1 st Half-year, 2014 Danfoss delivers good half-year results

Transcription

1 1 st Half-year, 2014 Danfoss delivers good half-year results

2 Danfoss at a glance Danfoss is a world-leading supplier of technologies that meet the growing need for food supply, modern infrastructure, efficient energy utilization, and climate-friendly solutions. The Group is divided into two business segments: Danfoss Climate & Energy and Danfoss Power Solutions. Danfoss Climate & Energy's key expertise lies in food refrigeration, air-conditioning systems, controls for electric motors, heating systems for buildings, and components for renewable energy, including solar and wind energy. Danfoss Power Solutions' key expertise is in hydraulic systems and components for powering mobile machinery used in agriculture, construction, materials handling, and specialty equipment. Danfoss is a privately-owned company that has grown and improved its skills and expertise in energy-efficient solutions over the past 80 years. Danfoss sells its products in more than 100 countries and employs some 22,500 people worldwide. Danfoss Approximate headcount: 22,500 Products sold in over 100 countries worldwide Has 59 factories in 17 countries and sales offices in 58 countries Headquartered in Nordborg, Denmark Find us here: Facebook: Twitter: Google+: YouTube: LinkedIn (Company Page): 2 Page 2

3 CONTENTS FINANCIAL HIGHLIGHTS FINANCIAL REVIEW SEGMENTS OUTLOOK FOR 2014 SUSTAINABILITY INCOME STATEMENT BALANCE SHEET CASH FLOW STATEMENT SPECIFICATION OF EQUITY NOTES QUARTERLY FINANCIAL HIGHLIGHTS Page 3

4 Financial Highlights (unless otherwise stated) Change in % Change in % 2013 Q Q Profit and loss accounts: Net sales 8,752 8,617-2% 16,815 16,920 1% 33,628 Operating profit before depreciation, amortization, impairment and other operating income and expenses 1,408 1,450 3% 2,515 2,851 13% 5,549 Operating profit before depreciation, amortization and impairment (EBITDA) 1,336 1,446 8% 2,393 2,785 16% 5,296 Operating profit excl. other income and expenses 987 1,043 6% 1,665 2,038 22% 3,870 Operating profit (EBIT) 907 1,040 15% 1,545 1,951 26% 3,616 Financial income/expenses % % -369 Profit before tax % 1,380 1,792 30% 3,255 Net profit % 979 1,187 21% 2,285 Balance sheet: Total non-current assets 16,691 18,029 8% 16,052 Assets 28,450 29,064 2% 26,116 Total shareholders equity 10,445 11,783 13% 11,443 Net interest-bearing debt 6,721 6,639-1% 4,116 Net assets 17,089 15,953-7% 15,476 Capital expenditure % % 1,210 Cash flow statement: Cash flow from operating activities 1,265 1,071-15% 4,444 Cash flow from investing activities ,673 *** -917 Acqquisition of intangible assets and property, plant and equipment % -1,003 Acquisition of subsidiaries and activities 0 0 0% -1 Free Cash flow 925-1, % 3,527 Free cash flow before M&A *** 3,513 Cash flow from financing activities , % -3,623 Key figures: Organic net sales growth ( %) EBITDA margin excl. other operating income etc. (%) EBITDA margin (%) EBIT margin excl. other operating income etc. (%) EBIT margin (%) Equity ratio (%) Leverage ratio (%) Net interest bearing debt to EBITDA ratio Number of employees (end of period) 23,155 22, ,463 Page 4

5 Danfoss delivers good half-year results The Group continues the positive trend from the recent quarters and delivers good first half-year 2014 results. Sales are above last year and earnings have improved by 22%. Financial review In the first half-year of 2014, Danfoss generated good total net sales of DKK 16,920m against DKK 16,815m in the same period of This is equal to 5% growth in local currency and 1% in DKK. The growth in sales was driven by generally high demand for Danfoss' energy-efficient solutions. Particularly, Danfoss hydraulic business, Danfoss Power Solutions, saw the increasing demand from first quarter continue into second quarter. Also the Power Electronics business, which among other things produces variable speed drives for control of electric motors, and the Refrigeration and Air-conditioning business, which supplies energy-saving components for a wide range of refrigeration and air-conditioning systems, had strong sales in the half-year. From a regional point of view, especially the BRIC countries continued, as expected, to be impacted by weakened exchange rates. The overall development in the markets confirmed the expected scenario, with growth in the BRIC countries gradually slowing down and the mature markets gaining a stronger momentum. Particularly remarkable is the continuing strong development in North America. Compared to last year, the region delivered growth of 9% in local currency. With close to one-quarter of the net sales coming from North America the regained momemtum in the region is very positive for the Group. The tendency of growth slowly picking up in the region started already in the second half of In Europe, markets are still struggling to regain consistent traction, and growth rates were modest. At the segment level, Danfoss Power Solutions showed strong performance in the first two quarters. The segment had sales growth of 7% in local currency and 3% in DKK. In Danfoss Climate & Energy, the results of the half-year were also strong. The segment had sales growth of 4% in local currency and a 1% decline in DKK, and profitability was significantly improved. The Group s operating profit before other income and expenses for the first two quarters Sales distribution by regions Net sales & EBIT excl. other operating income and expenses YTD Asia - Pacific 18% Other Europe 10% 24,000 2,400 Africa - Middle East 2% 20,000 2,000 Latin America 4% 16,000 1,600 North America 26% EU 40% 12,000 8,000 1, , H H H H Total net sales EBIT excl. other operating income and expenses was DKK 2,038m against DKK 1,665m in the same period in The impact from slightly lower fixed expenses, increased organic growth, procurement savings combined with continuous productivity improvements were the main drivers behind the improved earnings. Page 5

6 Balance Sheet The Group s equity amounted to DKK 11,783m against DKK 10,445m at June 30, The equity ratio at June 30, 2014 was 40.5% against 36.7% in the same period last year. Total assets amounted to DKK 29,064m against DKK 28,450m at June 30, Net interest-bearing debt stood at DKK 6,639m at June 30, 2014, compared with DKK 6,721m last year. The level of debt is equal to 1.2 EBITDA of the last four quarters, which is within the target range of from 0 to 2 times EBITDA for the last four quarters. In conclusion, the balance sheet remained strong. Cash Flows Impacted by increased capex and increased working capital due to higher sales the free cash flow before M&A was DKK 660m for the first half-year against DKK 918m in the same period last year. Free cash flow was DKK 1,602m against DKK 925m in the same period last year. The amount consisted of cash flow from operating activities of DKK 1,071m in and cash flow from investing activities of DKK 2,673m including the acquisition of 20% of the shares in the German SMA Solar Technology AG. Innovation Danfoss continues the high level of investments in research and development of new products and technologies. The development of energy-efficient and performanceenhancing solutions in the Group's core business areas is a cornerstone in the quest for profitable growth. In the first half-year of 2014, Danfoss invested DKK 638m in innovation, compared to DKK 704m in the same period last year. The investment in innovation was equal to 3.8% of the Group s net sales. Research & Development investments YTD H H H H H % 6% 5% 4% 3% 2% 1% 0% Danfoss Group - mdkk Danfoss Group - % of net sales Page 6

7 Employees Danfoss had a total of 22,633 employees at June 30, 2014 against 22,463 at the beginning of the year. Medarbejdere - koncernen. Danfoss Group 22,633 22,463 Europe excl. Denm ark 7,754 7,772 Denm ark As ia-pacific North America inc l. Mexico 5,319 5,415 5,002 4,889 4,077 3,920 Latin Am erica Africa-Middle East 0 5,000 10,000 15,000 20,000 25,000 H Q Page 7

8 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. All five divisions are leading players in the climate and energy sector. The entire segment is focused on providing energy-efficient and climatefriendly solutions for a number of selected business sectors. The divisions play a leading role in R&D, production, sales and service of mechanical and electronic products sold on the global market for cooling and air conditioning, comfort and heating, and control of electric motors, and for a number of industries in which energy efficiency is important. In the first half-year of 2014, Danfoss Climate & Energy had net sales of DKK 10,583m, corresponding to a 4% growth in local currency. The growth was driven by solid performance in most regions with North America standing out with 8% growth in local currency. In Europe, the segment s biggest market, sales were at last year s level. The Power Electronics business and the Refrigeration and Air-conditioning business recorded increasing demand, while the heating business showed slightly declining growth rates. EBIT before other income and expenses was improved from DKK 914m in the first half-year of 2013 to DKK 1265m, an improvement equal to 38%, corresponding to an EBIT margin of 11.7% against 8.3% in Full impact from adjustments of fixed expenses carried out in the second half of 2013, procurement savings, a positive trend in businesses and markets with a high profit margin and continuous productivity improvements were the main drivers of the significant improvement of earnings in the segment. Sales distribution by regions Net sales & EBIT excl. other operating income and expenses YTD Asia - Pacific 20% Other Europe 14% 14,000 12,000 1,400 1,200 Africa - Middle East 3% Latin America 5% 10,000 8,000 6,000 1, North America 14% EU 44% 4,000 2, H H H H Total net sales EBIT excl. other operating income and expenses DKK Mill. (unless otherwise stated) Q2 H H1 Q Change in % Change in % 2013 Net sales 5,697 5,504-3% 10,665 10,583-1% 22,330 Operating profit (EBIT) % 885 1,239 40% 2,554 EBIT Margin 10.0% 12.2% 8.3% 11.7% 11.4% Capital expenditure % % 814 Number of employees 14,379 13,411-7% 13,657 Page 8

9 Danfoss Power Solutions Danfoss Power Solutions consists of three divisions Danfoss Hydrostatics, Danfoss Work Function and Danfoss Controls and four stand-alone business operations. Danfoss Power Solutions is a global leader in hydraulic products for mobile machinery. The divisions of the segment all hold a leading position in R&D, design, manufacture and sale of innovative and performance-enhancing hydraulic and electronic systems and components used in mobile machinery operating in the agriculture, construction, materials handling, and specialty equipment markets. Danfoss Power Solutions continued the strong performance in the first two quarters of Driven by the growing need for better infrastructure and demand for agriculture machinery, the segment continued to see strong demand for its energy-efficient, advanced hydraulic solutions. For the half-year, net sales were DKK 6,194m against DKK 5,991m in the same period last year, corresponding to 8% growth in local currency and 3% growth in DKK. With the exception of a decline in Brazil, the segment recorded growth in all its primary markets with North America and China both delivering double-digit growth rates at 10 and 12%, respectively, in local currency. EBIT before other income and expenses was improved from DKK 1,001m in the first half-year of 2013 to DKK 1,035m, an improvement equal to 8%, corresponding to an EBIT margin of 17.6% against 16.7% in Continuous improvements of the productivity and a positive trend in business were the main drivers of the continued strong earnings in the segment. Sales distribution by regions Net sales & EBIT excl. other operating income and expenses YTD Asia - Pacific 16% Other Europe 4% 7,000 1,400 Latin America 3% 6,000 5,000 1,200 1,000 EU 31% 4,000 3,000 2, North America 46% 1,000 0 H H H H Total net sales EBIT excl. other operating income and expenses DKK Mill. (unless otherwise stated) Q2 H Q2 H Change in % Change in % 2013 Net sales 2,972 3,039 2% 5,991 6,193 3% 10,989 Operating profit (EBIT) % 1,001 1,090 9% 1,593 EBIT Margin 16.4% 16.6% 16.7% 17.6% 14.5% Capital expenditure % 377 Number of employees 6,302 6,192-2% 6,320 Page 9

10 Outlook for 2014 Danfoss expects the moderate global economic growth and the low visibility to continue the rest of the year. Accordingly, moderate growth is also expected in the Group's markets. Sales are expected to be negatively affected by exchange rate fluctuations, especially in the first half of Danfoss expects to retain profitability levels through continual operational improvements and targeted strategic initiatives already launched. Net sales for 2014 are thus expected to show moderate growth in local currency terms. Operating profit for 2014 is expected to increase in line with net sales. Page 10

11 Sustainability Due to the fact that in 2013 Danfoss gained full ownership of Sauer-Danfoss, now renamed Danfoss Power Solutions, information and data from the business segment is now included in this section. This means that the 2014 sustainability figures cannot immediately be compared with previous periods. Previous periods are included in the explanations below, where relevant. Figures for Danfoss Climate & Energy are shown in brackets. Resource consumption and CO2 emissions Danfoss continued the work to reduce CO2 emissions at its 15 largest factories in accordance with the objective to cut emissions by 25% (relative to the 2007 level) by Over the course of the first six months of the year, Danfoss emitted 100,600 tons (61,600 tons) of CO2 from its factories. Emissions amounted to 62,400 tons in the same period of The increase was caused by the fact that Danfoss Power Solutions factories are included in the 2014 figures. In the period, Danfoss consumed electricity amounting to 175 million kwh (99.9 million kwh) compared to million kwh in the year-earlier period of 2013, here the increase was also due to incorporation of Danfoss Power Solutions. The energy consumption for heating was 96.1 million kwh (78.5 million kwh) in the first half of the year compared to 82.7 million kwh in the same period of In the first six months of 2014, Danfoss water consumption for processing and sanitary purposes was 368,000 m3 (284,000 m3) against 286,500 m3 in the first half of Responsible supplier management In the first half of 2014, an additional 188 suppliers signed or re-signed Danfoss Code of Conduct. In total, 2126 suppliers of direct materials and 2421 suppliers of indirect materials have signed the Code of Conduct. In the first half of 2014, the strengthened work to get more suppliers in compliance with Danfoss Code of Conduct requirements has resulted in 44 closed audit reports across the world, hereof 25 in China alone. A closed audit report is only possible when all non-compliances raised during on-site audits have been successfully closed and sufficient documentation has been provided through on-site or desktop verification. Work-related lost time accidents The number of accidents, which led to more than one day s absence in the first half of 2014, is 80 compared to 68 in the same period in Accident frequency, which is defined as the number of work accidents with absence per 1 million working hours, was 4.5 in the period. The corresponding figure in the first half of 2013 was 4.7; and 4.7 for the whole of Absence as a result of work accidents is defined as the number of lost hours per 1,000 working hours, and this amounted to 0.35 in the first half of 2014 compared to 0.6 in the same period of The average absence among employees who had been involved in a work accident was approximately 10 days in the period. This is a reduction from an average of 16 days per accident in the first six months of Page 11

12 Income statement Q Q Net sales 8,752 8,617 16,815 16,920 33,628 Cost of sales -5,670-5,677-11,095-11,049-21,766 Research and development costs ,359 Gross profit 2,727 2,627 5,031 5,238 10,503 Distribution expenses -1,322-1,196-2,548-2,414-5,063 Administration expenses ,570 Operating profit excl. other income and expenses 987 1,043 1,665 2,038 3,870 Other operating income and expenses Operating profit (EBIT) 907 1,040 1,545 1,951 3,616 Income from associates and joint ventures after tax Financial income/expenses Profit before tax ,380 1,792 3,255 Corporate tax expenses Net profit ,187 2,285 Page 12

13 Balance sheet Q Q Assets Non-current assets Intangible fixed assets 8,514 7,963 8,054 Tangible fixed assets 6,719 6,246 6,506 Non-current financial assets 1,458 3,820 1,492 Total non-current assets 16,691 18,029 16,052 Current assets Inventories 4,371 4,234 3,849 Accounts receivable 6,564 6,323 5,478 Cash and cash equivalents Total current assets 11,759 11,035 10,064 Total assets 28,450 29,064 26,116 Liabilities and shareholders' equity Total shareholders equity 10,445 11,783 11,443 Liabilities Non-current liabilities 10,442 8,574 6,472 Current liabilities 7,563 8,707 8,201 Total liabilities 18,005 17,281 14,673 Total liabilities and shareholders equity 28,450 29,064 26,116 Page 13

14 Cash flow statement Profit before tax 1,380 1,792 3,255 Adjustments for non-cash transactions ,287 Changes in working capital Cash flow generated from operations 1,799 1,638 5,838 Financial income Financial expenses Dividends received Cash flow from operations before tax 1,664 1,513 5,615 Paid tax ,171 Cash flow from operating activities 1,265 1,071 4,444 Acquisition of intangible fixed assets Acquisition of tangible fixed assets ,118 Proceeds from sale of tangible fixed assets Acquisition of subsidiaries etc. 0 0 Proceeds from disposal of subsidiaries etc. 0 0 Acquisition (-) and sale of other investments etc , Cash flow from investing activities , Free Cash flow 925-1,602 3,527 Repayment of (-)/proceeds from interest-bearing debt 3,720 2,196 1,179 Financing by shareholders: Repurchase (-)/sale of own shares Add./disp. of minority interests -4, ,092 Dividends paid to shareholder in the Parent Company Dividends paid to minority shareholders Cash flow from financing activities ,340-3,623 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 14

15 Specification of equity 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 , ,638 10, ,855 2,338 14,193 Comprehensive income in 2013 Net profit 1,237 1, , ,285 Other comprehensive income Foreign exchange adjustments when converting foreign currencies Fair value adjustment of hedging instruments Actuarial gain/loss (-) on pension and healthcare plans Tax on Other comprehensive income Other comprehensive income Comprehensive income in the period ,366 1, , ,032 Transactions with owners Dividends to shareholders Purchase of minority interest -2,623-2,623-2,623-1,469-4,092 Capital increase/purchase of treasury shares Total transactions with owners ,619-2, ,134-1,648-4,782 Balance at 31 December , ,385 8, , ,443 Net profit ,063 1,063 1, ,188 Other comprehensive income Foreign exchange adjustments when converting foreign currencies Fair value adjustment of hedging instruments Actuarial gain/loss (-) on pension and healthcare plans Tax on other comprehensive income Other comprehensive income Comprehensive income in the period ,065 1, , ,196 Transactions with owners Dividends to shareholders Capital increase/purchase of treasury shares Total transactions with owners Balance at 30 June , ,450 9, , ,783 Page 15

16 Notes Accounting policies Danfoss prepares its annual and interim reports in accordance with IFRS (International Financial Reporting Standards). For a detailed description of the accounting policies applied, see Danfoss' 2013 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 exchange rates. Currency 1st half-year 2013 Ending rates 1st half-year 2014 Ending rates 2013 Ending rates 1st half-year 2013 Average rates 1st half-year 2014 Average rates 2013 Average rates EUR GBP USD Page 16

17 Quarterly financial highlights (unless otherwise stated) Q Q Q Q Q Q Profit and loss accounts Net sales 8,063 8,752 8,712 8,100 33,628 8,303 8,617 Operating profit before depreciation, amortization, impairment and other operating income and expenses 1,106 1,408 1,688 1,347 5,549 1,401 1,450 Operating profit before depreciation, amortization and impairment (EBITDA) 1,057 1,336 1,587 1,316 5,296 1,339 1,446 Operating profit excl. other income and expenses , , ,043 Operating profit (EBIT) , , ,040 Financial income/expenses Profit before tax , , Net profit , Balance sheet Total non-current assets 17,024 16,691 16,127 16,052 16,052 15,760 18,029 Assets 28,546 28,450 27,472 26,116 26,116 26,436 29,064 Total shareholders equity 14,637 10,445 10,942 11,443 11,443 11,946 11,783 Net interest-bearing debt 2,767 6,721 5,421 4,116 4,116 3,913 6,639 Net assets 17,332 17,089 16,284 15,476 15,476 15,785 15,953 Capital expenditure , Cash flow statement Cash flow from operating activities 435 1,265 2,623 4,444 4, ,071 Cash flow from investing activities ,673 acquisition of intangible assets and property, plant and equipment ,003-1, acquisition of subsidiaries and activities Free Cash flow ,118 3,527 3, ,602 Free cash flow before M&A ,121 3,513 3, Cash flow from financing activities ,202-3,623-3, ,340 Key figures Organic net sales growth ( %) EBITDA margin excl. other operating income etc. (%) EBITDA margin (%) EBIT margin excl. other operating income etc. (%) EBIT margin (%) Equity ratio (%) Leverage ratio (%) Net interest bearing debt to EBITDA ratio Geographical segments Total net sales EU 3,268 3,377 3,405 3,265 13,316 3,473 3,368 Rest of Europe ,153 1,011 3, Asia 1,242 1,551 1,604 1,493 5,890 1,324 1,528 North America 2,081 2,113 1,811 1,660 7,666 2,151 2,212 Africa Pacific Latin America , Middle East Total 8,063 8,752 8,712 8,100 33,628 8,303 8,617 Number of employees Europe excl. Denmark 7,973 8,041 7,972 7,772 7,772 7,727 7,754 North America incl. Mexico 3,994 4,039 3,946 3,920 3,920 3,861 4,077 Latin America Asia-Pacific incl. China 4,894 4,950 4,936 4,889 4,889 4,887 5,002 Africa - Middle East Denmark 5,684 5,640 5,512 5,415 5,415 5,329 5,319 Total 23,043 23,155 22,842 22,463 22,463 22,286 22,633 Total exclusive sold companies/activities 23,043 23,155 22,842 22,463 22,463 22,286 22,633 Page 17

18 Further information is available on Danfoss' website: Date of publication: August 28, 2014 Contact address: Danfoss A/S 6430 Nordborg Tel.: Fax: