Danfoss came out of 2020 with strong results despite COVID-19. The high investments in innovation, digitalization and electrification continued. Towards the end of the year, the order books grew significantly. At the same time, Danfoss is well prepared to take in Eaton Hydraulics and ready for the global growth that is driven by the focus on green transition, infrastructure, and urbanization.
In 2020, Danfoss delivered strong financial results despite the COVID-19 pandemic. At the same time, the company has prepared the acquisition of Eaton Hydraulics; launched the new business segment, Danfoss Climate Solutions; and continued the high investments in digitalization and electrification. Altogether, it has been one of the most important and transformational years in the history of Danfoss.
“I am very satisfied with our results and what we achieved in 2020. We delivered a significantly better financial performance in 2020 than we expected at the turn of the first half. Due to the uncertainty we experienced, we adjusted our cost to the lower activity level. The safety of our employees was our key priority. We kept our factories going globally, we serviced our customers, and strengthened our digital presence. Our teams around the globe have handled this difficult situation in a fantastic way. With their extraordinary efforts, we have been able to safeguard our strategic initiatives. We look forward to welcoming 10,000 new colleagues from Eaton Hydraulics; and we have prepared our company for the growth we will see in relation to the global megatrends that currently transform our world,” says Kim Fausing, President and CEO of Danfoss.
Danfoss saw the most significant impact on sales in the second quarter of 2020, followed by a gradual improvement in the second half. China especially gained traction rapidly and delivered high growth rates. In the fourth quarter, Danfoss was back to pre-COVID-19 sales levels in most markets.
All in all, sales ended at EUR 5,828m (2019: 6,285m), which was 6% lower than the previous year measured in local currency. Operating profit (EBITA) reached EUR 723m (2019: 771m), which was 6% below 2019, but with a strong EBITA margin of 12.4% (2019: 12.3%). Danfoss delivered a record high cash flow performance.
“Despite the global uncertainty and the impact this had on demand, we continue to deliver strong results. This shows the strength of our strategy and flexible business model. The COVID-19 pandemic is far from over, but we are ready for the global growth driven by the focus on green transition, electrification, infrastructure, and urbanization. We see companies, cities and countries around the world making plans for the future, and they need reliable, tried-and-tested technology partners. Danfoss supplies the necessary solutions which are needed by the automotive industry; the marine, energy and infrastructure sectors; and not least, by the agricultural sector and the entire food chain to enable a green, CO2-neutral future. That is why we say that Danfoss is more relevant than ever,” says Kim Fausing.
From the Annual Report 2020:
CO2 neutral in 2030: Danfoss has embarked on an ambitious journey to become CO2 neutral by 2030, at the latest. Since 2007, Danfoss has reduced its energy intensity by 45% and CO2 emissions by 36%, primarily driven by energy-saving projects in the largest factories around the world. In 2020, Danfoss joined the Science Based Targets initiative and expect an approval of the company CO₂-targets during 2021. Beginning in 2021, a major part of Danfoss’ global electricity consumption will be covered by wind. Read more in the Sustainability Report 2020.
30% female leaders in 2025: Danfoss has ambitious targets to reach 25% female leaders by 2022 and 30% female leaders by 2025. In 2020, Danfoss reached 20% female leaders globally. Read more in the Sustainability Report 2020.
Key figures 2020
- Sales ended at EUR 5,828m (2019: 6,285m), which was 6% lower than the previous year based on local currency.
- Operating profit before acquisition-related amortization (EBITA) reached EUR 723m (2019: 771m), which was 6% lower than the year before. The EBITA margin increased to 12.4% (2019: 12.3%).
- Net profit reached EUR 435m (2019: 502m), which was 13% lower than the prior year.
- Free operating cash flow after financial items and tax (before acquisitions) increased to EUR 493m (2019: 463m). This is a record cash flow for the Group, and it confirms the cash generating capability of its business model.
- Investments in innovation (R&D) reached EUR 267m (2019: 272m), corresponding to 4.6% of sales (2019: 4.3%).
2021 outlook
Despite the current volatility, Danfoss expects to continue to expand or maintain our market share, while maintaining or improving the profitability measured as margin versus the 2020 level, following continued investments in the development of new products and solutions.
The outlook excludes impacts from the acquisition of Eaton’s hydraulics business.