK 8,063m against DKK 8,357m in Q1 2012, corresponding to a decline of 4%. Operating profit (EBIT) was DKK 638m compared to DKK 796m in the year-earlier period. The free cash flow amounted to DKK 378m at March 31, 2013 against DKK 122m at March 31, Outlook for 2013 Based on the solid Q1 performance under the expected difficult conditions, Danfoss maintains its overall full-year expectations for Net sales for 2013 are thus expected to grow at a modest rate. Operating profit for 2013 is expected to grow in line with net sales. Please direct any queries about this announcement to: Danfoss Media Relations, tel.: Side 3

4 Financial highlights Profit and loss accounts: Q Q Change in % 2012 Net sales 8,357 8,063-4% 34,007 Operating profit added depreciations, amortisations and impairments (EBITDA) 1,217 1,057-13% 5,729 Operating profit excl. other income and expenses % 3,705 Operating profit (EBIT) % 3,745 Financial income/expenses % -371 Profit before tax % 3,372 Net profit % 2,357 Balance sheet: Total non-current assets 17,297 17,024-2% 17,038 Assets 29,057 28,546-2% 27,768 Total shareholders equity 12,997 14,637 13% 14,193 Net interest-bearing debt 4,493 2,767-38% 2,691 Net assets 17,304 17,332 0% 16,775 Capital expenditure % 2,053 Cash flow statement: Cash flow from operating activities % 4,245 Cash flow from investing activities *** -1,321 Acquisition of intangible assets and property, plant and equipment % -1,169 Acquisition of subsidiaries and activities 0 0 0% -191 Free Cash flow % 2,924 Free cash flow before M&A *** 3,019 Cash flow from financing activities *** -2,779 Key figures: Organic net sales growth ( %) EBIT margin excl. other operating income etc. (%) EBIT margin (%) EBITDA margin (%) Equity ratio (%) Leverage ratio (%) Net interest bearing debt to EBITDA ratio Number of employees (end of period) 23,226 23,043-1% 23,092 Page 4

5 Danfoss delivers solid Q1 performance Despite the continuing difficult global conditions, Danfoss generated a solid sales performance in the first quarter while maintaining profitability at a high level and further strengthening its financial versatility through a higher free cash flow. Financial review Danfoss continued its solid net sales performance in the first quarter of 2013, generating sales of DKK 8,063m, a 4% decline from DKK 8,357m. Net sales, EBIT & EBIT excl. divestitures - YTD 10,000 1,000 8, , , , Q Q Q Q Sales distribution by regions - Group Asia/ Pacific 17% Other Europe 10% Africa / Middle East 2% Latin America 5% EU 40% North America 26% Impressive growth in Russia and Brazil Sustaining sales in China Change in subsidy rules caused a slump in German solar [energy] market Demand for climate and energy solutions continued to drive developments in the first quarter. In particular, Danfoss generated growth in the important BRIC markets. The Russian market continued the positive developments with sales up by 29%. The increase was mainly driven by demand for district heating solutions. Brazil was also a positive surprise, as sales there grew by 30%. When adding the stable developments in India and China, the combined BRIC performance offset the slowdown in the large traditional markets in the USA and Europe. In Europe, sales plunged in the solar inverter business due to renewed uncertainty about the framework conditions for solar energy in the EU and changes to German and Danish subsidy schemes. Last year, the subsidy schemes provided a boost for the solar inverter business, resulting in a temporary increase in sales. Side 5

6 Sauer-Danfoss still impacted by deceleration of Chinese construction sector Sauer-Danfoss felt the impact of the general global economic downturn, particularly in China due to the controlled deceleration of the construction sector implemented by the Chinese authorities. Overall, sales in the segment were down by 7% relative to the extraordinarily strong performance of Q1 2012, while Danfoss Climate & Energy retained its high level of sales from Q The Group's operating profit (EBIT) was DKK 638m against DKK 796m in the year-earlier period. Danfoss maintains its targeted investments in growth opportunities and has continuously aligned cost levels to demand. Danfoss expects to lift earnings throughout the rest of 2013 as the full effects of these initiatives gradually materialize. Increase in equity Maintaining a low level of debt Danfoss continues to improve its free cash flow The level of investment in research and development remains high Balance sheet The Group's equity amounted to DKK 14,637m, a 13% increase from DKK 12,997m at March 31, Total assets amounted to DKK 28,546m against DKK 29,057m. This brought the equity ratio to 51% against 45% at March 31, Net interest-bearing debt was DKK 2,767m against DKK 2,691m at the beginning of the year. The current debt level corresponds to 0.5 EBITDA of the last four quarters Cash flows The free cash flow amounted to DKK 378m at March 31, 2013 against DKK 122m a year earlier. The amount consisted of cash flows from operating activities of DKK 435m and a cash outflow from investing activities of DKK 57m. The improvement was driven mainly by the Group's continued and dedicated focus on enhancing the free cash flow. Innovation Danfoss continues to invest in research and development. In Q1 2013, total amount invested was DKK 330m against DKK 336m in Q1 2012, indicating an increase in the level of investment from 4.0% to 4.1% of net sales.. Research & Development investments - YTD Q Q Q Q Q % 5% 4% 3% 2% 1% 0% Da nfoss Group - mdkk Da nfoss Group - % o f net sales Page 6

7 Employees Danfoss had a total of 23,043 employees at March 31, 2013 against 23,092 at December 31, Danfoss Group 23,043 23,226 Europe excl. Denmark 7,973 8,146 Denmark Asia-Pacific North America incl. Mexico Latin America Africa-Middle East ,894 4,807 3,994 3,718 5,684 6, ,000 10,000 15,000 20,000 25,000 Q Q Events occurring after March 31, 2013 On April 12, 2013, Danfoss completed the acquisition of the outstanding shares in Sauer- Danfoss Inc. that it did not already own at a price of USD per share in cash for a total price of DKK 3.9bn. Danfoss announced the plans and the tender offer for the outstanding shares on November 28 of last year. Accordingly, Danfoss now has full ownership of Sauer-Danfoss. Side 7

8 Danfoss A/S 1st quarter, May 28, 2013 Side 8

9 Corporate Citizenship Resource consumption and CO2 emissions Danfoss emitted approximately 33,000 tons of CO2 in Q against 30,000 tons in the same period of The main reason for the increase was the higher number of Group factories compared with a year earlier. Adjusted for the new factories, emissions increased by 3%. Danfoss continued the efforts to reduce CO2 emissions in accordance with the target of reducing emissions by 25% relative to the 2007-level by Electricity consumption amounted to about 48 million kwh, which was in line with the same period of Energy consumed for heating purposes increased by 10% relative to the first quarter of In Q1 2013, Danfoss consumed approximately 138,000 m3 of water for processes and sanitary purposes, a 14% reduction relative to the year-earlier period. Responsible supplier management The work on responsible supplier management continued in the first quarter. As part of its dedicated efforts, Danfoss will remain focused on ensuring that suppliers that have previously been audited resolve any issues identified in a satisfactory manner. In addition, the process of having all existing suppliers sign the Danfoss Code of Conduct continues. Danfoss continually adapts its purchasing organization and its supplier management tools. Prior to being approved as a new supplier of goods used in Danfoss products, suppliers are required to sign the Code of Conduct and have an initial audit performed to verify that they meet Danfoss' requirements and expectations. Work-related lost time accidents The number of accidents entailing more than one day's absence was 21 in Q against 28 in the same period last year. At the same time, the accident frequency, which is calculated as the number of accidents per 1 million working hours, fell to 7.0 from 8.9 in Q Absence caused by work-related accidents, expressed as the number of lost days per 1000 work days, fell to 0.6 from 1.1 in Q The average absence period for employees involved in a work-related accident was maintained at about two weeks in the first quarter of Around half of the injured employees returned to work after less than 5 days' absence. Danfoss A/S 1st quarter, May 28, 2013 Side 9

10 Outlook Danfoss expects the global financial uncertainty prevailing in 2012 to continue throughout 2013, causing sustained low visibility. Danfoss markets are expected to see modest growth with climate and energy solutions and globalization as the primary growth trends. At the same time, Danfoss expects to retain profitability through a continuous improvement of operations and the targeted strategic initiatives already launched. Net sales for 2013 are thus expected to grow at a modest rate. Operating profit for 2013 is expected to grow in line with net sales. Side 10

11 Danfoss A/S 1st quarter, May 28, 2013 Side 11

12 Danfoss Climate & Energy Danfoss Climate & Energy consists of five divisions: Danfoss Refrigeration & Air Conditioning Controls, Danfoss Power Electronics, Danfoss Heating Solutions, Danfoss Commercial Compressors and Danfoss District Energy. They are all leading players within climate and energy. The segment is focused on providing energy-efficient and climate-friendly solutions for a range of selected business sectors. The divisions play leading roles within research, development, production, sales and service of mechanical and electronic products sold on the global market for cooling and air-conditioning, comfort and heating, control of electric motors and for a number of industries where energy efficiency is important. Net sales were maintained at DKK 4,968m against DKK 4,975m in Q The business segment continued to record significant improvements in the Russian market. Net sales also improved in Brazil, whereas sales in China stabilized at last year's level. Sales declined in the USA and Europe relative to the strong performance of Q The set-back in Europe was predominantly due to the severe slowdown in the solar inverter business due to renewed uncertainty about the framework conditions for solar energy in Europe, including plans by the EU to introduce punitive duties on solar panels from China and changes to solar energy subsidy schemes in Germany and Denmark. Operating profit (EBIT) was DKK 314m against DKK 360m in Q The EBIT margin was 6.3% against 7.2%. Sales distribution by regions Net sales and EBIT 8, Other Europe 14% Asia/ Pacific 19% 6, Africa/ Middle East 3% 4, Latin America 6% 2, North America 13% EU 45% 0 Q Q Q Q DKK Mill. (unless otherwise stated) Q Q Change in % 2012 Net sales 4,975 4,968 0% 22,411 Operating profit (EBIT) % 2,541 EBIT Margin 7.2% 6.3% 11.3% Capital expenditure % 1,623 Number of employees 14,259 14,260 0% 14,319 Page 12

13 Sauer-Danfoss Sauer-Danfoss is a global leader in the design, manufacture and sale of energy-efficient and performance-enhancing hydraulic and electronic systems and components, primarily for mobile applications. The company operates within the following segments: Agriculture, Construction, Material Handling, Turf Care and Specialty Equipment. Danfoss completed the purchase of the outstanding shares in Sauer-Danfoss Inc. on April 12, Accordingly, Danfoss now has full ownership of Sauer-Danfoss. Sauer-Danfoss began 2013 with prospects of a rather volatile market, due to a general decline in the construction industry. This general slowdown in the market and in China in particular was the reason why net sales were down by 7% to DKK 3,019m against DKK 3,257m in Q Sales were also down in Europe, but were maintained in the important US market, while Latin America reported moderate sales growth. Operating profit (EBIT ) was DKK 512m against DKK 576m in Q The EBIT margin was 17.0% against 17.7%. Sales distribution by regions Net sales and EBIT Asia/ Pacific 13% Other Europe 4% 4, Latin America 4% 3, EU 31% 2, , North America 48% 0 Q Q Q Q DKK Mill. (unless otherwise stated) Q Q Change in % 2012 Net sales 3,257 3,019-7% 11,097 Operating profit (EBIT) % 1,562 EBIT Margin 17.7% 17.0% 14.1% Capital expenditure % 284 Number of employees 6,495 6,339-2% 6,363 Side 13

14 Income statement Mill. DKK Q Q Net sales 8,357 8,063 34,007 Cost of sales -5,946-5,759-23,803 Gross profit 2,411 2,304 10,204 Distribution expenses -1,228-1,225-5,021 Administration expenses ,478 Operating profit excl. other income and expenses ,705 Other operating income and expenses Operating profit (EBIT) ,745 Income from associates and joint ventures after tax Financial income/expenses Profit before tax ,372 Corporate tax expenses ,015 Net profit ,357 Page 14

15 Balance sheet Mill. DKK Q Q Assets Non-current assets Intangible fixed assets 8,450 8,675 8,649 Tangible fixed assets 6,853 6,880 6,940 Non-current financial assets 1,994 1,469 1,449 Total non-current assets 17,297 17,024 17,038 Current assets Inventories 4,583 4,315 4,050 Accounts receivable 6,248 6,462 5,792 Marketable securities Cash and cash equivalents Total current assets 11,760 11,522 10,730 Total assets 29,057 28,546 27,768 Liabilities and shareholders' equity Total shareholders equity 12,997 14,637 14,193 Liabilities Non-current liabilities 8,291 6,790 6,879 Current liabilities 7,769 7,119 6,696 Total liabilities 16,060 13,909 13,575 Total liabilities and shareholders equity 29,057 28,546 27,768 Side 15

16 Cash flow statement Mill. DKK Q Q Profit before tax from continuing operations ,372 Adjustments for non-cash transactions ,738 Changes in working capital Cash flow generated from operations ,648 Financial income Financial expenses Dividends received Cash flow from operations before tax ,170 Paid tax Cash flow from operating activities ,245 Acquisition of intangible fixed assets Acquisition of tangible fixed assets ,122 Proceeds from sale of tangible fixed assets Acquisition of subsidiaries etc Proceeds from disposal of subsidiaries etc Acquisition (-) and sale of other investments etc Cash flow from investing activities ,321 Free Cash flow ,924 Financing by non-shareholders: Repayment of (-)/proceeds from interest-bearing debt ,045 Financing by shareholders: Repurchase (-)/sale of own shares Addition/disposal of minority interest Dividends paid to shareholder in the Parent Company Dividends paid to minority shareholders Cash flow from financing activities ,779 Net change in cash and cash equivalents Cash and cash equivalents (beginning of period) Foreign exchange adjustment of cash and cash equivalents Cash and cash equivalents (end of period) Page 16

17 Specification of equity Mill. DKK Share capital Share premium Hedging reserves Currency translation Reserve own shares Other reserves Reserves Proposed dividends Danfoss A/S' share of equity Minority interest Total equity Balance at 1 January , ,511 8, ,340 2,257 12,597 Comprehensive income in 2012 Net profit 1,598 1, , ,357 Other comprehensive income Foreign exchange adjustments when converting foreign currencies Fair value adjustment of hedging reserve: Fair value adjustment of the year regarding hedging of net investments in subsidiaries Fair value adjustment of the year regarding hedging of future cash flows Fair value adjustment transferred to Net sales Actuarial gain/loss (-) on defined benefit plans Tax on Other comprehensive income Other comprehensive income Comprehensive income in the period ,471 1, , ,305 Transactions with owners Dividends to shareholders Purchase of minority interest Shares issued/capital reduction Total transactions with owners Balance at 31 December , ,638 10, ,855 2,338 14,193 Comprehensive income in 2013 Net profit Other comprehensive income Foreign exchange adjustments when converting foreign currencies Fair value adjustment of hedging reserve: Fair value adjustment of the year regarding hedging of net investments in subsidiaries Fair value adjustment of the year regarding hedging of future cash flows Fair value adjustment transferred to Net sales Actuarial gain/loss (-) on defined benefit plans Tax on Other comprehensive income Other comprehensive income Comprehensive income in the period Transactions with owners Dividends to shareholders Capital increase/purchase of treasury shares Capital reduction Total transactions with owners Balance at 31 March , ,917 10, ,329 2,308 14,637 Side 17

18 Notes Accounting policies Danfoss prepares annual reports and interim reports in accordance with IFRS (International Financial Reporting Standards). For a detailed review of the accounting policies applied, see Danfoss' annual report Please note that this interim report is not presented in accordance with IAS 34 Interim financial reporting and that the financial data are unaudited. Exchange rates applied The interim report is presented in Danish kroner. The figures in the income statement have been translated into DKK, using the average exchange rates of the reporting period. The balance sheet has been translated, using the end-of-period rates for the reporting period. Currency Q Ending rates Q Ending rates 2012 Ending rates Q Average rates Q Average rates 2012 Average rates EUR GBP USD Page 18

19 Quarterly financial highlights Mill. DKK (unless otherwise stated) Q Q Q Q Q Profit and loss accounts Net sales 8,357 8,865 8,763 8,022 34,007 8,063 Operating profit added depreciations, amortisations and impairments (EBITDA) 1,217 1,451 1,565 1,496 5,729 1,057 Operating profit excl. other income and expenses 823 1,009 1, , Operating profit (EBIT) 796 1,016 1, , Financial income/expenses Profit before tax , , Net profit , Balance sheet Total non-current assets 17,297 17,581 17,101 17,038 17,038 17,024 Assets 29,057 29,723 28,857 27,768 27,768 28,546 Total shareholders equity 12,997 13,398 14,153 14,193 14,193 14,637 Net interest-bearing debt 4,493 4,778 3,396 2,691 2,691 2,767 Net assets 17,304 17,979 17,353 16,775 16,775 17,332 Capital expenditure ,230 2, Cash flow statement Cash flow from operating activities 317 1,225 2,770 4,245 4, Cash flow from investing activities ,321-1, acquisition of intangible assets and property, plant and equipment ,169-1, acquisition of subsidiaries and activities Free Cash flow ,076 2,924 2, Free cash flow before M&A ,078 3,019 3, Cash flow from financing activities ,898-2,779-2, Key figures Organic net sales growth ( %) EBIT margin excl. other operating income etc. (%) EBIT margin (%) EBITDA margin (%) Equity ratio (%) Leverage ratio (%) Net interest bearing debt to EBITDA ratio Geographical segments Total net sales EU 3,511 3,621 3,518 3,086 13,735 3,268 Rest of Europe ,082 1,040 3, Asia 1,332 1,434 1,605 1,529 5,899 1,242 North America 2,159 2,260 1,855 1,671 7,945 2,081 Africa Pacific Latin America , Middle East Total 8,357 8,865 8,763 8,022 34,007 8,063 Number of employees Europe excl. Denmark 8,146 8,243 8,139 7,977 7,977 7,973 North America incl. Mexico 3,718 3,813 3,877 3,988 3,988 3,994 Latin America Asia-Pacific incl. China 4,807 4,866 4,904 4,895 4,895 4,894 Africa - Middle East Denmark 6,051 5,939 5,767 5,727 5,727 5,684 Total 23,226 23,376 23,201 23,092 23,092 23,043 Total exclusive sold companies/activities 23,120 23,310 23,135 23,092 23,092 23,043 Side 19

20 Further information is available on Danfoss' website: Date of publication: May 28, 2013 This interim report is available in Danish and English. In the event of any discrepancy between the two versions, the Danish language version shall prevail. Contact address: Danfoss A/S 6430 Nordborg Tel.: Fax: