Danfoss navigates market headwinds, maintains long-term growth focus in H1 2024

India continues to be the fastest-growing region for the Danfoss Group, experiencing strong double-digit growth in the first half of 2024. This growth is driven by increasing opportunities in energy efficiency and electrification, supporting the Group's plans to double sales in India by 2025.

Following three years of significant growth, both organically and through mergers and acquisitions, Danfoss faced challenges in the first half of 2024 due to reduced demand in certain key markets.

The Group reported sales of EUR 5 billion and a half-year EBITA of EUR 533 million, resulting in an EBITA margin of 10.6%, compared to 12.4% in the previous year. Despite these challenges, Danfoss maintains a high level of investment in innovation.

The company anticipates that the lower demand will persist for the remainder of the year, and measures are being implemented to adapt to the current market conditions.

Nordborg, Denmark; Chennai, India, August 24, 2024: Danfoss continues to demonstrate resilience, particularly in its Climate Solutions, Drives, and most of the Electrification businesses. The primary growth drivers remain decarbonization in industrial sectors, digitalization/datacenters, and electrification.

Reduced demand is observed in specific end-markets such as agriculture and construction/roadbuilding, which are experiencing a downturn that affects the Danfoss Power Solutions segment. The European construction market remains weak, especially in Central Europe, impacting the heating business, including residential heat pumps and the district heating market. Additionally, the automotive/EV market in both Europe and the US has seen significant reductions in OEM production schedules for 2024 and 2025.

Activity levels in Europe and China continue to be subdued and are expected to remain so for the rest of the year, while the US shows signs of a slowdown. India continues to demonstrate strong growth momentum.

Kim Fausing, President & CEO of Danfoss, acknowledges the team's resilience and commitment to serving customers. He emphasizes that while the current situation presents challenges, the company will continue to pursue its long-term growth strategy.

Danfoss' three segments maintained their investments in innovation and global footprint development, introducing innovative solutions and technology to the market and customers. Research and development investments totaled EUR 247 million (H1 2023: 249 million), remaining consistent with the previous year and representing 4.9% of sales (H1 2023: 4.5%).

Danfoss India is experiencing robust growth, driven by the rapid expansion of data centers, commercial buildings, and cold chain infrastructure across the country. The Indian government's push towards decarbonization and initiatives like the Production-Linked Incentive (PLI) schemes are contributing to this growth momentum.

As a provider of sustainable solutions, Danfoss is committed to supporting India's carbon neutrality goals. The company's products and solutions are designed to help customers reduce their carbon footprint and transition to more energy-efficient processes.

Ravichandran Purushothaman, President of Danfoss India, expresses confidence in the company's plans to double sales by 2025, citing the country's sustainable transformation and the expansion of key sectors.

Danfoss is implementing an updated operating model to support its long-term growth strategy, enhance innovation, and improve performance. This model aims to establish stronger end-to-end accountability, increase cost competitiveness, and accelerate decision-making across the company.

Kim Fausing explains that the updated operating model involves further decentralization and empowering teams to make decisions closer to customers. This restructuring may result in some job losses as the company aims to simplify its organization and eliminate duplication of roles.

Danfoss maintains its commitment to decarbonizing its global operations (scope 1 and 2) by 2030, as part of its initiatives on Decarbonization, Circularity, and Diversity, Equity, and Inclusion (DE&I).

In the first half of 2024, Danfoss continued to reduce its emissions. The company signed a local Power Purchase Agreement (PPA) in China that will reduce its annual scope 1 and 2 emissions in China by 33% and 9% globally from 2025 onward. In total, Danfoss has secured agreements to decarbonize 60% of its operations in China.

Regarding the outlook for the year, Danfoss aims to expand or maintain its market share. Due to the current downcycle, sales are now expected to be in the lower end of the range of EUR 10.0-11.5 billion for the full year. The EBITA margin is projected to be in the range of 11.0-12.0%.

The company is assessing strategic options to reduce its cost base, which may result in additional one-off costs. The expected growth and profitability performance depends on various factors, including global supply chain stability, the geopolitical environment, inflation, and general global growth rates.