Danfoss stays the course in H1 2024; India remains the fastest-growing region

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Danfoss stays the course in H1 2024; India remains the fastest-growing region

Danfoss stays the course in H1 2024; India remains the fastest-growing region

Industry News
Aug 24,24

After three years of significant growth, the first half of 2024 has proven to be challenging for Danfoss due to lower demand in select key markets. Strong double-digit growth in H1 in India supported the Danfoss Group’s ambitious plans to double sales in the country by 2025.

Danfoss stays the course in H1 2024; India remains the fastest-growing region

Nordborg (Denmark)

Danfoss - known for engineering solutions that increase machine productivity, reduce emissions, lower energy consumption, and enable electrification - continues to see robust performance and resilience, especially in its Climate Solutions, Drives, and most of the Electrification businesses. The most important growth drivers continue to be decarbonization in industrial sectors, digitalization/datacenters, and electrification.

After three years of significant growth, organically and through M&A, the first half of 2024 has proven to be challenging for Danfoss due to lower demand in select key markets. Group sales amounted to EUR 5 billion, and a half-year EBITA of EUR 533 million corresponding to an EBITA margin of 10.6 per cent as against 12.4 per cent last year. Staying the course, investments in innovation continue at a high level.

The lower demand is seen in selected end-markets like agriculture and construction/roadbuilding, which are in a downcycle impacting Danfoss Power Solutions segment. The European construction market continues to be soft, particularly in Central Europe, impacting especially the heating business, such as residential heat pumps and the district heating market. Finally, the automotive/EV-market, in both Europe and the US, has seen significant reductions in OEM production schedules for 2024 and 2025. The activity level in Europe and China continues to be soft and is expected to continue for the rest of the year, while the US show signs of a slowdown. Danfoss continues to see good growth momentum in India.

“I would like to thank the Danfoss team for showing resilience and strong engagement, maintaining full focus on serving our customers. It is exciting to see how the entire team is fully engaged to stay the course and does what it takes to manage through this cycle. We have successfully navigated various economic cycles before, and we are doing so again. While the current situation may be challenging, it is important to emphasize that we will continue pursuing our long-term growth strategy,” said Kim Fausing, President & CEO of Danfoss.

The company’s three segments continued to invest in innovation and developing its global footprint, bringing innovative solutions and technology to the market and its customers. Research and development investments amounted to EUR 247 million (H1 2023: 249 million), on par with last year and corresponding to 4.9 per cent of sales (H1 2023: 4.5 per cent).

India business exhibits strong growth

Danfoss India is experiencing robust growth, driven by the rapid expansion of data centers, commercial buildings, and cold chain infrastructure across the country. Additionally, the Indian government's strong push towards decarbonization, coupled with initiatives like the Production-Linked Incentive (PLI) schemes, is further fuelling our growth momentum. As a leader in sustainable solutions, we are committed to supporting India's ambitious carbon neutrality goals. Danfoss’ innovative products and solutions are designed to help customers reduce their carbon footprint and transition to cleaner, more energy-efficient processes.

With the company’s expertise in electrification, energy efficiency, and climate-friendly technologies, Danfoss is well-positioned to be a preferred decarbonisation partner for its customers in India. The company will continue to invest in and develop cutting-edge solutions that enable customers to achieve their sustainability objectives, while also driving business growth and competitiveness.

Ravichandran Purushothaman, President, Danfoss India, commented, “India continues to be the fastest growing region for Danfoss group, and we're proud to be at the forefront of the country's sustainable transformation. With the rapid expansion of data centers, commercial buildings, and cold chain infrastructure, coupled with the government's strong support for decarbonization, we're confident in our plans to double sales by 2025. Our innovative products and solutions are designed to support India's carbon neutral ambitions, and we're committed to being a trusted partner for our customers as they navigate this journey.”

Setting Danfoss up for the future

Danfoss has initiated the implementation of an updated operating model, aiming to further support its long-term growth strategy, strengthen innovation and entrepreneurial mindset, and improve performance. Guided by focus on market and customer proximity, scalability, and simplification, Danfoss wants to establish stronger end-to-end accountability in the business, increase cost competitiveness, and speed up decision-making across the company.

Kim Fausing said, “By updating our operating model, we are setting Danfoss up for the future. This is essentially about further decentralization and empowering our teams to make decisions closer to our customers. We will simplify the organization by eliminating duplications and reducing the fragmentation of accountabilities, enabling faster decision-making and a more responsive organisation. As we are targeting to simplify and eliminate duplication and fragmentation of accountabilities, this also means parting from some of our talented and dedicated colleagues. While this is not an easy decision to make, it is an important step to enable the long-term success of Danfoss. Additionally, as several businesses are impacted by the volatility and lower demand in the market, they are seeing the need to adapt to the current market situation.”

Danfoss remains committed to decarbonizing its global operations (scope 1 and 2) by 2030, as part of its three step-change initiatives on Decarbonization, Circularity, and DE&I (Diversity, Equity, and Inclusion). In the first half of the year, Danfoss continued to reduce its own emissions. In China, the company has signed a local Power Purchase Agreement (PPA) that, from 2025 onward, will reduce its annual scope 1 and 2 emissions in China by 33 per cent and 9 per cent globally. In total, we have now secured agreements to decarbonize 60 per cent of its operations in China.

Outlook for the year

Danfoss has a continued ambition 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 now expected to be in the range of 11.0-12.0%, following the continued integration of already acquired businesses as well as investments in the development of new products and solutions. Danfoss is in the process of assessing its strategic options to reduce cost base, which might cause further one-off costs. 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.

Danfoss’ 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. Danfoss also provides solutions for renewable energy, such as solar and wind power, as well as district-energy infrastructure for cities.