Annual Report 2022
Investing to
build a better
future
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Contents
Management’s Review
Letter from CEO
3
5
Danfoss at a glance
6
Danfoss in brief
8
Transformational growth
9
Our people
10
Five global megatrends
11
Our green growth strategy
Our purpose
12
The greenest energy is the energy we don’t use 13
17
Financial highlights and key figures
18
Outlook 2023
Our business
Our customer promise
Danfoss business segments
Core & Clear 2025
Core & Clear 2025
Strategic focus areas
Our ESG approach
ESG in our value chain
19
20
21
28
29
31
32
33
2 — Danfoss Annual Report 2022
Financial Statements
Financial review
Group accounts and notes
Group accounts
Group notes
Group companies
Parent accounts and notes
Management’s review
Parent accounts
Parent notes
Statements
Management’s statement
Independent Auditor’s Report
72
77
79
83
124
126
127
129
133
146
147
148
Environment
Decarbonization
Circularity
Safe and compliant products
Environmental performance
Social
Diversity & Inclusion
A safe place to work
Governance
ESG governance
Ethics and human rights
Responsible suppliers
Managing risks
Corporate governance
Board of Directors
Group Executive Team
ESG statements
ESG review
Consolidated ESG statements
Notes to the consolidated ESG statements
34
35
41
43
44
45
46
48
49
50
51
52
53
56
59
62
63
64
66
67
Frontpage:
Data centers are big energy
consumers. Cooling servers
prevent overheating and
downtime. Danfoss energy-
efficient technology can
reduce the amount of energy
needed to cool the data
centers and capture excess
heat from the cooling system
to heat nearby buildings.
Read more
In 2022, our largest
production facility in
Nordborg, Denmark, became
carbon neutral. It is one of
the key milestones on the
way to decarbonizing our
global operations by 2030.
Read more
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
We continue to make bold investments
in our green growth strategy
Kim Fausing — President & CEO
D riven by the shift in energy
systems from carbon-driven to
renewable energy and the need for
significantly higher energy productivity
in machines and infrastructure, Danfoss
continues its transformation. With bold
investments, we continue to improve
our offering of best-in-class technology
and solutions to drive the green
transition through energy efficiency,
machine productivity, lower emissions,
and electrification.
3 — Danfoss Annual Report 2022
With Core & Clear 2025, our green growth
strategy, and a highly engaged team, we are
well on the way towards 2025. I am excited to
highlight the following strategic steps in 2022:
• We launched our green growth strategy
in April, including our new ESG ambition,
where sustainability is at the heart of our
business focusing on Decarbonization,
Circularity, and Diversity & Inclusion.
• We continued to strengthen our three
core segments and are on track with
our integration of the transformational
acquisitions. The new Power Solutions
segment is building a leading position in
Our green growth
strategy is focused
on long-term value
creation. With
bold investments,
we continue
to improve our
offering of best-in-
class technology
and solutions to
drive the green
transition.
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
mobile and industrial hydraulics, as well as
electrification in the on- and off-highway
and marine markets. With Semikron
Danfoss, we have taken another important
step in establishing a leading position in
power electronics and electrification.
• We announced the agreement to acquire
the compressor manufacturer BOCK GmbH
and are looking forward to welcoming the
new team to Danfoss in 2023.
• We continued our bold investments in
innovation, additional capacity, new digital
and electric solutions as well as our One
ERP platform. We are approaching 25% of
sales via e-commerce and Electronic Data
Interchange (EDI).
• We are taking critical steps towards
promoting Diversity & Inclusion, as we are
strong believers that diverse teams lead to
more innovation and drive strong employee
engagement.
Our green growth strategy is focused on
long-term value creation, and we are investing
in significant growth opportunities like data
centers, the growing market for heat pumps,
and other energy-efficient solutions for the
energy transition, but also autonomous
machines, electrification of cars, trucks, marine
4 — Danfoss Annual Report 2022
vessels, and mobile machinery as well as
electrification related to Power-to-X/hydrogen
and battery energy-storage systems – just to
mention a few.
Despite the challenges we have faced
throughout the year, the strong growth
momentum continued across our three
segments and regions.
• Our sales reached EUR 10.3bn, up 36% since
2021, and almost doubling since 2017.
Organic growth was 15%.
• We continued to globalize our business,
and sales are now distributed almost evenly
across the Americas, Europe, and Asia.
Growth was strong across all
regions except China, which has been
counter cyclical since the start of the
pandemic.
• EBITA was up 26% from 2021, leading to an
EBITA margin of 11.9% against 12.8% last
year.
• By increasing R&D investments by 39% to
EUR 457m (2021: 328m), corresponding
to 4.5% of sales (2021: 4.4%), we again
demonstrated our commitment to
differentiating through best-in-class
technology and solutions.
Our results are truly driven by our
high-performing diverse teams
around the world. My sincere
thanks go to our close to 42,000
colleagues worldwide who made
this possible.
• Furthermore, with record levels of
investments in production capacity and
in digital transformation, our target is to
improve service to our customers.
We faced an unprecedented number of
challenges in 2022, and this has impacted our
customers. I am proud to see how our team
worked tirelessly together with our customers
and partners to handle such issues as supply
chain disruptions, extraordinary rising
inflation and costs, pandemic lockdowns, a
cyberattack on Semikron Danfoss, and our exit
from Russia.
We remain in contact with our Ukrainian
colleagues every day as they continue to face
an incredibly difficult time. It’s always safety
first, and we are doing everything we can to
keep our team in Ukraine safe and to support
however we can.
Our main priority is always the health and
safety of our teams, and we are proud that
Lost Time Injury Frequency (LTIF) ended at
another record-low level of 1.6, demonstrating
our safety-first focus.
We continue our journey towards
becoming carbon neutral in our global
operations by 2030. As a first step, we became
carbon neutral at our headquarters campus in
2022, and Danfoss’ own solutions have been
instrumental in achieving significant energy
savings.
I would like to sincerely thank our
customers and partners for the close
cooperation in this extraordinary year. I also
want to thank all of my colleagues. The team
is the foundation of everything we do – and
essential for our continued achievements as
we move towards 2025 and beyond.
Kim Fausing
President & CEO
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Danfoss at a glance
6 — Danfoss in brief
8 — Transformational growth
9 — Our people
10 — Five global megatrends
11 — Our green growth strategy
12 — Our purpose
13 — The greenest energy is the energy we don’t use
17 — Financial highlights and key figures
18 — Outlook 2023
Danfoss VLT drives regulate
the amount of heat Danfoss
Nordborg receives and delivers
to the district heating network.
Our advanced heat exchanger
technology minimizes the loss
of energy when transferring
heat from local to public
district heating network.
5 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Danfoss in brief
Worldwide sales
in more than
Three business segments
with leading positions
100
countries
Danfoss
Power Solutions
Danfoss
Climate Solutions
Danfoss
Power Electronics and Drives
Leading technology
partner for our
customers who want to
decarbonize through
energy efficiency,
machine productivity,
low emissions, and
electrification
41,928
97
employees worldwide.
People are the foundation
of our business
Well on the way towards
carbon-neutral global
operations by 2030
factories in more
than 20 countries
1933
Long track record
within innovation
and engineering
6 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Danfoss in numbers
2022 was a very strong year. We
continued our high investments in our
green growth strategy, innovation,
capacity, and digitalization. Our
results are driven by our diverse
teams across the world. The sales level
exceeded expectations, and the EBITA
margin reached 11.9% within range
of guidance combined with a strong
cash performance.
CO2-neutral operations
Total scope 1 and 2 GHG emissions
LTIF record low
(number of incidents
per million hours worked)
Employees at year-end
(headcount)
Gender split
women in leadership positions
-7%*
354
141
213
236
230
-6%
+1,885
+1%-point
2.0
1.7
1.6
27,491
40,043
41,928
20%
20%
21%
2020
2021
2022
2020
2021
2022
2020
2021
2022
2020
2021
2022
Danfoss excl. hydraulics
sites acquired in 2021
Hydraulics sites
acquired in 2021
Sales
EURbn
Innovation
EURm
Investments excl. M&A
EURm
EBITA
EURm
Cash flow
EURm
+36%
sales growth
10.3
7.5
5.8
2020
2021
2022
267
2020
+39%
R&D increase
457
328
+44%
531
368
230
+26%
earnings increase
1,224
+16%
cash generation
969
723
493
465
401
2021
2022
2020
2021
2022
2020
2021
2022
2020
2021
2022
7 — Danfoss Annual Report 2022
* excluding hydraulics sites acquired in 2021
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Transformational
growth
Danfoss grew by 76% over the past five years,
almost doubling. We continue to decouple
environmental impact from business growth
by delivering 7% decrease in scope 1 and
2 emissions while growing 15% organically
in 2022. The integration of the hydraulics
business acquired in 2021 continued as
planned. We established the new combined
Semikron Danfoss, building a global
technology leader in power modules and
assemblies for power electronics.
8 — Danfoss Annual Report 2022
Danfoss sales are distributed
almost evenly across the
Americas, Europe, and Asia.
EUR 10.3bn
EUR 7.5bn
EUR 5.8bn
2017
2021
2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Our people
Great teamwork and strong engagement are our top criteria for success.
Our people and high performing, diverse teams create results and are the
foundation of Danfoss, helping our business strategy come to life.
We are building a better future together.
Danfoss invests in early
talent recruitment
and development
with opportunities
for students, recent
graduates, and new
professionals.
9 — Danfoss Annual Report 2022
Our people are the foundation of our business – the strong pillar on
which we build our strategy. Our aim is to have high performing,
diverse teams in place who feel valued and respected, all across the
globe. We have made significant progress on our people agenda,
but there is still a lot to do. Diversity & Inclusion is now one of the
three step-change initiatives in our ESG ambition. Our 40 new
Employee Resource Groups across Danfoss are just one example of
many platforms that foster an inclusive environment.
Ilonka Nussbaumer
Executive Vice
President & Head of
Human Resources
We continue to foster high engagement by addressing:
Inclusive workplace
Engaged employees
We offer an inspiring and inclusive workplace
that represents the diversity of the communities
in which we live and work, and that allows
people to feel valued and respected.
We unleash the full potential of our people
by enabling them to build purposeful careers
through impactful development opportunities
and flexible ways of working that allow people
to be at their best.
High-performing, diverse teams
Key capabilities
Great teamwork and high engagement are our
top criteria for success. Our leaders grow high-
performing, diverse teams by living our Danfoss
Behaviors.
Our people are equipped to drive the green
transition because they have the skills,
knowledge, and agility to respond to current
and future opportunities and challenges.
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Five global megatrends
Danfoss is more relevant than ever. We engineer solutions that increase
machine productivity, reduce emissions, lower energy consumption, and
enable electrification. Our solutions meet many of the challenges from
climate change, urbanization, and food and water supply scarcity, while
capturing opportunities in digitalization and electrification.
Danfoss continues to transform by taking strategic steps to
accelerate growth. Initiatives that bring us closer to customers,
and increase customer satisfaction and loyalty, are key for our
competitive advantage and our growth ambitions. It is in our
DNA to have a positive impact on the communities in which
we operate, addressing key societal imperatives like energy
efficiency, energy availability, food security, and water scarcity.
Astrid Mozes
President, Regions
Climate change
Urbanization
Food and
water supply
Digitalization
Electrification
We need to keep global temperature
increases below 1.5 degrees by tackling
the most emission-heavy sectors
(transport, industry, buildings) with our
customers. Danfoss technologies meet
the increasing demand for sustainability,
energy efficiency, and a greener energy
mix.
Cities currently consume 80% of
energy resources, and with continued
urbanization, this will increase. Danfoss
solutions for urban growth areas like
data centers, industry, commercial, and
residential buildings ensure we expand
in the most efficient way.
We are seeing food and water scarcity
due to climate changes. Currently one
third of all food is wasted, and by 2050
the world will need 60% more food.
By making agriculture more efficient,
we can produce more food using less
resources. And by optimizing the cold
chain, we can minimize food waste all
the way from farm to fork.
The global digital adoption increased
seven times during the pandemic,
increasing customer expectations.
Danfoss delivers data, analytics, and
connectivity that can drive rapid change
in our energy systems as well as machine
productivity, enabling our customers to
better monitor and optimize.
Thanks to electromobility and
decarbonization, fully sustainable
transport is now a realistic goal. Danfoss
delivers electrification solutions not only
to cars and trucks, but also maritime
vessels and heavy machinery that can go
hybrid or fully electric, as well as energy
systems.
10 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Our green growth strategy
In 2022, we revised our strategy and
launched Core & Clear 2025 to continue the
transformation of Danfoss. To become the
preferred partner in helping our customers
decarbonize, we have set priorities within
ESG. We continue our investments to
strengthen our core businesses, building
a global number 1 or 2 position in the
industries in which they operate. We aim to
be the partner of choice for our customers
via our leading application know-how,
sustainable innovation that differentiates by
technology, adding low-carbon products and
circularity, and through our leading positions.
Go to Our customer promise
11 — Danfoss Annual Report 2022
Core & Clear
Danfoss ESG step-change initiatives
Our purpose
We engineer tomorrow to build a better future
Our strategy
Leading
portfolio
Customers
& Growth
Innovative
Solutions
Lean
& Agile
Our foundation
High-performing diverse teams
Decarbonization
Circularity
Diversity &
Inclusion
Go to Core & Clear 2025
Go to Our ESG ambition
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Our purpose
Why we exist: we engineer tomorrow
to build a better future.
Decarbonizing with our customers and long-term
value creation.
We help our customers decarbonize through our products
and solutions providing value in an intelligent and cost-
efficient way.
We continue on our own decarbonization journey.
We are a foundation- and family-owned company, with
focus on the longer view, courage, and sustainability. We
target over-proportional growth through investment-
driven value creation. Our profitable growth and strong
free cash flow allow us to invest significantly in the future.
12 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
The greenest energy is the energy we don’t use
To reach the goals of the Paris
Agreement and to accelerate the
green transition, faster action is
needed. Current challenges, like
energy security, energy prices, and
the cost of living require immediate
action to curb energy demand.
Without action, energy demand will
grow significantly, getting us off track
when it comes to meeting global
climate goals. Instead, according to
the International Energy Association
(IEA), a collective push for energy
efficiency can deliver one-third of the
total emissions reductions needed to
reach net zero.1
1 IEA (2022). The value of urgent action on energy efficiency, p. 7
13 — Danfoss Annual Report 2022
We have the solutions
Danfoss solutions are ready today to help reduce, reuse, and re-source energy – that is, technologies for energy efficiency, sector integration, and
electrification. They can provide most of the global reductions in carbon emissions needed to reach net zero – while curbing the growing demand for
energy. Danfoss has the solutions to help our customers decarbonize, and examples of our work are found throughout this report.
Reduce
Reuse
Re-source
Energy efficiency could reduce
CO₂ emissions by an additional
5 gigatons per year by 2030.
Sector coupling is key for the future.
Only one-third of all energy is used.
Two-thirds is wasted.
Turning the energy green – electrification
is an is an important lever, driving green
transition.
Reduce involves saving energy by
installing energy-efficient solutions.
Energy efficiency means using less energy
to perform the same task – eliminating
wasted energy.
Reuse is about recycling the energy we already
have, e.g., using excess heat from buildings,
processes, and data centers. This involves
connecting sectors in a smart way to convert
and store energy, maximizing synergies.
Re-source means fully or partially
switching from technologies that use fossil
fuels to those that use electricity, enabling
procurement of renewable energy.
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Reduce
Saving energy is possible all over the world
City area Linde Haven,
Denmark
Case story
Zero-carbon-ready city area
Barilla's Rubbiano
plant, Italy
The worlds biggest
airport in Istanbul,
Turkey
Watch video
230 billion square meters in new construction
are expected in the next 40 years – adding an
equivalent of Paris each week1. The new city area,
Linde Haven, in Sønderborg, Denmark, has been
built to meet the highest sustainability standards.
Danfoss’ smart systems allow tenants to control
lighting, heating, air-conditioning, and other
energy use as efficiently as possible. The local
district energy system supplies heating based
mainly on CO2-neutral sources, with Danfoss
contributing the district heating substations.
Energy efficiency of buildings defines their
operating temperatures, which are low at Linde
Haven; thus district heating temperatures can
be lowered, resulting in lower distribution
heat losses. The low temperature of 57°C
compared to typically 70°C in the network has
the estimated potential to save 81 MWh a year –
equal to a reduction in distribution heat loss of
31% compared to similar buildings operating at
the typical temperatures.
New city areas like Linde Haven need to
be built all over the world. The technology is
available, so there’s no reason to wait!
1 UN Environment, GBA & IEA (2017). Global Status Report 2017, p. 2
Case story
Case story
Danfoss makes
pasta sauce “greener”
Better efficiency in
world’s biggest airport
Electric motors claim about 50% of the
world’s electric energy usage2. A variable
speed drive can cut up to 40% off an
electric motor’s energy consumption3.
Imagine the savings and impact on
sustainable manufacturing if the world
maximized its use of drives.
Over 150 million jars of pasta
sauce are produced each year at the
Barilla Rubbiano plant in Italy. Danfoss
VLT® drives power all conveyor belt
movements, helping minimize energy
spend in electric motors and provide
maximum efficiency.
2 IEA (2016). World Energy Outlook 2016, p. 298
3 IEA (2016). World Energy Outlook 2016, p. 301
4 Leadership in Energy and Environmental Design
Istanbul Airport’s main terminal hosts
millions of visitors each year and promotes
energy efficiency according to LEED
certification4. The airport has around
14,000 control valves for heating and
cooling applications that help minimize
the airport’s energy consumption.
Operating with 100% capacity, the
valves realize up to 50% annual savings
in heating and cooling costs. Over 1,800
Danfoss VLT® HVAC drives and VLT® AQUA
drives installed have up to 30% annual
energy savings, reducing energy costs
by EUR 130,000, with a payback time of
18 months. Imagine the energy savings if
airports around the world were equipped
with Danfoss’ drives solutions!
14 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Reuse
Sector integration is possible
all over the world
Watch video
Supermarket,
Denmark
The data center at Danfoss’
headquarters in Denmark
Case story
Turning supermarkets into heat suppliers
In 2018, heat accounted for 50% of
global final energy consumption1.
District energy systems, which distribute
heat to end users via underground pipes,
can enable a 100% green heat supply
today – and offer a path for a complete
decarbonization of the heat supply.
A Danfoss heat recovery solution
helps a local supermarket, SuperBrugsen,
in a small town in Southern
Denmark, to capture waste heat from
its CO2 refrigeration system. Sounds
counterintuitive? It isn’t. Refrigeration
and cooling counters generate excess
heat – just like the back of your your
fridge at home becomes warm on the
outside when it is working.
The local supermarket uses its excess
heat to heat the store and produce
domestic hot water.
Since 2019, 78% of the store’s heat
consumption has been covered by
reused excess heat. And the supermarket
has sold 133 MWh to the local district
energy system to heat nearby homes and
businesses2.
Just imagine if more supermarkets
turned into heat suppliers – green
supermarkets reusing their excess heat
are possible all over the world!
1 IEA (2019). Renewables 2019: Heat
2 Dansk Fjernvarme (2022). Varmeprisstatistik.
Case story
Transforming energy users
into green energy sources
Data centers consume vast amounts of energy –
energy to supply servers with power, as well as to cool
down server rooms and remove the huge amounts
of heat they generate. It is estimated that 10% of all
electricity is used within the IT ecosystem.
Reducing the climate impact of digitalization is a
high priority for us at Danfoss. In 2024, reused excess
heat from Danfoss data centers will provide 25% of
the overall heat supply for our 250,000 m2 carbon-
neutral headquarters.
How do we do it? Oil-free heat-pump systems
transform the data center into a heat source.
Then the excess heat will be distributed to a local
neighborhood, helping to reduce data-center energy
costs and lower greenhouse-gas emissions.
Just imagine if data centers all over the world
became green energy sources?
15 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Re-source
Watch video
Zero-emission contruction site,
Denmark
Electrification is possible
all over the world
The Taiwanese port
city of Kaohsiung,
Taiwan
Case story
Case story
Zero-emissions construction sites are possible
Powering Asia’s first e-ferry
The construction industry accounted
for 20% of global energy-related carbon
emissions in 20201. These emissions can
be curbed by electrifying construction
machinery. An efficient and electrified
excavator only needs 25% of the energy
to do the same job as a diesel excavator.
In June 2022 at the IEA’s 7th Annual
Conference on Energy Efficiency
in Sønderborg, Denmark, Danfoss
showcased electric excavators, crawlers,
backhoe loaders, and more – all with
Danfoss energy-efficient solutions inside.
The machines moved tons of dirt –
without emitting CO2.
By combining Danfoss’ electric
drivetrain systems with our innovative
Digital Displacement® pump
technology, we can make electrification
a commercially viable option for
construction machinery and help the
industry significantly reduce its carbon
footprint.
No city is without a construction
site, and decarbonizing construction
machinery has tremendous societal
impact. By electrifying construction
machinery and increasing the number
of zero-emissions construction sites
globally, we can reduce global energy-
related CO2 emissions and decrease air
pollution2.
1 IEA (2021). Tracking Buildings 2021
2 Bellona (2019). Zero emission construction site, p. 12
Ferries rival flights in emissions per kilometer
traveled3, and approximately 15,400 ferries4 are used
all around the world, especially in Asia5. Taiwanese
shipping company, Ship, converted the 100-ton ferry
Happiness into Asia’s first hybrid electric ferry. The
ferry’s new system ensures pure electric cruising for
half the ferry’s operation time, significantly reducing
diesel fuel consumption. This reduces carbon
emissions and the release of other harmful emissions,
improving air quality. Following the success of this
project, the Kaohsiung City Government plans to
retrofit the rest of its diesel fleet.
Happiness shows the global potential in maritime
electrification. Electrifying more ferries around the world
can cut emission levels and improve air quality in cities.
3 IPCC (2014). Climate Change 2014: Mitigation of Climate Change: IPCC
Chapter 8 - Transport, p. 610.
4 https://interferry.com/ferry-industry-facts/
5 Interferry (2021). Economic impact of the global ferry industry, p. 4
16 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Financial highlights and key figures
EURm EURm EURm EURm EURm
2022
2020
2018
2019
2021
EURm EURm EURm EURm EURm
2022
2020
2018
2019
2021
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
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
10,256
1,618
1,576
1,224
1,043
-94
949
683
31
15.8
15.4
11.9
10.2
6,693
9,970
3,951
2,677
7,803
11,728
5,048
3,168
Key figures, financial ratios and highlighted key figures are calculated as defined in Note 27.
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)
673
-227
789
-407
800
-242
838
-2,794
1,053
-931
-238
-252
-187
-325
-486
88
-424
-140
-322
0
-54
-2,423
1,596
-429
-26
564
359
443
17.9
13.4
17.0
46.1
36.2
1.0
17.4
8.1
634
463
323
18.3
13.4
17.0
48.1
35.7
1.0
16.0
8.1
709
493
497
16.1
11.9
13.1
49.7
16.9
0.6
-
-
664
401
-2,020
16.7
12.8
16.6
39.6
67.8
2.1
30.0
19.0
794
465
40
14.1
10.2
14.8
43.0
62.8
2.0
30.0
20.6
17 — Danfoss Annual Report 2022
#Classified as Business
#Classified as Business
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Outlook 2023
Decarbonizing with our customers
and driving long-term sustainable
value creation.
Our growth projections for 2023 remain positive
as energy efficiency and electrification are
gaining traction worldwide. Danfoss is in a
good position with our three strong business
segments engineering solutions that increase
machine productivity, reduce emissions, lower
energy consumption, and enable electrification.
The solutions are available today, and
they are meeting many of the challenges
generated by climate change, urbanization,
and food and water supply scarcity while
capturing opportunities in digitalization and
electrification. This will continue to drive
demand for our solutions and products.
However, the global economy is slowing
down and in combination with global supply
chain disruptions, the war in Ukraine, the
inflationary business environment, and the
COVID-19 pandemic, it is creating a high
level of volatility and uncertainty. As a result,
visibility is low.
18 — Danfoss Annual Report 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. Our profitable growth and
strong free cash flow will allow us to invest
significantly in the future.
2023 expectations
Danfoss has a continued ambition to
expand or maintain market share. Sales are
expected to be in the range of EUR 10.4-
11.9bn for the full year. The EBITA margin is
expected to be in the range of 11.5-13.0%,
following the continued integration of
already acquired businesses as well as
investments in the development of new
products and solutions. The expected growth
and profitability performance is dependent
on the development of global supply chain
disruptions, the war in Ukraine, inflation, and
the pandemic, as well as the general 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,
which is included in the targets of our three
step-change initiatives on Decarbonization,
Circularity, and Diversity & Inclusion. We will
continue to invest in sustainability, improve
our climate footprint, and deliver on our ESG
ambition.
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 has no duty and undertakes no
obligation to update or revise any forward-
looking statements after the publication of
this Annual Report.
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
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Financial review
Group accounts and notes
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Statements
Our business
20 — Our customer promise
21 — Danfoss business segments
Every single Danfoss
component plays a role
in making applications all
over the world run with
higher energy efficiency
and productivity. We ensure
quality, reliability and
innovation from the drawing
board to the production line,
here in the Fluid Conveyance
unit in the New Danfoss
Power Solutions.
19 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
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Governance
ESG statements
Financial review
Group accounts and notes
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Statements
Our customer promise
Danfoss delivers value to our
Sustainable innovation
customers through our leading
application know-how, sustainable
innovation, and leading positions.
Being the preferred partner for our customers
requires us to continuously strengthen our
competitive advantage. We are building
on three core elements to deliver on our
customer promise: leading application know-
how, sustainable innovation, and leading
positions.
Leading application know-how
Understanding the applications where our
products and solutions are used 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.
We are the technology leaders in our core
businesses. We invest in technologies and
new products that help our customers
to differentiate even further. Danfoss is
accelerating low-carbon products and
circularity initiatives across all segments,
coupled with actions to build sustainable
value chains together with our suppliers.
Leading positions
All Danfoss core businesses are pursuing a
global number one or number two position.
We aim to be the partner of choice close to our
customers with a leading position in safety,
quality, delivery, and cost. Our long-term
investments and value creation has a strong
focus on strengthening our competitive
position organically as well as inorganically.
20 — Danfoss Annual Report 2022
Leading application
know-how
To be the partner
of choice
Sustainable
innovation
Differentiate through
technology, adding low-
carbon products
& circularity
Competitive
advantage
Leading
positions
Exploit scale and
operating model
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
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Governance
ESG statements
Financial review
Group accounts and notes
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Statements
Danfoss business segments
Decarbonizing with our customers
With the promise of quality, reliability, and innovation rooted in our
DNA, we deliver an extensive range of products and solutions across our
business segments: Danfoss Power Solutions, Danfoss Climate Solutions,
and Danfoss Power Electronics and Drives.
Watch video
19%
31%
Share
of sales
50%
Danfoss Power
Electronics and Drives
Danfoss
Climate Solutions
Danfoss
Power Solutions
Decarbonization with
electric and energy-
efficient solutions for
vehicles and industry.
Digital tools and
lifecycle services.
Sustainable heating
and cooling solutions
for buildings, cold
chains, industry, and
infrastructure.
Establishing a leading
position in mobile and
industrial hydraulics
as well as electric
powertrain systems.
We are at the forefront of developing
the newest decarbonization solutions
for our customers. This is the Application
Development Center, Nordborg, Denmark.
Here Danfoss showcases solutions to electrify
motor systems with battery technology that
can power heavy-duty construction machines,
like an electric wheel loader.
Danfoss is committed to building a
better future with solutions available
today – from our three strong business
segments. We deliver one of the
world’s strongest and most relevant
portfolios of efficient components to
increase machine productivity, reduce
emissions, lower energy consumption,
and enable electrification.
Our solutions are used in areas such as
refrigeration, air conditioning, heating, power
conversion, motor control, industrial machinery,
automotive, marine, and off- and on-highway
equipment. We also provide solutions for
renewable energy, such as solar and wind
power, as well as district-energy infrastructure
for cities.
Read about the development in segments
21 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
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Governance
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Financial review
Group accounts and notes
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Statements
Danfoss Power Solutions
Optimizing performance for mobile and industrial
equipment. Full solutions capabilities in mobile
and industrial hydraulics, fluid conveyance,
electrification, and software.
EUR 5.1bn
Sales
(2021: EUR 3.2bn)
EUR 720m
Earnings (EBITA)
(2021: EUR 489m)
14.2%
EBITA margin
(2021: 15.3%)
18,535
Number of employees
(2021: 19,061)
North America, Europe, Asia
Top three markets
52
Factories
3
Application
Development Centers
I’m immensely proud of what
our Danfoss Power Solutions
team has accomplished. Despite
being our first full year as a newly
merged business that had to
navigate continued economic
and supply chain challenges, we
delivered robust financial results
and kept investing in technology
that will transform machines,
vehicles, and vessels for our
customers and distribution
partners around the world.
Eric Alström
President, Danfoss Power Solutions
22 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
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Statements
Case story
Addressing population growth
and urbanization through
autonomous machines
A s the world’s population grows and
migrates to urban centers, food
production will need to increase, as will the
pace of construction. Machine productivity
will be critical to achieving these objectives.
One way to increase the productivity of off-
highway machines is autonomy.
Autonomous machines help operators
complete tasks quicker. They also increase
reliability and speed when performing precision
tasks, which helps prevent costly mistakes and
time-consuming rework. For one specialist
agricultural customer, one of our solutions
improved productivity by as much as 30%.
Beyond productivity, autonomy enhances
safety by enabling operators to pay closer
attention to a vehicle’s surroundings,
reducing blind spots and decreasing the risk
of a collision. Autonomy also helps address
labor shortages by moving some of the skill
and experience an operator would typically
have onto the vehicle. Automating certain
processes allows end users to assign workers
to critical tasks while producing operational
gains of up to 75%.
Danfoss Power Solutions has a team
of experts that works with machine
manufacturers in multiple industries to
automate their vehicles. Our autonomy
engineers work closely with customers to
understand their needs and provide services
for full machine development, including
engineering services, products, and tailor-
made software.
Our goal is to make the development,
prototyping, and commercialization of
autonomous functions faster for OEMs and to
build safer, more precise, and more productive
vehicles to solve the world’s biggest
challenges.
23 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
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Governance
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Financial review
Group accounts and notes
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Statements
Danfoss Climate Solutions
Helping customers and partners mitigate climate
change and build a greener future. Sustainable
heating and cooling solutions for buildings, cold
chains, industry, and infrastructure.
EUR 3.2bn
Sales
(2021: EUR 2.9bn)
EUR 556m
Earnings (EBITA)
(2021: EUR 511m)
17.4%
EBITA margin
(2021: 17.8%)
10,331
Number of employees
(2021: 11,235)
North America, Europe, Asia
Top three markets
31
Factories
4
Application
Development Centers
Danfoss Climate Solutions
provides sustainable heating
and cooling technologies for a
decarbonized tomorrow, food
and energy security, health and
well-being. Our climate-friendly
solutions are helping people to
stay cool or warm – depending
on season and geography. And
as a global leader with one of the
broadest product portfolios in the
industry, we enable our customers
to use energy and resources
efficiently, in buildings, industrial
applications, energy infrastructure
and the coldchain.
Jürgen Fischer
President, Danfoss Climate Solutions
24 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
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Financial review
Group accounts and notes
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Statements
Case story
Energy can be recovered
everywhere, reducing energy
consumption
T raveling on the London Underground can
be an extremely hot experience for the
millions of commuters and visitors every day.
But what if the surplus hot air could be put to
good use? Danfoss is proudly taking part in a
new state-of-the-art energy project, which is
reusing heat that would otherwise be wasted,
to heat up homes.
155 steps and 23 meters deep down in
the Underground, you will find a world-first
construction project, launched by Colloide
Engineering Systems. The station has been
transformed to house a new 500kW ammonia
heat pump driven by the heat recovered
from a heat exchanger coil within the shaft
of the Underground; recovering the warm air
generated along the Northern Line. The scheme
recycles the wasted heat to provide heating
and hot water to more than 1,350 homes, a
school, and two leisure centers in Islington.
Danfoss supplied plate heat exchangers
and substations to connect the four housing
blocks and the school. The heating bills for
council tenants connected to the network will
be cut by 10% compared to other communal
heating systems. In addition to this, connected
tenants help to reduce CO2 emissions by
around 500 tons each year, equal to the
annual emissions of approximately 200 cars.
This provides a blueprint for decarbonizing
heat in potential future schemes in London,
reducing heating bills and carbon emissions
while improving air quality and making cities
more self-sufficient in energy.
25 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Danfoss Power
Electronics and Drives
Fueling customers’ green transition through energy
efficiency and electrification in automotive, marine,
onshore industries, and infrastructure. Clean-energy
solutions, digital tools, and lifecycle services.
EUR 1.9bn
Sales
(2021: EUR 1.4bn)
EUR 196m
Earnings (EBITA)
(2021: EUR 180m)
10.1%
EBITA margin
(2021: 12.4%)
7,875
Number of employees
(2021: 4,582)
North America, Europe, Asia
Top three markets
17
Factories
4
Application
Development Centers
Danfoss Power Electronics
and Drives is a powerhouse
within energy efficiency and
electrification. As the world goes
electric, our technologies are more
relevant than ever, helping the
world use energy more efficiently.
With more than 7,800 dedicated
team members, we are ready to
serve customers around the globe
and around the clock with leading
technologies spanning from
semiconductor devices, power
modules, stacks and systems to
the world’s largest portfolio of
power converters and drives.
Mika Kulju
President, Danfoss Power Electronics and
Drives
26 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Case story
Retrofitting Keppel Bay Tower
for a zero-energy future
Keppel Bay Tower, a landmark in Singapore’s
Keppel Bay water-front area, has been
retrofitted with Danfoss VLT® drives. As a
result, validated energy savings of more than
45% were achieved – and Keppel Bay Tower
was Singapore’s first commercial building to
earn the Green Mark Platinum Zero Energy
building certificate.
How? Danfoss retrofitted fans in one of the
building’s air-handling units with the high
efficiency Danfoss EC+ concept engineered
to boost the efficiency of heating, ventilation,
and air-conditioning systems in new-builds
and existing systems.
The EC+ concept enables significant
reduction of energy use by means of
intelligent Danfoss VLT® drives. Variable speed
drives enable energy-efficient application
control, which is key to achieving energy
savings in building operations.
The HVAC-dedicated drive with built-in
intelligence is known for its high reliability, low
total cost of ownership, and many application
functions – a perfect match for Keppel Bay
Tower, a modern building fitted with a wealth
of sophisticated solutions.
Buildings account for 28% of global energy-
related CO2 emissions. And more than 85%
of the world’s existing building stock today
will still be standing in 2050.1 Retrofitting –
modifying existing buildings to incorporate
green technologies – is crucial in reaching net
zero.
Read more at danfoss.com
1 https://www.eea.europa.eu/publications/building-renovation-where-circular-economy
27 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Our Core & Clear 2025 plan was
rolled out in April 2022. It details
our green growth strategy to
become our customers’ preferred
decarbonization partner.
28 — Danfoss Annual Report 2022
28 — Danfoss Annual Report 2022
Core &
Clear 2025
29 — Core & Clear 2025
31 — Strategic focus areas
32 — Our ESG approach
33 — ESG in our value chain
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Core & Clear 2025
Case story
One ERP digital platform
– backbone of our digital transformation
We are transforming Danfoss into a
preferred technology partner for our
customers, with the business almost
doubling over the last five years. The
Core & Clear 2025 strategy including
our ESG ambition sets a clear direction
for the next three years, further
accelerating our green growth and
value creation while decarbonizing
with our customers.
Danfoss is transforming
Our transformation is fueled by bold
investments in Danfoss’ long-term success.
Our green growth strategy is focused on long-
term value creation, and in 2022 we continued
to increase our investments.
We are proud of our teams and our growth,
creating long-term value through innovation,
additional capacity, digitalization, and M&A.
Investments in innovation allow us to
continuously improve the performance of our
29 — Danfoss Annual Report 2022
products and solutions. In 2022, we invested
4.5% of sales in R&D, which allowed us to
drive sustainable innovation and help our
customers to differentiate even further.
We have significantly increased CAPEX and
investments in our digital transformation,
including One ERP and our Digital Customer
Experience. We intensified our regional
customer focus to drive even more
consistencies across regions, execute on cross-
regional synergies, and secure knowledge
transfer to future-proof our organization.
And we are investing in growth opportunities
that help customers decarbonize through
energy efficiency, machine productivity, low
emissions, and electrification.
Strategic M&A activities fuels transformational
growth. We continue to strengthen our three
core business segments and are on track with
integrating our transformational acquisitions,
such as the new Danfoss Power Solutions
segment and Semikron Danfoss. We have also
announced the agreement to acquire the
compressor manufacturer BOCK GmbH.
All in all, our high investment levels are
generating strong growth, which is reflected
in our very strong 2022 results. We will
continue with this strategy toward 2025.
We are continuously improving our digital
backbone with better end-to-end processes,
from R&D to our supply chain and customers.
This is enabled by our digital IT platform, One
ERP (Enterprise Resource Planning), which is
being implemented – in combination with the
global product store on our corporate website
– to enable an improved digital customer
experience. In 2022, we approached 25%
of sales via e-commerce, half of which was
through our product store.
In 2022, One ERP was fully implemented in
two of our three segments, covering almost
50% of sales. Now that the hydraulics business
we acquired in 2021 has been fully integrated
into the new Danfoss Power Solutions
segment, focus will now be directed towards
implementing One ERP in the segment.
Sharing one digital platform in Danfoss
will allow us to increase productivity and
efficiency, as well as provide significant
synergy value when acquired entities are
being integrated into One ERP in the future.
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Case story
Creating a leading position
in power electronics
O n August 1, Semikron and Danfoss joined
forces in a new business called Semikron
Danfoss. Together, we have established the
ultimate partnership in power electronics and
are a new leader in power semiconductor
modules and assemblies. We are now all set
to take the lead in automotive and silicon-
carbide (SiC) power modules.
The product offerings of Semikron Danfoss
include semiconductor devices, power
modules, stacks, and systems.
In a world that is going electric, Semikron
Danfoss technologies are more relevant than
ever. With innovative solutions for automotive,
industrial, and renewable applications, we
help the world use energy more efficiently
and sustainably, and thus significantly reduce
overall CO2 emissions.
30 — Danfoss Annual Report 2022
SiC power modules are the answer to the
global demand for smaller, faster, and more
effective electronic devices. SiC power
modules can reduce power consumption in
electric cars by 10% and energy consumption
in data centers by 5%. In the future, power
modules are expected to be applied in other
sectors like shipping, offshore, and hospitals to
increase efficiency and reduce emissions.
The merger comes with a strong growth
plan and a firm commitment to future
investments in capacity, technology, and
innovation.
Our bold investments to build the number
one or two position in electrification go
beyond Semikron Danfoss – all Danfoss
business segments are leveraging
electrification to increase efficiency and
reduce emissions.
We are very proud of the success
of our Core & Clear strategy. It
has transformed Danfoss into
a technology powerhouse.
We will continue to make bold
investments in our digital
transformation as well as our
unique products and solutions
to provide real value to our
customers. As we move towards
our 2025 destination, profitable
growth and strong free cash flow
will allow us to invest significantly
in the future.
Jesper V. Christensen
Executive Vice President &
Chief Financial Officer
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Strategic focus areas
Key to our success are our high-performing, diverse teams, enabling us to
navigate serious challenges such as the COVID-19 pandemic, record high
inflation, and severe supply chain bottlenecks. We have come out stronger
– and are ready to further accelerate our growth and value creation with our
Core & Clear 2025 strategy that includes our ESG ambition.
Leading
Portfolio
Strengthen our core with
three strong leading global
business segments.
Strengthen our leading
positions through focus on
our three strong segments.
Technology investments to
accelerate our offerings of
low-carbon products and
solutions.
Customers
& Growth
Leading application know-
how – to be the partner of
choice.
Customer satisfaction and
loyalty – continued strong
focus on quality and
delivery.
Digital customer experience
end-to-end: fast, easy, and
relevant.
Innovative
Solutions
Sustainable innovation –
differentiate through
technology, adding circular,
low-carbon, and net-zero
products to add further
value to our customers.
Digital as differentiator to
strengthen our position
within profitable digital
products and services.
Continue to improve time
to market.
Lean & Agile
Benchmark on safety,
quality, delivery, and cost.
Regionalize our supply chains
to be closer to our customers,
improve service levels, and
decarbonize our supply chain.
Continue to digitalize
Danfoss with one common
IT architecture and One ERP
to improve digital customer
experience and internal
efficiency, while creating
business impact.
31 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Our ESG approach
We are well on the way to decarbonize our
operations (scope 1 and 2), but we recognize
that we have a huge work ahead of us,
especially on value chain emissions (scope 3)
and circularity.
Decarbonization: We pioneer solutions for
customers to enable decarbonization in an
intelligent, cost-optimal manner and ensure
carbon neutrality in our own operations
Go to Decarbonization and read about our efforts
to become carbon neutral in scope 1 and 2 by 2030
Circularity: We innovate best-in-class circular
products as the default when developing,
producing, sourcing, and selling to deliver
new value propositions
Go to Circularity
Diversity & Inclusion: We offer a leading
employee experience that values and respects
diversity and inclusion to attract and retain the
top talent who will lead the green transition
Go to Diversity & Inclusion
We engineer tomorrow to build a better future.
We stand at a crucial moment for our
world. The planet is seeing its highest
recorded concentration of CO2.
Immediate change and a bold step up
in ambition is the only way to reduce
emissions and to accelerate green
transition.
At the heart of this is technology and people.
Danfoss’ biggest contribution to the green
transition and global climate goals is our own
solutions that increase machine productivity,
reduce emissions, lower energy consumption,
and enable electrification.
We want our ESG (Environmental, Social,
Governance) ambition to support our
customers’ decarbonization goals and become
their preferred partner for decarbonization.
Greening the entire value chain is not a
quick or easy task, and has to be done in
close collaboration with our suppliers and
customers.
32 — Danfoss Annual Report 2022
ESG is in demand and paves the
way for a new dialogue with
our customers. Our customers
want to decarbonize their
supply chains – a green supply
chain is often a lean supply
chain. We are in the same boat!
Reducing emissions by improving
circularity in product design, and
lowering energy consumption
with the help of our solutions is
a journey we take together with
our customers.
Martin Rossen
Senior Vice President, Head of Group
Communication & Sustainability
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ESG in our value chain
Upstream
Operations
Downstream
Supplier engagement
In line with our ambitious targets, we will
rethink our supplier relationship management
by analyzing embodied carbon in our products
and identifying decarbonization levers with
our suppliers.
See more on page 40
Safety first
We have a strong safety track record and are
committed to ensuring safe operations for our
employees and business partners.
See more on page 48
Product decarbonization
With over 98% of our emissions taking place
in the use-phase, we have set ambitious
emissions reduction targets validated by the
Science Based Target initiative.
See more on page 39
Circularity
Using our Rethink-Reduce-Recirculate
framework, we will work towards having 80%
of our newly developed products
covered with our circularity approach.
See more on page 41
Diversity
We are committed to recruiting
a diverse workforce, creating
an environment of belonging,
retaining our talents, and increasing
representation.
See more on page 46
Carbon-neutral operations
Installing our own energy-efficient
solutions to reduce energy consumption,
reuse excess heat from processes and
data centers, and source green electricity.
See more on page 38
Avoided emissions
As an essential solution provider to the global
energy transition, our products and services
support our customers’ decarbonization journey
and generate lifetime greenhouse gas emissions
savings.
See more on page 36
33 — Danfoss Annual Report 2022
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The local district energy
plant, Nordals Fjernvarme,
supplies green heat to Danfoss’
headquarters in Denmark.
34 — Danfoss Annual Report 2022
Environment
35 — Decarbonization
41 — Circularity
43 — Safe and compliant products
44 — Environmental performance
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Case story
Danfoss’ Chennai campus reducing 10,000 tons of CO2
– decarbonizing our own operations
Since 2014, solar panels have captured the
sun’s rays at our LEED Platinum-certified
Chennai, India, campus. The solar panels
cover 17% of the electricity consumption.
The Danfoss team found that excess
solar-generated energy was going to waste
and came up with the idea of installing a
200 kWh energy-storage facility.
Our campus now hosts India’s first privately
owned Energy Storage System, which is
equipped with Danfoss technology to
store electricity.
92% of the electricity used at the campus
comes from renewables. And most of the
technologies that the Indian team sell today
are in real-life operation on the campus.
This year, all efforts on campus resulted
in a reduction of 10,000 tons of CO2.
Decarbonization
Decarbonization is one of the three
pillars of our ESG ambition, and
Danfoss has committed to ambitious
targets covering our operations,
suppliers, and customers.
For years, Danfoss has systematically worked
to reduce and recycle energy in our factories
and offices around the world. We have
successfully optimized processes, heating,
and ventilation systems, and used excess heat
to minimize the energy needed to heat our
buildings.
We manufacture equipment that
reduces the use of energy. Smart
cooling and heating systems use
less energy to improve the indoor
climate and make it possible to
reuse excess heat.
As part of the science-based targets, Danfoss
is required to reduce absolute scope 1 and
2 GHG emissions by at least 46.2% by 2030
from a 2019 base year. Danfoss is going
beyond this requirement and has committed
to becoming carbon neutral in scope 1 and
2 by 2030. Danfoss will reduce absolute
scope 3 GHG emissions by 15% in the same
time frame. As an energy-efficiency solution
provider, walking the talk by decarbonizing
our operations, energy sources, and
manufacturing processes is a priority.
Decarbonization targets
Approved science-based targets validated
by SBTi to limit global warming to 1.5°C.
Global carbon neutral Danfoss operations
(scope 1 & 2) by 2030.
15% reduction of value chain emissions
(scope 3) by 2030.
Danfoss’ climate goals were validated by the
Science Based Targets initiative (SBTi) mid-
2022.
Make the reduction of customers’
emissions core to Danfoss’ value
proposition.
35 — Danfoss Annual Report 2022
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Decarbonizing with our customers
For more than a decade, Danfoss and
many other global businesses have
realized the benefits of measuring
greenhouse gas emissions using GHG
Protocol standards and tools.
Efficient use of energy simply means using
less energy to perform the same task – that is,
eliminating wasted energy. Today, energy is
being wasted everywhere across all sectors.
In the transport sector, in the industrial sector,
and in buildings, vast amounts of energy is
wasted every day because simple measures
to monitor and control energy use are not in
place.
In past decades, improvements in energy
efficiency have kept a lid on global emissions,
but we need to accelerate and drive the world
towards net zero. Energy efficiency will be
critical to success, and we must use our energy
smarter to stretch each watt generated from
wind and solar.
Ambitious emissions reduction goals have
been set by many companies, and significant
reductions have already been achieved.
Companies play a key role in developing and
promoting products and services that avoid
emissions by enabling energy reductions or by
providing low-emission products.
Avoided emissions or Scope 4 emissions
are emissions that can be avoided through
the use of a product or a service. Danfoss sells
products that enable our customers to reduce
their consumption of energy and thereby
avoid greenhouse gas emissions. Accurately
measuring a product’s impact - whether positive
or negative - is an important focal point of our
value proposition and our ESG ambition.
In 2022, Danfoss engaged with customers,
suppliers, and knowledge partners to build the
first application-specific methodologies that
quantify the energy saved and thereby the
emissions avoided when using our products.
By doing so, we have further strengthened
the support to our customers on their
decarbonization journey to demonstrate the
relevance of our solutions. The solutions are
here, and they will increase the competitiveness
of our industries and improve the livelihoods
of citizens. And most importantly, we need
them to meet our climate goals. In 2023, we will
further expand this work.
36 — Danfoss Annual Report 2022
Semikron Danfoss power
modules, like the eMPack for
electric vehicles, are vital in
building a leading position
in electrification, helping
customers reduce emissions
and further decarbonize.
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Decarbonizing Danfoss’ operations
Case story
Well on the way to reach carbon neutrality by 2030
In 2022, we reached carbon neutrality in
scope 1 and 2 at our largest production
facility, the Nordborg campus in Denmark.
The 250,000 m2 campus achieved
neutrality through reduction of energy
consumption, reuse of excess heat from
processes and data centers, and sourcing
of green electricity. Unavoidable emissions
from leakage of refrigerants and company
cars have been offset. Since 2007, the
energy consumption for heating has been
reduced by 78%, and the demand for
electricity has been reduced by 50%.
In pursuit of decarbonizing our global
operations, we apply a three-step approach:
1. Reduce involves saving energy by installing
energy-efficient solutions, such as heat
pumps where possible.
2. Reuse is about recycling the energy we
already have, e.g., using excess heat from
buildings, processes, and data centers.
3. Re-source involves turning the remaining
energy green by phasing out fossil fuels
and procuring renewable energy.
Compensation will be considered as the last
resort for the irremovable residual emissions.
We pioneer solutions
for customers to enable
decarbonization in an intelligent,
cost-optimal manner and ensure
carbon neutrality in our own
operations.
37 — Danfoss Annual Report 2022
We are ambitious in the use of our solutions to
achieve a large part of the energy savings and
have proven that applying energy-efficiency
measures is good business.
Green electricity
We continue towards our long-term
commitment to purchase 100% renewable
electricity by 2030. We prioritize Power
Purchase Agreements (PPAs) that contribute
to the transition to more sustainable
electricity grids and reinforce our long-
term commitment to renewable energy. By
purchasing green electricity where available,
we can make the fastest and most significant
contribution to climate action.
As a result, in February 2021, we entered
into the first PPA delivering green electricity
to all our Danish and German facilities
and accounting for approximately 14% of
Danfoss’ electricity consumption. Although
the current energy crisis makes it difficult to
enter long-term PPAs, in 2022 we focused
on decarbonizing electricity consumption
within the EU and US. In December 2022,
we took the first step towards signing a PPA
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with a developer of a solar farm that will
cover electricity use in all our US factories.
The solar park will cover 24% of our global
electricity consumption. As we advance, we
will gradually expand the scope of countries.
By entering the US PPA, and extending the
existing PPA to cover all of Europe, 50% of
our electricity consumption will come from
renewable sources.
Electric company cars
Electrification of transportation is a key focus
area for Danfoss. As a provider of solutions for
electric vehicles, we joined the Climate Group’s
EV100 initiative in 2019 and committed to
transitioning our entire company car fleet to
electric vehicles by 2030 at the latest.
In 2022, we increased capacity of on-site
charging stations by 50%, and the expansion
of charging infrastructure will continue in
the coming years to offer employees and
customers charging points for their electric
vehicles. We have established charging
infrastructure at 25% of our locations and
expect to replace more than 300 vehicles out
of the 2,000 cars in our company car fleet with
electric vehicles in 2023.
We are preparing for a significant
increase in electric company cars. In
2022, the number of on-site charging
stations increased by 50%.
38 — Danfoss Annual Report 2022
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The Danfoss Turbocor® compressor is the world’s first
oil-free magnetic bearing compressor unmatched on
efficiency and endurance. It helps our customers run
their comfort cooling, ice storage, and heat recovery
with the lowest amount of emissions possible.
Decreasing value stream emissions
As a leading provider of energy-
efficiency solutions, Danfoss is
an essential partner in the green
transition and decrease of value
stream emissions.
In 2022, we progressed in our decarbonization
journey by integrating our science-based
targets across the organization, identifying
decarbonization levers, and initiating pilot
projects focused on reducing use-phase
emissions. Our decarbonization activities span
across the full value chain.
Building robust emissions data
foundations
As part of our continued efforts to
decarbonize our products and the value chain,
we are building the foundation for an effective
data architecture. In 2022, we engaged
with customers to identify their data needs
and find out how we could support their
sustainability journey. We initiated several
projects to further develop the consistency
and transparency of sustainability data
39 — Danfoss Annual Report 2022
across functions, strengthening our internal
processes and controls.
To deliver accurate and up-to-date
information about our products’ use-phase
emissions and the corresponding avoided
emissions, we collect information from
our upstream and downstream business
partners, such as the final end-user, country
of destination, type of application, and
carbon footprint. In 2023, we will continue
to integrate our ESG data processes into our
business infrastructure paving the way for
third-party verified ESG reporting.
Reduction of product use-phase
emissions
Approximately 98% of the emissions
accounted for in our SBT baseline occur from
the energy consumed during customers’ use
of the products we manufacture.
While it is expected that the carbon
intensity of the used energy will decrease
over time, we work to find ways to reduce the
carbon footprint of our products, identifying
levers to make them more energy efficient and
optimize their use of energy.
Achieving a significant reduction in our
downstream emissions calls for new solutions,
ranging from business-model innovation to
product and market portfolio-mix strategies.
Strong collaboration with customers and
end users is a prerequisite for a successful
decarbonization of the use-phase of our
products, and focus is therefore on establishing
the necessary partnerships with customers to
drive the use-phase emissions down.
Our compressors, heating solutions, and
drives products account for most of our
emissions under the “Use of Sold Products”
category of the Science-Based Targets initiative.
Since 2021, we have built foundations to
identify decarbonization levers throughout
our portfolio and the scale of emissions
reduction needed to meet our targets. The
work will be intensified in the coming years.
Decarbonization levers and
technology roadmap
We are continuously assessing multiple
innovation opportunities aimed at
decarbonizing our product portfolio. With
the emergence of smart grid systems, it
has become possible to optimize the use of
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Danfoss invests in
developing solutions
that electrify off-highway
machines, like excavators,
crawlers, backhoe loaders,
and truck-mounted
cranes, making zero-
emissions construction
sites possible.
energy when the carbon content of the energy
mix is at its lowest.
We are also looking at integrated business
models and partnerships aimed at decarbonizing
energy sources along our value chain, so the
delivery of our solutions could result in the
production and use of renewable energy.
Research and development
Our product decarbonization strategy revolves
around existing products as well as products
in development. Given our products’ life cycle
and the time from design to market entry, we
identify short-term decarbonization levers
while incorporating our climate targets into
our long-term product development pipeline.
As such, we aim at integrating use-phase
emissions as a key performance indicator in
our product development toolbox. This will
enable the development of a product pipeline
consistent with our ambitious climate targets.
Development of low-carbon
products
Our approach to reducing emissions embodied
in our products involves engaging our
suppliers in productive dialogues to identify
decarbonization levers in our purchased goods
and services. While life-cycle thinking is still an
emerging field, we initiated the Low-Carbon
Product development project as a cross-
segment deep dive to tackle our products’
embodied emissions.
In 2022, we initiated a study on several
of our products to establish a baseline of
upstream carbon emissions, identify CO2-
reduction levers, reduce the CO2 emissions
from manufacturing, and develop strategic
decarbonization roadmaps. Electronics and
similar complex products involve multiple
suppliers and components sourced globally,
often requiring detailed product teardowns
and life cycle assessment to establish an
accurate emissions baseline. Once emissions
breakdowns are established, we will develop
specific product decarbonization strategies.
There are multiple levers available to the
manufacturing sector, ranging from circular
economy, alternative sourcing, and redesign
to material switch. This first assessment
supports us in the engagement with our
suppliers as part of our upstream emissions
reduction strategy. This approach is essential
in creating a common vision across the
value chain and mobilizing upstream and
downstream partners.
In 2023, we will expand and scale the
assessment of our products, across segments
and product categories, while collaborating
with our suppliers on decarbonization
initiatives.
Supplier collaboration
Our upstream emissions are mostly driven by
purchased goods and services, which represent
approximately 2% of our total emissions. Our
suppliers are important partners in helping
Danfoss reduce our emissions and making
our products more sustainable. In 2022, we
reached a significant milestone by establishing
a procurement sustainability roadmap and a
strong governance structure. The roadmap
sets a clear path towards 2024 and outlines
key activities within procurement, e.g., data
transparency and key enablers necessary to
achieve our goals. The roadmaps will be regularly
reviewed by a steering committee led by the
procurement and sustainability functions.
In 2022, Danfoss engaged with our top-
emissions supply chain partners, identifying
concrete opportunities for CO2 emissions savings.
The ESG screening of our suppliers will become a
part of our meetings with them. We also initiated
a far-reaching program called “Choose2Reduce”
aimed at decarbonizing our supply chain.
We continue to build data infrastructure
to gain further visibility on emissions coming
from the purchase of goods and services,
and assessing supplier decarbonization
opportunities across segments.
In 2023, we will focus on shaping and
executing identified CO2 emissions reductions,
building strategic partnerships with key
suppliers, and aligning sustainability criteria
with procurement decision-making.
40 — Danfoss Annual Report 2022
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Circularity
At Danfoss, we are committed to
supporting the transition towards a
low-carbon and circular society.
In 2019, the EU launched their second
comprehensive Circularity Action Plan.
With this action plan, many new legislative
initiatives will shape the future market
for manufacturers with focus on material
efficiency and recirculation of resources.
Additionally, countries are issuing new
regulations on waste minimization and
recycling, packaging, extended producer
responsibility and the right to repair.
Circularity is an important instrument that
enables Danfoss to reduce dependence on
scarce resources and raw materials. It reduces
the consumption of virgin resources and
energy used in the creation of new products.
Moreover, it can contribute towards the
reduction of carbon emissions by transforming
the way we make and use products.
We believe that the shift towards a
circular economy is particularly urgent in the
manufacturing industry. Our ambition is to
drive this change by refining how we design
our products.
41 — Danfoss Annual Report 2022
Danfoss’ Rethink-Reduce-Recirculate
approach drives the innovation and
development of our new products. In 2022,
we created the Danfoss Circularity Framework
that will be implemented in new product
development across Danfoss. We adopted
this framework to measure circularity
when designing new products, identifying
opportunities for improvement, and
determining whether a product contributes
to circularity compared to the next-best
alternatives. In 2023, we will implement our
circularity toolbox, which consists of the
framework and an assessment tool, in several
projects across our business segments.
Our goal is to integrate circularity assess-
ment as part of all product development
processes to enable successful collaboration
with customers. We aim to transparently
communicate the Danfoss circularity
framework next year and start tracking our
overall progress against our targets. We also
want to work with peers to create a shared
understanding and interpretation of circularity
in the industry. Our vision is to have our
framework and tool aligned and validated
across our industry towards a common
approach to circularity.
Circularity targets
Develop and implement
circularity framework in all
segments.
More than 80% of
newly developed
products sold
covered by
circularity
approach
in 2030.
Circularity
collaboration
with 80% of
top 25 customers.
(cid:18)(cid:21)(cid:17)(cid:24)(cid:23)(cid:22)(cid:29)
(cid:16)(cid:30)(cid:15)(cid:27)(cid:14)(cid:26)
(cid:7)(cid:26)(cid:24)(cid:6)(cid:17)(cid:10)(cid:6)(cid:9)(cid:27)(cid:10)(cid:30)
(cid:30)
(cid:29)
(cid:19)
(cid:20)
(cid:23)
(cid:22)
(cid:21)
(cid:27)
(cid:22)
(cid:30)
(cid:31)
(cid:8)(cid:15)(cid:30)
(cid:31)(cid:30)(cid:29)(cid:28)(cid:27)(cid:26)
(cid:25)
(cid:31)(cid:19)(cid:13)(cid:12)(cid:11)(cid:19)(cid:29)(cid:30)(cid:21)(cid:27)(cid:19)(cid:20)(cid:15)
(cid:11)(cid:19)(cid:26)(cid:23)(cid:10)(cid:19)(cid:22)(cid:29)(cid:23)(cid:21)(cid:27)(cid:26)(cid:14)
(cid:9)(cid:17)(cid:14)(cid:27)(cid:15)(cid:29)(cid:27)(cid:22)(cid:15)
(cid:18)(cid:19)(cid:22)(cid:25)(cid:19)(cid:14)(cid:27)(cid:26)(cid:14)
(cid:30)
(cid:22)
(cid:23)
(cid:24)
(cid:31) (cid:30)
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Collaborations for better
use of materials
Danfoss finds many ways of collaborating
with partners to incorporate the circularity
strategies that drive the Rethink-Reduce-
Recirculate approach.
Rethink: We’re working on changing the
design towards disassembly. For example, the
newly launched iCAD actuator from Danfoss
Climate Solutions contains valuable and rare
earth magnets. It was developed with end-of-
life and product disassembly in mind, ensuring
that the magnets can be removed more easily
and reused in other products.
Reduce: This can be achieved through
reducing and recycling more of our waste
than in the past. In 2022, we focused mainly
on plastics used in our products to achieve
the required quality and strength. Plastic,
however, can harm the environment when
not properly recycled at end-of-life. We have
joined a Danish cross-industry collaboration,
called Circular Industrial Plastic project, in
which several recycling plastic technologies
are being explored over a period of three
years. Through this engagement, we aim to
reduce plastic waste in our facilities.
42 — Danfoss Annual Report 2022
Recirculate: This can be secured through
collaboration with customers. We have
initiated several projects and partnerships
with the intention of creating value as well as
reducing environmental impacts through the
recirculation of our products and materials
from customers. We signed a three-year
agreement with Beijer Ref, with Danfoss as a
manufacturer and Beijer Ref as a wholesaler, to
drive the circular-economy transition.
We are very pleased with the renewal
of our partnership, and together
with Danfoss, we look forward to
implementing this new and ambitious
sustainability plan. In the last
decade, The European Commission
has established several policies to
encourage circularity, and it is of great
importance that we continue to support
this sustainable transformation.
Christopher Norbye, CEO
Beijer Ref
Case story
Offering circularity services to our customers
Through the digital service DrivePro®,
Danfoss offers an array of services with a
focus on circularity – such as exchange,
retrofit, preventive maintenance, and repair
– which have the potential to extend the
lifetime of products, save virgin resources,
and reduce CO₂ emissions.
The DrivePro® service package is
currently offered in 56 countries and
markets and covers 95% of segment’s
product portfolio. DrivePro® is built to
prolong and eventually close the loops
of material circles. Refurbishing returned
drives can make a significant impact,
especially for industries grappling with the
scarcity of virgin resources.
In 2022 we started a drives
refurbishment pilot project in India and
constructed a dedicated refurbishment
area for returned drives that would have
been scrapped and sent for external
recycling. We plan to scale the project and
offer refurbished drives to our customers in
India. Refurbishment and reuse of drives is
established practice in other Danfoss sites
such as the Haiyan factory in China.
Case story
Product repair and remanufacturing service
Utilities and wind turbine manufacturers
rely on Danfoss’ proven proportional
valve technology in turbine-blade pitch-
control systems to adjust the rotor blades
so they capture the right amount of wind
and don’t exceed maximum speed. The
valves endure extreme temperatures,
corrosive environments, and high and
variable rotational and vibrational loads.
Danfoss’ wind energy valves are designed
to withstand these conditions, but when
maintenance is needed, Danfoss can clean
and calibrate the valve, or repair it with
the latest amplifier, position sensor, seals,
and fasteners approved by the turbine
OEM. Repairing components rather than
replacing an entire valve keeps materials
out of the waste stream while lowering the
cost of energy.
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Safe and compliant products
Product compliance is an important
enabler for customer satisfaction,
growth, and sustainability.
To deliver world-class solutions, we
continuously monitor requirements from our
customers and regulators. Through robust
compliance programs and efficient processes,
we ensure transparency, quality, and safety
of our products. To minimize adverse impact
on the environment and society, our product
responsibility stretches across the supply
chain.
In 2022, we enhanced 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.
Chemical compliance
We continue building our One ERP platform
and other digital tools to provide common
processes to manage product chemical
compliance and to comply with extended
producer responsibility schemes.
43 — Danfoss Annual Report 2022
In 2022, we continued to roll out our IT
infrastructure project One ERP which, among
other things, is helping to ensure chemical
substance compliance and deliver reliable
compliance information to customers and
authorities, including full material declarations
and recycling information for our products.
Danfoss Negative List is the foundation for
managing the chemicals we use - restricting
the use of hazardous substances in products
and production processes. PFAS is a group
of thousands of substances, widely used in
industrial products and processes. Due to
their persistence in the environment, it has
been proposed to restrict PFAS under the
EU chemicals regulation, REACH, and similar
initiatives are seen in the US. To that effect,
Danfoss has established a task force for
mapping our use of PFAS and for providing
input to legislators.
Danfoss supports the Responsible Minerals
Initiative (RMI) and continuously reviews
whether tin, tantalum, tungsten, and gold
(3TG) in our products originate from conflict-
affected and high-risk regions. We collect data
from 1,800 tier-one suppliers and provide
conflict mineral reporting to our customers.
The printed circuit boards
control Danfoss drives, which
undergo life cycle assessment
to ensure compliance.
Life Cycle Assessment
LCA-based information is increasingly required
by various regulations, such as the Ecodesign
for Sustainable Products Regulation proposed
in 2022 by the European Commission. It is also
required by national building regulations and
counts towards building certification schemes.
Through Life Cycle Assessment (LCA), we
assess the impact of energy and resource
consumption, as well as carbon emissions
released into the environment during all
product’s life-cycle stages. In 2022, we
invested in building our capacity to carry out
LCAs. We hired LCA specialists in all business
segments, acquired LCA software, and built
a unified approach across the Danfoss Group
for carrying out LCAs and communicating
the results externally through Environmental
Product Declarations (EPDs). In 2023, we will
roll out EPDs based on customers’ requests
and defined priority criteria.
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Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Environmental performance
Danfoss is committed to complying
with all environmental regulations,
maintaining high standards of
environmental management, and
monitoring the impact on climate and
communities.
Our commitment to environmental compliance
is outlined in our Business Conduct Policy
and Environmental, Health, and Safety (EHS)
standards outlining minimum requirements
for all Danfoss locations. We have established
EHS objectives and targets to ensure our
efforts result in continuous and measurable
improvements of our EHS performance.
To minimize the environmental impact
of our operational activities, we monitor the
local consumption of materials, chemicals, and
energy, as well as the generation of water and
wastewater. We have clear governance and
standards that enable the implementation of
our sustainability agenda and environmental
compliance.
87% of our production sites are certified
to ISO 14001. Remaining sites are exempt
from the requirement. Compliance with
44 — Danfoss Annual Report 2022
environmental regulations is a high priority
for Danfoss and is reflected in our business
continuity plans and day-to-day operations.
Acting with due diligence
We follow a strict due-diligence procedure
when acquiring new companies and land.
This includes thorough reviews of potential
acquisitions by examining the site and the
environmental history of its surroundings.
Regional hydrogeological and geotechnical
conditions are evaluated through field surveys
to discover ground pollution or historical
deposits. Danfoss strives to continuously
reduce the company’s environmental footprint
through several initiatives throughout the
global organization.
Energy consumption and emissions
Danfoss continues to show the ability to
decouple the environmental impact from the
business growth by delivering a 7% decrease
in scope 1 and 2 emissions while growing 15%
organically.
See detailed data in the ESG statements page 66
Danfoss continues to show improvements
each year from 2019 to 2022 on environmental
key figures when adjusting for the 2021
acquired hydraulics business.
With the acquisition the scope of our
operations expanded significantly with
approximately 10,000 employees, 60 active
locations with 17,000 m2 of office, 660,000
m2 manufacturing space, and 47,000 m2
warehouse and light industrial space.
The expanded scope of operations, of
course, also added more energy and water
consumption as well as additional carbon
emissions compared with 2021.
The effect of the acquisition is further
specified in the ESG statements and notes on
pages 63-71.
We will continue to drive impact across
Danfoss including the newly integrated
businesses.
Intensity and productivity
Danfoss calculates energy intensity, energy
productivity, and CO2 intensity relative to
our net sales. We have worked with intensity
indicators, and especially energy intensity,
since 2007. Intensity indicators on scope 1 and
2 GHG emissions, energy, and water show an
improvement year-over-year for the Danfoss
Group adjusted for the acquired hydraulics
business. See page 66.
In 2022, environment figures were highly
impacted by the inclusion of data from the
acquired hydraulics business.
Water and waste
In 2022, Danfoss’ water withdrawal decreased
by 17% when adjusting for the acquired
businesses. The withdrawal totaled two million
m3 water used for processes and sanitary
purposes.
Danfoss recycled, in 2022, a total of 65% of
the 76,829 tons of waste generated in factories
and office locations. We will continue to
optimize the waste handling to further reduce
the amounts of waste and the withdrawal of
water.
Further information about our data can be found in
the section on ESG statements, pages 63-71
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Social
46 — Diversity & Inclusion
48 — A safe place to work
We value an environment
where people can unleash
their full potential, so we can
welcome the best people
on board to lead the green
transition. We strive to make
people feel like they belong.
At the production line, in the
meeting rooms, and in the
hall ways, where we are busy
working together on building
a better future.
45 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Diversity & Inclusion
Our high-performing, diverse teams
accelerate our green growth strategy.
We have a firmly established commitment
to diversity and inclusion as one of our three
ESG step-change initiatives. It focuses on
delivering an inspiring and inclusive employee
experience and fostering an environment of
belonging.
This focus has increased the awareness,
buy-in, and accountability of leaders across
our organization. We have defined what
success looks like when we deliver on three
focus areas:
Recruitment: Recruit diverse talent by
continuously improving our attraction,
selection, and hiring practices
Retention: 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
Representation: Increase diverse
representation by optimizing our talent-
management practices and digital platforms
46 — Danfoss Annual Report 2022
and accelerating development through
impactful learning experiences, including
training and mentoring
We are ensuring sustainable, long-term impact
through a comprehensive Diversity & Inclusion
roadmap and key performance indicators that
look across the employee experience. We are
also focused on diversifying the composition
of our management teams to accelerate
innovation, enable creative solutions, and
optimize agility. In 2022, we saw a minor
improvement in our ambitious target for
gender split in leadership positions. We will of
course continue our focus to improve further
but also realize we may need more time to
reach the target.
A significant milestone on our D&I
roadmap was the introduction of our global
Employee Resource Groups (ERGs), which
provide employees with an outlet to help
shape the organizational culture and create
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.
Each Global ERG is sponsored by a member
of the Group Executive Team and a business
or functional leader. The global ERGs serve
We ensure an environment of
belonging for our people and are
continuously improving diversity
through recruitment, retention, and
representation.
D&I targets
Continuously improve
diversity through
recruitment, retention,
and representation
as an umbrella for the local ERGs in the
organization. This structure empowers local
sites to implement groups that represent
their colleagues’ demographics and common
interests and experiences.
We also implemented Regional Inclusion
Councils to represent global perspectives across
all Danfoss regions and provide equitable
solutions by identifying and eliminating
systemic barriers. They meet monthly to discuss
what is being actioned, assess how it’s working,
and provide advice on next steps in expanding
the company’s D&I posture.
We will continue to embed Diversity &
Inclusion across the employee experience,
including how we recruit, develop, and engage
our employees. We’re already making focused
efforts to strengthen and diversify our succession
pipelines, enhance our leadership through
common leadership principles, and innovate our
talent practices and employer brand.
80%
diverse management
teams by 20301
30%
women in leadership
positions by 2025
1 Diverse management teams are defined by the following
criteria: ≥1 man, ≥1 woman/non-binary, and ≥2 nationalities
in management teams with ≥5 employees (excluding
assistants). The data point is measured on the first 4
management levels.
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Global Employee Resource Groups
Closing out the year, Danfoss is supporting 40 ERG chapters around the world.
Danfoss MULTICULTURAL & NATIONS –
focusing on employees of all ethnicities/
nationalities and allies
Danfoss ABILITIES – focusing on employees
with mental and/or physical disabilities and
allies
Danfoss GENDERS – focusing on employees
of all gender identities (i.e., women, men, non-
binary) and allies
Danfoss GENERATIONS – focusing on
employees of all age groups and allies
Danfoss PRIDE – focusing on employees of
the LGBTQ+ community and allies
Danfoss (cid:31)(cid:30)(cid:29)(cid:28)(cid:27)(cid:26)(cid:30)(cid:29)(cid:28)(cid:30)(cid:25)(cid:24)(cid:29)(cid:23)
(cid:22)(cid:23)(cid:21)(cid:24)(cid:28)(cid:27)(cid:20)(cid:21)(cid:19)
As part of our diversity and
inclusion journey, we have
started Employee Resource
Groups that accelerate career
development opportunities
and identify systemic barriers
that hinder career mobility.
47 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
A safe place to work
We measure the severity as the Lost Day Rate
(LDR) – the number of days of absence per
million hours worked.
Safety First! at Danfoss
Engaged employees drive our success in
achieving a safe work environment because
everyone is committed to safety as a top
priority at Danfoss.
In 2022, a new safety campaign introduced
different tools for employees and leaders to
further engage them in daily safety activities.
For example, leaders participated in daily
safety walks, sending a strong signal to the
organization that safety is a business priority.
Leaders experienced first-hand how safe
work practices are applied on the shop floor.
We introduced safety discussions, reminding
everyone to stay focused on safety during
their daily work tasks. Leaders were guided to
prepare safety discussions on relevant topics
focused on tasks or procedures, observing
potential hazards, and recognizing individual
and team safety efforts.
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.
In 2022, we reached a record low Lost Time
Injury Frequency (LTIF) of 1.6 incidents per
million hours worked where the injured
person was absent for more than one full
day. The Total Recordable Injury Frequency
(TRIF), which combines the number of Lost
Time Injuries and Medical Treatment Injuries,
fell by 7% from the the previous year and also
reached a record low.
We are proud to see continued
improvement in the work environment at
Danfoss during 2022. This is clearly reflected
in the steady decline of our safety indicators,
demonstrating a strong safety mindset and
management focus on making Danfoss an
even safer place to work. This is the way
forward, and we will continue this in 2023.
The severity of injuries was reduced by
12% in 2022 compared to the previous year.
48 — Danfoss Annual Report 2022
The health and safety of Danfoss
colleagues remain a top priority.
A new campaign has further
engaged employees and leaders
in daily safety activities.
For example, through daily safety
walks, highlighting that safety is a
business priority.
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Governance
50 — ESG governance
51 — Ethics and human rights
52 — Responsible suppliers
53 — Managing risks
56 — Corporate governance
59 — Board of Directors
62 — Global Executive Team
49 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
ESG governance
A solid ESG governance and
accountability structure was
established to ensure that we meet
our ESG ambition and targets.
The Danfoss Board of Directors has the overall
responsibility for ESG. The Audit Committee
oversees the ESG reporting and data integrity.
The Group Executive Team is accountable
for ESG, providing strategic guidance and
approving targets and policies. An ESG
Leadership Team consisting of 12 members
from segments and corporate functions and
chaired by the Senior Vice President, Head
of Group Communication & Sustainability,
oversees the implementation of the ESG
ambition and aligns cross-functional targets,
processes, and communication. Working
groups and supporting workstreams were
established for each of the step-change
initiatives. They determine metrics and targets
and subsequently monitor and report on the
overall process of each step-change initiative.
The supporting workstreams include
Sustainable Procurement, ESG Reporting, Life
Cycle Assessment, Innovation, and other ESG
relevant topics.
50 — Danfoss Annual Report 2022
Materiality assessment
The most material ESG issues for Danfoss were
identified through a materiality assessment
based on a robust analysis of the economic,
environmental, and social impacts of our
business. By applying the principle of double
materiality, we identified the topics with the
highest impact on the business in terms of
resilience and the ability to deliver long-term
value to our customers and society.
Read more about the materiality assessment here
Our policies
Our Policies on Danfoss Business Conduct
provide the link between our aspiration, our
Core & Clear strategy and how we conduct
business at Danfoss. It ensures that our efforts
are systematic, supported by documented
procedures, and governed by strong
accountability and responsibility for action.
Read more about our policies here
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Ethics and human rights
Danfoss conducts business and creates
financial results in an ethical manner
while respecting international human
rights. Our policies ensure that business
ethics and anti-corruption are core
elements of the company’s behaviors.
Comprehensive ethical guidelines
We have implemented comprehensive
compliance programs with mandatory training
to minimize the risk of non-compliance. The
programs define clear ownership, policies,
operational procedures, recurring training,
and awareness activities.
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. The Ethics
Hotline also fulfils the requirement of having a
griev-ance mechanism for human rights.
51 — Danfoss Annual Report 2022
In 2022, Danfoss launched a communication
campaign to refresh employees’ awareness of
the Ethics Hotline.
Dismissals due to unethical behavior
In 2022, we received 167 reports, a significant
increase compared to previous years. The
increase can be attributed to the awareness
campaign and workforce expansion due to
recent acquisitions. Subsequently, corrective
actions ranging from stopping inappropriate
behavior to termination of employment were
implemented for all substantiated allegations.
In 2022, we reviewed conformance of
the Ethics Hotline setup with the European
Whistleblower Protection Directive and the
interpretation by individual member states.
The review concluded that the setup of our
Ethics Hotline is in accordance with respective
legislations.
Since 2004, we have tracked employee
terminations due to unethical or illegal
behavior. In 2022, 32 employees left Danfoss
due to unethical behavior, compared to 28
in 2021, and 24 in 2020. 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. Some
dismissals were handled by the Danfoss Ethics
Hotline, while others were handled directly by
the local management.
human rights abuses committed in business
operations. New legislation like the European
Due Diligence Directive will impact how Danfoss
conducts human rights due diligence in the
future, and we have therefore initiated a project
to prepare for the upcoming legislation.
Anti-corruption and bribery
Mitigating modern slavery
Our dedicated compliance program ensured
that only very few cases were subject to
investigation for anti-corruption or bribery.
Most of them were concluded as unfounded;
however, two cases related to kickbacks
concluded in the dismissal of employees and
the cessation of our relationship with business
partners.
Focus in coming years will be on internal
communication and targeted training to
further avoid root causes for potential
misconduct.
Human rights due diligence
We commit to the United Nations Guiding
Principles on Business and Human Rights (UNGP)
that require companies to prevent and address
Danfoss addresses forced labor in our supply
chain and factories, where outsourced
func-tions and services, such as facility
management and recruitment, come with
increased risk of forced labor.
One of the sectors 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.
Since temporary production workers and
migrants are especially vulnerable to these
forms of practices, we initiated third-party
audits focusing on forced labor.
In 2022, we incorporated due diligence
measures and other activities to prevent
forced labor in construction. We continue to
monitor the development of regulations and
prepare to meet increased requirements.
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Responsible suppliers
A stable, sustainable, and transparent
Conducting audits for better results
supply chain is essential for Danfoss.
We are continuously working on
complying with quality standards and
making sure we satisfy our customers’
requirements.
Danfoss has more than 6,000 suppliers
of direct materials used in products and
approximately 20,000 suppliers of indirect
materials and services like cleaning and
catering. All suppliers must adhere to Danfoss’
Code of Conduct for suppliers and meet our
environmental and social requirements.
During the supplier qualification process,
direct suppliers in high-risk countries are
subject to second-party audits and self-
assessment questionnaires prior to third-
party audits. This is a precondition for being
approved as a new supplier for Danfoss and
has been an important lever in responsible
sourcing since Danfoss became a member of
the UN Global Compact.
In 2022, we conducted on-site audits in high-
risk countries, supplemented by self-
assessment reviews. Results revealed that
two suppliers did not meet the requirement
of paying minimum wage, two suppliers had
issues with excessive working days, and one
supplier was not providing correct payment
for overtime work. All issues were experienced
in high-risk countries:
Not paying minimum wage: one supplier
remediated immediately while one is planning
for the correction. 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): both suppliers agreed to remedy the
situation and a close follow-up is planned.
Excessive over time hours and not paying
for overtime work: Supplier has agreed to
remedy the situation and a follow-up audit
was made to monitor the situation.
Dedicated procurement specialists handle
supplier assessment. Continuous training,
awareness-raising activities, and an internal
ambassador network have supported the
understanding of the severity of the topic.
These efforts mature the procurement
organization – ensuring that requirements are
explained to our suppliers up front, allowing
for a better initial screening process.
high-risk countries. The merger has been
a great opportunity to learn best practice
from both companies, review the supplier
pool, and consolidate and develop long-
term strategic suppliers around the world. In
2023, we will continue to strengthen long-
term relationships with our global strategic
suppliers through our review process.
All suppliers must adhere to
Danfoss’ Code of Conduct
for suppliers and meet our
environmental and social
requirements.
Growing for bigger impact
Danfoss significantly increased the supplier
base after the acquisition of Eaton’s hydraulics
business. We carried out due diligence
through the fit-gap analysis for sourcing
activities. The process resulted in the creation
of a stricter governance in the identified
Responsible sourcing going forward
The Danfoss ESG ambition – integrating
sustainability into everything we do – has a
big effect on our sourcing practices. We began
engaging with our suppliers about our ESG
ambition and targets in 2022 and will continue
in 2023.
Increasingly stringent regulatory
requirements, growing customer demand, and
a call for greater transparency in the supply
chain has put a focus on stronger compliance.
In 2023, we plan to start a collaboration with
third-party providers to achieve the next level
in our supply chain activities.
52 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Managing risks
Risk-management structure
and control environment
We manage risks and opportunities
• The five global megatrends that affect
effectively to drive profitable growth
in increasingly complex business
Danfoss, our technologies, and the way we
do business
environments.
• 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
• 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
• Cyber-related threats
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 day-to-day risk
management activities lies with the respective
business segments and Group functions.
Risk governance
Like its industry peers, Danfoss is exposed
to risks. While no single risk can threaten the
existence of Danfoss – in either the current
circumstances or when looking to the future –
the following external risk conditions apply:
• Global market conditions, including a
continued stronger focus on energy
efficiency, sustainability, and infrastructure
53 — Danfoss Annual Report 2022
General Meeting
Board of Directors
Audit Committee
CEO and CFO
Business segments
& organization
Risk management
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.
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Specific risk areas
Case story
Stronger together: Fighting the cyberattack at Semikron
Days before joining forces with Danfoss
Silicon Power, Semikron was hit by a
cyberattack. Cybercriminals had deployed
malware on computer systems, which
then encrypted software and prevented
employees from accessing any data.
After the transaction closed, Danfoss
deployed resources to facilitate system
recovery.
Dedicated and determined IT colleagues
from Danfoss packed all available IT
equipment in a van and rushed to
Nuremberg, Germany, to help getting
critical business systems and processes
back on track with their new Semikron
colleagues. Since the attack, we continue
to closely monitor the changing threat
environment and respond accordingly.
Non-fulfilment of ESG regulation
and ambitions
Disruption of IT systems
Risk
Danfoss has recently ramped up on our ESG
ambition and set far-reaching targets across the
entire business. In addition, regulatory bodies
and other corporate stakeholders are setting
formal requirements and increasing their
expectations. This risk deals with the inability
to live up to the self-imposed targets and
upcoming regulation.
Mitigation
Danfoss has set up a global ESG Leadership
Team tasked with managing the execution of
the company’s ESG ambition and monitoring
and mitigating new and revised ESG-relevant
regulation. The ESG Leadership Team acts on
deviations from plans and escalates issues to
higher management bodies as required.
Risk
The risk of a disruption of IT systems, thereby
suppressing the ability to produce or deliver on
time.
Mitigation
Danfoss has set up relevant safeguards and
employee training to reflect the increased risk
in the cyber area to ensure that our business
can operate in this macro environment. Danfoss
closely follows the changing threat environment
and responds accordingly.
The Group Executive Team has a special focus on two additional
risks that 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 17.
54 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Our people ensure
diligent treatment of
data that always honors
the privacy of our
employees, business
partners, and product
users first.
Settlement agreement
Data privacy
On December 30, 2022, Danfoss entered into
a settlement agreement to pay USD 4.4m to
the Office of Foreign Asset Control (OFAC) of
the Department of the Treasury of the United
States of America for apparent violations of
OFAC economic sanctions programs regarding
Iran, Syria, and Sudan.
No products sold were subject to sanctions
or export controls. The apparent violations
occurred when a subsidiary company
accepted payments made to a US bank
account in the United Arab Emirates from and
to customers in sanctioned jurisdictions.
According to OFAC, no evidence was found
that Danfoss willfully accepted payments for the
purpose of potentially evading sanctions. OFAC
said Danfoss took quick action to ascertain
the root causes of the conduct at issue and
cooperated highly with OFAC. The settlement
also said Danfoss adopted new and more
effective internal controls and procedures to
prevent a recurrence of the apparent violations.
Danfoss has not had any businesses in Iran
since November 2018. The last shipment to
Iran took place in January 2019.
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.
Data ethics
Following our digital transformation, processes
in Danfoss are becoming increasingly
digitalized. This is accompanied by gathering,
storage, analysis, and use of vast quantities
of personal, but also non-personal data.
Danfoss applies the same ethical values and
guidelines to the processing of data across
the organization, and thereby goes beyond
compliance with privacy legislation. Danfoss
handles data with care and transparency.
Danfoss takes full responsibility for the data we
process, and we apply high standards to the
data we collect or receive. Data exploration
and data modelling help us to better
understand stakeholder needs and provide
insights to improve service, reduce risks, and
improve operational processes. This also means
that Danfoss respects the right to privacy,
whether it is the privacy of our employees,
our business partners, or the people using
our products. Danfoss takes great care to
protect data, and additional security measures
are in place to protect personal data. We do
not monetize the data of individuals. 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. 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 sexual activity
or orientation will in no event be subject to AI
or automated decision-making. An exception
is when individuals have provided their
explicit consent or the processing is necessary
for reasons of substantial public interest or
applicable law.
Employees and other stakeholders are
encouraged to contact Group Compliance or
the Group Data Protection Office for guidance
or to report concerns.
55 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Corporate governance
Remaining committed to good
corporate governance practices
and following the Danish
Recommendations on Corporate
Governance.
Danfoss has a two-tier management system
consisting of the Board of Directors and the
Group Executive Team (GET), including the
CEO and CFO. The Board of Directors appoints
and supervises the CEO and CFO and approves
Danfoss’ overall strategies and targets. As it
has 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 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
Nomination and Remuneration Committee.
56 — Danfoss Annual Report 2022
The Board of Directors consists of 12
members. Six of the eight shareholder-elected
members are independent. Each member is
elected for the term until the following year’s
Annual General Meeting (AGM) and may be
re-elected. The Board of Directors appoints
a Chair and may appoint a Vice Chair from
among its members. Pursuant to Danish
legislation, four employee representatives
serve on the Board for four years and may be
re-elected. The most recent employee election
took place in early 2022.
Diversity of thought and voices
ensures better discussions,
decisions, and outcomes.
The Board of Directors meets at least five
times a year and holds extraordinary meetings
when relevant. 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.
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 has a target that at least two of the
eight shareholder-elected members of the
Board of Directors should be women, equal to
25%. Danfoss met the target in 2022.
In 2022, the Board of Directors had three
female members, two shareholder-elected
and one 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 in the Board of Directors of Danfoss
Power Solutions ApS, but not in Danfoss
Power Electronics A/S, as the composition of
the Board did not change during the year.
However, Danfoss Power Electronics A/S has
a woman employee-elected Board member.
The gender composition target for the Board of
Directors is expected to be met in 2023.
Audit Committee
The Audit Committee consists of three
members of the Board of Directors and is
established in line with recommendations for
good corporate governance. The Chair of the
Audit Committee conducts regular meetings
with corporate functions and internal audit
outside Board meetings. The Committee’s
activities and tasks are set out in its rules of
procedure. Five meetings were held in 2022.
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
The main objectives of the Audit Committee
are to:
Group Executive Team
Recommendations on
Corporate governance
• Monitor the financial and ESG 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
The Group Executive Team is Danfoss’ top
management team and consists of the CEO,
CFO, the Presidents of the three business
segments, the President of Danfoss Regions,
and the Executive Vice President & Head
of Group Human Resources. 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.
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.
According to the rules of procedure, the CEO
and CFO are responsible for Group-related
governance activities, such as business
reviews, legal matters, and other formal
governance topics.
Shareholders with more than 5% of share capital
Shareholder
Shares
Votes
Bitten & Mads Clausen’s Foundation, Nordborg, Denmark, and its subsidiaries
Clausen Controls A/S, Sønderborg, Denmark
Henrik Mads Clausen, Lake Forest, USA
48%
26%
11%
86%
5%
2%
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. The recommendations are available
on corporategovernance.dk. Danfoss complies
with the recommendations.
Danfoss’ statement is available at:
https://www.danfoss.com/en/about-danfoss/
company/financial-information/corporate-
governance/
Share capital
Danfoss’ share capital amounts to EUR 134m
or DKK 997m and is divided into two share
classes: Class A shares account for EUR 57m or
DKK 425m and Class B shares account for EUR
78m or DKK 572m. A-shares entitle holders to
10 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. Class
A shareholders have a pre-emptive 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 99.88%
of the votes. At the end of 2022, Danfoss had
2,407 registered shareholders.
Share price
The price of Danfoss shares is set once a
year, based on a valuation prepared by
Danske Markets immediately before the
Annual General Meeting (AGM) is held. The
calculation of the share price is based on
the financial performance of Danfoss, the
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 2022, the price was set at DKK
11,908 per share against DKK 10,717 per share
the previous year.
Annual General Meeting
Danfoss’ AGM will be held virtually from the
company’s registered office, on March 24,
2023. The Board of Directors will recommend
that a dividend of 30.0% of the Group’s net
profit be paid for 2022, corresponding to EUR
20.6 or DKK 153.1 per DKK 100 share.
57 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Board of Directors
The Danfoss Board of Directors regularly makes site visits to Danfoss locations.
In 2022, the Board of Directors visited the Danfoss Climate Solutions Application Development Center in
Tallahassee, US, and were shown the world-leading oil-free compressor technology, Danfoss Turbocor®.
58 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Board of Directors
Jens Bjerg Sørensen
Chair
Born: 1957
Appointed: 2020
Independent
Mads Clausen
Mads-Peter Clausen
Born: 1984
Appointed: 2022
Born: 1976
Appointed: 2014
Karin Dohm
Chair of Audit Committee
Born: 1972
Appointed: 2022
Independent
Per Falholt
Born: 1958
Appointed: 2017
Independent
Special competencies
Strong experience within strategy,
M&A, portfolio management and
business administration. Strong
knowledge of management in a global
group and work in a listed company.
Special competencies
Professional experience in technology
and product development,
commercialization of new technology,
finance, M&A and business
management.
Board positions
Board Member and Chair: MC2
Therapeutics A/S; Vandstrom Inc.
Board Member: Bitten & Mads
Clausen’s Foundation since 2015.
Board positions
Board Member and Chair: F. Salling
Holding A/S; F. Salling Invest A/S;
Købmand Herman Sallings Fond; A.
Kirk A/S.
Board Member and Vice Chair: Salling
Group A/S.
Board Member: Købmand Herman
Sallings Mindefond; Aida A/S;
Ejendomsselskabet FMJ A/S; F.M.J. A/S.
59 — Danfoss Annual Report 2022
Special competencies
International experience from
managerial management positions
and strong strategic, organizational,
and communication skills.
Extensive knowledge of business
administration, engineering, and
Board work.
Board positions
Board Member and Chair:
miniBOOSTER A/S, Denmark.
Board Member: Bitten & Mads
Clausen’s Foundation since 2022.
Special competencies
Extensive international experience in
key topics such as strategy, finance,
treasury, risk management and
compliance as well as Corporate
governance and ESG reporting. Broad
experience in a global environment
working for and with multinational
companies. Former Assurance Partner
at Deloitte and Managing Director at
Deutsche Bank Group.
Board positions
Board Member and Vice Chair:
Hornbach Immobilien AG
Board Member and Head of Audit
Committee: CECONOMY AG
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
Board Member and Chair: Fonden
Universe Science Park; DHI
Foundation; Curasight A/S.
Board Member: Cytovac A/S;
Vandstrom; Co-Ro A/S; Lactobio; LIFE
foundation; Bactolife.
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Board of Directors continued
Connie Hedegaard
Jürgen Reinert
Mika Vehviläinen
Henning Bjørklund
Marianne Godballe
Henning Andreas
Krogh
Bent Lewke
Born: 1960
Appointed: 2016
Independent
Born: 1968
Appointed: 2015
Independent
Born: 1961
Appointed: 2018
Independent
Born: 1964
Appointed: 2022
Born: 1984
Appointed: 2018
Born: 1962
Appointed: 2022
Born: 1972
Appointed: 2022
Special competencies
Extensive international
experience in business
management.
Professional experience
with performance
transformation,
organizational changes,
mergers and acquisitions,
and Internet of Things
(IoT). Lengthy experience
in listed companies as a
Board member and CEO.
Special competencies
International experience
with executive
management and
industrial operation as
well as strong strategic,
organizational, and
communication skills.
Expert within electrical
engineering (drives,
electric vehicles,
renewable energy,
storage) and science, and
knowledge from other
Board positions.
Board positions
Board Member:
KraftPowercon AB.
Special competencies
Professional experience
as Minister in the Danish
Government and EU
Commissioner with extensive
knowledge of climate,
environmental and energy
challenges on an international
level. Expert on global
sustainable development and
green transition.
Board positions
Board Member and Chair:
KR Foundation; the green
think tank, CONCITO; OECD’s
Round Table on Sustainable
Development.
Board Member: Volkswagen’s
Sustainability Board; Cadeler;
Kirkbi A/S and BBVA.
60 — Danfoss Annual Report 2022
Special competencies
Employee-elected
member in accordance
with Danish law.
Special competencies
Employee-elected
member in accordance
with Danish law.
Special competencies
Employee-elected
member in accordance
with Danish law.
Special competencies
Employee-elected
member in accordance
with Danish law.
Board positions
Board Member: Dansk
Metal Sønderjylland.
Board positions
Board Member and Chair:
”TL-klubben,” South
Denmark, Danfoss A/S.
Board Member: Danfoss
Employee Foundation
in Denmark; Junior
Chamber International
Denmark.
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Group Executive Team
The Danfoss Group Executive Team holds their meetings at different site locations, here in
Semikron Danfoss. From left: Danfoss colleague, Kim Fausing, Jesper V. Christensen, Astrid
Mozes, Ilonka Nussbaumer, Eric Alström, Mika Kulju, Jürgen Fischer.
61 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
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
President, Danfoss
Power Solutions
Jürgen Fischer
President, Danfoss
Climate Solutions
Mika Kulju
President, Danfoss
Power Electronics
and Drives
Astrid Mozes
President, Regions
Ilonka Nussbaumer
Executive Vice President &
Head of Human Resources
Born: 1964
Joined Danfoss in 2007
Born: 1969
Joined Danfoss in 1993
Born: 1966
Joined Danfoss in 2012
Born: 1963
Joined Danfoss in 2008
Born: 1968
Joined Danfoss in 2022
Born: 1960
Joined Danfoss in 2021
Born: 1973
Joined Danfoss in 2019
Board positions
Board Member: SMA Solar
Technology AG.
Board positions
Board Member and Chair:
Climate Partnership
between Government
and Industry for the
manufacturing industry
in Denmark.
Board Member and
Vice Chair: SMA Solar
Technology AG.
Board Member: Holcim
Ltd.
Board positions
Board Member and Vice
Chair: Manufacturing
Industry in Denmark.
Board Member:
Confederation of Danish
Industries.
Board Member and Head
of Audit Committee:
Danish Crown A/S.
Board positions
Board Member and Vice
Chair: Hempel A/S.
Board Member: MSx
Advisory Board of
Stanford Graduate School
of Business.
Board positions
Board Member:
Steering Committee
EPEE - the European
Partnership for Energy
and the Environment;
Cool Champion at the
UN Environment Cool
Coalition.
Advisory Board Member:
TÜV SÜD Germany.
Supervisory Board
Member:
BDR Thermea
Registered officer with the Danish Business
Authority for Danfoss A/S since 2008.
Registered officer with the Danish Business
Authority for Danfoss A/S since 2013.
62 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
ESG statements
64 — ESG review
66 — Consolidated ESG statements
67 — Notes to consolidated ESG statements
Our climate targets are
validated by the Science Based
Target initiative (SBTi). Setting
science-based targets supports
an ambitious decarbonization
roadmap, clarifying the
alignment with the Paris
Agreement.
63 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
ESG review
To further increase the transparency in ESG data disclosure, we are introducing a
section of consolidated ESG statements accompanied by notes. These data points,
spanning from 2019 to 2022, are considered material. The notes to the consolidated
ESG statements contain descriptions of general considerations as well as accounting
policies and scope of reporting for each data point presented in the consolidated
ESG statements.
Consolidated ESG statements
Development in key figures in 2022
Environment
In 2022, our consolidated ESG statements
were influenced by the inclusion of data from
the hydraulics business acquired in 2021.
This applies especially to the environmental
figures, which show significant increases.
Adjusted for the acquired hydraulics business,
the development of the intensity ratios shows
an improvement each year from 2019 to 2022.
Intensity indicators on scope 1 and 2 GHG
emissions, energy, and water show an
improvement year-over-year when excluding
the acquired hydraulics business. In 2022,
environment figures are impacted by the
inclusion of data from the acquired hydraulics
business. The effect from the acquisition is
further specified in the consolidated ESG
statements and accompanying notes. We
will continue to drive impact across Danfoss
including the acquired business.
Including the consolidated ESG data and the
notes is the initial step towards an even more
comprehensive data table in the years to
come, as we continue to implement disclosure
requirements outlined by the Corporate
Sustainability Reporting Directive (CSRD). This
supports our ambition to improve data quality,
which allows us to develop a systematic
approach in monitoring the progress on our
ESG targets. As previously mentioned in this
report, 2022 was the year we had our targets
on scope 1, 2, and 3 approved by the SBTi to
limit global warming to 1.5°C.
64 — Danfoss Annual Report 2022
Renewable energy ratio
(cid:25)(cid:25)(cid:29)(cid:27)
(cid:31)(cid:26)(cid:29)(cid:31)
(cid:31)(cid:27)(cid:29)(cid:30)
(cid:31)(cid:30)(cid:29)(cid:28)
2019
2020
2021
2022
Renewable energy ratio (%)
Energy intensity
(MWh per EURm net sales)
(cid:31)(cid:31)(cid:31)
(cid:31)(cid:31)(cid:31)
(cid:30)(cid:29)
(cid:31)(cid:31)(cid:27)
(cid:28)(cid:31)
(cid:29)(cid:31)
2019
2020
2021
2022
Danfoss excl.
Eaton hydraulics
Effect from the 2021
acquired hydraulics business
Health & Safety
(cid:31)(cid:30)(cid:31)
(cid:27)(cid:30)(cid:27)
(cid:29)(cid:30)(cid:28)
(cid:27)(cid:30)(cid:28)
(cid:29)(cid:30)(cid:28)
(cid:25)(cid:30)(cid:24)
(cid:27)(cid:30)(cid:26)
(cid:25)(cid:30)(cid:23)
2019
2020
2021
2022
Total Recordable Injury Frequency (TRIF)
Lost Time Injury Frequency (LTIF)
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Social
Governance
Our governance continues to be of high
relevance for us, and we also see an
improvement in Board independence,
which reflects a healthy level of 75%. We will
continue to work with information campaigns
on our ethics hotline and collaborate with our
suppliers regarding Code of Conduct.
Next steps in 2023
In 2022, we focused on building robust ESG
data foundations. Our ambition for the coming
years is to further expand our consolidated
ESG statements to cover more disclosure
requirements in the European Sustainability
Reporting Standards (ESRS). In 2022, we
participated in industry forums to take part in
the regulation process of the standards and to
be prepared for the upcoming regulation.
Our people KPIs measure overall population
data, as well as gender data specifically so
we can quickly identify and address trends.
We focus on women representation in total
workforce and in management, women hiring
ratio, and salaried attrition by gender, which
we seek to stay within a 2.5% margin of men.
We are also conducting an equity analysis,
which uses quantitative and qualitative data
to identify and mitigate potential barriers for
women and underrepresented communities
within the employee experience.
With our focus on diversity & inclusion, we
see a minor improvement in our gender split
on leadership positions, moving from 20.1%
in 2021 to 21% in 2022. We will continue our
focus to improve further. In particular, we are
proud of our approach to safety as our LTIF
reached a new low of 1.6.
The pay ratio between genders per job
category is 3.6%, and the general pay ratio
between genders is at 22.7%. This reflects
the significant overrepresentation of men in
leadership positions, a challenge we aim to
improve.
The CEO pay ratio is calculated at 172. This
level is in line with our global peers.
65 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Consolidated ESG statements
Note
2019
2020
2021
2022
excl. acq.
hydraulics
bus.
2022
55,118
48,588
41,792
-
-
-
215,302
187,353
187,851
66,765,948
67,302,161
77,816,418
42,609
159,967
170,317
*
72,731
284,917
280,938
*
43.0
40.5
34.0
26.6
36.2
696,721
645,005
659,783
615,617
1,103,142
110.9
13.8
110.7
15.3
-
-
-
-
-
-
-
-
97.7
19.1
38,682
4,868
27,749
5.7
80.7
31.7
44,942
10,285
29,538
5.9
111.7
22.5
76,829
13,344
49,918
7.8
Environment
Climate
Scope 1 GHG emissions (metric tons CO2e)
Scope 2 GHG emissions, market-based (metric tons CO2e)
Scope 2 GHG emissions, location-based (metric tons CO2e)
Scope 3 GHG emsissons (metric tons CO2e)
GHG Intensity (scope 1 and 2 GHG emissions,
market-based, metric tons CO2e per EURm net sales)**
Energy
Energy consumption (MWh)
Energy intensity (MWh per EURm net sales)
Renewable energy ratio (%)
Circularity & Waste
Total waste amount (metric tons)
Hazardous waste (metric tons)
Recycled waste (metric tons)
Waste intensity (metric tons per EURm net sales)
Water
Water withdrawals (M3)
Water intensity (M3 per EURm net sales)
2
2
2
2
2
3
3
3
4
4
4
4
5
5
Note
2019
2020
2021
2022
6
6
7
7
7
8
8
8
9
9
27,871
-
27,491
11.8
40,043
16.0
41,928
19.2
70.4 / 29.6
70.6 / 29.4
72.5 / 27.5
71.0 / 29.0
79.9 / 20.1
79.8 / 20.2
79.9 / 20.1
79.0 / 21.0
-
-
-
-
2.2
4.4
-
-
-
-
2.0
3.0
66.8
67.4
-
-
-
1.7
3.0
22.7
3.6
172
1.6
2.8
Social
People
Number of employees
Employee turnover (%)
Diversity & Inclusion
Gender split all employees (m/f ) (%)
Gender split all leadership positions (m/f ) (%)
Management team diversity (%)
Equity
Pay ratio between gender, general (%)
Pay ratio between gender, within job categories (%)
Pay ratio between CEO and average employee (ratio)
Health & Safety
Lost Time Injury Freguency (LTIF)
Total Recordable Injury Frequency (TRIF)
Governance
Board of Directors
1,069,463
946,846
1,045,908
984,602
2,007,260
Gender split Board of Directors (m/f ) (%)
10
75.0 / 25.0
75.0 / 25.0
75.0 / 25.0
75.0 / 25.0
170.2
162.5
154.9
129.1
203.2
Attendance rate at Board meetings (%)
Environmental data includes the 2021 acquired hydraulics business as of 2022.
The Social and Governance data include the 2021 acquired hydraulics business as of 2021.
Scope 3 GHG emissions data on 2022 to be reported in CDP reporting in June 2023.
*
** 2019-2021 reported as scope 1 and 2, location-based, metric tons CO2e per EURm net sales.
66 — Danfoss Annual Report 2022
Board independence (%)
Ethics and Human Rights
Whistleblower cases (Ethics Hotline), all
Whistleblower cases (Ethics Hotline), substantiated
Ratio of suppliers signed Code of Conduct (%)
10
11
11
11
89.0
63.0
81
20
94.6
98.0
63.0
55
8
94.5
100.0
63.0
74
2
94.5
96.0
75.0
167
6
93.0
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Notes to the consolidated ESG statements
1 Basis of preparation
Reporting period
Unless otherwise stated, the consolidated ESG Statements covers the period from January 1 to December
31, 2022.
GHG emissions are calculated in accordance with the GHG Protocol. The consolidation of GHG emissions
follows the operational control approach, which implies that all locations where Danfoss has operational
control are included in the scope 1 and 2 figures.
Significant changes in accounting policies
In comparison to earlier years’ reporting of ESG performance, the following significant changes have been
implemented in 2022:
• Data on scope 1 and scope 2 market- and location-based emissions differs from earlier reports as
emissions factors have been updated. Comparative years have been corrected.
Data from the hydraulics business acquired in 2021 has been included.
•
Data from associates, joint ventures, and other capital interests are not included. Data from mergers
and acquisitions are included from the reporting year after the closing date of the acquisition. This does
not apply to the Social and Governance data points, which are applied from the transaction date and
onwards. This applies to the newly merged Semikron business, where Danfoss will include environmental
performance data from the reporting year 2023. In case of divestments in the reporting year, the data is
included up to the closing date of the divestment.
General reporting standards and guidelines
As a guidance to secure high-quality information and proper presentation of Danfoss’ ESG performance, we
strive to fulfill the reporting principles in November’s draft of European Sustainability Reporting Standards
(ESRS 1 General requirements, section 2).
Materiality
The data presented in the ESG statement is considered to have significant impact on the ESG performance
of Danfoss. Management is assessing key issues to include in the performance data with respect to
the importance for our stakeholders, risk assessment, and by professional judgement with inclusion of
qualitative factors. More information about our materiality assessment is to be found here
The consolidated ESG Statements are supported by a GRI Content Index, which can be found here
The GRI Content Index is reported with reference to GRI Standards.
Significant development in ESG figures is referred in connection with the specific notes.
Consolidation and scope of reporting
The ESG statement encompasses consolidated data from the parent company, Danfoss A/S (Danfoss), and
subsidiaries controlled by Danfoss.
Scope of reporting covers all Danfoss locations. Any deviations from this policy will be referred to under the
relevant note.
67 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
2 Climate
Primary data on scope 1 and 2 GHG emission constitutes the largest proportion of the emissions data. This
includes data from digital and manual meter readings and consumption data from invoices. Locations with
primary data covers Danfoss factories, currently approximately 1.9 million m2 out of Danfoss’ total real
estate footprint of 2.3 million m2 corresponding to 82%.
For the remaining part of Danfoss locations where no consumption and emissions data are available,
average consumption values per m2 have been applied to estimate energy consumption and GHG
emissions. For 2022, this amounts to 6% of total scope 1 and 2 emissions (market-based).
If available, calculations of GHG emissions are based on emission factors from invoices from energy
suppliers. Otherwise, most recent available emission factors from IEA, are applied. All GHG emissions are
converted to CO2 equivalents (CO2e).
2022 (CO2e metric tons)
Scope 1 GHG emissions
Combustion of gas
Combustion of oil
Filling media
Vehicles
Scope 2 GHG emissions
Purchased electricity
Purchased heating
Market-based
Location-based
-
-
-
-
-
284,917
279,522
5,395
72,731
51,265
3,780
9,531
8,155
280,938
273,568
7,370
Scope 1 GHG emissions
Scope 1 GHG emissions includes direct emissions from combustion of gas and oil, filling media and mileage
in Danfoss-owned or controlled vehicles.
Scope 2 GHG emissions (market-based)
Scope 2 GHG emissions includes indirect emissions from purchased heating and electricity. Market-based
emission factors have been applied, which implies that Power Purchase Agreements (PPAs) of green energy
and other renewable sourcing of energy influences the calculation. Where no market-based emissions
factors are available, location-based emissions factors from IEA have been applied. For 2022 emissions,
2021 factors are applied.
68 — Danfoss Annual Report 2022
Scope 2 GHG emissions (location-based)
Scope 2 GHG emissions includes indirect emissions from purchased heating and purchased electricity.
Location-based emission factors from IEA have been applied. For 2022 emissions, 2021 factors are applied.
Scope 3 GHG emissions (2021)
Scope 3 GHG emissions are reported for 2019-2021, where 2020 data have been extrapolated by net
sales. The scope of the calculation covers Danfoss without the hydraulics business acquired in 2021 and
the newly merged Semikron business. In Carbon Disclosure Project (CDP) reporting for 2022, Danfoss will
include the acquired hydraulics business, and calculation methodologies will be revisited to meet evolving
practices within the field. From 2023, Semikron will be included and Danfoss will align Scope 3 GHG
emissions reporting in the Annual Report for 2023.
Scope 3 GHG emissions include indirect emissions from the following categories (C):
C1 Purchased goods and services: covers direct spend on materials.
C2 Capital goods: includes acquisition of machines.
•
•
• C3 Fuel- and energy-related activities: covers emissions from energy not already included in scope 1 and
2 GHG emissions based on average country emission factors.
• C4 Upstream transportation and distribution: included as average based on shipped weight.
• C5 Waste generated in operations: includes emissions from categories listed in note 4 on waste.
• C6 Business travel: based on emissions data from booking system for air travel.
• C7 Employee commuting: calculation method based on average commuting data.
• C8 Upstream leased assets: includes emissions from leased locations, mainly Danfoss sales office
locations.
• C9 Downstream transportation and distribution: transportation and distribution of products sold by
Danfoss in the reporting year between the reporting company’s operations and the end consumer.
Emissions were estimated by splitting our spend by transport mode and extrapolating available supplier
emission factors to the spend base.
• C11 Use of sold products: covers the use-phase emissions from sold products in the reporting year,
over their expected lifetime. Lifetime power consumption is converted into emissions using IEA CO2e
emissions per kWh.
C12 End-of-life treatment of sold products: reported as emissions from disposal or treatment of
materials reported in C1 Purchased goods and services.
•
The following categories have been excluded from the calculation: C10: Processing of sold products, C13:
Downstream leased assets, C14: Franchises, C15: Investments.
GHG intensity - scope 1 and 2 GHG emissions (market-based)
GHG intensity is reported as scope 1 and 2 GHG emissions (market-based) in metric tons per EURm net
sales. Location-based scope 1 and 2 GHG emissions in metric tons per EURm net sales equals 35.8.
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3 Energy
Energy consumption
Energy consumption by type (MWh)
Oil
Natural gas
Electricity
District heating
Total
2021
Danfoss
915
127,990
487,714
43,164
Danfoss
excl. Eaton
hydraulics
897
131,801
444,928
37,991
2022
Total
897
313,432
750,822
37,991
659,783
615,617
1,103,142
Includes the total energy consumption of oil, natural gas, electricity, and district heating converted to
megawatt hours (MWh). Calculation of energy consumption follows operational control approach.
Energy consumption of the Danfoss Group excluding the acquired hydraulics business shows a reduction
compared to 2021. This can be attributed to an energy savings awareness campaign run in 2022, which
resulted in energy reduction in multiple locations. The inclusion of energy consumption data from the
acquired hydraulics business results in an overall increase in energy consumption.
Energy intensity
Energy intensity is reported as energy consumption (MWh) per EURm net sales. The energy intensity has
increased in 2022 due to the acquisition of the hydraulics business.
Renewable energy ratio
Renewable share of energy consumption. Renewable energy ratio is determined by average energy mix
from suppliers, energy generated from Danfoss’ own solar parks or via PPAs of renewable energy.
4 Waste
Primary data on waste is available for Danfoss and the acquired hydraulics production locations, while
the remaining locations are calculated as average waste generation per employee in unmapped location
multiplied by average waste generation (based on survey from Business Resource Efficience Guide, avg.
200 kg waste per employee). The estimated part accounts for 3.8% of the total waste amount reported in
the following table:
Waste types (metric tons)
Oil and chemicals (hazardous waste)
Landfill
General waste
Metal waste - non-recycled
Estimated remaining locations
Non-recycled waste
Cardboard and paper
Plastic
Metal
Electronic
Other recyclable waste
Estimated remaining locations
Recycled waste
Total waste amount
2021
Danfoss
Danfoss
excl. Eaton
hydraulics
4,868
2,613
2,694
354
404
10,933
3,629
710
18,661
187
2,808
1,754
27,749
38,682
10,285
1,690
2,878
179
372
15,404
3,890
948
19,197
279
3,532
1,672
29,538
44,942
2022
Total
13,344
5,561
7,303
179
524
26,911
5,346
5,186
28,935
291
7,775
2,385
49,918
76,829
A significant change is seen in the waste type; oil and chemicals due to a change in waste treatment
method in our Nordborg facility, where oil-contaminated wastewater treatment has been moved to an off-
site service provider. This is leading to higher reported numbers because the water in the wastewater was
previously evaporated before the wastewater was sent for external treatment.
Waste intensity
Waste intensity is reported as total waste amount in metric tons per EURm net sales.
69 — Danfoss Annual Report 2022
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5 Water
7 Diversity & Inclusion
Water withdrawals
Water is reported as withdrawals in m3. Primary data on water is available for Danfoss production locations,
while the remaining locations are estimated by industry average data. The estimated part accounts for
2.7% of the total water withdrawals.
Gender split all employees
Split between gender in total workforce measured by headcount and reported as the ratio of male to
female employees. Non-binary is collected on a voluntary basis and is included in the number of female
employees. The non-binary currently is less than 0.1% of our workforce.
Water withdrawals in m3
Production locations
Estimated remaining locations
Total water withdrawals in m3
2021
Danfoss
1,004,124
41,784
Danfoss
excl. Eaton
hydraulics
2022
Total
946,292
38,310
1,953,282
53,978
1,045,908
984,602
2,007,260
Gender split all leadership positions
Split between gender in all leadership positions measured by headcount and reported as the ratio of
male to female employees in leadership positions. Leadership positions are defined by leaders with direct
reports from employees.
Management team diversity
Diverse management teams are defined by the following criteria: ≥1 man, ≥1 woman/non-binary, and ≥2
nationalities in management teams with ≥5 employees (excluding assistants). The data point is measured
on the first 4 management levels.
Danfoss continued to see a reduction in our water withdrawals in our factory locations when excluding the
acquired hydraulics business. With the acquisition, Danfoss sees potential in implementing water-saving
initiatives that can reduce overall water withdrawals.
8 Equity
Pay ratio between gender
Pay ratio between gender is both reported as the general pay ratio between male and female employees
and as the pay ratio within job categories (equal pay for equal work). The general pay ratio between gender
is determined as the average salary for male employees compared to average salary for female employees.
Pay ratio within job categories shows the average pay ratio between employees in same job categories.
Danfoss is committed to equal remuneration for equal work. We let skills and experience determine
compensation.
Pay ratio between CEO and average employee
The ratio between the salary of the CEO compared to average employee salary (excluding CEO salary). Both
including bonuses and benefits.
Water intensity
Water intensity is measured as water withdrawals in m3 per EURm net sales.
Water intensity in our factory locations across Danfoss, when excluding the acquired hydraulics business,
has continuously been improving. In 2022, the improvement was related to a reduction in water
withdrawals combined with higher sales. With the acquisition of the hydraulics business and the nature of
the production processes, the water intensity increased to a higher level than previous years.
6 People
Number of employees
Number of employees are measured by headcount. The increase in number of employees is primarily
driven by the acquisition of the hydraulics business in 2021 and the merger with Semikron in 2022.
Employee turnover
Employee turnover is reported as the turnover of employees in general, including both voluntary and
involuntary turnover, divided by average headcount. Reported ratio of employee turnover is corrected for
divestments for 2021 and 2022. Actual reported employee turnover from 2021 and 2022 has been adjusted
to full-year ratios for the integrated hydraulics and Semikron businesses. Adjusted employee turnover has
increased by 3.2 percentage points to 19.2%.
70 — Danfoss Annual Report 2022
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9 Health & safety
11 Ethics & human rights
The following two measures cover all production locations in Danfoss and include full-time employees,
part-time employees (with a permanent contract), trainees and apprentices, temporary employees on
short-term contracts (<1 year), such as students, holiday reliefs, temporary replacements for Danfoss
employees on leave, or external workers employed by an external agency. Data from Semikron merger is
not included in TRIF and LTIF figures.
Lost Time Injury Frequency (LTIF)
The number of Lost Time Injuries occurred in Danfoss per million hours worked. A Lost Time Injury (LTI) is
defined as a personal injury that results in one or more days away from work beyond the day the injury
occurred.
Total Recordable Injury Frequency (TRIF)
Number of fatalities, Lost Time Injuries, and other injuries requiring treatment by a medical professional per
million hours worked.
Whistleblower cases
Whistleblower cases are reported as the total number of new whistleblower cases received through
Danfoss’ own Ethics Hotline. In the reporting year, 6 cases have been concluded as substantiated, 131 cases
have been closed as unsubstantiated, and 46 cases are still under investigation. The increase in the number
of cases from 2021 to 2022 can be ascribed to an awareness campaign and workforce expansion due to the
acquisition of the hydraulics business and the merger with Semikron.
Ratio of suppliers signed Code of Conduct
This datapoint is reported as total direct (materials) spend on suppliers who have signed Danfoss’ Code
of Conduct in relation to total direct spend. The scope of suppliers does not cover the following spend;
indirect, internal suppliers, joint ventures, prototypes, customs, taxes, and government-regulated spend.
In some cases, Danfoss accepts the Code of Conduct of a supplier, which is also considered eligible to be
included in this ratio. This datapoint does not cover data on the acquisition of the hydraulics business and
the merger with Semikron, which will be included from the reporting year 2023.
10 Board of Directors
Gender split Board of Directors
Split between gender in Board of Directors is reported in accordance with the Danish Financial Statements
Act §99b and reported as the ratio of male to female members on the Board of Directors.
Board independence
Board independence shows to what extent Board members elected at the Annual General Meeting are
independent from Danfoss. The Board of Directors’ independence is determined through criteria that
follows the recommendations from the Committee on Corporate Governance in Denmark, which are
accessible here
71 — Danfoss Annual Report 2022
Letter from CEO
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Financial review
73 — Financial review
72 — Danfoss Annual Report 2022
Letter from CEO
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Financial review
Danfoss continued to allocate high investments into innovation, additional capacity, digitalization,
and M&A. This resulted in a transformational sales growth of 36%. The organic growth was 15%
showing a high demand for our products and solutions. EBITA grew 26%, with a margin of 11.9%,
which was within our range of guidance. The strong results were achieved despite global supply
chain disruptions, rising inflation, pandemic lockdowns, exit from Russia and integration of the
Semikron business. The free operating cash flow after financial items and tax reached EUR 465m
after high investments in innovation, digital initiatives, and production capacity. On August 1,
we closed the transaction with Semikron, acquiring the majority of the shares to create a joint
operation with the Danfoss Silicon Power business unit.
Sales
2022 was another very strong year for Danfoss
with significant organic and inorganic
growth, continuing the company’s sound
growth journey. Group sales increased 36%
to EUR 10,256m (2021: 7,539m), with organic
growth of 15%. Acquisitions added 23% to
sales growth, while the exit of Russia and
divestments impacted -4%. The sales level
exceeded our expectations due to higher
demand than originally planned.
All three business segments and all Danfoss
regions saw continued high demand, despite
increased volatility created by global supply
chain disruptions, unprecedented rising
inflation, and our exit from Russia due to the
war in Ukraine.
Growth was broadly based across the
major markets of North America, Europe,
and Asia, and all three business segments
had double-digit organic growth rates. Sales
in China were at the same level as in 2021
as growth was impacted by the pandemic
lockdowns during the first half of 2022.
73 — Danfoss Annual Report 2022
Danfoss continued to see strong demand
for our technologies and solutions that are
driving the green transition towards lower
CO₂ emissions through energy efficiency,
machine productivity, low emissions, and
electrification.
Sales
(cid:31)(cid:30)(cid:29)
(cid:31)(cid:30)(cid:28)
(cid:27)(cid:30)(cid:26)
(cid:29)(cid:24)(cid:30)(cid:28)
(cid:25)(cid:30)(cid:27)
2018
2019
2020
2021
2022
Total net sales (EURbn)
Innovation spend
(cid:25)(cid:24)(cid:31)(cid:23)
(cid:25)(cid:24)(cid:27)(cid:23)
(cid:25)(cid:24)(cid:28)(cid:23)
(cid:25)(cid:24)(cid:25)(cid:23)
(cid:25)(cid:24)(cid:30)(cid:23)
(cid:25)(cid:30)(cid:29)
(cid:27)(cid:31)(cid:26)
(cid:31)(cid:30)(cid:30)
(cid:31)(cid:29)(cid:31)
(cid:31)(cid:28)(cid:29)
2018
2019
2020
2021
2022
R&D spend (EURm)
R&D spend ratio (%)
Net investments in fixed
assets excluding M&A
(cid:24)(cid:31)(cid:29)
(cid:31)(cid:26)(cid:25)
(cid:31)(cid:30)(cid:29)
(cid:31)(cid:30)(cid:28)
(cid:27)(cid:31)(cid:30)
2018
2019
2020
2021
2022
Investments excl. M&A (EURm)
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Earnings
After continued high levels of strategic
investments in innovation, production
capacity, digital transformation, regional
initiatives to fuel future growth as well as
integration of acquired companies, the
operating profit before acquisition-related
amortizations (EBITA) increased 26% to EUR
1,224m (2021: 969m). The EBITA margin
reached 11.9% (2021: 12.8%).
Earnings were driven by the higher
topline and continued traction in managing
procurement savings, factory performance,
as well as customer pricing and mix. To some
extent, this countered the inflationary cost
pressure from increasing raw material prices,
freight cost, and spot buys related to the supply
chain bottlenecks. All segments and regions
were managing the supply situation and
increasing cost in the inflationary environment.
Danfoss reassessed net assets at fair value
in relation to the Russia exit. This resulted in a
write-down of EUR 85m, impacting EBIT.
The effective tax rate for 2022 was 28.0%
(2021: 23.0%). Net profit reached EUR 683m
(2021: 631m), 8% higher than the previous year.
Innovation
Danfoss continues to invest in innovation
across the business segments to improve the
74 — Danfoss Annual Report 2022
performance of our products and solutions
and to become the preferred partner in
helping our customers decarbonize. Research
and development expenses increased 39%
to EUR 457m (2021: 328m), corresponding to
4.5% of sales (2021: 4.4%).
Assets and liabilities
Total assets increased 18% to EUR 11,728m
(2021: 9,970m), mainly due to the acquisition
of Semikron.
Equity increased 28% to EUR 5,048m
(2021: 3,951m). The acquisition of Semikron
contributed with minority equity of EUR 231m
and a gain on transfer of shareholdings in the
Danfoss Silicon Power business unit of EUR
180m. The equity ratio, calculated as equity
relative to total assets, was 43.0% (2021: 39.6%).
The return on equity was 14.8% (2021: 16.6%).
Net interest-bearing debt amounted to EUR
3,168m (2021: 2,677m), leading to a net interest-
bearing debt to EBITDA ratio of 2.0 (2021: 2.1).
The non-current interest-bearing debt
maturing after more than 12 months amounted
to EUR 2,702m (2021: 2,708m), corresponding
to 86% (2021: 92%) of the total interest-bearing
debt. At year-end, the Group had a liquidity
reserve of EUR 1.2bn (2021: 1.2bn).
At the end of 2022, Danfoss’ credit rating
assigned by Standard & Poor’s was “BBB
with a stable outlook.” See Note 16 for more
information.
Cash flow
Securing a continued 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 465m (2021: 401m), confirming the
cash generating capability of Danfoss. This is
including the higher level of investments in
innovation and production capacity as well
as additional trade working capital due to the
growth in activity levels.
The cash flow from operating activities
increased to EUR 1,053m (2021: 838m),
driven by a positive operational performance
but negatively impacted by a higher level
of inventory and receivables following the
growth in activity levels.
Cash flow from investing activities
amounted to EUR -931m (2021: -2,794m),
driven by investments in machinery and
equipment, M&A activities, and our digital
transformation. The exit of the Russian activities
impacted the cash flow negatively by EUR 20m.
The cash flow from financing activities
amounted to EUR -26m (2021: 1,596m). Last
year’s level reflected the bond issuance related
to the acquisition of Eaton’s hydraulics business.
EBITA
(cid:28)(cid:28)(cid:23)(cid:26)(cid:22)
(cid:28)(cid:30)(cid:23)(cid:27)(cid:22)
(cid:28)(cid:30)(cid:23)(cid:29)(cid:22)
(cid:28)(cid:30)(cid:23)(cid:21)(cid:22)
(cid:28)(cid:28)(cid:23)(cid:26)(cid:22)
(cid:28)(cid:24)(cid:30)(cid:30)(cid:29)
(cid:31)(cid:30)(cid:29)
(cid:31)(cid:31)(cid:28)
(cid:31)(cid:30)(cid:27)
(cid:26)(cid:25)(cid:26)
2018
2019
2020
2021
2022
EBITA (EURm)
EBITA margin (%)
Sales split by segments
(cid:27)(cid:26)(cid:29)
(cid:28)(cid:27)(cid:29)
(cid:31)(cid:30)(cid:29)
Danfoss Power Solutions
Danfoss Climate Solutions
Danfoss Power Electronics and Drives
Sales split by regions
(cid:31)(cid:29)
(cid:30)(cid:27)(cid:29)
(cid:31)(cid:30)(cid:29)
(cid:28)(cid:29)
(cid:28)(cid:29)
(cid:31)(cid:26)(cid:29)
North America
Latin America
Western Europe
Eastern Europe
Asia - Pacific
Africa - Middle East
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Statements
Danfoss Power Solutions sales increased 59% to EUR
5,087m (2021: 3,209m), due to full-year impact on sales
from the 2021 acquired Eaton’s hydraulics business
and an organic growth of 16%. The demand from the
mobile and industrial hydraulic industry remained high
and sales grew strongly in all regions. In some areas the
segment saw signs of softer market conditions, e.g., in
China that was challenged by pandemic lockdowns.
Following the global supply chain disruptions, Power
Solutions continued to see high inflationary cost pressure
on raw materials, freight rates, and spot buys, which was
countered by productivity improvements, inventory
optimization, and proactive pricing measures. EBITA
increased 47% to EUR 720m (2021: 489m). The EBITA
margin reached 14.2% against 15.3% the previous year.
Danfoss Climate Solutions sales increased 12% to
EUR 3,200m (2021: 2,869m) with strong organic growth
of 12%, compensating for lost sales in Russia. Growth
was driven by the strongly growing market for heat
pumps, high-pressure pumps, and other energy-efficient
solutions for the energy transition in the coming years,
such as refrigeration and commercial compressors
for supermarkets, sustainable datacenters, and other
buildings. Most regions grew strongly, but growth in
China slowed down due to pandemic lockdowns. The
global supply chain disruptions and the war in Ukraine
pushed high inflationary cost pressure on raw materials,
freight rates, and component availability. EBITA increased
9% to EUR 556m (2021: 511m). The EBITA margin reached
17.4% against 17.8% the previous year.
Danfoss Power Electronics and Drives sales increased
33% to EUR 1,927m (2021: 1,444m) mainly due to strong
organic growth of 19%. Semikron was included from
August 1, which was the date of closing the acquisition
and forming the new Semikron Danfoss division that is
targeting a leading position within electrification. The
demand for AC drives and power semiconductors was
high and all regions grew, despite the volatile market
dynamics with electronic components shortages
and pandemic lockdowns in China. The supply chain
disruptions were easing during the second half of the
year. The inflation was driving cost pressures that were
partly offset by factory performance and proactive
pricing actions. EBITA increased 9% to EUR 196m (2021:
180m). The EBITA margin was 10.1% against 12.4% the
previous year. Excluding the newly acquired Semikron,
the EBITA margin would have been 13.7%.
75 — Danfoss Annual Report 2022
Letter from CEO
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Group accounts and notes
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Statements
M&A activities
Semikron Danfoss joint venture
On August 1, Danfoss acquired the majority
of the shares in Semikron, forming the new
Semikron Danfoss division together with the
Danfoss Silicon Power business.
Semikron Danfoss is specialized in power
electronics focusing on power semiconductor
modules. The module is built of power
semiconductors that make it possible to
convert and control electrical power, which is
an increasingly important energy source.
Semikron Danfoss will leverage its strong
core business in industrial and renewable
power module applications, targeting
a leading position in automotive power
modules. Semikron Danfoss will set the trend
and drive the technology shift into silicon
carbide solutions in both automotive and
industrial applications.
Semikron Danfoss is owned by the current
owner-families of Semikron and the Danfoss
Group, with Danfoss being the majority owner.
Divestment of orbital motor business
in China
On July 5, 2022, an agreement to sell the
Danfoss Power Solutions orbital motor
business and assets in Zhenjiang (Jiangsu),
China, was signed with buyer Impro Fluidtek
Limited, an indirectly wholly owned subsidiary
by Impro Precision Industries Limited. As
previously announced, the divestment
76 — Danfoss Annual Report 2022
was a necessary condition by the State
Administration for Market Regulation in China
(SAMR) to reach approval to close the 2021
acquisition of Eaton’s hydraulics business. The
transaction was closed on October 31, 2022.
See Note 12 for more information.
Exit from Russia
Following the war in Ukraine and related
sanctions, Danfoss decided to exit from Russia
and Belarus on April 1, 2022. On July 15, 2022,
Danfoss signed the agreement to sell its
Russian businesses to the local management
in Russia, currently pending local Russian
approval. Following this, Danfoss no longer
sells products in Russia. Danfoss reassessed
its ability to controls its Russian subsidiaries
and determined that as of end of August 2022,
it can no longer exercise control over these
entities or repatriate funds. Thus, Danfoss de-
consolidated its Russian activities as of August
31, 2022.
Danfoss had 1,066 employees in the
Russian business that contributed around 2%
share of Group sales. Danfoss impaired net
assets of EUR 85m.
Employees
The number of employees increased by 1,885
to 41,928 employees end of year, impacted by
both the acquisition of Semikron and the de-
consolidation of Russia. In 2021, Danfoss had
40,043 employees.
Acquisition of BOCK GmbH
On October 10, 2022, Danfoss announced
the acquisition of the German compressor
manufacturer BOCK GmbH from NORD
Holding GmbH. BOCK GmbH is headquartered
in Germany and is a technology and
innovation leader in its field, offering one of
the world’s largest portfolios of semi-hermetic
compressors for natural refrigerants. With the
acquisition, Danfoss is investing significantly
in broadening its scope of sustainable, clean
technologies to speed up the green transition
in commercial refrigeration systems.
The acquisition of BOCK GmbH comes with
a firm commitment to invest in the business,
paving the way for green growth, and a more
sustainable, energy efficient and decarbonized
future. The transaction is subject to certain
closing conditions being fulfilled and is
expected to close in the first quarter of 2023.
There is no impact in the reported numbers
for 2022.
Events after the balance sheet date
We are not aware of any events after the
balance sheet date of December 31, 2022,
which could be expected to have a material
impact on the Group’s financial position.
Cash flow
(cid:27)(cid:25)(cid:29)
(cid:27)(cid:26)(cid:25)
(cid:30)(cid:29)(cid:29)
(cid:29)(cid:25)(cid:28)
(cid:29)(cid:30)(cid:31)
(cid:29)(cid:26)(cid:24)
(cid:30)(cid:28)(cid:29)
(cid:29)(cid:30)(cid:28)
(cid:31)(cid:30)(cid:29)
(cid:28)(cid:31)(cid:25)
2018
2019
2020
2021
2022
Free operating cash flow (EURm)
Free operating cash flow after financial items and tax (EURm)
Net interest-bearing debt (NIBD)
(cid:27)(cid:30)(cid:31)
(cid:31)(cid:30)(cid:29)
(cid:31)(cid:30)(cid:29)
(cid:29)(cid:30)(cid:24)
(cid:27)(cid:30)(cid:26)
(cid:27)(cid:30)(cid:29)
(cid:25)(cid:30)(cid:27)
(cid:31)(cid:30)(cid:29)
2018
(cid:31)(cid:30)(cid:29)
2019
(cid:29)(cid:30)(cid:28)
2020
NIBD (EURbn)
NIBD ratio
2021
2022
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Financial review
Group accounts and notes
Parent accounts and notes
Statements
Group accounts
and notes
79 — Group accounts
83 — Group notes
124 — Group companies
77 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Group accounts and notes
Group accounts
Group notes
Income statement
Statement of comprehensive income
Statement of financial position
Statement of cash flows
Statement of changes in equity
79
79
80
81
82
Basis of reporting and critical accounting estimates
83
1 Basis of preparation
Income statement
2 Segment reporting
3 Expenses and other operating income
Net working capital
Inventories
4
5 Trade receivables
6 Other debt
7 Change in working capital
84
87
89
90
90
90
78 — Danfoss Annual Report 2022
Capital employed
8
9
10 Property, plant and equipment
11 Leases
12
Investments in associates and joint ventures 91
94
Intangible assets
98
101
Acquisition and sale of subsidiaries
and activities
13 Acquisition/sale of other investments
14 Provisions
Capital structure and financing
15 Financial income and expenses
16 Share capital
17 Financial risks and instruments
18
Change in liabilities arising from
financing activities
19 Pension and healthcare obligations
101
104
104
105
106
107
111
112
Tax
20 Tax on profit
21 Deferred tax
22 Corporation tax
115
115
117
Other notes
23 Adjustment for non-cash transactions
117
24 Contingent liabilities, assets and securities 118
118
25 Related parties
119
26 Events after the balance sheet date
119
27 General accounting policies
124
28 Group companies
Letter from CEO
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ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Statement of comprehensive income
Statement of comprehensive income
January 1 to December 31
January 1 to December 31
Note
2021
2022
EURm
Net profit
Note
2021
2022
631
683
7,539
-5,087
2,452
-328
-970
-319
835
40
2
10,256
-6,956
3,300
-457
-1,249
-513
1,081
-41
3
2
3
3
3
3
3
8
15
15
20
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 adj. on disposal/de-consolidation of companies
Adjustment for hyperinflation on Equity
Fair value adjustment of hedging instruments:
877
1,043
Hedging of interest rates (Interest rates and cross currency swaps)
5
-63
819
-188
631
575
56
631
14
-108
949
-266
683
632
51
683
Hedging of future cash flows
Hedging transfered to inventory
Tax on hedging instruments
Items that will be reclassified to income statement
Other comprehensive income after tax
Total comprehensive income
Attributable to:
Shareholders of Danfoss A/S
Minority interests
28
-7
21
105
2
22
12
-4
-1
136
44
-15
29
25
16
58
130
3
12
-31
213
157
242
788
925
728
60
788
875
50
925
Income statement
Income statement
January 1 to December 31
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
79 — Danfoss Annual Report 2022
Letter from CEO
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Our business
Core & Clear 2025
Environment
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Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Statement of financial position
Statement of financial position
As of December 31
Note
2021
2022
EURm
Note
2021
2022
Statement of financial position
As of December 31
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
9
10
8
19
21
4,241
2,056
283
18
22
73
4,860
2,483
287
13
21
139
Shareholders' equity
Equity, shareholders in Danfoss A/S
Minority interests
Total shareholders' equity
Liabilities
6,693
7,803
Provisions
Deferred tax liabilities
Pension and healthcare benefit plan obligations
Borrowings
4
1,401
1,658
Derivative financial instruments (negative fair value)
5
22
17
1,394
1,648
34
2
197
1,627
27
8
244
1,927
Other non-current debt
Non-current liabilities
Provisions
Borrowings
Trade payables
Debt to associates and joint ventures
Cash and cash equivalents
17
249
340
Corporation tax
Derivative financial instruments (negative fair value)
Other debt
Current liabilities
Total current assets
Total assets
3,277
3,925
Total liabilities
9,970
11,728
Total liabilities and shareholders' equity
80 — Danfoss Annual Report 2022
16
14
21
19
17
17
14
17
22
17
6
3,848
103
4,720
328
3,951
5,048
79
165
203
86
325
150
2,708
2,702
81
96
232
140
3,332
3,635
91
236
104
442
1,417
1,511
4
96
18
825
2
164
822
2,687
3,045
6,019
6,680
9,970
11,728
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Statement of cash flows
Statement of cash flows
January 1 to December 31
January 1 to December 31
EURm
Note
2021
2022
Profit before tax
Adjustments for non-cash transactions
Change in working capital
Interest received
Interest paid
Dividends received
Income tax paid
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 activities
Proceeds from disposal of subsidiaries and activities
De-consolidation of Russian activities
Change in financial receivables
Proceeds from sale of other investments
Cash flow from investing activities
Cash repayment of interest-bearing debt
Cash proceeds from interest-bearing debt
Purchase of treasury shares
Sale of treasury shares
Proceeds from minority interests
Dividends to shareholders in Danfoss A/S
Dividends to minority interests
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
81 — Danfoss Annual Report 2022
23
7
22
12
12
12
13
13
18
18
819
385
-97
5
-67
2
-209
838
-43
-339
14
-2,664
241
-5
2
-2,794
-658
2,309
-2
2
1
-56
1,596
-360
611
-2
249
949
643
-226
4
-84
-233
1,053
-45
-504
18
-441
32
-20
24
5
-931
-390
603
-2
2
-183
-56
-26
96
249
-5
340
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 payments 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.
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Statement of changes in equity
Statement of changes in equity
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
EURm
Balance as of January 1, 2021
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
Balance as of December 31, 2021
134
10
Net profit
Foreign exchange adjustments of foreign companies
Recycling of foreign exchange adj. on disposal/de-consolidation of companies
Fair value adjustment of hedging instruments
Adjustment for hyperinflation on Equity
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
Addition of minority interest Semikron
Gain on sale of part of subsidiaries (Semikron Danfoss merger)
Total transactions with owners
s
e
v
r
e
s
e
r
g
n
g
d
e
H
i
-50
-4
30
-1
25
25
34
34
9
145
-31
114
114
n
o
i
t
a
l
s
n
a
r
t
y
c
n
e
r
r
u
C
-108
107
107
107
-1
95
26
16
58
100
100
Balance as of December 31, 2022
134
10
123
99
-309
82 — Danfoss Annual Report 2022
s
e
r
a
h
s
n
w
o
e
v
r
e
s
e
R
-309
-2
2
s
e
v
r
e
s
e
r
r
e
h
t
O
3,407
386
28
-7
21
407
2
2
s
e
v
r
e
s
e
R
2,940
386
103
30
28
-8
153
539
34
-2
2
2
36
-309
3,816
3,515
427
44
-15
29
456
6
180
186
4,458
427
26
16
145
58
44
-46
243
670
6
-2
2
180
186
4,371
-2
2
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
3,084
575
103
30
28
-8
153
728
34
-2
2
2
36
3,848
632
26
16
145
58
44
-46
243
875
-183
-2
2
180
-3
4,720
y
t
i
r
o
n
M
i
t
s
e
r
e
t
n
i
100
56
4
4
60
-56
-2
1
-57
103
51
-1
-1
50
-56
231
175
328
y
t
i
u
q
e
l
a
t
o
T
3,184
631
107
30
28
-8
157
788
-56
34
-2
2
1
-21
3,951
683
25
16
145
58
44
-46
242
925
-239
-2
2
231
180
172
5,048
d
e
s
o
p
o
r
P
s
d
n
e
d
i
v
i
d
189
189
189
205
205
-189
-189
205
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Basis of reporting and critical accounting estimates
Note 1 Basis of preparation
1 Basis of preparation
Note 1 Basis of preparation
Introduction
Danfoss A/S is a company domiciled in Denmark. The Annual Report for the period January 1 - December 31,
2022, 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. The Group is classified as a Class C (large) entity under the Danish Financial
Statements Act. However, the Group has decided to prepare Consolidated Financial Statements in accordance
with IFRS as adopted by the EU and additional requirements of the Danish Financial statements Act.
Estimates which are significant for the preparation of the Financial Statements are listed below:
- 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)
- Assessment of de-consolidation of the Russian activities (Note12)
Additional description of estimates made are described in the relevant notes.
Basis of measurement
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
Danfoss A/S has implemented a number of amendments and improvements to IFRS for the financial year 2022.
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.
Refer also to note 27 for description of accounting for hyperinflation related to the Turkish subsidiaries.
Changes in accounting policies
Danfoss A/S has implemented the standards and interpretations that have taken effect for 2022. None of those
standards and interpretations have material effect on recognition and measurement in 2022, 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.
The Group has assessed these interpretations and concluded they do not have material impact on the
Group in 2022 or previous years.
- Amendments to IFRS 3 "Reference to the Conceptual Framework".
- Amendments to IAS 16 "Property, Plant and Equipment: Proceeds before Intended Use"
- Amendments to IAS 37 "Onerous Contract - Cost of fulfilling a Contract"
- Annual improvements 2018-2022: IFRS 1, IFRS 9, IAS 41
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 2022 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 IAS 1 "Disclosure of Accounting Policies"
- Amendments to IAS 8 "Definition of Accounting Estimates"
- Amendments to IAS 12 "Deferred Tax related to Assets and Liabilities arising from a Single Transaction"
- IFRS 17 "Insurance Contracts"
- Amendments to IAS 1 "Classification of Liabilities as Current or Non-current"
- Amendments to IFRS16 "Leasing"
In 2022, IFRIC issued agenda decisions on IFRS 16, IAS 32, IAS 7 and IFRS 15. The Group has assessed these
interpretations and concluded they do not have material impact on the Group in 2022 or previous years.
83 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Income statement
Note 2 Segment reporting
2 Segment reporting
Note 2 Segment reporting
EURm
2021
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
Power
Electronics
and Drives
3,209
86
489
57
2,864
51
511
8
1,436
30
180
20
Other
areas
30
147
-211
-2
4,649
137
705
19,061
1,918
98
478
11,235
1,771
45
237
4,582
1,632
88
4,599
5,165
Group
Business segments
7,539
314
969
83
2
877
-58
819
9,970
368
6,019
40,043
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
Power
Electronics
and Drives
5,087
132
720
104
3,195
57
556
8
1,911
49
196
32
Other
areas
63
154
-248
4,837
181
690
18,535
2,001
124
478
10,331
2,985
118
365
7,875
1,905
108
5,147
5,187
2022
Group
10,256
392
1,224
144
3
1,043
-94
949
11,728
531
6,680
41,928
*) 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".
For further information on the business segments, see page 22, 24 and 26.
84 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 2 Segment reporting (continued)
2 Segment reporting continued
Note 2 Segment reporting (continued)
EURm
2021
EURm
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
2021
2022
-197
-14
-211
-241
-7
-248
356
181
1,069
26
1,632
3,206
985
203
200
5
4,599
506
232
1,131
36
1,905
3,633
1,132
150
221
11
5,147
*) Corporate and shared functions and projects, not allocated, are primarily corporate projects, administrative
expenses, and assets and liabilities.
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
EURm
Geographical segments
Western
Europe
Eastern
Europe
Asia
Pacific
North
America
Latin
America
Africa -
Middle
East
Net sales
Total non-current assets *)
3,212
3,752
480
225
2,422
641
3,270
2,782
525
129
347
135
Group
7,539
6,620
2022
Group
10,256
7,664
Sales in Denmark amount to EUR 265m (2021: 253m) and non-current assets amount to EUR 998m
(2021: 961m). Sales in North America mainly relate to the US, which represent EUR 3,040m (2021: 1,781m) and
non-current assets amount to EUR 2,781m (2021: 2,628m). China is part of the Asia Pacific region and sales
amount to EUR 1,378m (2021: 1,155m) and non-current assets amount to EUR 374m (2021: 328m).
Sales and non-current assets in the Eastern Europe region are impacted by the exit of Russia and the acquisition
of Semikron.
*) Deferred tax assets are not included.
85 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 2 Segment reporting (continued)
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.
86 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 3 Expenses and other operating income
3 Expenses and other operating income
Note 3 Expenses and other operating income
2021
2022
EURm
2021
2022
B. Depreciation/amortization and impairment losses
Classification by nature:
Amortization of intangible assets
Depreciation of property, plant and equipment
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
136
261
397
103
28
5
136
220
28
13
261
194
342
536
124
63
7
194
296
31
15
342
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
1,725
11
164
100
6
2,006
2,207
20
234
125
8
2,594
32,932
40,043
41,324
41,928
*) 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
8
16
31
1
32
5
2
6
16
29
1
30
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. Severance payments of EUR 2m
(2021: 2m) are included in bonuses, long term.
Total remuneration for registered and former registered members of the Group Executive Team amounts to
EUR 17m (2021: 20m).
A presentation of the Group Executive Team is available on page 62.
87 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 3 Expenses and other operating income (continued)
3 Expenses and other operating income continued
Note 3 Expenses and other operating income (continued)
EURm
2021
2022
EURm
2021
2022
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 activities
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
48
12
10
13
83
-1
-2
-11
-29
-43
40
51
4
18
27
100
-85
-4
-20
-32
-141
-41
Restructuring costs in both years mainly relate to terminations in Denmark, Turkey, Germany and China.
The Group has received government grants of EUR 18m in total. This is among other items related to
investment incentives and support for research and development programs.
On 31 October 2022 Danfoss disposed of part of Orbital Motors, which was part of the Danfoss Power
Solution activities in Zhenjiang, China. The divestment resulted in a a net gain of EUR 49m.
Danfoss has reassessed its ability to control its Russian subsidiaries and determined that as of end of August
2022, it can no longer exercise control over these entities or repatriate funds. Danfoss de-consolidated its
Russian activities as end of August 2022. This has resulted in a loss of approximately EUR 85m.
More details of the disposal in China and de-consolidation of Russian activities are available in Note 12.
Audit fee
Other assurance engagements fee
Tax and VAT advice
Other fees
Total fee to Group Auditor
Accounting Policy
4
0
0
1
5
5
0
0
1
6
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 employees, advertising and exhibition expenses etc., including depreciation. Furthermore, provisions for
bad debt are included.
Administrative expenses
Administrative expenses comprise expenses in relation to administrative employees, management, office
premises, office expenses etc., including depreciation.
88 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 3 Expenses and other operating income (continued)
3 Expenses and other operating income continued
Networking capital
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.
Note 4 Inventories
Inventories
4
EURm
Raw materials and consumables
Work in progress
Finished goods and goods for resale
Inventories
Write-downs of inventories
2021
2022
748
161
492
1,401
853
206
599
1,658
89
120
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. The cost of work in progress and finished goods comprise
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.
89 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 5 Trade receivables
5 Trade receivables
Note 6 Other debt
6 Other debt
EURm
2021
2022
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
Additions through acquisition of subsidiaries
Accrual of new provisions
Reversal of provisions accrued
Realized loss
Provision for bad debts as of December 31
1,327
32
29
37
1,425
-31
1,394
-21
-7
-6
1
2
-31
1,548
74
36
37
1,695
-47
1,648
-31
-13
-13
5
5
-47
Accrued salaries and wages
Accrued expenses and sundry creditors
Other debt
Note 7 Change in working capital
7 Change in working capital
EURm
Change in inventories
Change in receivables
Change in trade payables and other debt
Change in working capital
2021
2022
408
417
825
435
387
822
2021
2022
-307
-319
529
-97
-125
-178
77
-226
Out of the EUR 47m write-down, EUR 23m 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.
90 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Capital employed
Note 8 Investments in associates and joint ventures
8
Investments in associates and joint ventures
Note 8 Investments in associates and joint ventures
EURm
2021
EURm
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
Total
345
345
-62
2
-2
-62
283
Cost as of January 1
Additions through aquisition of subsidiaries
Disposals
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
3
-43
282
20
2
-1
21
-16
-16
5
2022
Total
345
2
-1
346
-62
3
-59
287
Impairment test
Where indicators for impairment were present at the end of 2022, impairment tests were performed on the
recovered amount of "Investments in associates and joint ventures". Main indicators are loss-making 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 2021.
Further information on associates and joint ventures is provided in Note 17 Financial risks and instruments and
Note 25 Related parties.
91 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 8 Investments in associates and joint ventures (continued)
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
2021
SMA Solar Technology AG
Place of business
Share of ownership
Summarized profit and loss statement, EURm *)
Revenue
EBITDA
Net income
Summarized balance sheet, EURm *)
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Equity
Other information, EURm
Group share of equity as of December 31
2021
Germany
20%
984
9
-23
333
719
290
352
410
80
2022
Germany
20%
975-1,050
60-75
N/A
349
757
280
403
423
82
Immaterial associates and joint ventures
Associates
Joint Ventures
Total
Danfoss' proportionate share of:
Profit or loss
Total comprehensive income
Carrying amount as of December 31
2
2
12
2
2
12
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
80
187
267
80
187
12
279
12
12
On the basis of the stock exchange quotation, the fair value of SMA Solar Technology AG as of December 31,
2022, was EUR 2,320m (2021: 1,300m).
*) 2021 numbers as reported from SMA Solar Technology AG. 2022 Numbers as of guidance from
SMA Solar Technology AG from Quarter3 2022.
92 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 8 Investments in associates and joint ventures (continued)
8
Investments in associates and joint ventures continued
Note 8 Investments in associates and joint ventures (continued)
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.
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.
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.
EURm
2022
Immaterial associates and joint ventures
Associates
Joint Ventures
Total
Danfoss' proportionate share of:
Profit or loss
Total comprehensive income
Carrying amount as of December 31
2
2
13
2
2
13
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
13
282
13
13
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 indicators of impairment
exists.
93 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 9 Intangible assets
Intangible assets
9
EURm
Cost as of January 1, 2021
Foreign exchange adjustments in foreign companies
Additions through acquisition of subsidiaries
Transfers
Additions
Disposals
Disposals of subsidiaries
Cost as of December 31, 2021
Amortization and impairment losses as of January 1
Foreign exchange adjustments in foreign companies
Transfers
Amortization
Disposals
Disposals of subsidiaries
Amortization and impairment losses as of December 31, 2021
Carrying amount as of December 31, 2021
Cost as of January 1, 2022
Foreign exchange adjustments in foreign companies
Additions through acquisition of subsidiaries
Additions
Disposals
Disposals of subsidiaries
Cost as of December 31, 2022
Amortization and impairment losses as of January 1, 2022
Foreign exchange adjustments in foreign companies
Amortization
Disposals
Disposals of subsidiaries
Amortization and impairment losses as of December 31, 2022
Carrying amount as of December 31, 2022
Goodwill
Internally developed
software
Brand
Technology
Customer
relations
Patents, trademarks
and other rights
Development
costs
Total
Other
1,786
88
1,145
-58
2,961
147
6
-8
145
2,816
2,961
102
265
-17
3,311
145
5
150
3,161
392
3
11
6
42
-31
-2
421
188
3
5
49
-30
-1
214
207
421
3
42
-3
-5
458
214
3
47
-3
261
197
144
15
48
207
15
1
6
22
185
207
-1
68
274
22
13
35
239
687
26
289
-30
972
454
19
54
-21
506
466
972
33
210
-5
1,210
506
12
80
-4
594
616
383
25
481
-13
-29
847
292
9
24
-13
-18
294
553
847
33
108
-4
984
294
9
51
-3
351
633
48
-4
1
-6
39
31
-3
3
-6
25
14
39
3
-6
36
25
1
3
-6
23
13
50
1
-8
43
50
1
-8
43
43
1
-5
39
43
-5
38
1
1,704
70
829
2
43
-58
-61
2,529
1,030
33
2
136
-57
-40
1,104
1,425
2,529
69
386
45
-14
-14
3,001
1,104
25
194
-14
-7
1,302
1,699
Total
3,490
158
1,974
2
43
-58
-119
5,490
1,177
39
2
136
-57
-48
1,249
4,241
5,490
171
651
45
-14
-31
6,312
1,249
30
194
-14
-7
1,452
4,860
Of the "Internally developed software", approximately 50% relates to the One ERP program.
Additions/disposals through acquisitions/sales of subsidiaries are mainly due to Semikron acquisition and partial disposal of Orbital Motors in China are further described in Note 12 Acquisition and sales of subsidiaries and
activities. Impact on Goodwill, due to hyperinflation in Turkey, amounts to EUR 13m (2021: 0m), and is included in above "Foreign exchange adjustments in foreign companies".
94 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 9 Intangible assets (continued)
9
EURm
Intangible assets continued
Impairment tests
At the end of 2022, 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 2023-2032. 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.
EURm
2021
Danfoss
Power
Solutions
Danfoss
Climate
Solutions
Danfoss
Power
Electronics
and Drives
Danfoss
Power
Solutions
Danfoss
Climate
Solutions
Other
Danfoss
Power
Electronics
and Drives
2022
Other
Goodwill as of December 31
Brand with indefinite useful
life as of December 31
1,479
564
770
3
1,536
572
1,050
3
132
136
The Danfoss Power Solutions brand with a carrying amount EUR 136m (2021: 132m) is not amoritized, but is
tested annually for impairment. Global megatrends and industry recognition as one of the market leaders
indicate that the brand will generate cash inflow for the Group for an indefinite period.
Note 9 Intangible assets (continued)
The weighted average growth rate until 2032 is based on past performance/Management expectation of
market development etc. and is estimated to be 2-7% (2021: 2-6%) 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 2021. The net cash flow during the terminal
period from 2033 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 11-12% (2021: 9-10%) before tax for all segments.
Management assess that a reasonable change in the fundamental assumptions used in the impairment
tests will not result in recoverable amounts lower than the carrying amounts. The same conclusion was
made for 2021.
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 2022, the carrying amount of Brand, Technology
and Customer relations acquired in connection with business combinations amounts to EUR 1,021m
(2021: 1,041m), or approximately 69% (2021: 86%) 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 2022, the carrying amount of Technology and Customer
relations acquired in connection with business combinations amounts to EUR 48m (2021: 56m), or
approximately 3% (2021: 5%) of the corresponding Group carrying amount. The carrying amount of
Technology and Customer relations is amortized until 2032 and 2030, respectively.
95 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 9 Intangible assets (continued)
Note 9 Intangible assets (continued)
9
Intangible assets continued
Danfoss Power Electronics and Drives
The goodwill allocated to Danfoss Power Electronics and Drives segment derives primarily from the acquisition
of Vacon (Finland) in December 2014 and Semikron (Germany) in 2022. At the end of 2022, the carrying
amount of Technology and Customer relations acquired in connection with business combinations
amounts to EUR 419m (2021: 108m), or approximately 28% (2021: 9%) of the corresponding
Group carrying amount. The carrying amount of Technology and Customer relations is amortized until
2034 and 2035, respectively.
Other intangible assets
At the end of 2022, Danfoss had software in progress amounting to EUR 38m (2021: 43m). Capitalized
software in progress is mainly developed internally.
In 2022, 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 (2021: 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.
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.
96 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 9 Intangible assets (continued)
9
Intangible assets continued
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 life of the assets, taking into
account the asset’s residual value. Expected useful life 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 life 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.
97 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 10 Property, plant and equipment
10 Property, plant and equipment
EURm
Cost as of January 1, 2021
Foreign exchange adjustments in foreign companies
Additions through acquisition of subsidiaries
Transfers
Additions
Disposals
Disposals 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
Cost as of January 1, 2022
Foreign exchange adjustments in foreign companies
Additions through acquisition of subsidiaries
Transfers
Additions
Disposals
Disposals of subsidiaries
Cost as of December 31, 2022
Depreciation and impairment losses as of January 1, 2022
Foreign exchange adjustments in foreign companies
Transfers
Depreciation
Disposals
Disposals of subsidiaries
Depreciation and impairment losses as of December 31, 2022
Carrying amount as of December 31, 2022
Land and
buildings
Plant and
machinery
Equipment
Assets under
construction
1,158
32
249
24
77
-46
-36
1,458
538
10
79
-40
-9
578
880
1,458
56
72
43
101
-56
-28
1,646
578
28
104
-45
-17
648
998
1,755
58
275
116
76
-47
-94
2,139
1,295
36
-3
140
-45
-64
1,359
780
2,139
25
71
101
120
-62
-25
2,369
1,359
-1
-5
194
-52
-19
1,476
893
307
5
23
9
22
-27
-1
338
183
3
1
42
-24
205
133
338
17
6
17
22
-40
-9
351
205
15
5
44
-35
-6
228
123
200
6
-151
219
-11
263
263
263
-1
28
-161
344
-4
469
469
Total
3,420
101
547
-2
394
-120
-142
4,198
2,016
49
-2
261
-109
-73
2,142
2,056
4,198
97
177
587
-158
-66
4,835
2,142
42
342
-132
-42
2,352
2,483
Additions/disposals through acquisitions/sales of subsidiaries are further described in Note 12 Acquisition and sale of subsidiaries and activities.
Impact on Property, plant and equipment, due to hyperinflation in Turkey, amounts to EUR 27m (2021:0m), and is included in above "Foreign exchange adjustments in foreign companies".
98 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 10 Property, plant and equipment (continued)
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, 2021
Additions through acquisition of subsidiaries
Additions
Depreciation
Disposals
Disposals of subsidiaries
Carrying amount related to right-of-use assets as of December 31, 2021
Carrying amount related to right-of-use assets as of January 1, 2022
Foreign exchange adjustments in foreign companies
Additions through acquisition of subsidiaries
Additions
Depreciation
Disposals
Disposals of subsidiaries
Carrying amount related to right-of-use assets as of December 31, 2022
Further information on leases is provided in Note 11 Leases.
Land and
buildings
Plant and
machinery
Equipment
Total
164
69
40
-42
-5
-13
213
213
7
7
69
-57
-3
-1
235
3
-1
2
2
2
41
8
15
-24
-2
38
38
14
-22
-3
-1
26
208
77
55
-67
-7
-13
253
253
7
7
83
-79
-6
-2
263
99 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 10 Property, plant and equipment (continued)
Note 10 Property, plant and equipment (continued)
10 Property, plant and equipment continued
EURm
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
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.
100 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 11 Leases
11 Leases
Note 12 Acquisition and sale of subsidiaries and activities
12 Acquisition and sale of subsidiaries and activities
Lease liabilities are presented in borrowings of the Statement of financial position as follows:
EURbn
2022
EURm
Current
Non-current
2021
2022
83
185
63
207
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 15m (2021: 8m).
At December 31, 2022, the Group had committed to leases not yet commenced. The total future cash
outflows for leases that had not yet commenced are EUR 55m (2021: 56m), which are mainly for buildings.
Total cash outflow for leases for the financial year ended December 31, 2022 was EUR 93m (2021: 70m).
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.
101 — Danfoss Annual Report 2022
Company/activity:
Semikron Group
Kolex Production
Russia exit
Part of Orbital Motors, China
y
r
t
n
u
o
C
DE
DK
RU
CN
Acquisition
Acquisition
De-consolidation
Disposal
*) Net sales in the financial year prior to the acquisition or sale.
** According to non-disclosure
d
e
t
a
d
i
l
o
s
n
o
C
l
i
t
n
u
/
m
o
r
f
l
d
o
s
/
d
e
r
i
u
q
c
a
i
g
n
d
o
H
l
Aug
61%
Jan 100%
Aug 100%
Oct 100%
)
*
r
a
e
y
r
e
p
s
e
a
s
l
t
e
N
0.5
0.0
0.3
0.1
l
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
d
e
v
e
c
e
r
/
d
a
p
i
2,800
10
1,100
170
0.6
**
**
**
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.
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.
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 12 Acquisition and sale of subsidiaries and activities (cont.)
12 Acquisition and sale of subsidiaries and activities cont.
Note 12 Acquisition and sale of subsidiaries and activities (cont.)
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 and synergies expected from combining the
operations of the Danfoss Group and the acquired business. A large part of the goodwill and recognized
PPA Intangible assets are expected to be deductible for income tax purposes.
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%.
2022 acquisitions and disposals:
On January 3, 2022, Danfoss acquired assets and activities in Kolex Production ApS. Kolex was a subcontractor
to Danfoss' industrial refrigeration business, and the acquisition ensures a future stable delivery to Danfoss'
customers. Kolex has specialized in precision CNC machining in stainless steel and aluminum. The acquisition
has an insignificant impact on Danfoss revenue and profit before tax.
On August 1, 2022, Danfoss acquired approximately 61% of the shares in the Semikron Group, one of the
world's leading manufacturers of power modules used for energy-efficient motor drives and industrial
automation systems. Further application areas include power supplies, renewable energies and electric
vehicles. The Semikron business has been merged with Danfoss Silicon Power, and the new combined
business is named Semikron-Danfoss Division. The new division is part of the Danfoss Power Electronics and
Drives segment. The shares in Semikron were acquired at EUR 0.6bn. At the same time as the acquisition, some
of the previous shareholders of Semikron received shares amounting to around 39% of the new Semikron-
Danfoss Division. The acquisition has been included in the consolidated financial statements from the time of
acquisition. From the acquisition date to December 31, 2022, Semikron contributed with a revenue of
EUR 195m and a profit before tax of EUR -70m. 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. Additionally, Semikron was exposed to a cyber-attack during August and September
that has impacted sales and net profit negatively.
If the acquisition had occurred on January 1, 2022, the impact on the Group’s revenue would
have been additional EUR 0.4bn. The profit before tax contributed to the Group would have been additional
EUR 33m. Acquisition related transaction costs are EUR 2m and have been included in "Other operating
expenses" in the consolidated income statement. Integration costs are ongoing and amount to EUR 13m,
impacting EBIT negatively. The preliminary purchase price allocation (PPA) accounting has total goodwill of
EUR 0.3bn. Goodwill arising from the acquisition is attributable to the value of employees and synergies
expected from combining the operations of the Danfoss Group and the acquired business.
The final PPA calculation will take place within 12 months from the acquisition date.
On 31 October, 2022, Danfoss disposed part of Orbital Motors, which was part of the Danfoss Power
Solution activities in Zhenjiang, China. The divestment resulted in a a net gain of EUR 49m, which is recognized
in the consolidated income statement under "Other operating income". The divestment has been excluded
from the consolidated financial statements as of 1 November 2022.
In response to the Russian invasion of Ukraine, many juristictions, including USA and Europe, have imposed
several economic sanctions on Russia. As a result Danfoss has reassessed its ability to controls its Russian
subsidiaries and determined that as of end of August 2022, it can no longer exercise control over these
entities or repatriate funds. Thus Danfoss de-consolidated its Russian activities as end of August 2022. This has
resulted in a loss of approximately EUR 85m, which is recorded under Other Operating Expenses.
Danfoss has signed an agreement to divest the shareholdings in Russia to the local management. This
process is ongoing and is awaiting approval from the relevant authorities in Russia. Any consideration
for the transfer is considered very uncertain and the value of the shares in the Russian subsidiaries
are thus recorded to nil.
Disposal of White Drives, partial disposal of Orbital Motors in China and de-consolidation of activities in Russia
have a combined impact on the Group's Net Sales development from 2021 to 2022 of approximately -4%.
102 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 12 Acquisition and sale of subsidiaries and activities (cont.)
12 Acquisition and sale of subsidiaries and activities cont.
Note 12 Acquisition and sale of subsidiaries and activities (cont.)
The below figures for 2022 acquisitions include adjustments to final PPA allocation related to acquisitions in 2021.
Accounting Policy
The net impact of these changes are around EUR -16m on Net cash paid (-)/received.
EURm
2021 2021
2022 2022 2022
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
Adjustments minority interest
Gain on sale of part of subsidiary (Semikron Danfoss merger)
Adjustments for recycling of translation impact
Net cash paid(-)/received
s
n
o
i
t
i
s
i
u
q
c
A
-829
-547
-11
-382
-328
-60
93
124
355
-1,585
-1,145
-2,730
60
-2,670
6
s
l
a
s
o
p
s
i
D
21
69
2
30
30
9
-13
-5
-38
105
98
203
-8
195
46
s
l
a
s
o
p
s
i
D
2
4
4
-7
3
59
62
62
-30
s
n
o
i
t
i
s
i
u
q
c
A
-386
-177
-51
-137
-142
-42
99
128
81
-627
-265
-892
41
-851
-1
231
180
-2,664
241
-441
32
d
e
t
a
d
i
l
o
s
n
o
c
e
D
5
20
1
29
17
19
-2
-1
-28
60
-77
-17
-19
-36
16
-20
*) Receivables in acquisitions includes provision for bad debt of EUR 2m (2021: 8m).
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.
When part of the business is sold, but the Group remains control of the business, the gain is recorded directly
in the equity.
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.
103 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 12 Acquisition and sale of subsidiaries and activities (cont.)
12 Acquisition and sale of subsidiaries and activities cont.
Note 14 Provisions
14 Provisions
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.
Note 13 Acquisition / Sale of other investments
13 Acquisition / Sale of other investments
EURm
Sale of shares and other securities
Increase/decrease in lending
2021
2022
2
-5
-3
5
24
29
EURm
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
Employee-
related
Other
Total
2022
Provisions as of January 1
Foreign exchange adjustments in foreign companies
Additions through acquisition of subsidiaries and activities
Provisions used
Reversal of unused provisions
Additional provisions recognized
Disposals through sale of subsidiaries
Provisions as of December 31
42
1
14
-20
-8
36
-1
64
52
1
-6
-3
21
65
76
1
15
-23
-14
6
61
170
3
29
-49
-25
63
-1
190
2022
Estimated maturity of above provisions:
Within 1 year
Between 1 and 5 years
After more than 5 years
Provisions as of December 31
Warranty
Employee-
related
Other
Total
49
15
64
8
29
28
65
47
12
2
61
104
56
30
190
104 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 14 Provisions (continued)
14 Provisions continued
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.
Capital structure and financing
15 Financial income and expenses
Note 15 Financial income and expenses
EURm
Financial income
Gain on other investments
Foreign exchange gains, net
Interest from banks, etc.
Financial income
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.
Interest on financial assets measured at amortized cost.
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.
Financial expenses
Interest to banks etc.
Calculated interest on defined benefit plans
Interest expense for leasing arrangements
Monetary loss on adjustments for hyperinflation
Foreign exchange losses, net
Financial expenses
Interest on financial liabilities measured at amortized cost
2021
2022
4
6
4
14
4
-78
-4
-8
-18
-108
-86
5
5
5
-52
-3
-7
-1
-63
-59
A fair-value hedge impact of EUR -1m (2021: 5m) is included in Foreign exchange gains, net.
Further information on leases is provided in Note 11 Leases.
Further infomation on Monetary loss on adjustments for hyperinflation is provided in note 27.
General accounting policies including hyperinflation.
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.
105 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 16 Share capital
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
2021
2022
340,398
1,189
-1,434
340,153
340,153
1,254
-1,233
340,174
Distribution of shares
A shares
B shares
Total
Number
DKKm
Number
DKKm
Number
DKKm
Balance as of January 1, 2021
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
Balance as of December 31, 2022
4,250,000
425.0
5,719,625
572.0
9,969,625
997.0
Class A shares entitle the holder to 10 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
DKK
141.3
0
2021
EUR
19.0
0
DKK
153.1
136.4
2022
EUR
20.6
18.3
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 2022 for acquiring own shares amounts to EUR 2m (2021: 2m). The total selling
price in 2022 for selling own shares amounts to EUR 2m (2021: 2m). The Group's holding of treasury shares
represents 3.4% (2021: 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 a credit rating over the cycle. Danfoss is
currently rated “BBB with a stable outlook" by Standard and Poor’s. End of 2022, the net-interest-bearing
debt to EBITDA ratio was 2.0 (2021: 2.1) 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.
106 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 17 Financial risks and instruments
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 2022 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 2022 and 2021.
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.
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
Sensitivity
Probable increase in exchange rate
Hypothetical impact on profit and loss for
the year
Hypothetical impact on equity
2021
2022
EUR
USD GBP Total
EUR USD
GBP Total
-75
-180
10
22
-5
59
-70
-99
-69
-252
23
65
1
58
-45
-129
263
-31
-55
177
318
-88
-59
171
-231
-130
-30
-391
-289
-75
-25
-389
1% 10% 10%
1% 10% 10%
0
-3
0
-13
0
-3
0
-19
0
-4
0
-7
0
-3
0
-14
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 87m (2021: 101m) are used for hedging of net investments. The
impact on the Group's equity is EUR 0m (2021: 0m).
2) Financial instrument for hedging of fair value also includes the exposure related to inventories in countries
applying foreign currency price lists.
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.
107 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 17 Financial risks and instruments (continued)
17 Financial risks and instruments continued
The Group's debt categories and maturities
The Group applies the simplified approach to provide for expected credit losses prescribed by IFRS 9, which
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. 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.
EURm
l
a
u
t
c
a
r
t
n
o
C
w
o
l
f
h
s
a
c
i
g
n
y
r
r
a
C
t
n
u
o
m
a
2021
Maturity
r
a
e
y
1
-
0
)
*
s
r
a
e
y
5
r
e
v
O
s
r
a
e
y
5
-
1
i
g
n
y
r
r
a
C
t
n
u
o
m
a
l
a
u
t
c
a
r
t
n
o
C
w
o
l
f
h
s
a
c
2022
Maturity
r
a
e
y
1
-
0
)
*
s
r
a
e
y
5
-
1
5
r
e
v
O
s
r
a
e
y
Bank debt and corporate bond 2,568 2,637
74
Mortgage debt
39
Contingent considerations
Lease liabilities
291
1,417 1,417
Trade payables
Debt to ass./ JV.
4
99
Derivative financial liabilities
4,464 4,561
69
39
268
4
99
72
1
37
154
1
2
88
1,417
4
18
162 1,259 1,216 2,782
64
26
270
1,511
2
232
1,692 1,489 1,380 4,887
43
38
49
393 1,362 1,098
75
4
24
160
66
2,853
79
26
295
2
69
1,511 1,511
2
2
232
146
4,998 1,977 1,636 1,385
86
*) Maturity is evenly spread over the period.
Further information on lease is provided in Note 11 Leases.
In 2021, Danfoss issued three EUR Bonds in total EUR 1.9bn as part of the financing related to the acquisition
of the Eaton Hydraulics business.
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 65m (2021: 37m) of trade payables that are part of such agreements.
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 0.5% 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 4m, while equity would be impacted by a gain of
EUR 45m, 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 7.5% of Group sales, in terms of
accessible cash, and non-terminable credit facilities with an average maturity profile of at least 3 years.
At the end of 2022, Danfoss' credit rating from Standard and Poor’s was "BBB with a stable outlook" and
the liquidity reserve equaled EUR 1.2bn (2021: 1.2bn). 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 3.9 years at the end of 2022.
The Danfoss Group's loan agreements contain no financial covenants.
Note 17 Financial risks and instruments (continued)
108 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 17 Financial risks and instruments (continued)
17 Financial risks and instruments continued
Note 17 Financial risks and instruments (continued)
Financial instruments by category
Financial instruments by category
Carrying
amount
2021
Fair
value
Carrying
amount
2022
Fair
value
EURm
Carrying
amount
2021
Fair
value
Carrying
amount
2022
Fair
value
EURm
Financial assets:
Investments in associates and joint ventures
Financial assets measured at equity method
279
279
272
272
282
282
478
478
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
1
39
40
4
4
1
39
40
1,394
197
249
1,394
197
249
5
5
4
5
5
4
163
167
1,648
244
340
163
167
1,648
244
340
1,840
1,840
2,232
2,232
39
39
27
27
Interest-bearing debt
Trade payables and other debt
Financial liabilities measured at amortized cost
2,905
2,342
5,247
2,967
2,342
5,309
3,117
2,475
5,592
3,112
2,475
5,587
109 — Danfoss Annual Report 2022
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
107
107
391
391
30
30
Financial liabilities used as hedging instruments
137
137
391
391
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. They 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 2022 remain unchanged compared to 2021.
1) Out of EURm 163, the 159 is offset in derivative financial instruments under liabilities in the statement of
financial position (2021: EURm 38).
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 17 Financial risks and instruments (continued)
17 Financial risks and instruments continued
Note 17 Financial risks and instruments (continued)
Cash flow hedge
The Group uses forward exchange contracts to hedge currency risks regarding expected future cash flows
meet the criteria for cash flow hedging. At the end of 2022, unrealized gain/loss(-) on derivatives on hedging
that of foreign currency risk recognized in equity amounted to EUR 4m (2021: -15M).
For the open foreign exchange contracts, used for USD cash flow hedges, at the end of 2022, the weighted
average hedge rate for USD/DKK is 7.24 (2021: 6.32).
Refer to section below "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, related to issued bonds in 2021, 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 bond loans. Refer also to the
table "The Group's debt categories and maturities".
Due to the economic relationship between the exposure and the hedges, a highly outcome is expected.
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 2022 or 2021.
Derivates as of December 31 for the Group
EURm
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
USD
EUR
Other currencies
Forward exchange contracts
Interest rate swaps
Cross currency hedge
Derivatives end of year
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
-202
31
-116
-1,266
1,603
e
u
a
v
l
r
i
a
f
t
e
N
5
5
-2
8
-41
-191
-224
2022
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
-2
5
1
4
-205
-183
-384
Fair value hedge
The Group mainly uses 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 4m (2021: -5m).
Refer to section below "Derivative contracts related to the bond issuance" for fair value hedges related to
cross currency swaps.
110 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 17 Financial risks and instruments (continued)
17 Financial risks and instruments continued
Note 18 Change in liabilities arising from financing activities
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
Group 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, 2021
Cash flows:
Cash repayment
Lease payments
Cash proceeds
Non-cash transactions:
Acquisitions of subsidiaries
Acquisitions and disposal of lease liabilities
Adjustment of Euro borrowings *)
Reclassification
Other
Carrying amount as of December 31, 2021
Cash flows:
Cash repayment
Lease payments
Cash proceeds
Non-cash transactions:
Acquisitions of subsidiaries
Acquisitions and disposal of lease liabilities
Adjustment of Euro borrowings *)
Reclassification
Other
Carrying amount as of December 31, 2022
Short-term
borrowings
Long-term
borrowings
68
-90
-64
153
35
23
117
-6
236
-215
-81
250
8
24
212
8
442
1,103
-504
2,156
46
23
-104
-117
105
2,708
-94
353
89
52
-276
-212
82
2,702
Total
1,171
-594
-64
2,309
81
46
-104
99
2,944
-309
-81
603
97
76
-276
90
3,144
Lease payments are the principal portion of lease liabilities and are presented under cash flows from financing
activities in the Statement of cash flows. Further information on leases is provided in Note 11 Leases.
*) Some of the Euro borrowings, are swapped to USD borrowings via cross- currency and interest-swap
derivatives. The impact of this arrangement is that borrowings are reduced with foreign exchange and fair
value adjustments.
Other, includes changes in contingent liabilities/earn-outs and currency translation impacts.
111 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 19 Pensions and healthcare obligations
19 Pensions and healthcare obligations
Note 19 Pensions and healthcare obligations
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 2022, Danfoss acquired Semikron Group and in this respect certain pension plans were taken over.
The largest plan is located in Germany.
The Group's defined-benefit plan obligations
EURm
Present value of defined-benefit plan obligations
Fair value of plan assets
2021
634
-449
185
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:
Defined-benefit plan obligations are presented in the statement of financial position as follows:
Pension benefit plan assets
Pension and healthcare plan obligations
18
203
185
2022
475
-338
137
13
150
137
Germany
USA
UK
Other
Total
Gross
liability
29%
35%
30%
6%
100%
2021
Net
Liability
72%
19%
-9%
18%
100%
Gross
liability
27%
39%
25%
9%
100%
2022
Net
Liability
56%
21%
-8%
31%
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 (2021: 300) active employees. 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.
Plans 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 obligations
EURm
2021
2022
Provision as of January 1
Foreign exchange adjustments in foreign companies
Additions through acquisition of subsidiaries and activities
Pension costs for the year
Calculated interest on plan liabilities
Actuarial gains(-)/losses from changes in demographic assumptions
Actuarial gains(-)/losses from changes in financial assumptions
Plan participants' contribution liabilities
Disbursed benefits from the Group
Disbursed benefits from plan assets
Net transfer from provisions
Provision as of December 31
559
27
72
6
10
1
-18
1
-5
-19
634
634
3
1
9
14
1
-155
1
-9
-18
-6
475
112 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 19 Pensions and healthcare obligations (continued)
19 Pensions and healthcare obligations continued
Note 19 Pensions and healthcare obligations (continued)
Development in the fair value of plan assets
Estimated maturity of provisions
EURm
2021
2022
EURm
2021
2022
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
410
27
3
7
1
12
7
-19
1
449
449
3
10
1
-112
7
-18
-2
338
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 86m (2021: 95m).
Expenses relating to pension and healthcare obligations
Within 1 year
Between 1 and 5 years
After more than 5 years
Pension plan assets are specified as follows:
EURm
Shares and similar securities
Listed corporate bonds
Bonds
Other
24
101
509
634
95
116
80
47
338
25
103
347
475
2022
28%
34%
24%
14%
100%
2021
31%
34%
19%
16%
100%
138
153
83
75
449
Plans in which the pension funds are invested in financial instruments are exposed to risk. 28% (2021: 31%) of
the funds are invested in shares, which have historically been subject to value fluctuations.
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
2021
2022
Significant assumptions for calculation of pension and healthcare obligations and related costs
6
10
-7
9
2
1
4
2
9
9
14
-10
13
4
1
4
4
13
Discount rate
Estimated future salary increase
Life expectancy for a pensioner retiring at the
end of the reporting period
Life expectancy for a pensioner retiring 20 years
after the end of the reporting period
2021
Weighted
average
2.1%
3.7%
2021
Female
Range
Range
1.0-2.7%
1.8-4.7%
Male
Range
2022
Weighted
average
4.8%
3.8%
2022
Female
Range
Range
3.6-5.2%
2.0-4.7%
Male
Range
85-87
87-89
86-87
87-89
87-89
88-90
87-90
89-91
113 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 19 Pensions and healthcare obligations (continued)
19 Pensions and healthcare obligations continued
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 14m to defined-benefit plans in 2023 (2022: 11m).
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
2021
634
2022
475
-42
+45
+8
-8
+21
-21
-26
+29
+4
-4
+13
-13
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).
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. Past
service costs are recognized immediately, provided that the benefits have already vested. If the benefits
have not vested, the past service costs are expensed in the income statement over the period in which
the 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 estimates
The 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.
114 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Tax
Note 20 Tax on profit
20 Tax on profit
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
De-consolidation of Russian activities
Income from associates and joint ventures after tax
Adjustment of net tax assets
Withholding tax on dividends
Hyperinflation restatements
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
Note 21 Deferred tax
21 Deferred tax
2021
2022
Changes in deferred taxes
-239
48
3
-188
22.0%
1.7%
-2.5%
-0.1%
0.5%
1.9%
-0.1%
-0.4%
23.0%
-314
46
2
-266
22.0%
2.8%
-2.2%
2.0%
-0.1%
1.1%
1.6%
1.4%
-0.3%
-0.3%
28.0%
2021
2022
-188
-266
-1
-7
-196
-31
-15
-312
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
2021
2022
-107
-25
2
48
-10
-92
-92
-3
-78
-10
-1
46
-48
-186
2021
2022
Deferred
tax asset
Deferred
tax asset
2
47
23
150
50
-43
229
-156
73
31
68
36
160
100
-54
341
-202
139
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.
115 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 21 Deferred tax (continued)
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
2021
2022
Deferred
tax
Deferred
tax
165
114
11
26
5
321
-156
165
312
97
18
99
1
527
-202
325
The tax asset related to tax-loss carry-forwards of EUR 46m net (2021: 7m) 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, 100% (2021: 99%) 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 54m (2021: 43m).
The amount is not recognized as an asset, as the tax losses carried forward are not expected to be utilized.
13% of the amount (2021: 13%) has a remaining period of 3 years or less, whereas the share with a
remaining period of 10 years or more totals 82% (2021: 82%).
Of the deferred tax liability of EUR 325m (2021: 165m), EUR 1m (2021: 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 42m (2021: 21m). 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
crystallized 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.
116 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 22 Corporation tax
22 Corporation tax
Other notes
EURm
2021
2022
23 Adjustment for non-cash transactions
Note 23 Adjustment for non-cash transactions
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
2021
2022
397
-58
-2
-5
63
-10
385
536
36
-3
-14
108
-20
643
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
-1
-209
-3
-1
239
-2
62
34
96
62
62
8
-233
-12
-1
314
-1
137
27
164
137
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 judgement 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.
117 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 24 Contingent liabilities, assets and securities
24 Contingent liabilities, assets and securities
Note 25 Related parties
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
2021
2022
115
253
337
138
262
335
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 (2021: 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 the company (2021: 2m). 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 2022, these shares constitute less than 1% of the share capital in Danfoss A/S.
Around 96% of Danfoss A/S' dividend payments are related to the Bitten & Mads Clausen's Foundation and
shareholders from the Clausen family.
Contractual obligations
EURm
Service contract commitment other than leases
Inventories
Property, plant and equipment
Purchase commitments
2021
2022
123
194
108
425
281
210
226
717
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 Mads Clausen have significant ownership interests have sold goods and services of less than
EUR 0.7m (2021: 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.
118 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 25 Related parties (continued)
25 Related parties continued
27 General accounting policies
Transactions with associates and joint ventures
EURm
Sales of goods and services
Purchases of goods and services
2021
2022
3
17
4
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.
26 Events after the balance sheet date
Note 26 Events after the balance sheet date
Subsequent to December 31, 2022, 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.
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”.
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.
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.
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.
119 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
27 General accounting policies continued
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.
On disposal of partially owned foreign subsidiaries, the part of the translation reserve related to minority
interests is not recognized in the income statement.
Repayments of balances which are considered part of the net investment are not considered a partial disposal
of the subsidiary.
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.
120 — Danfoss Annual Report 2022
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
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.
Transition to hyperinflation
In 2022, Turkey was included on The International Practices Task Force’s (IPTF) list of hyperinflationary economies
based on several qualitative and quantitative conditions, including that the accumulated inflation over a 3-year
period exceeded 100% after several years of increasing inflation.
As a result of this classification, Danfoss has implemented IAS 29 on financial reporting in hyperinflationary
economies regarding the group’s Turkish subsidiaries. The implementation of IAS 29 means that the accounting
figures for the Turkish subsidiaries are restated so that they reflect the current purchasing power at the end of
the accounting period. In this regard, both non-monetary items, including fixed assets, inventories, equity and
the income statement are restated to the current purchasing power on the balance sheet date. Monetary items
such as receivables, debts and bank debts etc. in itself reflect the current purchasing power, as the items consist
of cash, receivables, or debts in the current monetary unit.
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27 General accounting policies continued
At the same time, IAS 29, with reference to IAS 21 on currency conversion, requires that all the year’s
transactions in the hyperinflationary currency, the Turkish lira, TRY, be converted into the group’s presentational
currency, euro, EUR, using the exchange rate on the balance sheet date. All Turkish transactions in the financial
year have thus been converted to EUR using the exchange rate on 31 December 2022, in contrast to the group’s
usual practice, according to which the profit and loss account transactions are converted to the exchange rate
on the day of the transaction.
Basis for hyperinflation restatements
The hyperinflation restatement of the accounting figures for Turkey is based on the development in the
available general price index in Turkey, which consists of the Turkish Consumer Price Index (CPI) in the period
from and including January 2022. The price index has changed so that the inflation amounted to 63% in 2022.
Impact on key figures
EURm
Income Statement
External net sales
Profit before tax
Tax
Profit
The exchange rate between TRY and EUR has fallen from 0.067 at the beginning of the year to 0.050 at the end
of the year. This constitutes a decrease of 25%.
Intangible and tangible assets as well as inventories in Danfoss’ Turkish business are adjusted for inflation
based on the changes in the price index from the time of first recognition until 31 December 2022 or until the
date of any departure or consumption of goods during 2022. The adjustments have been made from the first
recognition of the items in the accounts, however, from 1 January 2022 at the earliest.
Statement of financial position
Non-monetary assets
Equity
Financial measures
2022
12
-15
-11
-26
43
32
Equity in Turkey is adjusted for inflation based on the development of the price index in the financial year 2022
to reflect purchasing power on the balance sheet date. In the income statement, all transactions in 2022 are
adjusted for changes in the price index from the month of recognition in the income statement to the price
index per 31 December.
Time and practice for recognition
Implementation of IAS 29 was made retroactively from 1 January 2022 and were recognized for the first time
in the group’s Annual Report for year of 2022 with a total effect for the period from 1 January 2022 to 31
December 2022.
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.
The non-IFRS financial measures are calculated in the following manner:
Organic growth
Sales growth adjusted for exchange rate translation and M&A effects.
Local currency growth
Sales growth adjusted for exchange rate translation.
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:
121 — Danfoss Annual Report 2022
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27 General accounting policies continued
EURm
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
2020
2021
2022
Return on Invested Capital (ROIC) after tax
EBIT after tax/average invested capital excluding tax
625
-6
3
47
19
35
877
-2
6
54
24
10
1,043
-3
13
80
51
40
Invested capital excluding tax
Net interest-bearing debt and tax balance sheet items (net) added to shareholders’ equity
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
723
969
1,224
Equity ratio
Equity/total assets
EBITDA margin
Operating profit (EBIT) before depreciation, amortization, impairment and profit from associates & joint ventures
/net sales
Leverage ratio
Interest-bearing debt/equity at year-end
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
122 — Danfoss Annual Report 2022
Net interest-bearing debt to EBITDA ratio
Interest-bearing debt, including fair value of derivatives hedging the underlying 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 cash flow
Cash flow from operating and investing activities including lease payments (IFRS16)
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).
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27 General accounting policies continued
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:
EURm
2020
2021
2022
Free operating cash flow after financial items and tax
Cash flow from operating activities
Cash flow from investing activities
Acquisition of subsidiaries
Disposal of subsidiaries
Acquisition of other investments
Proceeds from sale of other investments
Lease payments
Free operating cash flow after financial items and tax
800
-242
-4
-61
493
838
-2,794
+2,664
-241
-2
-64
401
1,053
-931
+441
-12
-5
-81
465
123 — Danfoss Annual Report 2022
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28 Group companies
Per December 31, 2022
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 – 60%
Bulgaria
Danfoss EOOD
Croatia
Danfoss d.o.o.
Czech Republic
Danfoss s.r.o.
Danfoss Power Solutions II s.r.o
Denmark
Danfoss Distribution Services A/S
Danfoss Distribution II A/S
Danfoss Fire Safety A/S
Danfoss International A/S
Danfoss IXA A/S – 75%
Danfoss Power Electronics A/S
Danfoss Power Solutions ApS
Danfoss Power Solutions Holding ApS
Danfoss Power Solutions Holding II ApS
124 — Danfoss Annual Report 2022
Danfoss Redan A/S
Enfor A/S – 17% (associate)
Gemina Termix Production A/S
Issab Holding ApS
Semikron Danfoss Holding A/S – 61%
Sondex Holding A/S
Estonia
Danfoss AS
Finland
Danfoss Editron Oy
Danfoss Power Solutions Oy Ab
Oy Danfoss Ab
Leanheat Oy
Semikron Oy – 61%
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.
Semikron S.a.r.l – 61%
Germany
Danfoss Esslingen Gm0bH
Danfoss GmbH
Danfoss Deutschland GmbH
Danfoss Power Solutions GmbH & Co. OHG
Danfoss Power Solutions Holding GmbH
Danfoss Power Solutions Informatic GmbH
Danfoss Power Solutions II GmbH
Danfoss Sensors GmbH
Danfoss Silicon Power GmbH – 61%
Danfoss Werk Offenbach GmbH - in liquidation
Semikron Elektronik GmbH & Co. KG – 61%
Semikron Elektronik Verwaltungs GmbH – 61%
Semikron International GmbH – 61%
SMA Solar Technology AG – 20% (associate)
Sondex Deutschland GmbH
Great Britain
Artemis Intelligent Power Ltd.
Danfoss Limited
Danfoss Power Solutions Ltd.
Danfoss Power Solutions II Ltd.
Danfoss Scotland Ltd.
Semikron Ltd. – 61%
Senstronics Holding Ltd. – 50% (joint venture)
Senstronics Limited – 50% (joint venture)
Hungary
Danfoss Kft.
Iceland
Danfoss hf.
Italy
Danfoss Distribution Services S.r.l.
Danfoss Power Solutions S.r.l.
Danfoss S.r.l.
Eaton Fluid Power S.r.l.
Semikron S.r.l. – 61%
Kazakhstan
Danfoss LLP
Latvia
Danfoss SIA
Lithuania
Danfoss UAB
The Netherlands
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.
Semikron B.V. – 61%
Sondex B.V.
Sondex Holding Netherlands B.V.
Norway
Danfoss AS
Danfoss Power Solutions AS
Poland
Danfoss Poland Sp. z.o.o.
Danfoss Saginomiya Sp. z.o.o. – 50% (joint venture)
Elektronika S.A. – 50% (joint venture)
Semikron Sp.z.o.o. – 61%
Sondex Braze Sp. z.o.o.
Sondex Poland Sp. z.o.o. - in liquidation
Sondex Sp. z.o.o.
Romania
Danfoss S.r.l.
S.C. Sondex Production S.r.l.
Russia
AO Ridan*
Ridan LLC*
Semikron OOO – 61% – in liquidation
Serbia
Danfoss d.o.o.
Slovakia
Danfoss Power Solutions a.s.
Danfoss spol. s.r.o.
Semikron s.r.o – 61%
Slovenia
Danfoss Trata d.o.o.
Spain
Danfoss S.A.
Danfoss Power Solutions Telecontrol, S.L.U.
Danfoss Power Solutions S.A.
Semikron Electronics S.L – 61%
* Companies in Russia have been excluded from the Group consolidation as of 31/08-2022
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Statements
28 Group companies continued
Sweden
Danfoss AB
Danfoss Power Solutions AB
EP Technology AB
Ohmia Retail Sweden AB – 33% (associate)
Switzerland
Danfoss AG
Semikron AG – 61%
Ukraine
Danfoss T.o.v.
AFRICA – MIDDLE EAST
Egypt
Danfoss Egypt LLC
South Africa
Danfoss (Pty) Ltd.
Danfoss South Africa (Pty.) Ltd.
Sondex South Africa Pty. Ltd. – 80%
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
NORTH AMERICA
Canada
Aeroquip-Vickers Canada Company
Danfoss Inc.
USA
Daikin-Sauer-Danfoss America LLC – 45%
Danfoss LLC
Danfoss Power Solutions Inc.
125 — Danfoss Annual Report 2022
Danfoss Power Solutions II, LLC
Danfoss Power Solutions (US) Company
Danfoss Power Solutions Work Function, LLC
Danfoss Silicon Power LLC – 61%
Hydro-Gear Inc. – 60%
Hydro-Gear Limited Partnership – 60%
Hydro-Gear of Indiana, LLC – 60%
Semikron Inc. – 61%
Sondex Equipment Holding, LLC
Sondex Properties, Inc.
LATIN AMERICA
Argentina
Danfoss S.A.
Brazil
Aeroquip do Brasil Ltda.
Danfoss do Brasil Indústria e Comércio Ltda.
Danfoss Power Solutions Comércio e Indústria Ltda.
Semikron Semiconductures Ltda. – 61%
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. – in liquidation
Danfoss Power Solutions IV S.A. de C.V. – in liquidation
Eaton Controls, S. de R.L. de C.V.
Semikron de México S.A. de C.V. – 49%
ASIA-PACIFIC
Australia
Danfoss (Australia) Pty. Ltd.
Danfoss Power Solutions Pty. Ltd.
Danfoss Power Solutions II Pty. Ltd.
Semikron Pty. Ltd. – 61%
Sondex Australia Pty. Ltd.
Sondex Engineering Pty. Ltd.
P. R. of China
Danfoss (Anshan) Controls Co., Ltd.
Danfoss (China) Investment Co., Ltd.
Danfoss ( Tianjin) Ltd.
Danfoss Micro Channel Heat Exchanger (Jiaxing) Co., Ltd.
Danfoss (Jiaxing) Plate Heat Exchanger Co., Ltd.
Danfoss Power Electronics (Nanjing) Co., Ltd
Danfoss Power Solutions (Jiangsu) Co., Ltd.
Danfoss Power Solutions (Jining) Co., Ltd.
Danfoss Power Solutions (Luzhou) Co., Ltd.
Danfoss Power Solutions (Nanjing) Co., Ltd.
Danfoss Power Solutions (Ningbo) Co., Ltd.
Danfoss Power Solutions Trading (Shanghai) Co., Ltd.
Danfoss Power Solutions (Zhejiang) Co., Ltd.
Danfoss Shanghai Hydrostatic Transmission Co., Ltd. – 60%
Danfoss (Tianjin) Fire Safety Co., Ltd.
Eaton Fluid Power (Shanghai) Co., Ltd.
Eaton Industrial Clutches and Brakes (Shanghai) Co., Ltd.
Semikron Electronics (Zhuhai) Co., Ltd. – 61%
Sondex Plate Heat Exchanger (Taicang) Co., Ltd.
Vacon (China) Drives Co., Ltd.
Zheijang Holip Electronic Technology Co., Ltd.
Hong Kong
Danfoss Industries Limited
Semikron Hong Kong Co., Ltd. – 61%
Vickers Systems Limited
India
Danfoss Fluid Power Pvt. Ltd.
Danfoss Industries Pvt. Ltd.
Danfoss Power Solutions India Pvt. Ltd.
Danfoss Technologies Pvt. Ltd.
Danfoss Systems Limited – 98%
Semikron Electronics Pvt. Ltd. – 61%
Indonesia
PT Danfoss Indonesia
Iran
Danfoss Pars Private Joint Stock Company - in liquidation
Japan
Daikin-Sauer-Danfoss Ltd. – 45%
Danfoss Power Solutions Ltd.
Danfoss Power Solutions (Japan) Ltd.
Semikron K.K. – 61%
Malaysia
Danfoss Malaysia Sdn. Bhd.
Danfoss Power Solutions II 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.
Semikron Co., Ltd. – 61%
Taiwan
Danfoss Co. Ltd.
Thailand
Danfoss (Thailand) Co. Ltd.
New Zealand
Danfoss (New Zealand) Ltd.
Danfoss Power Solutions II Ltd.
Letter from CEO
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Environment
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ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Parent accounts
and notes
127 — Management’s review for Danfoss A/S
129 — Parent accounts
133 — Parent notes
126 — Danfoss Annual Report 2022
Letter from CEO
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Financial review
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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 2,814 employees at the end
of 2022.
In 2022 Danfoss A/S merged as the continuing
entity with the following fully owned
subsidiaries:
• Sondex A/S
• Danfoss Compressors Holding A/S
• Danfoss Power Solutions II Technology A/S
The mergers have been done with retro
perspective effect and comparative
information for 2021 has been adjusted
accordingly. The effect from the mergers is
shown in the table to the right.
127 — Danfoss Annual Report 2022
The profit before other operating income and
expenses was EUR 130m against EUR 84m in
2021. The company’s operating profit was EUR
116m against EUR 94m the previous year.
Financial income and expenses decreased
to a net income of EUR 128m against a net
income of EUR 174m in 2021, mainly due to
an increase in received dividends, impact of
foreign exchange contracts and increased
impairment of subsidiaries.
The profit after tax in 2022 was EUR 200m
against EUR 241m the previous year.
Equity was EUR 3,290m at the end of
2022 against EUR 3,273m at the end of 2021.
The increase was mainly attributable to
recognition of the profit for the year.
Danfoss A/S expects net sales for 2023 to
be on a level with the 2022 figures, and the
company expects to report a profit in 2023.
Gender split senior leadership
positions
Split between gender in senior leadership
positions are reported as the two levels under
Board of Directors of the Parent Company
Danfoss A/S in compliance to the Danish
Financial Statements Act §99b. The two levels
under Board of Directors are defined as the level
that reports directly to the Board of Directors (1st
level) and the level that reports to this level (2nd
level). The calculation is based on headcount
and is reported as the ratio of male to female
employees in senior leadership positions.
The ratio for 2022 is 83.3/16.7. Danfoss is
committed to increase the gender diversity in
senior leadership positions.
EURm
Net sales
Gross profit
Operating profit (EBIT)
Profit before tax
Net profit
EURm
Intangible assets
Tangible assets
Shares in subsidiaries
Other non-current assets
Total current assets
Total assets
Equity
Non-current liabilities
Current liabilities
Total liabilities and shareholders’ equity
Danfoss A/S
2021
Effect from mergers
Danfoss A/S
new 2021
1,335
276
96
267
240
94
24
-2
1
1
1,429
300
94
268
241
Danfoss A/S
closing
31 December 2021
Effect from mergers
Danfoss A/S
new balances
1 January 2022
243
264
2,852
1,444
1,122
5,925
3,272
1,060
1,593
5,925
86
33
0
0
-72
47
1
4
42
47
329
297
2,852
1,444
1,050
5,972
3,273
1,064
1,635
5,972
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
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Governance
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Financial review
Group accounts and notes
Parent accounts and notes
Statements
Parent accounts and notes
Parent accounts
Parent notes
Income statement
Statement of comprehensive income
Statement of financial position
Statement of cash flows
Statement of changes in equity
129
129
130
131
132
Income statement
1
Net sales, expenses and
other operating income
Capital employed
Investments
2
3
Intangible assets
4 Property, plant and equipment
5 Leases
133
134
136
137
139
Capital structure and financing
6 Financial income and expenses
7 Financial risks and instruments
8
Change in liabilities arising from
financing activities
Tax
9 Tax on profit
10 Deferred tax
11 Corporation tax
139
140
141
142
142
143
128 — Danfoss Annual Report 2022
Other notes
12 Adjustment for non-cash transactions
143
13 Contingent liabilities, assets and securities 144
14 Related parties
144
144
15 Events after the balance sheet date
16 General accounting policies for Danfoss A/S 145
17
Significant accounting estimates
for Danfoss A/S
145
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Statements
Statement of comprehensive income
Statement of comprehensive income
January 1 to December 31
January 1 to December 31
Note
2021
2022
EURm
1,429
-1,129
300
1,569
-1,153
416
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
243
200
2021
2022
241
200
2
2
2
1
1
1
1
1
1
6
6
9
-64
-95
-57
84
10
94
228
-54
268
-27
241
189
52
241
-123
-96
-67
130
-14
116
447
-319
244
-44
200
205
-5
200
Income statement
Income statement
January 1 to December 31
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
129 — Danfoss Annual Report 2022
Letter from CEO
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Financial review
Group accounts and notes
Parent accounts and notes
Statements
Statement of financial position
Statement of financial position
As of December 31
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
Derivative financial instruments (positive fair value)
Other receivables
Receivables
Cash and cash equivalents
Total current assets
Note
2021
2022
EURm
3
4
2
11
7
7
329
297
4,296
4,922
316
340
4,765
5,421
132
61
140
925
8
26
1,160
125
55
171
438
10
46
720
205
Shareholders' equity
Non-current liabilities
Provisions
Deferred tax liabilities
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
Debt to associates and joint ventures
240
Corporation tax
1,050
1,532
Derivative financial instruments (negative fair value)
Other debt
Total current liabilities
Total liabilities
Total assets
5,972
6,953
Total liabilities and shareholders' equity
130 — Danfoss Annual Report 2022
Note
2021
2022
3,273
3,290
10
7
7
11
7
9
47
402
564
42
9
54
667
983
58
1,064
1,771
10
12
206
49
7
211
185
40
1,239
1,301
2
26
3
8
108
120
1,635
1,892
2,699
3,663
5,972
6,953
Letter from CEO
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Our business
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Environment
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ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Statement of cash flows
Statement of cash flows
January 1 to December 31
January 1 to December 31
EURm
Note
2021
2022
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 proceeds from interest-bearing debt
Cash repayment of (-)/cash proceeds from borrowings from subsidiaries
Purchase of treasury shares
Sale of treasury shares
Dividends paid to shareholders in the Parent Company
Cash flow from financing activities
Net change in cash and cash equivalents
Cash and cash equivalents as of January 1
Cash and cash equivalents as of December 31
12
11
8
8
268
-152
-40
30
-35
164
-23
212
-111
-46
30
-295
4
-370
-788
-571
798
-2
2
227
-349
554
205
244
-66
35
39
-19
360
1
594
-28
-82
-3
-1,249
18
23
-1,321
-75
538
482
-2
2
-183
762
35
205
240
131 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
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Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Statement of changes in equity
Statement of changes in equity
EURm
Balance as of January 1, 2021
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
Net profit
Software-development costs
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, 2022
134
10
For further information on Equity and Share capital, see Statement of changes in equity and Note 16 Share capital, in Group section.
132 — Danfoss Annual Report 2022
e
r
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h
S
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134
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S
i
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10
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s
-309
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i
l
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m
p
o
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r
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138
-5
-5
s
e
v
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s
e
r
r
e
h
t
O
3,057
52
5
2
2
59
s
e
v
r
e
s
e
R
2,886
52
2
2
54
-2
2
133
3,116
2,940
-4
-4
-5
4
-1
6
6
-5
-5
6
-2
2
6
129
3,121
2,941
d
e
s
o
p
o
r
P
s
d
n
e
d
i
v
i
d
189
189
189
205
205
-189
-189
205
y
t
i
u
q
e
l
a
t
o
T
3,030
241
2
2
243
-2
2
3,273
200
200
-183
-2
2
-183
3,290
-2
2
-309
-2
2
-309
Letter from CEO
Danfoss at a glance
Our business
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Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Income statement
Note 1 Net Sales, expenses and other operating income
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 and income from royalties, Group members
2021
2022
EURm
2021
2022
C. Depreciation/amortization and impairment losses
1,221
208
1,429
1,262
307
1,569
Classification by nature:
Amortization of intangible assets
Depreciation of property, plant and equipment
Depreciation/amortization and impairment losses
44
41
85
42
2
44
30
11
41
42
42
84
41
1
42
32
10
42
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
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
2021
2022
271
5
9
21
306
277
3
9
22
311
2,859
2,827
2,826
2,814
4
2
7
14
27
1
28
4
1
5
14
24
1
25
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. Severance payments of EUR 2m.
(2021: 0m) are included in bonuses, long term.
Total remuneration for registered members of Executive Management amounts to EUR 17m (2021: 20m).
133 — Danfoss Annual Report 2022
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Governance
ESG statements
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Group accounts and notes
Parent accounts and notes
Statements
1
Note 1 Net Sales, expenses and other operating income
Net sales, expenses and other operating income
continued
Capital employed
2021
2022
Investments
2
Note 2 Investments
EURm
4
19
3
26
-5
-11
-16
10
1
1
1
3
-5
-3
-9
-17
-14
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
i
s
t
n
e
m
t
s
e
v
n
I
i
s
e
i
r
a
d
i
s
b
u
s
2,774
1
295
-99
2,971
-199
2
-17
95
-119
m
o
r
f
l
s
e
b
a
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R
i
n
i
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I
d
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a
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a
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o
s
s
a
i
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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
2021
l
a
t
o
T
4,056
1
473
-99
4,431
-218
5
-17
95
-135
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 2021 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 2021 on "Investments in subsidiaries" of EUR 17m 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.
EURm
D. Other operating income and expenses
Other gains related to acquisitions/disposals
Gain on disposal of property, plant and equipment
Government grants
Other
Other operating income
Loss on disp. of intangible fixed assets
Restructuring costs
Other
Other operating expenses
Other operating income and expenses
EURm
2021
2022
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
1
0
0
1
2
1
0
0
1
2
134 — Danfoss Annual Report 2022
Letter from CEO
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Our business
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Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 2 Investments (continued)
Investments continued
2
EURm
Costs as of January 1
Additions
Disposals
Costs as of December 31
Adjustments as of January 1
Reversed impairment
Impairment for the year
Adjustments as of December 31
n
i
s
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e
m
t
s
e
v
n
I
i
s
e
i
r
a
d
i
s
b
u
s
2,971
1,246
-9
4,208
-119
15
-278
-382
m
o
r
f
l
s
e
b
a
v
e
c
e
R
i
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i
s
t
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a
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s
s
a
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i
s
b
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s
s
e
r
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t
n
e
v
t
n
o
i
j
1,124
316
-505
619
316
Carrying amount as of December 31
3,826
619
316
Note 2 Investments (continued)
Impairment tests
Where indicators for impairment were present at the end of 2022, impairment tests were performed on the
carrying amount of "Investments in subsidiaries, associates and joint ventures". Main indicators are loss-making
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 2021.
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.
2022
l
a
t
o
T
4,431
1,246
-514
5,163
-135
15
-278
-398
4,765
r
e
h
t
O
s
t
n
e
m
t
s
e
v
n
i
20
20
-16
-16
4
Additions for the year to "Investments in subsidiaries" is mainly related to investment in Semikron Danfoss
Holding A/S, Danfoss Power Solutions S.r.l. (Italy) and Danfoss Deutschland GmbH.
Impairment losses for the year on "Investments in subsidiaries" of EUR 278m mainly relates to
Sondex Holding A/S, Danfoss Scotland Ltd. and Danfoss Editron Oy. The impairment is caused by a lower
valuation of the entity due to lower earnings during recent years and expected lower earnings in future
years.
Impairment losses/reversed impairment are reported as financial expenses/financial income.
The principle for calculating recoverable amounts is basically the same as described in Note 9 Intangible
assets in the Group section, with the main difference that the focus is on a stand-alone company basis.
In the calculation of recoverable amounts discount rates of around 11% to 15%, before tax, are used.
135 — Danfoss Annual Report 2022
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Environment
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Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 3 Intangible assets
Intangible assets
3
EURm
Cost as of January 1, 2021
Additions
Disposals
Cost as of December 31, 2021
Amortization and impairment losses as of January 1, 2021
Amortization
Impairments for the year
Disposals
Amortization and impairment losses as of December 31, 2021
Carrying amount as of December 31, 2021
Cost as of January 1, 2022
Additions
Disposals
Cost as of December 31, 2022
Amortization and impairment losses as of January 1, 2022
Amortization
Disposals
Amortization and impairment losses as of December 31, 2022
Carrying amount as of December 31, 2022
Goodwill
Internally developed
software
Patents, trademarks
and other rights
Development
costs
Total
Other
Total
83
83
3
3
80
83
83
3
3
80
284
33
-26
291
107
39
-26
120
171
291
33
-6
318
120
35
-2
153
165
26
78
-2
102
21
5
-2
24
78
102
-3
99
24
7
-3
28
71
10
-8
2
10
-8
2
2
2
2
2
320
111
-36
395
138
44
-36
146
249
395
33
-9
419
146
42
-5
183
236
403
111
-36
478
138
44
3
-36
149
329
478
33
-9
502
149
42
-5
186
316
Of the "internally developed software" approximately 60% relates to the One ERP Program.
Impairment tests
Goodwill in Danfoss A/S of EUR 80m (2021: 80m) 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 2022, 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 assess that a reasonable change in the fundamental assumptions used in the impairment tests will not result in a recoverable amount lower than the carrying amount. The same conclusion was made for 2021.
136 — Danfoss Annual Report 2022
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Group accounts and notes
Parent accounts and notes
Statements
Land and
buildings
Plant and
machinery
Equipment
Assets under
construction
Total
321
14
18
-34
319
194
1
11
-34
172
147
319
5
5
-2
327
172
14
-2
184
143
339
16
3
-59
299
291
14
-48
257
42
299
1
5
7
-27
285
257
-5
12
-26
238
47
118
2
-4
116
43
-1
16
-4
54
62
116
9
1
-5
121
54
5
16
-5
70
51
49
-30
27
46
46
46
-19
72
99
99
827
50
-97
780
528
41
-86
483
297
780
1
85
-34
832
483
42
-33
492
340
Note 4 Property, plant and equipment
4 Property, plant and equipment
EURm
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
Cost as of January 1, 2022
Addition through acquisition of subsidiaries/activities
Transfers
Additions
Disposals
Cost as of December 31, 2022
Depreciation and impairment losses as of January 1, 2022
Transfers
Depreciation
Disposals
Depreciation and impairment losses as of December 31, 2022
Carrying amount as of December 31, 2022
137 — Danfoss Annual Report 2022
Letter from CEO
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Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 4 Property, plant and equipment (continued)
4 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, 2021
Additions
Depreciation
Carrying amount related to right-of-use assets as of December 31, 2021
Carrying amount related to right-of-use assets as of January 1, 2022
Additions
Depreciation
Carrying amount related to right-of-use assets as of December 31, 2022
Further information on leases is provided in Note 5 Leases.
Land and
buildings
Equipment
Total
5
-1
4
4
1
-1
4
19
1
-8
12
12
2
-8
6
24
1
-9
16
16
3
-9
10
138 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 5 Leases
5 Leases
Lease liabilities are included as borrowings in the statement of financial position as follows:
EURm
Current
Non-current
2021
2022
8
8
6
4
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, 2022, was EUR 10m (2021: 9m).
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.
Capital structure and financing
6 Financial income and expenses
Note 6 Financial income and expenses
EURm
Financial income
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.
Reversal of impairment on loans
Financial income
Interest on financial assets measured at amortized cost
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
Financial expenses
Interest on financial liabilities measured at amortized cost
2021
2022
164
35
5
23
1
228
36
-27
-17
-5
-5
-54
-32
360
54
24
3
6
447
57
-20
-4
-278
-17
-319
-37
The impact of derivatives/foreign exchange contracts of EUR 8m is included in Foreign exchange losses, net.
(2021: 27m included in Foreign exchange gains, net).
Further information on leases is provided in Note 5 Leases.
139 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 7 Financial risks and instruments
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
Financial assets:
Investments in associates and joint ventures
Financial assets measured at equity method
Other investment **)
External derivatives *)
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
2021
Fair
value
Carrying
amount
316
316
272
272
4
4
55
171
438
46
205
915
4
4
55
171
438
46
205
915
2022
Fair
value
Carrying
amount
316
316
4
8
12
61
140
925
26
240
478
478
4
8
12
61
140
925
26
240
1,392
1,392
29
29
27
27
385
49
1,803
359
443
49
1,803
359
851
40
2,284
365
846
40
2,284
365
Financial liabilities measured at amortized cost
2,596
2,654
3,540
3,535
Financial liabilities measured at fair value in
the income statement *)
8
8
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
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
1,239
9
206
49
3
l
a
u
t
c
a
r
t
n
o
C
w
o
l
f
h
s
a
c
309
73
29
1,803
17
206
49
3
l
a
u
t
c
a
r
t
n
o
C
w
o
l
f
h
s
a
c
793
79
27
2,284
10
185
40
2
i
g
n
y
r
r
a
C
t
n
u
o
m
a
777
64
27
2,284
10
185
40
2
2022
Maturity
r
a
e
y
1
-
0
)
*
s
r
a
e
y
5
r
e
v
O
s
r
a
e
y
5
-
1
75
584
3
24
983
4
209
1
3
1,301
6
185
40
2
2,489
1,513
904
72
3,389
3,420
1,747 1,598
75
i
g
n
y
r
r
a
C
t
n
u
o
m
a
299
69
29
1,803
17
206
49
3
8
2,483
*) Maturity is evenly spread over the period.
Further information on leases is provided in Note 5 Leases.
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.
140 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 7 Financial risks and instruments (continued)
7 Financial risks and instruments continued
Note 8 Change in liabilities arising from financing activities
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, 2021
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
Long-term
borrowings
16
-63
-7
1
69
-4
12
-64
-6
200
1
69
-1
211
946
-501
1
-69
25
402
-5
338
1
-69
667
Total
962
-564
-7
2
21
414
-69
-6
538
2
-1
878
Non-cash transactions:
Acquisitions and disposal of lease liabilities
Reclassification
Other
Carrying amount as of December 31, 2021
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, 2022
Lease payments are the principal portion of lease liabilities and are presented under cash flows from financing
activities in the Statement of Cash Flow.
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 2021.
Derivates as of December 31 for Danfoss A/S
2022
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
5
5
-2
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
t
n
u
o
m
a
l
a
n
o
i
t
o
N
-202
31
-116
e
u
a
v
l
r
i
a
f
t
e
N
5
5
-2
8
8
EURm
USD
EUR
Other currencies
Forward exchange contracts
Derivatives end of year
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
141 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Tax
Note 9 Tax on profit
9 Tax on profit
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
142 — Danfoss Annual Report 2022
Note 10 Deferred tax
10 Deferred tax
2021
2022
Changes in deferred taxes
-24
-5
2
-27
22.0%
0.6%
-13.5%
1.6%
-0.6%
10.1%
-39
-4
-1
-44
22.0%
25.6%
-32.5%
2.7%
0.2%
18.0%
2021
2022
-27
-27
-44
-44
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
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
2021
2022
-38
-4
-5
-47
-47
-3
-4
-54
2021
Deferred
tax asset
2022
Deferred
tax asset
6
13
19
-19
0
5
10
15
-15
0
Deferred
tax liability
Deferred
tax liability
33
12
2
14
5
66
-19
47
33
11
2
22
1
69
-15
54
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 10 Deferred tax (continued)
10 Deferred tax continued
Other notes
Of the deferred tax liability of EUR 54m (2021: 47m), EUR 1m (2021: 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 20m (2021: 18m). 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
11 Corporation tax
EURm
2021
2022
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
Liabilities
-5
-23
-6
24
-10
10
-10
-10
1
-4
39
26
26
26
12 Adjustment for non-cash transactions
Note 12 Adjustment for non-cash transactions
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
2021
2022
85
-19
-228
54
-44
-152
84
4
-447
319
-26
-66
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.
143 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 13 Contingent liabilities, assets and securities
13 Contingent liabilities, assets and securities
Note 14 Related parties
14 Related parties
Securities
EURm
For more information about related parties, see Note 25 Related parties, in Group section.
2021
2022
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
115
16
85
138
10
74
EURm
Purchases of goods and services
2021
2022
20
19
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
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.
Contractual obligations
EURm
Service contract commitment other than leases
Inventories
Property, plant and equipment
Purchase commitments
2021
2022
61
44
4
109
169
36
72
277
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.
Transactions between Danfoss A/S and the subsidiaries
EURm
Sales of goods and services
Purchases of goods and services
Disposal of intangible assets and property, plant and equipment
2021
2022
1,397
590
24
1,556
696
3
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
15 Events after the balance sheet date
Subsequent to December 31, 2022, 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.
144 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Note 16 General accounting policies for Danfoss A/S
16 General accounting policies for Danfoss A/S
Note 17 Significant accounting estimates for Danfoss A/S
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, 2022, 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.
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.
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.
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.
Significant subsidiaries, that are merged into Danfoss A/S are accounted for according to the
“Group-method" (Koncernmetoden), which means it has retro perspective effect and comparative
information is adjusted accordingly. Any difference between accumulated cost price (after any impairments)
and merged net assets (January 1, 2021) is treated as goodwill.
In 2022 Danfoss merged with certain subsidiaries, refer to “Management’s review for Danfoss A/S”, where the
impact on main comparative figures is also stated.
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.
145 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Statements
147 — Management’s statement
148 — Independent Auditor’s Report
146 — Danfoss Annual Report 2022
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
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, 2022.
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, 2022, of
the Group and the Parent Company and of
the results of the Group and Parent Company
operations and cash flows for 2022.
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 1, 2023
CEO and CFO
Kim Fausing
Jesper V. Christensen
147 — Danfoss Annual Report 2022
Board of Directors
Jens Bjerg Sørensen, Chair
Mads Clausen
Mads-Peter Clausen
Karin Dohm
Per Falholt
Connie Hedegaard
Jürgen Reinert
Mika Vehviläinen
Henning Bjørklund
Marianne Godballe
Henning Andreas Krogh
Bent Lewke
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
Independent Auditor’s Report
To the Shareholders of Danfoss A/S
Basis for Opinion
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, 2022 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, 2022 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, 2022, pp. 79-125 and
129-145, 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”).
148 — Danfoss Annual Report 2022
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. 1-78 and 126-128.
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.
Letter from CEO
Danfoss at a glance
Our business
Core & Clear 2025
Environment
Social
Governance
ESG statements
Financial review
Group accounts and notes
Parent accounts and notes
Statements
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.
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
149 — Danfoss Annual Report 2022
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.
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.
• 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.
• Evaluate the appropriateness of accounting
• Obtain sufficient appropriate audit evidence
regarding the financial information of
the entities or business activities within
the Group to express an 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.
policies used and the reasonableness
of accounting estimates and related
disclosures made by Management.
• 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
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 1, 2023
PricewaterhouseCoopers
Statsautoriseret Revisionspartnerselskab
CVR No 33 77 12 31
Lars Baungaard
State Authorised Public Accountant
mne23331
Mads Melgaard
State Authorised Public Accountant
mne34354
Further information available
on Danfoss’ website: www.danfoss.com
Date of publication: March 1, 2023
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