The greenest
energy is the
energy we don’t use
Annual Report 2021
Leading technology partner for our customers
already today
The science is clear
We need to act on climate change today. According to the
International Energy Agency (IEA), energy efficiency delivers
more than 40% of the reduction in energy-related emissions
needed to fully achieve international climate and energy goals.
The good news is that we have the solutions already today.
Danfoss engineers solutions that increase machine productivity,
reduce emissions, lower energy consumption, and enable
electrification.
Source: IEA, Energy Efficiency report (2020), p. 10
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Danfoss Annual Report 2021
contents
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Contents
Contents
Management’s Review
Integrated Annual Report
In brief
Danfoss at a glance
Performance highlights
Letter from CEO
Financial highlights
Outlook 2022
Energy efficiency in action
How we create value
Delivering value to our customers as
globally leading technology partner
with leading positions, deep application
knowledge and sustainable innovation
Our business model
Business segments
Our Core & Clear strategy
ESG ambitions
Achievements 2021
Objectives 2022
4
6
7
9
11
12
13
15
19
20
27
32
34
35
Financial Statements
Financial review
Group accounts and notes
Group accounts
Group notes
Group companies
Parent accounts and notes
Management’s review
Parent accounts and notes
Statements
Management’s Statement
Independent Auditor’s Report
63
68
72
113
117
119
137
138
Environment
Decarbonization
Circularity
Safe and sustainable products
Social
Diversity and inclusion
A safe place to work
Governance
Strong focus on ethics and human rights
Our policies
Risk management and compliance
Corporate governance
Board of Directors
Succession in the founder‘s family
Group Executive Team
37
40
41
43
45
47
49
50
53
55
58
60
Creating value for our customers
Danfoss solutions that drive the green transition are
available, proven, and ready to be scaled up.
Read more on page 14
Decarbonizing Danfoss
We are committed to decarbonizing our global
operations by 2030 and continuing our work to make the
campus at our headquarters carbon neutral in 2022.
Read more on page 37
We support:
Follow us here:
Danfoss became a signatory to the UN Global
Compact in 2002. We continue to support the
Global Compact and its principles, which govern
our sustainability efforts.
Read more at unglobalcompact.org
Best financial performance ever
Customer demand for our energy-efficient solutions was
very high, leading to record sales and profitability – the
strongest year we’ve ever had.
Read more on page 62
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Danfoss Annual Report 2021 step change esg
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Integrated Annual Report
Danfoss is ready to take a big and bold step to battle climate change
and help our customers decarbonize. We will integrate new and
ambitious ESG targets in our Core & Clear strategy and aspire for
leading positions within Decarbonization, Circularity, and Diversity
and Inclusion. This step change is reflected in the annual report 2021.
With our new ESG ambitions, Danfoss is ready
to take greater responsibility for the planet and
for our people. ESG is short for Environment,
Social, and Governance, which are central
factors in measuring a company’s sustainability
impact and performance. By integrating
sustainability in our strategy and daily
practices, we want to reinforce our position
as one of the leaders of the green transition.
Danfoss is building a better future with
solutions available today – solutions that
increase machine productivity, reduce
emissions, lower energy consumption, and
enable electrification. Sustainability is not
an add-on to our business. Sustainability is
our business.
For the financial year 2021, we are therefore
taking the first step in our reporting by
combining financial, sustainability, and
corporate governance in a single publication.
This gives our stakeholders a holistic view
of Danfoss’ business, value drivers, strategy,
governance, and performance.
EU and further requirements in the Danish
Financial Statements Act and meets the
Danish Recommendations on Corporate
Governance.
This report constitutes our reporting
pursuant to the Danish Financial Statements
Act, sections 99a and 99b, as well as the
Communication on Progress to the UN
Global Compact.
Danfoss is a family- and foundation-
owned company with bonds listed
on the Luxembourg Stock Exchange.
Danfoss is classified as a non-listed large
Class C company and is therefore not EU
Taxonomy-eligible in the financial year
2021. To ensure that we are ready to report
according to the EU Taxonomy in the
financial year 2023, we keep raising the bar
when it comes to climate change – setting
science-based CO2-reduction targets,
working with suppliers to reduce their
emissions, and reporting transparent and
comparable sustainability data.
This Annual Report has been prepared in
accordance with the International Financial
Reporting Standards as adopted by the
The Annual Report 2021 is published as
an electronic publication only and made
available at www.danfoss.com.
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Reader’s guide
Non-financial disclosure requirements as per the Danish Financial Statements Act.
Topic
Section 99a
Business model
Content of policies for sustainability, relevant
procedures and due diligence processes, if
any, results and KPIs
Key risks and mitigation related to business
activities and products
Section 99b
Target figure for under-represented gender
in the Board of Directors
Account of policy to improve the gender
balance at the other management levels
Other content elements related to our
integrated reporting journey
Data ethics (section 99d)
Internal control and risk management
systems
Page reference
p. 19
How we create value pp. 14-35
Achievements and objectives pp. 34-35
Climate matters pp. 37-39
Social matters pp. 30-31 and 42-44
Respect for human rights pp. 47-48
Anti-corruption and bribery p. 47
Our policies p. 49
pp. 50-52
p. 53
p. 43
p. 52
p. 51
Danfoss Annual Report 2021 in brief
Maximizing
energy
efficiency
with Danfoss
solutions
To break the global emissions
curve, we need to optimize
the way we heat and cool our
buildings. The fourth tallest
building in the world, Lotte
World Tower in Seoul, South
Korea, is a model example of a
sustainable building. Danfoss
drives maximize energy
efficiency in the heating,
ventilation, and air conditioning
systems. With digitalization
and connectivity, hardware is
combined with data collection
and Danfoss cloud connectivity
solutions. These save 5,040
megawatt hours of electric
energy a year, which equates to
about 2,345 tons of CO₂ emissions
annually.
In brief
Danfoss at a glance
Performance highlights
Letter from CEO
Financial highlights
Outlook 2022
Energy efficiency in action
6
7
9
11
12
13
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Danfoss Annual Report 2021 danfoss at a glance
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Danfoss at a glance
Three strong business segments with leading positions
Danfoss
Power Solutions
Danfoss
Climate Solutions
Danfoss
Drives
1933
Long track record
within innovative
engineering
Worldwide sales
in more than
100 countries
40,043
employees
95
factories
Preferred partner in helping our customers decarbonize
6/141
Danfoss Annual Report 2021 performance highlights
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Performance highlights
Sales
EURbn
2021
2020
2019
Earnings (EBITA)
EURm
7.5
5.8
6.3
+29%
Sales growth
2021
2020
2019
969
+34%
EBITA increase
723
771
Record year above expectations. Danfoss
acquired Eaton's hydraulics business on
August 2, adding 5 months sales of EUR
786m to the topline. The customer demand
for our energy-efficient products and
solutions was very strong and all Danfoss
segments and regions saw growth. Despite
the pandemic, organic growth was 18%
against 2020.
Profitability stronger than outlook. The
EBITA margin reached 12.8% against 12.4%
in 2020. The high demand for our products
and solutions combined with managing the
disruptions in the global supply chains in
an inflationary environment are the main
drivers of the high EBITA margin. Net profit
was up 45% to EUR 631m.
R&D expense
EURm
Cash flow
EURm
2021
2020
2019
328
267
272
+23%
R&D increase
2021
2020
2019
401
493
463
401
Cash generation
Continued high investments to fuel
future growth. To be the preferred partner
in delivering energy-efficient solutions and
helping our customers decarbonize, the
high level of investments in innovation and
R&D continued. In particular, we increased
the digitalization and electrification of our
solutions.
Solid cash generation from operations.
Strong profitability, combined with
investments in expanding production
capacity to meet the growing customer
demand, generated a free operating cash
flow after financial items and tax (before
M&A) of EUR 401m, confirming the cash
generating capability of Danfoss.
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Iconic water tower transforming
from Eaton to Danfoss
Watch the transformation from blue to red of the water
tower in Eden Prairie, Minnesota, US.
Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Performance highlights*
Energy intensity improvement
(MWh consumed energy
per EURm net sales)
51%
lower energy intensity than in 2007.
CO2-neutral electricity
CO2 intensity improvement
(tons CO2 per EURm net sales)
25%
42%
of our global electricity consumption is
CO2-neutral.
lower indexed CO2 emissions from energy
consumed in our operations since 2007.
Energy productivity improvement
(EURm net sales per GWh consumed energy)
LTIF improvement
(Lost time injuries per million hours worked)
Women in leadership
104%
15%
20%
higher energy productivity than in 2007.
lower Lost Time Injury Frequency than in
2020.
of our leaders are women.
* Performance highlights exclude Eaton’s hydraulics business
8/141
Danfoss Annual Report 2021
ceo letter
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Letter from CEO
A transformational,
record year for Danfoss
As megatrends such as urbanization, digitalization,
electrification, and climate change continue to
strengthen, sustainability and decarbonization are
taking center stage globally. This speaks directly to our
ambitions at Danfoss to be the leading technology
partner for our customers in the green transition.
We have never seen better opportunities for Danfoss. Our
momentum is clearly reflected in our 2021 annual results:
Danfoss has delivered the best results in our history, and we
are in a strong financial position.
There are several significant highlights demonstrating the
transformation and our commitment to long-term growth
that strengthen our core business:
• We started the year by launching Danfoss Climate
Solutions. This new segment holds leading positions
within sustainable and energy-efficient heating and
cooling technology and solutions for buildings, cold
chains, industry, and infrastructure with significant further
growth potential.
• In August, we closed the acquisition of Eaton’s hydraulics
business. We welcomed 10,000+ new colleagues and
created one of the leading and most innovative mobile
and industrial hydraulics companies in the world. With this,
Danfoss Power Solutions provides unmatched systems
capabilities within mobile and industrial hydraulics, fluid
conveyance, electrification, and software.
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“What makes me most
proud is how our teams have
continued to navigate the
pandemic and significant
supply chain challenges and,
at the same time, delivered a
transformational, record year.”
Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Letter from CEO continued
• We strengthened our position in electrification and the
automotive, marine, and off- and on-highway industries,
where we saw significant growth and a fast-growing
pipeline. Our Danfoss Drives segment benefitted from the
increasing demand for hybrid and fully electric drivetrains
and marine industries.
The strong momentum is also reflected in record results for
both top- and bottom-line growth, robust cash flow, and
a healthy balance sheet, despite the acquisition of Eaton’s
hydraulics business. We saw growth across all segments and
regions.
• Sales reached EUR 7.5 billion, up 29% against 2020.
• Growth was driven by very strong demand for our energy-
efficient products and solutions, leading to organic growth
of 18%, as well as added sales from the acquisition of
Eaton’s hydraulics business.
• EBITA was up 34% against 2020, leading to EBITA margin
of 12.8% against 12.4% last year, despite components
shortages and inflationary cost increases on raw materials
and freight.
• We made record level of investments in innovation,
capacity expansion, and digitalization, including One
ERP, which will significantly improve how we serve our
customers.
• And we reached our 2030 target of doubling the energy
productivity in our factories globally – nine years ahead of
time.
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What makes me most proud is how our teams have
continued to navigate the pandemic and significant
supply chain challenges and, at the same time, delivered a
transformational, record year. Unfortunately, these significant
challenges affected our service to customers. Furthermore,
all three business segments were impacted by inflation. We
continue to do everything we can to serve our customers,
and we continue our high investments in capacity expansion,
innovation, and digitalization of Danfoss.
Our top priority remains the health and safety of our team.
Therefore, we are proud that Lost Time Injury Frequency
(LTIF) ended at a record-low level of 1.7 – demonstrating
our safety-first approach. At the same time, the employee
engagement score continued to rise during 2021.
In 2022, Danfoss is taking a big and bold step to put
sustainability at the core of our strategy. The ambitions are
clear, and our targets have been submitted and are being
validated by the Science Based Targets initiative (SBTi). With
the new ESG targets and ambitions, Danfoss is ready to take
greater responsibility for the planet and our people. Looking
towards 2030, Danfoss aspires to leading positions within
Decarbonization, Circularity, and Diversity & Inclusion. You
can read more about our sustainability results and ambitions
in this integrated Annual Report.
In June, we have a unique opportunity to showcase our cost-
effective technologies when the IEA holds its Annual Global
Conference on Energy Efficiency in Sønderborg, home to
Danfoss. The IEA has invited leaders from all over the world
to be inspired before they revisit their Nationally Determined
Contributions (NDCs) to increase climate action.
I would like to sincerely thank our customers and partners
for their cooperation and the Danfoss team for their
engagement, dedication, and outstanding teamwork that
made everything possible.
Kim Fausing
President & CEO
“We have never seen better opportunities
for Danfoss. Our momentum is clearly
reflected in our 2021 annual results:
Danfoss has delivered the best results
in our history, and we are in a strong
financial position.”
Danfoss Annual Report 2021 financial highlights
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Financial highlights
EURm EURm EURm EURm EURm
2021
2019
2017
2018
2020
DKKm DKKm
2021
2020
Cash flow statement
Cash flow from operating activities
Cash flow from investing activities
Hereof:
Acquisition of/Proceeds from disposal
of property, plant and equipment
Acquisition of/Proceeds from disposal
of subsidiaries and activities
Cash flow from financing activities
Financial key figures
Free operating cash flow
Free operating cash flow after
financial items and tax
Free cash flow
Financial ratios
Return on invested capital ROIC (%)
Return on invested capital after tax
ROIC (%)
Return on equity (%)
Equity ratio (%)
Leverage ratio (%)
Net interest-bearing debt to EBITDA ratio
Dividend ratio (%) (proposed)
Dividend per 100 DKK share (proposed)
742
-405
673
-227
789
-407
800
-242
838
-2,794
5,967
6,230
-1,806 -20,779
-217
-238
-252
-187
-325
-1,395
-2,420
-103
-373
88
-424
-140
-322
0
-54
-2,423
1,596
-3 -18,019
11,871
-406
627
564
634
709
664
5,283
4,940
441
334
359
443
463
323
493
497
401
-2,020
3,677
2,984
3,705 -15,022
17.8
17.9
18.3
16.1
16.7
16.1
16.7
13.0
17.3
46.0
40.9
1.2
18.1
8.1
13.4
17.0
46.1
36.2
1.0
17.4
8.1
13.4
17.0
48.1
35.7
1.0
16.0
8.1
11.9
13.1
49.7
16.9
0.6
-
-
12.8
16.6
39.6
67.8
2.1
30.0
19.0
11.9
13.1
49.7
16.9
0.6
-
-
12.8
16.6
39.6
67.8
2.1
30.0
141.3
EURm EURm EURm EURm EURm
2021
2019
2018
2020
2017
Profit and loss account
Net sales
EBITDA before OOI/E
EBITDA
EBITA
EBIT
Financial items, net
Profit before tax
Net profit
Financial ratios
Local currency growth (%)
EBITDA before OOI/E margin (%)
EBITDA margin (%)
EBITA margin (%)
EBIT margin (%)
Balance sheet
Total non-current assets
Total assets
Total shareholders’ equity
Net interest-bearing debt
5,827
923
882
714
645
-49
596
445
12
15.8
15.1
12.2
11.1
3,883
5,583
2,569
1,050
6,098
929
926
724
648
-45
603
463
7
15.2
15.2
11.9
10.6
3,886
5,760
2,654
962
6,285
1,028
1,026
771
695
-33
662
502
1
16.4
16.3
12.3
11.1
4,217
6,096
2,933
1,048
5,828
1,008
954
723
625
-48
577
435
-6
17.3
16.4
12.4
10.7
4,106
6,412
3,184
537
7,539
1,232
1,272
969
877
-58
819
631
31
16.3
16.9
12.8
11.6
6,693
9,970
3,951
2,677
DKKm DKKm
2021
2020
43,445
7,516
7,111
5,394
4,659
-359
4,300
3,243
56,071
9,160
9,460
7,205
6,524
-430
6,094
4,695
-6
17.3
16.4
12.4
10.7
31
16.3
16.9
12.8
11.6
30,555
47,714
23,691
3,996
49,776
74,143
29,379
19,911
Conversion factor between DKK/EUR: Profit and loss account and cash flow statement: 0.1345 (2020: 0.1342).
Balance sheet: 0.1345 (2020: 0.1344).
Key figures, financial ratios and highlighted key figures are calculated as defined in Note 27 on page 111.
11/141
#Classified as Business
#Classified as Business
Danfoss Annual Report 2021 outlook 2022
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Outlook 2022
Driving future growth and long-term, sustainable value creation
In 2022, our key focus continues to be
on ensuring profitable growth, while
maintaining a high level of investments in
our core businesses, new digital and electric
solutions, and sustainability.
Based on current market insights, our growth
projections for 2022 are positive as energy
efficiency, renewables, and electrification
are gaining traction worldwide.
However, as the world economy makes its
comeback, there is pressure on all supply
chains. In particular, the global supply chain
disruption, the ongoing pandemic, and
political conflicts are creating a high level
of volatility and uncertainty. As a result,
visibility is low.
Short- as well as long-term business
growth will be influenced by the successful
execution of green stimulus packages,
creating positive momentum worldwide.
Danfoss is in a good position with leading
positions, application know-how, and
innovative solutions driving the green
transition.
2022 expectations
Danfoss assumes a positive outlook in
the market with a continued ambition
to expand or maintain market share. The
outlook includes a full year ownership
of Eaton's hydraulics business. Sales are
expected to be in the range of EUR 8.8-
9.8bn for the full year. The EBITA margin
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is expected to be in the range of 11.4-
12.9%, following continued investments
in the development of new products
and solutions. The expected growth and
profitability performance is dependent
on the development of the pandemic, the
global supply chain disruptions as well
as the continuation of the current strong
growth rates in the world economy.
Together with our customers, Danfoss
has huge potential to contribute to global
and regional climate goals through the
technologies and solutions we bring to
market. Danfoss remains committed to
decarbonizing our global operations by
2030 and improving gender diversity to
30% women leaders by 2025, while also
reframing our approach to building a
diverse and inclusive workforce. We will
continue to invest in sustainability and
improve our climate footprint by setting
science-based targets and extending our
robust approach to include our entire value
chain.
In 2022, we remain committed to making
the energy consumption at our 250,000 m2
headquarters in Nordborg CO2 neutral by
using electricity and energy from renewable
sources. Our heating demand will be
covered by carbon-neutral district energy
and heat pumps. We also apply our own
solutions to reuse excess heat from our
data center, buildings, and processes. To
stretch every single watt as far as we can, we
use our own solutions to maximize energy
efficiency and speed up the phaseout of the
remaining fossil fuels for heating.
Specific key factors
Specific key factors that could affect the
Group’s financial performance in 2022:
• The Group’s continued strategic initiatives
to accelerate profitable growth, organic
as well as acquisitive, are expected to
generate a positive impact on market-
share development.
• Additional M&A activities.
• Increasing prices on raw materials
and freight, as well as shortage of
components and holdups in logistics,
could have a negative impact on our
financial results.
• Increasing prices on commodities, such
as crops, metals, and oil, that are driving
demand in the global agriculture, marine,
and other heavy industry sectors, are
associated with considerable volatility,
leading to low visibility as well as having a
direct impact on our own raw materials.
• Fluctuation in foreign exchange rates.
• The ongoing pandemic with partial
lockdowns in some countries could result
in a potential temporary slowdown locally
due to disrupted supply chains.
Forward-looking statements
This Annual Report includes forward-looking
statements on various matters, e.g., expected
earnings, future expansion of market share,
and future profitable growth. Such statements
are subject to risks and uncertainties,
because various factors, many of which are
beyond Danfoss’ control, may cause actual
developments and results to differ materially
from the expectations set out in the Annual
Report. Such factors include, but are not limited
to, the geopolitical environment, general
economic and business conditions, changes in
commodity prices impacting the demand for
Danfoss’ solutions and services, competition
in the industrial sectors, in which the business
segments are operating, fluctuations in
foreign exchange rates, interest rates or our
own raw material prices, changes in climate
policy, legislation, regulation or standards, and
uncertainty in connection with acquisitions or
potential acquisitions and divestments. Unless
required by law, Danfoss is under no duty and
undertakes no obligation to update or revise any
forward-looking statements after the publication
of this Annual Report.
Danfoss Annual Report 2021 energy efficiency in action
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Energy efficiency in action
In 2022, the IEA will host its seventh annual global conference
on energy efficiency – this time in the Danish city of
Sønderborg, which is working towards reaching net zero
before 2030.
Facts:
• On June 8-9, 2022, Sønderborg will host the IEA’s annual global
conference on energy efficiency.
• The Danish Ministry of Climate, Energy, and Utilities is a co-organizer
of the conference, which is being held in collaboration with Danfoss,
the Confederation of Danish Industry, and State of Green.
• The purpose of the conference is to bring together ministers, CEOs,
and decision-makers from government, industry, and civil society
to explore how international ambition on energy efficiency can be
translated into faster and stronger real-world progress. It will focus on
implementation over the next 5-10 years, to achieve the gains that are
needed on the global path to net zero.
• With ProjectZero, Sønderborg envisions reducing its climate footprint
to zero by 2029 through conversion of the energy system.
Sønderborg is home to Danfoss and our founding family. This is where
it all started. In 2022, our 250,000 m2 production and office space at the
headquarters in Nordborg, near Sønderborg, will be CO2 neutral. The
city of Sønderborg will follow by 2029. The IEA conference will allow us
to demonstrate the energy-efficient technologies that can and will lead
the way in bringing down CO2 emissions.
Danfoss has the energy-efficient solutions needed to meet the goals set
out in the Paris Agreement. It is time to speed up and act!
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The greenest
energy is the
energy we don’t use
Danfoss Annual Report 2021
how we create value
How we create value
Delivering value to our customers as
globally leading technology partner
with leading positions, deep
application knowledge and
sustainable innovation
Our business model
Business segments
Our Core & Clear strategy
ESG ambitions
Achievements 2021
Objectives 2022
15
19
20
27
32
34
35
14/141
Building a
better future
Intelligent, energy-efficient
buildings play a key part in future
energy systems. The district
heating supply in Hafencity,
Hamburg, is a cost-effective and
sustainable solution provided by
Danfoss. Hamburg’s prestigious
project is a model for successful
city development with an energy
concept that sets the standards
for future cities. Danfoss provides
district-heating solutions and flat
stations for maximum energy
efficiency and the best indoor
climate for healthy living.
Danfoss Annual Report 2021 energy eff climate action
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Delivering value to our customers as globally leading
technology partner with leading positions, deep application
knowledge and sustainable innovation
If we are to succeed in meeting global climate and energy goals, we must break the global emissions curve.
Danfoss engineers solutions that increase machine productivity, reduce emissions, lower energy consumption, and enable electrification.
In 2050, we expect
the planet to have:
But to achieve net-zero emissions
by 2050, we will also need:
So, how can we make our energy
power more, while using less?
the
economy
2x
2bn
more
people
less
energy use
8%
Unlock
energy
efficiency
Source: IEA, Net Zero by 2050 – A Roadmap for
the Global Energy Sector (2021), p.18
Danfoss is a preferred technology
partner in industry
Danfoss is helping the world
to become electrified
Danfoss secures the fast track
to highly efficient buildings
The industrial sector is vital to achieving and
maintaining a sustainable society. Sixty percent
of the sector’s overall energy use is consumed by three areas:
chemicals, steel, and cement (IEA, 2021). However, there
is ample opportunity here to ensure energy is used only
when needed. For example, if manufacturers were to install
variable frequency drives where possible, the industry could
save 8% of global energy use by 2040 (IEA, 2016). Additionally,
if manufacturers were to install heat exchangers, they could
produce more while using less – and even reuse energy by
sending surplus heat back into the grid to warm our homes.
The transport sector is still reliant on fossil fuels,
procuring 90% of its energy from oil (IEA, 2021).
But electrifying transport doesn’t just mean switching to
renewable energy; it also means increased energy efficiency.
For example, gas engines waste between 64% and 75% of
the energy they use converting power to movement, while
the drive system of an electric vehicle reduces this loss to
between 15% and 20% (US Department of Energy, 2021). With
heavy machinery and passenger ferries starting to go hybrid
or fully electric, electrification is helping businesses achieve
their green goals while lowering total cost of ownership.
The world is on course to build the equivalent of
New York City every month for the next 40 years
(UN Environment, 2017). For every new square meter built,
greenhouse gases are emitted during construction and when
a building is heated, cooled, or filled with white goods and
devices. Today, buildings account for nearly 40% of the world’s
energy-related emissions (IEA, 2021). If we are to turn the tide,
every square meter of new floor space needs to function
using less energy. That means taking action anywhere we can.
Simple measures like upgrading technical building systems
can save on average 30% when heating and cooling buildings
(Ecofys, 2017) – and by integrating buildings on a physical and
digital level, we can go even further.
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Danfoss Annual Report 2021 In brief
How we create value
Environment
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Governance
Group accounts and notes
Parent accounts and notes
Statements
Industry case
15% energy savings with Danfoss drives
Manufacturing companies can minimize energy use and reduce emissions
and operational costs by installing variable frequency drives. Low-voltage drives
enhance machine processes to improve efficiency and productivity.
Ensuring the optimal speed, accuracy, and stability, Danfoss
low-voltage drives control different parts of the grinding
machines, such as the sanding unit, position controller,
vacuum table, and conveyor belt.
15% reduction in energy consumption
WEBER uses Eco Drive technology, where the Danfoss drives
automatically recognize the load and regulate optimal
processes and action. This enables energy savings of around
15%.
WEBER also benefits from DrivePro® Remote Expert Support,
an IoT maintenance service that provides easy, fast, and
secure access to all drives, supporting customers around the
world.
”We have worked with Danfoss for a long time,
and the cooperation has always gone well.
They know their way around our products,
and they know us. They understood exactly
what we needed, and we received drives that
were perfectly suited to our requirements.
The Danfoss drives support our high-precision
grinding machines, but most importantly, they
enable us to reduce energy consumption and
operating costs.”
Stefan Fischer
Head of Electrical Design at Hans Weber
Leading Bavarian manufacturer Hans Weber Maschinenfabrik
GmbH needed drives that could improve the efficiency of
its high-precision grinding machines, while maintaining the
renowned high-quality finish given to every product, metal
or wood.
With limited space in the machine control cabinets, WEBER
needed a small solution that could deliver a big impact.
Danfoss Drives had the perfect fit.
AC drives have the
potential to save:
8%
of global electricity
consumption by
2040
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Source: IEA World Energy Outlook 2016
Danfoss Annual Report 2021 In brief
How we create value
Environment
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Statements
Transport case
Reducing emissions at sea
Danfoss is teaming up with Volvo Penta to take electrification
within the marine industry to the next level.
Danfoss’ Editron division is partnering with Volvo Penta
on electrification at sea, delivering the highest quality
future-proof technology to our customers, helping them
decarbonize.
The hybrids cut emissions by 20%
Two hybrid crew and supply ships, MHO Asgard and MHO
Appollo, are operated in the UK by customer MHO-Co and
wind-farm operator Ørsted and powered by Volvo Penta and
Danfoss Editron.
In this case, hybrid means that the ships can be operated
using only electric power from battery for a limited time or
they can be operated using both battery and diesel engines.
The ships take workers and supplies to offshore windfarms
in the North Sea off the Yorkshire, UK, coast – now in a more
climate-friendly way.
After only a few months in operation, the ships had
an impressive environmental impact, reducing fuel
consumption and CO2 emissions by roughly 20% compared
to non-hybrid ships in the MHO-Co fleet.
”We are thrilled to announce this partnership.
By leveraging the strengths of both our
companies, we will be able to support
our customers’ transformation journey by
providing world-leading electrified solutions.”
Heléne Mellquist
President of Volvo Penta
Watch the video and learn
how Volvo Penta and Danfoss
Editron make an impact
https://www.youtube.com/watch?v=O9hPI5n7x30
Volvo Penta and Danfoss working together on MHO-Co’s new
hybrid crew transfer ships.
”I think we have the best system possible with
the technology that exists today.”
Mik Henriksen
CEO of MHO-Co
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Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Buildings case
Decarbonizing buildings
by enhancing energy efficiency
Optimizing the way we heat and cool buildings is essential to reduce
emissions and meet the Paris Agreement goals.
EDGE Amsterdam West is a new sustainable landmark in
Amsterdam, Netherlands. The 47,000 m2 multi-tenant office
building is packed with innovative technology and provides
optimal comfort and health and meets BREEAM Outstanding
sustainability levels. The backbone of the building is a
building management system that controls and monitors the
building’s mechanical and electrical equipment, including
the use of IoT and artificial intelligence.
”Working together with EDGE and our partners,
our calculation proved the Danfoss solution to
be an economically stronger choice.
Energy monitoring at climate ceiling level is
an important part of achieving the highest
BREEAM score.”
Peter Mol
Project Manager at the installer Bosman Bedrijven B.V.
The building uses smart, innovative Danfoss climate
solutions for its heating and cooling system, including
Danfoss NovoCon® digital actuators that guarantee fail-free
health-optimized indoor climate. Ceiling panels provide
heating and cooling through an energy-efficient hydronic
solution, and they’re used to control the flow demand. To
control room temperature, Danfoss IoT actuators provide
flexibility – if the office space changes, actuators can
remotely be reassigned to another space.
Digital system data provide detailed real-time insights
on energy use, cost, and predictive maintenance, like
malfunctions or unexpected energy loss – insights that can
be detected and solved early, increasing energy efficiency
and reducing emissions.
To gain the BREEAM Outstanding credits, a leading
sustainability assessment method, Danfoss’ Digital Hydronics
NovoCon® Energy solution and temperature sensors are used
for optimization of energy consumption.
Buildings and their construction
account for over one-third of global
energy consumption and close to
40% of the world’s energy-related
emissions. Decarbonizing buildings
and enhancing their energy efficiency
is essential to curtail a rise in emissions
and meet the Paris Agreement goals.
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Danfoss Annual Report 2021 our business model
In brief
How we create value
Environment
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Statements
Our business model
Danfoss solutions provide real value to our customers through our application
knowledge, innovation, and leading positions.
Being the preferred partner in helping
our customers decarbonize requires
continuously strengthening our competitive
advantage.
Our capabilities within application
knowledge, innovation, and leading
positions reflect how we create value for our
customers across our business segments.
Application knowledge
Understanding customer applications is key
to differentiating and creating customer
value. We invest in initiatives that enable
our sales and R&D teams to turn their
expertise and application understanding
into performance-enhancing advantages
for our customers.
Innovation
Our mechanical, electrical, and software
engineering enable bold innovation
and continuous improvement of our
technologies, solutions, and processes
in the core businesses. We innovate to
differentiate and create customer value. We
invest to take full advantage of innovation
and take the lead within IoT, connectivity,
and electric solutions.
Leading positions
In the global manufacturing industry,
global reach, size, and scale matter. It is a
key element in our business model that the
business segments hold leading positions as
either number one or two in their industries.
Our shared operating model further helps
to drive advantages of scale, increased
customer value, and a world-class supply
chain, and we share a unique business
system with a strong focus on improving
safety, quality, delivery, and cost.
Application
knowledge
Close to
customers
Innovation
Differentiate
through new
technology
Competitive
advantage
Leading
positions
Scale benefits
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Danfoss Annual Report 2021 business segments
In brief
How we create value
Environment
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Governance
Group accounts and notes
Parent accounts and notes
Statements
Danfoss
Power
Solutions
Sales
3.2bn
(2020: EUR 2.0bn)
EBITA
489m
(2020: EUR 329m)
EBITA margin
15.3%
(2020: 16.8%)
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Segment development in 2021
Danfoss Power Solutions delivered both record sales and
record profit in 2021, excluding impacts from the acquisition
of Eaton’s hydraulics business.
The segment delivered significantly better sales than in
2020 and well ahead of 2019, driven by the continued strong
demand of the mobile hydraulics industry. In addition, the
integrated hydraulics business contributed to sales growth
after closing of the acquisition on August 2, 2021. All regions
achieved strong growth rates.
Profitability was impacted by integration cost resulting
from the large acquisition, and operationally the business
experienced inflationary pressure from increasing raw
material prices and freight rates as well as from spot buys of
electronic components. Excluding the integration cost, the
business delivered unprecedented profitability in 2021.
Danfoss Annual Report 2021 In brief
How we create value
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Statements
Strongest partner in mobile and industrial hydraulics
With the integration of Eaton’s hydraulics business into Danfoss Power Solutions,
the segment is well positioned to become a global leader in hydraulics and
electrification. It engineers innovative products and solutions that optimize the
performance of mobile and industrial equipment for our distribution partners
and customers all around the globe.
It was a transformational year for Danfoss Power Solutions.
In 2021, the business delivered remarkable results while
integrating about 10,000 new employees. The coming
together of these two strong businesses doubled the
employee base and level of expertise. The segment includes
more than 1,500 engineers and a sales force of nearly 2,000,
along with a much larger distribution network.
The global footprint is now broader, with a manufacturing
presence close to customers in all regions. That, coupled with
a significantly enhanced product portfolio, allows the business
to better serve its distribution partners and customers.
Globally recognized brands
In addition to its mobile hydraulics and electrification
solutions, Power Solutions now offers industrial hydraulics
and fluid conveyance products.
• The new Industrial division meets the hydraulic needs
of stationary machines in industries such as renewable
energy, manufacturing, processing, marine, and oil and
gas, where customizable system solutions are required.
With Vickers, a well-known brand in the market, Danfoss
now offers complete system solutions for the industrial
customer.
• The new fluid conveyance division provides hoses, fittings,
tubing, and connectors that transport – or convey –
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many types of gases and liquids including hydraulic oil,
beverages, air, and more. The portfolio includes brands
well known around the world, such as Aeroquip, Boston,
Synflex, Weatherhead, and Winner.
Stronger together
This integration also brings together the dynamic machine
control experiences and application development centers
that customers have appreciated from the now-integrated
businesses for years. These interactive and hands-on
experiences demonstrate how our solutions meet specific
customer needs, no matter how complex. Our development
and testing facilities around the world save customers time
and money by accelerating critical time-to-market.
19,061
53
employees worldwide
factories in 19 countries
3
3
application development
centers in the US, China,
and Denmark
top markets:
North America, Europe,
and Asia
Continually investing in innovation
A new incubation division launched and focuses
on creating innovative and disruptive solutions
for customers. The team, which has a passion
for exploration and learning, will focus on
highly strategic projects with high potential to
transform the industry.
While Danfoss Power Solutions has a long
history of innovation, this new division fosters
an entrepreneurial approach as it develops
technologies for on- and off-highway vehicles
as well as industrial machinery. Launching
great innovations takes more than the standard
approach to business. It requires specialized
talent, more time, and certainly dedicated
funding. Bringing acceleration projects together
into a separate division drives greater focus
and ensures these projects have the resources
needed.
The incubation team is well versed on important
megatrends such as autonomous vehicles and
digitization, while keeping a clear focus on what
solutions customers need most.
Danfoss Annual Report 2021 In brief
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Statements
Danfoss Power Solutions
NEW fluid conveyance division
Convey liquids, gases, and solids for a wide variety
of mobile and industrial applications.
in industries including commercial vehicle, oil and gas,
agriculture, construction, and beverage – to name a few.
In addition, our fluid conveyance footprint allows us to
deliver a comprehensive portfolio of engineered solutions to
help our customers with everything they need to move, cool,
dig, lift, power, and haul.
Through the recent integration, Danfoss Power Solutions
gained a large, global team of fluid conveyance experts and
industry-leading capabilities. We provide critical connections
in challenging applications that keep our world moving
forward.
Fluid conveyance solutions move fluids from one point to
another – connecting hydraulic circuits, airbrake lines for on-
highway vehicles, chemical tankers to processing facilities,
beverage lines to dispensers, oil rigs to the ocean floor, and
so much more.
Our new fluid conveyance division provides hoses, fittings,
tubing, and connectors that transport a variety of liquids
and gases. The business brings a long history of strong and
trusted brands, like Aeroquip, Weatherhead, Synflex, Boston,
and Winner, some of which have been relied upon for more
than 100 years.
Well established in traditional mobile and industrial
hydraulics markets, these products are also instrumental
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Fluid conveyance on the
move – innovation highlight
Our innovations keep customers’
businesses moving: making their
products better, fueling their growth,
and increasing their efficiencies. Fluid
conveyance is proud to be a leader in
on-highway commercial vehicles. Our
reputation for quality and innovation
in brake systems, air conditioning,
engines, steering, and more helps
our customers – and the planet – by
tackling tight routing challenges,
meeting or exceeding stringent
emission standards, and reducing
weight. As demand increases for
more complex and sustainable
solutions in electrification, fuel, and
permeation, our fluid conveyance
business is poised to continue to lead
with the next generation of thermal-
management coolant, hydrogen fuel,
and air conditioning hoses.
Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Danfoss
Climate
Solutions
Sales
2.9bn
(2020: EUR 2.5bn)
EBITA
511m
(2020: EUR 410m)
EBITA margin
17.8%
(2020: 16.4%)
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Segment development in 2021
Danfoss Climate Solutions delivered significantly better sales
than in 2020 and well ahead of 2019.
Danfoss Climate Solutions had strong momentum, fueled
by the strong market demand, especially within heat pumps
and cold chain technology.
Commercial compressors had strong growth, and Turbocor®
oil-free compressors won the AHR 2022 Innovation Award
and the Asia-Pacific Cloud and Data Award for energy
efficiency, supporting growth within data centers.
All regions grew, and China showed record-high sales.
However, the strong global rebound put high inflationary
pressure on raw material prices and freight rates as well as
electronic components availability.
Profitability was significantly ahead of 2020 and above the
2019 level.
Danfoss Annual Report 2021 In brief
How we create value
Environment
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Governance
Group accounts and notes
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Statements
Accelerating the green transition
Our innovative technologies enable the transition to a decarbonized, digital,
and more sustainable tomorrow. We provide energy-efficient solutions for
industry, buildings, and the entire food chain.
Our technologies and solutions support the transition to a
decarbonized, digital, and more sustainable tomorrow by
providing a broad portfolio of energy-efficient solutions
needed to reduce food loss, improve energy performance in
buildings, and make our cities cleaner.
• With our integrated and energy-efficient heating and
cooling solutions, we aim to innovate best-in-class circular
products and pioneer solutions for customers to enable
decarbonization in an intelligent, cost-optimal way.
• As a leading provider, we support our customers as they
accelerate the shift to natural refrigerants to reduce
climate impact.
• We continue to develop technologies to deliver the
innovative energy-efficient solutions that are needed
to reduce global emissions from buildings and mitigate
climate change.
We combine heating and cooling applications so waste
heat from industry, data centers, and supermarkets can be
recovered to heat buildings – saving energy and reducing
investments in new heat generation. We also develop
innovative energy-storage solutions, such as the connected
supermarket and the Danfoss Smart Store.
11,235
employees worldwide
4
application development
centers in the US, China,
and Denmark
34
factories in 15 countries
3
top markets:
Europe, China, and
North America
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Electrification of heating kickstarts a new
era of greener district heating
District heating plants are moving away from fossil fuels and turning to
renewable energy and innovative technology, such as electric heat pumps
and heat recovery, to reduce their environmental impact and ensure
affordable heating. Ringsted District Heating Company – a large district-
heating utility in Denmark – reduced its reliance on fossil fuels by 97% after
installing an innovative heat recovery system using Geoclima heat pumps
built with Danfoss Turbocor® oil-free compressor technology.
Danfoss Annual Report 2021 In brief
How we create value
Environment
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Governance
Group accounts and notes
Parent accounts and notes
Statements
Danfoss
Drives
Sales
1.4bn
(2020: EUR 1.4bn)
EBITA
180m
(2020: EUR 186m)
EBITA margin
12.4%
(2020: 13.6%)
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Segment development in 2021
Danfoss Drives delivered 6% sales growth compared with
2020 and was on par with 2019. Especially in China, Drives saw
significant growth.
Customer demand was high, but the entire industry was
constrained by component shortages. Drives also had to
manage significant logistics disruptions, inflationary pressure
on freight rates and raw materials, as well as unprecedented
supply shortages, especially of microcontrollers and other
electronic components.
Demand and order intake in Danfoss Silicon Power were
strong, driven by the ramp-up of automotive power modules
for drive trains.
Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
We are driven by drives
Danfoss Drives is a global leader in electrification and variable speed control of electric
motors. For more than 50 years, we have contributed globally to meeting the need for
energy-efficient infrastructure, connected systems, and integrated renewable energy,
with our quality, application-optimized drives, and lifecycle services.
Danfoss Drives is a global leader in electrification and
variable speed control of electric motors.
The portfolio of high-quality, application-optimized VACON®
and VLT® products optimize process performance, save
energy, and minimize emissions. Innovative technology that
tackles climate change and helps the world of tomorrow go
green and become more sustainable is high on our agenda.
We have decades of industry-dedicated experience in
meeting our customers’ specialized challenges. We create
and share solutions that deliver better process precision and
superior energy efficiency for electric-motor operations,
marine, and land-based electrification solutions as well as
new sustainable technologies such as green hydrogen.
Danfoss Silicon Power – a technology leader in customized
power modules for automotive, solar, wind, and industrial
applications – is an independent business and part of the
Danfoss Drives segment, enabling electrification to change
our world.
The solutions are used to provide optimal operation of
pumps, fans, chillers, conveyors, electric vehicles, hybrid
systems, and power conversion, enabling energy storage,
new renewable energy sources, and electrification solutions.
4,582
employees worldwide
3
application development
centers in China,
Singapore, and the
Netherlands
9
factories in 7 countries
3
top markets:
Europe, China, and North
America
.
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100% electric and close to emission-free – Danfoss is on board
It’s super-low emissions, fully electric, and in operation. Denmark’s largest
domestic ferry company, Molslinjen, launched its first electric passenger
ferry named Grotte, paving the way for electrification at sea and the green
transformation. The E-ferry Grotte will be breaking the waves on the
UNESCO World Heritage waters between the town of Esbjerg and the island
of Fanø in the Southern part of the North Sea, Denmark. Grotte is operated
by two electric motors from Danfoss Editron, controlled by Danfoss Drives
converters – all helping our customer to achieve green goals while lowering
total cost of ownership.
Imagine if this were done for all short-sea voyage ferries around the world!
In Europe alone, around 900 ferries operate on shorter routes, all with
a potential to electrify. Most ferries – on shorter routes – operate in the
Mediterranean, followed by the North Sea and the Baltic Sea.
Danfoss Annual Report 2021 our core clear strategy
In brief
How we create value
Environment
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Governance
Group accounts and notes
Parent accounts and notes
Statements
Our Core & Clear strategy
Danfoss is uniquely positioned to drive growth and be the
preferred partner in helping our customers decarbonize.
Megatrends
Danfoss technologies and solutions
are more relevant than ever.
Global megatrends are transforming our world, making
Danfoss more relevant than ever. We have proven and
reliable solutions to meet many of the climate, urbanization,
and food challenges. Driven by the power of an electrified
society and fueled by the opportunities of going digital,
Danfoss is dedicated to engineering solutions that can
unleash the potential of tomorrow. This is how we engineer
tomorrow and build a better future.
Core & Clear – Going Great
Our aspiration
We engineer tomorrow and build a better future
Our strategy
“Core & Clear is our growth strategy. We are
pleased that our organic growth developed
well, while welcoming 10,000 new team
members. On top, our engagement score
continues to rise. Our success is due to the
incredible commitment and engagement
across the company.”
Kim Fausing
Danfoss President & CEO
Leading Portfolio
Customers & Growth
Innovative Solutions
Lean & Agile
Our foundation
High-performing diverse teams
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Climate change
Urbanization
Food supply
Digitalization
Electrification
Danfoss Annual Report 2021 In brief
How we create value
Environment
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Governance
Group accounts and notes
Parent accounts and notes
Statements
Summing up our Core & Clear strategy
We target a global leading #1 or #2 position in all three business
segments. We invest to strengthen our core businesses and build a
leading position within digitalization and electrification to enable a
green, carbon-neutral future.
We focus on being close to our customers and drive customer
satisfaction with strong and consistent performance on quality and
delivery. We focus on growth verticals to outgrow the market and
provide a seamless end-to-end digital customer experience.
We differentiate through deep application knowledge and new
technology, enabling low-carbon and net-zero products. We create
significant opportunities by leveraging the latest technologies to
create even more value for our customers.
We aim to be recognized as a leader in operational excellence in the
industries we serve. We want to be the benchmark in safety, quality,
delivery, and cost. A flexible and agile supply chain and our “One
ERP” IT architecture ensure we serve our customers with speed.
Leading portfolio
Customers & Growth
Innovative Solutions
Lean & Agile
Key achievements 2021
2021 was a transformational year for
Danfoss, and we are well on track
with our key strategic initiatives. We
further strengthened our core with the
acquisition and integration of Eaton’s
hydraulics business as well as integration
activities in the new Climate Solutions
segment. Furthermore, we maintained
strong momentum in taking the lead
in digitalization and building a leading
position in electrification.
Leading Portfolio
To strengthen our leading positions, we
invest in the future. Danfoss has a strong
position in all three business segments and
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continues the leading performance levels
compared to our peers.
Acquisition of Eaton’s
hydraulics business
On August 2, 2021, Danfoss closed the
acquisition of Eaton’s hydraulics business for
a purchase price of USD 3.3bn – the biggest
acquisition in the history of Danfoss. With
the acquisition, Danfoss grew by a third. We
added more than 10,000 new colleagues
to the Danfoss team, now totaling 40,043
employees. With this acquisition, Danfoss
has created a global leader in mobile and
industrial hydraulics. Our customers will
benefit from combining the two businesses
into a full-line hydraulics player dedicated
to innovation and with a broad offering of
products, unparalleled distribution channel,
and tremendous geographic reach.
New Climate Solutions segment
Integrating the Danfoss Cooling and
Danfoss Heating segments into the new
Danfoss Climate Solutions segment has
further strengthened our leading positions.
The segment covers all key applications
within heating and cooling. There are
significant opportunities on the technology
side as well as common key applications,
such as heat pumps, data centers,
supermarkets, and food retail solutions.
Today, 40% of all energy consumption in
cities is used for cooling and heating. With
the increasing urbanization and global
focus on the green transition, Danfoss
Climate Solutions offers huge potential
for enabling a carbon-neutral future and
providing the integrated energy-efficient
solutions needed to deliver on international
climate and energy goals.
Leading position in drives
and electrification
Building a leading position in drives and
electrification is a key strategic priority for
Danfoss and is our biggest growth potential.
The development of transportation, such as
hybrid and electric cars, trucks, construction
machines, and marine vessels, is rapidly
accelerating to ensure efficiency gains and
lower emissions as an essential part of the
green transition.
In 2021, Danfoss made significant progress in
taking a leading position in electrification.
Our order books significantly increased. We
are building an electrification campus in
Nanjing, China, housing our business units
Danfoss Silicon Power and Danfoss Editron.
Also, we are creating a new Low-Carbon
Innovation Center in Edinburgh, Scotland,
which will house Danfoss teams working
on next-generation, climate-friendly
technologies in hydraulics, digitalization,
and electrification. The Low-Carbon
Innovation Center will be operationally
carbon-neutral, marking an important
step towards our goal to be a carbon-
neutral business by 2030. The Low-Carbon
Innovation Center will be fully operational
by the end of 2022.
Based on this, we will continue to focus
on building stronger capabilities within
electrification. In combination with our
conventional core technologies, we are
well-positioned to serve our customers’
increasing demands within hybrid and
electric solutions.
Customers & Growth
Being close to customers and having a
systematic approach to drive customer
satisfaction is at the center of our growth
agenda. Danfoss is uniquely positioned
for growth driven by global megatrends,
such as climate change, electrification,
and digitalization, as well as the economic
shift towards developing regions. Our
three business segments have strong
representation in all regions – close to our
customers.
Danfoss Annual Report 2021
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
store on our corporate website –
throughout Danfoss to enable our digital
transformation.
By mid-2022, Danfoss Climate Solutions and
Danfoss Drives will be covered by One ERP.
With initial merger activities complete, we
are now focusing on One ERP in Danfoss
Power Solutions.
Implementing One ERP is a team effort.
The central One ERP team brings the
proven methodology and guidance to the
local teams. Local teams work with the
central team to address local requirements
and execute. One ERP core teams also
collaborate with stakeholders across the
segments to ensure alignment.
One ERP has proven to be an excellent
development opportunity for all project
members to expand knowledge on global
processes and project management.
One ERP works in a diverse environment
that brings speed to Danfoss’ digital
transformation, enabling digital customer
experience and supporting connected
products and services.
Accelerating growth in
Developing Regions
We intend to accelerate growth in
Developing Regions (China; Russia; India;
Asia-Pacific; Turkey, Middle East, and Africa;
and East Europe). Our regions are driving
profitable growth based on deep market
understanding, customer proximity, and
insights into local delivery models, enabling
regionalized supply chains. Being close to
Danfoss story
Autonomous farming
One of the first self-driving
machines in the specialty crop
industry is proving itself among a
select group of California farmers
– with promising results. Danfoss
supplies the digital brain making
the workday easier and farm
productivity higher.
Watch the digital
story and video
Autonomous driving success for
Danfoss https://danfoss.pageflow.
io/autonomous-driving-success-for-
danfoss#321080
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customers allows us to respond quickly
and be flexible in creating and capturing
regional growth opportunities and, at the
same time, strengthen our efforts in key
areas of our customer interaction.
Accelerating digital customer experience
Danfoss is on a digital transformation
journey, driving decision speed and
bringing us closer to our customers.
Benefiting from the best practices of
implementing our IT platform "One ERP"
(SAP S/4HANA), we continue to address
customer processes and data in our strong
IT infrastructure.
Innovative Solutions
A heightened awareness and urgency to
combat climate change, combined with
significant government stimulus packages
and exponential growth in available green
capital, are driving increasing demand
for Danfoss products and solutions that
support environmental sustainability,
energy efficiency, and a greener energy mix.
We continue our high investments in
innovation and R&D to ensure that we stay
at the technology forefront and create
more value for our customers. In all our
business segments, we are strengthening
our innovation pipeline, focusing on new
innovations like the IC7 platform in Danfoss
Drives, Turbocor range extension in Danfoss
Climate Solutions, and fully autonomous
solutions in Danfoss Power Solutions.
Our own autonomy solution is based
on more than 10 years of experience in
providing hydraulics, control systems, and
software to the mobile off-highway market.
We continue to innovate and develop new
capabilities for our customers’ machines,
providing the highest possible productivity,
precision, and safety.
In our innovation, we also use digital
technology to bring speed into R&D by
using, for example, simulation and 3D
printing to reduce the time-to-market of
new products. The number of 3D printed
parts has increased significantly.
During 2021, Danfoss filed 198 (2020: 136)
new patent applications. During 2021, 704
(2020: 708) patents were granted to the
Group. At year end, Danfoss had a total
of 1,995 (2020: 1,567) patent families. The
significant increase is due to the integration
of Eaton’s hydraulics business.
Lean & Agile
To create increased competitive advantage
and execute with operational excellence,
we stay focused on being lean and
agile – harvesting the potential of digital
technologies and fighting unnecessary
complexity to be the best in the markets
we serve when it comes to safety, quality,
delivery, and cost.
We are building a flexible supply chain
that reacts quickly to the needs of our
customers. This is leading to higher
customer and employee satisfaction. A
strong IT infrastructure and smart factories
across Danfoss are key to its success.
One ERP
We are improving the digital customer
experience with better end-to-end
processes between our supply chain and
our customers. This is enabled by our IT
platform, One ERP (Enterprise Resource
Planning), that is being implemented – in
combination with the global product
Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Our foundation
2021 has been a transformational year, with
our foundation of diverse, high-performing
team members expanding to around 40,000
people with the acquisition of Eaton’s
hydraulics business.
to ensure our customers’ needs were met.
And we faced another year of the COVID-19
pandemic around the world, maintaining
our unwavering commitment to the health
and safety of our colleagues and sharpening
our focus to keep the growth momentum.
We learned a lot this year. While we patiently
worked behind the scenes and waited for
the go-ahead to bring on Eaton’s hydraulics
business, once we had the green light, we
quickly pivoted to focus on a smooth and
successful transition. We planned to engage
and motivate our new team members to
become part of the Danfoss family while also
run our businesses and meet our customers’
needs. And we succeeded.
We faced global supply chain challenges
head on, working directly with our suppliers
We couldn’t have done all this if it weren’t
for our high levels of engagement and
the key that unlocks how we work, our
Danfoss behaviors: Frontline Passion, Run
the Business Like Your Own, and Think
Danfoss. These behaviors describe how
we act as employees and teams to support
the Danfoss values and support Danfoss’
growth journey.
Employee engagement
In 2021, we carried out our employee
engagement survey three months after the
acquisition of Eaton’s hydraulics business to
ensure our more than 10,000 new colleagues
could participate. Of our 40,000 global
employees, 89% participated in the survey,
an exceptional participation rate.
Our overall engagement at Danfoss is high,
with a score of 81, showing that employees
are passionate, proud, and care about
Danfoss and that they would recommend
us as an employer to others. We have seen
a positive increase in engagement over
the last three surveys. One call-out is the
significant increase in the engagement level
in Danfoss Power Solutions, showing a great
start with our new colleagues.
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Danfoss story:
Welcome celebrations
At the beginning of August, we
welcomed more than 10,000 new
colleagues into Danfoss. It was
important to us that our new
colleagues felt part of Danfoss as
quickly as possible.
We welcomed all employees from
Danfoss Power Solutions and
Eaton’s hydraulics business to the
new Danfoss Power Solutions. This
was an altogether new business for
us all. Colleagues received welcome
gifts, and Danfoss Power Solutions
management hosted virtual
town halls welcoming all team
members to the new Danfoss Power
Solutions.
Along with virtual celebrations,
President & CEO Kim Fausing
and Danfoss Power Solutions
leaders visited the sites of Eaton’s
hydraulics business – observing
coronavirus safety precautions, of
course – where they held town halls
and management meetings, eager
to meet new colleagues.
Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
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Danfoss Annual Report 2021 esg ambitions
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
ESG ambitions
We strive to put ourselves and our customers in the perfect
position to drive sustainable transformation.
In 2019, the UN Secretary-General called on all sectors of
society to mobilize for a decade of action to deal with the
biggest challenges we’re currently facing – climate change.
Today, with more than 80 years of experience in creating
solutions that help lower CO2 emissions in sectors around the
globe, Danfoss wants to be the preferred decarbonization
partner for our customers. We are committed to continue
investing in this goal going forward – through our leading
positions, application knowledge, and innovation.
We’ve built a solid foundation
Sustainability has been part of the Danfoss purpose since
the company was founded. Our DNA and culture have been
instrumental in building our leading position across multiple
industries. Over many years, we have had a sustainability
program that ensured our efforts were focused on where we
can make the most significant impact. The program reflected
a two-fold contribution toward mitigating climate change:
through our solutions that help reduce our customers’ carbon
footprint and through applying high standards and setting
stretch targets across people, climate, and environmental
agendas. Now we are ready to take even greater responsibility.
Strong actions to combat climate change
We began the “decade of action” by announcing our
ambition to become carbon neutral in all our global
operations by 2030 and committing to the Science Based
Targets initiative (SBTi). In 2021, we took one step further
towards integrating sustainability in our strategy and daily
practices by developing ESG ambitions and targets. This
builds on our previous work with sustainability and focuses
on three areas:
Decarbonization: we will pioneer solutions for customers
to enable decarbonization in an intelligent, cost-optimal
manner and ensure carbon neutrality in our own operations.
Circularity: we will innovate best-in-class circular products
as the default when developing, producing, sourcing, and
selling to deliver new value propositions.
Diversity & inclusion: we aspire to deliver an inspiring and
inclusive employee experience and create an environment of
belonging.
Clear and bold ambition ahead
We’ve established measurable targets that are based on the
SBTi to create a strong foundation for our long-term climate
strategy and initiatives. We will monitor our sustainability
progress like we track our financials – with solid data and a
systematic approach.
Looking towards 2030, we will integrate new and ambitious
ESG targets in our Core & Clear strategy and aspire for leading
positions within Decarbonization, Circularity, and Diversity &
Inclusion.
This work supports our commitment to address climate
change and create action. With the new targets and
ambitions, we can make a real impact.
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Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Our ESG step-change initiatives
We’ve built a strong foundation for achieving our own targets and we have clear goals,
ownership, and roadmaps for ESG. Our ambitions support three key areas where we want to
make a step change.
Decarbonization
We pioneer solutions for customers
to enable decarbonization
Circularity
We innovate best-in-class
circular products
Diversity & Inclusion (D&I)
We offer a leading employee experience that
values and respects diversity and inclusion
CO2 neutrality in Danfoss‘ global
operations by 2030 (SBT scope 1 and 2)
Reduction of emissions from
use of Danfoss products (SBT scope 3)
Establish and implement circularity
assessment and framework in
all segments
Accelerate momentum and engagement through
a comprehensive, data-driven approach to D&I
Embed D&I across the employee lifecycle, including
recruitment, development, and talent management
Strengthen and commercialize emissions
avoided by the use of Danfoss products
Resource and
waste management
Launch Employee Resource Groups and
establish Regional Inclusion Councils
ESG-specific supplier diagnostics and collaboration program
Integrated reporting
Enhanced ESG ratings
ESG data foundation & transparency
Ethics & human rights
Health & safety
Product innovation, research, quality & safety
Regulatory compliance
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Danfoss Annual Report 2021 achievements in 2021
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Achievements 2021
Our impact and contribution towards mitigating climate change is two-fold – through the solutions
we sell and what we do internally. As a responsible business, we apply high standards and set
stretch targets across climate, people, and environmental agendas.
Topic
SDG
2021 - What we said
2021 - What we did
Climate
consciousness
• Half of Danfoss’ electricity consumption to be covered by green
• From January 2021, 25% of Danfoss global electricity consumption was CO2-neutral. We are making
Power Purchase Agreements (PPAs)
solid progress towards expanding the coverage further in 2022
• Prepare roadmap for decarbonizing Danfoss’ heating demand
• Establish science-based targets and mitigation plans and get targets
• 45% of our district energy consumption is from renewables. Solid steps taken towards phasing out
fossil fuels
approved by the Science Based Targets initiative (SBTi)
• Science-based targets baseline established. SBT targets submitted for validation by the SBTi.
• Run electric vehicles project in Sweden
• Continue global energy-saving projects in selected factories to cut
Approval expected mid-2022
• Transition of car fleet to EVs commencing according to plan. Emissions from company cars
energy consumption and maintenance cost by up to 40%
reduced by 15% since 2019. In 2021, 184 charging points were installed at our facilities
• Energy consumption per EURm net sale reduced by 12% from previous year due to continued
optimization of energy use
• Roll out product chemical-compliance system and recycling
• Product chemical-compliance system rollout concluded according to plans. Rollout of recycling
administration system for electronic equipment, batteries, and
packaging as part of Group ERP system
• Roll out setup for Life-Cycle Assessment and Environmental Product
administration system for electronic equipment ,etc., to be implemented in 2022
• Life-Cycle Assessment and Environmental Product Declaration projects run in Climate Solutions
and Drives according to plans. Further implantation to commence in 2022 as part of ESG ambition
Declaration of products
• Continue to reduce the global Lost Time Injury Frequency (LTIF)
towards 1.6 lost time injuries per million hours worked
• LTIF was successfully reduced by 15% to 1.7 lost time injuries per million hours worked
• Global tools for identifying and mitigating ergonomic hazards developed and tested. All machines
• Develop global tools for identifying and mitigating ergonomic
assessed using the Danfoss Machine Safety Inspection Tool (DMSIT)
hazards and managing safety data sheets
• Evaluate where processes to avoid forced labor in recruitment of
• Evaluation completed through cross-functional project targeted local agreements with
temporary workers are relevant and implement accordingly
recruitment agencies. Workshops in all regions ensure deployment of forced labor clause in new
and renewed local contracts
• Educate our leaders on inclusive leadership and unconscious bias
• Unconscious bias training offered to our people leaders
• The 2021 employee engagement survey included a more comprehensive D&I index and initial
results reflect a solid foundation on which to build our D&I strategy
Resources
and products
Responsible
business
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Danfoss Annual Report 2021 objectives 2022
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
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Statements
Objectives 2022
2022 objectives create focus, alignment, and ensure value for our stakeholders and our business.
We are ambitious so we can meet our customers’ expectations, make an impact on the world, and
create growth. Sustainability is a business enabler for us and strengthens our license to operate.
Topic
SDG
2022 - What we want
Decarbonization
• Continue decarbonization of our global operations in line with the ambitious science-based
targets for scope 1, 2, and 3 and make the headquarters in Nordborg, Denmark, carbon
neutral
• Further improve energy efficiency and substitute fossil-based energy across Danfoss’
locations
• Engage with suppliers to reduce emissions from purchased materials and reduce CO2
footprint of products
• Establish verification methodology for emissions avoided from the use of our products and
solutions
Circularity
• Develop and implement a Circularity Toolbox, Life-Cycle Assessment and Design for
Recycling in our Product Development Processes
• Establish take-back solutions for packaging with selected customers to lower carbon
footprint and increase reuse of packaging
• Establish ”Reduce and reuse” platform for plastics with selected customers
• Develop and deploy ESG training programs for our employees with focus on
decarbonization and circularity
• Recruit diverse talent by continuously improving our attraction, selection, and hiring
practices
• Retain diverse talent by creating an environment of belonging through communities of
shared identity, experience, and interests, as well as providing resources that empower
leaders and teams to foster inclusion
Increase diverse representation by optimizing our talent-management practices and
digital platforms and accelerating development through impactful learning experiences,
including training and mentoring
•
Diversity &
Inclusion
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Danfoss Annual Report 2021 environment
Environment
Decarbonization
Circularity
Safe and sustainable products
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Accelerating
electrification
More than 24% of global CO₂
emissions come from the transport
sector today. Currently available
electrification technologies have
the potential to significantly
lower that. Danfoss manufactures
and delivers the world’s most
sophisticated hybrid and fully
electric drivetrains for the on- and
off-highway and marine sectors.
Danfoss is part of developing the
next-generation, zero-emission
electric powertrain for heavy-duty
vehicles, providing the high-power
electric motor and high-efficiency
silicon carbide inverter.
Danfoss Annual Report 2021 decarbonizing Danfoss
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Decarbonization
We create solutions that help lower our customers’
CO2 emissions across sectors – and set the highest
ambitions for our own journey towards carbon
neutrality by 2030.
One of the three main areas of Danfoss’ new ESG ambitions
is decarbonizing Danfoss’ value chain and helping our
customers to achieve carbon neutrality. Energy efficiency is
core to what we do, and we want to be the preferred partner
in helping our customers decarbonize.
In 2021, we strengthened the focus on reducing energy
consumption in our buildings and processes by setting
ambitious science-based targets and launching several
projects under the new ESG ambitions “Decarbonization.”
Focus in 2022 will be on ensuring that new or refurbished
buildings are brought as close to carbon neutrality as
possible, for example, by eliminating the use of fossil energy
sources for heating.
The acquisition of Eaton’s hydraulics business
With Danfoss’ acquisition of Eaton’s hydraulics business,
energy consumption and thereby carbon emissions of the
entire Danfoss Group will increase. Mapping all energy
consumption and identifying energy saving potentials in
buildings and processes will commence in 2022 as part
of Danfoss’ ESG project and our commitment to become
carbon neutral by 2030.
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Energy efficiency
is climate action
Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Science-based targets
In 2021, Danfoss continued the journey towards our
ambitious target of making our operations carbon-neutral
by 2030 through our commitment to the “Business Ambition
for 1.5°C.” We strive to reduce our scope 1 and 2 emissions
combined by at least 46% and our total scope 3 emissions
by a minimum of 15% before 2030 (compared to the 2019
baseline).
Danfoss submitted ambitious targets for validation by the
Science Based Targets initiative (SBTi) in 2021 and expects to
receive approval in the first half of 2022.
In 2021, we performed a detailed screening to map all
emissions across the value chain as part of our 2019 baseline
calculations and target submission process to the SBTi. The
screening does not include Eaton’s hydraulics business, as
the SBT baseline is 2019, the year when Danfoss did not have
control of Eaton’s hydraulics business data.
The major contributor to our value chain emissions is the
customers’ use of our products. The “Use of Sold Products”
emissions make up 98% of the total baseline of 67 million
tons CO2 equivalents (CO2e). While our products help our
customers reduce their footprint through energy efficiency,
we recognize that energy is required for our products to
operate.
In 2021, we identified levers and mitigation activities for
the reduction of CO2 emissions in our value chain. We will
leverage energy efficiency, electrification, renewable energy
use, and innovation to reach our targets. We want to actively
shape climate action as a means of differentiation from our
competitors.
At the same time, Danfoss products are best in class
regarding energy efficiency, and they help mitigate
greenhouse gas emissions during their use. They are
designed to reduce energy consumption and energy-related
carbon emissions. This way we help our customers to lower
energy demand and, as a result, their carbon footprint.
In 2022, we will set up a solid methodology and start
quantifying avoided emissions using Danfoss products as a
part of our ESG ambition.
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The relevant emission categories included in Danfoss’ scope 1, 2, and
3 2019 baseline (numbers exclude Eaton's hydraulics business).
Scope 1
Scope 1
56kt CO2e
56kt CO2e
Scope 2
246kt CO2e
Scope 3
Scope 3
66,820kt CO2e
66.820kt CO2e
Our direct emissions: Carbon
emissions produced as a direct
result of our activities at our
sites, such as fuel combustion
and the use of our vehicles.
Our indirect emissions:
Carbon emissions from
the use of purchased
electricity and heating
and cooling.
Our upstream and downstream processes: Other emissions
within our supply chain, e.g., from raw materials, business travel,
and transport of goods to customers.
Combustion
of fuels
Company
cars
Leakage of cooling
agents in factories
Purchased
electricity
Purchased
heating
Purchased
goods
Upstream
transport
Capital
goods
Waste
Downstream
transport
Employee
commuting
Business
travel
Use of sold
products
Trans-
mission
of
electricity
End-of-life
treatment
of sold
products
Carbon-neutral operations
We aim to achieve our ambition by prioritizing energy
efficiency in buildings and processes and by reducing our
energy consumption with our own solutions.
With more than 90% of energy use emissions coming from
electricity, the next step is decreasing energy consumption
from electricity use. This will help us deliver on our ambition
to reduce scope 1 and 2 emissions.
Since January 2021, Danfoss sources carbon-neutral
electricity for all the company’s locations in Denmark
and Germany through a power purchase agreement.
The agreement delivers 116 GWh of electricity annually,
corresponding to 25% of Danfoss’ total electricity
consumption prior to the acquisition of Eaton’s hydraulics
business.
We work to source green electricity for our facilities in
other regions where power purchase agreements are
readily available or are expected to be within a few years.
We will reduce energy demand by ensuring that no heat
is wasted, but rather recovered and reused. And we aim to
substitute the remaining fossil-based energy for heating with
renewable energy sources.
Many of our factories do not have hydronic heating systems
but base the heating on natural gas with indirect gas heaters
in the air-handling units. In 2022, Danfoss Group Real Estate
will assess all locations’ energy consumption and prioritize
refurbishment to ensure carbon neutrality in our own
operations before 2030.
Energy consumption and emissions of Danfoss
In 2021, Danfoss changed the calculation methodology for
energy-related emissions to be aligned with science-based
targets. We moved from location-based emission factors to
Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
market-based factors documenting the exact CO2 content
of the energy procured for each location rather than using a
country-specific factor.
In 2021, Danfoss’ total energy consumption for buildings
and processes increased by 2% to 601 GWh. Danfoss’ energy
intensity in 2021 decreased by 12% compared to the previous
year, proving that we have managed to decouple growth
from energy consumption in our business.
In 2021, Danfoss emitted 236 kt of CO2 from the company’s
consumption of electricity and heating, which is the same
as the previous year. The sources were the generation
of electricity and heat in our own facilities as well as the
purchase of electricity and district heating from external
sources.
Intensity and productivity performance
For several years, Danfoss has calculated energy intensity,
energy productivity, and CO2 intensity relative to our net
sales. In 2016 we set ourselves a target to double our energy
productivity and to halve our energy intensity by 2030
compared to the 2007 base year. In 2021 we achieved both
targets – nine years ahead of time.
Energy productivity went up from 80% in 2020 to 104%
improvement from the baseline year 2007. Energy intensity of
Danfoss was 51% lower than in 2007. CO2 intensity of Danfoss
fell to 35 tons per EURm, equal to an overall reduction of 42%
since 2007.
2/3
of our
headquarter’s
heating demand is
carbon-neutral
CO₂-neutral headquarters
All electricity and heating for buildings at our
headquarters in Nordborg, Denmark, will be carbon
neutral by the end of 2022. The campus is Danfoss’
largest production facility and covers more than
250,000 m2. Within recent years, the buildings have
undergone a massive change to improve ener-
gy efficiency. Danfoss’ own solutions have been
instrumental every bit of the way, allowing massive
energy savings. This together with other green
initiatives has resulted in an 80% cut in emissions
in 2021.
Our green initiatives
In 2021, we sourced 100% green electricity for the
campus in Nordborg. Two-thirds of our heating
demand was covered by green energy from carbon-
neutral district energy, utilization of excess heat,
and from heat pumps.
The district energy comes from a municipal district-
heating facility next to the campus. The municipality
does not buy wood or other biomass that needs
to be transported over long distances, but rather
sources excess straw from local farmers’ fields.
Furthermore, to heat our offices and production
areas, we apply our own solutions to reuse excess
heat from our manufacturing processes and from
a data center next to the campus – in addition
to installing heat pumps and electric boilers. To
stretch every single watt as far as we can, we use
our own digital solutions to maximize energy
efficiency and speed up the complete phase-out of
the last fossil fuels.
Rolling out electric company cars
The electrification of our company car fleet is an
important part of our goal to become carbon-
neutral by 2030. Converting our car fleet to
all-electric goes hand-in-hand with our business
strategy, where electrification plays a key part.
In November 2021, we signed a global declaration,
launched at COP26 by The Climate Group, that
accelerates the transition to 100% zero-emission
cars and vans. As a company that delivers solutions
to the automotive industry to drive electrification,
we commit to supporting the rapid acceleration to
zero-emission vehicles to achieve the goals of the
Paris Agreement.
In 2021, our car fleet contributed 8 kt of CO2
emissions to our global carbon footprint. To
eliminate these emissions, we are replacing
fossil-fuel-based cars in our car fleet with electric
vehicles, including plug-in hybrid vehicles. We now
have 97 electric and hybrid company cars on the
roads in 10 countries. The electric and hybrid cars
are around 5% of the company’s car fleet.
We are also installing charging points at our largest
sites and facilitating their installation at employees’
homes. In 2021, we completed the installation of 184
charging points at our facilities, 109 of which were
installed in Denmark. Our reporting data is aligned
with the EV100 reporting timeline and covers the
period from July 2020 to June 2021.
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Danfoss Annual Report 2021 circularity
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Circularity
Achieving decarbonization goals through circular solutions
for our customers, Danfoss, and the world.
Committing to circularity
We strive to deliver the best circular solutions on the market,
preferring to keep our products in use, if environmentally
suitable, and perceiving waste as a design flaw. We are
working to develop innovative circular business models with
our customers and suppliers.
Our commitment to a circularity framework is reflected
across all Danfoss’ activities, including how we:
• Assess and improve reusing and recycling materials across
the entire value chain
• Take responsibility for the entire life cycle of our product
• Design our products with sustainable end-of-life in mind
As part of the implementation of a circularity approach in
Danfoss, the KPI’s needed to measure and track our progress
will be defined. This is expected in the first half of 2022.
Sustainable collaboration with customers
Our circularity practices go across the entire value chain. We
collaborate with our customers and suppliers to develop
innovative approaches and explore new opportunities. With
the experience we gain, we can continuously adapt our
processes and improve our circularity toolbox.
Measuring environmental impacts of our products
We have integrated life-cycle thinking into our product
and process development for years, and now we’ve started
working with the life-cycle assessment (LCA) methodology,
defined as systematic analysis of potential environmental
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impact during a product’s entire lifecycle. The process
provides the foundation for developing Environmental
Product Declarations (EPDs) for our products.
Environmental Product Declarations
In 2021, we implemented an organization-wide approach
to EPDs, including tools, processes, and methodologies
for performing life-cycle assessments on our products. We
successfully ran a first pilot with a Danfoss Drives frequency
converter, and now we’re running a second pilot with two
valves produced by Danfoss Climate Solutions. The pilots
allow us to build processes along with the tools, confirming
that we have the right setup, resources, and knowledge.
From the experience we gain, we are better equipped to
deliver on increasing requests on EPDs from customers and
internal needs to use a life-cycle approach in our product
development.
We recognize that EDPs give our customers straightforward
information on a product’s carbon footprint and
environmental impact. In 2022, we will make a strong effort
to deploy and build capacity to respond to increasing
customer requests on this front. We’re convinced this will
greatly benefit our efforts towards decarbonization and
circularity in helping our customers decarbonize and achieve
their environmental targets.
Danfoss story
Refurbishing and renovating
– a good idea and sustainable solution
Keeping components and materials in use as
long as possible helps lessen their impact on the
environment and secures material efficiency.
Take, for example, our refurbished high-pressure
pump setup. The pumps are made of high-quality
stainless steel, very heavy to move and expensive
to produce. But their parts can be given a second
life. When we receive a pump for renovation, we
refurbish parts, replacing those that are worn out,
test for full functionality, and grant a new warranty
period to the customer.
The APP 53-92 high-pressure pump and iSave
energy recovery device are used within the reverse
osmosis process to make fresh, clean water from
seawater. The pump supplies seawater to the
membranes, while the energy-recovery device
captures wasted hydraulic energy from the
membrane reject flow. Since reverse osmosis is
an energy-intensive process, our APP pump and
iSave energy recovery device together offer the
most energy-efficient solution for the desalination
market. We offer our customers refurbished parts,
or a service-exchange spare part solution to keep
their operations running and increase uptime.
Danfoss Annual Report 2021 safe and sustainable products
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Safe and sustainable
products
We focus on integrity, compliance, and transparency
and ensure our products are safe and sustainable.
Product compliance is an ongoing responsibility at Danfoss
and a critical enabler of customer satisfaction, growth, and
sustainability. In 2021, we advanced our product compliance
program to meet the needs of the changing landscape.
platform. Once the rollout is finalized, our businesses
can more quickly deliver reliable compliance information
to customers and authorities, including full material
declarations and recycling information for our products.
Enhanced monitoring capabilities
We continuously monitor requirements from our customers
and regulators. Our robust product compliance program
ensures transparency, quality, and safety of our products. To
minimize adverse effects on the environment and society,
product responsibility stretches across the supply chain,
and we keep open dialogs with our suppliers to improve
compliance practices throughout Danfoss.
In 2021, we further developed our monitoring capabilities for
managing the ever-increasing number of regulations and
standards affecting our products. This enables us to stay
agile and deliver compliant products to our customers.
Improved digital-product compliance
Developments in both regulatory and customer
requirements over 2021 confirmed that digitalization with
rigorous product and supply chain data management
is increasingly important to stay compliant and support
sustainable business growth.
In previous years, we built systems to manage product-
related chemical compliance and recycling administration
under the extended producer responsibility schemes. In
2021, we started to roll in substance and extended producer-
responsibility solutions anchored in the Danfoss One ERP
In 2022-2023, solutions will be rolled out to take Danfoss
to the next level of effective product compliance data
management and have one aligned solution across the
whole business. This will improve our ability to stay
compliant, lower risk, report to authorities, and live up to
customer expectations.
Robust compliance processes and tools
We implement robust product compliance processes across
the organization through Group Standards. The Danfoss
Negative List is the foundation for chemicals management
at Danfoss. It restricts the use of hazardous substances in
products and production processes, and it must be complied
with by all Danfoss suppliers, tenants, and contractors.
An important focus in 2021 was the US Environmental
Protection Agency (EPA) amendment of the Toxic Substances
Control Act (TSCA) with five new substances. We conducted
extensive supplier campaigns to clarify the impact of these
restrictions on our products, and we developed internal
TSCA processes for our product compliance program. We
also strengthened our process for compliance with the
California Safe Drinking Water and Toxic Enforcement Act
of 1986 (Proposition 65), aligning our scoping procedure
and improving customer notification prior to purchasing
products that contain listed substances.
Smart sourcing decisions
We want to make informed sourcing decisions, which is why
we support the Responsible Minerals Initiative (RMI) and
review whether tin, tantalum, tungsten, and gold (3TG) in
our products originate from conflict-affected and high-risk
regions as defined in the US Dodd-Frank Act. We collect data
from 1,450 tier-one suppliers and provide conflict mineral
reporting templates to our customers.
Many Danfoss products are in direct or indirect scope of the
EU’s Restriction of Hazardous Substances (RoHS) Directive
(or similar rules elsewhere) restricting usage of hazardous
substances in electrical and electronic equipment. In new
product development, we strive to substitute hazardous
substances and materials with more sustainable ones.
Our processes ensure compliance with European and
international regulations to secure protection of human
health and the environment. We conform to the EU regulation
for Registration, Evaluation, Authorization and restriction of
Chemicals (REACH) and the Candidate List that is updated by
the European Chemical Agency (ECHA).
In 2022, our focus will be monitoring and reporting under
REACH, updating our Negative List, and continuing to deliver
data to the ECHA’s SCIP database (Substances of Concern In
articles or in complex objects (Products) established under
the EU Waste Framework Directive). The SCIP database
provides information on articles containing Candidate List
substances available through the lifecycle of products and
materials, including at the waste stage.
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Danfoss Annual Report 2021 social
Social
Diversity & Inclusion
A safe place to work
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Success is
driven by
our people
Danfoss’ foundation is our high-
performing, diverse teams. We
strongly believe that taking care
of our people and our working
environment, where everyone
feels engaged, respected, and
excited about their work, is
essential for Danfoss’ growth
journey.
Danfoss Annual Report 2021 diversity and inclusion
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Diversity & Inclusion
We strengthen the power of engaged, diverse, and high-performing
global teams to accelerate our Core & Clear strategy.
Diversity & Inclusion (D&I) is a strategic imperative that
attracts and retains diverse talent, drives high-performing
teams, accelerates innovation, enables creative solutions,
and optimizes agility in an evolving world. This is especially
relevant with our expanding global footprint and our
strategic intention to lead the green transition.
To help accelerate our progress on D&I, we set an ambitious
target in 2019 to increase women in leadership from 20% to
30% by 2025. This stretch goal sent a clear message about
our unwavering commitment to this important topic and
positively influenced our talent practices and employer brand.
Externally, Danfoss has been recognized by global media
outlets for our actions and ambitions.
•
The Financial Times ranked Danfoss on the “FT – Diversity
Leaders 2022” list. Results reflect the fields of age, gender,
ethnicity, disability, LGBTQ+, and general diversity.
• Forbes listed Danfoss among “The World’s Top Female-
Friendly Companies.” The survey recognizes companies
that lead the way when it comes to supporting women
inside and outside the workforce.
• Forbes named Danfoss among the “World’s Best
Employers 2021,” acknowledging our efforts to create a
great workplace.
D&I is a key element of employee engagement at Danfoss.
This year’s employee engagement survey included a more
comprehensive D&I index through additional questions
that create a benchmark we can use to measure and track
employees’ sentiments about D&I at Danfoss. Initial results
reflect a solid foundation on which to build our D&I strategy.
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We are proud of these achievements and know there is more
work to be done, because we are not making the progress on
gender representation that we would like to see. That’s why
we have prioritized diversity and inclusion within our ESG
strategy and reframed our focus and approach.
At Danfoss, we aspire to foster an inspiring and inclusive
workplace that unleashes the full potential of our people and
empowers them to thrive in a purpose-driven career. We are
committed to delivering an engaging employee experience
that values and respects all aspects of diversity and creates
an environment of belonging.
This approach addresses multiple dimensions of diversity,
equity, and inclusion across the entire employee experience,
including recruitment, retention, development, and
representation across all levels, functions, and teams.
Here are some of the initiatives we’ll focus on in 2022:
• Recruit diverse talent by continuously improving our
attraction, selection, and hiring practices
• Retain diverse talent by creating an environment of
belonging through communities of shared identity,
experience, and interests, as well as providing resources
that empower leaders and teams to foster inclusion
Increase diverse representation by optimizing our
talent-management practices and digital platforms and
accelerating development through impactful learning
experiences, including training and mentoring
•
D&I definitions
Diversity: The dimensions of difference that make
individuals unique from one another
Inclusion: The extent to which you feel valued,
respected, and encouraged to fully participate as your
authentic self
Equity: Treating everyone fairly while striving to
identify and eliminate inequities and barriers
Belonging: The experience of being fully accepted for
your authentic self and feeling valued as a member of
a community in which you are empowered to thrive
What does diversity mean to you?
“Diversity is so much more than age,
ethnicity, or gender. I value the diverse
backgrounds and characteristics our
colleagues bring to Danfoss because I
know diversity drives innovation.”
Eric Alström
President, Danfoss Power Solutions
Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Nearly 90%
of postgraduate
alumni are still
with Danfoss
five years after
completing the
program.
Danfoss story
Danfoss Postgraduate Program
Our employee engagement survey also reinforces
our commitment to equal opportunities to
career growth. A key focus of our D&I strategy
is providing career pathways for diverse talent,
including those who are entering, or re-entering,
the workforce.
One example of how we’re working with people
joining the workforce to have a purpose-driven
career at Danfoss is the Danfoss Postgraduate
Program, which offers recent master’s graduates
an opportunity for professional growth and
opens the door to an international career.
Postgraduates in the two-year program work on
four strategic projects, and at least one of them is
an international assignment. Admission is highly
competitive, with upwards of 4,500 candidates
for 20 spots per intake year. Candidates are
keenly interested in Danfoss’ commitment to
sustainability as well as our company culture,
showing that our employer brand is well known
around the world.
We currently have 27 postgraduates at Danfoss,
representing 21 nationalities and a near-50/50
gender split.
The program is a mutual success for our
postgraduates and for Danfoss. Business segment
leaders propose interesting, significant business
challenges postgraduates can work on. And at the
end of the two-year program, postgraduates are
offered a full-time role with Danfoss.
Danfoss is very proud of the Postgraduate
Program and sees it as a strategic advantage.
It began in 1974 and has produced countless
Danfoss leaders, including two current Group
Executive Team members – Jesper V. Christensen,
CFO, and Lars Tveen, President, Developing
Regions. The program signals to the world that
we care about talent development and know
that fresh graduates can contribute and make a
difference at Danfoss early in their careers.
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Danfoss Annual Report 2021 a safe place to work
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
A safe place to work
Safety is a core value for Danfoss. We strive to create a safe
working environment and continuously improve the health and
well-being of our colleagues across our global organization.
1.7
of LTIF in 2021 compared
to 2.0 in 2020
45%
decrease in days lost due to
serious injuries compared
to 2020
Successfully reducing Lost Time Injuries
In 2021, we continued improving our
Lost Time Injury Frequency (LTIF)
performance. LTIF was reduced to 1.7
compared to 2.0 in 2020. LTIF is the number
of incidents per million hours worked
where the injured person is absent for
more than one full day. A total of 77 Lost
Time Injuries were experienced in 2021
compared to 85 the previous year.
In 2021, we experienced an increase in our
Medical Treatment Injuries (MTI), which
we define as injuries requiring medical
treatment beyond first aid. We recorded 61
MTI compared to 47 in 2020. The increase
is due to a better reporting process where
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more incidents are correctly recorded. Our
Total Recordable Injury Frequency (TRIF),
combining the number of Lost Time Injuries
and Medical Treatment Injuries, ended at
3.0, which is on par with 2020 results.
Overall, the severity of injuries in 2021 was
reduced to 776 days lost compared to
1,404 in 2020. The Lost Day Rate (LDR) – the
number of days of absence per million hours
worked – was 17, a reduction compared to 33
the previous year. Danfoss experienced no
employee or contractor fatalities in 2021.
While it is encouraging that we reduced
serious injuries resulting in lost time, the
plateau we are on in relation to Total
Recordable Injuries indicates there is more
work to do to protect employees and
prevent incidents.
Preventing machine accidents
In 2020, we launched a machine safety
inspection tool to help employees to better
identify and manage potential hazards
and risks related to machine operation.
While risk assessment is a fundamental
requirement for all machines, experience
shows that hazards and risks are not always
fully understood, identified, or corrected.
With a minimum amount of training, the
tool guides employees to assess basic
machine safety principles surrounding the
machine, from sharp edges and corners to
emergency stops and safety barriers.
We successfully assessed close to 10,000
machines in 2021.
instantly points to movements and postures
that need to be changed.
During 2021, we piloted the tool at three
Danfoss Power Solutions manufacturing
sites. The plan is to expand the roll out of the
tool to other manufacturing sites in 2022.
Using this tool taught us many lessons. For
example, the tool identified the need to
strengthen control of energy stored in the
machine that can be accidentally released
when performing repair or maintenance on
machines.
Improving ergonomics
Ergonomic assessments are a standard
part of risk assessments carried out during
Workplace Assessments or Job Hazard
Analysis. Various improvement methods,
such as the use of lifting devices, robots
and autonomous material movers, support
our ongoing efforts to reduce ergonomic
exposures. As our work environments
continue to change, we assess the
introduction of new risk exposures related
to the movement of heavy products,
manual handling of parts, and a high-
pace work activity that contribute to
musculoskeletal disorders.
During 2021, we continued to introduce
an ergonomic assessment tool that helps
identify ergonomic hazards and necessary
improvement options. The tool can be used
through a mobile phone app involving the
user recording a standard work cycle. The
recording is then analyzed by software that
highlights body posture and movements
that put the body in potential risk of
musculoskeletal disorders. The tool makes
the assessment in a matter of minutes and
Danfoss story
“Safety First“ role models
We set high safety expectations
that apply at Danfoss workplaces,
and it is hard to overestimate the
importance for leaders to act as
role models for safety. That is
why in 2021 we created a safety
program to further strengthen
leadership involvement.
Safety leadership training was
rolled out globally to all sites
to support Danfoss leaders in
communicating a consistent
“Safety First” message across the
organization. This training provides
guidance to leaders about how to
be role models for safe behavior
and recommendations on how
to engage employees in safety
conversations and activities.
Focusing leaders’ attention on
being a role model for safety sends
a clear signal that safety comes
first. The training has become an
integrated part of onboarding new
leaders at Danfoss.
Danfoss Annual Report 2021 governance
Governance
Strong focus on ethics and human rights
Our policies
Risk management and compliance
Corporate governance
Board of Directors
Succession in the founder‘s family
Group Executive Team
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Danfoss is
co-organizing
the IEA
conference
To ensure an effective green
transition, we need to become
better at using energy more
efficiently. The IEA will, for
the seventh time, open its
international conference on
energy efficiency. This time it will
be held in Sønderborg, Denmark,
near the Danfoss headquarters
on June 8-9, 2022. Danfoss is
very proud to co-organize the
event, and we look forward to
showcasing our green solutions
and the concrete potential of
energy efficiency in action.
Danfoss Annual Report 2021
strong focus on ethics and hr
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Strong focus on
ethics and human rights
Danfoss respects international human rights declarations and implements
policies and procedures to ensure that proper working conditions and social
and environmental considerations are core elements of the company’s
behaviors.
Comprehensive ethical guidelines
Danfoss welcomes the growing international focus on areas
such as export control, data privacy, and human rights. We
believe businesses and society at large must take an active
part in the fight against corruption, human rights abuse,
and modern slavery. Because of this, we implemented
comprehensive compliance programs with mandatory
training to minimize the risk of non-compliance.
The programs define clear ownership, policies, operational
procedures, and recurring training and awareness activities.
Furthermore, we have implemented control mechanisms to
minimize the risk of rule violations.
Since the Danfoss Ethics Handbook was first issued in 2008,
it has been regularly updated to reflect the latest legislation,
guidelines, and stakeholder expectations. Respect for
human rights is also reflected in the updated Ethics training
launched in 2021 and mandatory for all managers in Danfoss.
Ethics training was implemented in legacy Eaton Hydraulics
as part of the onboarding activities of our new colleagues.
Our whistleblower function
Danfoss Ethics Hotline serves as our whistleblower function.
It is hosted by an external operator, ensuring that employees
and external stakeholders can anonymously report violations
of legislation or internal ethics guidelines without risk of
retaliation. In 2021, 74 reports were received. Corrective
actions have been taken for all substantiated allegations,
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ranging from stopping inexpedient behavior to termination
of employment. Additionally, Danfoss’ employees can use
the “AskEthics” helpline to ask for guidance on ethics and
compliance.
Eliminating all forms of corruption
To prevent Danfoss from being involved in any kind of
corruption or bribery, we ask third parties that do business
on our behalf to sign an Anti-Corruption clause as part of
the contractual agreement with the business partner.
For our employees, the Danfoss Anti-Corruption Manual
requires compliance with all applicable laws and regulations
on bribery and corruption, including – but not limited to
– the US Foreign Corrupt Practices Act, the UK Bribery Act
2010 and other applicable national anti-bribery statutes and
regulations. All employees are required to comply with our
anti-corruption manual, and employees who have contact
with business partners (primarily in sales and procurement)
are additionally required to take mandatory training on anti-
corruption facilitated by Danfoss Group Compliance.
Our work with human rights due diligence
We conform to the United Nations Guiding Principles on
Business and Human Rights (UNGP), guidelines that require
companies to prevent, address, and remedy human rights
abuses committed in business operations. Danfoss has
exercised due diligence in regions with the highest risk of
human rights violations: China, India, Russia, Latin America,
Turkey, and the Middle East. Our due diligence identified
Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
salient human rights, meaning those rights we could affect
most severely, and we have responded with how we mitigate
those risks. Information on Danfoss’ human rights due
diligence process and salient rights can be found on the
company’s website: https://www.danfoss.com/en/about-
danfoss/company/sustainability/ethics-and-human-rights/.
Mitigating modern slavery
Several countries have issued regulations to avoid modern
slavery, comprising all forms of forced or bonded labor.
Danfoss addresses forced labor in our supply chain and in
our factories, where outsourced functions like cleaning and
construction come with increased risk of forced labor.
In 2021, we focused our due diligence efforts on support
functions like procurement and real estate, as these
functions support the regions with building projects and
facility management services. Furthermore, we took the first
steps towards extending our understanding of the human
rights impacts within our sales organization.
In 2020, the Danish Institute of Human Rights published a
“Corporate Human Rights Benchmark” showing how Danish
companies comply with the UNGP. Even though Danfoss
ranked number four among the benchmarked companies,
“Access to grievance” was noted as an area for improvement.
At Danfoss, the Ethics Hotline serves as our grievance
mechanism. In 2021, we conducted a gap analysis against the
requirements in the UNGP and made necessary adjustments
that give clearer access for external parties and describe a
process for handling human rights complaints.
In 2021, Danfoss received one human rights-related
complaint from an external party relating to two business
partners. One became a sanctioned party causing the
business relationship to be terminated immediately. Danfoss
is further investigating the other business partner.
Dismissals due to unethical behavior
Since 2004, Danfoss has tracked employee terminations due
to unethical or illegal behavior. In 2021, 28 employees left
Danfoss due to unethical behavior, compared to 24 in 2020
and 32 in 2019. The figure includes dismissals and voluntary
resignations connected with ethical issues. The main reasons
for the dismissals have been fraudulent behavior, conflicts
of interest, disloyal behavior, or other violations of company
policies. There are dismissals that were handled by Danfoss’
Ethics Hotline, while some were handled directly by the local
management.
Research shows that sectors with many low- or unskilled
workers and relatively low wages are exposed to forced
labor. The sector with the highest risk of forced labor is
recruitment, as various forms of fees and cost to workers
can lead to debt bondage and other types of forced labor.
Blue-collar temporary workers and migrants are vulnerable
to these forms of practices.
To avoid this, we analyzed a large number of contracts with
recruitment agencies and identified an area of improvement.
Danfoss has a standard process for frame agreements in
which Danfoss’ Code of Conduct addresses forced labor
issues. Sometimes local contracts are used, created by local
recruitment agencies, which do not address modern slavery
issues. To avoid forced labor in recruitment, we rolled out
a process to ensure that our standard process is followed,
or alternatively, a forced labor clause will be inserted in all
future local contracts. This has been deployed in all regions.
We source responsibly
Danfoss has more than 3,500 suppliers of direct materials
used in products and 14,000 suppliers of indirect materials
and services like cleaning and catering, excluding Eaton’s
hydraulics business. All suppliers must adhere to the Danfoss
Code of Conduct. All new direct suppliers in high-risk
countries are subject to internal audits and self-assessment
questionnaires prior to third-party audits. This is a
precondition for being approved as a new supplier.
As with any acquisition, aligning procurement practices with
new suppliers is a focus area. In 2021, this involved working
with our combined (Danfoss and Eaton’s hydraulics business)
supplier list to consolidate and develop long-term, strategic
relationships with key suppliers around the world. This work
will continue into 2022.
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Conducting audits for better results
In 2021, Danfoss conducted nearly as many on-site audits
in high-risk countries as usual, supplemented with virtual
audits. The results revealed that three suppliers did not meet
the requirement of paying the minimum wage, six suppliers
had issues with excessive working days, two suppliers were
not providing correct payment for overtime work, and one
supplier did not meet the standard for employing young
workers. All issues were experienced in high-risk countries:
• Not paying minimum wage: two suppliers remediated
immediately while one refused. The latter will not have
more business with Danfoss until remedied.
• Excessive working days (i.e., not having one day off in
seven days for a long period of time): all six suppliers
agreed to remedy the situation; four of them remedied
immediately.
• Not paying for overtime work: one supplier agreed to
remedy the situation immediately, while the other was
not willing. This supplier will not have more business with
Danfoss.
• Young workers must not work at night: the supplier who
did not meet this requirement has immediately remedied
the situation. Furthermore, the supplier remedied an
unreasonable clause in young workers’ employment
contracts.
In all cases in which suppliers agreed to remedy, a follow-up
audit will take place.
Ethics and human rights going forward
Our efforts to support human rights and avoid bribery and
corruption will continue in years to come with the same high
ambitions as for 2021.
Danfoss Annual Report 2021
our policies
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Our policies
Our policies on business conduct ensure that our efforts are
systematic, supported by documented procedures, and governed
by strong accountability and responsibility for action.
Danfoss’ Policy on Business Conduct
Danfoss policies on business conduct provide the link
between our aspiration, our Core & Clear strategy and how
we conduct business at Danfoss.
The document includes:
Environment, Health and Safety Policy
We provide a safe and healthy workplace, prevent
negative impacts of work, prevent pollution, and manage
resources efficiently. We protect the health and safety of
our employees and other stakeholders and minimize the
environmental impact of our activities.
Health & Wellbeing Policy
We promote wellbeing through health initiatives, maintain
motivated employees, and reduce absence. We care about
the health and wellbeing of our employees to ensure a
strong workforce and high-performing teams.
People Policy
We work together to exceed customer expectations and
achieve excellent performance. We continue to learn and
value expertise, curiosity, and ambition. We trust people and
give them freedom to act, providing an environment where
people are treated fairly.
Quality Policy
We support customers in achieving their business goals
through committed leadership and highly skilled, competent
staff. We drive effective and aligned processes and prevent
failures while being recognized for excellence in quality.
Human Rights Policy
We respect human rights and ensure proper working
conditions. We comply with the UN Guiding Principles on
Business and Human Rights, monitor our impact on human
rights, and mitigate where relevant.
Ethics and Compliance Policy
We are a trustworthy and reliable business driving profitable
growth in a decent, ethical manner. We apply high standards
and act with due diligence to address ethical dilemmas. We
educate our employees to act as responsible ambassadors,
respecting other people and cultures.
Sustainability Policy
We participate in the UN Global Compact, support
the Sustainable Development Goals and engage with
stakeholders to promote sustainable development,
implementing decisions and actions with dignity and
fairness. Sustainability is a fundamental element of our
business conduct.
Product Compliance Policy
We drive our compliance program with defined roles and
responsibilities, continually monitoring requirements from
customers and regulators to make safe and sustainable
products that proactively meet compliance obligations to
customers and regulators.
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Risk Management Policy
We manage risks and opportunities effectively to ensure that
we remain a sustainable business. We maintain efficient risk
management as a prerequisite for running our business and
act rapidly and flexibly when conditions change. We identify,
assess, treat, and monitor risks at all managerial levels.
Information Security Policy
We protect our information and assets against deliberate
and accidental threats by applying security-by-design and
security-by-default when developing our products and
services. We operate controls to ensure the confidentiality,
integrity, and availability of our information and assets.
Communication and Reputation Policy
We conduct open and honest communication with all
our stakeholders to retain, expand and defend Danfoss’
reputation as a trustworthy and responsible company. We
communicate clearly and transparently with all stakeholders,
showing authenticity and thought leadership.
More information about our policies and management
practices can be found on our webpage.
Danfoss Annual Report 2021
risk management and comp
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Risk management and compliance
We manage risks and opportunities effectively to drive profitable growth
in increasingly complex business environments.
Danfoss takes a systematic and comprehensive approach to
managing risk. Maintaining efficient risk management is a
foundation as well as a prerequisite for running a profitable
business and for acting in a rapid and flexible way when
conditions change.
Risk governance
Overall, the Board of Directors performs risk oversight,
and the Audit Committee assesses the effectiveness of the
risk management process. The Group Executive Team is
responsible for executing risk management, ensuring that
policies and processes are effective at all relevant levels.
Responsibility for the day-to-day risk management activities
lies with the respective business segments and Group
functions.
Risk overview
Like its industry peers, Danfoss is exposed to risks. While no
single risk can threaten the existence of Danfoss – both in
the current and future outlook – the following external risk
conditions apply:
• Global market conditions, including a continued
stronger focus on energy efficiency, sustainability, and
infrastructure
• The five global megatrends that affect Danfoss, our
technologies, and the way we do business
• Fair and equal access to markets
• Global economic growth
• Developments in key markets and cyclical industries
• Customer relations and reputation, including our ability to
build business on trust and integrity
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Specific risk areas
Pandemics
Risk
The risk that a pandemic, such as COVID-19, creates global volatility and
uncertainty that could affect Danfoss employees’ health and safety as well
as Danfoss’ supply chain and markets.
Mitigation
Danfoss set up crisis teams at Group, regional, country, and site levels of
the organization, tasked with managing the risk of infection, safeguarding
business continuity, and ensuring that our business can continue to
operate. We follow local rules and guidelines to support the safety of our
employees. Regular meetings help us learn from each other and adapt to
the changing reality. Segments are in close contact with customers and
suppliers.
Preparation and integration
of new acquisitions
Risks associated with the
ongoing integration of the
newly acquired Eaton’s
hydraulics business.
The integration of the business
is underway, using a structured
approach to minimize any
disruption to the business and
our customers and maximize the
benefits.
• Competitive strength and innovation, including the ability
to support customers in providing efficient solutions, high
product quality, and attractive cost levels
• Financial sustainability, including our ability to fund new
growth and innovation
The Group Executive Team has a special focus
on two additional risks, which are currently very
important. These two specific risk areas are described
in the overview, which does not include financial
risks. Financial risks are described in Note 7.
Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Internal control and risk management systems
Danfoss’ consolidated financial statements are prepared
in accordance with the International Financial Reporting
Standards (IFRS) as adopted by the EU and Danish disclosure
requirements as set out in the Danish Financial Statements
Act.
Danfoss has set up internal control and risk-management
systems to ensure that its financial reporting complies
with the above-mentioned rules, containing the following
categories:
• Control environment
• Risk assessment
• Control structure
• Information and communication
• Monitoring
Control environment
The most significant policies and procedures related to
financial reporting include: Accounting and Controls Manual
(containing accounting policies, methods, and requirements
on key internal controls), the Treasury Manual, the Tax Policy,
the IT Security Policy, and the Ethics Handbook. The purpose
of the control activities is to prevent, detect, and correct
any errors or irregularities, as well as ensure that applied
estimates are reasonable under the circumstances. In order
to ensure efficient controls, Danfoss applies three lines of
defense, as shown in the overview.
Risk assessment
On an ongoing basis, the CEO, CFO, and the Audit Committee
evaluate the risks considered to have a potential impact on
the Group’s financial reporting. Quarterly, such evaluations
are performed during business review meetings between
the CEO and CFO and each segment. The risks are treated
according to their potential impact and likelihood. At least
once a year, the CEO, CFO, and the Audit Committee perform
a general assessment of the risks related to the financial
reporting, including the risk of fraud, mitigating measures,
and the assessment of internal controls.
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Risk-management structure and control environment
General Meeting
Board of Directors
CEO and CFO
Business segments
& organization
Risk management
Audit Committee
External auditors
Group functions
Internal audit
1st line of defense
Daily risk
management.
Responsible for
identifying and
acting on risks.
2nd line of defense
Controlling and
follow-up.
3rd line of defense
Independent
auditing of the
company, the
management, and
the risk function.
Control structure
Danfoss’ Corporate Standards describe the requirements that
apply to accounting systems. These standards are revised
and improved as and when considered necessary. Danfoss
subsidiaries report financial information for use in the Annual
Report and in interim announcements in a shared reporting
environment. The reporting by the subsidiaries is checked
on an ongoing basis, and procedures have been set up to
ensure that any errors or inadequacies in the data reported
are communicated to and corrected by the subsidiaries in
a timely way. Danfoss’ standards related to accounting and
controls have been prepared in order to enable uniform and
reliable reporting, which uphold the quality of the Group’s
financial statements. The Group Finance function supervises
and verifies to ensure that the reports comply with these
corporate standards. Furthermore, the internal audit
function performs random assessments of the reporting as
well as of the controlling process to minimize the risk of fraud
and misreporting.
Information and communication
Group standards, policies, procedures, and guidelines are
available for all employees on the Group’s intranet. All
changes to legislation and regulations are communicated
to all who are responsible for reporting, in a timely way by
using email or meetings.
Monitoring
The segments monitor the transactions from a business
perspective, whereas the corporate functions monitor the
transactions from a Group perspective. Danfoss’ Corporate
Finance function performs a series of controls over the
Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Furthermore, AI or automated decision making will only take
place if the decision is:
•
Necessary for entering into, or performance of, a
contract; or
• Authorized by Union or Member State law to which
Danfoss is subject and which also lays down suitable
measures to safeguard individuals’ rights and freedoms
and legitimate interests; or
• Based on consent.
Special personal data that reveals racial or ethnic origin,
political opinions, religious or philosophical beliefs, trade
union membership, genetic data, biometric data, or data
concerning health or revealing a person’s sex life or sexual
orientation will in no event be subject to AI or automated
decision making. An exception is if individuals have provided
their explicit consent or the processing is necessary for
reasons of substantial public interest or applicable law.
subsidiaries’ financial reporting, e.g., finance and tax
reporting matters. On a monthly basis, issues identified
in the most recent monthly financial report are reported.
Additionally, the Internal Audit function performs a series of
audits on selected subsidiaries in order to verify compliance
with Danfoss’ standards, policies, procedures, and internal
controls, including IT general controls. Monthly, the audit
issues identified are reported to the Group Executive Team.
Data privacy
We maintain a high focus on data privacy processes and
compliance with data privacy regulations.
Based on updated Danfoss Binding Corporate Rules,
approved by the Danish data protection authorities, we
follow a Data Privacy Handbook, conduct and participate
in training, and follow other requirements of data privacy
legislations. Furthermore, the organization keeps its focus
on Export Control, including sanctions, countries, business
partners, and product reviews.
Data ethics
Danfoss is in the process of transforming from traditional
business operations into a more digital business. This shift
is accelerated by the gathering, storage, analysis and use of
vast quantities of data. While this represents opportunities,
it also comes with challenges and ethical dilemmas. Danfoss
targets consistency across the organization and applies the
same ethical values and guidelines to processing data while
keeping local context in mind.
Danfoss respects the right to privacy, whether it is the
privacy of our employees, our business partners, or the
people using our products. Danfoss has taken security
measures to protect personal data. For that reason,
Danfoss has implemented a set of Binding Corporate
Rules, introducing a global standard of data protection
requirements to be complied with by all Danfoss entities,
regardless of location. The Binding Corporate Rules have
been approved by the leading European data protection
agency for Danfoss and establish the foundation for Danfoss’
processing of personal data.
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Data exploration and data modelling help us understand
stakeholder needs better and provide insights to improve
service, reduce risks, and improve operational processes.
Danfoss’ overall approach to using data is transparency, and
we handle it with care. Danfoss takes full responsibility for the
data we process, and we do not monetize individuals’ data.
Personal data is processed only to pursue a legitimate
purpose, and generally we will only do so if:
•
•
Consent to such processing has been provided; or
The processing is necessary for the performance of a
contract; or
• The processing is necessary for compliance with a legal
•
obligation that we are subject to; or
The processing is necessary for the purposes of the
legitimate interests pursued by us or by a third party and
such processing is not considered to be harmful to the
individual.
We will protect access to individuals’ data, and we will
comply with all regulations that protect individuals’ data
in the countries in which we operate. In relation to our
employees, Danfoss generally refrains from performance
monitoring and conducts monitoring only in an
extraordinary situation that requires restricted access as well
as in accordance with current legislation.
When confronted with an ethical dilemma, our employees
are encouraged to reach out to Group Compliance
to minimize uncertainty and prevent unintended
noncompliance when making managerial or business
decisions. Furthermore, stakeholders are welcome to contact
the Group Data Protection Office for guidance or to report
concerns.
Where Danfoss uses Artificial Intelligence (AI) or automated
decision making, Danfoss ensures that stakeholders
are informed in line with our legal obligations and that
appropriate security measures are implemented.
Danfoss Annual Report 2021 corporate governance
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Corporate governance
The Board of Directors remains committed to good
corporate governance practices and to following the Danish
Recommendations on Corporate Governance.
Legislation provides the overall framework for the
governance in Danfoss, and corporate governance
determines how the business is managed within this
framework. The Group structure determines a clear
distribution of management responsibilities and supports
corporate values. These principles drive the interaction
between the Group’s management, the owners, and
other stakeholders. The articles of association and a
comprehensive set of internal management and control
procedures also form part of corporate governance within
Danfoss.
As its code of corporate governance, Danfoss follows the
recommendations on good corporate governance, as set out
by the Committee on Corporate Governance in Denmark,
which are available on corporategovernance.dk. Danfoss
complies with the recommendations. The statement is
available at: https://www.danfoss.com/en/about-danfoss/
company/financial-information/corporate-governance/
necessary to ensure the Group’s long-term performance.
The aggregate competencies of the members of the Board
of Directors are regularly assessed to ensure consistency
with the Group’s requirements. The entire Board of Directors
performs the function of the Audit, Nomination, and
Remuneration Committee.
The Board of Directors consists of eight members and four
employee-elected members. Shareholder-elected members
are elected for the term until the following year’s Annual
General Meeting and may be re-elected. Six of the eight
shareholder-elected members are independent. The Board
of Directors appoints a Chair and one or two Vice Chairs
from among its members. Pursuant to Danish legislation,
employee representatives serve on the Board for four years
and may be re-elected. The most recent employee election
took place in early 2022 and the newly elected employee
representatives will join the Board of Directors at the Annual
General Meeting 2022.
Management structure
Danfoss has a two-tier management system consisting of the
Board of Directors and the Group Executive Team, including
the CEO and CFO.
The Board of Directors approves the overall strategies and
targets of Danfoss, appoints and supervises the CEO and
CFO, and defines the guidelines for the CEO and CFO on
the day-to-day operation of Danfoss. Having the overall
responsibility for the company’s activities, it is important that
Danfoss has a dynamic and professional Board of Directors,
whose members possess the knowledge and experience
The Board of Directors meets at least five times a year and
holds extraordinary meetings when required. At least one
meeting each year includes a site visit to one of the Group’s
locations around the world. All members of the Board
of Directors are expected to participate in the meetings.
Matters discussed at Board meetings are decided by simple
majority, and, if needed, the Chair has the casting vote. The
CEO and CFO normally attend the meetings of the Board of
Directors, unless the Board of Directors is reviewing matters
pertaining to the CEO and CFO. The distribution of tasks
between the Board of Directors, CEO and CFO is set out in
the rules of procedure.
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Gender composition of the Board of Directors
The Danish Financial Statements Act (FSA) requires that
corporate entities of a certain size and type report on the
gender composition in management.
Danfoss aims for a gender composition in the Group’s Board
of Directors that reflects that of the rest of the Group and has
a target of having at least one female member of the Board
of Directors, who is elected at the Annual General Meeting
(AGM). Danfoss remains committed to the target and met it
again in 2021.
In 2021, the Board of Directors had twelve members, of
which nine were male and three were female, one AGM-
elected and two employee-elected. Furthermore, the Board
of Directors consists of people with diverse backgrounds,
professional skills, nationalities, and ages.
Gender composition targets like that of the Board
of Directors have been implemented in the relevant
subsidiaries of a certain size and type. Danfoss meets the
gender composition target for the Board of Directors of
Danfoss Power Solutions ApS, but not of Danfoss Power
Electronics A/S (Danfoss Drives), Danfoss International A/S
and Sondex A/S, as the composition of the boards did not
change during the year. However, Danfoss Drives has a
female board member elected by the employees. In these
relevant subsidiaries, the gender composition target for the
Board of Directors is expected to be met in 2022.
Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Shares
Votes
48%
26%
11%
86%
5%
2%
Group’s expectations for the upcoming year, its ability to
meet expectations, the financial development of several
comparable companies and their expectations for the future,
as well as general developments in the stock market. In 2021,
the price was set at DKK 10,717 per share against DKK 7,072 per
share the previous year.
Annual General Meeting
Danfoss’ Annual General Meeting will be held virtually from
the company’s registered office, on March 25, 2022. The Board
of Directors will recommend that a dividend of 30.0% of the
Group’s net profit be paid for 2021, corresponding to EUR 19.0
or DKK 141.3 per DKK 100 share.
Audit Committee
The Chair of the Audit Committee conducts regular meetings
with the corporate functions and internal audit outside
Board meetings. The committee’s activities and tasks are set
out in its rules of procedure. Four meetings were held in 2021.
The main objectives of the Audit Committee are to:
• Monitor the financial reporting process (reliable reporting)
• Supervise the efficiency of the company’s internal control
system and risk management systems
• Monitor the statutory audit of the financial statements
• Monitor and verify the auditors’ independence, including
the provision of additional services to the company
• Monitor the external auditors’ competencies and findings
• Make recommendations to the Board regarding the
appointment of auditors
Shareholders with more than 5% of share capital
Shareholder
Bitten & Mads Clausen’s Foundation, Nordborg, Denmark, and its subsidiaries
Clausen Controls A/S, Sønderborg, Denmark
Henrik Mads Clausen, Lake Forest, USA
The CEO and CFO are the company’s registered officers and
signatories with the Danish Business Authority. They are
appointed by the Board of Directors and are accountable for
the management of the Danfoss Group towards the Board of
Directors. According to the rules of procedure, the CEO and
CFO are responsible for Group-related governance activities,
such as Board of Directors meetings, business reviews, legal
matters, and other formal governance topics.
Internal audit
Danfoss has an internal audit function to carry out
independent internal checks. The internal audit function
provides independent and objective audits to ensure:
Shareholders
At the end of 2021, Danfoss had 2,453 registered shareholders.
Approximately three in four shareholders were resident in
Denmark.
• The Group has a comprehensive set of internal
management and control procedures and processes,
as well as segregation of duties and functions. This also
includes the Group’s IT systems.
• The Group follows good administrative practice. The
internal audit function performed a series of audits of
selected Group companies in 2021. No matters of material
importance to the Group’s overall risk management and
control management and control environment were
detected.
Group Executive Team
The Group Executive Team is Danfoss’ top management
team and consists of the CEO, CFO, the Presidents of the
three business segments and the President of Developing
Regions. The GET holds formal meetings regularly and
focuses on strong ownership, execution of strategy and
performance and handling the day-to-day responsibility for
the Group’s operations.
Share capital
Danfoss’ share capital amounts to EUR 134m or DKK
997m and is divided into two share classes: Class A shares
accounting for EUR 57m or DKK 425m and Class B shares
accounting for EUR 78m or DKK 572m. A-shares entitle
holders to ten votes for every DKK 100 nominal value of
shares held and B-shares entitle holders to one vote for every
DKK 100 nominal value of shares held. See more information
in Note 16, page 95. Class A shareholders have a pre-emption
right to A-shares in the event of share capital increases.
Apart from this, no shares carry special rights. Bitten & Mads
Clausen’s Foundation and the Clausen family hold all issued
A-shares and several B-shares corresponding to 99.87% of
the votes.
Share price
The price of Danfoss shares is set once a year, based on
a valuation prepared by Danske Markets immediately
before the AGM is held. The calculation of the share price
is based on the financial performance of Danfoss, the
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Danfoss Annual Report 2021 board of directors
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Board of Directors
From left: Sandra Nørgaard Bertelsen, Jürgen Reinert, Jørgen M. Clausen, Per Falholt,
Mads-Peter Clausen, Connie Hedegaard, Jens Bjerg Sørensen, Lars Grau, Mika Vehviläinen
Sitting from left: Marianne Godballe, William Ervin Hoover Jr., Jens Peter Rosendahl Nielsen
Danfoss Power Solutions Controls division in Nordborg, Denmark. The building was renovated according to Danfoss ‘ new
workplace concept “future ways of working.“ Danfoss invested in new production machines and an optimal framework for
new thinking, collaboration, and knowledge sharing across teams. The name “Nexus“ represents a series of connections
linking two or more things together in a solution. In an application system, control products link pump, motors, and
steering units together in the system solution – the nexus.
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Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Board of Directors
Jørgen M. Clausen
Chair
Jens Bjerg Sørensen
Vice Chair
Mads-Peter Clausen
Per Falholt
Connie Hedegaard
Born: September 1948
Appointed: 2009
Born: June 1957
Appointed 2020
Independent
Born: July 1976
Appointed: 2014
Born: September 1958
Appointed: 2017
Independent
Born: September 1960
Appointed: 2016
Independent
Special competencies:
International experience
from managerial manage-
ment positions and strong
strategic, organizational, and
communication skills. Exten-
sive knowledge of business
administration, engineering,
and board work.
Board positions:
Chair: miniBOOSTER A/S.
Special competencies:
Professional experience
from Research &
Development, product
innovation and
development of new
biotechnologies for
products, applications and
processes as well as start-
up companies.
Board positions:
Chair: Fonden Universe
Science Park; DHI
Foundation; Curasight A/S.
Member: Cytovac A/S;
Applied Biomemetics;
Co-Ro A/S; Lactobio; LIFE
foundation; Bactolife.
Special competencies:
Professional experience as
Minister and EU Com-
missioner with extensive
knowledge of climate,
environmental and energy
challenges on an interna-
tional level. Expert on glob-
al sustainable development
and green transition.
Board positions:
Chair: KR Foundation; the
green think tank, CONCITO;
OECD’s Round Table on
Sustainable Development;
Aarhus University.
Member: NORDEX;
Volkswagen’s Sustainability
Board; Cadeler.
Special competencies:
Professional experience
managing a Danish-based
global company and from
other board memberships.
Board positions:
Member: Fonden Universe
Science Park; miniBOOSTER
Hydraulics A/S.
Owner: SaltPower ApS.
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Special competencies:
Strong experience within
strategy, M&A, portfolio
management and business
administration. Strong
knowledge of management
in a global group and the
work in a listed company.
Board positions:
Chair: Alba Ejendomme A/S;
BioMar Group A/S; Borg
Automotive A/S; F. Salling
Holding A/S; F. Salling Invest
A/S; GPV International
A/S; HydraSpecma A/S;
Købmand Herman Sallings
Fond; A. Kirk A/S.
Vice chair: Salling Group A/S;
Fibertex Nonwovens A/S;
Fibertex Personal Care A/S.
Member: Per Aarsleff
Holding A/S; Købmand
Herman Sallings
Mindefond; Aida A/S;
Ejendomsselskabet FMJ
A/S; F.M.J. A/S; Bitten &
Mads Clausens Fond.
William Ervin Hoover Jr.
Chair of Audit Committee
Born: December 1949
Appointed: 2007
Special competencies:
Professional experience
with supply chain,
performance
transformation,
organizational changes
and mergers and
acquisitions.
Board positions:
Chair: ReD Associates
Holding A/S, Denmark.
Member: Specialist People
Foundation.
Danfoss Annual Report 2021
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Board of Directors
Jürgen Reinert
Mika Vehviläinen
Born: January 1968
Appointed: 2015
Independent
Born: February 1961
Appointed: 2018
Independent
Sandra Nørgaard
Bertelsen
Born: August 1982
Appointed: 2014
Marianne Godballe
Lars Grau
Jens Peter Rosendahl
Nielsen
Born: June 1984
Appointed: 2018
Born: July 1963
Appointed: 2014
Born: January 1957
Appointed: 2006
Special competencies:
Professional experience
with performance
transformation,
organizational changes,
mergers and acquisitions,
and Internet of Things (IoT).
Special competencies:
Employee-elected member
of the Board of Directors.
Special competencies:
Employee-elected member
of the Board of Directors.
Special competencies:
Employee-elected member
of the Board of Directors.
Special competencies:
Employee-elected member
of the Board of Directors.
Board positions:
Chair: ”TL-klubben,” South
Denmark, Danfoss A/S.
Board positions:
Member: Danish El Federal
in South Jutland.
Board positions:
Chair: Danfoss Employee
Foundation in Denmark.
Member: Danfoss Employee
Foundation in Denmark;
Deputy President, Junior
Chamber International in
Denmark; Junior Chamber
International Denmark
Foundation.
Member: Metal Kolding;
LO-Kolding.
Special competencies:
International experience
with executive
management and
business administration
as well as strong strategic,
organizational, and
communication skills.
Expert within electrical
engineering (drives,
electric vehicles, renewable
energy) and science, and
extensive knowledge from
other board positions.
Board positions:
Member: KraftPowercon
Sweden AB.
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Danfoss Annual Report 2021 generational succession
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Succession in the founder‘s family
As announced on March 26, 2021, Danfoss A/S and Bitten & Mads Clausen’s Foundation will
implement a well-planned generational succession of the representatives of its family ownership in
2022. Following decades of passionate contribution to Danfoss and the Foundation, Jørgen Mads
Clausen at Danfoss A/S and Peter Mads Clausen at Bitten & Mads Clausen’s Foundation will pass the
baton to the next generation of the family.
This change highlights the Clausen family’s
historic ties and affiliation with Danfoss A/S
and Bitten & Mads Clausen’s Foundation –
which celebrated its 50th anniversary in 2021
– and it ensures continued stability of the
operations of Danfoss and the Foundation.
The Clausen family is deeply committed
to continuing the close and trusting
cooperation with the executive boards and
senior management of both Danfoss and
the Foundation.
The timing of this change is important as
Danfoss is establishing a strong position
in the global competitive landscape, and –
actively supported by the Foundation – is
investing heavily to ensure future growth
and development.
The Foundation and family ownership of
Danfoss A/S is fundamental to ensuring
long-term success – and in fulfilling the
enormous potential – of Danfoss, especially
in a world where climate change is an
inevitable challenge.
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Peter Mads Clausen
and Jørgen Mads Clausen
Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Family representation
Mads Clausen, who is the son of Anette and Jørgen Mads
Clausen, will be up for election as new board member of
the Board of Directors at Danfoss A/S at the Annual General
Meeting 2022. He will continue as a member of the Board of
Directors of Bitten & Mads Clausen’s Foundation, which he
joined in 2015.
In 2022, Mads-Peter Clausen, who is the son of Anne-
Dorthe and Peter Mads Clausen, will be up for election as
new board member of Bitten & Mads Clausen’s Foundation.
He will be up for re-election for the Board of Directors at
Danfoss A/S, which he has been a member of since 2014.
Jens Martin Skibsted, son of Bente Skibsted (the daughter
of Danfoss founder Mads Clausen), will be up for re-election
for the Board of Directors of Bitten & Mads Clausen’s
Foundation, which he became a member of in 2012.
The ownership structure, as well as the strategic direction
of Danfoss A/S and Bitten & Mads Clausen’s Foundation,
continues unchanged.
Passing the baton
Both Jørgen Mads Clausen and Peter Mads Clausen are proud
to have the generational succession in place and to be able
to ensure the necessary stability in both the Foundation
and Danfoss for the next generation. They are very satisfied
with Danfoss’ positive development and are delighted that
the third generation of the Clausen family is showing its
loyalty to Danfoss and the Foundation by accepting greater
responsibility in the future.
Jørgen Mads Clausen and Peter Mads Clausen will continue
to support both Danfoss and the Foundation going forward
with their insights and with their well-demonstrated
commitment.
The final setup, including the distribution of roles on the
boards of directors of Danfoss A/S and Bitten & Mads
Clausen’s Foundation, will be determined in 2022 after
the Annual General Meeting and the Annual Meeting
respectively.
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Danfoss Annual Report 2021 group executive team
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group Executive Team
Eric Alström, Vesa Laisi, Kim Fausing, Jesper V. Christensen, Jürgen Fischer and Lars Tveen getting a Climate Solutions
product presentation at the newly built, sustainable Campus Kolding, Denmark. Danfoss’ new and contemporary
workplace concept encourages collaboration and knowledge-sharing across business segments, functions, and teams.
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Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group Executive Team
Kim Fausing
President & CEO
Jesper V. Christensen
Executive Vice President
& CFO
Eric Alström
Segment President,
Danfoss Power Solutions
Jürgen Fischer
Segment President,
Danfoss Climate Solutions
Vesa Laisi
Segment President,
Danfoss Drives
Lars Tveen
Segment President, Danfoss
Developing Regions
Born August 1964
Joined Danfoss in 2007
Registered officer with the
Danish Business Authority
since 2008.
Born November 1969
Joined Danfoss in 1993
Registered officer with the
Danish Business Authority
since 2013.
Born April 1966
Joined Danfoss in 2012
Born December 1963
Joined Danfoss in 2008
Born June 1957
Joined Danfoss in 2014
Born June 1963
Joined Danfoss in 1989
Board positions:
Vice Chair:
Manufacturing Industry in
Denmark.
Member:
Confederation of Danish
Industries;
Danish Crown A/S.
Board positions:
Vice Chair:
Hempel A/S.
Member:
MSx Advisory Board of
Stanford Graduate School
of Business.
Board positions:
Chair:
Steering Board of EPEE -
the European Partnership
for Energy and the
Environment.
Member:
Advisory Board of TÜV
SÜD.
Board positions:
Member:
Kempower Plc.
Advisor:
Wirepas Ltd.
Board positions:
Chair:
Project Zero Foundation.
Member:
P4G - Partnering for Green
Growth and the Global Goals
2030;
SKAKO A/S;
The Energy Industry in
Denmark;
Synergi in Denmark;
Grøn Energi in Denmark.
Board positions:
Chair:
Climate Partnership
between Government
and Industry for the
manufacturing industry in
Denmark.
Vice Chair:
SMA Solar Technology AG.
Member:
Hilti AG;
LafargeHolcim Ltd.
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Danfoss Annual Report 2021 financial statements intro
Financial
Statements
Financial Review
Financial Review
Group Accounts and Notes
Group Accounts
Group Notes
Group Companies
Parent Accounts and Notes
Management’s Review
Parent Accounts and Notes
63
68
72
113
117
119
Statements
Management’s Statement
137
Independent Auditor’s Report 138
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30% more
efficient
cooling with
Danfoss
technologies
As we digitize our societies, we
increase demand for a specific
type of building: data centers. By
2025, data centers will consume
1/5 of the world’s power supply,
making it vital to create data
center sustainability and cut CO₂
emissions.
Chillers and heat pumps
featuring Danfoss Turbocor®
technology can cool data centers
up to 30% more efficiently
than traditional compressors.
Danfoss also has innovative
solutions for heat recovery.
Excess heat generated by server
equipment and discharged to
the atmosphere can be recycled
and used in heating applications.
Recycling like this represents a
massive opportunity.
Danfoss Annual Report 2021
Financial review
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Financial review
Danfoss delivered a very strong financial performance which was better than expected.
Sales increased 29% to EUR 7,539m. This was driven by strong demand, leading to
organic growth of 18%, and the acquisition of Eaton’s hydraulics business. The higher
topline generated strong profitability. EBITA increased 34% to EUR 969m, leading to an
EBITA margin of 12.8%. The high EBITA was delivered by managing the global supply
chain disruptions. Danfoss continued to drive a solid cash flow, allowing a high level
of investments in innovation and production capacity. Despite taking on new debt to
acquire Eaton's hydraulics business, the net debt to EBITDA ratio ended the year at 2.1.
Sales
2021 was a historically strong year for Danfoss with significant
organic and inorganic growth. This puts us on a sound
growth trajectory, also in comparison to 2019, pre-COVID-19.
Sales increased to EUR 7,539m (2020: 5,828m), which was
EUR 1,711m above 2020. The reported growth was 29% after
a negative currency impact of 2%. Organic growth was 18%.
As of August 2, Eaton’s hydraulics business was included in
the consolidated numbers adding sales of EUR 786m in 2021.
Organic growth to 2019 was 11%, demonstrating that we are
well ahead of pre-COVID-19 sales levels.
All three business segments grew compared to 2020.
Compared over 2019, Danfoss Power Solutions and Danfoss
Climate Solutions were well ahead and Danfoss Drives on
par.
Compared to 2020, Danfoss delivered strong growth in all
regions, led by Latin America, Asia-Pacific, Africa-Middle East,
and North America.
We continued to see strong demand for our technologies
and solutions that are driving the green transition towards
lower CO₂ emissions and more electrification, e.g., within
infrastructure, food, commercial and residential buildings,
and renewables. Examples are controls, electric-vehicle
drivetrains, energy-efficient compressor technologies for
cooling, industrial refrigeration, heat pumps, floor heating,
and variable speed drives for wind and solar.
2021 was characterized by the increased activity levels in the
world economy leading to supply chain disruption due to
components shortages, turbulence in transport, significantly
increasing freight cost, and higher raw material prices.
Danfoss acted early to mitigate through partnering with
suppliers to ensure the highest supply priority, re-designs
using alternative components approved by customers, price
increases, and even more focus on adapting our planning
and working closely with our customers to minimize impact
and improve lead times and deliveries.
63/141
Sales
EURbn
7.5
6.0
4.5
3.0
1.5
0.0
2017
2018
2019
2020
2021
Sales split by segments
19%
43%
38%
Danfoss Power Solutions
Danfoss Climate Solutions
Danfoss Drives
Sales split by regions
3%
5%
25%
34%
25%
8%
Western Europe
Eastern Europe
North America
Asia-Pacific
Latin America
Africa-Middle East
Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Later in the year, our cash planning furthermore enabled
the early repayment of the EUR 500 million bond notes
issued in 2014 to fund the acquisition of the Finnish AC
drives manufacturer Vacon. The bonds were redeemed on
November 23, 2021, three months ahead of time. Following
this, Danfoss no longer has listed bonds on the Irish stock
exchange but continues to have bonds on the stock
exchange in Luxembourg. See page 97 for more information.
Total assets increased 55% to EUR 9,970m (2020: 6,412m),
mainly due to the acquisition of Eaton’s hydraulics business.
Equity increased 24% to EUR 3,951m (2020: 3,184m),
predominantly influenced by the profits. Furthermore,
at the Annual General Meeting held on March 26, 2021, it
was decided that no dividends would be paid, due to the
uncertainty created by the pandemic. The equity ratio,
calculated as equity relative to total assets, was 39.6% (2020:
49.7%). The return on equity was 16.6% (2020: 13.1%).
Net interest-bearing debt amounted to EUR 2,677m (2020:
537m), leading to a net interest-bearing debt to EBITDA ratio
of 2.1 (2020: 0.6). The net interest-bearing debt was positively
impacted by no dividend payout and negatively impacted
by the bond issuance related to the acquisition of Eaton’s
hydraulics business.
The non-current interest-bearing debt maturing after more
than 12 months amounted to EUR 2,708m (2020: 1,103m),
corresponding to 92% (2020: 94%) of the total interest-
bearing debt. At year-end, the Group had unutilized and
long-term committed credit facilities of EUR 986m (2020:
1.5bn) in addition to cash and cash equivalents and ordinary
operating credits.
At the end of 2021, Danfoss’ credit rating assigned by
Standard & Poor’s was “BBB/A2 with a stable outlook.” See
Note 16, page 95, for more information.
Earnings
After continued high levels of strategic investments in
innovation, production capacity, digital transformation, and
regional initiatives to fuel future growth, the operating profit
before acquisition-related amortization (EBITA) increased
34% to EUR 969m (2020: 723m). The EBITA margin reached
12.8% (2020: 12.4%).
The strong earnings were driven by the higher topline and
continued traction in managing procurement savings,
productivity improvements in the factories, as well as
customer pricing and mix. To a large extent, this countered
the inflationary pressure from increasing raw material prices,
freight cost, and spot buys related to the challenging supply
situation.
Operating profit (EBIT) increased 40% to EUR 877m (2020:
625m), leading to an EBIT margin of 11.6% (2020: 10.7%). EBIT
was positively impacted by the gain from the divestment
of White Drive Motors & Steering, but negatively impacted
by integration cost related to the acquisition of Eaton’s
hydraulics business.
Net profit reached EUR 631m (2019: 435m), 45% higher than
the previous year. The effective tax rate for 2021 was 23.0%
(2020: 24.6%).
Innovation
Danfoss continues to invest in innovation across the business
segments to improve the performance of our products
and solutions and be the preferred partner in helping our
customers decarbonize. The research and development
expense increased 23% to EUR 328m (2020: 267m),
corresponding to 4.4% of sales (2020: 4.6%).
Assets and liabilities
To secure the long-term funding of the acquisition of Eaton’s
hydraulics business, Danfoss completed a successful bond
issuance on April 21, 2021. Danfoss raised EUR 1.9bn, and the
remaining funding of the cash purchase price of 3.3 billion
USD was made up of bank financing already in place and
cash at hand. See page 97 for more information.
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EBITA
EURm
1,000
800
600
400
200
0
2017
2018
2019
2020
2021
EBITA
EBITA margin
Innovation
EURm
350
280
210
140
70
0
2017
2018
2019
2020
2021
%
15
12
9
6
3
0
%
5
4
3
2
1
0
R&D spend
R&D spend ratio
Net interest-bearing debt (NIBD)
EURbn
3.0
2.4
1.8
1.2
0.6
0.0
3,0
2,4
1,8
1,2
0,6
0,0
2017
2018
2019
2020
2021
NIBD
NIBD ratio
Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Divestiture
On January 27, 2021, Danfoss announced the preparation of
a necessary divestiture to meet regulatory requirements as
a prerequisite to close the acquisition of Eaton’s hydraulics
business. On June 1, Danfoss entered into an agreement
to sell the White Drive Motors & Steering business unit to
Interpump Group S.p.A. in Italy. The transaction was officially
closed on October 1, 2021. See Note 12, page 91, for more
information.
Employees
The number of employees increased significantly to 40,043
following the integration of new colleagues from Eaton’s
hydraulics business, adding more than 10,000 employees to
the group. In 2020, Danfoss had 27,491 employees.
Events after the balance sheet date
We are not aware of any events after the balance sheet date
of December 31, 2021, which could be expected to have a
material impact on the Group’s financial position.
Cash flow
Securing a solid cash performance remains a priority for
Danfoss to finance our M&A activities, strategic growth
initiatives and repay interest-bearing debt.
The free operating cash flow after financial items and
tax (before M&A) amounted to EUR 401m (2020: 493m),
confirming the cash generating capability of Danfoss.
The cash flow from operating activities increased to
EUR 838m (2020: 800m), driven by a positive operational
performance and negatively impacted by a higher level of
investments in innovation and capacity as well as additional
trade working capital due to the growth in activity levels.
Cash flow from investing activities amounted to EUR -2,794m
(2020: -242m), driven by M&A activities, investments in
production capacity and our digital transformation.
The cash flow from financing activities increased to EUR
1,596m (2020: -54m), impacted by the bond issuance related
to the acquisition of Eaton’s hydraulics business.
Acquisition
As announced on August 2, 2021, Danfoss closed its USD
3.3bn acquisition of Eaton’s hydraulics business. With this
move, the Danfoss Group grew by a third and established
itself as a global leader in mobile and industrial hydraulics.
See Note 12, page 90, for more information.
Cash flow
EURm
750
600
450
300
150
0
2017
2018
2019
2020
2021
Free operating cash flow
Free operating cash flow after financial items and tax
Net investments in fixed
assets excluding M&A
EURm
400
320
240
160
80
0
2017
2018
2019
2020
2021
65/141
Danfoss Annual Report 2021 group accounts and notes
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
2-3 years
payback time
for energy
savings features
Energy management in
supermarkets is crucial to success
and profitability. In the US, utilities
often offer incentives to reduce
electricity consumption. With
Danfoss Smart Store solutions,
we provide case controls,
digital monitoring, sustainable
refrigeration, and more.
Additionally with heat recovery
technology, we can capture
and recycle heat given off from
refrigeration systems to supply
heat and hot water for the store.
In markets that have established
modern district energy systems,
such as Northern Europe, the excess
heat can be distributed to nearby
homes and buildings – turning
supermarkets into heat suppliers.
66/141
Danfoss Annual Report 2021 group notes overview
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Financial Statements – Group
Income statement & comprehensive income 68
Basis of reporting and critical accounting estimates
Capital structure and financing
Statement of financial position
Statement of cash flows
Statement of changes in equity
69
70
71
Note 1
Basis of preparation
Income statement
Note 2
Note 3
Segment reporting
Expenses and other operating income
Net working capital
Note 4
Note 5
Note 6
Inventories
Trade receivables
Other debt
Note 7
Change in working capital
Capital employed
Note 8
Note 9
Investments in associates and joint ventures
Intangible assets
Note 10
Property, plant and equipment
Note 11
Leases
Note 12
Acquisition and sale of subsidiaries and activities
Note 13
Acquisition/sale of other investments
Note 14
Provisions
Note 15
Financial income and expenses
Note 16
Share capital
Note 17
Financial risks and instruments
94
95
96
Note 18
Change in liabilities arising from financing activities 100
Note 19
Pension and healthcare obligations
Tax
Note 20
Tax on profit
Note 21
Deferred tax
Note 22
Corporation tax
Other notes
Note 23
Adjustment for non-cash transactions
Note 24
Contingent liabilities, assets and securities
Note 25
Related parties
Note 26
Events after the balance sheet date
Note 27
General accounting policies
Note 28
Group companies
101
104
104
106
106
107
107
108
109
113
72
73
76
78
79
79
79
80
83
87
90
90
93
93
67/141
Danfoss Annual Report 2021 group income comprehensive
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Income statement and statement of comprehensive income
Income statement
January 1 to December 31
EURm
Net sales
Cost of sales
Gross profit
Research and development costs
Selling and distribution costs
Administrative expenses
Operating profit excluding other operating income and expenses
Other operating income and expenses
Share of profit from associates and joint ventures after tax
Operating profit (EBIT)
Financial income
Financial expenses
Profit before tax
Tax on profit
Net profit
Attributable to:
Shareholders of Danfoss A/S
Minority interests
68/141
2
3
3
3
3
3
8
15
15
20
5,828
-3,845
1,983
7,539
-5,087
2,452
-267
-773
-270
673
-54
6
625
2
-50
577
-142
435
389
46
435
-328
-970
-319
835
40
2
877
5
-63
819
-188
631
575
56
631
Statement of comprehensive income
January 1 to December 31
Note
2020
2021
EURm
Net profit
Note
2020
2021
435
631
Other comprehensive income
Actuarial gain/loss (-) on pension and healthcare plans
Tax on actuarial gain/loss on pension and healthcare plans
Items that cannot be reclassified to income statement
19
21
Foreign exchange adjustments on translation of foreign currency into EUR
Recycling of foreign exchange adjustments on disposal of foreign companies
Fair value adjustment of hedging instruments:
Hedging of interest rates (Interest rates and cross currency swaps)
Hedging of net investments in subsidiaries
Hedging of future cash flows
Hedging transfered to inventory
Tax on hedging instruments
-14
4
-10
-156
3
-56
1
4
28
-7
21
105
2
22
12
-4
-1
Items that will be reclassified to income statement
-204
136
Other comprehensive income after tax
Total comprehensive income
Attributable to:
Shareholders of Danfoss A/S
Minority interests
-214
157
221
788
181
40
221
728
60
788
Danfoss Annual Report 2021 group financial pos
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Statement of financial position
Statement of financial position
As of December 31
EURm
Non-current assets
Intangible assets
Property, plant and equipment
Investments in associates and joint ventures
Pension benefit plan assets
Non-current receivables
Deferred tax assets
Total non-current assets
Current assets
Inventories
Trade receivables
Receivable corporation tax
Derivative financial instruments (positive fair value)
Other receivables
Receivables
Cash and cash equivalents
Total current assets
Total assets
69/141
Statement of financial position
As of December 31
Note
2020
2021
EURm
Note
2020
2021
9
10
8
19
21
4
5
22
17
17
Shareholders' equity
Equity, shareholders in Danfoss A/S
Minority interests
Total shareholders' equity
Liabilities
2,313
1,404
283
4
10
92
4,241
2,056
283
18
22
73
4,106
6,693
Provisions
Deferred tax liabilities
Pension and healthcare benefit plan obligations
Borrowings
703
1,401
Derivative financial instruments (negative fair value)
863
23
106
992
611
1,394
34
2
197
1,627
Other non-current debt
Non-current liabilities
Provisions
Borrowings
Trade payables
Debt to associates and joint ventures
249
Corporation tax
Derivative financial instruments (negative fair value)
Other debt
Current liabilities
2,306
3,277
Total liabilities
6,412
9,970
Total liabilities and shareholders' equity
16
14
21
19
17
17
14
17
22
17
6
3,084
100
3,848
103
3,184
3,951
113
199
153
79
165
203
1,103
2,708
1
98
81
96
1,667
3,332
52
68
774
4
61
61
541
91
236
1,417
4
96
18
825
1,561
2,687
3,228
6,019
6,412
9,970
Danfoss Annual Report 2021 group cash flows
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Statement of cash flows
70/141
Statement of cash flowsJanuary 1 to December 31EURmNote20202021Profit before tax577819Adjustments for non-cash transactions23372385Change in working capital752-97Interest received25Interest paid-34-67Dividends received2Income tax paid22-169-209Cash flow operating activities800838Acquisition of intangible assets-44-43Acquisition of property, plant and equipment-201-339Proceeds from sale of property, plant and equipment1414Acquisition of subsidiaries and activities12-2,664Proceeds from disposal of subsidiaries and activities12241Change in financial receivables13-15-5Proceeds from sale of other investments1342Cash flow from investing activities-242-2,794Cash repayment of interest-bearing debt18-92-658Cash proceeds from interest-bearing debt1882,309Purchase of treasury shares-2-2Sale of treasury shares702Proceeds from minority interests1Dividends to minority interests-38-56Cash flow from financing activities-541,596Net change in cash and cash equivalents504-360Cash and cash equivalents as of January 1110611Foreign exchange adjustment of cash and cash equivalents-3-2Cash and cash equivalents as of December 31611249Danfoss Annual Report 2021 group equity
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Statement of changes in equity
Statement of changes in equity
EURm
Balance as of January 1, 2020
Net profit
Foreign exchange adjustments of foreign companies
Fair value adjustment of hedging instruments
Actuarial gain/loss (-) on pension and healthcare plans
Tax on other comprehensive income
Total other comprehensive income
Total comprehensive income for the period
Dividends to shareholders
Purchase of treasury shares
Sale of treasury shares
Total transactions with owners
Balance as of December 31, 2020
Net profit
Foreign exchange adjustments of foreign companies
Fair value adjustment of hedging instruments
Actuarial gain/loss (-) on pension and healthcare plans
Tax on other comprehensive income
Total other comprehensive income
Total comprehensive income for the period
Dividends to shareholders
Hedging transferred to Goodwill (Acquisition of companies)
Purchase of treasury shares
Sale of treasury shares
Purchase of minority interests
Capital increase
Total transactions with owners
e
r
a
h
S
l
a
t
i
p
a
c
134
e
r
a
h
S
i
m
u
m
e
r
p
10
s
e
v
r
e
s
e
r
g
n
g
d
e
H
-2
i
-52
4
-48
-48
y
c
n
e
r
r
u
C
n
o
i
t
a
l
s
n
a
r
t
42
-150
-150
-150
e
v
r
e
s
e
R
s
e
r
a
h
s
n
w
o
-377
-2
70
68
134
10
-50
-108
-309
107
107
107
-2
2
-4
30
-1
25
25
34
34
9
s
e
v
r
e
s
e
R
d
e
s
o
p
o
r
P
s
d
n
e
d
v
d
i
i
l
s
r
e
d
o
h
e
r
a
h
s
,
y
t
i
u
q
E
/
S
A
s
s
o
f
n
a
D
n
i
2,611
80
2,835
389
-150
-52
-14
8
-208
181
80
-2
70
148
2,940
386
103
30
28
-8
153
539
34
-2
2
2
36
-80
-80
189
189
389
-150
-52
-14
8
-208
181
-2
70
68
3,084
575
103
30
28
-8
153
728
34
-2
2
2
36
s
e
v
r
e
s
e
r
r
e
h
t
O
2,948
389
-14
4
-10
379
80
80
3,407
386
28
-7
21
407
2
2
y
t
i
r
o
n
M
i
t
s
e
r
e
t
n
i
98
46
-6
-6
40
-38
-38
100
56
4
4
60
-56
-2
1
-57
103
y
t
i
u
q
e
l
a
t
o
T
2,933
435
-156
-52
-14
8
-214
221
-38
-2
70
30
3,184
631
107
30
28
-8
157
788
-56
34
-2
2
1
-21
3,951
Balance as of December 31, 2021
134
10
71/141
-1
-309
3,816
3,515
189
3,848
Danfoss Annual Report 2021
group note 1
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 1 Basis of preparation
Note 1 Basis of preparation
Introduction
Estimates which are significant for the preparation of the Financial Statements are listed below:
Danfoss A/S is a company domiciled in Denmark. The Annual Report for the period January 1 - December 31,
2021, comprises the Consolidated Financial Statements of Danfoss A/S and its subsidiaries (the Group).
The Consolidated Financial Statements of the Group have been prepared in accordance with International
Financial Reporting Standards (IFRS) as adopted by the EU and additional requirements of the Danish
Financial statements Act. With effect on November 23, 2021, the Group repaid the corporate bonds listed
on the Euronext Dublin Stock Exchange and is from that date no longer classified as an EU-PIE entity and
has consequently moved from a Class D to a Class C (large) entity under the Danish Financial Statements Act.
However, the Group has decided to continue to prepare Consolidated Financial Statements in accordance
with IFRS as adopted by the EU and additional requirements of the Danish Financial statements Act.
Basis of measurement
- Investments in associates and joint ventures (Note 8)
- Goodwill and measurement of intangible assets (Note 9 and Note 12)
- Assessment of depreciation, amortization and impairment of non-current assets (Note 9 and Note 10)
- Deferred tax assets (Note 21)
- Measurement of pension and healthcare obligations (Note 19)
Additional description of estimates made are described in the relevant notes.
Impact of COVID-19
Danfoss has actively monitored the COVID-19 development and the related risks during the year. Credit risk of
customers, trade receivables and inventory development has been monitored.
The Annual Report is presented in EUR, rounded to the nearest million unless otherwise indicated. The functional
currency of the Parent Company is DKK.
New financial reporting regulations
The Annual Report has been prepared on the basis of the historical-cost convention except for the following
assets and liabilities, which are measured at fair value: financial instruments measured at fair value, derivatives,
contingent considerations from business combinations as well as pension and healthcare obligations. Non-
current assets and disposal groups held for sale are measured at the lower carrying amount before the
reclassification and fair value less costs to sell.
Changes in accounting policies
Danfoss A/S has implemented the standards and interpretations that have taken effect for 2021. None of those
standards and interpretations have material effect on recognition and measurement in 2021, nor are they
expected to have a material effect on Danfoss A/S in the future.
Critical accounting estimates and assesments
In preparing the Consolidated Financial Statements, Management makes various accounting estimates that affect
the reported amounts and disclosures in the Financial Statements and notes to the statements. The estimates
used are based on Management assumptions, which are assessed to be reliable, but which are inherently subject
to uncertainty. Accordingly, Danfoss is subject to risks and uncertainties, which may cause actual results to differ
from these estimates.
72/141
A number of issued, but not yet effective, standards and interpretations have been published which have not
been adopted early by Danfoss A/S in the preparation of the 2021 Annual Report.
The Group has assessed these standards and interpretations and conclude they are not expected to have a
material impact on the Group.
- Amendments to IFRS 4 "Insurance Contracts - deferral of IFRS 9".
- Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest Rate Benchmark Reform - Phase 2
In 2021, IFRIC issued an agenda decision on configuration and customization costs in a cloud computing
arrangement (Software as a Service). The Group has assessed this interpretation and concluded that it did not
have a material impact on the Group in 2021 or previous years.
Danfoss Annual Report 2021 group note 2
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 2 Segment reporting
Note 2 Segment reporting
EURm
2020
EURm
Business segments
Income statement
Net sales
Depreciation/amortization/impairment
EBITA
Acquisition-related amortization
Share of profit from Ass./JV. after tax *)
Operating profit (EBIT)
Financial Items
Profit before tax
Total assets **)
Net investments, excluding M&A
Total liabilities **)
Number of employees
Danfoss
Power
Solutions
Danfoss
Climate
Solutions
Danfoss
Drives
Other
areas
Group
Business segments
Danfoss
Power
Solutions
Danfoss
Climate
Solutions
Danfoss
Drives
Other
areas
1,956
60
329
41
2,491
53
410
8
1,362
59
262
7,609
1,616
65
332
10,530
1,352
25
186
21
1,666
34
186
4,438
29
132
-202
1,768
73
2,448
4,914
5,828
270
723
70
6
625
-48
577
6,412
231
3,228
27,491
Income statement
Net sales
Depreciation/amortization/impairment
EBITA
Acquisition-related amortization
Share of profit from Ass./JV. after tax *)
Operating profit (EBIT)
Financial Items
Profit before tax
Total assets **)
Net investments, excluding M&A
Total liabilities **)
Number of employees
3,209
86
489
57
2,864
51
511
8
4,649
137
705
19,061
1,918
98
478
11,235
1,436
30
180
20
1,771
45
237
4,582
30
147
-211
-2
1,632
88
4,599
5,165
*) Share of profit from associates and joint ventures after tax.
For further information on the business segments, see page 20, 23 and 25.
**) Corporate and shared functions' assets and liabilities, cash and cash equivalents, interest-bearing debt and
deferred tax liabilities/assets have been included in the column "Other areas".
2021
Group
7,539
314
969
83
2
877
-58
819
9,970
368
6,019
40,043
73/141
Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 2 Segment reporting (continued)
Note 2 Segment reporting (continued)
EURm
2020
EURm
Geographical segments
Western
Europe
Eastern
Europe
Asia
Pacific
North
America
Latin
America
Africa -
Middle
East
Net sales
Total non-current assets *)
2,166
2,783
516
140
1,403
298
1,332
747
267
26
144
20
EURm
Geographical segments
Western
Europe
Eastern
Europe
Asia
Pacific
North
America
Latin
America
Africa -
Middle
East
Net sales
Total non-current assets *)
2,562
3,078
594
173
1,896
564
1,914
2,628
364
102
209
75
Group
5,828
4,014
2021
Group
7,539
6,620
Sales in Denmark amount to EUR 253m (2020: 248m) and non-current assets amount to EUR 1,294m
(2020: 1,004m). Sales in North America mainly relate to the US, which represent EUR 1,781m (2020: 1,256m) and
non-current assets amount to EUR 2,628m (2020: 747m). China is part of the Asia Pacific region and sales
amount to EUR 1,155m (2020: 871m) and non-current assets amount to EUR 328m (2020: 231m).
*) Deferred tax assets are not included.
Specification of other areas - EBITA
Corporate and shared functions and projects, not allocated *)
Other
EBITA
Specification of other areas - Assets
Cash, current & non-current tax receivables
Other receivables
Corporate and shared functions, not allocated tangible, and intangible fixed assets *)
Other
Total assets
Specification of other areas - Liabilities
Interest-bearing debt, current & non-current tax liabilities
Other debt
Pension and healthcare plans
Corporate and shared functions and projects, not allocated *)
Other
Total liabilities
2020
2021
-184
-18
-202
-197
-14
-211
726
82
953
7
1,768
1,432
665
153
195
3
2,448
356
181
1,069
26
1,632
3,206
985
203
200
5
4,599
*) Corporate and shared functions and projects, not allocated, are primarily corporate projects, administrative
expenses, and assets and liabilities.
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Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 2 Segment reporting (continued)
Note 2 Segment reporting (continued)
Net sales are recognized at the fair value of the consideration agreed, excluding VAT, duties and discounts in
relation to the sale. Accumulated experience is used to estimate variable considerations
(expected value method).
The validity of assumptions and estimates are reassessed at each reporting date. Because of historical
accurate estimates, it is highly probable that a significant reversal in the cumulative revenue recognized
will not occur.
Related service income is recognized in the income statement as the services are rendered. Accordingly,
the recognized sale corresponds to the sales value of the work performed during the year. This is determined
based on the actual costs incurred relative to the total expected costs. The sale of services is recognized in
the income statement when the aggregated income and expenses of the service contract can be reliably
measured, and it is probable that the Group will receive the financial benefits, including payments.
The Group’s standard payment terms is 30 days, net from the date of invoice or current month +15 days.
However, there may be country-specific deviations from the standard payment terms. The Group does not
expect to have any contracts where the period between the transfer of the promised products or services
to the customer and payment by the customer exceeds one year. As a consequence, the Group does not
adjust any of the transaction prices for the time value of money. A receivable is recognized when the products
are delivered as this is the point in time that the consideration is unconditional because only the passage
of time is required before the payment is due.
The Group’s obligation to repair or replace faulty products under the standard warranty terms is recognized
as a provision.
Accounting Policy
Segment information
The segment information applies to the internal management reporting and is prepared according to the
Group’s accounting policies. Segment performance is primarily measured by EBITA. Segment income,
expenses, assets and liabilities comprise those items which can be allocated on a reliable basis. Items that
are not allocated primarily include income and expenses incurred by corporate functions, deferred tax
(assets and liabilities), receivable and payable tax, other receivables and payables, cash and interest-bearing
liabilities.
Non-current segment assets are those non-current assets which are used directly for segment operations,
including intangible assets and property, plant and equipment as well as investments in associates and
joint ventures. The majority of the Group’s buildings are recognized under Other areas in the segment
reporting, as buildings are managed and operated by a real-estate unit. The segments are instead charged
with rent/lease expenses for the use of these assets.
Current assets are those current assets which are used directly for segment operations, including inventories
and trade receivables.
Segment liabilities comprise both non-current and current liabilities derived from segment operations,
including trade payables and warranty obligations as well as other provisions.
Lease payments are recognized under segment expenses. Capitalized lease assets and lease liabilities, and
related depreciations and interest are recognized in Other areas. Relevant adjustments are made in Other
areas to eliminate for lease payments in segments. Trade between segments takes place on market terms or
on a cost-recovery basis.
Net sales from contracts with customers
The Group is selling products and services in areas such as refrigeration, air conditioning, heating, motor
control, and off-highway machinery. Net sales of products for resale and finished goods are recognized in
the income statement when control of the products has been transferred to the customer. Control is
transferred when the products are delivered, which occurs when the Group has objective evidence that all
criteria for transfer of risk have been satisfied. Sales are only recognized to the extent that it is highly probable
that a significant reversal will not occur. Products are often sold with retrospective volume discounts.
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Danfoss Annual Report 2021 group note 3
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 3 Expenses and other operating income
Note 3 Expenses and other operating income
2020
2021
EURm
2020
2021
B. Depreciation/amortization and impairment losses
Classification by nature:
Amortization of intangible assets
Depreciation of property, plant and equipment
Impairment on tangible assets
Depreciation/amortization and impairment losses
Classification of amortization/impairment of intangible assets by functions:
Cost of sales
Selling and distribution costs
Administrative expenses
Intangible assets
Classification of depreciation/impairment of tangible assets by functions:
Cost of sales
Selling and distribution costs
Administrative expenses
Tangible assets
106
227
2
335
79
22
5
106
186
28
15
229
136
261
397
103
28
5
136
220
28
13
261
EURm
A. Personnel expenses
Salaries and wages
Severance payments
Social security
Pension cost - defined contribution plans
Pension cost - defined benefit plans excl. gains from reductions and redemptions *)
Average number of employees
Total number of employees as of end of the year
1,379
28
132
76
4
1,619
1,725
11
164
100
6
2,006
27,539
27,491
32,932
40,043
*) Expenses for defined benefit plans are described in Note 19 Pension and healthcare obligations.
Remuneration to the Group Executive Team and the Board of Directors:
Salaries
Pension costs
Bonuses, short-term
Bonuses, long-term
Group Executive Team
Board of Directors' fee
Total remuneration
5
2
6
7
20
1
21
5
2
8
16
31
1
32
Bonuses, short-term are paid based on meeting annual targets for selected financial ratios and sales growth.
Bonuses, long-term are paid based on value creation over multiple years.
Total remuneration for registered and former registered members of the Group Executive Team amounts to
EUR 20m (2020: 12m).
A presentation of the Group Executive Team is available on page 61.
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Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 3 Expenses and other operating income (continued)
Note 3 Expenses and other operating income (continued)
EURm
2020
2021
EURm
2020
2021
C. Other operating income and expenses
D. Fees to auditors appointed at the annual general meeting
Gain on disposal of activities
Gain from disposal of property, plant and equipment
Government grants
Other
Other operating income
Loss on disposal of intangible fixed assets
Loss on disposal of property, plant and equipment
Restructuring costs
Other
Other operating expenses
Other operating income and expenses
2
9
13
24
-6
-28
-44
-78
-54
48
12
10
13
83
-1
-2
-11
-29
-43
40
Restructuring costs in both years mainly relate to terminations in Denmark, China, Germany and USA.
The Group has received government grants of EUR 10m in total. This is among other items related to
investment incentives, support for research and development programs.
In 2020 the Group received grants of EUR 35m in total, related to the above as well as Covid 19
compensation. The government grants are mainly deducted from the related expenses in the functions;
Cost of sales, Selling and distribution costs, and Administrative expenses.
Audit fee
Other assurance engagements fee
Tax and VAT advice
Other fees
Total fee to Group Auditor
Accounting Policy
3
0
0
1
4
4
0
0
1
5
Cost of sales
Cost of sales comprises costs incurred in generating the year’s net sales. Such costs include cost of sales or
manufacturing costs, including direct and indirect costs for raw materials and consumables, wages and
salaries, rent and leases, and depreciation.
Research and development costs
Research and development costs include costs that do not qualify for capitalization, including costs like
wages and salaries and consumables.
Selling and distribution costs
Selling and distribution costs comprise costs related to distribution of products sold during the year and
sales staff, advertising and exhibition expenses etc., including depreciation. Furthermore, provisions for bad
debt are included.
Administrative expenses
Administrative expenses comprise expenses in relation to administrative staff, management, office premises,
office expenses etc., including depreciation.
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Danfoss Annual Report 2021 group note 4
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 3 Expenses and other operating income (continued)
Note 4 Inventories
Other operating income and expenses
Other operating income and expenses comprise items secondary to the principal activities of the Group,
including gains/losses on disposal of non-current assets and companies, impairment losses, employee-
termination expenses and government grants. Government grants related to income are recognized at their
fair value where there is a reasonable assurance that the grant will be received, and the Group will comply
with all attached conditions. Government grants that compensate the Group for expenses incurred are
deducted at related expenses. Government grants related to purchase of property, plant and equipment
are deducted at the carrying amount of the asset.
EURm
Raw materials and consumables
Work in progress
Finished goods and goods for resale
Inventories
Write-downs of inventories
2020
2021
337
75
291
703
66
748
161
492
1,401
89
Accounting Policy
Inventories are measured at cost. Where the estimated selling price less any costs of completion and selling
(net realizable value) is lower than cost, inventories are written down to this lower value. Cost is calculated
on the basis of the weighted average method or the FIFO method. The cost of work in progress and
finished goods comprises the cost of raw materials and consumables, conversion costs and other costs
directly or indirectly attributable to the goods. Indirect production overheads comprise maintenance and
depreciation of production facilities and plant as well as administration and management of factories.
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Danfoss Annual Report 2021 group note 5-7
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 5 Trade receivables
Note 6 Other debt
EURm
2020
2021
EURm
Not overdue at the reporting date
Overdue less than 30 days
Overdue from 30 to 90 days
Overdue more than 90 days
Trade receivables before provision for bad debts
Provision for bad debts as of December 31
Net carrying amount
Provision for bad debts as of January 1
Foreign exchange adjustments in foreign companies
Additions through acquisition of subsidiaries
Accrual of new provisions
Reversal of provisions accrued
Realized loss
Provision for bad debts as of December 31
836
13
15
20
884
-21
863
-25
2
-3
3
2
-21
1,327
32
29
37
1,425
-31
1,394
-21
-7
-6
1
2
-31
Accrued salaries and wages
Accrued expenses and sundry creditors
Other debt
Note 7 Change in working capital
EURm
Change in inventories
Change in receivables
Change in trade payables and other debt
Change in working capital
2020
2021
319
222
541
408
417
825
2020
2021
-7
-13
72
52
-307
-319
529
-97
Out of the EUR 31m write-down, EUR 21m relates to receivables which are more than 180 days overdue.
The carrying amount of trade receivables is estimated to represent their fair value as well as the maximum
credit risk.
Trade receivables are distributed across a large number of customers and geographical areas. The geographical
distribution does not differ significantly from the split of net sales according to Note 2 Segment reporting.
Historically, the Group has only had limited losses on bad debts.
Accounting Policy
Receivables are measured at amortized cost. Receivables are written down for bad-debt losses based on the
simplified approach to providing for expected credit losses, which requires expected lifetime losses to be
recognized from initial recognition of receivables. Impairment losses are calculated as the difference between
the carrying amount and present value of expected cash flows, including the expected realizable value of any
collateral provided. The discount rate is the effective interest rate used at the time of initial recognition of
the receivable.
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Danfoss Annual Report 2021 group note 8
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 8 Investments in associates and joint ventures
Note 8 Investments in associates and joint ventures
EURm
2020
EURm
Cost as of January 1
Additions
Disposals
Cost as of December 31
Adjustments as of January 1
Foreign exchange adjustments in foreign companies
Net profit/value adjustment
Disposal / Transfer
Adjustments as of December 31
Carrying amount as of December 31
Investments in
associates and
joint ventures
Other
investments
349
-24
325
-69
-2
6
19
-46
279
19
2
-1
20
-16
-16
4
Total
368
2
-25
345
-85
-2
6
19
-62
283
Cost as of January 1
Cost as of December 31
Adjustments as of January 1
Net profit/value adjustment
Dividends
Adjustments as of December 31
Carrying amount as of December 31
Investments in
associates and
joint ventures
Other
investments
325
325
-46
2
-2
-46
279
20
20
-16
-16
4
2021
Total
345
345
-62
2
-2
-62
283
Impairment test
Where indicators for impairment were present at the end of 2021, impairment tests were performed on the
recovered amount of "Investments in associates and joint ventures". Main indicators are loss-giving activities, or
if the carrying amount is higher than the equity in the local accounts or, where relevant, higher than valuation
using a listed share price. When performing the impairment test, the recoverable amount of cash flows from
associates and joint ventures is compared with their carrying amount. The principles are unchanged
compared to the impairment tests performed in 2020.
Further information on associates and joint ventures is provided in Note 17 Financial risks and instruments and
Note 25 Related parties.
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Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 8 Investments in associates and joint ventures (continued)
Note 8 Investments in associates and joint ventures (continued)
Material associates and joint ventures
Summarized information for associates and joint ventures, which are material to Danfoss, has been amended
to reflect adjustments made for differences in the accounting policy. The financial information is stated below
at full value, not according to Danfoss' proportionate ownership interests. As SMA Solar Technology AG is a
listed company, the stated financial information below is based on publicly available information.
In addition to the interests in associates and joint ventures disclosed above, Danfoss also has interests in a
number of individually immaterial associates and joint ventures.
EURm
2020
Immaterial associates and joint ventures
Associates
Joint Ventures
Total
SMA Solar Technology AG
Place of business
Share of ownership
Summarized profit and loss statement, EURm *)
Revenue
EBITDA
Net income
Summarized Balance Sheet, EURm (Q3 numbers)
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Equity
Other information, EURm
Group share of equity as of December 31
2020
Germany
20%
2021
Germany
20%
1,027
72
28
980 - 1,030
20 - 30
N/A
307
679
259
305
422
83
327
709
271
318
447
80
Danfoss' proportionate share of:
Profit or loss
Total comprehensive income
Carrying amount as of December 31
2
2
10
2
2
10
Reconciliation of carrying amount
Associates
Joint Ventures
Total
Group share of equity of material Ass/JV.
Goodwill concerning material Ass/JV.
Carrying amount of immaterial Ass/JV.
Total carrying amount as of December 31 of
associates and joint ventures
82
187
269
82
187
10
279
10
10
On the basis of the stock exchange quotation, the fair value of SMA Solar Technology AG as of
December 31, 2021, was EUR 1,300m (2020: 1,900m).
*) Provisional numbers for 2020. 2021 numbers as of guidance from SMA Solar Technology AG from
January 2022.
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Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 8 Investments in associates and joint ventures (continued)
Note 8 Investments in associates and joint ventures (continued)
EURm
2021
Immaterial associates and joint ventures
Associates
Joint Ventures
Total
Share of profit from investments in associates and joint ventures
The proportionate share of the results of associates and joint ventures after tax is recognized in the
consolidated income statement after elimination of the proportionate share of intra-group profits/losses and
less goodwill impairment.
Danfoss' proportionate share of:
Profit or loss
Total comprehensive income
Carrying amount as of December 31
2
2
12
2
2
12
Critical accounting estimates
Impairment of associates and joint ventures
Danfoss performs impairment tests concerning investments in associates and joint ventures whenever
indicators for impairment are present.
Reconciliation of carrying amount
Associates
Joint Ventures
Total
Due to the nature of the operations of the investments, estimates have to be made of expected cash flows
many years into the future, which will be subject to some degree of uncertainty.
Group share of equity of material Ass/JV.
Goodwill concerning material Ass/JV.
Carrying amount of immaterial Ass/JV.
Total carrying amount as of December 31 of
associates and joint ventures
80
187
267
80
187
12
279
12
12
For further information on associates and joint ventures, please see Note 28 Group companies.
Accounting Policy
Investments in associates and joint ventures
Investments in associates and joint ventures are measured in the Consolidated Financial Statements according
to the equity method at the proportionate share of the enterprises including additional value from
acquisitions, goodwill and deduction or addition of proportionate shares of unrealized intra-group profits and
losses. Investments in associates and joint ventures are tested for impairment, when evidence of impairment
exists.
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Danfoss Annual Report 2021 group note 9
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 9 Intangible assets
EURm
Cost as of January 1, 2020
Foreign exchange adjustments in foreign companies
Additions through acquisition of subsidiaries
Transfers
Additions
Disposals
Cost as of December 31, 2020
Amortization and impairment losses as of January 1
Foreign exchange adjustments in foreign companies
Amortization
Disposals
Amortization and impairment losses as of December 31, 2020
Carrying amount as of December 31, 2020
Cost as of January 1, 2021
Foreign exchange adjustments in foreign companies
Additions through acquisition of subsidiaries
Transfers
Additions
Disposals
Disposals through sale of subsidiaries
Cost as of December 31, 2021
Amortization and impairment losses as of January 1, 2021
Foreign exchange adjustments in foreign companies
Transfers
Amortization
Disposals
Disposals through sale of subsidiaries
Amortization and impairment losses as of December 31, 2021
Carrying amount as of December 31, 2021
Goodwill
Internally developed
software
Brand
Technology
Customer
relations
Patents, trademarks
and other rights
Development
costs
Total
Other
1,830
-42
-2
1,786
154
-7
147
1,639
1,786
88
1,145
-58
2,961
147
6
-8
145
2,816
389
-4
2
44
-39
392
195
-2
34
-39
188
204
392
3
11
6
42
-31
-2
421
188
3
5
49
-30
-1
214
207
151
-7
144
13
-1
3
15
129
144
15
48
207
15
1
6
22
185
705
-24
6
687
426
-19
47
454
233
687
26
289
-30
972
454
19
54
-21
506
466
403
-14
-6
383
285
-12
19
292
91
383
25
481
-13
-29
847
292
9
24
-13
-18
294
553
59
-1
-1
-9
48
38
-1
3
-9
31
17
48
-4
1
-6
39
31
-3
3
-6
25
14
52
-2
50
52
-2
50
50
1
-8
43
50
1
-8
43
1,759
-50
1
44
-50
1,704
1,009
-35
106
-50
1,030
674
1,704
70
829
2
43
-58
-61
2,529
1,030
33
2
136
-57
-40
1,104
1,425
Total
3,589
-92
-2
1
44
-50
3,490
1,163
-42
106
-50
1,177
2,313
3,490
158
1,974
2
43
-58
-119
5,490
1,177
39
2
136
-57
-48
1,249
4,241
Of the "Internally developed software", approximately 50% relates to the One ERP program.
Additions/disposals through acquisitions/sales of subsidiaries are mainly due to Eaton Hydraulics acquisition and White Drives disposal and are further described in Note 12 Acquisition and sales of subsidiaries and activities.
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Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 9 Intangible assets (continued)
EURm
Impairment tests
At the end of 2021, impairment tests were performed on the carrying amount of goodwill and brand (assets with indefinite useful lives). The impairment tests were performed on business segments representing the base level
of cash generating units (CGUs) to which the carrying amount of goodwill and brand can be allocated with reasonable accuracy. The basis for determining the recoverable amount is value-in-use for all cash-generating units.
Acquired activities and companies are integrated as quickly as possible into the respective business segments for optimum synergy. One consequence is that, soon after, it will not be possible to allocate the carrying amount
of goodwill to the acquired companies and activities with reasonable accuracy, and thus it will no longer be possible to perform impairment tests on these individual acquisitions. As part of the impairment test, the net present
value of the estimated net cash flow from the CGUs is compared to the carrying amount of the net assets. As acquisitions in Danfoss are made on the basis of 10-year projections, the expected cash flow is calculated on the
basis of estimates for the years 2022-2031. The estimates are prepared and approved by the Management in the respective CGUs and Group Management. The primary variables are sales, EBITA, working capital and
investments.
The most significant goodwill allocations have been described below.
Goodwill as of December 31
Brand with indefinite useful life as of December 31
Danfoss Power
Solutions
323
126
Danfoss
Climate
Solutions
Danfoss
Drives
544
770
2020
Other
2
Danfoss Power
Solutions
1,479
132
Danfoss
Climate
Solutions
Danfoss
Drives
564
770
2021
Other
3
The Danfoss Power Solutions brand with a carrying amount EUR 132m (2020: 126m) is not amoritized, but is tested annually for impairment. Global megatrends and industry recognition as one of the market leaders support
that the brand will generate cash inflow for the Group for an indefinite period.
The weighted average growth rate until 2031 is based on past performance/Management expectation of market development etc. and is estimated to be 2-6% (2020: 3-6%) for the business segments, which is at or above
the general market development. The growth in net sales is driven by continuous high investments in innovation and market development. The expected average EBITA margins used in the impairment tests are in general
kept at a stable level, taking past performance and initiatives in the business segments into consideration.
The EBITA and working capital as a percentage of sales are expected to remain unchanged during the terminal period. Investments are assumed to be at the same level as the depreciations. These assumptions are unchanged
compared to the impairment tests performed in 2020. The net cash flow during the terminal period from 2030 and onwards is estimated at a 2% annual growth, which is assumed to be at or below the expected growth in the
markets addressed by Danfoss. The discount rates are set under consideration of a market-based cost of equity and cost of debt, and are 9-10% (2020: 10-11%) before tax for all segments.
Management does not assess that a reasonable change in the fundamental assumptions used in the impairment tests will result in recoverable amounts lower than the carrying amounts. The same conclusion was
made for 2020.
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Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 9 Intangible assets (continued)
EURm
Danfoss Power Solutions
The goodwill allocated to Danfoss Power Solutions derives primarly from Eaton Hydraulics in 2021, the acquisition of the additional 38.2% of the share capital in Sauer-Danfoss Inc. (USA) in 2008, Visedo Oy (Finland) in 2017,
UQM Technologies Inc. (USA) in 2019. At the end of 2021, the carrying amount of Brand, Technology and Customer relations acquired in connection with business combinations amounts to EUR 1,041m (2020: 262m),
or approximately 86% (2020: 58%) of the corresponding Group carrying amount. The carrying amount of Technology and Customer relations is amortized until 2033 and 2036, respectively.
Danfoss Climate Solutions
The goodwill allocated to Danfoss Climate Solutions derives primarily from the acquisitions of DEVI Group (Denmark) in 2003, Scroll Technologies (USA) in 2006, Danfoss Turbocor Compressors (USA) in 2012, and
Sondex Holding A/S (Denmark) in 2016. At the end of 2021, the carrying amount of Technology and Customer relations acquired in connection with business combinations amounts to EUR 56m (2020: 63m),
or approximately 5% (2020: 14%) of the corresponding Group carrying amount. The carrying amount of Technology and Customer relations is amortized until 2032 and 2030, respectively.
Danfoss Drives
The goodwill allocated to Danfoss Drives segment derives primarily from the acquisition of Vacon (Finland) in December 2014. At the end of 2021, the carrying amount of Technology and Customer relations acquired in
connection with business combinations amounts to EUR 108m (2020: 128m), or approximately 9% (2020: 28%) of the corresponding Group carrying amount. The carrying amount of Technology and Customer relations is
amortized until 2026 and 2029, respectively.
Other intangible assets
At the end of 2021, Danfoss had software in progress amounting to EUR 43m (2020: 49m). Capitalized software in progress is mainly developed internally.
In 2021, the Group performed impairment tests on the carrying amount of software in progress. The actual expenses and achieved milestones have been evaluated according to the approved project and business plans. This
led to no impairment of current software assets (2020: 0m).
Accounting Policy
Goodwill
Goodwill is initially recognized in the balance sheet at cost and allocated to cash-generating units as described under “Business combinations”.
Subsequently, goodwill is measured at cost less accumulated impairment losses. Goodwill is not amortized.
Development projects, software, patents and licenses
Development projects that are clearly defined and identifiable, where the technical feasibility, sufficient resources and a potential future market or utilization opportunity within the company is demonstrated, and where the
company intends to produce, market or use the project, are recognized as intangible assets provided that the cost can be measured reliably and that there is sufficient assurance that future earnings or the net selling price can
cover cost of sales, selling and distribution costs and administrative expenses and development costs. Other development costs are recognized in the income statement when incurred.
Recognized development projects are measured at cost less accumulated amortization and impairment. Cost includes direct and indirect expenses, including salaries and borrowing costs incurred from specific and general
borrowing directly pertaining to the development of development projects.
Completed development projects, including software, are generally amortized on a straight-line basis over 4 to 8 years. Development projects in progress are not amortized, but annually tested for impairment.
Patents and licenses are measured at cost less accumulated amortization and impairment. Patents are amortized on a straight-line basis over the patent period and licenses are amortized over the shorter of the contract
period and the useful life. Patent and contract periods are normally 5-10 years.
85/141
Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 9 Intangible assets (continued)
EURm
Other intangible assets
Other intangible assets, including intangible assets acquired in a business combination, which typically comprise technology and customer relations, are amortized on a straight-line basis over the expected useful life, which is
typically a period of 10 to 20 years.
Intangible assets, including trademarks, with indefinite useful lives are not amortized, but are tested annually for impairment.
Gains and losses on the disposal of intangible assets are determined as the difference between the selling price less costs to sell and the carrying amount at the selling date. Gains or losses are recognized in the income
statement under “Other operating income and expenses”.
Impairment of intangible assets
Goodwill and intangible assets with indefinite useful lives are tested annually for impairment, initially before the end of the acquisition year. Similarly, development projects in progress are subject to an annual impairment test.
The carrying amount of other non-current assets is tested annually for evidence of impairment. When there is evidence that assets may be impaired, an impairment test is performed. Impairment is tested by calculating the
recoverable amount. The recoverable amount is the higher of an asset’s fair value less expected costs to sell and its value in use. The value in use is determined as the present value of expected future cash flows from the
asset or the cash-generating unit (CGU). If the fair value or value in use cannot be determined on individual assets, the recoverable amount is determined as the fair value of expected future cash flows from activities or the
cash-generating unit (CGU) to which the asset belongs.
Impairment losses are recognized in the income statement if the carrying amount of an asset or a cash-generating unit exceeds the recoverable amount.
Impairment of assets is reversed to the extent of changes in the assumptions and estimates underlying the impairment calculation. Impairment is only reversed to the extent that the asset’s new carrying amount does not
exceed the carrying amount of the asset after amortization, had the asset not been impaired. However, impairment of goodwill is never reversed.
Critical accounting estimates
Impairment of goodwill
In performing the annual impairment test of goodwill, an assessment is made as to whether the individual units of the enterprise (cash-generating units) to which goodwill relates, will be able to generate sufficient positive,
net cash flows to support the value of goodwill and other net assets of the unit.
Due to the nature of the Group’s operations, estimates have to be made of expected cash flows many years into the future, which will be subject to some degree of uncertainty due to changes in the global economic
situation and changes in the strategy of the Group. This uncertainty is reflected in the chosen discount rate.
Useful life and residual value of non-current assets
Non-current assets are measured at cost less accumulated amortization, depreciation and impairment. Amortization and depreciation is made on a straight-line basis over the useful lives of the assets, taking into
account the asset’s residual value. Expected useful lives and residual values are determined based on historical experience and expectations of the future use of the non-current assets. The expectations for future use
and residual values may not be met, which may lead to a future reassessment of useful lives and residual values and a need for impairment write-downs or the incurrence of gain or losses on the disposal of the non-current
assets.
86/141
Danfoss Annual Report 2021 group note 10
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 10 Property, plant and equipment
EURm
Cost as of January 1, 2020
Foreign exchange adjustments in foreign companies
Transfers
Additions
Disposals
Cost as of December 31, 2020
Depreciation and impairment losses as of January 1, 2020
Foreign exchange adjustments in foreign companies
Transfers
Depreciation
Impairment
Disposals
Depreciation and impairment losses as of December 31, 2020
Carrying amount as of December 31, 2020
Cost as of January 1, 2021
Foreign exchange adjustments in foreign companies
Additions through acquisition of subsidiaries
Transfers
Additions
Disposals
Disposals through sale of subsidiaries
Cost as of December 31, 2021
Depreciation and impairment losses as of January 1, 2021
Foreign exchange adjustments in foreign companies
Transfers
Depreciation
Disposals
Disposals through sale of subsidiaries
Depreciation and impairment losses as of December 31, 2021
Carrying amount as of December 31, 2021
Land and
buildings
Plant and
machinery
Equipment
Assets under
construction
1,106
-34
29
79
-22
1,158
485
-12
1
69
2
-7
538
620
1,158
32
249
24
77
-46
-36
1,458
538
10
79
-40
-9
578
880
1,703
-43
101
48
-54
1,755
1,260
-26
-5
116
-50
1,295
460
1,755
58
275
116
76
-47
-94
2,139
1,295
36
-3
140
-45
-64
1,359
780
309
-6
11
36
-43
307
182
-5
4
42
-40
183
124
307
5
23
9
22
-27
-1
338
183
3
1
42
-24
205
133
218
-5
-142
129
200
200
200
6
-151
219
-11
263
263
Total
3,336
-88
-1
292
-119
3,420
1,927
-43
227
2
-97
2,016
1,404
3,420
101
547
-2
394
-120
-142
4,198
2,016
49
-2
261
-109
-73
2,142
2,056
Additions/disposals through acquisitions/sales of subsidiaries are further described in Note 12 Acquisition and sale of subsidiaries and activities.
87/141
Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 10 Property, plant and equipment (continued)
EURm
The right-of use assets included in property, plant and equipment are presented below.
Carrying amount related to right-of-use assets as of January 1, 2020
Foreign exchange adjustments in foreign companies
Additions
Depreciation
Disposals
Carrying amount related to right-of-use assets as of December 31, 2020
Carrying amount related to right-of-use assets as of January 1, 2021
Additions through acquisition of subsidiaries
Additions
Depreciation
Disposals
Disposals through sale of subsidiaries
Carrying amount related to right-of-use assets as of December 31, 2021
Further information on leases is provided in Note 11 Leases.
Land and
buildings
Plant and
machinery
Equipment
Total
142
-3
61
-33
-3
164
164
69
40
-42
-5
-13
213
3
2
-2
3
3
-1
2
39
28
-25
-1
41
41
8
15
-24
-2
38
184
-3
91
-60
-4
208
208
77
55
-67
-7
-13
253
Accounting Policy
Land and buildings, plant and machinery and equipment are measured at cost less accumulated depreciation and impairment losses.
Cost comprises the purchase price, expenses for materials, components, sub-suppliers, direct salary expenses, borrowing costs incurred from specific and general borrowing, which directly pertain to the construction of the
individual asset and for self-produced assets as well as indirect construction costs. Where individual components of an item of property, plant and equipment have different useful lives, they are accounted for as seperate items,
and depreciated separately.
Subsequent costs, e.g. in connection with replacement of components of property, plant and equipment, are recognized in the carrying amount of the asset, if it is probable that the costs will result in future economic benefits.
All costs incurred for ordinary repairs and maintenance are recognized in the income statement as incurred.
Depreciation is provided on a straight-line basis over the expected useful lives, which are as follows:
Buildings and building components
Plant and machinery
Equipment
10-30 years
4-8 years
2-6 years
88/141
Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 10 Property, plant and equipment (continued)
EURm
Property, plant and equipment
The depreciable amount of an asset is determined based on the residual value of the asset less any impairment charges. The residual value is determined at the acquisition date and reassessed annually. If the residual value
exceeds the carrying amount of the asset, depreciation is discontinued. When changing the depreciation period or the residual value, the effect on the depreciation is recognized prospectively as a change in accounting estimates.
Depreciation is recognized in the income statement under “Costs of sale”, “Selling and distribution costs” or “Administrative expenses”.
Gains and losses on disposal of property, plant and equipment are determined as the difference between the selling price less costs to sell and the carrying amount at the selling date. Gains or losses are recognized in the income
statement under ‘Other operating income and expenses’.
The cost of leased assets capitalized is recognized at the lease commencement date at the present value of the future lease payments. For the calculation of the net present value, the incremental borrowing rate is used as
discount rate. They are depreciated and amortized like other property, plant and equipment. Leased assets with low value or lease term less than 12 months are expensed over the lease period on a straight-line basis.
Impairment of property, plant and equipment
The carrying amount of property, plant and equipment is tested annually for evidence of impairment. When there is evidence that assets may be impaired, an impairment test is performed. Impairment is tested by calculating
the recoverable amount. The recoverable amount is the higher of an asset’s fair value less expected costs to sell and its value in use. The value in use is determined as the present value of expected future cash flows from
the asset or the cash-generating unit (CGU). If the fair value or value in use cannot be determined on individual assets, the recoverable amount is determined as the fair value of expected future cash flows from activities
or the cash-generating unit (CGU) to which the asset belongs.
Impairment losses are recognized in the income statement if the carrying amount of an asset or a cash-generating unit exceeds the recoverable amount.
Impairment of assets is reversed to the extent of changes in the assumptions and estimates underlying the impairment calculation. Impairment is only reversed to the extent that the asset’s new carrying amount does not
exceed the carrying amount of the asset after depreciation, had the asset not been impaired.
Critical accounting estimates
Useful life and residual value of non-current assets
Non-current assets are measured at cost less accumulated amortization, depreciation and impairment. Amortization and depreciation is made on a straight-line basis over the useful lives of the assets, taking into
account the asset’s residual value. Expected useful lives and residual values are determined based on historical experience and expectations of the future use of the non-current assets. The expectations for future use
and residual values may not be met, which may lead to a future reassessment of useful lives and residual values and a need for impairment write-downs or the incurrence of gain or losses on the disposal of the non-current
assets.
89/141
Danfoss Annual Report 2021 group note 11-12
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 11 Leases
Lessee
Lease liabilities are presented in borrowings of the Statement of Financial Position as follows:
EURm
Current
Non-current
2020
2021
49
170
83
185
The Group mainly leases buildings and cars. Lease payments are generally fixed. With the exception of
short-term leases and leases of low-value underlying assets, each lease is reflected in the Statement of Financial
Position as a right-of-use asset and a lease liability. The Group classifies its right-of-use assets in a consistent
manner to property, plant and equipment, see Note 10 Property, plant and equipment. Each lease contract
generally restricts the use of the right-of-use assets to the Group. Some lease contracts contain an option to
extend the lease period or terminate the lease before the lease term. Management assesses whether or not
it is reasonably certain that the option will be exercised after considering all relevant facts and circumstances.
The Group has decided not to recognize a lease liability for short-term leases
(leases with an expected term of 12 months or less) or for leases of low-value assets. Payments made under
such leases are expensed on a straight-line basis. The expenses related to payments not included in the
measurement of the lease liability are below EUR 8m (2020: 8m).
At December 31, 2021, the Group had committed to leases not yet commenced. The total future cash
outflows for leases that had not yet commenced are EUR 56m (2020: 57m), which are mainly for buildings.
Total cash outflow for leases for the financial year ended December 31, 2021 was EUR 70m (2020: 65m).
Further information on lease payment, interest expense on lease liabilities, additions, depreciation charge,
carrying amount of right-of-use assets and maturity analysis of lease liabilities, is provided in Note 18 Change
in liabilities arising from financing activities, Note 15 Financial income and expenses, Note 10 Property, plant
and equipment and Note 17 Financial risks and instruments.
90/141
Note 12 Acquisition and sale of subsidiaries and activities
EURbn
2021
)
*
r
a
e
y
r
e
p
s
e
a
s
l
t
e
N
l
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o
s
/
d
e
r
i
u
q
c
a
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s
e
e
y
o
p
m
e
f
o
.
o
N
n
o
i
t
a
r
e
d
i
s
n
o
C
i
g
n
d
o
H
l
d
e
t
a
d
i
l
o
s
n
o
C
l
i
t
n
u
/
m
o
r
f
y
r
t
n
u
o
C
i
d
e
v
e
c
e
r
/
d
a
p
i
Acquisition
Disposal
US
August
September
100%
100%
1.5 11,000
900
0.2
2.7
0.3
Company/activity:
Eaton hydraulics business
White Drive Motors & Steering
*) Net sales in the financial year prior to the acquisition or sale.
2020 acquisitions and disposals:
The Group neither acquired nor sold any subsidiaries or activities in 2020. Revaluation of Purchase Price
Allocation for the previous year has been done and is included in the statement below.
2021 acquisitions and disposals:
On August 2, 2021, Danfoss acquired Eaton’s hydraulics business. A business that provides products for
customers in markets such as agriculture, construction, as well as in industrial market segments with a
global presence for both sales and manufacturing. The business has been incorporated into the existing
Danfoss segment, Danfoss Power Solutions. Eaton’s hydraulics business was acquired at around EUR 2.7bn
on a cash and debt free basis.
The strengthened Danfoss Power Solutions will have a broad selection of mobile and industrial hydraulics
products and solutions available on the market, with a full line offering including fluid conveyance systems.
The company’s distribution channels have also been significantly widened, while its local application
support and geographical reach have increased considerably.
The acquisition has been included in the consolidated financial statements from August 2, 2021. From the
acquisition date to December 31, 2021, Eaton’s hydraulics business contributed with a revenue of EUR
786m and a profit before tax of EUR -93m. Net profit is significantly impacted by consumption of inventory
step-up, integration costs and amortizations on PPA intangibles assets related to the opening balance sheet.
Danfoss Annual Report 2021
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 12 Acquisition and sale of subsidiaries and activities (cont.)
Note 12 Acquisition and sale of subsidiaries and activities (cont.)
If the acquisition had occurred on January 1, 2021, the impact on the Group’s revenue would have been
additional EUR 1.1bn. The profit before tax contributed to the Group would have been additional
EUR 64m. Acquisition related transaction costs are EUR 12m and have been included in Other Operating
Expenses in the consolidated income statement. Integration costs are ongoing and amount to EUR 38m,
impacting EBIT negatively.
The preliminary purchase price allocation (PPA) accounting has total goodwill of EUR 1.1bn. Goodwill arising
from the acquisition is attributable to the value of employees, know-how and synergies expected from
combining the operations of the Danfoss Group and the acquired business. A large part of the goodwill and
PPA Intangible’s assets recognized is expected to be deductible for income tax purposes. The final
calculation will take place within 12 months from the acquisition date.
On 1 October 2021 Danfoss disposed White Drive Motors & Steering. This was a standalone business unit
within the Danfoss business segment, Danfoss Power Solutions. The business unit was established in
February 2021 and prepared for sale as a necessary step to get the regulatory approvals needed to close
the acquisition of Eaton’s hydraulics business.
The White Drive Motors & Steering business unit includes operations and products at three Danfoss
locations in Hopkinsville, Kentucky (US), Wroclaw, Poland; and Parchim, (Germany) as well as two product
lines from the newly acquired Eaton hydraulics business.
In 2021, divestments of the discontinued businesses have resulted in recognition of a net gain of EUR 46m
in the consolidated income statement under Other Operating Income.
The divestment has been excluded from the consolidated financial statements as of 1 October 2021.
The gain on the disposal is included in other operating income, cf. Note 3. The impact of the disposal on the
Group's Net Sales development from 2020 to 2021 is less than -1%.
EURm
2020 2021 2020 2021
Intangible assets, except goodwill
Property, plant and equipment
Other non-current assets, including deferred tax assets
Inventories
Receivables *)
Cash and cash equivalents
Interest-bearing debts
Provisions, including deferred tax liabilities
Trade and other payables
Net assets acquired
Goodwill/profit on disposal
Net assets, including goodwill(-)/profit on disposal
Cash and cash equivalents
Consideration, net of cash
Change in short-term payables/receivables/provisions
Net cash paid(-)/received
*) Receivables in acquisitions includes provision for bad debt of EUR 8m (2020: 0m).
s
n
o
i
t
i
s
i
u
q
c
A
s
n
o
i
t
i
s
i
u
q
c
A
-2
-829
-547
-11
-382
-328
-60
93
124
355
-2 -1,585
2 -1,145
-2,730
60
-2,670
6
-2,664
s
l
a
s
o
p
s
i
D
s
l
a
s
o
p
s
i
D
21
69
2
30
30
9
-13
-5
-38
105
98
203
-8
195
46
241
91/141
Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 12 Acquisition and sale of subsidiaries and activities (cont.)
Note 12 Acquisition and sale of subsidiaries and activities (cont.)
Any excess of the cost over the fair value of the identifiable assets and liabilities, including contingent liabilities,
is recognized as goodwill under intangible assets. Goodwill is not amortized but is subject to annual impairment
tests. The initial impairment test is carried out before the end of the acquisition year. Upon acquisition, goodwill
is allocated to the cash-generating units, which form the basis for subsequent impairment tests. Identification
of cash-generating units is based on the Group’s cash flow, in accordance with the structure in the internal
financial reporting. Such cash flow does not always follow the legal structure of the Group. Goodwill and fair
value adjustments related to the acquisition of a foreign unit with a functional currency other than the
Danfoss Group’s presentation currency are treated as assets and liabilities belonging to the foreign unit and
converted to the functional currency of the foreign unit at the exchange rate on the transaction day. Gain or
loss on disposal of subsidiaries, associates or joint ventures, are stated as the difference between the sales
amount or the disposal amount and the carrying amount of net assets, including goodwill at the date of
disposal, less disposal costs.
Minority interests
On initial recognition, minority interests are measured either at fair value or at their proportionate share of the
fair value of the acquired company’s identifiable assets, liabilities and contingent liabilities. In the case of the
former, goodwill is recognized in respect of the minority interests’ ownership share in the acquired company,
whereas in the latter case, goodwill is not recognized as a part of minority interests. The measurement of
minority interests is determined for each transaction and stated in the notes under the description of acquired
companies.
Accounting Policy
Business combinations
Newly acquired or established companies are recognized in the Consolidated Financial Statements from the
acquisition date, and divested companies are recognized in the consolidated income statement until the time
of divestment. Comparative figures are not restated for newly acquired companies. Unless divested companies
are classified as discontinued operations, comparative figures are not restated. When the Danfoss Group takes
over control of acquired companies, the purchase method is applied. This means that the identifiable assets and
liabilities, including contingent liabilities, of the acquired companies are stated at fair value at the acquisition
date. Identifiable intangible assets are recognized if they can be separated, or arise, from a contractual right. The
tax effect of revaluations is recognized. The time of takeover is the day when the Danfoss Group de facto obtains
control of the acquired company.
The consideration for a business comprises the fair value of the consideration agreed upon, in the form of assets
transferred, liabilities assumed, and equity instruments issued. If part of the consideration is contingent on
future events or in compliance with agreed conditions, that part of the consideration is recognized at fair value
at the acquisition date. Costs attributable to business combinations are recognized directly in the income
statement when incurred. When a business is taken over in more than one transaction (step acquisition),
previously acquired investments are revalued at fair value at the acquisition date, and value adjustments are
recognized in the income statement under other operating income or other operating expenses. Management
estimates the fair value of the total investment acquired immediately on completion of the step acquisition.
Fair value is measured at the cost of the total investment acquired.
If uncertainty exists at the acquisition date concerning the identification or measurement of acquired assets,
liabilities or contingent liabilities, initial recognition is made at provisional fair values. If it subsequently becomes
apparent that the fair value of identifiable assets and liabilities, including contingent liabilities, differs from the
assumed fair value at the acquisition date, the calculation is adjusted retroactively, including goodwill, until 12
months following the acquisition. The effect of the adjustments is recognized in the opening equity and
comparative figures are restated, if material. Subsequently, goodwill is not adjusted. Changes in estimates of
contingent consideration are recognized directly in the income statement.
92/141
Danfoss Annual Report 2021 group note 13-14
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 13 Acquisition / Sale of other investments
Note 14 Provisions
EURm
2020
2021
EURm
Sale of shares and other securities
Purchase of shares and other securities
Increase/decrease in lending
5
-1
-15
-11
2
-5
-3
Provisions for warranty comprise expected costs arising during the warranty period of the Group's products.
Employee-related provisions mainly consist of certain employee expenses, including jubilee costs. Other mainly
comprises expenses for restructuring and severance payments. Provisions have been discounted to net present
value, if the values are significant.
Warranty
Contingent
consideration
Employee-
related
Provisions as of January 1
Foreign exchange adjustments in foreign
companies
Additions through acquisition of
subsidiaries and activities
Transferred to borrowings
Provisions used
Reversal of unused provisions
Additional provisions recognized *)
Disposals through sale of subsidiaries
Provisions as of December 31
45
1
6
-24
-14
28
42
48
-48
43
3
-4
-2
12
52
*) Increase in other provisions is related to divestment of subsidiaries.
Other
29
19
-6
-1
36
-1
76
2021
Total
165
4
25
-48
-34
-17
76
-1
170
2021
Estimated maturity of above provisions:
Warranty
Contingent
consideration
Employee-
related
Other
Total
Within 1 year
Between 1 and 5 years
After more than 5 years
Provisions as of December 31
26
16
42
7
25
20
52
58
16
2
76
91
57
22
170
93/141
Danfoss Annual Report 2021 group note 15
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 14 Provisions (continued)
Note 15 Financial income and expenses
Accounting Policy
A provision is recognized in the balance sheet when the Group has a legal or constructive obligation as a result
of a past event in the financial year or previous years, and it is probable that the settlement of the obligation
may lead to an outflow of the Group’s financial resources, which can be reliably measured at the balance sheet
date.
The amount recognized as a provision is Management’s best estimate of the expenses required to settle
the obligation. In measuring provisions, the costs required to settle the liability are discounted if the effect is
material to the measurement of the liability. For the measurement, a pre-tax discount factor is used, which
reflects the current market interest rate level and the specific risks related to the liability. Changes in present
values for the financial year are recognized under financial expenses.
Warranty provisions are recognized as the underlying goods and services are sold, based on warranty costs
incurred in the financial year and in previous years.
Provisions for restructuring and employee-termination costs are made when the Group has agreed on a
detailed and formal plan, and the Group has started implementing the plan or has announced the plan to
the persons affected. Restructuring provisions do not include costs for the ongoing operations during the
restructuring phase.
Other long-term employee benefits are recognized based on an actuarial calculation. However, actuarial gains
and losses are recognized in the income statement immediately. Other long-term employee benefits include
jubilee benefits.
EURm
Financial income
Interest from banks, etc.
Financial income
Interest on financial assets measured at amortized cost.
Financial expenses
Interest to banks etc.
Calculated interest on defined benefit plans
Interest expense for leasing arrangements
Foreign exchange losses, net
Financial expenses
Interest on financial liabilities measured at amortized cost
2020
2021
2
2
2
-27
-2
-8
-13
-50
-35
5
5
5
-52
-3
-7
-1
-63
-59
A fair-value hedge impact of EUR 5m (2020: 14m) is included in Foreign exchange losses, net.
Further information on leases is provided in Note 11 Leases.
Accounting Policy
Financial income and expenses comprise interest income and expenses, realized and unrealized gains and
losses on securities that are valued through the income statement, debt and transactions denominated in
foreign currencies, amortization of financial assets and liabilities and surcharges and refunds under the
Tax Prepayment Scheme etc. Also included is the interest element of leases and gains and losses on derivative
financial instruments, which are not designated as hedging arrangements.
Borrowing costs incurred in relation to general borrowing activities or loans, which relate directly to the
purchase, construction or development of qualifying assets, are allocated to the cost of such assets.
94/141
Danfoss Annual Report 2021 group note 16
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 16 Share capital
Note 16 Share capital
Shareholders holding more than 5% of the shares or 5% of the votes
Development in the Group's holding of treasury shares (No. of B-shares of 100 DKK)
The Bitten & Mads Clausen's Foundation, Nordborg, Denmark
Clausen Controls A/S, Sønderborg, Denmark
Henrik Mads Clausen, Lake Forest, USA
Shares
Votes
48%
26%
11%
86%
5%
2%
Holding as of January 1
Acquired in the year
Sold to The Bitten & Mads Clausen's Foundation
Holding as of December 31
2020
2021
412,122
2,512
-74,236
340,398
340,398
1,189
-1,434
340,153
Distribution of shares
A shares
B shares
Total
Number
DKKm
Number
DKKm
Number
Balance as of January 1, 2020
4,250,000
425.0
5,719,625
572.0
9,969,625
DKKm
997.0
The shareholders' meeting of Danfoss A/S has authorized Danfoss A/S to buy back up to 10% of Danfoss A/S’
share capital. The total cost in 2021 for acquiring own shares amounts to EUR 2m (2020: 2m). The total selling
price in 2021 for selling own shares amounts to EUR 2m (2020: 70m). The Group's holding of treasury shares
represents 3.4% (2020: 3.4%) of the Group's share capital.
Capital structure
The capital structure of Danfoss is intended to ensure sufficient financial flexibility and stability over the cycle
for the company to reach its strategic goals. It is the policy of the Group to have a “BBB credit rating”, and the
Group aims for financial metrics that are commensurate with such credit rating over the cycle. Danfoss is
currently rated “BBB with a stable outlook" by Standard and Poor’s. End of 2021 the net-interest-bearing
debt to EBITDA ratio was 2.1 (2020: 0.6) on a reported basis. Danfoss aims to use the free operating cash flow
after financial items and tax for debt servicing, business development and shareholder distribution.
Balance as of December 31, 2020
4,250,000
425.0
5,719,625
572.0
9,969,625
997.0
Balance as of December 31, 2021
4,250,000
425.0
5,719,625
572.0
9,969,625
997.0
Class A shares entitle the holder to ten votes for each share, while Class B shares entitle the holder to one vote
for each share. The holders of Class A shares also have pre-emptive rights to Class A shares in the event of any
increases in share capital. Otherwise, no shares have special rights. Resolutions regarding amendments to the
Articles of Association or Danfoss A/S’ dissolution require at least two-thirds of the votes cast as well as
two-thirds of the voting share capital represented at the Annual General Meeting to be adopted. The share
capital is fully paid in. All shares have a nominal value of DKK 100.
Dividend per share
Proposed dividend per 100 DKK share
Dividend from last year paid per 100 DKK share
No dividend was paid for 2020.
DKK
0
0
2020
EUR
0
0
DKK
141.3
0
2021
EUR
19.0
0
95/141
Danfoss Annual Report 2021 group note 17
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 17 Financial risks and instruments
Note 17 Financial risks and instruments
Financial risks
Danfoss's profitability, cash flow and balance sheet are exposed to financial market risk as a consequence
of the Group's multinational business profile. The risk factors include currency, credit, interest rate,
liquidity and commodity risks. The Group's risk-management activities focus on risk mitigation, with
particular emphasis on protecting the Group's cash flows and profitability in local currency.
The risk-management activity of the Group is governed by the Treasury Policy, which is approved and
reviewed annually by the Board of Directors. Group Treasury is the function responsible for executing the
Treasury Policy and managing the Group's financial market risks in accordance with it. In general, the aim
of Group Treasury’s risk-management activities is to mitigate risk and reduce the volatility of the Group's
cash flows and earnings in local currency and not to engage in speculative transactions that increase the
financial risk of the Group.
Currency risk
Currency exposure consists of three elements:
1. Transaction risk: This covers both the fair value risk, i.e. the risk related to assets and liabilities denominated in
foreign currency, and the cash flow risk, i.e. the risk related to future cash flows in foreign currency. Both risk
types have direct cash flow and earnings impact and therefore are the primary focus of Danfoss’ currency
hedging strategy. The hedging policy is to cover all fair value risk and all significant future cash flow risk for a
12-month period on a rolling and layered basis. The policy for future cash flow hedge for 2021 follows a
Cash Flow at Risk approach in combination with the hedge ratios below:
Cash flow risk, five largest exposures: Minimum hedge 60%
Other significant cash flow exposures: Minimum hedge 30%
The policy for balance sheet risk has been unchanged and the hedge ratio was 100% in both 2021 and 2020.
2. Translation risk: This is the risk that the P&L and Equity of Danfoss are impacted adversely by currency
movements when consolidating the financials and is generally not hedged. However, it is partly mitigated by
keeping an appropriate capital structure in the subsidiaries of the Group in terms of equity and debt in local
currency, and by drawing the Group's financing facilities in foreign currency to match the assets of the Group.
3. Economic risk: This risk is not in scope for financial risk management. Economic risk is dealt with strategically
by keeping an appropriate balance between the geographical footprint of end markets and sourcing markets.
96/141
Nominal position of significant currencies
EURm
Receivables and payables
Cash and loans 1)
Derivative financial instruments for hedging of
fair value 2)
Derivative financial instruments for hedging of
future cash flow 3)
Sensitivity
Probable increase in exchange rate
Hypothetical impact on profit and loss for the
year
Hypothetical impact on equity
2020
2021
EUR
USD GBP Total
EUR
USD
GBP Total
-117
89
15
-142
-6
-108
-53
-75
-180
10
22
-5
59
-70
-99
31
124
6
161
263
-31
-55
177
-1,136
747
-27
-416
-231
-130
-30
-391
1%
10% 10%
1% 10%
10%
0
-17
0
75
0
-3
0
55
0
-3
0
-13
0
-3
0
-19
A decrease in exchange rates as stated would have had the opposite effect on the profit and equity. The
sensitivities are based on recognized financial assets and liabilities at December 31 and include impact from
derivatives.
1) Besides the loans included, loans of EUR 101m (2020: 614m) are used for hedging of net investments. The
impact on the Group's equity is EUR 0.2m (2020: 2.6m).
2) Financial instrument for hedging of fair value also includes the exposure related to inventories in countries
applying foreign currency price lists.
3) 2020 includes the cash flow hedge related to the acquisition of Eaton Hydraulics, USD/EUR 1.000m.
Cross currency swaps and related interest swaps are not included in the above but are described below in the
section "Derivative contracts related to the bond issuance".
Credit risk
The Group’s credit risks primarily apply to trade receivables and bank deposits (i.e. counterparty risk). It is
Danfoss' policy to minimize the risk of losses from credit risk. The counterparty risks towards banks and
towards other financial partners are managed by only using solid regional and global financial partners with
a credit rating of minimum "A-" or better, according to Standard & Poor’s credit rating metric.
Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 17 Financial risks and instruments (continued)
Note 17 Financial risks and instruments (continued)
The Group applies the simplified approach to provide for expected credit losses prescribed by IFRS 9, which
The Group's debt categories and maturities
permits the use of the lifetime expected loss provision for all trade receivables. To measure the expected credit
losses, trade receivables have been grouped based on shared credit-risk characteristics and the days past due.
EURm
For the expected credit loss recognized, refer to Note 5 Trade receivables. The carrying amount of trade
receivables is estimated to represent their fair value as well as the maximum credit risk.
Interest-rate risk
The Group’s interest-rate risk derives primarily from interest-bearing debt, cash funds and pension obligations.
The Group makes use of both fixed and floating-rate loans, as well as interest-rate derivatives, to manage this
risk. As per Danfoss’ Treasury Policy, the interest-rate risk on its debt portfolio should not exceed a maximum
of 0.25% of Group annual revenue in case of a 1% point parallel shift in interest rates across the
interest rate curve.
All things being equal, an increase in the interest rate of 1% point compared to the interest rate level on the
balance sheet date would impact on the profit with EUR 5m, while equity would be impacted by a gain of
EUR 55m, mainly related to USD interest rate hedge.
For interest rate risk on pension obligations, refer to Note 19 Pensions and healthcare obligations.
Liquidity risk
It is Danfoss' policy to maintain a robust capital structure and to aim for a capital and financing structure that
is compatible with a BBB credit rating, a liquidity reserve of minimum EUR 0.6bn, in terms of accessible cash,
and non-terminable credit facilities with an average maturity profile of at least 3 years.
At the end of 2021, Danfoss' credit rating from Standard and Poor’s was "BBB with a stable outlook" and
the liquidity reserve equaled EUR 1.2bn (2020: 2.1bn). In addition to this, Danfoss had significant amounts
of short-term credit lines. The Group considers the liquidity reserve to be adequate in relation to current
plans and the market conditions in general.
The average maturity profile on non-terminable credit facilities was 4.7 years at the end of 2021.
The Danfoss Group's loan agreements contain no financial covenants.
97/141
l
a
u
t
c
a
r
t
n
o
C
w
o
l
f
h
s
a
c
906
74
247
774
4
62
2,067
i
g
n
y
r
r
a
C
t
n
u
o
m
a
883
69
219
774
4
62
2,011
2020
Maturity
r
a
e
y
1
-
0
30
56
774
4
61
925
)
*
s
r
a
e
y
5
r
e
v
O
s
r
a
e
y
5
-
1
626
1
250
73
139
52
1
376
766
l
a
u
t
c
a
r
t
n
o
C
w
o
l
f
h
s
a
c
2,637
74
39
291
1,417
4
99
4,561
i
g
n
y
r
r
a
C
t
n
u
o
m
a
2,568
69
39
268
1,417
4
99
4,464
2021
Maturity
r
a
e
y
1
-
0
)
*
s
r
a
e
y
5
-
1
5
r
e
v
O
s
r
a
e
y
162
1
2
88
1,417
4
18
1,692
1,259 1,216
72
1
37
154
49
38
43
1,489 1,380
Bank debt and corporate bond
Mortgage debt
Contingent considerations
Lease liabilities
Trade payables
Debt to ass./ JV.
Derivative financial liabilities
*) Maturity is evenly spread over the period.
Further information on lease is provided in Note 11 Leases.
Danfoss has issued three EUR Bonds in total EUR 1.9bn as part of the financing related to the acquisition of
the Eaton Hydraulics business. The EUR Bond EUR 500m with maturity February 2022 has been repaid in
November 2021 by exercising the option to prepay ahead of maturity.
The maturity analysis is based on all non-discounted cash flows, including estimated interest payments.
Interest payments are estimated according to existing market conditions. The non-discounted cash flows
from derivative financial instruments are presented in gross amounts, unless the parties have a contractual
right or obligation to make net settlements. The Group generally accepts that vendors sell off their
receivables arising from the sales to the Group to a third party. Danfoss has established a supply-chain
financing program where vendors can sell off their receivables from Danfoss at attractive terms, but at the
bank's sole discretion. Danfoss is not directly or indirectly a party to these agreements. End of December,
the Group is aware of EUR 37m (2020: 37m) of trade payables that are part of such agreements.
Danfoss Annual Report 2021
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 17 Financial risks and instruments (continued)
Note 17 Financial risks and instruments (continued)
Financial instruments by category
Financial instruments by category
Carrying
amount
2020
Fair
value
Carrying
amount
2021
Fair
value
EURm
Carrying
amount
2020
Fair
value
Carrying
amount
2021
Fair
value
EURm
Financial assets:
Investments in associates and joint ventures
Financial assets measured at equity method
279
279
390
390
279
279
272
272
Other investments **)
Financial assets measured at fair value via the
income statement
Derivative financial instruments for the hedging
of the fair value of recognized assets *)
Derivative financial instruments for the hedging
of future assets cash flows 1)
Financial assets used as hedging instruments
Trade receivables
Other receivables
Cash and cash equivalents
Loans, receivables, cash and cash
equivalents measured at amortized cost
Financial liabilities:
Contingent consideration measured at fair
value via the income statement **)
4
4
0
0
0
4
4
0
0
0
4
4
1
39
40
4
4
1
39
40
863
106
611
863
106
611
1,394
197
249
1,394
197
249
1,580
1,580
1,840
1,840
48
48
39
39
Interest-bearing debt
Trade payables and other debt
Financial liabilities measured at amortized cost
1,171
1,417
2,588
1,193
1,417
2,610
2,905
2,342
5,247
2,967
2,342
5,309
98/141
Financial liabilities:
Derivative financial instruments for the hedging
of the fair value of recognized liabilities *)
Derivative financial instruments for the hedging
of future cash flows
Financial liabilities used as hedging instruments
4
58
62
4
58
62
107
107
30
30
137
137
Financial assets and liabilities measured at fair value are measured on a recurring basis and categorized into
the following levels of the fair value hierarchy:
Level 1: Observable market prices for identical instruments.
Level 2 *): Hedging instruments are not traded on an active market based on quoted prices are measured using
valuation techniques, where all significant inputs are based on observable market data such as exchange
rates and swap curves.
Level 3 **): Valuation techniques primarily based on unobservable prices.
The fair value of the interest-bearing debt is recognized as the present value of expected future installment
and interest payments. The discount rate applied is the Group's current borrowing rate on loans for
corresponding terms. The short-term, floating-rate debt at banks is stated at par value. The fair value of trade
receivables and trade payables with short credit terms is estimated to be equal to the carrying amount. The
methods applied in 2021 remain unchanged compared to 2020.
1) Out of EURm 39, the 38 is offset in derivative financial instuments under liabilities in statement of financial
position (2020 EURm 0).
Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 17 Financial risks and instruments (continued)
Note 17 Financial risks and instruments (continued)
Derivates as of December 31 for the Group
EURm
t
n
u
o
m
a
l
a
n
o
i
t
o
N
857
-27
144
877
e
u
a
v
l
r
i
a
f
t
e
N
-59
-1
-60
-1
-1
-62
USD
EUR
Other currencies
Forward exchange contracts
Interest rate swaps
Cross currency hedge
Derivatives end of year
2020
d
e
z
i
n
g
o
c
e
r
)
-
(
s
s
o
L
/
n
a
G
i
t
n
e
m
e
t
a
t
s
e
m
o
c
n
i
n
i
-2
-2
-4
-1
-5
2021
d
e
z
i
n
g
o
c
e
r
t
n
e
m
e
t
a
t
s
e
m
o
c
n
i
n
i
)
-
(
s
s
o
L
/
n
a
G
i
-3
-2
-5
-15
-83
-103
t
n
u
o
m
a
l
a
n
o
i
t
o
N
-138
-1,007
-96
-1,125
1,425
e
u
a
v
l
r
i
a
f
t
e
N
-4
-13
-3
-20
22
-99
-97
Cash flow hedge
The Group use forward exchange contracts to hedge currency risks regarding expected future cash flows that
meet the criteria for cash flow hedging. At the end of 2021, unrealized gain/loss(-) on derivatives on hedging
of foreign currency risk recognized in equity amounted to EUR -15m (2020: -57M). The main reason for the
2020 impact is the hedging of part of the acquisition price of Eaton Hydraulics. For the open foreign
exchange contracts, used for USD cash flow hedges, at the end of 2021, the weighted average hedge
rate for USD/DKK is 6.3184 (2020: 6.4793).
Refer to below section "Derivative contracts related to the bond issuance" for Cash flow hedge related to
interest rate swaps.
Derivative contracts related to the bond issuance
To obtain a balanced currency risk profile on the outstanding debt, part of the bonds issuance is swapped
into USD via cross currency swaps, while a significant part of the interest rate risk is hedged via interest rate
swaps. The maturity of these contracts follow the maturity of the bonds loans. Refer also to the table
The Group's debt categories and maturities.
Due to the economic relationship between the exposure and the hedges, it is expected to be highly
effective.
Fair value hedge
The Group mainly use forward exchange contracts to hedge currency risks arising from assets and liabilities
denominated in foreign currency in the balance sheet. All derivates are due within 1 year. Fair value adjustments
recognized in financial items in the income statement amounted to EUR -5m (2020: -4m).
Refer to below section "Derivative contracts related to the bond issuance" for fair value hedges related to
cross currency swaps.
Commodity risk
Movements in commodity prices can affect the Group's earnings and cash flow. It is Danfoss' policy to ensure
that significant commodity risks are covered for a period of minimum 6 months and maximum 18 months,
preferably by fixed price agreements with the suppliers or alternatively by financial hedging.
Danfoss has not undertaken financial hedging of commodities in 2021 or 2020.
99/141
Danfoss Annual Report 2021
group note 18
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 17 Financial risks and instruments (continued)
Note 18 Change in liabilities arising from financing activities
Accounting Policy
EURm
Financial assets
Securities are measured at fair value through the income statement.
Financial liabilities, other than derivatives
Financial liabilities are initially recognized at fair value less transaction costs. Subsequently, they are measured at
amortized cost. Amortized cost implies the recognition of a constant effective interest rate to maturity.
Amortized cost is calculated as initial cost less any principal repayments and plus or minus the cumulative
amortization of any difference between cost and nominal amount. Any capitalized residual obligation on leases
is recognized in the balance sheet as a liability. The interest element of the lease payment is expensed in the
income statement under financial items.
Derivative financial instruments
Derivative financial instruments, such as forward exchange contracts or options and commodity contracts, are
recognized and measured at fair value. Positive and negative fair values of derivative financial instruments are
shown as separate items in the balance sheet. Set-off of positive and negative values is only made when the
Company has the right and the intention to settle several financial instruments net. Provided that the
documentation requirements etc. are met, hedge accounting is applied to the instruments. In connection
with hedging of future sales and purchase transactions (cash flows), changes in the fair value of instruments
qualifying for hedge accounting are recognized in the statement of comprehensive income under the hedging
reserve until the hedged transaction occurs in the balance sheet. At this point, gains or losses relating to such
hedging transactions are transferred from the statement of comprehensive income and are recognized in the
same item as the hedged transaction. If the instruments do not qualify for hedge accounting, changes in
market value are recognized directly in the income statement under financial items.
Carrying amount as of January 1, 2020
Cash flows:
Cash repayment
Lease payments
Cash proceeds
Non-cash transactions:
Acquisitions and disposal of lease liabilities
Reclassification
Other
Carrying amount as of December 31, 2020
Cash flows:
Cash repayment
Lease payments
Cash proceeds
Non-cash transactions:
Acquisitions of subsidiaries
Acquisitions and disposal of lease liabilities
Reclassification
Other
Carrying amount as of December 31, 2021
Short-term
borrowings
Long-term
borrowings
76
-26
-61
8
23
50
-2
68
-90
-64
153
35
23
117
-6
236
1,093
-5
64
-50
1
1,103
-504
2,156
46
23
-117
1
2,708
Total
1,169
-31
-61
8
87
-1
1,171
-594
-64
2,309
81
46
-5
2,944
Lease payments are the principal portion of lease liabilities and are presented under cash flows from financing
activities in the Statement of Cash Flows.
The Group's other change in liabilities arising from financing activities in 2021 mainly consists of Cash
repayments and cash proceeds.
Other includes the reclassification in 2021 of contingent consideration from provisions to borrowings.
Further information on lease is provided in Note 11 Leases.
100/141
Danfoss Annual Report 2021 group note 19
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 19 Pensions and healthcare obligations
EURm
In most countries, Danfoss offers defined contribution plans, which are fully funded. However, a few of the
foreign subsidiaries have obligations concerning defined-benefit plans which are unfunded or only partly
funded.
In 2021 Danfoss acquired Eaton Hydraulics business and in this respect certain pension plans were taken over.
The largest plan is located in Germany.
It is the Group’s policy that pension and healthcare plans within the Group should, generally, be arranged as
defined-contribution plans. However, in countries like the USA, the UK and Germany, there is a tradition for
defined-benefit plans. The geographical split of defined-benefit plans is as follows:
Germany
USA
UK
Other
Total
Gross
liability
26%
38%
33%
3%
100%
2020
Net
Liability
65%
26%
-3%
12%
100%
Gross
liability
29%
35%
30%
6%
100%
2021
Net
Liability
72%
19%
-9%
18%
100%
The pension plans are based on the individual employee´s salary and years of service in the company. The plans
have varying requirements for risk diversification and for matching assets strategies. The majority of the
liabilities are either due to deferred members and pensioners, or they are linked to minimum-return guarantees.
However, some of the defined-benefit plans in the UK and the USA are still linked to final salary for a closed,
limited group of less than 300 (2020: 200 ) active employees. The increase since 2020 is caused by
acquisitions in 2021. Danfoss is working on minimizing the defined-benefit risk by integrated risk
management and by changing the nature of existing plans.
All material defined-benefit plans have been computed by independent actuaries.
101/141
Note 19 Pensions and healthcare obligationsThe Group's defined-benefit plan obligationsEURm20202021Present value of defined-benefit plan obligations559634Fair value of plan assets-410-449149185Defined-benefit plan obligations are presented in the statement of financial position as follows:Pension benefit plan assets418Pension and healthcare plan obligations153203149185Plans with a surplus have been recognized on the basis that future economic benefits are available to the Group in the form of a reduction in future contributions or a cash refund. Development in the present value of defined-benefit plan obligationsEURm20202021Provision as of January 1550559Foreign exchange adjustments in foreign companies-2927Additions through acquisition of subsidiaries and activities72Pension costs for the year46Calculated interest on plan liabilities1110Actuarial gains(-)/losses from changes in demographic assumptions-21Actuarial gains(-)/losses from changes in financial assumptions48-18Plan participants' contribution liabilities11Disbursed benefits from the Group-5-5Disbursed benefits from plan assets-19-19Provision as of December 31559634Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 19 Pensions and healthcare obligations (continued)
Development in the fair value of plan assets
EURm
Plan assets as of January 1
Foreign exchange adjustments in foreign companies
Additions through acquisition of subsidiaries and activities
Calculated interest on plan assets
Plan participants' contribution asset
Return for the year on plan assets, excluding calculated interest
Payments by the Group
Disbursed benefits
Net transfer from provisions
Plan assets as of December 31
2020
2021
406
-26
9
1
32
7
-19
410
410
27
3
7
1
12
7
-19
1
449
A few countries may require that the liability is funded, but this is not the case in most countries.
Defined-benefit plans that are unfunded are mainly related to pension plans in Germany and the
healthcare plan in the USA. Unfunded plans amount to approximately EUR 95m (2020: 72m).
Expenses relating to pension and healthcare obligations
EURm
Pension costs for the year
Calculated interest on liabilities
Calculated interest on assets
Expensed in the income statement
Pension costs distributed by function:
Pension cost stated under cost of sales
Pension cost stated under selling and distribution costs
Pension cost stated under administrative expenses
Interest concerning pension and healthcare obligations posted under financial items
2020
2021
4
11
-9
6
1
3
2
6
6
10
-7
9
2
1
4
2
9
102/141
Note 19 Pensions and healthcare obligations (continued)Estimated maturity of provisionsEURm20202021Within 1 year2524Between 1 and 5 years100101After more than 5 years434509559634Pension plan assets are specified as follows:EURm20202021Shares and similar securities14034%13831%Listed corporate bonds13834%15334%Bonds6516%8319%Other6716%7516%410100%449100%Plans in which the pension funds are invested in financial instruments are exposed to risk. 31% (2020: 34%) of the funds are invested in shares, which have historically been subject to value fluctuations.Significant assumptions for calculation of pension and healthcare obligations and related costs20202021RangeWeightedaverageRangeWeightedaverageDiscount rate-0.3-2.3%1.7%1.0-2.7%2.1%Estimated future salary increase1.2-4.3%3.5%1.8-4.7%3.7%20202021MaleRangeFemaleRangeMaleRangeFemaleRangeLife expectancy for a pensioner retiring at the end of the reporting period84-8786-8985-8787-89Life expectancy for a pensioner retiring 20 years after the end of the reporting period86-9088-9087-8988-90Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 19 Pensions and healthcare obligations (continued)
The estimated return on defined-benefit plan assets is based on external actuarial calculations and determined
according to the composition of the assets and considering the general expectations with regard to economic
developments. The Group expects to pay in EUR 11m to defined-benefit plans in 2022 (2021: 10m).
SENSITIVITY ANALYSIS
EURm
Reported defined-benefit plan obligations
Impact of increase in discount rate of a 0.5 percentage point
Impact of decrease in discount rate of a 0.5 percentage point
Impact of increase in future salary increase of a 0.5 percentage point
Impact of decrease in future salary increase of a 0.5 percentage point
Impact of increase in average life expectancy of 1 year
Impact of decrease in average life expectancy of 1 year
2020
559
2021
634
-42
+47
+3
-3
+21
-21
-42
+45
+8
-8
+21
-21
Accounting Policy
The Group has entered into pension schemes and similar arrangements with the majority of the Group’s
employees. In addition, the Group has healthcare plans contributing with payment for medical expenses for
certain employee groups in the USA after their retirement. Contributions to defined-contribution plans,
where the Group currently pays fixed pension payments to independent pension funds, are recognized in
the income statement in the period to which they relate, and any contributions outstanding are recognized
in the balance sheet as other debt. For defined-benefit pension and healthcare plans, the Group is under
obligation to pay a specific benefit upon retirement (e.g. a fixed amount or a percentage of the exit salary).
103/141
Note 19 Pensions and healthcare obligations (continued)For these plans, an annual actuarial calculation (Projected Unit Credit method) is made of the present value of future benefits under the defined-benefit plan. The present value is determined on the basis of assumptions about the future development in variables such as salary levels, interest rates, inflation and mortality. The present value is determined only for benefits earned by employees from their employment with the Group. The actuarial present value less the fair value of any plan assets is recognized in the balance sheet under pension and healthcare obligations. Pension and healthcare costs for the year are recognized in the income statement based on actuarial estimates and financial expectations at the beginning of the year. Any difference between the expected development in assets and liabilities, and realized amounts determined at year-end constitutes actuarial gains or losses and is recognized directly in other comprehensive income. If changes in benefits relating to services rendered by employees in previous years result in changes in the actuarial present value, the changes are recognized as past service costs. Pastservice costs are recognized immediately, provided that the benefits have already vested. If the benefitshave not vested, the past service costs are expensed in the income statement over the period in whichthe changed benefits vest.If a pension or healthcare plan constitutes a net asset, the asset is only recognized if it offsets future refunds from the plan or will lead to reduced future payments to the plan Critical accounting estimatesThe Group has established defined-benefit plans with certain employees at some of the Group’s foreign companies. The plans place the Group under an obligation to pay a certain benefit in connection with retirement (e.g. in the form of a fixed amount at retirement or a share of the employee’s exit salary). The pension obligations are determined by discounting the pension obligations at the present value. The present value is determined on the basis of assumptions about the future development in economic variables such as interest rates, inflation, mortality and disability probabilities, which are subject to some degree of uncertainty. External actuaries are used for the measurement of all significant defined-benefit plans. Danfoss Annual Report 2021 group note 20-21
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 20 Tax on profit
Note 21 Deferred tax
EURm
Current tax expense
Change in deferred tax
Adjustments concerning previous years
Tax on profit (income statement)
Tax on profit is defined as:
Tax on profit before tax
Adjustment of tax in foreign subsidiaries calculated at 22.0%
Tax exempt income/non-deductible expenses
Income from associates and joint ventures after tax
Adjustment of net tax assets
Other taxes
Adjustments concerning previous years
Effective tax rate
EURm
Tax on profit (income statement)
Tax on fair-value adjustment of hedging instruments
(other comprehensive income)
Tax on actuarial gain/loss on pension and healthcare plans
(other comprehensive income)
Total taxes
2020
2021
Changes in deferred taxes
-175
30
3
-142
22.0%
1.7%
-1.0%
-0.2%
0.7%
1.9%
-0.5%
24.6%
-239
48
3
-188
22.0%
1.7%
-2.5%
-0.1%
0.5%
1.8%
-0.4%
23.0%
2020
2021
-142
-188
4
4
-134
-1
-7
-196
EURm
Deferred taxes as of January 1 (net) *)
Foreign exchange adjustment in foreign companies
Additions through acquisition of subsidiaries
Adjustments concerning previous years
Disposals through sale of subsidiaries
Deferred tax recognized in the income statement
Deferred tax recognized in other comprehensive income
Deferred taxes as of December 31 (net) *)
*) Liability (-)
Specification of deferred taxes
EURm
Intangible assets
Property, plant and equipment and financial assets
Current assets
Debt and provisions
Tax loss carry-forwards
Non-capitalized tax assets regarding tax losses
Set-off within the same legal entities and jurisdiction
Deferred tax assets
2020
2021
-144
1
2
30
4
-107
-107
-25
2
48
-10
-92
2020
2021
Deferred
tax asset
Deferred
tax asset
4
48
22
156
41
-36
235
-143
92
2
47
23
150
50
-43
229
-156
73
Accounting Policy
Current and deferred taxes for the year are recognized in the income statement, except for tax related to
transactions recognized in the statement of comprehensive income or directly in equity. Surcharges,
premiums and refunds relating to tax payments are recognized in financial income and expenses.
104/141
Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 21 Deferred tax (continued)
Note 21 Deferred tax (continued)
Specification of deferred taxes
EURm
Intangible assets
Property, plant and equipment and financial assets
Current assets
Debt and provisions
Deferred tax regarding Danish joint taxation
Set-off within the same legal entities and jurisdiction
Deferred tax liabilities
2020
2021
Deferred
tax liability
Deferred
tax liability
131
123
10
73
5
342
-143
199
165
114
11
26
5
321
-156
165
The tax asset related to tax-loss carry-forwards of EUR 7m net (2020: 5m) is largely related to companies that
have suffered tax losses within the last three financial years. Based on business plans and expected future
taxable income in the respective companies, it is the Management’s opinion that the net tax-loss
carry-forwards will be utilized in the future. Of the tax-loss carry-forwards recognized, 99% (2020: 100%) can still
be utilized after 3 years or later.
The tax value of unrecognized tax assets related to tax-loss carry-forwards amounts to EUR 43m (2020: 36m).
The amount is not recognized as an asset, as the tax losses carried forward are not expected to be utilized.
13% of the amount (2020: 2%) has a remaining period of 3 years or less, whereas the share with a
remaining period of 10 years or more totals 82% (2020: 83%).
Of the deferred tax liability of EUR 165m (2020: 199m), EUR 5m (2020: 5m) can be attributed to taxes relating to
joint taxation with foreign subsidiaries in previous years. The Group has deferred tax liabilities concerning
temporary differences in foreign subsidiaries, associates and joint ventures of EUR 21m (2020: 8m). The
liabilities are not recognized, because the Group decides on their utilization and it is likely that the liabilities
will not be recognized in the foreseeable future.
Accounting Policy
Deferred tax liabilities and deferred tax assets are measured according to the balance sheet liability
method, which means that all temporary differences between the carrying amount and the tax base of
not deductible for tax purposes. Assets and liabilities are recognized in the balance sheet as deferred tax
liabilities and deferred tax assets, respectively. Exceptions are any tax incurred by selling shares in
subsidiaries and which the Group can identify as being a tax liability and tax relating to goodwill, which is not
deductible for tax purposes. Deferred tax assets are recognized at the expected value of their utilization;
either as a set-off against tax on future income or as a set-off against deferred tax liabilities in the same legal
tax entity and jurisdiction. Adjustment is made for deferred tax resulting from elimination of unrealized
intra-Group profits and losses. Deferred tax is measured according to the tax rules and at the tax rates
applicable in the respective countries at the balance sheet date when the deferred tax is expected to be
crystallizd as current tax. Deferred tax assets are subject to annual impairment tests and are recognized only
to the extent that it is probable that the assets will be utilized.
Critical accounting estimates
Measurement of recognized tax assets and liabilities
Deferred taxes, including the tax value of tax-loss carryforwards, are recognized at their expected value.
The assessment of deferred tax assets regarding tax-loss carryforwards is based on the expected future
taxable income of the respective units and the expiration date of the losses.
In the course of conducting business globally, transfer-pricing disputes with tax authorities may occur and
Management judgment is applied to assess the possible outcome of such disputes. The most probable
outcome is used as the measurement method. Management believes that the provisions made for
uncertain tax positions is adequate. However, the actual obligation may deviate and is dependent on
the results of the litigation and settlement with the relevant tax authorities.
Uncertain tax positions are recognized if it is probable that the uncertain tax position will affect the enterprise’s
future tax payments or refunds. Uncertain tax positions are measured so as to better reflect the
receivable/liability and the related uncertainty.
105/141
Danfoss Annual Report 2021 group note 22-23
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 22 Corporation tax
Note 23 Adjustment for non-cash transactions
EURm
2020
2021
EURm
Depreciation/amortization and impairment
Gain(-)/loss on disposal of tangible assets and business activities
Share of profit from associates and joint ventures after tax
Financial income
Financial expenses
Other
Adjustment for non-cash transactions
2020
2021
335
4
-6
-2
50
-9
372
397
-58
-2
-5
63
-10
385
Depreciation/amortization and impairment includes depreciation on leased right-of-use assets. Further
information on depreciation charge and lease payment is provided in Note 10 Property, plant and equipment
and Note 18 Change in liabilities arising from financing activities.
The Group's other adjustments for non-cash transactions mainly consist of provisions, derivatives and
defined-benefit plans.
Corporation tax payable/receivable (-) as of January 1
Foreign exchange adjustment in foreign companies
Additions through aquisition of subsidiaries
Paid during the year
Adjustments concerning previous years
Disposals through sale of subsidiaries
Current tax expenses in income statement
Current tax expenses in other comprehensive income
Corporation tax payable/receivable (-) as of December 31
The above corporation tax is recorded as follows:
Assets
Liabilities
38
-1
-169
-1
175
-4
38
23
61
38
38
1
-1
-209
-3
-1
239
-2
62
34
96
62
Accounting Policy
Companies belonging to Danfoss A/S are generally liable to pay tax in the countries where they are domiciled.
The current tax includes both Danish and foreign income taxes. Current tax payable and receivable are
recognized in the balance sheet as tax computed on the taxable income for the year, adjusted for tax paid
under the tax prepayment scheme.
Critical accounting estimates
In the course of conducting business globally, transfer-pricing disputes with tax authorities may occur and
Management judgment is applied to assess the possible outcome of such disputes. The most probable
outcome is used as the measurement method. Management believes that the provisions made for
uncertain tax positions not yet settled with local authorities is adequate. However, the actual obligation may
deviate and is dependent on the results of the litigation and settlement with the relevant tax authorities.
Uncertain tax positions are recognized if it is probable that the uncertain tax position will affect the enterprise’s
future tax payments or refunds. Uncertain tax positions are measured so as to better reflect the
receivable/liability and the related uncertainty.
106/141
Danfoss Annual Report 2021 group note 24-25
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 24 Contingent liabilities, assets and securities
Note 25 Related parties
Securities
EURm
Carrying amount of land and buildings pledged as security for bank loans and
mortgages
Leasing assets pledged as security for leasing commitments
Carrying amount of interest-bearing liabilities with security in assets
2020
2021
126
208
289
115
253
337
In connection with disposal of subsidiaries, ordinary guarantees and warranties have been issued. These
guarantees and warranties are considered to have no impact on the Group's financial position beyond
what has been stated in the Annual Report.
Contingent liabilities
The Danfoss Group is party to a small number of disputes, lawsuits and legal actions, including tax disputes. It is
the view of the Management that the outcome of these legal actions will have no other significant impact on
the Danfoss Group financial position beyond what has been recognized and stated in the Annual Report.
Danfoss A/S’ related parties comprise the Bitten & Mads Clausen's Foundation and other shareholders with
significant ownership interests, cf. Note 16 Share capital, as well as subsidiaries, associates, joint ventures, the
Board of Directors and the Group Executive Team. Further, related parties comprise companies in which the
above mentioned persons have controlling interest, joint controlling interests, or significant influence.
Bitten & Mads Clausen's foundation, other shareholders and other related companies
The Bitten & Mads Clausen's Foundation, which holds 48% of the shares in Danfoss A/S and controls 86%
of the voting power, has the controlling influence.
In the financial year, a limited number of transactions have taken place between the Bitten & Mads Clausen's
Foundation, its other subsidiaries and certain shareholders of the Clausen family. The transactions comprise
service and financial transactions, and they have been made according to the arm's length principle, or on
a cost-covering basis. The total payment to the Danfoss Group does not exceed EUR 3.3m (2020: 3.3m). In the
financial year, the Bitten & Mads Clausen's Foundation purchased shares in Danfoss A/S at a value of EUR 2m
from to the company (2020: 70m). The Bitten & Mads Clausen's Foundation has agreed to utilize its first right
to buy back the Danfoss A/S shares that relate to employee share programs, when these shares will be
offered for sale. End of December 2021, these shares constitute around 1% of the share capital in Danfoss A/S.
Contractual obligations
EURm
Service contract commitment other than leases
Inventories
Property, plant and equipment
Purchase commitments
2020
2021
72
144
48
264
123
194
108
425
Board of directors and group executive team
In the financial year, no transactions took place with the Board of Directors and Group Executive Team other
than the transactions as a result of conditions of employment. The companies in which Mads-Peter Clausen
and Jørgen M. Clausen have significant ownership interests have sold goods and services of less than
EUR 0.7m (2020: 0.7m) to the Danfoss Group. All transactions were performed on an arm's length basis.
For further information about the salaries of the Board and Group Executive Team, see Note 3 Expenses and
other operating income, section A. Personnel expenses.
107/141
Danfoss Annual Report 2021 group note 26
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 25 Related parties (continued)
Note 26 Events after the balance sheet date
Transactions with associates and joint ventures
EURm
Sales of goods and services
Purchases of goods and services
2020
2021
40
16
3
17
Transactions besides the above transactions with joint ventures and associates are described in
Note 8 Investments in associates and joint ventures, Note 15 Financial income and expenses and Note 17
Financial risks and instruments.
Subsequent to December 31, 2021 there have been no further events with any significant effect on
the financial statements beyond what has been recognized and disclosed in the Annual report.
108/141
Danfoss Annual Report 2021 group note 27
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 27 General accounting policies
The general accounting policies set out below have been consistently applied in respect of the financial year
and the comparative figures.
Consolidated Financial Statements
The Consolidated Financial Statements comprise the Parent Company, Danfoss A/S and subsidiaries in
which Danfoss A/S directly or indirectly holds more than 50% of the voting rights, or otherwise controls the
company’s financial and operating policies with a view to obtaining a yield or other benefits from its activities.
Companies in which the Group has between 20% and 50% of the voting rights and exercises a significant
influence, but does not control, are considered associates or joint ventures when the joint-venture conditions
of IFRS 11 are met. When assessing whether Danfoss A/S exercises control or significant influence or joint
control, potential voting rights, which can be utilized at the balance sheet date are taken into account.
The Consolidated Financial Statements are prepared by aggregating the Financial Statements of the Parent
Company and the individual subsidiaries, which have all been prepared in accordance with the accounting
policies of Danfoss A/S.
Investments in subsidiaries are set off against the proportionate share of the subsidiaries’ fair value of the
identifiable net assets and recognized contingent liabilities at the acquisition date. On consolidation, intra-
group income and expenses, shareholdings, intra-group balances and dividends, and realized, and unrealized,
profits and losses on transactions between the consolidated companies are eliminated. Unrealized losses are
eliminated in the same way as unrealized profits, provided that no impairment has occurred.
In the Consolidated Financial Statements, the items of subsidiaries are recognized in full. The minority interests’
proportionate share of the profit/loss for the year is recognized as part of the Group’s profit/loss for the year
and as a separate share of the Group’s equity.
The companies included in the Group are disclosed in the section “Group Companies”.
Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rates at the
balance sheet date. Currency gains and losses arising on translation are recognized in the income statement
under financial items. Non-monetary assets and liabilities denominated in foreign currencies are recognized at
the foreign exchange rates at the transaction date.
On recognition in the Consolidated Financial Statements of companies with a functional currency other than
EUR, the income statements are translated at the exchange rates at the transaction date, and the balance sheet
items are translated at the exchange rates at the balance sheet date.
An average exchange rate for each month is used as the exchange rate at the transaction date to the extent
that this does not significantly distort the presentation of the underlying transactions. Foreign exchange
differences arising on translation of the opening balance of equity of such enterprises at the exchange rates at
the balance sheet date and on translation of the income statements from the exchange rates at the transaction
date to the exchange rates at the balance sheet date are recognized directly in equity under a separate
translation reserve. The foreign exchange adjustment is allocated between the equity of the Parent Company
and of the minority shareholders.
Foreign exchange adjustments of balances which are considered part of the total net investment in companies
with a different functional currency than EUR are recognized directly in the equity under a separate reserve for
foreign exchange adjustments. Likewise, foreign exchange gains or losses are recognized in the Consolidated
Financial Statements (directly in the equity under a separate reserve for foreign exchange adjustments)
concerning the part of loans and derivative financial instruments which has been allocated for currency
hedging of net investments made in these companies, and which effectively protects against similar currency
rate gains or losses on net investments in the company.
On disposal of wholly owned foreign units, the foreign exchange adjustments which have been accumulated
in equity via other comprehensive income, and which can be ascribed to the unit, are reclassified from
“Translation reserve” to the income statement, together with any gains or losses from the disposal.
Foreign currency translation
For each of the reporting enterprises in the Group, a functional currency is determined. The functional
currency is the currency used in the primary financial environment in which the reporting enterprise operates.
On disposal of partially owned foreign subsidiaries, the part of the translation reserve related to minority
interests is not recognized in the income statement.
Transactions denominated in currencies other than the functional currency are considered transactions
denominated in foreign currencies. On initial recognition, transactions denominated in foreign currencies are
translated to the functional currency at the exchange rates at the transaction date.
Repayments of balances which are considered part of the net investment are not considered a partial disposal
of the subsidiary.
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Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 27 General accounting policies (Continued)
Equity
Share capital
The share capital comprises the nominal portion of the amounts paid in accordance with the subscription for
shares. Share capital can only be released according to the rules relating to capital reduction.
Share premium
Share premium comprises amounts not included in the nominal share capital, which have been paid by the
shareholders in connection with capital increases, and gains and losses from the sale of treasury shares. The
reserve is part of the company’s free reserves.
Reserve for proposed dividends
Dividends are recognized as a liability at the date when they are adopted at the Annual General Meeting.
Proposed dividends for the financial year are included in equity under proposed dividends.
Hedging reserve
In connection with hedging of future sales and purchase transactions (cash flows), changes in the fair value
of instruments qualifying for hedge accounting (documentation etc.) are recognized in the statement of
comprehensive income under hedging reserve, until the hedged transaction is transferred to inventories. The
recognized changes in the fair value are recognized in the hedging reserve under equity.
Currency translation reserve
Foreign exchange differences arising on the translation of the opening balance of equity of foreign companies
at the exchange rates at the balance sheet date, and on translation of income statements from the exchange
rates at the transaction date to the exchange rates at the balance sheet date are recognized directly in a
separate translation reserve in the statement of comprehensive income under the item “Foreign exchange
adjustments of foreign companies”.
Foreign exchange adjustments of non-current balances with foreign subsidiaries and associates which are
considered additions to or deductions from the subsidiaries’ equity, as well as foreign exchange adjustments
of hedging transactions for the purpose of hedging the Group’s net investments in subsidiaries, are also
recognized directly in the consolidated statement of comprehensive income. The translation reserve in the
equity comprises the Parent Company shareholders’ share of the foreign exchange adjustments. On complete
or partial disposal of a foreign entity or on repayment of balances which constitute part of the net investment
in the foreign entity, the share of the cumulative amount of the exchange differences recognized in other
110/141
comprehensive income relating to that foreign entity is recognized in the income statement when the gain or
loss on disposal is recognized.
Reserve for own shares
The reserve for own shares comprises the acquisition cost for the company’s portfolio of treasury shares. The
dividend from treasury shares is recognized directly in the retained earnings in equity. Gains and losses from
the sale of treasury shares are recognized in share premium.
Statement of cash flows
The statement of cash flows shows the cash flows from operating, investing and financing activities for the
year, and cash equivalents at the beginning and the end of the year. The cash-flow effect of acquisitions and
disposals of companies is shown separately under cash flows from investing activities.
Cash flows relating to acquired companies are recognized in the statement of cash flows at the acquisition
date, and cash flows relating to divested companies are included until the disposal date.
Cash flows from operating activities
Cash flows from operating activities are calculated according to the indirect method on the basis of profit
before tax/profit before tax from continuing operations and adjusted for non-cash operating items, changes in
working capital, paid financial items, received dividend and paid corporation taxes.
Cash flows from investing activities
Cash flows from investing activities comprise payment in connection with the acquisition and disposal of
companies and activities, intangible assets and property, plant and equipment as well as securities classified as
investing activities. Acquisitions of assets under leases capitalized are treated as non-cash transactions.
Cash flows from financing activities
Cash flows from financing activities comprise changes in the size or composition of the share capital, the
raising and repayment of long-term and short-term bank debt, lease payment, acquisition of minority interests,
acquisition and disposal of treasury shares and payment of dividends to shareholders.
Cash and cash equivalents
Cash and cash equivalents comprise bank account deposits, cash balances and highly liquid investments with
short-term maturity and which are exposed to insignificant risk of change in value.
Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 27 General accounting policies (Continued)
Financial measures
In the Annual Report, Danfoss presents certain financial measures of the Group’s financial performance,
financial position and cash flows that are not defined according to IFRS. These non-IFRS financial measures may
not be defined and calculated by other companies using the same method and may not be comparable.
EBITDA margin
Operating profit (EBIT) before depreciation, amortization, impairment and profit from associates & joint
ventures /net sales
The non-IFRS financial measures are calculated in the following manner:
Organic growth
Sales growth adjusted for exchange rate translation and M&A effects.
EBITA
Profit before interest, taxes, profit from associates & joint ventures and amortization, gains and losses related to
acquisitions and divestments
The following table shows the reconciliation of EBITA with operating profit (EBIT), the most direct comparable
IFRS financial measure:
EURm
2019
EURm
2020
EURm
2021
695
4
3
46
30
-7
625
-6
3
47
19
35
877
-2
6
54
24
10
771
723
969
EBITA
Operating profit (EBIT)
Share of profit from associates and joint ventures
Amortizations:
Brand
Technology
Customer relations
Gains/losses and costs related to acquisitions and divestments
EBITA
111/141
EBITDA margin excluding other operating income, etc.
Operating profit (EBIT) before depreciation, amortization, impairment and other operating income and
expenses, and profit from associates & joint ventures /net sales
EBITA margin excluding other operating income, etc.
Operating profit (EBIT) before acquisition-related amortization, other operating income and expenses, and
profit from associates & joint ventures /net sales
EBITA margin
EBITA /net sales
EBIT margin
Operating profit (EBIT)/net sales
Return on Invested Capital (ROIC)
Operating profit (EBIT)/average invested capital
Invested Capital
Net interest-bearing debt added to shareholders’ equity
Return on Invested Capital (ROIC) after tax
EBIT after tax/average invested capital excluding tax
Invested capital excluding tax
Net interest-bearing debt and tax balance sheet items (net) added to shareholders’ equity
Danfoss Annual Report 2021
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 27 General accounting policies (Continued)
EBIT after tax
Operating profit (EBIT) reduced with tax on profit
Return on equity
Net profit after minority interests’ share/average equity excluding minority interests
Equity ratio
Equity/total assets
Leverage ratio
Interest-bearing debt/equity at year-end
Net interest-bearing debt to EBITDA ratio
Interest-bearing debt less interest-bearing assets/EBITDA
Dividend ratio (%) (proposed)
Total proposed dividends distributed to shareholders/net profit
Dividend ratio per share (proposed)
Total proposed dividends distributed to shareholders/total shares
Free operating cash flow after financial items and tax
Cash flow from operating and investing activities before acquisition of subsidiaries, proceeds from disposal of
subsidiaries and acquisitions/sales of other investments but including lease payments (IFRS16).
The following table shows the reconciliation of free operating cash flow after financial items and tax with cash
generated from operating activities, the most direct comparable IFRS financial measure:
Free operating cash flow after financial items and tax
Cash flow from operating activities
Cash flow from investing activities
Acquisition of subsidiaries
Proceeds from sales of subsidiaries
Acquisition of other investments
Proceeds from sale of other investments
Lease payments
Free operating cash flow after financial items and tax
EURm
2019
EURm
2020
EURm
2021
789
-407
140
-59
463
800
-242
838
-2,794
+2,664
-241
-4
-61
493
-2
-64
401
Free operating cash flow
Cash flow from operating and investing activities before acquisition of subsidiaries, proceeds from disposal of
subsidiaries and acquisitions/sales of other investments, financial items, taxes, but including lease payments
(IFRS16).
Free cash flow
Cash flow from operating and investing activities including lease payments (IFRS16).
112/141
Danfoss Annual Report 2021
group note 28
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 28 Group companies
Per December 31, 2021
The companies are owned 100% by Danfoss unless
otherwise stated after the company name.
Danfoss A/S, Nordborg, Denmark (Parent Company)
• Subsidiary
• Associate or joint venture
EUROPE
Austria
• Danfoss Gesellschaft m.b.H.
Belgium
• Danfoss N.V./S.A.
• Danfoss Power Solutions BVBA
• Hydro-Gear Europe BVBA
Bulgaria
• Danfoss EOOD
Croatia
• Danfoss d.o.o.
Czech Republic
• Danfoss s.r.o.
• Danfoss Power Solutions II s.r.o
113/141
Denmark
• Danfoss Compressors Holding A/S
• Danfoss Distribution Services A/S
• Danfoss Distribution II A/S
• Danfoss Fire Safety A/S
• Danfoss International A/S
• Danfoss IXA A/S – 73%
• Danfoss Power Electronics A/S
• Danfoss Power Solutions ApS
• Danfoss Power Solutions Holding ApS
• Danfoss Power Solutions Holding II ApS
• Danfoss Power Solutions II Technology A/S
• Danfoss Redan A/S
• Gemina Termix Production A/S
• Issab Holding ApS
• Sondex A/S
• Sondex Holding A/S
Estonia
• Danfoss AS
Finland
• Danfoss Editron Oy
• Danfoss Power Solutions Oy Ab
• Oy Danfoss Ab
• Leanheat Oy
• Sondex Tapiro Oy Ab
• Vacon Oy
France
• Danfoss Commercial Compressors S.A.
• Danfoss Power Solutions S.AS.
• Danfoss Power Solutions II S.A.S.
• Danfoss S.a.r.l.
Germany
• Danfoss Esslingen GmbH
• Danfoss GmbH
• Danfoss Power Solutions GmbH & Co. OHG
• Danfoss Power Solutions Holding GmbH
• Danfoss Power Solutions Informatic GmbH
• Danfoss Power Solutions Parchim GmbH
• Danfoss Power Solutions II GmbH
• Danfoss Sensors GmbH
• Danfoss Silicon Power GmbH
• Danfoss Werk Offenbach GmbH
• SMA Solar Technology AG -20%
• Sondex Deutschland GmbH
Great Britain
• Artemis Intelligent Power Ltd.
• Danfoss Limited
• Danfoss Power Solutions Ltd.
• Danfoss Power Solutions II Ltd.
• Danfoss Scotland Limited
• Senstronics Holding Ltd.– 50% (joint venture)
• Senstronics Limited
Hungary
• Danfoss Kft.
Iceland
• Danfoss hf.
Italy
• Danfoss Power Solutions S.r.l.
• Danfoss S.r.l.
• Danfoss Distribution Services S.r.l.
• Eaton Fluid Power S.r.l.
Kazakhstan
• Danfoss LLP
Latvia
• Danfoss SIA
Lithuania
• Danfoss UAB
The Netherlands
• Advitronic Engineering B.V.
• Danfoss B.V.
• Danfoss Editron B.V.
• Danfoss Finance I B.V.
• Danfoss Finance II B.V.
• Danfoss Power Solutions B.V.
• Danfoss Power Solutions II B.V.
• Sondex B.V.
• Sondex Holding Netherlands B.V.
Norway
• Danfoss AS
• Danfoss Power Solutions AS
Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 28 Group companies (Continued)
Poland
• Danfoss Poland Sp. z.o.o.
• Danfoss Saginomiya Sp. z.o.o. – 50% (joint venture)
• Elektronica S.A. – 50% (joint venture)
• Sondex Braze Sp. z.o.o.
• Sondex Poland Sp. z.o.o.
• Sondex Sp. z.o.o.
Romania
• Danfoss S.R.L.
• S.C. Sondex Production S.R.L.
Russia
• AO Ridan
• Danfoss LLC
Serbia
• Danfoss d.o.o.
Slovakia
• Danfoss Power Solutions a.s.
• Danfoss spol. s.r.o.
Slovenia
• Danfoss Trata d.o.o.
Spain
• Danfoss S.A.
• Danfoss Power Solutions Telecontrol, S.L.U.
• Danfoss Power Solutions S.A.
114/141
Sweden
• Danfoss AB
• Danfoss Power Solutions AB
• EP Technology AB
• Ohmia Retail Sweden AB – 33.33%
Switzerland
• Danfoss AG
Ukraine
• Danfoss T.o.v.
AFRICA – MIDDLE EAST
Turkey
• DAF Enerji Sanayi Ve Ticaret Anonim Sirketi
• Danfoss Otomasyon ve Urunleri Tic Ltd.
• Polimer Kauçuk Sanayi ve Pazarlama A. Ş.
United Arab Emirates
• Danfoss FZCO – 95%
• Gulf Sondex FZCO
South Africa
• Danfoss (Pty) Ltd.
• Eaton Hydraulics (Pty.) Ltd.
• Sondex South Africa Pty. Ltd. – 80%
NORTH AMERICA
Canada
• Aeroquip-Vickers Canada Company
• Danfoss Inc.
USA
• Daikin-Sauer-Danfoss America LLC – 45%
• Danfoss LLC
• Danfoss Power Solutions Inc.
• Danfoss Silicon Power LLC
• Danfoss Power Solutions II, LLC
• Danfoss Power Solutions (US) Company
• Danfoss Power Solutions Work Function, LLC
• Hydro-Gear Inc. – 60%
• Hydro-Gear Limited Partnership– 60%
• Hydro-Gear of Indiana, LLC
• Sondex Equipment Holding, LLC
• Sondex Properties, Inc.
• White Hydraulics, Inc.
LATIN AMERICA
Argentina
• Danfoss S.A.
Brazil
• Aeroquip do Brasil Ltda.
• Danfoss do Brasil Indústria e Comércio Ltda.
• Danfoss Power Solutions Comércio Electrohidráulica
Ltda.
Chile
• Danfoss Industrias Ltda.
• Danfoss Power Solutions II SpA
Colombia
• Danfoss S.A.
Mexico
• Danfoss Industries S.A. de C.V.
• Danfoss Power Solutions II S.A. de C.V.
• Danfoss Power Solutions III S.A. de C.V.
• Danfoss Power Solutions IV S.A. de C.V.
• Eaton Controls, S. de R.L. de C.V.
ASIA-PACIFIC
Australia
• Danfoss (Australia) Pty. Ltd.
• Danfoss Power Solutions Pty. Ltd.
• Danfoss Power Solutions II Pty. Ltd.
• Sondex Australia Pty. Ltd.
• Sondex Engineering Pty. Ltd.
P. R. of China
• Danfoss (Anshan) Controls Co. Ltd.
• Danfoss ( Tianjin) Limited
• Danfoss Micro Channel Heat Exchanger (Jiaxing)
Co., Ltd.
• Danfoss (Jiaxing) Plate Heat Exchanger Co., Ltd.
• Danfoss Power Solutions (Jiangsu) Co., Ltd.
• Danfoss Power Solutions Trading (Shanghai) Co., Ltd.
• Danfoss Power Solutions (Zhejiang) Co., Ltd.
• Danfoss ( Tianjin) Fire Safety Co., Ltd.
• Danfoss Shanghai Hydrostatic Transmission Co.
Ltd.– 60%
• Danfoss Power Solutions (Nanjing) Co., Ltd.
• Danfoss Power Solutions (Jining) Co., Ltd.
• Danfoss (Shanghai) Investment Co., Ltd.
• Danfoss Power Electronics (Nanjing) Co., Ltd
• Eaton Industrial Clutches and Brakes (Shanghai)
Co., Ltd.
Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Notes
Note 28 Group companies (Continued)
• Eaton Hydraulics (Ningbo) Co., Ltd.
• Eaton Hydraulics (Luzhou) Co., Ltd.
• Eaton Fluid Power (Shanghai) Co., Ltd.
• Sondex Plate Heat Exchanger (Taicang) Co. Ltd.
• Vacon (China) Drives Co. Ltd.
• Zheijang Holip Electronic Technology Co. Ltd.
Hong Kong
• Danfoss Industries Limited
• Vickers Systems Limited
• UQM Technologies Asia Ltd.
India
• Danfoss Industries Pvt. Ltd.
• Danfoss Power Solutions India Pvt. Ltd.
• Danfoss Technologies Pvt. Ltd.
• Danfoss Fluid Power Pvt. Ltd.
• Eaton Fluid Power Limited (97.6%)
• Sondex Heat Exchangers India Pvt. Ltd.
Indonesia
• PT Danfoss Indonesia
Iran
• Danfoss Pars Private Joint Stock Company
- in liquidation
Japan
• Daikin-Sauer-Danfoss Ltd. - 45%
• Danfoss Power Solutions Ltd.
• Eaton Industries (Japan) Ltd.
115/141
Malaysia
• Danfoss Malaysia Sdn. Bhd.
• Danfoss Power Solutions II Sdn. Bhd.
• Sondex Heat Exchangers Malaysia Sdn. Bhd.
Philippines
• Danfoss Philippines, Inc.
Singapore
• Danfoss Singapore Pte. Ltd.
• Danfoss Power Solutions Pte. Ltd.
• Danfoss Power Solutions II Pte. Ltd.
South Korea
• Danfoss Korea Ltd.
• Danfoss Power Solutions Ltd.
• Danfoss Power Solutions 2 Ltd.
Taiwan
• Danfoss Co. Ltd.
Thailand
• Danfoss ( Thailand) Co. Ltd.
New Zealand
• Danfoss (New Zealand) Ltd.
• Danfoss Power Solutions II Ltd.
Danfoss Annual Report 2021 parent accounts and notes
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Parent accounts and notes
43%
energy savings
using Danfoss
solutions
In Keppel Bay Tower in
Singapore, retrofits using
Danfoss solutions have resulted
in 43% energy savings using
high-efficiency fans, motors,
and variable frequency drives. It
is an absolute necessity to heat
and cool buildings as efficiently
as possible to avoid excessive
cost and further emissions while
maintaining comfortable and
safe indoor environments.
116/141
Danfoss Annual Report 2021 parent managements review
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Management’s review for Danfoss A/S
(Part of Management’s Review)
Danfoss A/S is the Parent Company of the
Danfoss Group. In addition to holding the
shares of most of the other Danfoss Group
companies, an important function of the
company is to fund the Group’s activities.
The Company also constitutes the corporate
framework for many of Danfoss’ Danish
activities and therefore includes a number
of Danfoss’ Danish factories and Group
functions. Danfoss A/S had 2,646 employees
at the end of 2021.
The profit before other operating income
and expenses was EUR 87m (2020: 101m). The
company’s operating profit was EUR 96m
(2020: 86m).
Financial income and expenses increased
to a net income of EUR 171m against a net
expense of EUR 15m in 2020, mainly due to
an increase in received dividends, impact of
foreign exchange contracts and decreased
impairment of subsidiaries.
The profit after tax in 2021 was EUR 240m
(2020: 53m).
Equity was EUR 3,272m at the end of 2021
(2020: EUR 3,030m). The increase was mainly
attributable to recognition of the profit for
the year.
Danfoss A/S expects net sales for 2022 to
be on level with the 2021 figures, and the
company expects to report a profit in 2022.
117/141
Danfoss Annual Report 2021 parent notes overview
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Financial Statements – Parent
Income statement
Note 1
Net sales, expenses and other operating income
123
Capital employed
Note 2
Note 3
Note 4
Note 5
Investments
Intangible assets
Property, plant and equipment
Leases
Capital structure and financing
Financial income and expenses
Financial risks and instruments
Note 6
Note 7
Note 8
Change in liabilities arising from financing activities 131
Tax
Note 9
Tax on profit
Note 10
Deferred tax
Note 11
Corporation tax
Other notes
Note 12
Adjustment for non-cash transactions
Note 13
Contingent liabilities, assets and securities
Note 14
Related parties
Note 15
Events after the balance sheet date
Note 16
General accounting policies for Danfoss A/S
Note 17
Significant accounting estimates for Danfoss A/S
132
132
133
133
134
134
134
135
135
124
126
127
129
129
130
Income statement
Statement of comprehensive income
Statement of financial position
Statement of cash flows
Statement of changes in equity
119
119
120
121
122
118/141
Danfoss Annual Report 2021 parent income comprehensive
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Parent accounts and notes
Income statement and comprehensive income
Statement of comprehensive income
January 1 to December 31
Note
2020
2021
EURm
1
1
1
1
1
1
6
6
9
1.224
-952
272
1.335
-1.059
276
Net profit
Other comprehensive income
Foreign exchange adjustments on translation of DKK into EUR
Items that will be reclassified to income statement
Other comprehensive income after tax
Total comprehensive income
-37
-83
-51
101
-15
86
127
-142
71
-18
53
53
53
-45
-90
-54
87
9
96
227
-56
267
-27
240
189
51
240
Income statement
January 1 to December 31
EURm
Net sales
Cost of sales
Gross profit
Research and development costs
Selling and distribution costs
Administrative expenses
Operating profit excluding other operating income and expenses
Other operating income and expenses
Operating profit (EBIT)
Financial income
Financial expenses
Profit before tax
Tax on profit
Net profit
Attributable to:
Proposed dividends reserve
Other reserves
119/141
2020
2021
53
240
13
13
13
66
2
2
2
242
Danfoss Annual Report 2021 parent financial pos
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Parent accounts and notes
Statement of financial position
Statement of financial position
As of December 31
Statement of financial position
As of December 31
EURm
Non-current assets
Intangible assets
Property, plant and equipment
Investments
Total non-current assets
Current assets
Inventories
Trade receivables external
Trade receivables from subsidiaries
Short-term loans to subsidiaries
Receivable corporation tax
Other receivables
Receivables
Cash and cash equivalents
Total current assets
Note
2020
2021
EURm
3
4
2
11
7
249
286
3.840
4.375
243
264
4.296
4.803
100
38
90
275
5
17
425
554
107
52
156
548
8
46
810
205
Shareholders' equity
Non-current liabilities
Provisions
Deferred tax liabilities
Pension and healthcare benefit plan obligations
Borrowings
Borrowings from subsidiaries
Other non-current debt
Total non-current liabilities
Current liabilities
Provisions
Borrowings
Trade payables
Trade payables to subsidiaries
Borrowings from subsidiaries
1.079
1.122
Debt to associates and joint ventures
Derivative financial instruments (negative fair value)
Other debt
Total current liabilities
Total liabilities
Total assets
5.454
5.925
Total liabilities and shareholders' equity
120/141
Note
2020
2021
3.030
3.272
10
7
7
7
41
37
2
946
102
39
9
44
402
564
41
1.167
1.060
23
16
153
13
880
4
60
108
9
12
199
34
1.217
3
8
111
1.257
1.593
2.424
2.653
5.454
5.925
Danfoss Annual Report 2021 parent cash flows
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Parent accounts and notes
Statement of cash flows
Statement of cash flows
January 1 to December 31
EURm
Note
2020
2021
Profit before tax
Adjustments for non-cash transactions
Change in working capital
Interest received
Interest paid
Dividends received
Paid tax
Cash flow operating activities
Acquisition of intangible assets
Acquisition of property, plant and equipment
Proceeds from sale of property, plant and equipment
Acquisition of subsidiaries and capital increase
Proceeds from disposal of subsidiaries
Cash repayment of (-)/cash proceeds from loans to subsidiaries
Cash flow from investing activities
Cash repayment of interest-bearing debt
Cash repayment of (-)/cash proceeds from borrowings from subsidiaries
Purchase of treasury shares
Sale of treasury shares
Cash flow from financing activities
Net change in cash and cash equivalents
Cash and cash equivalents as of January 1
Foreign exchange adjustment of cash and cash equivalents
Cash and cash equivalents as of December 31
121/141
12
11
8
71
101
-7
26
-21
92
-26
236
-37
-37
-34
2
26
-80
-24
270
-2
70
314
470
83
1
554
267
-157
-45
31
-35
164
-23
202
-35
-27
31
-295
3
-455
-778
-571
798
-2
2
227
-349
554
205
Danfoss Annual Report 2021 parent equity
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Parent accounts and notes
Statement of changes in equity
Statement of changes in equity
EURm
Balance as of January 1, 2020
Net profit
Software-development costs
Currency-translation adjustments
Total other comprehensive income
Total comprehensive income for the period
Dividends to shareholders
Purchase of treasury shares
Sale of treasury shares
Total transactions with owners
Balance as of December 31, 2020
Net profit
Software-development costs
Currency-translation adjustments
Total other comprehensive income
Total comprehensive income for the period
Purchase of treasury shares
Sale of treasury shares
Total transactions with owners
Balance as of December 31, 2021
134
10
For further information on Equity and Share capital, see Statement of changes in equity and Note 16 Share capital, in Group section.
122/141
e
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130
7
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8
-1
-1
-1
-2
70
68
s
e
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h
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O
2.918
53
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13
13
59
80
80
s
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2.672
53
13
13
66
80
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70
148
134
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-309
138
3.057
2.886
d
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-80
-80
189
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2.896
53
13
13
66
-2
70
68
3.030
240
2
2
242
-2
2
51
5
2
2
58
-5
-5
51
2
2
53
-2
2
-2
2
-309
133
3.115
2.939
189
3.272
Danfoss Annual Report 2021
parent note 1
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Parent accounts and notes
Notes
Note 1 Net Sales, expenses and other operating income
Note 1 Net Sales, expenses and other operating income
EURm
A. Net sales
Sale of goods
Sale of services to Group members
Sales of services to Group members mainly includes services sold in relation to Group functions.
EURm
B. Personnel expenses
Salaries and wages
Severance payments
Social security
Pension cost - defined contribution plans
Average number of employees
Total number of employees as of end of the year
Remuneration to Group Executive Team and Board of Directors:
Salaries
Pension costs
Bonuses, short term
Bonuses, long term
Group Executive Team
Board of Director's fee
Total remuneration
2020
2021
EURm
2020
2021
C. Depreciation/amortisation and impairment losses
1.047
177
1.224
1.144
191
1.335
Classification by nature:
Amortization of intangible assets
Depreciation of property, plant and equipment
Depreciation/amortization and impairment losses
2020
2021
Classification of amortization/impairment of intangible assets by functions:
Cost of sales
Selling and distribution costs
Intangible assets
Classification of depreciation/impairment of tangible assets by functions:
Cost of sales
Administrative expenses
Tangible assets
238
9
8
20
275
2.810
2.752
4
1
5
6
16
1
17
256
5
9
21
291
2.677
2.646
4
2
7
14
27
1
28
29
39
68
27
2
29
25
14
39
41
40
81
39
2
41
30
10
40
Total remuneration for registered members of Executive Management amounts to EUR 20m (2020: 12m).
Bonuses, short term are paid based on meeting annual targets for selected financial ratios and sales growth.
Bonuses, long term are paid based on value creation over multiple years.
123/141
Danfoss Annual Report 2021 parent note 2
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Parent accounts and notes
Notes
Note 1 Net Sales, expenses and other operating income
Note 2 Investments
EURm
2020
2021
EURm
D. Other operating income and expenses
Other gains related to acquisitions/disposals
Gain on disposal of property, plant and equipment
Other
Other operating income
Loss on disposal of property, plant and equipment
Restructuring costs
Other
Other operating expenses
Other operating income and expenses
5
4
9
-1
-9
-14
-24
-15
4
19
2
25
-5
-11
-16
9
Danfoss A/S has received government grants of EUR 0m (2020: 13m) in total, which is related to COVID-19
compensation. The governments grants are deducted from the related expenses in the functions; Cost of sales,
Selling and Distribution costs and Administrative expenses.
Costs as of January 1
Foreign exchange adjustments, etc.
Additions
Disposals
Costs as of December 31
Adjustments as of January 1
Reversed impairment
Impairment for the year
Disposal
Adjustments as of December 31
n
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I
i
s
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i
r
a
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i
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b
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2.677
10
34
-11
2.710
-78
-65
10
-133
m
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l
s
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b
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v
t
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j
369
578
947
314
1
315
-4
1
-3
2020
l
a
t
o
T
3.379
11
614
-12
3.992
-98
1
-65
10
-152
3.840
r
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h
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s
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m
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19
2
-1
20
-16
-16
4
Carrying amount as of December 31
2.577
947
312
2020
2021
Additions for 2020 to "Investments in subsidiaries" is mainly related to capital injection in
Danfoss (Shanghai) Investment Co., Ltd.
Impairment losses for 2020 on "Investments in subsidiaries" of EUR 65m mainly relates to Sondex Holding A/S
and Danfoss District Heating SRL. For Sondex Holding A/S the impairment is caused by a lower valuation of
the entity due to large dividend payments in recent years. Danfoss District Heating SRL is under liquidation.
Impairment losses/reversed impairment are reported as financial expenses/financial income.
1
0
0
1
2
1
0
0
1
2
EURm
E. Fees to auditors appointed at the Annual General Meeting
Audit fee
Other assurance engagements fee
Tax and VAT advice
Other fees
Total fee to Group Auditor
124/141
Danfoss Annual Report 2021
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Parent accounts and notes
Notes
Note 2 Investments (continued)
Note 2 Investments (continued)
EURm
Costs as of January 1
Foreign exchange adjustments, etc.
Additions
Disposals
Costs as of December 31
Adjustments as of January 1
Reversed impairment
Impairment for the year
Disposal
Adjustments as of December 31
n
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n
e
m
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s
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v
n
I
i
s
e
i
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a
d
i
s
b
u
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2.710
1
295
-15
2.991
-133
2
-20
12
-139
m
o
r
f
l
s
e
b
a
v
e
c
e
R
i
n
i
s
t
n
e
m
t
s
e
v
n
I
d
n
a
s
e
t
a
c
o
s
s
a
i
i
s
e
i
r
a
d
i
s
b
u
s
s
e
r
u
t
n
e
v
t
n
o
i
j
947
177
1.124
315
1
316
-3
3
Carrying amount as of December 31
2.852
1.124
316
Impairment tests
Where indicators for impairment were present at the end of 2021, impairment tests were performed on the
carrying amount of "Investments in subsidiaries, associates and joint ventures". Main indicators are loss-giving
activities, or if the carrying amount is higher than the equity in the local accounts or, where relevant, higher
than valuation using a listed share price. When performing the impairment test, the valuation of the
subsidiaries, associates and joint ventures is compared with their carrying amount. The principles are
unchanged compared to the impairment tests performed in 2020.
Further information on subsidiaries, associates and joint ventures is provided in Note 6 Financial income and
expenses, Note 7 Financial risks and instruments, and Note 14 Related parties.
2021
l
a
t
o
T
3.992
1
473
-15
4.451
-152
5
-20
12
-155
4.296
s
t
n
e
m
t
s
e
v
n
i
20
r
e
h
t
O
20
-16
-16
4
Additions for the year to "Investments in subsidiaries" is mainly related to investment in Danfoss B.V.,
Polimer Kauçuk Sanayi ve Pazarlama A. S. and Eaton Industries (Japan) Ltd.
Impairment losses for the year on "Investments in subsidiaries" of EUR 20m mainly relates to
Danfoss Power Solutions AS (Norway). The impairment is caused by a lower valuation of the entity due to
dividend payments and lower earnings during recent years.
Impairment losses/reversed impairment are reported as financial expenses/financial income.
125/141
Danfoss Annual Report 2021
parent note 3
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Parent accounts and notes
Notes
Note 3 Intangible assets
EURm
Cost as of January 1, 2020
Foreign exchange adjustments
Additions
Disposals
Cost as of December 31, 2020
Amortization and impairment losses as of January 1, 2020
Amortization
Disposals
Amortization and impairment losses as of December 31, 2020
Carrying amount as of December 31, 2020
Cost as of January 1, 2021
Additions
Disposals
Cost as of December 31, 2021
Amortization and impairment losses as of January 1, 2021
Amortization
Disposals
Amortization and impairment losses as of December 31, 2021
Carrying amount as of December 31, 2021
Goodwill
Internally developed
software
Patents, trademarks
and other rights
Development
costs
Total
Other
Total
67
67
67
67
67
67
261
1
37
-15
284
94
28
-15
107
177
284
33
-26
291
107
39
-26
120
171
32
-6
26
26
1
-6
21
5
26
2
-2
26
21
2
-2
21
5
11
-1
10
11
-1
10
10
-8
2
10
-8
2
304
1
37
-22
320
131
29
-22
138
182
320
35
-36
319
138
41
-36
143
176
371
1
37
-22
387
131
29
-22
138
249
387
35
-36
386
138
41
-36
143
243
Of the "internally developed software" approximately 60% relates to the One ERP Program.
Impairment tests
Goodwill in Danfoss A/S of EUR 67m (2020: 67m) is mainly a consequence of Danfoss A/S having merged with other Danish subsidiaries, in particular the merger with DEVI A/S in 2010.
At the end of 2021, impairment tests have been performed on the carrying amount of goodwill (assets with indefinite useful lives). The impairment tests were perfomed on Danfoss A/S representing the base level of cash-generating
units (CGUs), to which the carrying amount of goodwill can be allocated with reasonable accuracy. The impairment test method is similar to the impairment test performed at Group level described in Note 9 Intangible assets in the
Danfoss Group accounts.
Management does not assess that a reasonable change in the fundamental assumptions used in the impairment tests will result in a recoverable amount lower than the carrying amount. The same conclusion was made for 2020.
126/141
Danfoss Annual Report 2021 parent note 4
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Parent accounts and notes
Notes
Note 4 Property, plant and equipment
EURm
Cost as of January 1, 2020
Foreign exchange adjustments
Transfers
Additions
Disposals
Cost as of December 31, 2020
Depreciation and impairment losses as of January 1, 2020
Foreign exchange adjustments
Depreciation
Disposals
Depreciation and impairment losses as of December 31, 2020
Carrying amount as of December 31, 2020
Cost as of January 1, 2021
Transfers
Additions
Disposals
Cost as of December 31, 2021
Depreciation and impairment losses as of January 1, 2021
Transfers
Depreciation
Disposals
Depreciation and impairment losses as of December 31, 2021
Carrying amount as of December 31, 2021
127/141
Land and
buildings
Plant and
machinery
Equipment
Assets under
construction
Total
294
1
12
4
-3
308
181
12
-2
191
117
308
14
1
-34
289
191
1
12
-34
170
119
319
1
8
3
-5
326
274
1
11
-5
281
45
326
15
3
-58
286
281
12
-47
246
40
127
1
3
12
-25
118
52
16
-25
43
75
118
2
-4
116
43
-1
16
-4
54
62
44
-23
28
49
49
49
-29
23
43
43
784
3
47
-33
801
507
1
39
-32
515
286
801
29
-96
734
515
40
-85
470
264
Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Parent accounts and notes
Notes
Note 4 Property, plant and equipment (continued)
The right-of-use assets included in property, plant and equipment are presented below.
EURm
Carrying amount related to right-of-use assets as of January 1, 2020
Additions
Depreciation
Carrying amount related to right-of-use assets as of December 31, 2020
Carrying amount related to right-of-use assets as of January 1, 2021
Additions
Depreciation
Carrying amount related to right-of-use assets as of December 31, 2021
Further information on leases is provided in Note 5 Leases.
128/141
Land and
buildings
Equipment
Total
6
-1
5
5
-1
4
20
9
-10
19
19
1
-8
12
26
9
-11
24
24
1
-9
16
Danfoss Annual Report 2021 parent note 5-6
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Parent accounts and notes
Notes
Note 5 Leases
Lessee
Lease liabilities are included as borrowings in the statement of financial position as follows:
EURm
Current
Non-current
Note 6 Financial income and expenses
EURm
Financial income
2020
2021
9
15
8
8
Dividend from subsidiaries and associates/joint ventures
Interest from subsidiaries
Reversal of impairment/gain on disposal of subsidiaries and associates/joint ventures
Foreign exchange gains, net
Interest from banks, etc.
Financial income
Danfoss A/S mainly leases buildings and cars. Lease payments are generally fixed. With the exception of
short-term leases and leases of low-value underlying assets, each lease is reflected in the Statement of Financial
Position as a right-of-use asset and a lease liability. Danfoss A/S classifies its right-of-use assets in a consistent
manner to property, plant and equipment, see Note 4. Each lease contract generally restricts the use of the
right-of-use asset to Danfoss A/S. Some lease contracts contain an option to extend the lease period or
terminate the lease before the lease term. Management assesses whether or not it is reasonably certain that the
option will be exercised after considering all relevant facts and circumstances.
Danfoss A/S has decided not to recognize a lease liability for short-term leases (leases with an expected term of
12 months or less) or for leases of low-value assets. Payments made under such leases are expensed on a
straight-line basis. The expenses related to payments not included in the measurement of the lease liability are
below EUR 5m.
Total cash outflow for leases for the financial year ending December 31, 2021, was EUR 9m (2020: 11m).
Interest on financial assets measured at amortized cost
The impact of derivatives/foreign exchange contracts of EUR 27m is included in Foreign exchange gain, net.
(2020: -65m included in Foreign exchange losses, net).
Financial expenses
Interest to banks, etc.
Foreign exchange losses, net
Impairment/loss on disposal of subsidiaries and associates/joint ventures
Interest to subsidiaries
Impairment/loss on loans
Interest expense for leasing arrangements
Financial expenses
2020
2021
92
32
1
2
127
34
164
35
5
22
1
227
36
-22
-45
-65
-6
-3
-1
-142
-28
-26
-20
-5
-5
-56
-31
Further information on lease payments, interest expense on lease liabilities, additions, depreciation charge,
carrying amount of right-of-use assets and maturity analysis of lease liabilities is provided in Note 6
Financial income and expenses, Note 4 Property, plant and equipment, Note 7 Financial risks and instruments
and Note 8 Change in liabilities arising from financing activities.
Interest on financial liabilities measured at amortized cost
Further information on leases is provided in Note 5 Leases.
129/141
Danfoss Annual Report 2021 parent note 7
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Parent accounts and notes
Notes
Note 7 Financial risks and instruments
Note 7 Financial risks and instruments (continued)
Financial instruments
Financial instruments by category
Below are relevant financial instrument specifications regarding Danfoss A/S. A description of financial risks can
be found in the Group section, see Note 17 Financial risks and instruments, to which reference is made.
EURm
Danfoss A/S' debt categories and maturities
EURm
Bank debt and corporate
bond
Mortgage debt
Contingent consideration
Borrowings from subsidiaries
Finance lease liabilities
Trade payables
Trade payables to subsidiaries
Debt to ass./ JV.
Derivative financial liabilities
2020
Maturity
)
*
s
r
a
e
y
5
r
e
v
O
s
r
a
e
y
5
-
1
250
73
626
1
102
15
r
a
e
y
1
-
0
17
880
10
153
13
4
l
a
u
t
c
a
r
t
n
o
C
w
o
l
f
h
s
a
c
893
74
982
25
153
13
4
2.144
1.077
744
323
i
g
n
y
r
r
a
C
t
n
u
o
m
a
869
69
982
24
153
13
4
60
2.174
i
g
n
y
r
r
a
C
t
n
u
o
m
a
299
69
29
1.781
17
199
34
3
8
2.439
*) Maturity is evenly spread over the period.
Further information on leases is provided in Note 5 Leases.
2021
Maturity
)
*
s
r
a
e
y
5
r
e
v
O
s
r
a
e
y
5
-
1
72
305
1
26
564
8
r
a
e
y
1
-
0
4
3
1.217
9
199
34
3
l
a
u
t
c
a
r
t
n
o
C
w
o
l
f
h
s
a
c
309
73
29
1.781
17
199
34
3
2.445
1.469
904
72
The maturity analysis is based on all non-discounted cash flow, including estimated interest payments. Interest
payments are estimated according to existing market conditions. The non-discounted cash flow from
derivative financial instruments is presented in gross amounts, unless the parties have a contractual right or
obligation to make net settlements.
130/141
Financial assets:
Investments in associates and joint ventures
Financial assets measured at equity method
Other investment **)
Financial assets measured at fair value in the
income statement
Trade receivables
Trade receivables from subsidiaries
Short-term loans to subsidiaries
Other receivables
Cash and cash equivalents
Loans, receivables, cash and cash equivalents
measured at amortized cost
Financial liabilities:
Contingent consideration measured at fair
value via the income statement **)
Interest-bearing debt *)
Debt to subsidiaries
Borrowing from subsidiaries
Trade payables and other debt
2020
Fair
value
Carrying
amount
2021
Fair
value
Carrying
amount
312
312
4
4
38
90
275
17
554
974
34
962
13
982
304
398
398
4
4
38
90
275
17
554
974
34
984
13
982
304
316
316
4
4
52
156
548
46
205
272
272
4
4
52
156
548
46
205
1.007
1.007
29
29
385
34
1.781
354
443
34
1.781
354
Financial liabilities measured at amortized cost
2.261
2.283
2.554
2.612
Financial liabilities measured at fair value in
the income statement *)
60
60
8
8
Danfoss Annual Report 2021
parent note 8
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Parent accounts and notes
Notes
Note 7 Financial risks and instruments (continued)
Note 8 Change in liabilities arising from financing activities
Financial assets and liabilities measured at fair value are measured on a recurring basis and categorized into
EURm
the following levels of the fair value hierarchy:
Level 1: Observable market prices for identical instruments.
Level 2 *): Derivatives that are not traded on an active market based on quoted prices are measured using
Carrying amount as of January 1, 2020
valuation techniques, where all significant inputs are based on observable market data such as exchange
rates and swap curves.
Level 3 **): Valuation techniques primarily based on unobservable prices.
Cash flows:
Cash repayment
Lease payments
Short-term
borrowings
16
-17
-7
4
20
16
-63
-7
1
69
-4
12
Long-term
borrowings
959
6
-20
1
946
-501
1
-69
25
402
Total
975
-17
-7
10
1
962
-564
-7
2
21
414
Non-cash transactions:
Acquisitions and disposal of lease liabilities
Reclassification
Other
Carrying amount as of December 31, 2020
Cash flows:
Cash repayment
Lease payments
Non-cash transactions:
Acquisitions and disposal of lease liabilities
Reclassification
Other
Carrying amount as of December 31, 2021
Lease payments are the principal portion of lease liabilities and are presented under cash flows from financing
activities in the Statement of Cash Flow.
Other includes the reclassification in 2021 of contingent consideration from provisions to borrowings.
Further information on leases is provided in Note 5 Leases.
The value of derivative financial instruments is measured according to generally accepted valuation
techniques based on relevant observable swap prices and exchange rates. The market value of the
interest-bearing debt is recognized at the present value of expected future instalment and interest payments.
The discount rate applied was the Group's current borrowing rate on loans for corresponding terms. The
short-term floating-rate bank debt is stated at the par value. The fair value of trade receivables and trade
payables with short credit terms is estimated to be equal to the carrying amount. The methods applied remain
unchanged compared to 2020.
Derivates as of December 31 for Danfoss A/S
EURm
USD
EUR
Other currencies
Forward exchange contracts
Derivatives end of year
131/141
t
n
u
o
m
a
l
a
n
o
i
t
o
N
898
-27
144
e
u
a
v
l
r
i
a
f
t
e
N
-59
-1
-60
-60
2020
d
e
z
i
n
g
o
c
e
r
t
n
e
m
e
t
a
t
s
e
m
o
c
n
i
)
-
(
s
s
o
L
/
n
a
G
i
n
i
-59
-1
-60
-60
t
n
u
o
m
a
l
a
n
o
i
t
o
N
-159
-1.046
-98
e
u
a
v
l
r
i
a
f
t
e
N
-4
-4
-8
-8
2021
d
e
z
i
n
g
o
c
e
r
)
-
(
s
s
o
L
/
n
a
G
i
t
n
e
m
e
t
a
t
s
e
m
o
c
n
i
n
i
-4
-4
-8
-8
Danfoss Annual Report 2021
parent note 9-10
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Parent accounts and notes
Notes
Note 9 Tax on profit
Note 10 Deferred tax
EURm
Current tax expense
Change in deferred tax
Adjustments concerning previous years
Tax on profit (income statement)
Tax on profit is defined as:
Tax on profit before tax
Tax-exempt income/non-deductible expenses
Dividends exempt of tax
Other taxes
Adjustments concerning previous years
Effective tax rate
EURm
Tax on profit (income statement)
Total taxes
132/141
2020
2021
Changes in deferred taxes
-17
-1
-18
22,0%
29,0%
-28,7%
2,0%
0,4%
24,7%
-26
-3
2
-27
22,0%
0,8%
-13,5%
1,6%
-0,6%
10,3%
2020
2021
-18
-18
-27
-27
EURm
Deferred taxes as of January 1 (net) *)
Adjustments concerning previous years
Deferred tax recognized in the income statement
Deferred taxes as of December 31 (net) *)
*) Liability (-)
Specification of deferred taxes
EURm
Property, plant and equipment and financial assets
Current assets
Liabilities
Set-off within the same legal entities and jurisdiction
Deferred tax assets
Intangible assets
Property, plant and equipment and financial assets
Current assets
Liabilities
Deferred tax regarding Danish joint taxation
Set-off within the same legal entities and jurisdiction
Deferred tax liabilities
2020
2021
-38
2
-1
-37
-37
-4
-3
-44
2020
2021
Deferred
tax asset
Deferred
tax asset
10
1
16
27
-27
0
6
13
19
-19
0
Deferred
tax liability
Deferred
tax liability
31
13
15
5
64
-27
37
31
11
2
14
5
63
-19
44
Danfoss Annual Report 2021 parent note 11-12
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Parent accounts and notes
Notes
Note 10 Deferred tax (continued)
Note 12 Adjustment for non-cash transactions
Of the deferred tax liability of EUR 44m (2020: 37m), EUR 5m (2020: 5m) can be attributed to tax relating to joint
taxation with foreign subsidiaries in previous years. Danfoss A/S has deferred tax liabilities concerning
temporary differences in foreign subsidiaries and associates and joint ventures of EUR 18m (2020: 6m). The
liabilities are not recognized, because Danfoss A/S decides on their utilization and it is likely that the liabilities
will not be recognized in the forseeable future.
Note 11 Corporation tax
EURm
Corporation tax payable/receivable (-) as of January 1
Paid during the year
Adjustments concerning previous years
Current tax expenses in income statement
Corporation tax payable/receivable (-) as of December 31
The above corporation tax is recorded as follows:
Assets
2020
2021
2
-26
2
17
-5
5
-5
-5
-23
-6
26
-8
8
-8
EURm
Depreciation/amortization and impairment
Gain(-)/loss on disposal of tangible assets and business activities
Financial income
Financial expenses
Other, including provisions
Adjustment for non-cash transactions
2020
2021
68
-127
142
18
101
81
-19
-227
56
-48
-157
Depreciation/amortization and impairment includes depreciation on leased right-of-use assets. Further
information on depreciation charge and lease payments is provided in Note 4 Property, plant and
equipment and Note 8 Change in liabilities arising from financing activities.
133/141
Danfoss Annual Report 2021 parent note 13-15
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Parent accounts and notes
Notes
Note 13 Contingent liabilities, assets and securities
Note 14 Related parties
Securities
EURm
For more information about related parties, see Note 25 Related parties, in Group section.
2020
2021
Transactions with associates and joint ventures
Carrying amount of land and buildings pledged as security for bank loans and
mortgages
Leasing assets pledged as security for leasing commitments
Carrying amount of interest-bearing liabilities with security in assets
111
24
93
115
16
85
EURm
Purchases of goods and services
2020
2021
19
20
In connection with disposal of subsidiaries, ordinary guarantees and warranties have been issued. These
guarantees and warranties are considered to have no impact on Danfoss A/S' financial position beyond what
has been stated in the Annual Report.
Contingent liabilities
Transactions between Danfoss A/S and the subsidiaries
EURm
Danfoss A/S is party to a small number of disputes, lawsuits and legal actions, including tax disputes. It is the
view of the Management that the outcome of these legal actions will have no other significant impact on
Danfoss A/S' financial position beyond what has been recognized and stated in the Annual Report.
Sales of goods and services
Purchases of goods and services
Disposal of intangible assets and property, plant and equipment
Transactions besides the above transactions with joint ventures and associates are described in Note 6
Financial income and expenses, Note 2 Investments and Note 7 Financial risks and instruments.
2020
2021
1.196
452
1.315
534
40
Contractual obligations
EURm
Service contract commitment other than leases
Inventories
Property, plant and equipment
Purchase commitments
2020
2021
61
32
27
120
61
41
4
106
Transactions besides the above transactions with joint ventures and associates are described in Note 6
Financial income and expenses, Note 2 Investments and Note 7 Financial risks and instruments.
Note 15 Events after the balance sheet date
Subsequent to December 31, 2021, there have been no further events with any significant effect on the
financial statements beyond what has been recognized and disclosed in the Annual Report.
134/141
Danfoss Annual Report 2021 parent note 16-17
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Parent accounts and notes
Notes
Note 16 General accounting policies for Danfoss A/S
Note 17 Significant accounting estimates for Danfoss A/S
Danfoss A/S is a public limited company domiciled in Denmark. The Annual Report for the period January 1 to
December 31, 2021, comprises the Financial Statements of Danfoss A/S.
Significant accounting estimates for Danfoss A/S concern investments in subsidiaries, associates and joint
ventures.
The Financial Statements of Danfoss A/S have been prepared in accordance with the International Financial
Reporting Standards (IFRS) as adopted by the EU and Danish disclosure requirements for listed companies.
Unless otherwise indicated, the Annual Report is presented in EUR rounded to the nearest million.
In Danfoss A/S’ Financial Statements, investments in subsidiaries, associates and joint ventures are measured at
cost. In case of indication of impairment, an impairment test is performed. If the recoverable amount is lower
than cost, investments are written down to this lower value.
Besides the following section, the accounting policies for Danfoss A/S are the same as for the Danfoss Group.
Please refer to Note 27 in the Consolidated Financial Statements for the Danfoss Group. The impact of new
accounting standards, as described in Note 1 in the Consolidated Financial Statements for the Danfoss Group
are also assessed as immaterial to Danfoss A/S.
Due to the nature of the operations of the investments, estimates of expected cash flows have to be made
many years into the future, which will be subject to some degree of uncertainty. The investments in
subsidiaries, associates and joint ventures are described in more detail in Note 2 Investments.
Investments in subsidiaries, associates and joint ventures
In Danfoss A/S’ Financial Statements, investments in subsidiaries, associates and joint ventures are measured at
cost. In case of indication of impairment, an impairment test is performed. If the recoverable amount is lower
than cost, investments are written down to this lower value. Impairments are recognized in Danfoss A/S’
income statement under financial expenses. Reversal of impairments are recognized under financial income.
Dividends from investments in subsidiaries, associates and joint ventures are recognized in Danfoss A/S’ income
statement under financial income in the year, when the dividends are declared.
Corporation tax and deferred tax
Danfoss A/S is jointly taxed with its Danish subsidiaries and sister companies. Current tax and deferred tax is
allocated between the jointly taxed companies. The jointly taxed companies are taxed under the tax
prepayment scheme.
Reserve for capitalized development projects
Danfoss A/S has established a non-distributable reserve in equity regarding capitalized development projects.
This reserve will be reversed as the development projects have effect on the income statements. The amount is
presented net of deferred tax.
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Danfoss Annual Report 2021 statements intro
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Statements
Helping the
world move to
sustainable
transport
Danfoss solutions accelerate
electrification of transportation,
making hybrid and purely
electric vehicles a natural and
sustainable choice for everyone.
The more e-mobility solutions
we employ, the greater the
reduction in CO₂ and other
greenhouse gases.
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Danfoss Annual Report 2021 managements statement
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Management’s statement
The Board of Directors and the CEO and CFO have today considered and adopted
the Annual Report of Danfoss A/S for the financial year January 1 – December 31,
2021.
The Annual Report has been prepared in accordance with International Financial
Reporting Standards as adopted by the EU and further requirements in the Danish
Financial Statements Act.
In our opinion, the Consolidated Financial Statements and the Parent Company
Financial Statements give a true and fair view of the financial position at December
31, 2021, of the Group and the Parent Company and of the results of the Group and
Parent Company operations and cash flows for 2021.
In our opinion, the Management’s Review includes a true and fair account of the
development in the operations and financial circumstances of the Group and the
Parent Company, of the results for the year and of the financial position of the Group
and the Parent Company as well as a description of the most significant risks and
elements of uncertainty facing the Group and the Parent Company.
We recommend that the Annual Report be adopted at the Annual General Meeting.
Nordborg, March 2, 2022
CEO and CFO
Kim Fausing
Jesper V. Christensen
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Board of Directors
Jørgen M. Clausen, Chair
Jens Bjerg Sørensen, Vice Chair
Mads-Peter Clausen
Per Falholt
Connie Hedegaard
William Erwin Hoover Jr.
Jürgen Reinert
Mika Vehviläinen
Sandra Nørgaard Bertelsen
Marianne Godballe
Lars Grau
Jens Peter Rosendahl Nielsen
Danfoss Annual Report 2021 indep auditor
In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
Independent Auditor’s Report
To the shareholders of Danfoss A/S
Opinion
In our opinion, the Consolidated Financial
Statements and the Parent Company
Financial Statements give a true and
fair view of the Group’s and the Parent
Company’s financial position at December
31, 2021 and of the results of the Group’s
and the Parent Company’s operations and
cash flows for the financial year January
1 to December 31, 2021 in accordance
with International Financial Reporting
Standards as adopted by the EU and further
requirements in the Danish Financial
Statements Act.
We have audited the Consolidated Financial
Statements and the Parent Company
Financial Statements of Danfoss A/S for
the financial year January 1 - December
31, 2021, pp. 67-115 and 118-135, which
comprise income statement, statement
of comprehensive income, statement
of financial position, statement of cash
flows, statement of changes in equity and
notes, including a summary of significant
accounting policies, for both the Group
and the Parent Company (“financial
statements”).
138/141
Basis for Opinion
We conducted our audit in accordance
with International Standards on Auditing
(ISAs) and the additional requirements
applicable in Denmark. Our responsibilities
under those standards and requirements
are further described in the Auditor’s
Responsibilities for the Audit of the
Financial Statements section of our
report. We are independent of the Group
in accordance with the International
Ethics Standards Board for Accountants’
International Code of Ethics for Professional
Accountants (IESBA Code) and the
additional ethical requirements applicable
in Denmark, and we have fulfilled our other
ethical responsibilities in accordance with
these requirements and the IESBA Code.
We believe that the audit evidence we have
obtained is sufficient and appropriate to
provide a basis for our opinion.
Statement on Management’s Review
Management is responsible for
Management’s Review, pp. 1-65 and 117.
Our opinion on the financial statements
does not cover Management’s Review, and
we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial
statements, our responsibility is to read
Management’s Review and, in doing so,
consider whether Management’s Review
is materially inconsistent with the financial
statements or our knowledge obtained
during the audit, or otherwise appears to be
materially misstated.
Moreover, it is our responsibility to consider
whether Management’s Review provides
the information required under the Danish
Financial Statements Act.
Based on the work we have performed,
in our view, Management’s Review is in
accordance with the Consolidated Financial
Statements and the Parent Company
Financial Statements and has been prepared
in accordance with the requirements of
the Danish Financial Statement Act. We did
not identify any material misstatement in
Management’s Review.
Management’s Responsibilities
for the Financial Statements
Management is responsible for the
preparation of Consolidated Financial
Statements and Parent Company Financial
Statements that give a true and fair view
in accordance with International Financial
Reporting Standards as adopted by the
EU and further requirements in the Danish
Financial Statements Act, and for such
internal control as Management determines
is necessary to enable the preparation of
financial statements that are free from
material misstatement, whether due to
fraud or error.
In preparing the financial statements,
Management is responsible for assessing
the Group’s and the Parent Company’s
ability to continue as a going concern,
disclosing, as applicable, matters related to
going concern and using the going concern
basis of accounting in preparing the
financial statements unless Management
either intends to liquidate the Group or the
Parent Company or to cease operations, or
has no realistic alternative but to do so.
Auditor’s Responsibilities for the
Audit of the Financial Statements
Our objectives are to obtain reasonable
assurance about whether the financial
statements as a whole are free from material
misstatement, whether due to fraud or
error, and to issue an auditor’s report that
includes our opinion. Reasonable assurance
is a high level of assurance but is not a
guarantee that an audit conducted in
accordance with ISAs and the additional
requirements applicable in Denmark will
always detect a material misstatement
when it exists. Misstatements can arise from
fraud or error and are considered material if,
individually or in the aggregate, they could
reasonably be expected to influence the
economic decisions of users taken on the
basis of these financial statements.
Danfoss Annual Report 2021 In brief
How we create value
Environment
Social
Governance
Group accounts and notes
Parent accounts and notes
Statements
As part of an audit conducted in accordance
with ISAs and the additional requirements
applicable in Denmark, we exercise
professional judgment and maintain
professional skepticism throughout the
audit. We also:
• Identify and assess the risks of material
misstatement of the financial statements,
whether due to fraud or error, design and
perform audit procedures responsive to
those risks, and obtain audit evidence
that is sufficient and appropriate to
provide a basis for our opinion. The risk
of not detecting a material misstatement
resulting from fraud is higher than for one
resulting from error as fraud may involve
collusion, forgery, intentional omissions,
misrepresentations, or the override of
internal control.
• Obtain an understanding of internal
control relevant to the audit in order
to design audit procedures that are
appropriate in the circumstances, but not
for the purpose of expressing an opinion
on the effectiveness of the Group’s and
the Parent Company’s internal control.
• Evaluate the appropriateness of
accounting policies used and the
reasonableness of accounting
estimates and related disclosures made
by Management.
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• Conclude on the appropriateness of
Management’s use of the going concern
basis of accounting in preparing the
financial statements and, based on
the audit evidence obtained, whether
a material uncertainty exists related
to events or conditions that may cast
significant doubt on the Group’s and the
Parent Company’s ability to continue
as a going concern. If we conclude that
a material uncertainty exists, we are
required to draw attention in our auditor’s
report to the related disclosures in the
financial statements or, if such disclosures
are inadequate, to modify our opinion.
Our conclusions are based on the audit
evidence obtained up to the date of our
auditor’s report. However, future events
or conditions may cause the Group and
the Parent Company to cease to continue
as a going concern.
opinion on the Consolidated Financial
Statements. We are responsible for the
direction, supervision and performance
of the group audit. We remain solely
responsible for our audit opinion.
We communicate with those charged
with governance regarding, among other
matters, the planned scope and timing of
the audit and significant audit findings,
including any significant deficiencies in
internal control that we identify during our
audit.
Hellerup, March 2, 2022
PricewaterhouseCoopers
Statsautoriseret Revisionspartnerselskab
CVR No 33 77 12 31
• Evaluate the overall presentation,
structure and contents of the financial
statements, including the disclosures,
and whether the financial statements
represent the underlying transactions and
events in a manner that gives a true and
fair view.
Lars Baungaard
State Authorised Public Accountant
mne23331
Mads Melgaard
State Authorised Public Accountant
mne34354
• Obtain sufficient appropriate audit
evidence regarding the financial
information of the entities or business
activities within the Group to express an
Danfoss Annual Report 2021 Danfoss – the preferred
partner in helping our
customers decarbonize
Further information available
on Danfoss’ website: www.danfoss.com
Date of publication: March 2, 2022
Contact address:
Danfoss A/S
Nordborgvej 81
6430 Nordborg
Denmark
Tel.: +45 7488 2222
CVR no. 20165715 (registration number with the Danish Business Authority)
Email: danfoss@danfoss.com