Sauer-Danfoss Inc. Annual Report 2023

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FY2023 Annual Report · Sauer-Danfoss Inc.

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Strong partnerships
and bold investments

Annual Report 2023

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Danfoss Annual Report 2023

Letter from the CEO

Danfoss at a glance

Our purpose

Our business

Our strategy

Sustainability

ESG statements

Financial statements

2 /158

PAGE 3-78

Management’s Review

Letter from the CEO
3

Letter from the CEO

Danfoss at a glance
Danfoss in brief
6
Our transformation highlights
7
In 2023, we continued our positive development
13
14
Financial highlights
15 Outlook 2024

Our purpose
17

Global megatrends and technology shifts
create significant opportunities for Danfoss
Our purpose is to be part of the solution
and help build a better future
To decarbonize in an intelligent and
cost-effective manner, sequence matters!

Our business
21 How we deliver value to our customers
We continue to invest in building
22
leading positions in our three segments

23 Danfoss Power Solutions
25 Danfoss Climate Solutions
27 Danfoss Power Electronics and Drives

Our strategy
30 Our green growth strategy: Core & Clear 2025

PAGE 79-158

Financial Statements

Financial review
80

Financial review

Group accounts and notes
84
Group accounts
88 Group notes
130 Group companies

Parent accounts and notes
133 Management’s review for Danfoss A/S
134 Parent accounts
139 Parent notes

Statements
153 Management’s statement
154
156

Independent Auditor’s Report
Independent limited assurance report

Sustainability
32
34 Materiality of sustainability topics

Driving sustainability at Danfoss

Environmental
35 Decarbonization
Circularity
41
Environmental performance
43
Product safety and compliance
44

Social
45 Our people
Safety
47
Human rights
48

Governance
Business ethics
50
Sustainable procurement
52
Corporate governance
53
ESG governance
57
58
Board of Directors
61 Group Executive Team

ESG statements
ESG review
64
Consolidated ESG statements
66
Accounting policies to the
67
consolidated ESG statements
EU Taxonomy

Cover photo

The automotive power module showcased on the
front cover converts the DC voltage in the battery to
AC voltage, enabling the electric motor to function as
well as controlling the speed of the electric vehicle.

Danfoss Annual Report 2023

Letter from the CEO

Danfoss at a glance

Our purpose

Our business

Our strategy

Sustainability

ESG statements

Financial statements

3 /158

Letter from the CEO

With strong partnerships and
bold investments, we continue to
expand our offering of competitive,
innovative, and best-in-class
technology and solutions

We have entered a new era where the
future energy system is electric and where
improving energy efficiency in machines,
infrastructure, and industry is critical
to delivering an affordable, secure, and
decarbonized future.

customers and partners. We will continue to deliver
sustainable innovations that increase energy
efficiency, enhance machine productivity, reduce
emissions, and enable electrification. This is a key
part of our green growth strategy and central to
our sustainability and ESG goal of becoming our
customers’ preferred decarbonization partner.

Being part of the solution to build a better future
is what our purpose in Danfoss is all about. We
continue to transform and invest in our green
growth strategy. This is key to us as we continue to
develop even closer relationships with our

This year, we celebrated our 90-year anniversary,
and I would like to sincerely thank our customers
and partners for the support and cooperation
throughout the years. Partnering across the entire
value chain has never been more important
than it is today.

Danfoss Annual Report 2023

Letter from the CEO

Danfoss at a glance

Our purpose

Our business

Our strategy

Sustainability

ESG statements

Financial statements

4 /158

To conclude, I would like to sincerely thank my
42,000 colleagues all around the world for the
engagement and great contributions over the year.

Kim Fausing
President and CEO

With Core & Clear 2025, our green growth strategy,
and our highly engaged teams across Danfoss, we
are well on the way towards 2025. I am excited about
our strong portfolio and progress in both our core
business and high-growth opportunities and would
like to highlight the following:

• We continued to strengthen our core business
with significant investments in innovation and
building a more resilient supply chain by further
regionalizing and adding new capacity.

• We are well on track with integrating our

transformational acquisitions, Eaton’s hydraulics
business in Power Solutions and BOCK®
Compressors in Climate Solutions, as well as
establishing Semikron Danfoss as part of Power
Electronics and Drives.

• We continue to focus on offering a broad set of
competitive and innovative solutions for several
high-growth verticals, for example, data
centers and electrification of heating systems
with commercial heat pumps.

• We invest to build a leading position in

electrification by creating a strong offering for
EVs, trucks, off-highway machines, marine vessels,
and hydrogen production.

Our results 2023

The post-pandemic recovery of our markets
and businesses has been very strong. However,
during the second half of 2023, high inflation and
interest rates impacted the market, creating a more
challenging business environment.

Despite the increasing headwinds, we delivered
a robust result, while continuing to make
significant investments in capacity, innovation, and
digitalization. I would like to highlight the following:

• Our EBITA was up 10%, leading to an EBITA

margin of 12.6%. EBITA excluding integration
cost and other operating income and expenses,
reached 13.7%.

• We delivered a record-level cash flow of

EUR 692 million, up 49%.

• Our growth in local currency was 7%. We saw

positive growth in North America and Europe. Asia
Pacific sales growth was negative, mainly driven by
the economic slowdown in China. India continued
to deliver a strong growth performance.

• Our transformation continued with high
investment in innovation and R&D that
increased to 4.6% of sales and CapEx at record
levels of EUR 596 million.

Results are created by people, and our
empowered and high-performing, diverse
teams are the foundation of everything we
do. That’s why we also continue to strengthen
Danfoss as an inclusive, collaborative workplace
and will keep working on our diversity, equity,
and inclusion initiatives.

— Kim Fausing, President and CEO

• We continued to decouple our organic growth
from our own emissions. In 2023, our scope 1
and 2 emissions, excluding the newly acquired
Semikron and BOCK® Compressors, decreased
by 18%, despite organic sales growth of 2%. And
for scope 3 emissions, we have clear roadmaps in
place to reduce our carbon footprint by 15% from
2019 to 2030.

The more challenging business environment in
the second half of 2023 has continued into 2024.
However, we remain focused on serving and
delivering strong value to our customers and
partners all over the world. Close partnerships have
never been more important, and we are more than
ready to continue our collaboration in 2024.

Danfoss Annual Report 2023

Letter from the CEO

Danfoss at a glance

Our purpose

Our business

Our strategy

Sustainability

ESG statements

Financial statements

5 /158

Danfoss
at a glance

CONTENT

6 Danfoss in brief
7 Our transformation highlights
In 2023, we continued
13
our positive development

14 Financial highlights
15 Outlook 2024

Danfoss technologies help farmers get work done efficiently, safely, and reliably.
Our state-of-the-art software, electronic, and hydraulic systems enable machines
like this harvester to maximize crop yields.

Danfoss Annual Report 2023

Letter from the CEO

Danfoss at a glance

Our purpose

Our business

Our strategy

Sustainability

ESG statements

Financial statements

6 /158

Danfoss in brief

We aspire to be the leading technology partner for our customers
who want to decarbonize through energy efficiency, machine
productivity, lower emissions, and electrification.

Business segments

Business segments with global leading positions

Employees worldwide

42,000 Results are created

by people

Global footprint

100

factories close to our
customers and partners

Worldwide sales

Sales in
more than

100

countries

The Americas

38%

Europe

40%

Asia

22%

Danfoss
Power Solutions

Danfoss
Climate Solutions

Danfoss
Power Electronics
and Drives

Danfoss Annual Report 2023

Letter from the CEO

Danfoss at a glance

Our purpose

Our business

Our strategy

Sustainability

ESG statements

Financial statements

7 /158

Our transformation highlights

Our foundation

Our results are created by our people.
Our high-performing, diverse teams around
the globe are the strong foundation of
Danfoss, empowered to execute on our
strategy.

We continue our focus on four priorities:
inclusive workplace; engaged employees;
high-performing, diverse teams; and key
capabilities. We prioritized our focus on
improving gender and nationality diversity
in our global teams as well as succession
planning by sharing, developing, and
rotating our team members across our
organization.

Inclusive workplace

Engaged employees

We offer an inspiring and inclusive
workplace, where everyone feels “at
home.” Our teams represent the diversity
of the communities in which we live and
work. Our global and regional Employee
Resource Groups (ERGs) help us to make
sure all our colleagues feel included,
valued, and respected.

High-performing,
diverse teams

Increasing the share of diverse talents in
all job functions remains a key focus area.
In 2023, the share of women managers
increased to 22.1% from 21.0% in 2022.
We continue our efforts to improve but
also realize that it will take time to reach
our 30% target.

Our highly engaged workforce drives
Danfoss’ transformation. This year’s
engagement survey reconfirmed the
high motivation and engagement level
in Danfoss. In the last two years, we have
added one-third of all team members
through our M&A activities, while
keeping the high engagement.

Key capabilities

To help our customers decarbonize
and thereby drive the green transition,
we need to ensure we have the key
capabilities to succeed. For that reason,
we focus on succession planning,
developing competences, and filling skill
gaps to grow our team members.

"Developing our colleagues

and taking care of our
working environment
is key to achieving our
purpose-led strategy. We
want everyone to feel
valued and be a respected
team member of our high-
performing, diverse teams.

— Ilonka Nussbaumer, Executive Vice
President, Group Human Resources

Danfoss Annual Report 2023

Letter from the CEO

Danfoss at a glance

Our purpose

Our business

Our strategy

Sustainability

ESG statements

Financial statements

8 /158

Case story

Apprentice Training
Program in Neumünster

Danfoss Power Solutions factory in
Neumünster, Germany, received the
“Best Place to Learn®” award in 2023
for their Apprentice Training Program.

We focus on building critical supply
chain competences. Dedicated
programs are provided within
Metal Cutting Mechanics, Industrial
Mechanics, Industrial Management
Assistants, Computer Science, and
Warehouse Logistics. Programs run
over four years including a minimum
of two years active support on the
assembly lines.

Empowering our teams

To become an even stronger partner
for our customers, we aim to maintain
a strong customer focus throughout the
organization. We have taken inspiration
from our founder and the Danfoss
DNA to empower our teams and ensure
strong engagement. This is what we call
Our Behaviors.

Frontline passion
Run the business like your own
Think Danfoss

The German “Best Place to Learn®” recognition is a national award
given to companies being rated as “top-educators” providing excellent
in-house apprentice training programs.

Danfoss Annual Report 2023

Letter from the CEO

Danfoss at a glance

Our purpose

Our business

Our strategy

Sustainability

ESG statements

Financial statements

9 /158

Our transformation highlights

Continued strong
investments to build a
better future

In 2023, we continued our significant
investments in innovation, production
capacity, and digitalizing Danfoss.
By increasing innovation spend by 7%
to EUR 487m (2022: 457m), corresponding
to 4.6% of sales (2022: 4.5%), we have
strengthened the leading position in our
core businesses and invested significantly
in building new high-growth businesses.

We regionalize our supply chains to improve service
levels to our customers and reduce our carbon
footprint. In 2023, we had another record level of
investment. We also continued our high investments
in digitalizing Danfoss to improve customer
experience and drive further efficiencies. In 2023,

we invested in our business with a total capital
expenditure of EUR 596m (5.6% of sales), which
is 12% more than last year.

"Our frontline passion sets the direction for

how we provide a best-in-class digital customer
experience. Together with our customers,
we continue to improve our ways of working
across all our regions.

– Astrid Mozes,
President, Danfoss Regions

Case story

Digital customer
experience at Danfoss

Danfoss continues to invest in digital
solutions to deliver a best-in-class
customer experience. Our dedication
to enhance customer relationships and
improve day-to-day convenience for
our customers led us to embark
on a transformational journey towards
digitalization. One of the cornerstones
of these efforts has been implementing
our e-commerce platform. This dynamic
platform enables our customers to
browse, choose, and order products at
their convenience 24/7.

Through user-friendly interfaces and
robust backend systems, we aim to
make every interaction with Danfoss
seamless. From intuitive navigation
to secure transactions, every aspect has
been shaped to meet our customers’
needs.

Our investment in digital solutions is
an ongoing commitment, ensuring that
our customers continue to benefit from
the latest advancements in technology.

Danfoss Annual Report 2023

Letter from the CEO

Danfoss at a glance

Our purpose

Our business

Our strategy

Sustainability

ESG statements

Financial statements

10 /158

Our transformation highlights

On track with our
transformative acquisitions

The transformation of Danfoss is driven
by significant investments. In recent years,
we have closed the acquisitions of Eaton’s
hydraulics business, Semikron, and BOCK®
Compressors. We are on track with the
integration of our three transformational
acquisitions, and our new colleagues have
quickly become part of our team.

"Despite increasing headwind from the markets,

we continued to invest in driving long-term
value creation in 2023. This is what our
investment-driven growth model is all about.

Danfoss Power Solutions is building a leading
position in mobile and industrial hydraulics, as well
as electrification in the on- and off-highway markets.
The acquisition of Eaton’s hydraulics business in 2021
was the largest acquisition in the history of Danfoss,
adding 10,000 colleagues to the team.

Danfoss Power Electronics and Drives is building
a leading position in power electronics from power
modules to intelligent drives, with Semikron Danfoss
as a technology leader in power semiconducter
modules and assemblies. The acquisition of
Semikron in 2022 added 2,800 colleagues to
the team.

Danfoss Climate Solutions is building a leading
position in sustainable heating and cooling for
buildings, cold chains, industry, and infrastructure.
With the acquisition of BOCK® Compressors in 2023,
we offer one of the most comprehensive compressor
portfolios in the industry. This acquisition added
400 colleagues to the team.

— Jesper V. Christensen,
Chief Financial Officer

Danfoss Annual Report 2023

Letter from the CEO

Danfoss at a glance

Our purpose

Our business

Our strategy

Sustainability

ESG statements

Financial statements

11 /158

Our transformation highlights

Case story

Strong progress on our
sustainability initiatives

In 2022, we defined our three ESG step-change
initiatives: Decarbonization, Circularity, and DE&I
(Diversity, Equity, and Inclusion). These are now an
embedded part of our green growth strategy. During
2023, we further developed our competencies and
understanding, supported by an online training
platform for all employees.

Decarbonization: our own operations
We have a clear plan to fully decarbonize our own
operations by 2030. In 2023, our scope 1 and 2
emissions, excluding the newly acquired Semikron
and BOCK® Compressors, decreased by 18%, despite
organic sales growth of 2%, demonstrating a
continued decoupling of our decarbonization
from our growth.

We have agreements in place that cover a 30%
reduction towards carbon neutrality in 2030. These
agreements include entering into two long-term

power purchase agreements in China and North
America, effective from 2024 and 2025, respectively.

Decarbonization: our value chain
In 2023, we developed decarbonization roadmaps by
segment and business towards our 2030 target of a
15% reduction of our scope 3 emissions based on the
2019 baseline. One action has been our commitment
to the First Movers Coalition to reduce the emissions
from aluminum sourcing.

Circularity: integration
into new product development
We developed a circularity framework and
sustainable design guide for our innovation and
product development teams, along with a toolbox
to assess the circularity potential of materials
and packaging. This will be a key lever for reducing
the environmental impact of our products
going forward.

"Our strategic approach to

sustainability is based on
strong partnerships and
remains the same whether
we apply it to our own
business or decarbonize
with our customers. First,
we apply energy-efficient
solutions to reduce energy
consumption. Second, we
reuse energy wherever
possible. Finally, we source
any remaining demand from
renewable sources.

— Torben Christensen,
Chief Sustainability Officer &
Head of Global Services

China PPA

In 2023, Danfoss signed a power purchase agreement (PPA) for renewable
power supply that will reduce 28,000 tons of CO2e (CO2 equivalents)
annually, corresponding to a reduction of 23% of our total scope 1
and 2 emissions in China. The renewable power is produced at a newly
constructed solar park located about 20 kilometers from the Danfoss
Wuqing campus and will cover the annual electricity consumption of the
87,000 square meter campus. Danfoss is one of the first global companies
to secure long-term renewable power for part of its operations in China.

Danfoss Annual Report 2023

Letter from the CEO

Danfoss at a glance

Our purpose

Our business

Our strategy

Sustainability

ESG statements

Financial statements

12 /158

Diversity, Equity, and Inclusion
Danfoss is committed to making a step-change in
Diversity, Equity, and Inclusion (DE&I), as it leads to
greater engagement, performance, and innovation.

In 2023, we increased the share of women leaders
to 22.1% from 21.0% in 2022. To reach our target of
30% women leaders in 2025, we have implemented
a number of initiatives across the business to
accelerate the development of women candidates to
fill our talent pipeline for future leadership positions.

At leadership levels 1 to 4, we increased
management team diversity from 67.4% to 75.5%.
We would like to see a minimum of two nationalities
and two genders in each management team.

Our five global Employee Resource Groups (ERGs)
– Danfoss Abilities, Danfoss Genders, Danfoss
Generations, Danfoss Multicultural and Nations, and
Danfoss Pride – support our commitment to improve
on our DE&I journey. We currently have 45 active
groups around the world.

Case story

Accelerating our share
of women in senior
leadership positions

To fuel the pipeline of women leaders,
Danfoss offers a mentoring program for
women in senior leadership positions.
This program helps them grow, develop,
and build strong networks through
coaching and learning.

Our Danfoss President and CEO coaches
them, while our Executive Vice President,
Group Human Resources facilitates. Each
year, a senior leader also joins as role
model and co-leader. The agenda is set
by the women themselves.

Not only do the mentees benefit from
the program – the coaches and facilitator
say that they learn as much from the
mentees. Each session is filled with
diverse perspectives, unique insights,
and valuable input that enrich their
own understanding of the business
and leadership.

All mentees are developing, rotating,
or advancing, and we have been able
to retain all of them.

The mentoring program for women
is currently in its fourth year.

Danfoss Annual Report 2023

Letter from the CEO

Danfoss at a glance

Our purpose

Our business

Our strategy

Sustainability

ESG statements

Financial statements

13 /158

In 2023, we continued our positive development

In 2023, we continued our strong
investments in innovation, capacity, and
digitalization. Despite the slower growth
environment during the year, we delivered
a 10% increase in earnings and a strong
cash flow after financial items and tax, up
49% compared to last year. We reduced our
scope 1 and 2 emissions by 18% (excluding
newly acquired Semikron and BOCK®
Compressors), demonstrating the continued
decoupling of our own emissions from our
sales growth. With a 25% reduction of LTIF,
our safety is at the best level achieved so far.

Decarbonizing operations
Total scope 1 and 2 GHG emissions
(kt CO2e)

Energy intensity
MWh per EURm net sales

-18%3

1551

241

271

2332

191

-6%

LTIF record low
Number of incidents per
million hours worked

-25%

Management team diversity
At least two genders and two
nationalities in leadership levels 1-4

+8%-points

66.8%

67.4%

75.5%

112

105

1.7

1.6

1.2

2021

2022

2023

2021

2022

2023

2021

2022

2023

2021

2022

2023

Sales
EURbn

+4%

Innovation
EURm

+7%

R&D expense

Investments excl. M&A
EURm

EBITA
EURm

+12%

+10%

earnings increase

Cash flow
EURm

+49%

cash generation

10.3

10.7

457

487

596

531

1,345

1,224

692

7.5

328

368

969

465

401

1 Addition of Eaton’s hydraulics business
2 Addition of Eaton’s hydraulics business and Semikron. BOCK® Compressors
is not included in the Environmental data for 2023
3 Calculated using scope 1 and 2 emissions in 2023 for Danfoss excluding Semikron
(to ensure comparability with 2022)

2021

2022

2023

2021

2022

2023

2021

2022

2023

2021

2022

2023

2021

2022

2023

Danfoss Annual Report 2023

Letter from the CEO

Danfoss at a glance

Our purpose

Our business

Our strategy

Sustainability

ESG statements

Financial statements

14 /158

Financial highlights

Profit and loss account
Profit and loss account
Profit and loss account
Net sales
Net sales
Net sales
EBITDA before OOI/E
EBITDA before OOI/E
EBITDA before OOI/E
EBITDA
EBITDA
EBITDA
EBITA
EBITA
EBITA
EBIT
EBIT
EBIT
Financial items, net
Financial items, net
Financial items, net
Profit before tax
Profit before tax
Profit before tax
Net profit
Net profit
Net profit

Financial ratios
Financial ratios
Financial ratios
Local currency growth (%)
Local currency growth (%)
Local currency growth (%)
EBITDA before OOI/E margin (%)
EBITDA before OOI/E margin (%)
EBITDA before OOI/E margin (%)
EBITDA margin (%)
EBITDA margin (%)
EBITDA margin (%)
EBITA margin (%)
EBITA margin (%)
EBITA margin (%)
EBIT margin (%)
EBIT margin (%)
EBIT margin (%)

Balance sheet
Balance sheet
Balance sheet
Total non-current assets
Total non-current assets
Total non-current assets
Total assets
Total assets
Total assets
Total shareholders’ equity
Total shareholders’ equity
Total shareholders’ equity
Net interest-bearing debt
Net interest-bearing debt
Net interest-bearing debt

EURm
2019

EURm
EURm
2019
2019

EURm
2020

EURm
EURm
2020
2020

EURm
2021

EURm
EURm
2021
2021

EURm
2022

EURm
EURm
2022
2022

EURm
2023

EURm
EURm
2023
2023

6,285
1,028
1,026
771
695
-33
662
502

6,285
6,285
1,028
1,028
1,026
1,026
771
771
695
695
-33
-33
662
662
502
502

5,828
1,008
954
723
625
-48
577
435

5,828
5,828
1,008
1,008
954
954
723
723
625
625
-48
-48
577
577
435
435

7,539
1,232
1,272
969
877
-58
819
631

7,539
7,539
1,232
1,232
1,272
1,272
969
969
877
877
-58
-58
819
819
631
631

10,256
1,618
1,576
1,224
1,043
-94
949
683

10,256
10,256
1,618
1,618
1,576
1,576
1,224
1,224
1,043
1,043
-94
-94
949
949
683
683

10,654
1,786
1,768
1,345
1,252
-175
1,077
819

10,654
10,654
1,786
1,786
1,768
1,768
1,345
1,345
1,252
1,252
-175
-175
1,077
1,077
819
819

1
16.4
16.3
12.3
11.1

1
1
16.4
16.4
16.3
16.3
12.3
12.3
11.1
11.1

-6
17.3
16.4
12.4
10.7

-6
-6
17.3
17.3
16.4
16.4
12.4
12.4
10.7
10.7

31
16.3
16.9
12.8
11.6

31
31
16.3
16.3
16.9
16.9
12.8
12.8
11.6
11.6

31
15.8
15.4
11.9
10.2

31
31
15.8
15.8
15.4
15.4
11.9
11.9
10.2
10.2

7
16.8
16.6
12.6
11.7

7
7
16.8
16.8
16.6
16.6
12.6
12.6
11.7
11.7

4,217
6,096
2,933
1,048

4,217
4,217
6,096
6,096
2,933
2,933
1,048
1,048

4,106
6,412
3,184
537

4,106
4,106
6,412
6,412
3,184
3,184
537
537

6,693
9,970
3,951
2,677

6,693
6,693
9,970
9,970
3,951
3,951
2,677
2,677

7,803
11,728
5,048
3,168

7,803
7,803
11,728
11,728
5,048
5,048
3,168
3,168

7,975
11,717
5,443
2,871

7,975
7,975
11,717
11,717
5,443
5,443
2,871
2,871

Key figures, financial ratios and highlighted key figures are calculated as defined in Note 27.

Key figures, financial ratios and highlighted key figures are calculated as defined in Note 27.
Key figures, financial ratios and highlighted key figures are calculated as defined in Note 27.

EURm
2019

EURm
2020

EURm
2021

EURm
2022

EURm
2023

Cash flow statement
Cash flow statement
Cash flow from operating activities
Cash flow from operating activities
Cash flow from investing activities
Cash flow from investing activities
Hereof:
Hereof:
Acquisition of intangible fixed assets
Acquisition of intangible fixed assets
Acquisition of property, plant and equipment
Acquisition of property, plant and equipment
Proceeds from sale of property, plant and equipment
Proceeds from sale of property, plant and equipment
Acquisition of subsidiaries and activities
Acquisition of subsidiaries and activities
Proceeds from disposal of subsidiaries and activities
Proceeds from disposal of subsidiaries and activities
Cash flow from financing 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
Financial ratios
Return on invested capital ROIC (%)
Return on invested capital ROIC (%)
Return on invested capital after tax ROIC (%)
Return on invested capital after tax ROIC (%)
Return on equity (%)
Return on equity (%)
Equity ratio (%)
Equity ratio (%)
Leverage ratio (%)
Leverage ratio (%)
Net interest-bearing debt to EBITDA ratio
Net interest-bearing debt to EBITDA ratio
Dividend ratio (%) (proposed)
Dividend ratio (%) (proposed)
Dividend per 100 DKK share (proposed)
Dividend per 100 DKK share (proposed)

789
-407

800
-242

838
-2,794

1,053
-931

1,355
-724

-52
-258
6
-140
0
-322

-44
-201
14
0
0
-54

-43
-339
14
-2,664
241
1,596

-45
-504
18
-441
12
-26

-44
-558
6
-120
-11
-590

634
463
323

709
493
497

664
401
-2,020

794
465
40

1,141
692
561

18.3
13.4
17.0
48.1
35.7
1.0
16.0
8.1

16.1
11.9
13.1
49.7
16.9
0.6
-
-

16.7
12.8
16.6
39.6
67.8
2.1
30.0
19.0

14.1
10.2
14.8
43.0
62.8
2.0
30.0
20.6

15.4
11.8
15.3
46.4
52.8
1.6
30.0
24.6

#Classified as Business

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Outlook 2024

through the innovative technologies and solutions
we bring to market. We remain committed to
decarbonizing our global operations by 2030,
as part of our three step-change initiatives on
Decarbonization, Circularity, and DE&I (Diversity,
Equity, and Inclusion). Finally, we will continue to
invest in sustainability, improve our climate footprint,
and deliver on our sustainability ambition.

We will continue to execute our
investment-driven growth strategy in
2024, being mindful of the uncertainty
in the global economy and geopolitical
environment. As the megatrends continue
to strengthen, we have a clear direction
towards 2025, and our priorities do
not change.

Danfoss is well positioned for 2024 as demands
for energy efficiency and electrification gain
momentum and continue to ensure a strong match
between our offerings and customer needs. Global
megatrends and technology shifts create significant
opportunities in all our three global segments.

However, a high level of volatility and uncertainty
still prevails in the global economy and geopolitical
environment, causing lower visibility. Despite
the current environment, our focus continues

to be ensuring profitable growth. Our strong free
cash flow will allow us to maintain a high level of
investments in our core businesses, digitalization,
and electrification that will drive energy efficiency
and decarbonization.

2024 expectations
Danfoss has a continued ambition to expand or
maintain our market share. Sales are expected to
be in the range of EUR 10.0-11.5bn for the full year.
The EBITA margin is expected to be in the range of
11.8-13.3%, following our continued integration of
already-acquired businesses as well as investments
in innovation of new products and solutions.

The expected growth and profitability performance
is dependent on the development of global supply
chain stability, the geopolitical environment, and
inflation, as well as general global growth rates.
As our customers’ preferred decarbonization
partner, Danfoss has huge potential to contribute
to delivering on global and regional climate goals

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.

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Our purpose

CONTENT

Global megatrends and technology
shifts create significant opportunities
for Danfoss
Our purpose is to be part of the
solution and help build a better future
To decarbonize in an intelligent
and cost-effective manner, sequence
matters!

As part of the introduction of fully electric Volvo trucks for transport needs
in Denmark, Danfoss is the first Danish company to introduce e-trucks that will
operate fixed routes between local Danfoss sites. The trucks will operate up
to 24 hours a day, five days per week, without significant charging downtime.
The Volvo e-trucks are built with Danfoss technology.

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Global megatrends and technology shifts
create significant opportunities for Danfoss

Climate change

Urbanization

Food and water supply

Digitalization

Electrification

Climate change is an immediate,
not a future, risk. To stay on a 1.5°C
pathway, rapid emissions reductions
are necessary. Danfoss solutions
accelerate the green transition of even
the most carbon-intensive sectors:
transport, industry, and buildings. Our
technologies increase energy efficiency
and enable electrification, increasing
the share of renewables in the energy
mix.

Cities account for more than 70% of
global carbon emissions.1 Danfoss
solutions can significantly reduce their
carbon footprint through a range of
smart and efficient technologies in
transportation, heating and cooling,
supermarkets, wastewater facilities,
data centers, and much more.

Nearly one-fifth of all food is wasted,2
and global food demand is expected
to increase by up to 56% by 2050.3
Optimizing food production, transport,
and storage is essential. By making
agriculture more efficient and reducing
energy waste in the food and beverage
industries, we can produce more
with fewer resources.

Digitalization increases functionality in
our systems and solutions and thereby
the opportunity to further decarbonize.
Danfoss’ intelligent software solutions
provide customers with real-time
insights and automated decision-
making. Our digital technologies
can drive rapid change in our energy
systems, increase machine productivity,
and ensure that energy is used when it
is greenest and cheapest.

Transitioning to a fully electrified
energy system could cut up to 40% of
energy consumption.4 Danfoss delivers
electrification solutions not only to cars
and trucks, but also to heavy industrial
machinery, marine, and off- and on-
highway equipment that can go hybrid
or fully electric. Our technologies for
hydrogen production can help electrify
hard-to-abate sectors.

1IEA (2021). Empowering Cities for a Net Zero Future.
2 NEP (2021). UN: 17% of all food available at consumer
levels is wasted.
3 van Dijk et al. (2021). A meta-analysis of projected global
food demand and population at risk of hunger for the
period 2010-2050. Nature Food. 2, 494-501.
4 United Nations (n.d.). Reducing food loss and waste:
Taking Action to Transform Food Systems

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Our purpose is to be part of the solution
and help build a better future

Our sustainable innovations increase energy
efficiency, enhance machine productivity,
reduce emissions, and enable electrification.
We decarbonize with our customers
through our leading application know-how.
This is how we are part of the solution.

We already have many of the solutions
needed to tackle the world’s challenges
while creating growth. This is all made
possible by our long-term view on value
creation and the dedicated Danfoss teams
around the world, pushing the boundaries
of what’s possible.

We have implemented energy-saving projects
across our global campuses since 2007 with
short pay-back times. We reduce our energy
consumption, reuse as much energy as
possible, and source renewable energy.
In 2022, our headquarter campus, 250,000
m2 indoor floorspace, became CO2e neutral.
In 2023, our Graasten, Kolding, and Sunds
campuses in Denmark and our Vaasa campus
in Finland also became CO2e neutral.

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To decarbonize in an intelligent and
cost-effective manner, sequence matters!

To grow the role of green electricity in the
energy mix, it is a fundamental fact, yet
often overlooked, that we must first reduce
demand for energy.

The first priority is to reduce energy waste by
scaling energy-efficient technologies and increasing
machine productivity. Secondly, we focus on
reusing energy through energy recovery and sector
coupling. And thirdly, we re-source green energy by
replacing fossil fuels with renewable energy sources.
Only in this sequence can we achieve rapid and
cost-efficient decarbonization.

The greenest energy is the one we don't use – or
the energy we reuse. We have many of the solutions
ready today to drive decarbonization in all three
focus areas. Seeing is believing. In addition, the
majority of our solutions have short payback times
and attractive returns.

In decarbonizing our own operations globally,
we apply the same approach that we bring to our
customers.

Reduce

Reuse

Re-source

Reducing energy waste is possible across all sectors.
Energy efficiency can improve the fuel economy of
machines and reduce demand for diesel, while simple
and smart technologies for heating and cooling buildings
can reduce energy consumption significantly. Likewise,
implementing better energy management in industries
can deliver significant energy savings. Energy efficiency
is a major opportunity to drive the world towards an
ambitious and cost-effective green transition.

Energy reuse has a large, untapped potential in the green
transition. Industries, supermarkets, data centers, and
wastewater facilities all produce large amounts of excess
energy – often in the form of heat. With Danfoss solutions,
this energy can both be reused onsite and sold back to
the grid. Through sector integration and district energy
systems, heavy energy consumers can become major
energy suppliers.

Re-sourcing from fossil fuels to renewable electricity
represents a pivotal change in the green transition.
Through electrification, we can lower emissions and
become more efficient, enabling a future energy grid
powered by renewables. Wherever electrification is not
possible, we can partly electrify through hybrid solutions
or indirectly electrify through hydrogen production.

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Our business

CONTENT

21 How we deliver value to our customers
We continue to invest in building
22
leading positions in our three segments

23 Danfoss Power Solutions
25 Danfoss Climate Solutions
27 Danfoss Power Electronics and Drives

The Danfoss Smart Store supermarket and Application Development Center
is a functioning supermarket and test environment, providing the unique
opportunity to understand how new technology will operate in the real world.

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How we deliver value to our customers

Danfoss delivers value to our customers
as a technology partner with global
leading positions, deep application
know-how, and sustainable innovation
in our core businesses. This is our
competitive advantage.

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 Application
Development Centers to optimize solutions for our
customers. Our deep application know-how makes
us the partner of choice to decarbonize together
with our customers.

Sustainable innovation
We strive to be the technology leader in our core
businesses. We invest significantly in new products
and new technologies to help our customers
differentiate even further. To help our customers
decarbonize, Danfoss develops low-carbon products,
and implements circularity initiatives across our
businesses. This includes 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. Operational
excellence is part of the Danfoss DNA building
on a leading position within safety, quality, delivery,
and productivity. Through our investment-driven
growth strategy, we invest to strengthen our core
businesses, take the lead in digital, and build a
leading position in electrification.

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

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We continue to invest in building
leading positions in our three segments

Danfoss
Power Solutions

Danfoss
Climate Solutions

Danfoss
Power Electronics and Drives

Full solutions capabilities in mobile and industrial
hydraulics, fluid conveyance, electrification, and software,
driving machine productivity

Sustainable heating and cooling solutions for buildings,
cold chains, industry, and infrastructure

Clean-energy solutions such as AC drives, power
semiconductor modules, and electrification in automotive
and various industries

Share of sales

46%

Share of sales

29%

Share of sales

25%

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Danfoss
Power Solutions

Sales

Earnings (EBITA)

EUR 4.8bn

EUR 701m

EBITA margin

14.5%

Number of employees

17,694

Factories

Application
Development Centers

"Danfoss Power Solutions equips

machines to be more productive,
efficient, and sustainable. While
enabling machines to do more
with less, we’re strengthening
our core in hydraulics and building
new business in autonomy
and electrification.

— Eric Alström, President,
Danfoss Power Solutions

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Case story

Danfoss Power Solutions
Propelling growth with hydrostatics

The challenge

As the world’s population continues to grow, so does
the demand for food, housing, and infrastructure.
However, the amount of land available for farming
and development is finite, and sectors such as
construction and agriculture are facing challenges
with resource scarcity, rising cost of materials and
energy, and lack of skilled labor. We must maximize
the productivity of our land as well as farmers and
construction workers.

The solution

providing the best traction for the toughest terrain.
We offer differentiated solutions known for high
efficiency, controllability, and reliability.

A key application is agricultural sprayers. In fact,
Danfoss holds a leading position in hydrostatic
transmissions for self-propelled sprayers. Typically
featuring an elevated chassis, hydraulically operated
boom, and large tank, these machines efficiently
apply crop performance and management materials,
helping maximize yields while minimizing costs.
Danfoss hydrostatic components are robust, reliable,
and efficient, but our complete system solution is
the reason we win with sprayer OEMs. Our pumps
and motors together with our controllers and
software provide superior traction and control.

Efficient, productive machinery is vital to solving
this challenge, and Danfoss Power Solutions plays
a key role in keeping such equipment moving,
increasing productivity and efficiency. Our
Hydrostatics division is home to hydraulic pumps
and motors that propel agricultural, construction,
material-handling, and other off-highway machines,

With recent and future capital investments
totaling more than EUR 100 million, Danfoss is
well positioned to continue its growth trajectory
in Hydrostatics. Capital allocated to a variety of
projects globally has enabled increased production
capacity, allowing us to better serve our customers
with the products and the quantities they want.

Self-propelled sprayers help maximize yields by efficiently
applying fertilizers and other performance materials.

Localization initiatives ensure these products are
available where and when our customers need them,
reducing supply chain risk as well as shipping-related
emissions. In short, we’re investing to win and to

enable our customers as they develop the machines
that help feed and house the world’s growing
population.

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Danfoss
Climate Solutions

Sales

Earnings (EBITA)

EUR 3.1bn

EUR 524m

EBITA margin

16.8%

Number of employees

11,289

Factories

Application
Development Centers

"Decarbonizing with our customers

is at the heart of everything we
do in Climate Solutions. With the
move away from burning fossil fuels
towards an electrified economy
comes the need to use resources
more efficiently. We systematically
look beyond the individual
product or application, helping
our customers to disrupt existing
patterns. We also do this with digital
solutions to address peak loads, with
heat recovery from cooling and with
innovative approaches to support
the further uptake of heat pumps.

— Jürgen Fischer, President,
Danfoss Climate Solutions

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Case story

Danfoss Climate Solutions
Decarbonizing supermarkets
with Danfoss technologies

The challenge

The world’s population is on course to reach
10 billion people by 2050 and investments in
sustainable food retail and storage are urgently
needed. The pressure is growing, both on energy
demand and costs, and on the need to reduce
food loss. While supermarkets and retail food stores
are an integral part of communities around the
world, they are also big energy consumers and
account for 3% of the total electricity used
in industrialized countries.1

The solution

This year, Danfoss opened a Smart Store that is
expected to be around 50% more energy efficient
compared to typical supermarkets and with a

first-generation CO2 refrigeration system, cutting
both energy and emissions.2 Enabled by Danfoss
solutions, including compressors, heat exchangers,
valves, energy storage, smart refrigeration case
controls, AC drives, sensors, and digital monitoring,
it demonstrates significant savings for supermarkets,
with a typical payback time of 3-4 years. 90% of the
space heating need is provided by a heat recovery
unit capturingexcess heat from cooling systems.3

The site is also an Application Development Center,
a test environment for equipment manufacturers,
contractors, food retailers, and Danfoss engineers
to co-develop new technologies and solutions
enhancing energy and operational efficiency.
The Smart Store is managed by Danfoss and ANEO
Retail’s partnership using the unique Energy-as-a-
Service model.

The Smart Store’s refrigeration and comfort cooling
systems run exclusively on natural refrigerants (CO₂).

which has a very low global warming potential
(GWP = 1). In comparison, typically used fluorinated
refrigerants in this application have a GWP between
1,300 and 4,000. Combining CO2 as a refrigerant with
highest energy efficiency maximizes savings both
from refrigerant and energy use.

The Smart Store’s refrigeration and comfort cooling
systems run exclusively on a natural refrigerant (CO2),

A core solution featured in the Smart Store is a
compressor rack, combining multiple Danfoss BOCK®

semi-hermetic reciprocating compressors working
together to create the cooling as well as heating
effect through reuse of heat.

1 Environmental Investigation Agency and Shecco (2018). Technical report on energy
efficiency in HFC-free supermarket refrigeration, p. 10
2 Danfoss calculation.
3 Danish supermarket cuts heating bill and CO₂ footprint with Danfoss Heat Recovery
Unit (HRU) | Danfoss

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Danfoss
Power Electronics and Drives

Sales

Earnings (EBITA)

EUR 2.7bn

EUR 391m

EBITA margin

14.4%

Number of employees

8,365

Factories

Application
Development Centers

"Power Electronics and Drives

is a powerhouse within energy
efficiency and electrification.
We enable our customers to
improve energy efficiency and
productivity, and to develop
sustainable decarbonization
solutions. Based on leading-edge
technologies, our strong
offering spanning from power
semiconductor modules to
intelligent drives makes us
uniquely positioned within
power electronics.

— Mika Kulju, President, Danfoss
Power Electronics and Drives

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Case story

Danfoss Power Electronics and Drives
Brewing for a greener future

The challenge

Industry production accounts for approximately
one-quarter of total global energy consumption.
Recognizing the environmental and economic
significance of this sector, scalable initiatives
focusing on energy efficiency can serve as powerful
tools for creating a long-lasting impact.

The solution

Retrofit is exactly such a tool. In many cases
prolonging the lifecycle of existing facilities with
a retrofit solution on key components is a better
investment that will solve several challenges by
increasing availability and total system efficiency,
reduce the need for maintenance, and cut energy
consumption. AC drives control power supply to
electric motors and typically save 15-40% of energy
consumed. The latest technology within AC drives
offers substantial savings potential with short payback

time, making retrofit investments not only environ-
mentally responsible but also financially prudent.

Okocim Brewery in Poland embarked on a
journey towards higher operational efficiency and
sustainable brewing to enhance its productivity
and competitiveness. Danfoss played a pivotal role
in transforming Okocim Brewery’s operations by
optimizing the ventilation and water pressurization
systems with the local partner, Control-Service.
With the help of VLT® drives solutions, the water
supply, air conditioning, and ventilation systems
consume approximately 50% less electricity than
comparable standard solutions.

Not only did the new water distribution system
meet the requirements, the investment also had a
payback time of only seven months. The dual-pump
solution is approximately 17% more energy-efficient
than a comparable system using only a single pump
running at 100% capacity. Furthermore, the system
now uses data analysis to create ideal conditions for
both beer production and storage, ensuring quality
and efficiency.

Besides reducing CO₂e emmisions, Okocim Brewery has
enhanced productivity and competitiveness by choosing a
retrofit solution using Danfoss AC drives as one key component.

The positive outcomes of this project extend beyond
the brewery walls. By significantly reducing energy
consumption and implementing water-saving
measures, Okocim Brewery has taken substantial
steps towards sustainability. Carbon dioxide
emissions have been curtailed, aligning with global
efforts to combat climate change. And there are

many more like Okocim around the world. Through
innovative solutions and technological upgrades,
most industry production lines can gain significant
operational efficiency while also becoming a global
sustainability leader in their respective industries.

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Our strategy

According to the International Energy Agency, the rollout of electric vehicles
is set to avoid the need for five million barrels of oil a day. Already, approximately
500,000 new electric cars use our Semikron Danfoss power modules to
control the power of the car – saving the world millions of tons of CO₂e.

CONTENT

30 Our green growth strategy:

Core & Clear 2025

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Our green growth strategy:
Core & Clear 2025

We transform Danfoss through our green
growth strategy. Our strategy is fueled
by significant investments, ensuring we
are ready for the future, with focus on the
longer view.

Danfoss delivers value to our customers as a
technology partner with global leading positions,
deep application know-how, and sustainable
innovation in our core businesses.

Our priorities remain unchanged, and we have four
key strategic focus areas within Leading Portfolio,
Customers & Growth, Innovative Solutions,
and Lean & Agile.

Our foundation is our people. We offer an inspiring
and inclusive workplace where we unlock the full
potential of our colleagues through empowering
high-performing, diverse teams. And we develop
key capabilities to drive the green transition.

Our purpose
We engineer tomorrow to build a better future

Leading
Portfolio

Customers
& Growth

Innovative
Solutions

Lean
& Agile

Our strategy

Leading
Portfolio

Customers
& Growth

Innovative
Solutions

Lean
& Agile

Our foundation
High-performing, diverse teams

We strengthen our
leading positions
through continued
investments in our three
strong segments.

We build new businesses
through investments
in new high-growth
opportunities.

We invest in new
technology to accelerate
our offering of low-
carbon products and
solutions.

We want to be the
partner of choice by
providing leading
application know-how.

We continue to improve
quality and delivery
service to ensure
customer satisfaction
and loyalty.

We invest to improve
the digital customer
experience.

We want to be the
preferred partner on our
customers’ intelligent
decarbonization journey,
enabled by our cost-
optimal, low-carbon
products and solutions.

We differentiate through
digital solutions.

We continue to improve
time-to-market by using
digital engineering
enablers.

We want to be the
benchmark on safety,
quality, delivery, and
cost.

We regionalize our
supply chains to be
closer to our customers,
improve service levels,
and decarbonize.

We continue to digitalize
Danfoss with one
common IT architecture
and One ERP to improve
the digital customer
experience and internal
efficiency, while creating
business impact.

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Sustainability

CONTENT

Materiality of sustainability topics

32 Driving sustainability at Danfoss
34
35 Environmental
45 Social
50 Governance

We are putting sustainability at the heart of our strategy with bold step-change initiatives:
Decarbonization, Circularity, and Diversity, Equity, and Inclusion. We integrate sustainability
into everything we do – from our operations to the way we engineer solutions for our customers
and our ability to attract people to help drive the green transition.

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Driving sustainability at Danfoss

At Danfoss, we continue our transformation
and integrate sustainability in everything
we do.

We stand at a pivotal moment in setting the pathway
for global climate change. In 2023, global leaders
agreed that to keep the goals of the Paris Agreement
within reach, and to limit warming to 1.5°C, we must
triple renewables and double energy efficiency
globally by 2030. The solutions to make this a reality
are available today, and we bring these solutions to
our customers in a responsible way.

In 2022, we defined three ESG (environmental,
social, and governance) step-change initiatives:
Decarbonization, Circularity, and Diversity, Equity,
and Inclusion.

We stay committed to reaching the targets
related to our three step-change initiatives and
reaching our ESG ambitions.

Progress on our ESG step-change initiatives in 2023

Decarbonization

Circularity

Diversity, Equity,
and Inclusion

∙ Reduced our scope 1 and 2 emissions
by 18%, excluding the newly acquired
BOCK® Compressors and Semikron.

∙ Secured long-term PPAs in North
America and China, which are
expected to result in 75% and
23% reductions in our scope 1
and 2 emissions in each region,
respectively.

∙ Developed decarbonization

roadmaps by segment and business
towards our 2030 target of a 15%
reduction of our scope 3 emissions
based on the 2019 baseline.
∙ Committed to the First Movers’

Coalition, in support of emerging
climate technologies in hard-to-
abate sectors.

∙ Developed the Danfoss Circularity
Framework, Sustainable Design
Guide, and toolbox, which are ready
to be deployed as part of all R&D
and new product development
processes in early 2024.

∙ Achieved 75.5% management team
diversity,1 up from 67.4% in 2022.

∙ Reached 22.1% women in

leadership positions, compared to
21.0% in 2022.

1 Management team diversity is measured on
manager levels 1-4. Teams of at least five employees
(excluding administrative assistants) are diverse if
they are composed of at least two genders and two
nationalities. The team is considered non-diverse, if
only one of these requirements is met.

Danfoss in Eastern Europe has reached
our diversity target of 30% women leaders.
In Eastern Europe, we cover 16 countries
and 15 languages.

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Sustainability is at the core of
our business and value chain

Upstream
Decarbonizing with our suppliers
We work with our suppliers to secure stable and high-quality
resources for our products in a responsible way and continue
to deepen supplier relationships to decarbonize
the embodied carbon of our products.
Read more on p. 38

Operations
Carbon-neutral operations
For the production of our products and solutions, we
install our own energy-efficient solutions to reduce energy
consumption, reuse excess heat, and source renewable energy.
Read more on p. 37

Downstream
Decarbonizing with our customers
We deliver value to our customers through our energy-efficient
products that enable electrification and decarbonization.
Read more on p. 38

We work with material sustainability topics across our entire value chain

Safety first
We have a strong safety track record and
are committed to ensuring safe operations
for our employees and business partners.
Read more on p. 47

Diversity
We are committed to recruiting a diverse
workforce, creating an environment of belonging,
retaining our talents, and increasing representation.
Read more on p. 45

Circularity
Using our Rethink, Reduce, Recirculate framework,
we will work towards increasing the circularity
of our products.
Read more on p. 41

Decarbonization and 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.
Read more on p. 39

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Materiality of
sustainability topics

Danfoss’ prioritization of environmental,
social, and governance topics, both for
action and in this report, is based on a
materiality assessment.

Through this analysis, we identified the ESG topics
that are most important to:

•

Our purpose, behaviors, our business,
and growth opportunities

• The social and environmental impact

that we have in our value chain

• Our stakeholders, including our customers

We selected Decarbonization, Circularity,
and DE&I (Diversity, Equity, and Inclusion) as our
three ESG step-change initiatives as these are areas
where Danfoss can create positive impact at scale
through our core business.

For other material topics, our approach is to be a
responsible business partner across our value chain
and to our customers. That means we must continue
to get the basics right.

We conducted our materiality assessment in 2021.
Since then, the EU has further developed guidance
on double materiality, which comprises both
financial and impact materiality.

We will therefore update our materiality assessment
to reflect that the world around us has changed in
the past three years and to better reflect both the
financial and impact materiality dimensions.

Read more about the materiality assessment

Our three ESG step-change initiatives

Decarbonization

Circularity

We help our customers
decarbonize through our
energy-efficient solutions
and ensure carbon neutrality
in our operations.

We innovate best-in-class
circular and safe products.

Diversity, Equity,
and Inclusion

We are committed to
recruiting a diverse
workforce, creating an
environment of belonging,
retaining our talents, and
increasing representation.

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Environmental

Decarbonization

Climate change is one of the defining
challenges of this generation.1 It is also
where we at Danfoss, as the core of our
business, engineer the solutions needed
to support the decarbonization of the
industries we serve.

In decarbonizing our own operations globally,
we apply the same approach that we bring to our
customers. We have coined this three-step approach:
Reduce, Reuse, Re-source.

In 2023, we continued to make progress on our
validated science-based targets to limit global
warming to 1.5°C. Since 2022, we have reduced our
scope 1 and 2 emissions by 18% (excluding newly
acquired Semikron and BOCK® Compressors).
Since 2019, we have decreased our total scope 1
and 2 emissions, compared to the 2019 recalculated
baseline, by 10.7%.

1United Nations Framework Convention on Climate Change

Targets

Scope 1 & 2

Scope 3

46.2%

reduction by 2030 compared
to a base year of 2019

(Validated science-based target)

Additionally, we have a
clear commitment to fully
decarbonize our own
operations by 2030.

Progress

10.7%

decrease of total emissions
(scope 1 and 2), compared to
the 2019 recalculated baseline

We secured long-term PPAs in
China and North America to become
active in 2024 and 2025, respectively.

15%

emissions reduction
by 2030 compared to
a base year of 2019

(Validated science-based target)

25%

reduction of scope 3
upstream emissions
by 2030 compared
to a base year of 2019

We have developed decarbonization roadmaps for all our businesses,
charting the way to our 2030 science-based target and embedding
ownership of the targets with our business leaders. In the coming years,
we will continue to execute on our roadmaps.

Additionally, together with our customers, we have established pilot cases
on avoided emissions.

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Environmental

Danfoss scope 1, 2, and 3 emissions 2023

Scope 1

0.1%

Scope 2

0.2%

Scope 3

99.7%

Combustion of fuels
51kt CO2e

Purchased electricity
256kt CO2e

Purchased goods
4,027kt CO2e

Upstream transport
387kt CO2e

Commuting
34kt CO2e

Company cars
6kt CO2e

Purchased heating
6kt CO2e

Capital goods
682kt CO2e

Waste
2kt CO2e

Upstream leased assets
5kt CO2e

Use of sold products
122,284kt CO2e

Leakage of cooling
agents in factories
105kt CO2e

Transmission of electricity
34kt CO2e

Business travel
39kt CO2e

Downstream transport
41kt CO2e

End-of-life treatment
of sold products
27kt CO2e

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Read more about our three-step approach:
Reduce, Reuse, Re-source

Own emissions (scope 1 and 2)

In 2023, we continued to take concrete steps
towards achieving carbon neutrality in our
operations, including securing a plan for
renewable energy, covering 30% of this target.
Danfoss remains a committed member of the
EP100 initiative, with the objective of doubling
our energy productivity by 2030. We have already
achieved 68% since 2007.

Carbon-neutral operations
We have applied our Reduce, Reuse, Re-source
approach to decarbonizing our own factories
around the world. By the end of 2023, five of our
factories were carbon neutral, with additional
factories set to become carbon neutral in the
coming years.

purchase agreements (PPAs) in 2023, in the US and
China, which are expected to reduce our scope
2 emissions in those regions by 75% and 23%,
respectively. This builds on our first PPA in 2021 that
supplies renewable energy to our operations in
Denmark and Germany.

Electrification of our own fleet
Electrification of transportation is a focus area for
Danfoss – both from the perspective of being a
solution provider for electric vehicles and charging
infrastructure and as a member of the Climate
Group’s EV100 initiative. Through this initiative, we
have committed to transitioning our entire company
car fleet to electric vehicles by 2030 and installing
charging infrastructure on our premises. In 2023,
we increased the share of electric vehicles in
our car fleet to 12%, and we increased the capacity
of on-site charging stations.

Value chain emissions (scope 3)

By applying this approach, we have demonstrated
that decarbonization is also good business.
Our factory decarbonization projects thus far
have achieved a payback time on investment
of fewer than three years.

Securing renewable energy
To fulfill our long-term commitment to sourcing
100% renewable electricity for our own operations
by 2030, we entered into two long-term power

Value chain emissions, also known as scope 3
emissions, are the most significant part of Danfoss’
total carbon footprint, comprising more than
99%. These emissions happen outside of our own
walls – upstream with suppliers and downstream
with the use of our products by our customers
– and we take responsibility to be a part of the
solution. This is why we have set a science-based
target to reduce our scope 3 emissions by 15% in
2030. Given Danfoss’ influence on decision-making

Case story

Electric trucks
in Denmark

This year, Danfoss received one of the
world’s first heavy duty line haul electric
trucks from Volvo, with additional
trucks to be delivered in 2024. Danfoss
and Volvo Trucks have a strategic
collaboration to pioneer electric
transport operations. The first project
will see Danfoss’ existing fleet of 10
internal combustion engine-powered
delivery trucks replaced with nine new,
fully electric vehicles.

The new e-truck will operate routes
between Danfoss sites in Denmark.
Mega chargers will be used to rapidly
charge the truck’s battery during
offloading and onloading at each stop
– usually around 15 minutes, reducing
charging downtime. This is made
possible by using Danfoss solutions,
such as on-board chargers and electric
power supplies and traction inverters.

The e-truck fleet will reduce CO₂e
emissions by approximately 70%
compared to diesel trucks, leading
to a reduction of our scope 1 and 2
emissions of 433 tons CO₂e annually.

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through our purchasing power in the supply
chain, we have set a stretch goal, going beyond
our science-based target, to reduce upstream
scope 3 emissions by 25%.

2023 was about preparing the launch pad for
executing on scope 3 emissions reductions. All
our businesses developed 2030 decarbonization
roadmaps, charting the path and levers to achieving
our scope 3 targets. The process was overseen
by the Group Executive Team, and ownership of
decarbonizing our value chain was anchored with
our business leaders. This is an important foundation
for the execution of the decarbonization levers going
forward. We will continue to mature and further
refine the roadmaps next year.

The decarbonization levers for scope 3 are complex
and often require innovation and partnerships
all along the value chain. We embrace this as an
opportunity to collaborate with our business
partners, suppliers, peers, and customers to achieve
our shared goals of industry decarbonization.

Upstream emissions:
Decarbonizing with our suppliers
Upstream emissions make up around 4% of our
total carbon footprint. This is where we have
influence through our partnership with suppliers.
In the upstream decarbonization roadmaps
developed in 2023, we identified key levers that
will guide our work in the coming years:

• Low-carbon raw materials: We selected three

high-impact materials categories to ramp up our
efforts in 2024: aluminum, iron, and steel, focusing
on low-carbon production and increasing recycled
content. We selected these materials as they
comprise more than two-thirds of our upstream
emissions.

• Circular economy: Strategies, such as design for
disassembly and recycling, increased recycled
content, and re-manufacturing, are key to our
work on circularity. They are also important levers
identified in our roadmaps for decarbonizing our
supply chain.

• Supplier commitments to decarbonization:

We will continue to work with sustainability data
and performance improvements, rolled out to key
suppliers in the coming years.

Downstream emissions:
Decarbonizing with our customers
Our downstream scope 3 emissions from the use
of sold products account for around 96% of our total
carbon footprint and amount to approximately
122 million tons annually.

In the segment decarbonization roadmaps,
we identified levers, opportunities, and also
roadblocks and learnings. Highlights of levers
and opportunities include: further investment
in optimization and energy efficiency, transition
to next-generation technologies, and automation.

Case story

First Movers Coalition

In November 2023, Danfoss announced
our commitment to the First Movers
Coalition (FMC). The goal of the
Coalition is simple: Send a clear demand
signal to accelerate emerging climate
technologies in order to decarbonize
the world’s heaviest emitting sectors.

Danfoss made the commitment to
purchase at least 10% (by volume)
low-carbon primary aluminum by 2030.
Additionally, we committed to ensuring
that at least half of all aluminum used
is composed of secondary aluminum
by 2030.

It was important to us at Danfoss to
have a clear path towards delivering on
our First Movers Coalition commitment.
By the time we announced our
commitment, we had begun
negotiations with suppliers and had
secured the first contracts for low-
carbon aluminum.

"Joining the First Movers Coalition goes hand-in-hand with our

aim to be our customers’ preferred decarbonization partner.
To bring products to market with a lower carbon footprint, we
will continue to expand collaboration across our value chain.
The coalition comprises global leading companies that are
important partners and customers to Danfoss. We look forward
to working together in the FMC to accelerate innovation and
decarbonize hard-to-abate sectors, starting with aluminum.

— Frances Iris Lu, Vice President,

Head of Sustainability & ESG

About the First Movers Coalition

∙ 90+ leading global companies
∙ A partnership by the US State Department and

World Economic Forum

∙ Represents EUR 14 billion in annual demand, the world’s

largest demand signal

∙ The seven hard-to-abate sectors covered by the FMC account

for 30% of total global emissions

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In addition to our direct use-phase emissions, levers
for decarbonization were identified for products
with indirect use-phase emissions, which consume
energy sources other than fuel and electricity. These
levers have been included in the decarbonization
roadmaps. In line with the SBTi guidelines, these
emissions are not currently included in Danfoss’
scope 3 baseline. However, it is important to
Danfoss that we work to reduce emissions, increase
efficiency, and minimize losses for all of our products,
as they represent our customers’ emissions.

Not all decarbonization levers are alike. For some,
the financial investment results in a viable business
case and a positive impact on decarbonization.
Examples of this are energy efficiency and energy-
use optimization. Others are technologically
feasible but pose other challenges and dilemmas.

In 2024, we will further mature these roadmaps
with best practices and learnings, explore other
strategic levers, such as new business models, and
continue to grow our portfolio of solutions that
enable the green transition.

Avoided emissions

Avoided emissions is a term used to quantify the
savings enabled by a specific solution versus a
reference scenario. For Danfoss, avoided emissions
represent potential savings for our customers and
end-users of our products. Delivering on this through

energy efficiency, machine productivity, and enabling
electrification is the core of our business.

Case story

In 2023, we welcomed the World Business Council
for Sustainable Development’s (WBCSD) Guidance
on Avoided Emissions. Building on existing literature
on avoided emissions, the WBCSD provides a guide
on how companies can credibly, consistently, and
transparently calculate avoided emissions, leveling
the playing field for corporate claims on avoided
emissions.

Also in 2023, we took the first major steps on our
avoided emissions journey. We have:

• Developed an Avoided Emissions Guideline to
support the calculation and communication of
avoided emissions in a credible way (according
to existing public standards and guides).
• Begun to pilot cases that measure avoided

emissions on selected applications and sites.
• Included avoided emissions considerations
in the new product development toolbox.

Going forward, we will finalize the pilots and
continue to build a baseline from which to further
increase Danfoss’ avoided emissions.

Scope 3 emissions data

Data availability, quality, comparability,
and transparency across value chains
is an important part of measuring
progress against our goals on
decarbonization.

One of the challenges that Danfoss
faces, like many other companies, is the
availability of ESG data along the entire
supply chain. We will continue our work
to secure this data, so we can reliably
measure the progress we are making.

Since setting our science-based target,
we have continued to grow and mature
our competencies on sustainability
across the company. As a result, we
have identified potential improvements
in the methodology, underlying
assumptions, and data sources behind
our scope 3 emissions. Starting in
2023, and continuing into 2024, we
will continue to work on improving our
baseline and scope 3 data.

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TCFD disclosures

Governance

Strategy

Climate-related risk management

The Task Force on Climate-related Financial Disclosures
(TCFD) developed a set of climate-related financial
disclosure recommendations designed to help
companies provide better information to support market
transparency and more informed capital allocation. These
recommendations have formed the basis of reporting
regulation in the EU and the US, as well as voluntary global
standards and ratings. Disclosures are structured around
four thematic areas: governance, strategy,
risk management, and metrics and targets.

At Danfoss, the management of climate risks is integrated
into a company-wide enterprise risk management process.
The types of risks considered include current and emerging
regulations, technology changes, legal challenges, market
shifts, reputational impacts, and physical risks, both acute
and chronic.

In 2024, we will continue to build out and refine our
approach to identifying and addressing climate-related
risks and opportunities in line with the recommendations
of the TCFD.

The Board of Directors has the ultimate oversight of
sustainability, including climate change. The Group
Executive Team is responsible for setting the ambition
and direction for sustainability and climate. Regular
updates on ESG topics, including climate change,
are given to the Group Executive Team at least
every quarter.

Our climate-related risks and opportunities are
owned by various functions that have the following
responsibilities:

∙ Group Risk Management: For Group-wide

risk assessments and monitoring

∙ Group Sustainability: For overall risk assessment,
climate strategy and targets, data collection
and reporting

∙ Segment leadership: For their respective operations,

including optimization of processes

∙ Global Real Estate: For facility and energy

management of all locations and buildings,
including risk management and risk mitigation

∙ Group Finance: For data and reporting

Read more about our policies here

Sustainability-linked financing

2023 was a pivotal year for Danfoss within
sustainable finance. We set out to align our ESG
objectives with our funding strategy by publishing
our first sustainability-linked bond framework, with
a second-party opinion from S&P and subsequently
issuing EUR 500 million of sustainability-linked bonds.

Danfoss issued its sustainability-linked bond in
May 2023. It is a 6.5-year, EUR 500 million senior

Sustainability-linked bond progress

Achieve carbon-neutral
operation (scope 1 and 2) by 2030

Absolute scope 1 and 2 greenhouse
gas (GHG) emissions

2019 baseline1

2019 recalculated1,2

2023 actual

419,116 metric tons CO2e

475,259 metric tons CO2e

424,384 metric tons CO2e
equal to 10.7% reduction

1 Original baseline 2019 and recalculated baseline 2019 have been reviewed
by PwC with limited assurance. Limited assurance reports can be found here

2 Baseline 2019 has been recalculated to include the acquisition of Semikron,
adding eight factory locations, totaling 148,000 m2, and 19 other light industrial
and office locations, totaling 4,300 m2.

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Governance

Board of Directors

Jens Bjerg Sørensen
Chair

Born: June 1957
Nationality: Danish
Resident: Denmark
Independent

Mads Clausen

Born: October 1984
Nationality: Danish
Resident: Denmark
Non-independent

Board member since 2020. Chairman since 2022.
Elected for a term of one year.

Board member since 2022.
Elected for a term of one year.

Board member since 2014.
Elected for a term of one year.

Special competencies
Experience within strategy, M&A, portfolio
management and business administration. Knowledge
of management in a global group and the work in a
listed company.

Special competencies
Experience in technology and product
development, commercialization of new technology,
finance, M&A, and business management.

Board positions
∙ Chair: F. Salling Holding A/S; F. Salling Invest A/S;
HydraSpecma A/S; Købmand Herman Sallings
Fond; A. Kirk A/S

∙ Vice chair: Salling Group A/S
∙ Member: Købmand Herman Sallings Mindefond;

Aida A/S; Ejendomsselskabet
FMJ A/S; F.M.J. A/S.

∙ Present position

CEO in Aktieselskabet Schouw & Co.

Board positions
∙ Chair: MC2 Therapeutics A/S
∙ Member: Bitten & Mads Clausen’s Foundation

Present position
∙ Entrepreneur and founder of

MC2 Therapeutics A/S

Special competencies
Experience from management positions and strategic,
organizational, and communication skills. Extensive
knowledge of business administration, engineering,
and board work.

Board positions
∙ Board member and Chair: miniBOOSTER A/S, Denmark
∙ Member: Bitten & Mads Clausen’s Foundation

Mads-Peter Clausen

Karin Dohm

Per Falholt

Born: July 1976
Nationality: Danish
Resident: Denmark
Non-independent

Born: September 1958
Nationality: Danish
Resident: Denmark
Independent

Board member since 2017.
Elected for a term of one year.

Special competencies
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: Universe Science Park,

Denmark; DHI Foundation; Curasight A/S
∙ Member: Cytovac A/S; Vandstrom; Co-Ro A/S;

LIFE foundation; People Ventures

Present position
∙ CSO and co-founder 21stBIO

Born: June 1972
Nationality: German
Resident: Germany
Independent

Board member since 2022.
Chair of Audit Committee since 2022.
Elected for a term of one year.

Special competencies
Experience in key topics such as strategy, finance,
treasury, risk management and compliance as
well as Corporate Governance and ESG reporting.
Experience in a global environment working for and
with multi national 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 Chair of the Audit Committee:

Supervisory Board of CECONOMY AG
(Head of Audit Committee)

Present position
∙ CFO of HORNBACH Management AG, the general
partner of HORNBACH Holding AG & Co. KGaA

∙ CFO of Baumarkt AG

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Board of Directors continued

Connie Hedegaard

Born: September 1960
Nationality: Danish
Residence: Denmark
Independent

Jürgen Reinert

Born: January 1968
Nationality: German
Resident: Germany
Independent

Mika Vehviläinen

Henning Bjørklund

Marianne Godballe

Henning Andreas Krogh

Bent Lewke

Born: February 1961
Nationality: Finnish
Resident: Finland
Independent

Born: December 1964
Nationality: Danish
Resident: Denmark
Non-independent

Born: June 1984
Nationality: Danish
Resident: Denmark
Non-independent

Born: January 1962
Nationality: Danish
Resident: Denmark
Non-independent

Born: October 1972
Nationality: Danish
Resident: Denmark
Non-independent

Board member since 2016.
Elected for a term of one year.

Board member since 2015.
Elected for a term of one year.

Board member since 2018.
Elected for a term of one year.

Employee-elected Board member since
2022. Elected for a term of four years
in accordance with Danish law.

Employee-elected Board member since
2018. Elected for a term of four years
in accordance with Danish law.

Employee-elected Board member since
2022. Elected for a term of four years
in accordance with Danish law.

Special competencies
Experience as Minister and EU
Commissioner with extensive
knowledge of climate, environmental
and energy challenges on an
international level. Expert on global
sustainable development and green
transition.

Special competencies
Experience with executive
management and business
administration. Expert on electrical
engineering (including drives,
electric vehicles, and renewable
energy) and knowledge of industrial
ESG implementation.

Board positions
∙ Board member and Chair:

Board positions
∙ Member: KraftPowercon AB

KR Foundation; the green think
tank, CONCITO; OECD’s Round
Table on Sustainable Development

Present position
∙ CEO in SMA Technology AG

Special competencies
Experience with performance
transformation, organizational
changes, M&A, and digital
technologies. Experience in listed
companies as a Board member
and CEO.

Board positions
∙ Vice Chairman: Wärtsilä Oy

Present position
∙ Senior Supplier Quality Engineer at

Board positions
∙ Board member and Chair: Danfoss

Present position
∙ Director Operations Denmark at

Danfoss Climate Solutions

Employee Foundation in Denmark;
”TL-klubben,” South Denmark,
Danfoss A/S; Immediate Past
President; Junior Chamber
International Denmark

∙ Board member: Junior Chamber

International Denmark Foundation

Present position
∙ Senior Design Technician and

shop steward at Danfoss Climate
Solutions

Board positions
∙ Member: Dansk Metal

Sønderjylland

Present position
∙ Skilled worker and shop steward

at Danfoss Climate Solutions

Member
∙ Kirkbi A/S
∙ BBVA
∙ Villum-Fonden

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The Danfoss Board learns about our full-scale motion platform at
Danfoss Power Solutions. The platform enables customers to fully
experience, in a virtual 3D environment, how our machine solutions
perform. An example of the increasing added value our investments in
digital engineering enablers are providing to our customers.

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Governance

Group Executive Team

Kim Fausing
President & Chief
Executive Officer

Born: 1964
Joined Danfoss in 2007

Board positions
∙ Board member and Vice Chair:
SMA Solar Technology AG,
Germany

∙ Board member: Holcim Ltd.

Jesper V. Christensen
Executive Vice President
& Chief Financial Officer

Born: 1969
Joined Danfoss in 1993

Eric Alström
President, Danfoss
Power Solutions

Born: 1966
Joined Danfoss in 2012

Jürgen Fischer
President, Danfoss
Climate Solutions

Born: 1963
Joined Danfoss in 2008

Mika Kulju
President, Danfoss Power
Electronics and Drives

Astrid Mozes
President,
Danfoss Regions

Born: 1968
Joined Danfoss in 2022

Born: 1960
Joined Danfoss in 2021

Board positions
∙ Board member and Vice Chair:

Board positions
∙ Board member: Steering

Manufacturing Industry, Denmark

Hempel A/S, Denmark

∙ Board member: Confederation of

∙ Board member: MSx Advisory

Danish Industries, Denmark

∙ Board member and Head of Audit
Committee: Danish Crown A/S,
Denmark

Board of Stanford Graduate School
of Business, USA

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

Ilonka Nussbaumer
Executive Vice President
& Head of Group
Human Resources

Born: 1973
Joined Danfoss in 2019

Board positions
∙ Board member: SMA Solar
Technology AG, Germany

∙ Board member: Danish-German

Chamber of Commerce

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The Danfoss Group Executive Team is introduced to the Application Development Center at our new Smart Store, a test environment for equipment
manufacturers, contractors, food retailers, and our own engineering teams to co-develop new technologies and solutions that enhance energy and operational
efficiency. An example of the increasing added value our investments in Application Development Centers provide to our customers – seeing is believing.

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ESG statements

CONTENT

64 ESG review
66 Consolidated ESG statements
Accounting policies to the
67
consolidated ESG statements
EU Taxonomy

The digital and fully automated warehouse in our Drives factory in Graasten, Denmark, works
around the clock. This factory alone produces more than 600,000 AC drives every year, and they
are all handled in the no-touch warehouse before being shipped to customers around the globe.
Our Drives factory in Graasten is one of our five carbon-neutral factories.

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ESG review

In 2023, we focused on improving the
quality of our data disclosures and
including our newly acquired business,
Semikron. In preparation for additional
disclosure requirements, including the
EU Corporate Sustainability Reporting
Directive, we added a number of new
data points and expanded our ESG notes.
To ensure quality in our data, our 2023
data table on page 66 has been obtained
with limited assurance from PwC.
For 2023, we are also voluntarily
reporting on EU Taxonomy eligibility
for the first time.

Consolidated ESG statements

Environment

Data availability, quality, comparability, and
transparency are important to measure progress
on ESG. In 2023, we improved our calculation
models to ensure the validity of our numbers.
As a consequence, some of our comparables were
changed to reflect the updated methodology.
We will continue to improve our data collection
in the coming years.

The development of our scope 1, 2, and 3 figures
is impacted by the addition of Semikron in 2023.
Excluding Semikron, our scope 1 and 2 emissions
decreased by 18%, continuing our positive
development from 2022. Our scope 3 emissions,
excluding Semikron, are on level with last year.
In the coming years, we will continue to mature
our plans for our scope 3 reductions and start to
execute the roadmaps to reduce our footprint.

As a result of our efforts, the energy intensity
is developing positively. In 2024 and 2025, our
new power purchase agreements in China and the
US will come into effect and thereby continue the
positive development.

Our circularity and waste intensity factor is
improving; however, we see a slightly negative
deviation compared to 2022 for water intensity.
In the coming years, we will continue to work
with waste and water to ensure progress.

Decarbonizing operations
Total scope 1 and 2 GHG emissions (kt CO2e)

Gender split
Women in leadership positions (%)

Health & Safety

Total Recordable Injury Frequency (TRIF)
Lost Time Injury Frequency (LTIF)

292

267

271

1551

241

2332

191

20.1%

20.2%

20.1%

21.0%

22.1%

4.4

2.2

3.0

2.0

3.0

1.7

2.8

1.6

2.1

1.2

1 Addition of Eaton’s hydraulics business
2 Addition of Eaton’s hydraulics business and Semikron. BOCK® Compressors
is not included in the Environmental data for 2023

2019

2020

2021

2022

2023

2019

2020

2021

2022

2023

2019

2020

2021

2022

2023

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Social

Governance

Increasing the share of diverse talents in all job
functions remains a key focus area. We prioritized
our focus on improving gender and nationality
diversity in our global leadership teams. In 2023,
we increased the share of women leaders to 22.1%
(2022: 21.0%). We saw a significant improvement in
the management team diversity1 to 75.5% (2022:
67.4%) in leadership levels 1 to 4. Furthermore,
Danfoss is committed to maintaining a gender pay
gap below 5%, and in 2023, the pay ratio between
genders per job category was at 4.5% (2022: 4.5%),
while the general pay ratio between genders
was 22.4% (2022: 22.7%). The CEO pay ratio was
calculated at 191, which is in line with our global
peers. We are very proud of our progress on safety
with our LTIF reaching a new low of 1.2.

A strong governance continues to be of high
importance for us. In 2023, the ratio of supplier-
signed code of conducts excluding recent
acquisitions was on par with last year. During
the year, we started onboarding Eaton’s hydraulics
business to the Danfoss platform for tracking our
Code of Conduct. Due to the ongoing integration,
the Group reached a ratio of 72.8% compared 93.0%
in 2022.

We saw an increase in our whistleblower cases
in 2023. The increase can be attributed to the
ongoing awareness and the alignment of the
whistleblowing process with other internal
reporting processes.

1 Management team diversity is measured on manager levels 1-4. Teams of at
least five employees (excluding administrative assistants) are diverse if they are
composed of at least two genders and two nationalities. The team is considered
non-diverse, if only one of these requirements is met.

Danfoss’ foundation is our high-performing and
diverse teams. We strongly believe that taking
care of our people and our working environment
– where everyone feels engaged, respected, and
included – is essential for Danfoss’ growth journey.

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Consolidated ESG statements

2019

2020

2021

20221

20231,2

2019

2020

2021

2022

20232

Environment

Climate (Note 2)
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 emissions (metric tons CO2e)
Total GHG emissions, market based (metric tons CO2e)
Total GHG emissions, location based (metric tons CO2e)
GHG intensity (scope 1 and 2 GHG emissions,
market-based, metric tons CO2e per EURm net sales)

Energy (Note 3)

Energy consumption (MWh)

Energy intensity (MWh per EURm net sales)

Renewable energy ratio (%)

Circularity and Waste (Note 4)

Total waste (metric tons)

Hereof hazardous waste (metric tons)

Hereof recycled waste (metric tons)

Waste intensity (metric tons per EURm net sales)

Water (Note 5)

Water withdrawals (m3)

88,622

79,645

82,906

203,364

187,353

187,851

110,687

284,917

280,938

162,162

262,222

289,368

Social

People (Note 6)

Number of employees

Employee turnover (%)

Hereof employee voluntary turnover (%)

66,820,165

67,542,795

78,661,076

84,550,471

127,561,817

Employee engagement score

27,871

27,491

40,043

41,928

42,054

11.8

16.0

19.2

18.2

7.7

84,946,075

127,986,201

67,112,151

67,809,793

78,931,833

84,942,096

128,013,347

46.5

45.8

40.1

708,596

645,006

659,784

1,103,141

1,107,199

112.7

13.5

110.7

15.3

97.7

19.1

111.7

21.1

104.7

21.3

73,289

6,947

54,929

10.9

100,246

100,927

14,305

67,281

10.2

15,797

63,125

9.5

Diversity and Inclusion (Note 7)

Gender split all employees (women/men/other) (%)

30/70/0

29/71/0

Gender split all leadership positions (women/men/other) (%)

20/80/0

Management team diversity (%)

Equity (Note 8)

Pay ratio between gender, general (%)

Pay ratio between gender, within job categories (%)

Pay ratio between CEO and average employee (ratio)

Health and Safety (Note 9)

Lost Time Injury Frequency (LTIF)

Total Recordable Injury Frequency (TRIF)

Governance

2.2

4.4

2.0

3.0

28/72/0

20/80/0

66.8

29/71/0

21/79/0

67.4

29/70/1

22/78/0

75.5

1.7

3.0

22.7

4.5

172

1.6

2.8

22.4

4.5

191

1.2

2.1

1,069,463

946,846

1,045,908

2,107,228

2,320,972

Board of Directors (Note 10)

Total water withdrawals in areas at material water risk (m3)

Water intensity (m3 per EURm net sales)

170.2

162.5

154.9

646,398

213.4

219.5

1 Acquired Eaton's hydraulics business is included in 2022. Semikron is included from 2023.
2 2023 figures are subject to limited assurance.

Gender split Board of Directors (women/men/other) (%)

13/87/0

25/75/0

Attendance rate at Board meetings (%)

Board independence (%)

Ethics and Human Rights (Note 11)

Whistleblower cases (Ethics Hotline), all

Whistleblower cases (Ethics Hotline), substantiated

Ratio of suppliers signed code of conduct (%)

89.0

63.0

94.6

98.0

63.0

94.5

100.0

63.0

94.5

96.0

75.0

167

93.0

98.0

75.0

297

72.8

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Accounting policies to the consolidated ESG statements

Restatement
In instances where we identify material misstated ESG datapoints, due to a change in calculation
methodology or improved data quality, Danfoss will update these numbers in subsequent annual
reporting.

If a misstatement is deemed material, the restatement will be accompanied with an explanation
as to why the data quality has improved and which datapoints are impacted. The restatement
applies to the baseline year and all subsequent reported years.

Note 1 Basis of preparation

Reporting period
Unless otherwise stated, the consolidated ESG statements cover the period from January 1
to December 31, 2023.

Consolidation and scope of reporting
The ESG statements encompass consolidated data from the parent company, Danfoss A/S (Danfoss),
and subsidiaries controlled by Danfoss. The reporting covers all Danfoss locations. Any deviations
from these principles will be commented on under the relevant note.

GHG emissions are calculated in accordance with the GHG Protocol. The consolidation of
GHG emissions follows the operational control approach, which means that emissions data
from locations under operational control by Danfoss are included in consolidated scope
1, 2, and 3 numbers.

Data from associates, joint ventures, and other capital interests are not included in the consolidated
ESG statements. Environmental data from mergers and acquisitions are included from the reporting
year after the closing date of the acquisition, whereas social and governance data are included from
the transaction date and onwards. In 2022, Danfoss included environmental performance data
from the acquisition of Eaton’s hydraulics business, and in 2023, data from the Semikron acquisition.
In case of divestments in the reporting year, the data is included up to the closing date of the
divestment.

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Environment

Note 2 Climate

Primary data on scope 1 and 2 GHG emissions constitutes the largest proportion of emissions data.
This includes data from digital and manual meter readings and consumption data from invoices.
Locations with primary data cover Danfoss factories, currently approximately 2.1 million m2 out of
Danfoss’ total real estate footprint of 2.5 million m2 corresponding to 85%. 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 2023,
this amounted to 10% 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, the
most recent available emission factors from IEA are applied. All GHG emissions are converted to
CO2 equivalents (CO2e).

Significant impact on GHG emissions calculation due to recent acquisitions
From 2022, emissions from Eaton’s hydraulics business are included and from 2023 the Semikron
business is included.

Scope 1 GHG emissions
Scope 1 GHG emissions include direct emissions from combustion of gas and oil, filling media,
and mileage in Danfoss owned or controlled vehicles.

Compared to our reporting from 2022, emissions related to reporting of filling media from 2019
to 2022 increased, due to updated methodology of the data collection.

Scope 2 GHG emissions (market-based)
Scope 2 GHG emissions include indirect emissions from purchased heating and electricity. Market-
based emissions factors were 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 were applied.
For 2023 emissions, 2022 factors were applied as the new factors are not available at the time of
publishing this report.

Scope 2 GHG emissions (location-based)
Scope 2 GHG emissions include indirect emissions from purchased heating and electricity.
Location-based emissions factors from IEA have been applied. For 2023 emissions, 2022 factors
are applied as the new factors are not available at the time of publishing this report.

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.

Scope 1 GHG emissions

2021

2022

2023

Total

Gross scope 1 GHG emissions (tCO2e)

82,906

110,687

162,162

Scope 2 GHG emissions

Gross location-based scope 2 GHG emissions (tCO2e)
Gross market-based scope 2 GHG emissions (tCO2e)

GHG emissions related to recent acquisitions

Danfoss excluding recent acquisitions

Impact from acquisition of Eaton’s hydraulics business

Impact from acquisition of Semikron

Total scope 1

Danfoss excluding recent acquisitions

Impact from acquisition of Eaton’s hydraulics business

Impact from acquisition of Semikron

Total market-based scope 2

187,851

280,938

284,917

289,368

262,222

82,906

80,565

30,122

42,093

26,852

93,217

82,906

110,687

162,162

159,967

124,950

149,272

106,958

5,992

284,917

262,222

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Note 2 Climate continued

Scope 3 GHG emissions
During 2023, Danfoss worked intensely with improving calculation methodology and data
completeness related the material categories within our scope 3 reporting, which are C1, C2, C4,
C9, and C11. This work has been coordinated across our three segments.

Emissions factors for energy and fuels consumption used are from IEA, DEFRA 2023, and suppliers.
Materials emissions factors used are from the Sphera database. Transportation emissions are
calculated using suppliers’ emissions reports.

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 and real estate
• C3 Fuel- and energy-related activities: covers emissions from energy not already included in scope

1 and 2 GHG emissions based on average country emissions factors

• C4 Upstream transportation and distribution: covers intercompany flows, supplier and customer
flows paid by Danfoss, 3PL warehouses and supplier flows not paid by Danfoss. Calculation is
based on supplier emissions reports, where available, combined with spend-based calculation
of remaining volume

• 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 of flight travels
• C7 Employee commuting: calculation method based on average commuting data combined with

mode of transportation

• C8 Upstream leased assets: includes emissions from leased locations, mainly Danfoss sales office

locations not already included in scope 1 and 2

• C9 Downstream transportation and distribution: covers customer flows not paid by Danfoss.

Calculation based on incoterms and volume per transportation mode

• 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 as they are being considered
either not material (C10 Processing of sold products and C15 Investments) or not relevant
(C13 Downstream leased assets and C14 Franchise) to Danfoss.

Significant scope 3 GHG emissions

1 Purchased goods and services

2 Capital goods

3 Fuel and energy-related activities (not included in scope 1 or scope 2)

4 Upstream transportation and distribution

5 Waste generated in operations

6 Business travel

7 Employee commuting

8 Upstream leased assets

9 Downstream transportation

10 Processing of sold products

11 Use of sold products

12 End-of-life treatment of sold products

13 Downstream leased assets

14 Franchises

15 Investments

2021

2022

2023

Total

1,551,579

4,014,366

4,026,717

884,847

38,982

501,571

1,086

5,671

25,338

4,732

13,853

718,610

34,181

399,699

1,699

28,946

31,719

5,803

41,900

682,484

34,173

387,161

1,764

38,700

34,077

4,574

40,586

75,613,166

79,243,677

122,284,354

20,341

29,871

27,227

Total gross indirect (scope 3) GHG emissions (tCO2e)

78,661,076

84,550,471

127,561,817

GHG emissions related to recent acquisitions

Danfoss excluding recent acquisitions

Impact from acquisition of Eaton’s hydraulics business

Impact from acquisition of Semikron

Total scope 3

78,661,076

83,405,239

84,580,246

1,145,232

1,012,119

41,969,451

78,661,076

84,550,471

127,561,817

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Note 3 Energy

Note 4 Waste

Includes the total energy consumption of oil, natural gas, electricity, and district heating converted
to megawatt hours (MWh). During 2023, we continued our efforts to optimize our use of energy,
which resulted in energy reduction in multiple locations. Energy consumption of the Danfoss Group,
excluding the acquired Semikron business, shows a reduction compared to 2022 of 6.9%.

Energy intensity is reported as energy consumption (MWh) per EURm net sales. As a consequence
of our energy saving activities, our intensity ratio decreased by 6% compared to 2022.

Primary data from waste-handler companies is available for most Danfoss production locations.
In production locations where data has not been collected, an average waste generation per m2 has
been calculated and used as assumption. In remaining locations (Danfoss sales office, light industrial
locations, and warehouses), waste generation per employee is calculated (based on survey from
Business Resource Efficiency Guide). The estimated part accounts for 10% of the total waste amount
reported. Reported waste figures for 2021 and 2022 have been restated due to the improved data
collection processes.

Renewable share of energy consumption. Renewable energy ratio is determined by average energy
mix from suppliers, energy generated from own solar parks, or via PPAs of renewable energy.

Energy consumption and mix (MWh)

Oil

Natural gas

Electricity

District heating

Total fossil energy consumption

Share of fossil sources

Electricity

District heating

Total renewable energy consumption

Share of renewable sources

2021

2022

915

130,598

382,346

19,688

897

313,431

534,577

21,812

2023

Total

1,147

310,524

536,184

23,510

81%

79%

105,368

20,869

126,237

19%

216,245

16,179

232,424

21%

226,205

9,629

235,834

21%

Waste types (metric tons)

Oil and chemicals (hazardous waste)

Landfill

General waste

Metal waste – non-recycled

Estimated remaining locations

Total non-recycled waste

Plastic

Metal

Electronic

Other recyclable waste

Estimated remaining locations

Recycled waste

Total waste

533,547

870,717

871,365

Cardboard and paper

Total energy consumption (MWh)

659,784

1,103,141

1,107,199

Energy consumption related to recent acquisitions

Danfoss excluding recent acquisitions

Impact from acquisition of Eaton’s hydraulics business

Impact from acquisition of Semikron

Total energy consumption (MWh)

659,784

615,616

487,525

590,094

436,860

80,245

Waste related to recent acquisitions

Danfoss excluding recent acquisitions

Impact from acquisition of Eaton’s hydraulics business

Impact from acquisition of Semikron

659,784

1,103,141

1,107,199

Total waste

73,289

100,246

100,927

2021

2022

2023

Total

6,947

6,147

3,264

1,584

418

14,305

15,797

8,522

7.209

1,899

1.030

9,878

8,953

1,937

1,237

18,360

32,965

37,802

7,092

916

35,153

234

11,409

125

54,929

73,289

7,593

4,963

36,960

303

11,396

6,066

67,281

100,246

7,190

4,761

36,868

359

7,936

6,011

63,125

100,927

69,521

30,725

69,088

29,701

2,138

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Note 5 Water

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 13% of the total water withdrawals.

Excluding the acquisition of the Semikron business, withdrawals were on par with 2022. Danfoss
will continue to closely monitor the water withdrawals in our factory locations and intensify
our work with water going forward. For now, the water withdrawals are not adjusted for water
discharge. We will be working on improving this from 2024 onwards.

Water intensity
Water intensity is measured as water withdrawals in m3 per EURm net sales. With the increased
water withdrawals in 2023, we saw water intensity increase from 213.4 in 2022 to 219.5 in 2023.

Water withdrawals in m3

Production locations

Estimated remaining locations

Total water withdrawals in m3

Water related to recent acquisitions

Danfoss excluding recent acquisitions

Impact from acquisition of Eaton’s hydraulics business

Impact from acquisition of Semikron

Total water withdrawals in m³

2021

2022

2023

Total

1,045,908

1,900,613

2,021,936

206,615

299,036

1,045,908

2,107,228

2,320,972

1,045,908

1,034,586

1,072,642

1,058,302

1,100,351

162,319

1,045,908

2,107,228

2,320,972

Social

Note 6

People

Number of employees
The number of employees is measured by headcount end of year, including employees on leave.

Employee turnover
Employee turnover is reported as the percentage of employees who left Danfoss, including
voluntary exits, involuntary exits, and retirements, divided by the average headcount over a
12-month period.

Employee engagement score
The global Voice employee engagement survey has been performed every two years since 2007.
As previously, the 2023 survey was run by an external provider, who ensured that all data and survey
results remained anonymous and were treated confidentially.

The 2023 survey showed a high engagement score of 79, which was two points below the previous
survey in 2021. We have maintained the high level of engagement despite one-third of our
employees having joined through M&A in the last two years.

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Note 7

Diversity and Inclusion

Note 9 Health and Safety

Gender split all employees
The split between genders in total workforce is measured by headcount and reported as the
percentage of women, men, and other employees.1 Employees can voluntarily self-identify their
gender in the HR system.

Gender split all leadership positions
The split between genders in all leadership positions is measured by headcount and reported as the
percentage of women, men, and other employees in leadership positions. Leaders are defined as
having a team reporting directly to them.

Management team diversity
Management team diversity is measured on manager levels 1-4. Teams of at least five employees
(excluding administrative assistants) are diverse if they are composed of at least two genders and
two nationalities. The team is considered non-diverse if only one of these requirements is met.

The following two measures cover all 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 Hydro-Gear
and the acquired Semikron business is not included in TRIF and LTIF figures.

Lost Time Injury Frequency (LTIF)
The number of lost time injuries that 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)
The total recordable injury frequency (TRIF) includes the number of fatalities, lost time injuries,
and other injuries requiring treatment by a medical professional per million hours worked.

Note 8

Equity

Pay ratio between genders
Pay ratio between genders is reported both as the general pay ratio between men and women
employees and as the pay ratio within job categories (equal pay for equal work). The general pay
ratio between genders is determined as the average salary for men compared to the average salary
for women. Pay ratio within job categories shows the average pay ratio between employees in the
same job categories.

Pay ratio between CEO and average employee
The pay ratio between the salary of the CEO compared to average employee salary (excluding
CEO salary) includes bonuses and benefits.

1This includes non-binary, undisclosed, and unknown and applies for all genders split within note 7.

Danfoss Annual Report 2023

Letter from the CEO

Danfoss at a glance

Our purpose

Our business

Our strategy

Sustainability

ESG statements

Financial statements

73 /158

Additional disclosures own workforce

Employee turnover by gender

Employees by country (with 10% representation) and gender

Number – percent

Women

Men

Others

Total

Number – percent

Germany

China

United States

Denmark

Total
All Countries (53)

Average number of employees

No. employees leaving

Total (%)

12,546

2,435

19.4%

29,718

5,262

17.7%

105

29.4%

42,369

7,728

18.2%

Women

Men

Others

Total

1,311 26%

3,736 73%

1,703 31%

3,684 69%

2,067 28%

5,101 70%

148

1,669 31%

3,716 69%

5,111

5,408

7,316

5,413

12,282

29,283

489

42,054

Employees by age group and gender

Employees by contract type and gender

Number – percent

<30 years

30-50 Years

>50 years

Total

Number – percent

Permanent

Temporary

Total

Women

Men

Others

Total

1,941 29%

4,505 68%

210

7,338 29%

17,535 70%

232

3,003 29%

7,243 71%

6,656

25,105

10,293

12,282

29,283

489

42,054

Women

Men

Others

Total

11,681 29%

28,302 70%

404

40,387

601 36%

981 59%

1,667

12,282

29,283

489

42,054

Employees by region and gender

Employees by employment type and gender

Number

Women

Men

Others

Total

Western
Europe

Eastern
Europe

Asia
Pacific

North
America

Latin
America

Africa -
Middle East

Total

Number – percent

Full-time

Part-time

Total

4,033

10,466

126

14,625

1,982

2,401

4,417

2,453

6,491

9,001

2,077

5,130

148

7,355

1,528

2,663

4,288

209

2,132

2,368

12,282

29,283

489

42,054

Women

Men

Others

Total

11,640 28%

28,846 71%

468

40,954

642 58%

437 40%

1,100

12,282

29,283

489

42,054

Danfoss Annual Report 2023

Letter from the CEO

Danfoss at a glance

Our purpose

Our business

Our strategy

Sustainability

ESG statements

Financial statements

74 /158

Governance

Note 10 Board of Directors

Gender split Board of Directors
The split between genders in the Board of Directors is reported in accordance with The Danish
Financial Statements Act §99b and is reported as the ratio of men to women members of the Board
of Directors.

Board independence
Board independence shows to what extent Board members elected by the general assembly 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 is accessible here

Note 11 Ethics and Human Rights

Whistleblower cases
Whistleblower cases are reported as the total number of new whistleblower cases received through
Danfoss’ own Ethics Hotline.

The increase in the number of cases from 2022 to 2023 can be attributed to an awareness campaign,
a workforce expansion due to recent acquisitions of Eaton’s hydraulics business and Semikron and
adding all cases received through HR to our Ethics Hotline. In the reporting year, 36 cases were
concluded as substantiated, 273 cases were closed as unsubstantiated, and 34 cases are still under
investigation.

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 (CoC) in relation to total direct spend. For 2023, the data comprisses the total group
excluding Semikron and BOCK® Compressors.

In 2023, the ratio of supplier-signed codes of conduct, excluding recent acquisitions, was on par
with last year. During the year, we started onboarding Eaton’s hydraulics business to the Danfoss
platform for tracking our code of conduct. Due to the ongoing integration, the Group reached a
ratio of 72.8% compared 93.0% in 2022.

Danfoss Annual Report 2023

Letter from the CEO

Danfoss at a glance

Our purpose

Our business

Our strategy

Sustainability

ESG statements

Financial statements

75 /158

EU Taxonomy

Background and purpose

Reporting

The EU Taxonomy is a cornerstone of the EU’s
sustainable finance framework and an important
market transparency tool. It provides a classification
system for identifying environmentally sustainable
economic activities that will drive the transition
to a sustainable economy. The purpose is to avoid
greenwashing and to channel investments towards
sustainable activities. The Taxonomy also gives
companies like Danfoss the opportunity to show
customers, investors, and other stakeholders how
we support the transition and the EU’s ambitious
climate goals for 2030 and 2050.

To qualify as a sustainable economic activity under
Article 9 of the EU Taxonomy regulation 2020/852,1
an activity must:

• Contribute to at least one of six environmental

objectives listed in the Taxonomy; and
• Do no significant harm to any of the other
objectives, while respecting basic human
rights and labor standards.

The first step in documenting whether an economic
activity is environmentally sustainable is determining
if the activity is “eligible,” i.e., covered by the EU
Taxonomy. According to the Taxonomy regulation,
companies are required to disclose sales, capital
expenditures (CapEx), and operating expenses
(OpEx) related to its identified eligible activities.2
For 2023, Danfoss is voluntary reporting on
its “taxonomy-eligible” share of sales, CapEx,
and OpEx for the first time. To be aligned with
reporting requirements, we have included the full
taxonomy table; however, we will not be reporting
on alignment for 2023, as we are still in the
implementation phase.

Eligible activities at Danfoss

To identify EU Taxonomy-eligible activities at
Danfoss, we conducted an analysis of all our
products and activities across the countries where
we operate. Danfoss products were mapped by our
businesses and industry usage and consolidated at
Group level.

Based on this, we identified a list of activities covered
by the EU Taxonomy that are classified as contributing
to the environmental objectives, climate change
mitigation, and transition to a circular economy.

Danfoss is a leading technology partner for our
customers who want to decarbonize through energy
efficiency, machine productivity, and electrification,
and we consider the EU Taxonomy as an important
step towards building a common understanding of
sustainable economic activities and highlighting the
investments that support the green transition.

Despite the fact that the majority of our products
are driving lower emissions through machine
productivity and efficiency, a significant part of our
products, mainly related to the hydraulics business,
are currently not eligible within the EU Taxonomy
regulation. We are monitoring the development
of the Taxonomy regulation and are working with
industry associations to recommend expansions
of current activity codes.

EU Taxonomy, eligibility

45%

Sales

55%

53%

OpEx

47%

49%

CapEx

51%

1 Regulation (EU) 2020/852 of the European Parliament and of the Council of 18 June
2020 on the establishment of a framework to facilitate sustainable investment.
2Commission delegated regulation (EU) 2021/2178 ANNEX II

Eligible
Non-eligible

Danfoss Annual Report 2023

Letter from the CEO

Danfoss at a glance

Our purpose

Our business

Our strategy

Sustainability

ESG statements

Financial statements

76 /158

KPI Sales

Substantial contribution criteria

DNSH criteria
('Does Not Significantly Harm')

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Y/N Y/N Y/N Y/N Y/N Y/N

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17% 100%

10% 100%

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3.5

3.6

3.18

3.20

7.3

8.2

5.1

5.2

Economic Activites

A. Taxonomy-eligible activities

A.1 Environmentally sustainable activities (Taxonomy-aligned)

Sales, Taxonomy-aligned activities

A.2 Taxonomy-eligible, but not Taxonomy-aligned activities

Manufacture of energy efficiency equipment for buildings

Manufacture of other low carbon technologies

Manufacture of automotive and mobility components

Manufacture medium and low voltage electrical equipment

Installation, maintenance and repair of energy efficiency equipment

Information and communication

Repair, refurbishment and remanufacturing

Sale of spare parts

Sales, Taxonomy-eligible but not aligned activities

Total aligned and eligible activities (A.1 + A.2)

B. Taxonomy non-eligible activities

B Sales from non-eligible activities

Total A+B

Share of Taxonomy-eligible sales

Total Group sales amounted to EUR 10,654 million,1
and of this, 45% is considered eligible mainly related
to the following activities:

• 3.5 Manufacture of energy efficiency equipment

for buildings

• 3.6 Manufacture of other low carbon technologies
• 3.20 Manufacture, installation, and servicing
of high, medium and low voltage electrical
equipment.

The majority of our products are driving lower
emissions through machine productivity and
efficiency; however, a significant part of our
products, mainly related to the hydraulics business,
are currently not eligible within the EU Taxonomy
regulation. The majority of our products and
activities within Danfoss Climate Solutions and
Danfoss Power Electronics and Drives are considered
Taxonomy eligible.

1Income statement note 2

Danfoss Annual Report 2023

Letter from the CEO

Danfoss at a glance

Our purpose

Our business

Our strategy

Sustainability

ESG statements

Financial statements

77 /158

KPI OpEx

Substantial contribution criteria

DNSH criteria
('Does Not Significantly Harm')

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Y/N Y/N Y/N Y/N Y/N Y/N

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3.5

3.6

3.18

3.20

7.2

7.3

8.2

5.1

5.2

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11% 100%

4% 100%

16% 100%

7% 100%

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53%

47%

100%

Economic Activites

A. Taxonomy-eligible activities

A.1 Environmentally sustainable activities (Taxonomy-aligned)

OpEx, Taxonomy-aligned activities

A.2 Taxonomy-eligible, but not Taxonomy-aligned activities

Manufacture of energy efficiency equipment for buildings

Manufacture of other low carbon technologies

Manufacture of automotive and mobility components

Manufacture medium and low voltage electrical equipment

Renovation of existing buildings

Installation, maintenance and repair of energy efficiency equipment

Information and communication

Repair, refurbishment and remanufacturing

Sale of spare parts

OpEx, Taxonomy-eligible but not aligned activities

Total aligned and eligible activities (A.1 + A.2)

B. Taxonomy non-eligible activities

B OpEx from non-eligible activities

Total A+B

Share of Taxonomy-eligible OpEx

Danfoss’ Taxonomy-eligible OpEx is related to the
cost categories research and development, building
renovation, and repair and maintenance. The cost
categories are defined as below.

Research and development costs are assessed as
Taxonomy-eligible if they are related to activities
generating eligible sales. If a share of R&D costs is
not directly related to Taxonomy-eligible activities,
but connected to emissions reduction activities
related to future products, these will be mapped as
belonging to Activity 9.1 “Close to market research,
development and innovation.”

Building renovation costs that are captured as part
of our real estate activities for each location. These
costs are considered as belonging to Activity 7.2
“Renovation of existing buildings.”

Repair and maintenance costs are mainly related
to machinery and equipment within the production
area in each segment.

Danfoss Annual Report 2023

Letter from the CEO

Danfoss at a glance

Our purpose

Our business

Our strategy

Sustainability

ESG statements

Financial statements

78 /158

KPI CapEx

Substantial contribution criteria

DNSH criteria
('Does Not Significantly Harm')

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3.5

3.6

3.18

3.20

6.5

7.1

8.2

5.2

8% 100%

4% 100%

6% 100%

4% 100%

2% 100%

233

25% 100%

460

481

941

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49%

51%

100%

Economic Activites

A. Taxonomy-eligible activities

A.1 Environmentally sustainable activities (Taxonomy-aligned)

CapEx, Taxonomy-aligned activities

A.2 Taxonomy-eligible, but not Taxonomy-aligned activities

Manufacture of energy efficiency equipment for buildings

Manufacture of other low carbon technologies

Manufacture of automotive and mobility components

Manufacture medium and low voltage electrical equipment

Transport by motorbikes, passenger cars and other vehicles

Construction of new buildings

Data driven solutions for GHG emissions reduction

Sale of spare parts

CapEx, Taxonomy-eligible but not aligned activities

Total aligned and eligible activities (A.1 + A.2)

B. Taxonomy non-eligible activities

B CapEx from non-eligible activities

Total A+B

Share of Taxonomy-eligible CapEx

Danfoss’ Taxonomy-eligible CapEx is related to fixed
assets, intangible assets, and leasing.1

Fixed assets includes the additions to land &
building and machinery & equipment. The additions
to land & buildings are mapped into the activities
within Construction and Real Estate.

Intangible assets includes the additions of software
and intangible assets related to acquisition of
subsidiaries excluding Goodwill.

Leasing includes the additions to land & building
and machinery & equipment. The additions to land
& buildings are mapped into the activities within
Construction and Real Estate. Leasing additions of
company cars are mapped into 6.5 Transport by
motorbikes, passenger cars, and light commercial
vehicles.

1Intangible assets note 9 and Property, plant and equipment note 10

Danfoss Annual Report 2023

Letter from the CEO

Danfoss at a glance

Our purpose

Our business

Our strategy

Sustainability

ESG statements

Financial statements

79 /158

Financial
statements

CONTENT

80 Financial review
83 Group accounts and notes
132 Parent accounts and notes
153 Statements

Our commitment to sustainability means efficient and reliable solutions for commercial and industrial
refrigeration, air conditioning, heating, and more. Danfoss BOCK® compressors are the global choice for essential
components in commercial and industrial refrigeration, including air conditioning, cooling, heating, heat
recovery, and heat pumps. We’re committed to a sustainable future by embracing natural refrigerants like CO2.

Danfoss Annual Report 2023

Letter from the CEO

Danfoss at a glance

Our purpose

Our business

Our strategy

Sustainability

ESG statements

Financial statements

80 /158

Financial review

2023 was another strong year for Danfoss,

Sales

Earnings

where we successfully captured the

market opportunities generated by global

megatrends. Despite the global economy

slowing down in the second half of the year,

we delivered a local currency growth of 7%,

demonstrating a continued demand for our

products and solutions. Total sales reached

EUR 10.7bn and was within our guided

range. We continued our high investments

in innovation, digitalization, and capacity

throughout the year. EBITA grew 10%, to

a margin of 12.6%, which was within our

range of guidance. The free operating cash

flow after financial items and tax reached an

all-time high level of EUR 692m. The strong

results were achieved despite challenging

market conditions and cost of integrating

new businesses.

Overall, 2023 marked a year of profitable growth.
A strong growth in the first half-year was followed
by low, and in some markets negative growth,
in the second half-year, due to the decline in the
global economy. We continue to see strong sales
in several high-growth business areas like data
centers, commercial heat pumps, and electrification.
2023 Group sales increased 7% in local currency
and 4% reported to EUR 10,654m (2022: 10,256m).
The organic growth was 2%. We saw positive
growth in North America and Europe, whereas Asia
Pacific sales growth was negative, mainly driven by
China. Danfoss Power Solutions, our most cyclical
business, had a negative organic growth of 1%.
Danfoss Climate Solutions had a positive organic
growth of 1%. Danfoss Power Electronics and Drives
achieved reported organic growth of 17% and
reported growth of 41%, driven by the acquisition
of Semikron in 2022 and the high demand for
electrification. On a global scale, Danfoss continued
to see strong demand for our products and solutions
that are designed to tackle the challenges from
climate change, urbanization, and resource scarcity,
while capturing opportunities in digitalization and
electrification.

After continued high levels of strategic investments
to fuel future growth and cost of integrating
acquired companies to harvest synergies, the
operating profit before acquisition-related
amortizations (EBITA) increased 10% to EUR 1,345m
(2022: 1,224m). The EBITA margin reached 12.6%
(2022: 11.9%). Earnings were driven by continued
focus on operational excellence and managing cost.
The effective tax rate for 2023 was 24.0% (2022:
28.0%). Net profit reached a record-high EUR 819m
(2022: 683m), 20% higher than the previous year.

Total net sales
(EURbn)

7.5

6.3

5.8

10.3

10.7

2019

2020

2021

2022

2023

EBITA
(EURm)

EBITA margin (%)

12.3% 12.4%

12.8%

771

723

969

12.6%

11.9%

1,224

1,345

Innovation

2019

2020

2021

2022

2023

Danfoss continues to invest in innovation across
business segments to improve the performance and
customer experience of our products and solutions,
and to become the preferred partner in helping our
customers to decarbonize. In 2023, research and
development expenses increased 7% to EUR 487m
(2022: 457m), corresponding to 4.6% of sales
(2022: 4.5%).

Innovation spend
R&D spend (EURm)

R&D spend ratio (%)

4.6%

4.4%

4.3%

272

267

328

4.5%

457

4.6%

487

2019

2020

2021

2022

2023

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Financial statements

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Sales split by segments

Danfoss Power Solutions: 46%
Danfoss Climate Solutions: 29%
Danfoss Power Electronics and Drives: 25%

Sales split by regions

Western Europe: 33%
Eastern Europe: 4%
North America: 33%

Asia - Pacific: 22%
Latin America: 5%
Africa - Middle East: 3%

Net investments
in fixed assets excluding M&A
(EURm)

596

531

368

304

230

2019

2020

2021

2022

2023

Assets and liabilities

Total assets were at EUR 11,717m, the same level
as last year (2022: 11,728m). Equity increased 8%
to EUR 5,443m (2022: 5,048m). The equity ratio,
calculated as equity relative to total assets, was
46.4% (2022: 43.0%). The return on equity was 15.3%
(2022: 14.8%). Net interest-bearing debt amounted
to EUR 2,871m (2022: 3,168m), leading to a net
interest-bearing debt to EBITDA ratio of 1.6 (2022:
2.0). The non-current interest-bearing debt maturing
after more than 12 months amounted to EUR 2,733m
(2022: 2,702m), corresponding to 91% (2022: 86%)
of the total interest-bearing debt. At year-end, the
Group had a liquidity reserve of EUR 1.5bn (2022:
1.2bn), and 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 amounted to
EUR 692m (2022: 465m), confirming the cash
generating capability of Danfoss. This despite an
increase in investments in innovation and
production capacity. The cash flow from operating
activities increased to EUR 1,355m (2022: 1,053m),
driven by a positive operational performance.

Cash flow from investing activities amounted to
EUR -724m (2022: -931m), impacted by higher
investments in machinery and equipment and lower
M&A investments. The cash flow from financing
activities amounted to EUR -590m (2022: -26m),
primarily impacted by repayment of interest-bearing
debt. In May 2023, as part of the ongoing financing
of the Group, Danfoss issued a sustainability-linked
bond of EUR 500m. More details related to the sustain -
ability-linked bond performance are available on p 57.

Employees

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 was
closed on March 1, 2023.

The number of employees reached 42,054 end-of-
year. In 2022, Danfoss had 41,928 employees.

Events after the balance sheet date

Acquisition of BOCK GmbH

In 2022, Danfoss announced the acquisition of the
German compressor manufacturer BOCK GmbH.

We are not aware of any events after the balance
sheet date of December 31, 2023, which could be
expected to have a material impact on the Group’s
financial position.

Cash flow

Free operating cash flow (EURm)
Free operating cash flow after financial items and tax (EURm)

634

463

2019

709

493

2020

644

401

2021

1.141

692

794

465

Net interest-bearing debt (NIBD)
(EURbn)

2.1

2.0

NIBD ratio

1.0

0.6

0.5

3.2

2.7

1.6

2.9

2022

2023

2019

2020

2021

2022

2023

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Danfoss
Power Solutions

Danfoss
Climate Solutions

Danfoss
Power Electronics and Drives

Sales

-1% organic growth
EUR 4,833m

(2022: 5,087m)

+1% organic growth
EUR 3,120m

(2022: 3,200m)

+17% organic growth
EUR 2,718m

(2022: 1,927m)

Danfoss Power Solutions sales decreased 5% to EUR 4,833m
(2022: 5,087m), equal to -1% organic growth, negatively
impacted by currency developments and an overall declining
market throughout the year, driven by lower demand across
Europe and Asia Pacific, while demand in North America
remained strong. Despite market headwinds, the solid
performance of our core business allows us to continue our
investments into the future. We see strong traction in our
Editron business, where the high demand for electrification
continues. The Integration of Eaton’s hydraulics business is
progressing well, and there is a positive impact from M&A
synergies. Earnings are influenced by a positive development
in operational excellence, procurement savings, and product
mix; however, this is countered by planned integration costs.
EBITA decreased 3% to EUR 701m (2022: 720m). The EBITA
margin reached 14.5% against 14.2% the previous year.

Danfoss Climate Solutions sales decreased 3% to EUR 3,120m
(2022: 3,200m), equal to +1% organic growth. Growth was
negatively impacted by currency developments and by
market headwinds, driven by the slowdown of the global
economy. However, overall demand remains strong for
energy-efficient solutions that can support the energy
transition in the coming years, such as refrigeration and
commercial compressors for supermarkets, data centers,
and the building industry. Throughout the year, component
availability has improved significantly, and we see a positive
cost development within our own operations. The integration
of BOCK® Compressors is progressing well, and the business is
starting to win significant new deals by leveraging the Climate
Solutions sales network. EBITA decreased 6% to EUR 524m
(2022: 556m). The EBITA margin reached 16.8% against 17.4%
the previous year.

Danfoss Power Electronics and Drives sales increased
41% to EUR 2,718 (2022: 1,927m), equal to +17% organic
growth. A full year of Semikron Danfoss sales during
2023 and a continued high demand for our products and
solutions, specifically within electrification and renewables,
have supported the growth in 2023. The integration of
Semikron is progressing well, and the Semikron Danfoss
business, formed last year, has been well received by our
customers. The component shortage has eased, leading
to better delivery performance across all regions. Earnings
have doubled compared to last year, due to the newly
formed business and the delivery of a high backlog. EBITA
increased 100% to EUR 391m (2022: 196m). The EBITA
margin was 14.4% against 10.1% the previous year.

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Financial statements

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PAGE 84-87

Group accounts

PAGE 88-131

Group notes

Group accounts
and notes

84
84
85
86
87

Income statement
Statement of comprehensive income
Statement of financial position
Statement of cash flows
Statement of changes in equity

Basis of reporting and
critical accounting estimates
88

Note 1

Basis of preparation

Income Statement
89
92

Note 2 Segment reporting
Note 3

Expenses and other operating income

Inventories

Net working capital
Note 4
94
Note 5 Trade receivables
94
Note 6 Other debt
95
Note 7 Change in working capital
95

Capital employed
96

Note 8

Investments in associates
and joint ventures
Intangible assets

Note 9

99
103 Note 10 Property, plant and equipment
106 Note 11 Leases
106

Note 12 Acquisition and sale of subsidiaries

and activities

109
110

Note 13 Acquisition/Sale of other investments
Note 14 Provisions

Capital structure and financing
111 Note 15 Financial income and expenses
111 Note 16 Share capital and capital structure
112 Note 17 Financial risks and instruments
117

Note 18 Change in liabilities arising

from financing activities

117 Note 19 Pension and healthcare obligations

Tax
120 Note 20 Tax on profit
121 Note 21 Deferred tax
123 Note 22 Corporation tax

Other notes
123 Note 23 Adjustment for non-cash transactions
124 Note 24 Contingent liabilities, assets and securities
124 Note 25 Related parties
125 Note 26 Events after the balance sheet date
125 Note 27 General accounting policies
130 Note 28 Group companies

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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

Statement of comprehensive income
Statement of comprehensive income
January 1 to December 31
January 1 to December 31

Note

2022

2023

EURm

Note

2022

2023

Net profit

683

819

10,256

-6,956

3,300

-457

-1,249

-513

1,081

-41

10,654

-7,162

3,492

-487

-1,227

-559

1,219

-18

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

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:

1,043

1,252

Hedging of interest rates (Interest rates and cross currency swaps)

-108

949

-266

683

632

683

-180

1,077

-258

819

755

819

Hedging of future cash flows

Hedging transferred 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

-15

130

-31

213

242

925

875

925

-9

-7

-149

-45

-23

-145

-152

667

608

667

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Statement of financial position
Statement of financial position
As of December 31
As of December 31

Statement of financial position
As of December 31

Note

2022

2023

EURm

Note

2022

2023

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

4,860

2,483

287

139

4,709

2,778

338

122

7,803

7,975

1,658

1,564

1,648

1,535

244

1,927

236

1,809

Shareholders' equity

Equity, shareholders in Danfoss A/S

Minority interests

Total shareholders' equity

Liabilities

Provisions

Deferred tax liabilities

Pension and healthcare benefit plan obligations

Borrowings

Derivative financial instruments (negative fair value)

Other non-current debt

Non-current liabilities

Provisions

Borrowings

Trade payables

Debt to associates and joint ventures

Corporation tax

Cash and cash equivalents

340

369

Other debt

Total current assets

Total assets

Current liabilities

3,925

3,742

Total liabilities

11,728

11,717

Total liabilities and shareholders' equity

4,720

328

5,048

325

150

2,702

232

140

3,635

104

442

1,511

164

822

5,130

313

5,443

109

290

149

2,733

149

151

3,581

273

1,378

119

840

3,045

2,693

6,680

6,274

11,728

11,717

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Statement of cash flows
Statement of cash flows
January 1 to December 31
January 1 to December 31

EURm

Note

2022

2023

Accounting Policy

Profit before tax
Adjustments for non-cash transactions
Change in working capital
Interest received
Interest paid
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
Other investments, sale and acquisitions
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
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

23
7

12
12
12
13
13

18
18

949
643
-226
4
-84
-233
1,053

-45
-504
18
-441
32
-20
24
5
-931

-390
603
-2
2
-183
-56
-26

249
-5
340

1,077
701
30
4
-132
-325
1,355

-44
-558
6
-120
-11

4
-1
-724

-838
519
-3
3
-198
-73
-590

340
-12
369

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.

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Statement of changes in equity
Statement of changes in equity

EURm

Balance as of January 1, 2022

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

Share
capital

134

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

Balance as of December 31, 2022

Net profit

Foreign exchange adjustments of foreign 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
Adjustment to minority interest

Total transactions with owners

Balance as of December 31, 2023

Share
premium

Hedging
reserves

Currency
translation

Reserve
own shares

Other
reserves

-309

3,816

427

145

-31
114

114

-1

26
16

100

-2
2

134

123

-309

-41

9
-32

-32

-144

-108

-3
3

134

-9

-309

Reserves

3,515

427
26
16
145
58
44
-46

243

670
6
-2
2

180
186

4,371

509

-144
-41
36
-9
11

-147

362
7
-3
3

4,740

Proposed
dividends

189

205

205
-189

-189

205

246

246
-205

-205

246

Equity,
shareholders
in Danfoss A/S

Minority
interest

3,848

632
26
16
145
58
44
-46

243

875
-183
-2
2

180
-3

4,720

755

-144
-41
36
-9
11

-147

608
-198
-3
3

-198

5,130

103

-1

-56

231

175

328

-5

-73

-1

-74

313

Total
equity

3,951

683

25
16
145
58
44
-46
242

925

-239
-2
2
231

180
172

5,048

819

-149
-41
36
-9
11
-152

667

-271
-3
3
-1

-272

5,443

44
-15
29

456

180
186

4,458

509

-9
2
-7

502

4,967

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Basis of reporting and critical accounting estimates
Note 1 Basis of preparation
Note 1

Basis of preparation

Note 1 Basis of preparation (continued)

Introduction

Estimates which are significant for the preparation of the Financial Statements are listed below:

Danfoss A/S is a company domiciled in Denmark. The Annual Report for the period January 1 - December 31, 2023,
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 IFRS Accounting Standards
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.

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.

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 and Argentinian subsidiaries.

Changes in accounting policies

Danfoss A/S has implemented the standards and interpretations that have taken effect for 2023. None of those standards and
interpretations have material effect on recognition and measurement in 2023, nor are they expected to have a material effect
on Danfoss A/S in the future.

Critical accounting estimates and assessments

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.

- Investments in associates and joint ventures (Note 8)
- Goodwill and measurement of intangible assets (Note 9 and Note 12)
- Assessment of depreciation, amortization and impairment of non-current assets (Note 9 and Note 10)
- Deferred tax assets (Note 21)
- Measurement of pension and healthcare obligations (Note 19)

Additional description of estimates made are described in the relevant notes.

New financial reporting regulations

Danfoss A/S has implemented a number of amendments and improvements to IFRS for the financial year 2023.

The Group has assessed these interpretations and concluded they do not have material impact on the Group in 2023 or
previous years.

- Amendments to IAS 1 Presentation of Financial Statements. Clarifies certain disclosure of Accounting Policies.
- Amendments to IAS 8 Accounting policies etc. Clarification of definition of Accounting Estimates.
- Amendments to IAS 12 Deferred tax. Related to Assets and Liabilities arising from a Single Transaction.

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 2023 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. Classification of Liabilities as Current or Non-current.
- Amendment to IFRS16 Leases. Clarifies how to measure the lease liability in a sale and leaseback transaction.
- Amendments to IAS 7 Cash Flow Statement and IFRS 7 Financial Instruments: Disclosures. Introduces disclosure
requirements for supplier finance arrangements (reverse factoring), regarding terms and conditions in the
agreements.
- Amendments to IAS 12, Income taxes. A temporary exemption for recognition of deferred taxes from the effects of
implementation of Pillar II and disclosure requirements for companies affected by Pillar II.
- Amendment to IAS 21, Foreign exchange rates. Regards the effect of changes in foreign exchange rates when a
currency lacks exchangeability.

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Income statement
Note 2 Segment reporting
Note 2

Segment reporting

Note 2 Segment reporting (continued)

EURm

2022

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 Other areas

Group

Business segments

5,087
132
720
104

3,195
57
556
8

4,837
181
690
18,535

2,001
124
478
10,331

1,911
49
196
32

2,985
118
365
7,875

63
154
-248

1,905
108
5,147
5,187

10,256
392
1,224
144
3
1,043
-94
949
11,728
531
6,680
41,928

Danfoss
Power
Solutions

Danfoss
Climate
Solutions

Danfoss
Power
Electronics
and Drives Other areas

4,833
130
701
88

3,115
65
524
11

4,546
181
610
17,694

2,120
125
466
11,289

2,685
68
391
43

3,008
140
354
8,365

21
162
-271

2,043
150
4,844
4,706

2023

Group

10,654
425
1,345
142
51
1,252
-175
1,077
11,717
596
6,274
42,054

*) 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".
**) Exclusive acquisition-related amortization

For further information on the business segments, see page 23, 25 and 27.

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Note 2 Segment reporting (continued)
Segment reporting continued
Note 2

Note 2 Segment reporting (continued)

EURm

2022

EURm

2022

2023

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

EURm

Geographical segments

Western
Europe

Eastern
Europe Asia Pacific

North
America

Latin
America

Africa -
Middle East

Net sales
Total non-current assets *)

3,558
4,003

383
255

2,369
626

3,481
2,694

536
144

327
131

Group

10,256
7,664

2023

Group

10,654
7,853

Sales in Denmark amount to EUR 279m (2022: 265m) and non-current assets amount to EUR 1,042m (2022: 998m). Sales in
North America mainly relate to the US, which represent EUR 3,261m (2022: 3,040m) and non-current assets amount to
EUR 2,694 m (2022: 2,781m). China is part of the Asia Pacific region and sales amount to EUR 1,288m (2022: 1,378m) and
non-current assets amount to EUR 374m (2022: 374m).

*) Deferred tax assets are not included.

Specification of other areas - EBITA

Corporate and shared functions and projects, not allocated *)
Other
EBITA

Specification of other areas - Assets

Cash, current & non-current tax receivables
Other receivables
Corporate and shared functions, not allocated tangible, and intangible fixed assets *)
Other
Total assets

Specification of other areas - Liabilities

Interest-bearing debt, current & non-current tax liabilities
Other debt
Pension and healthcare plans
Corporate and shared functions and projects, not allocated *)
Other
Total liabilities

-241
-7
-248

-281
10
-271

506
232
1,131
36
1,905

3,633
1,132
150
221
11
5,147

514
236
1,267
26
2,043

3,415
1,075
149
199
6
4,844

*) Corporate and shared functions and projects, not allocated, are primarily corporate projects, administrative expenses, and
assets and liabilities.

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Note 2 Segment reporting (continued)
Segment reporting continued
Note 2

Note 2 Segment reporting (continued)

Accounting Policy

Segment information

The Group's registered members of Executive Management examines the Group's performance both from a product and

geographic perspective and has identified 3 reportable segments: Danfoss Power Electronics and Drives,

Danfoss Climate Solutions and Danfoss Power Solutions.

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.

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.

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Note 3 Expenses and other operating income
Expenses and other operating income
Note 3

Note 3 Expenses and other operating income (continued)

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

*) 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

2022

2023

EURm

2022

2023

B. Depreciation/amortization and impairment losses

Classification by nature:
Amortization of intangible assets
Depreciation of property, plant and equipment
Reversal of impairment losses on 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

194
342

536

124
63
7
194

296
31
15
342

194
378
-5
567

125
64
5
194

327
32
14
373

2,207
20
234
125
8
2,594

2,392
49
267
129
8
2,845

41,324
41,928

42,369
42,054

5
2
6
16
29

1
30

6
2
5
20
33

1
34

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. Long-term bonuses equal rights earned, but not necessarily
paid out in the year. Severance payments of EUR 0m (2022: 2m) are included in bonuses, long-term.

Total remuneration for registered members of the Group Executive Team amounts to EUR 20m (2022: 17m).

A presentation of the Group Executive Team is available on page 61.

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Note 3 Expenses and other operating income (continued)
Note 3

Expenses and other operating income continued

Note 3 Expenses and other operating income (continued)

EURm

2022

2023

EURm

2022

2023

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
Reversal of restructuring costs
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

51
4
18

27
100

-85

-4
-20
-32
-141

-41

3
7
24
1
8
43

-1
-1
-3
-50
-6
-61

-18

Restructuring costs in both years mainly relate to terminations in Germany, Denmark, USA, China & Türkiye.

The Group has received government grants of EUR 24m in total. This is among other items related to investment incentives
and support for research and development programs.

Audit fee
Other assurance engagements fee
Tax and VAT advice
Other fees
Total fee to Group Auditor

Accounting Policy

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.

In 2022, Danfoss disposed of part of Orbital Motors, which was part of the Danfoss Power Solution activities in Zhejiang, China,
resulting in a net gain of EUR 49m. Danfoss de-consolidated its Russian activities as end of August 2022 resulting in a loss of
approximately EUR 85m.

Administrative expenses
Administrative expenses comprise expenses in relation to administrative employees, management, office premises, office
expenses etc., including depreciation.

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Note 3 Expenses and other operating income (continued)
Note 3

Expenses and other operating income continued

Note 5 Trade receivables
Note 5

Trade receivables

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, 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.

Net working capital
Note 4 Inventories
Note 4

Inventories

EURm

Raw materials and consumables
Work in progress
Finished goods and goods for resale
Inventories

Write-downs of inventories

2022

2023

853
206
599
1,658

791
204
569
1,564

120

126

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.

EURm

2022

2023

Not overdue at the reporting date
Overdue less than 30 days
Overdue from 30 to 90 days
Overdue more than 90 days
Trade receivables before provision for bad debts
Provision for bad debts as of December 31
Net carrying amount

Provision for bad debts as of January 1
Foreign exchange adjustments in foreign companies
Additions through acquisition of subsidiaries
Accrual of new provisions
Reversal of provisions accrued
Realized loss
Provision for bad debts as of December 31

1,548
74
36
37
1,695
-47
1,648

-31

-13
-13
5
5
-47

1,454
51
36
39
1,580
-45
1,535

-47
2

-13
8
5
-45

Out of the EUR 45m write-down, EUR 27m 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.
Refer to Note 17, Financial risks and instruments, Credit risk, for further descriptions on accounting for expected credit losses.

Accounting Policy
Receivables are measured at amortized cost. Receivables are written down for bad-debt losses based on the simplified
approach to providing for expected credit losses, which requires expected lifetime losses to be recognized from initial
recognition of receivables. Impairment losses are calculated as the difference between the carrying amount and present value
of expected cash flows, including the expected realizable value of any collateral provided. The discount rate is the effective
interest rate used at the time of initial recognition of the receivable.

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Note 6 Other debt
Note 6

Other debt

EURm

Accrued salaries and wages
Accrued expenses and sundry creditors
Other debt

Note 7 Change in working capital
Change in working capital
Note 7

EURm

Change in inventories
Change in receivables
Change in trade payables and other debt
Change in working capital

2022

2023

435
387
822

480
360
840

2022

2023

-125
-178
77
-226

63
47
-80
30

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Capital employed
Note 8 Investments in associates and joint ventures
Note 8

Investments in associates and joint ventures

Note 8 Investments in associates and joint ventures

EURm

2022

EURm

Cost as of January 1
Additions through acquisition of subsidiaries
Disposals

Cost as of December 31

Adjustments as of January 1
Net profit/value adjustment
Adjustments as of December 31

Carrying amount as of December 31

Investments in
associates and
joint ventures

Other
investments

325

-46
3
-43

282

20
2
-1

-16

Total

345
2
-1

346

-62
3
-59

287

Cost as of January 1
Additions through acquisition of subsidiaries
Disposals

Cost as of December 31

Adjustments as of January 1
Net profit/value adjustment
Adjustments as of December 31

Carrying amount as of December 31

Investments in
associates and
joint ventures

Other
investments

325

-43
51
8

333

-16

2023

Total

346

-59
51
-8

338

Impairment test
Where indicators for impairment were present at the end of 2023, impairment tests were performed on the carrying
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 2022.

Further information on associates and joint ventures is provided in Note 17 Financial risks and instruments and
Note 25 Related parties.

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Note 8 Investments in associates and joint ventures
Note 8
(continued)

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

2022

Immaterial associates and joint ventures

Associates

Joint Ventures

Total

SMA Solar Technology AG

Place of business
Share of ownership

Summarized profit and loss statement, EURm *)
Revenue
EBITDA
Net income

Summarized balance sheet, EURm *)
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Equity

Other information, EURm
Group share of equity as of December 31

2022

Germany
20%

2023

Germany
20%

1,066
70
56

1,800-1,900
285-325
N/A

349
757
280
403
423

426
1,136
273
647
642

130

Danfoss' proportionate share of:

Profit or loss
Total comprehensive income
Carrying amount as of December 31

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

On the basis of the stock exchange quotation, the fair value of SMA Solar Technology AG as of December 31, 2023, was
EUR 2,101m (2022: 2,320m).

*) 2022 numbers as reported from SMA Solar Technology AG. 2023 numbers as of guidance from SMA Solar Technology AG
from Quarter 3 2023.

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Note 8 Investments in associates and joint ventures
(continued)
Note 8

Investments in associates and joint ventures continued

EURm

2023

Immaterial associates and joint ventures

Associates

Joint Ventures

Total

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

Danfoss' proportionate share of:

Profit or loss
Total comprehensive income
Carrying amount as of December 31

1
1
16

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.

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

130
187

317

130
187
16

333

For further information on associates and joint ventures, refer to 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.

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Note 9 Intangible assets
Note 9

Intangible assets

EURm

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
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

Cost as of January 1, 2023
Foreign exchange adjustments in foreign companies
Additions through acquisition of subsidiaries

Transfers
Additions
Disposals

Cost as of December 31, 2023

Amortization and impairment losses as of January 1, 2023
Foreign exchange adjustments in foreign companies
Amortization
Disposals

Amortization and impairment losses as of December 31, 2023

Carrying amount as of December 31, 2023

Goodwill

Internally developed
software

Brand

Technology

Customer
relations

Patents,
trademarks and
other rights

Development
costs

Total Other

Total

2,961
102
265

-17

3,311

145
5

150

3,161

3,311
-75
60

3,296

150
-3

147

3,149

421
3

42
-3
-5

458

214
3
47
-3

261

197

458
-4

-1
44
-21

476

261
-3
49
-21
286

190

207
-1
68

274

239

274
-6
5

273

35
-1
12

227

972
33
210

-5

1,210

506
12
80

-4
594

616

1,210
-21
29

1,218

594
-11
79

662

556

847
33
108

-4

984

294
9
51

-3
351

633

984
-27
13

970

351
-7
51

395

575

3
-6

25
1
3
-6

-1

23
-1
3
-1
24

43
1

-5

2,529
69
386
45
-14
-14

3,001

1,104
25
194
-14
-7
1,302

1,699

3,001
-58
47

-1
44
-22

3,011

1,302
-23
194
-22
1,451

1,560

5,490
171
651
45
-14
-31

6,312

1,249
30
194
-14
-7
1,452

4,860

6,312
-133
107

-1
44
-22

6,307

1,452
-26
194
-22
1,598

4,709

Of the "Internally developed software", approximately 50% relates to the One ERP program.
Additions through acquisitions of subsidiaries are mainly due to the BOCK® Compressors acquisition. Refer to Note 12 Acquisition and sales of subsidiaries and activities for further details.
Impact on goodwill, due to hyperinflation in Türkiye, amounts to EUR 8m (2022: 13m), and is included in above "Foreign exchange adjustments in foreign companies".

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Note 9 Intangible assets (continued)
Intangible assets continued
Note 9

Note 9 Intangible assets (continued)

Impairment tests
At the end of 2023, 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.

The weighted average growth rate until 2033 is based on past performance/Management expectation of market
development etc. and is estimated to be 2-7% (2022: 2-7%) 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.

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 2024-2033. 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

Goodwill as of December 31
Brand with indefinite useful
life as of December 31

Danfoss
Power
Solutions

Danfoss
Climate
Solutions

Danfoss
Power
Electronics
and Drives

2022

Other

Danfoss
Power
Solutions

Danfoss
Climate
Solutions

Danfoss
Power
Electronics
and Drives

2023

Other

1,536

572

1,050

1,475

619

1,052

136

134

The Danfoss Power Solutions brand with a carrying amount EUR 134m (2022: 136m) is not amortized, 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.

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 2022. The net cash flow during the terminal period from 2034 and onwards is
estimated at a 2% (2022: 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% (2022: 11-12%) 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 2022.

Danfoss Power Solutions
The goodwill allocated to Danfoss Power Solutions derives primarily from Eaton's hydraulics business 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 2023, the carrying amount of brand, technology and customer relations
acquired in connection with business combinations amounts to EUR 899m (2022: 1,021m), or approximately 66% (2022: 69%)
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, Sondex Holding A/S (Denmark) in 2016
and BOCK® Compressors (Germany) in 2023. At the end of 2023, the carrying amount of technology and customer relations
acquired in connection with business combinations amounts to EUR 81m (2022: 48m), or approximately 6% (2022: 3%)
of the corresponding Group carrying amount. The carrying amount of technology and customer relations is amortized
until 2035 and 2038, respectively.

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Note 9 Intangible assets (continued)
Intangible assets continued
Note 9

Note 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 2023, the carrying amount of technology and
customer relations acquired in connection with business combinations amounts to EUR 378m (2022: 419m), or approximately
28% (2022: 28%) 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 2023, Danfoss had software in progress amounting to EUR 42m (2022: 38m). Capitalized software in progress is
mainly developed internally.

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 to10 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.

In 2023, 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 (2022: 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.

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 assessed 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.

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Note 9 Intangible assets (continued)
Intangible assets continued
Note 9

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.

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Note 10 Property, plant and equipment
Property, plant and equipment
Note 10

EURm
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 through sale of subsidiaries
Depreciation and impairment losses as of December 31, 2022

Carrying amount as of December 31, 2022

Cost as of January 1, 2023
Foreign exchange adjustments in foreign companies
Additions through acquisition of subsidiaries
Transfers
Additions
Disposals
Cost as of December 31, 2023

Depreciation and impairment losses as of January 1, 2023
Foreign exchange adjustments in foreign companies
Transfers
Depreciation
Impairment
Disposals
Depreciation and impairment losses as of December 31, 2023

Carrying amount as of December 31, 2023

Land and
buildings
1,458
56
72
43
101
-56
-28
1,646

578
28

104
-45
-17
648

998

1,646
-34
23
56
137
-20
1,808

648
-7

115
-5
-16
735

1,073

Plant and
machinery
2,139
25
71
101
120
-62
-25
2,369

Equipment
338
17
6
17
22
-40
-9
351

Assets under
construction
263
-1
28
-161
344

-4
469

1,359
-1
-5
194
-52
-19
1,476

893

2,369
-36
4
219
110
-48
2,618

1,476
-24
-1
213

-45
1,619

999

205
15
5
44
-35
-6
228

123

351
-6
18
16
57
-36
400

228
-5
1
50

-34
240

160

469

469
-10

-290
377

546

Total
4,198
97
177

587
-158
-66
4,835

2,142
42

342
-132
-42
2,352

2,483

4,835
-86
45
1
681
-104
5,372

2,352
-36

378
-5
-95
2,594

2,778

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 Türkiye, amounts to net EUR 0m (2022: 27m), and is included in above "Foreign exchange adjustments in foreign companies".

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Note 10 Property, plant and equipment (continued)
Note 10

Property, plant and equipment continued

EURm

The right-of use assets included in Property, plant and equipment are presented below.

Carrying amount related to right-of-use assets as of January 1, 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

Carrying amount related to right-of-use assets as of January 1, 2023
Foreign exchange adjustments in foreign companies
Additions through acquisition of subsidiaries
Additions
Depreciation
Disposals
Carrying amount related to right-of-use assets as of December 31, 2023

Further information on leases is provided in Note 11 Leases.

Land and
buildings

Plant and
machinery

Equipment

Total

213
7
7
69
-57
-3
-1
235

235
-4
3
89
-59
-1
263

-1

14
-22
-3
-1
26

34
-20

253
7
7
83
-79
-6
-2
263

263
-4
3
123
-80
-1
304

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Note 10 Property, plant and equipment (continued)
Note 10

Property, plant and equipment continued

Note 10 Property, plant and equipment (continued)

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 assets 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 separate items, and
depreciated separately.

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.

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:

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.

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.

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.

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Note 11 Leases
Note 11

Leases

Note 12 Acquisition and sale of subsidiaries and activities
Note 12

Acquisition and sale of subsidiaries and activities

Lease liabilities are presented in borrowings of the Statement of financial position as follows:

EURbn

EURm

Current
Non-current

2022

63
207

2023

75
241

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 21m (2022: 15m).

At December 31, 2023, the Group had committed to leases not yet commenced. The total future cash outflows for leases
that had not yet commenced are EUR 54m (2022: 55m), which are mainly for buildings.

Total cash outflow for leases for the financial year ended December 31, 2023 was EUR 103m (2022: 101m).

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.

Consoli-
dated
from/until

Holding
acquired/
sold

Country

Net sales per
year *)

No. of
employees

2022
Considera-
tion
paid/re-
ceived

Company/activity:

Semikron Group
Kolex Production
Russia exit
Part of Orbital Motors, China

Acquisition
Acquisition
De-consolidation
Disposal

DE
DK
RU
CN

Aug
Jan
Aug
Oct

61%
100%
100%
100%

0.5
0.0
0.3
0.1

2,800
10
1,100
170

0.6
**
**
**

EURbn

Company/activity:

Consoli-
dated
from/until

Holding
acquired/
sold

Country

Net sales per
year *)

No. of
employees

2023
Considera-
tion
paid/re-
ceived

BOCK® Compressors
Acquisition
1500 VDC converter technology Acquisition

DE
FI

Mar
Dec

100%
100%

0.1
0.0

400
7

0.1
0.0

*) Net sales in the financial year prior to the acquisition or sale.
**) According to non-disclosure obligations, purchase prices are not stated.

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.

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Note 12 Acquisition and sale of subsidiaries and activities
Note 12
(continued)

Acquisition and sale of subsidiaries and activities continued

Note 12 Acquisition and sale of subsidiaries and activities
(continued)

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.

On 31 October, 2022, Danfoss disposed part of Orbital Motors, which was part of the Danfoss Power Solutions activities in
Zhejiang, China. The divestment resulted in 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 jurisdictions, including USA and Europe, have imposed several economic
sanctions on Russia. As a result Danfoss 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 and repatriate funds. Thus Danfoss de-consolidated
its Russian activities as of end of August 2022. This resulted in a loss of approximately EUR 85m, which is recorded under
"Other Operating Expenses".

2023 acquisitions and disposals:
On 1 March, 2023 Danfoss acquired BOCK® Compressors, a world leader in CO2 and low-GWP (Global Warming Potential)
compressors utilized in cooling and heating applications. The acquisition expands Danfoss' position as a full-service provider
for greener cooling and heating solutions. BOCK® Compressors has been incorporated into the existing Danfoss Commercial
Compressors' business. Net cash consideration paid was around EUR 114m.
The acquisition has been included in the consolidated financial statements from March 1, 2023. From the acquisition
date to December 31, 2023, BOCK® Compressors' business contributed with a revenue of EUR 82m and a profit before tax
of EUR 2m. 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, 2023, the impact on the Group’s revenue would have been additional EUR 16m
whereas there would have been no material effect on profit before tax. Acquisition-related transaction costs are EUR 1m
and have been included in "Other operating expenses" in the consolidated income statement. Integration costs are ongoing
and amount to EUR 6m, impacting EBIT negatively. The preliminary purchase price allocation (PPA) accounting has total

goodwill of EUR 58m. 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 14 December, 2023 Danfoss completed the acquisition of the 1500 VDC converter technology and the takeover of the
product team from Finland-based company Ampner Oy. The product will be integrated within Danfoss Drives' portfolio of
Electrification Solutions with primary focus on Smart Grids and energy storage. The acquisition has an insignificant impact
on Danfoss' revenue and profit before tax.

In 2023, the Russian activities were discontinued. This had no impact on P&L as the loss was recognized in 2022 at the time
of de-consolidation.

There were no disposals in 2023. The reported figures are mainly adjustments to the partial divestment of Orbital Motors
in 2022.

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Note 12 Acquisition and sale of subsidiaries and activities
Note 12
(continued)

Acquisition and sale of subsidiaries and activities continued

Note 12 Acquisition and sale of subsidiaries and activities
(continued)

EURm

2022

2023

Accounting Policy

Acqui-
sitions Disposals

De-
consolidated

Acqui-
sitions Disposals

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

-386
-177
-51
-137
-142
-42
99
128
81
-627
-265
-892
41
-851
-1
231
180

-441

2
4

-7
3
59
62

62
-30

5
20
1
29
17
19
-2
-1
-28
60
-77
-17
-19
-36

16
-20

-47
-45

-24
-12
-6
3
31
39
-61
-60
-121
6
-115
-3
-2

-120

-11

In the figures for Acquisitions for 2023, are included reclassifications for final adjustments to the opening balance of the
Semikron Group. These adjustments have no cash impact. Main adjustments are EUR -21m related to fixed-asset revaluation
and EUR +23m on other payables.

*) Receivables in acquisitions includes provision for bad debt of EUR 1m (2022: 2m).

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.

2
2

2
-13

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.

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Note 12 Acquisition and sale of subsidiaries and activities
Note 12
(continued)

Acquisition and sale of subsidiaries and activities continued

Note 13 Acquisition / Sale of other investments
Note 13

Acquisition / Sale of other investments

Any excess of the cost over the fair value of the identifiable assets and liabilities, including contingent liabilities, is recognized

EURm

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.

Sale and acquisition of shares and other securities
Increase/decrease in lending

2022

2023

5
24
29

-1
4
3

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Note 14 Provisions
Note 14

Provisions

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

2023

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
Provisions as of December 31

64
-1

-17
-12
35
69

65
-1

-8
-2
18
72

61
-1
2
-17
-2
6
49

190
-3
2
-42
-16
59
190

2023

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

50
19

10
31
31
72

21
26
2
49

81
76
33
190

Note 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.

Warranty provisions are recognized as the underlying goods and services are sold, based on warranty costs incurred in the
financial year and in previous years.

Provisions for restructuring and employee-termination costs are made when the Group has agreed on a detailed and formal
plan, and the Group has started implementing the plan or has announced the plan to the persons affected. Restructuring
provisions do not include costs for the ongoing operations during the restructuring phase.

Other long-term employee benefits are recognized based on an actuarial calculation. However, actuarial gains and losses are
recognized in the income statement immediately. Other long-term employee benefits include jubilee benefits.

Note 15 Financial income and expenses

EURm

Financial income

Gain on other investments

Foreign exchange gains, net

Interest from banks, etc.

Financial income

Interest on financial assets measured at amortized cost.

Financial expenses

Interest to banks etc.

Calculated interest on defined benefit plans

Interest expense for leasing arrangements

Monetary loss on adjustments for hyperinflation
Foreign exchange losses, net
Loss on other investments
Financial expenses

ESG statements

Sustainability

Financial statements

Interest on financial liabilities measured at amortized cost

2022

2023

-78

-4

-8

-18

-108

-86

-116

-6

-11

-20
-26
-1
-180

-127

111 /158

A fair-value hedge impact of EUR -7m (2022: -1m) is included in Foreign exchange losses, net.
Further information on leases is provided in Note 11 Leases.
Further information on Monetary loss on adjustments for hyperinflation is provided in Note 27 General accounting policies.

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.

Note 16 Share capital and capital structure
Share capital and capital structure
Note 16

Distribution of shares

A shares

B shares

Total

Balance as of December 31, 2022

Number
4,250,000

DKKm
425.0

Number
5,719,625

DKKm
572.0

Number
9,969,625

DKKm
997.0

Balance as of December 31, 2023

4,250,000

425.0

5,719,625

572.0

9,969,625

997.0

Class A shares entitle the holder to ten votes for each share, while Class B shares entitle the holder to one vote for each share.
The holders of Class A shares also have pre-emptive rights to Class A shares in the event of any increases in share capital.
Otherwise, no shares have special rights. Resolutions regarding amendments to the Articles of Association or Danfoss A/S’
dissolution require at least two-thirds of the votes cast as well as two-thirds of the voting share capital represented at the
Annual General Meeting to be adopted. The share capital is fully paid in. All shares have a nominal value of DKK 100.

The Bitten & Mads Clausen's Foundation holds 48% of the shares corresponding to 86% of the votes.

Dividend per share

Proposed dividend per 100 DKK share
Dividend from last year paid per 100 DKK share

DKK

153.1
136.4

2022
EUR

20.6
18.3

DKK

183.6
147.9

2023
EUR

24.6
19.8

Danfoss Annual Report 2023

Letter from the CEO

Danfoss at a glance

Our purpose

Our business

Our strategy

Capital structure and financing
Note 15 Financial income and expenses
Financial income and expenses
Note 15

EURm

Financial income

Gain on other investments
Foreign exchange gains, net
Interest from banks, etc.
Financial income

Interest on financial assets measured at amortized cost.

Financial expenses

Interest to banks etc.
Calculated interest on defined benefit plans
Interest expense for leasing arrangements
Monetary loss on adjustments for hyperinflation
Foreign exchange losses, net
Loss on other investments
Financial expenses

Interest on financial liabilities measured at amortized cost

2022

2023

4
6
4
14

-78
-4
-8
-18

-108

-86

4
5

-116
-6
-11
-20
-26
-1
-180

-127

Danfoss Annual Report 2023

Letter from the CEO

Danfoss at a glance

Our purpose

Our business

Our strategy

Sustainability

ESG statements

Financial statements

112 /158

Note 16 Share capital and capital structure (continued)
Note 16

Share capital and capital structure continued

Note 17 Financial risks and instruments
Financial risks and instruments
Note 17

Development in the Group's holding of treasury shares (No. of B-shares of 100 DKK)

Holding as of January 1
Acquired in the year
Sold to The Bitten & Mads Clausen's Foundation
Holding as of December 31

2022

340,153
1,254
-1,233
340,174

2023

340,174
1,597
-1,602
340,169

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 2023 for acquiring own shares amounts to EUR 3m (2022: 2m). The total selling price in 2023 for selling
own shares amounts to EUR 3m (2022: 2m). The Group's holding of treasury shares represents 3.4% (2022: 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 2023, the net-interest-bearing debt to EBITDA ratio was 1.6 (2022: 2.0) 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.

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 2023 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 2023 and 2022.

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.

Danfoss Annual Report 2023

Letter from the CEO

Danfoss at a glance

Our purpose

Our business

Our strategy

Sustainability

ESG statements

Financial statements

113 /158

Note 17 Financial risks and instruments (continued)
Note 17 Financial risks and instruments (continued)
Note 17

Financial risks and instruments continued

Note 17 Financial risks and instruments (continued)

Nominal position of significant currencies
Nominal position of significant currencies

EURm
EURm

Receivables and payables
Receivables and payables
Cash and loans 1)
Cash and loans 1)
Derivative financial instruments for hedging of fair
Derivative financial instruments for hedging of fair
value 2)
value 2)
Derivative financial instruments for hedging of
Derivative financial instruments for hedging of
future cash flow
future cash flow

Sensitivity
Sensitivity

Probable increase in exchange rate
Probable increase in exchange rate
Hypothetical impact on profit and loss for the
Hypothetical impact on profit and loss for the
year
year
Hypothetical impact on equity
Hypothetical impact on equity

2022
2022

USD
USD

GBP
GBP

Total
Total

EUR
EUR

42
42
-520
-520

USD
USD

88
88
-162
-162

2023
2023

GBP
GBP

Total
Total

-3
-3
65
65

127
127
-617
-617

-45
-45
-129
-129

171
171

474
474

74
74

-62
-62

486
486

-389
-389

-175
-175

-285
-285

-17
-17

-477
-477

EUR
EUR

-69
-69
-252
-252

318
318

-289
-289

23
23
65
65

-88
-88

-75
-75

1
1
58
58

-59
-59

-25
-25

1%
1%

10%
10%

1%
1%

10%
10%

0
0
-4
-4

0
0
-7
-7

0
0
-3
-3

0
0
-14
-14

0
0
-3
-3

0
0
-28
-28

0
0
-2
-2

0
0
-33
-33

A decrease in exchange rates as stated would have had the opposite effect on the profit and equity. The sensitivities are based
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.
on recognized financial assets and liabilities at December 31 and include impact from derivatives.

1) Besides the loans included, loans of EUR 74m (2022: 87m) are used for hedging of net investments. The impact on the
1) Besides the loans included, loans of EUR 74m (2022: 87m) are used for hedging of net investments. The impact on the
Group's equity is EUR 0m (2022: 0m).
Group's equity is EUR 0m (2022: 0m).
2) Financial instrument for hedging of fair value also includes the exposure related to inventories in countries applying
2) Financial instrument for hedging of fair value also includes the exposure related to inventories in countries applying
foreign currency price lists.
foreign currency price lists.

Cross currency swaps and related interest swaps are not included in the above but are described below in the section
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".
"Derivative contracts related to the bond issuance".

Credit risk
Credit risk
The Group’s credit risks primarily apply to trade receivables and bank deposits (i.e. counterparty risk). It is Danfoss' policy to
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
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
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.
to Standard & Poor’s credit-rating metric.

The Group applies the simplified approach to provide for expected credit losses prescribed by IFRS 9, which permits the use
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.

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 2m, while equity would be impacted by a gain of EUR 31m, 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. The target financial gearing is 2 x EBITDA before special
items. The ratio may exceed this level following significant acquisitions.

At the end of 2023, Danfoss' credit rating from Standard and Poor’s was "BBB with a stable outlook" and the liquidity reserve
equalled EUR 1.5bn (2022: 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 4.3 years at the end of 2023. The Danfoss Group's loan
agreements contain no financial covenants.

Danfoss Annual Report 2023

Letter from the CEO

Danfoss at a glance

Our purpose

Our business

Our strategy

Sustainability

ESG statements

Financial statements

114 /158

Note 17 Financial risks and instruments (continued)
Note 17 Financial risks and instruments (continued)
Note 17

Financial risks and instruments continued

Note 17 Financial risks and instruments (continued)
Note 17 Financial risks and instruments (continued)

Financial instruments by category
Financial instruments by category

2023
2023

EURm
EURm

Maturity
Maturity

The Group's debt categories and maturities
The Group's debt categories and maturities
EURm
EURm

Bank debt and corporate bond
Mortgage debt
Bank debt and corporate bond
Contingent considerations
Mortgage debt
Lease liabilities
Contingent considerations
Trade payables
Lease liabilities
Debt to ass./ JV.
Trade payables
Derivative financial liabilities
Debt to ass./ JV.
Derivative financial liabilities

g
t
n
n
u
y
g
t
o
r
n
n
r
m
a
i
u
y
C
a
o
r
r
m
a
C
a
2,782
64
2,782
26
64
270
26
1,511
270
2
1,511
232
2
4,887
232
4,887

w
o
l
w
f
h
o
s
l
f
a
c
h
s
a
c

a
u
t
l
c
a
a
u
r
t
t
c
n
a
o
r
t
C
n
o
C
2,853
79
2,853
26
79
295
26
1,511
295
2
1,511
232
2
4,998
232
4,998

2022
2022

Maturity
Maturity

0-1
year
0-1
year
393
393
2
69
2
1,511
69
2
1,511
2
1,977
1,977

1-5
years*)
1-5
years*)
1,362
4
1,362
24
4
160
24
160

Over 5
years
Over 5
years
1,098
75
1,098
75
66
66

86
1,636
86
1,636

146
1,385
146
1,385

g
t
n
n
u
y
g
t
o
r
n
n
r
m
a
i
u
y
C
a
o
r
r
m
a
C
a
2,602
64
2,602
22
64
316
22
1,378
316
2
1,378
149
2
4,533
149
4,533

w
o
l
w
f
h
o
s
l
f
a
c
h
s
a
c

a
u
t
l
c
a
a
u
r
t
t
c
n
a
o
r
t
C
n
o
C
2,768
64
2,768
22
64
372
22
1,378
372
2
1,378
149
2
4,755
149
4,755

0-1
year
0-1
year
221
221
5
85
5
1,378
85
2
1,378
2
1,691
1,691

1-5
years*)
1-5
years*)
1,509
1,509
17
177
17
177

Over 5
years
Over 5
years
1,038
64
1,038
64
110
110

149
1,852
149
1,852

1,212
1,212

*) Maturity is evenly spread over the period.
Further information on lease is provided in Note 11 Leases.
*) Maturity is evenly spread over the period.
Further information on lease is provided in Note 11 Leases.
In 2023, Danfoss issued EUR Bonds in total EUR 0.5 bn as part of a general refinancing program.
The 2023 bonds financing costs are linked to certain sustainability targets. If Danfoss does not meet these targets, accumulated
In 2023, Danfoss issued EUR Bonds in total EUR 0.5 bn as part of a general refinancing program.
financing costs will increase by a maximum of 4 mEUR with payment at maturity.
The 2023 bonds financing costs are linked to certain sustainability targets. If Danfoss does not meet these targets, accumulated
financing costs will increase by a maximum of 4 mEUR with payment at maturity.
The maturity analysis is based on all non-discounted cash flows, including estimated interest payments. Interest payments
are estimated according to existing market conditions. The non-discounted cash flows from derivative financial instruments
The maturity analysis is based on all non-discounted cash flows, including estimated interest payments. Interest payments
are presented in gross amounts, unless the parties have a contractual right or obligation to make net settlements. The Group
are estimated according to existing market conditions. The non-discounted cash flows from derivative financial instruments
generally accepts that vendors sell off their receivables arising from the sales to the Group, to a third party. Danfoss has
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
established a supply-chain financing program where vendors can sell off their receivables from Danfoss at attractive terms,
Group is aware of EUR 64m (2022: 65m) of trade payables that are part of such agreements.
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 64m (2022: 65m) of trade payables that are part of such agreements.

Financial assets:
Financial assets:

Investments in associates and joint ventures
Investments in associates and joint ventures
Financial assets measured at equity method
Financial assets measured at equity method

Other investments **)
Other investments **)
Financial assets measured at fair value via the income
Financial assets measured at fair value via the income
statement
statement

Derivative financial instruments for the hedging of the
Derivative financial instruments for the hedging of the
fair value of recognized assets *)
fair value of recognized assets *)
Derivative financial instruments for the hedging
Derivative financial instruments for the hedging
of future assets cash flows 1)
of future assets cash flows 1)
Financial assets used as hedging instruments
Financial assets used as hedging instruments

Trade receivables
Trade receivables
Other receivables
Other receivables
Cash and cash equivalents
Cash and cash equivalents
Loans, receivables, cash and cash equivalents
Loans, receivables, cash and cash equivalents
measured at amortized cost
measured at amortized cost

Financial liabilities:
Financial liabilities:

Contingent consideration measured at fair value via the
Contingent consideration measured at fair value via the
income statement **)
income statement **)

Interest-bearing debt
Interest-bearing debt
Trade payables and other debt
Trade payables and other debt
Financial liabilities measured at amortized cost
Financial liabilities measured at amortized cost

Carrying
Carrying
amount
amount

2022
2022
Fair
Fair
value
value

Carrying
Carrying
amount
amount

2023
2023
Fair
Fair
value
value

282
282
282
282

478
478
478
478

333
333
333
333

436
436
436
436

5
5

4
4

5
5

4
4

163
163
167
167

1,648
1,648
244
244
340
340

163
163
167
167

1,648
1,648
244
244
340
340

5
5

121
121
126
126

1,535
1,535
236
236
369
369

121
121
126
126

1,535
1,535
236
236
369
369

2,232
2,232

2,140
2,140

27
27

3,117
3,117
2,475
2,475
5,592
5,592

3,112
3,112
2,475
2,475
5,587
5,587

23
23

2,983
2,983
2,371
2,371
5,354
5,354

Danfoss Annual Report 2023

Letter from the CEO

Danfoss at a glance

Our purpose

Our business

Our strategy

Sustainability

ESG statements

Financial statements

115 /158

Note 17 Financial risks and instruments (continued)
Note 17 Financial risks and instruments (continued)
Note 17

Financial risks and instruments continued

Note 17 Financial risks and instruments (continued)

Financial instruments by category
Financial instruments by category

EURm
EURm

Financial liabilities:
Financial liabilities:
Derivative financial instruments for the hedging
Derivative financial instruments for the hedging
of the fair value of recognized liabilities *)
of the fair value of recognized liabilities *)

Financial liabilities used as hedging instruments
Financial liabilities used as hedging instruments

Derivatives as of December 31 for the Group

Carrying
Carrying
amount
amount

2022
2022
Fair
Fair
value
value

Carrying
Carrying
amount
amount

2023
2023
Fair
Fair
value
value

EURm

391
391

260
260

Financial assets and liabilities measured at fair value are measured on a recurring basis and categorized into the following
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:
levels of the fair value hierarchy:

Level 1: Observable market prices for identical instruments.
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
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
valuation techniques, where all significant inputs are based on observable market data such as exchange rates and swap
curves.
curves.
Level 3 **): Valuation techniques primarily based on unobservable prices.
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 instalment and interest
The fair value of the interest-bearing debt is recognized as the present value of expected future instalment and interest
payments. The discount rate applied is the Group's current borrowing rate on loans for corresponding terms. The short-term,
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
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 2023 remain unchanged compared to 2022.
is estimated to be equal to the carrying amount. The methods applied in 2023 remain unchanged compared to 2022.

1) Out of EURm 121, the 111 is offset in derivative financial instruments under liabilities in the statement of financial position
1) Out of EURm 121, the 111 is offset in derivative financial instruments under liabilities in the statement of financial position
(2022: EURm 159).
(2022: EURm 159).

USD
EUR
Other currencies
Forward exchange contracts
Interest rate swaps
Cross currency hedge
Derivatives end of year

2022

d
e
z
i
n
g
o
c
e
r

)
-
(
s
s
o
L
/
n
a
G

t
n
e
m
e
t
a
t
s
e
m
o
c
n

-2
5
1
4
-205
-183
-384

2023

d
e
z
i
n
g
o
c
e
r

)
-
(
s
s
o
L
/
n
a
G

t
n
e
m
e
t
a
t
s
e
m
o
c
n

-2

-121
-128
-249

t
n
u
o
m
a

a
n
o
i
t
o
N

-290
336
-102

-1,380
1,558

e
u
a
v
r
i
a
f

t
e
N

1
9
-5
-137
-133

t
n
u
o
m
a

a
n
o
i
t
o
N

-202
31
-116

-1,266
1,603

e
u
a
v
r
i
a
f

t
e
N

5
5
-2
8
-41
-191
-224

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 0m (2022: 4m). Refer to section below: "Derivative contracts related to
the bond issuance" for fair value hedges related to cross-currency swaps.

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Financial statements

116 /158

Note 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 2023, unrealized gain/loss(-) on derivatives on hedging that of foreign currency risk in
equity amounted to EUR 9m (2022: 4m). For the open foreign exchange contracts, used for USD cash flow hedges, at the end
of 2023, the weighted average hedge rate for USD/DKK is 6.78 (2022: 7.24).

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, the majority is swapped into usd via cross-currency swaps,
while a significant part of the interest rate risk is hedged via interest rate swaps (from fixed EUR to fixed USD rates). For
the issued bonds in 2023 a minor part of the interest rate risk is hedged via interest rate swaps (from fixed to variable
EUR rate). The maturity of the 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 of offset is expected.

Derivative related to Virtual Power Purchase Agreement (VPPA)
As part of Danfoss' sustainability strategy to achieve our climate targets, a virtual power purchase agreement (VPPA) was
signed in the USA in 2023. The solar facility underlying the agreement is to be managed by the operator. Danfoss will have no
rights of determination or control over the use of the facility. The benefits accruing from the VPPA come in the form of two
components: A financial flow that depends, among other things, on the development of the respective spot electricity price,
and certificates that Danfoss receives as proof of origin for electricity from renewable energies. The difference between the
contractually fixed price per MWh of electricity produced and the respective spot electricity price when the electricity is fed
into the grid is settled between Danfoss and the operator on a monthly basis is expected to begin from 2025. Due to the
derivatives embedded in the agreements, the agreement is accounted for at fair value through profit or loss. The fair value
allocated to level 3 is derived from the present value of the expected cash flows from the agreement. A positive impact of
EUR 1m in fair value is recognized in cost of sales in the statement of income for 2023. Notional amount is EUR 67m based on
a contract of 12 years and expected yearly utilization of 185.000 MWh. If the anticipated electricity prices had been 10%
lower on the valuation date, the fair value of the agreement would have been EUR 3m lower. In our effort to pursue
renewable energy Danfoss also has physical PPAs not subject to derivative accounting.

Note 17 Financial risks and instruments (continued)

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 2023 or 2022.

Accounting Policy

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.
ESG linked bonds is also accounted for as above (Amortized cost method), with the exception that any change in expected
cash flow of not fulfilling the ESG requirements will be accounted for as a change in financial liability and corresponding
impact in 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.

Danfoss Annual Report 2023

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Our strategy

Sustainability

ESG statements

Financial statements

117 /158

Note 18 Change in liabilities arising from financing
Note 18
activities

Change in liabilities arising from financing activities

Note 19 Pensions and healthcare obligations
Note 19

Pensions and healthcare obligations

EURm

Carrying amount as of January 1, 2022

Cash flows:
Cash repayment
Lease payments
Cash proceeds

Non-cash transactions:
Acquisitions of subsidiaries
Addition and disposal of lease liabilities
Adjustment of Euro borrowings *)
Reclassification
Other
Carrying amount as of December 31, 2022

Cash flows:
Cash repayment
Lease payments
Cash proceeds

Non-cash transactions:
Acquisitions of subsidiaries
Addition and disposal of lease liabilities
Adjustment of Euro borrowings *)
Reclassification
Other
Carrying amount as of December 31, 2023

Short-term
borrowings

236

-215
-81
250

8
24

212
8
442

-418
-70
17

2
38

281
-19
273

Long-term
borrowings

2,708

-94

353

89
52
-276
-212
82
2,702

-350

502

1
84
128
-281
-53
2,733

Total

2,944

-309
-81
603

97
76
-276

90
3,144

-768
-70
519

3
122
128

-72
3,006

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.

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 2023, Danfoss acquired BOCK® Compressors and in this respect certain pension plans were taken over. The largest plan
is located in Germany.

It is the Group’s policy that pension and healthcare plans within the Group should, generally, be arranged as
defined-contribution plans. However, in countries like the USA, the UK and Germany, there is a tradition for defined-benefit
plans. The geographical split of defined-benefit plans is as follows:

Germany
USA
UK
Other
Total

Gross
liability

27%
39%
25%
9%
100%

2022
Net
Liability

56%
21%
-8%
31%
100%

Gross
liability

30%
38%
24%
8%
100%

2023
Net
Liability

62%
18%
-5%
25%
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 250 (2022: 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.

Danfoss Annual Report 2023

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Our strategy

Sustainability

ESG statements

Financial statements

118 /158

Note 19 Pensions and healthcare obligations (continued)
Note 19 Pensions and healthcare obligations (continued)
Note 19

Pensions and healthcare obligations continued

Note 19 Pensions and healthcare obligations (continued)
Note 19 Pensions and healthcare obligations (continued)

The Group's defined-benefit plan obligations
The Group's defined-benefit plan obligations

EURm
EURm

Present value of defined-benefit plan obligations
Present value of defined-benefit plan obligations
Fair value of plan assets
Fair value of plan assets

Defined-benefit plan obligations are presented in the statement of financial position as follows:
Defined-benefit plan obligations are presented in the statement of financial position as follows:
Pension benefit plan assets
Pension benefit plan assets
Pension and healthcare plan obligations
Pension and healthcare plan obligations

2022
2022

475
475
-338
-338
137
137

13
13
150
150
137
137

2023
2023

471
471
-331
-331
140
140

9
9
149
149
140
140

Development in the fair value of plan assets
Development in the fair value of plan assets

EURm
EURm

Plan assets as of January 1
Plan assets as of January 1
Foreign exchange adjustments in foreign companies
Foreign exchange adjustments in foreign companies
Calculated interest on plan assets
Calculated interest on plan assets
Plan participants' contribution asset
Plan participants' contribution asset
Return for the year on plan assets, excluding calculated interest
Return for the year on plan assets, excluding calculated interest
Payments by the Group
Payments by the Group
Disbursed benefits
Disbursed benefits
Net transfer from provisions
Net transfer from provisions
Plan assets as of December 31
Plan assets as of December 31

2022
2022

2023
2023

449
449
3
3
10
10
1
1
-112
-112
7
7
-18
-18
-2
-2
338
338

338
338
-3
-3
16
16
1
1
-9
-9
6
6
-18
-18

331
331

Plans with a surplus have been recognized on the basis that future economic benefits are available to the Group in the form of
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.
a reduction in future contributions or a cash refund.

Development in the present value of defined-benefit plan obligations
Development in the present value of defined-benefit plan obligations

EURm
EURm

Provision as of January 1
Provision as of January 1
Foreign exchange adjustments in foreign companies
Foreign exchange adjustments in foreign companies
Additions through acquisition of subsidiaries and activities
Additions through acquisition of subsidiaries and activities
Pension costs for the year
Pension costs for the year
Calculated interest on plan liabilities
Calculated interest on plan liabilities
Actuarial gains(-)/losses from changes in demographic assumptions
Actuarial gains(-)/losses from changes in demographic assumptions
Actuarial gains(-)/losses from changes in financial assumptions
Actuarial gains(-)/losses from changes in financial assumptions
Plan participants' contribution liabilities
Plan participants' contribution liabilities
Disbursed benefits from the Group
Disbursed benefits from the Group
Disbursed benefits from plan assets
Disbursed benefits from plan assets
Net transfer from provisions
Net transfer from provisions
Provision as of December 31
Provision as of December 31

A few countries may require that the liability is funded, but this is not the case in most countries. Defined-benefit plans that
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
are unfunded are mainly related to pension plans in Germany and the healthcare plan in the USA. Unfunded plans amount to
approximately EUR 122m (2022: 112m).
approximately EUR 122m (2022: 112m).

2022
2022

2023
2023

Expenses relating to pension and healthcare obligations
Expenses relating to pension and healthcare obligations

634
634
3
3
1
1
9
9
14
14
1
1
-155
-155
1
1
-9
-9
-18
-18
-6
-6
475
475

475
475
-14
-14
13
13
8
8
22
22
-2
-2
-1
-1
1
1
-13
-13
-18
-18

471
471

EURm
EURm

Pension costs for the year
Pension costs for the year
Calculated interest on liabilities
Calculated interest on liabilities
Calculated interest on assets
Calculated interest on assets
Expensed in the income statement
Expensed in the income statement

Pension costs distributed by function:
Pension costs distributed by function:

Pension cost stated under cost of sales
Pension cost stated under cost of sales
Pension cost stated under selling and distribution costs
Pension cost stated under selling and distribution costs
Pension cost stated under administrative expenses
Pension cost stated under administrative expenses
Interest concerning pension and healthcare obligations posted under financial items
Interest concerning pension and healthcare obligations posted under financial items

2022
2022

2023
2023

9
9
14
14
-10
-10
13
13

4
4
1
1
4
4
4
4
13
13

8
8
22
22
-16
-16
14
14

3
3
1
1
4
4
6
6
14
14

Danfoss Annual Report 2023

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ESG statements

Financial statements

119 /158

Note 19 Pensions and healthcare obligations (continued)
Note 19

Pensions and healthcare obligations continued

Note 19 Pensions and healthcare obligations (continued)

2022

2023

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 12m to defined-benefit plans in 2024 (2023: 11m).

Estimated maturity of provisions

EURm

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

25
103
347
475

104
130
52
45
331

24
108
339
471

2023

31%
39%
16%
14%
100%

2022

28%
34%
24%
14%
100%

95
116
80
47
338

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

Plans in which the pension funds are invested in financial instruments are exposed to risk. 31% (2022: 28%) of the funds are
invested in shares, which have historically been subject to value fluctuations.

Impact of increase in average life expectancy of 1 year
Impact of decrease in average life expectancy of 1 year

Significant assumptions for calculation of pension and healthcare obligations and related costs

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

2022
Weighted
average

4.8%
3.8%

2022
Female
Range

Range

3.6-5.2%
2.0-4.7%

Male
Range

2023
Weighted
average

5.2%
4.1%

2023
Female
Range

Range

3.1-5.3%
2.2-4.5%

Male
Range

86-87

87-89

86-87

87-89

87-90

89-91

87-89

89-91

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).

2022

475

2023

471

-26
+29

+4
-4

+13
-13

-24
+26

+7
-6

+12
-12

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ESG statements

Financial statements

120 /158

Note 19 Pensions and healthcare obligations (continued)
Note 19

Pensions and healthcare obligations continued

For these plans, an annual actuarial calculation (projected unit credit method) is made of the present value of future benefits
under the defined-benefit plan. The present value is determined on the basis of assumptions about the future development
in variables such as salary levels, interest rates, inflation and mortality. The present value is determined only for benefits
earned by employees from their employment with the Group. The actuarial present value, less the fair value of any plan
assets, is recognized in the balance sheet under pension and healthcare obligations. Pension and healthcare costs for the
year are recognized in the income statement based on actuarial estimates and financial expectations at the beginning of
the year. Any difference between the expected development in assets and liabilities, and realized amounts determined at
year-end constitutes actuarial gains or losses and is recognized directly in other comprehensive income. If changes in
benefits relating to services rendered by employees in previous years result in changes in the actuarial present value, the
changes are recognized as past service costs. 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.

Tax
Note 20 Tax on profit
Note 20

Tax on profit

EURm

2022

2023

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
Adjustment of net tax assets
Repatriation taxes
Income from associates and joint ventures after tax
Hyperinflation restatements
De-consolidation of Russian activities
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

-314
46
2
-266

22.0%
2.8%
-2.2%
1.1%
1.6%
-0.1%
1.4%
2.0%
-0.3%
-0.3%
28.0%

2022

-266
-31
-15
-312

-289
35
-4
-258

22.0%
1.9%
-1.1%
0.9%
1.1%
-1.0%

-0.2%
0.4%
24.0%

2023

-258
9
2
-247

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Sustainability

ESG statements

Financial statements

121 /158

Note 20 Tax on profit (continued)
Tax on profit continued
Note 20

Pillar II disclosure
The Group is within the scope of the OECD Pillar II model rules. Pillar II legislation was enacted in Denmark in
December 2023, the jurisdiction in which the Ultimate Parent of the Group is incorporated, and will be effective from
January 1, 2024. Since the Pillar II legislation was not effective as of the reporting date, the Group has no related current
tax exposure in 2023. The Group applies the mandatory exception to recognizing and disclosing information about
deferred tax assets and liabilities related to Pillar II income taxes, as provided in the amendments to IAS 12 issued in
May 2023.

Under the legislation, the Group is liable to pay a top-up tax for the difference between its GloBE effective tax rate per
jurisdiction and the 15% minimum rate.

The Group is in the process of assessing its exposure to the Pillar II legislation for when it comes into effect in 2024.
The preliminary assessment, which is based on the most recent tax filings, country-by-country reporting and financial
statements for the companies in the Group, indicates that only a few jurisdictions, will have an effective tax rate
below 15%. As these jurisdictions typically only have a relatively small share of the total Group profits, we do not expect
a material exposure to Pillar II income taxes related to those or other jurisdictions.

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.

Note 21 Deferred tax
Note 21

Deferred tax

Changes in deferred taxes

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 tax assets

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

2022

2023

-92
-3
-78
-10
-1
46
-48
-186

-186
-4
-16
-10

35
13
-168

2022

2023

12
68
36
160
100
-54
322
-183
139

4
79
33
167
108
-64
327
-205
122

Danfoss Annual Report 2023

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Our business

Our strategy

Sustainability

ESG statements

Financial statements

122 /158

Note 21 Deferred tax (continued)
Note 21 Deferred tax (continued)
Deferred tax continued
Note 21

Note 21 Deferred tax (continued)

Specification of deferred tax liabilities
Specification of deferred tax liabilities

EURm
EURm

Intangible assets
Intangible assets
Property, plant and equipment and financial assets
Property, plant and equipment and financial assets
Current assets
Current assets
Debt and provisions
Debt and provisions
Deferred tax regarding Danish joint taxation
Deferred tax regarding Danish joint taxation

Set-off within the same legal entities and jurisdiction
Set-off within the same legal entities and jurisdiction
Deferred tax liabilities
Deferred tax liabilities

2022
2022

2023
2023

293
293
97
97
18
18
99
99
1
1
508
508
-183
-183
325
325

266
266
123
123
16
16
89
89
1
1
495
495
-205
-205
290
290

The tax asset related to tax-loss carry-forwards of EUR 44m net (2022: 46m) is largely related to companies that have suffered
The tax asset related to tax-loss carry-forwards of EUR 44m net (2022: 46m) 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
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
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% (2022: 100%) can still be utilized after 3 years or later.
carry-forwards recognized, 100% (2022: 100%) can still be utilized after 3 years or later.

The tax value of unrecognized tax assets related to tax-loss carry-forwards amounts to EUR 64m (2022: 54m). The amount
The tax value of unrecognized tax assets related to tax-loss carry-forwards amounts to EUR 64m (2022: 54m). The amount
is not recognized as an asset, as the tax losses carried forward are not expected to be utilized. 4% of the amount
is not recognized as an asset, as the tax losses carried forward are not expected to be utilized. 4% of the amount
(2022: 13%) has a remaining period of 3 years or less, whereas the share with a remaining period of 10 years or more
(2022: 13%) has a remaining period of 3 years or less, whereas the share with a remaining period of 10 years or more
totals 91% (2022:82%).
totals 91% (2022:82%).

Of the deferred tax liability of EUR 290m (2022: 325m), EUR 1m (2022: 1m) can be attributed to taxes relating to joint taxation
Of the deferred tax liability of EUR 290m (2022: 325m), EUR 1m (2022: 1m) 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
with foreign subsidiaries in previous years. The Group has deferred tax liabilities concerning temporary differences in foreign
subsidiaries, associates and joint ventures of EUR 31m (2022: 42m). The liabilities are not recognized, because the Group
subsidiaries, associates and joint ventures of EUR 31m (2022: 42m). 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.
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 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 carry forwards, are recognized at their expected value. The assessment of
deferred tax assets regarding tax-loss carry forwards 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
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 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.

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Other notes
Note 23 Adjustment for non-cash transactions
Note 23 Adjustment for non-cash transactions

EURm

2022

2023

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

536
36
-3
-14
108
-20
643

567
-5
-51
-5
180
15
701

The Group's other adjustments for non-cash transactions mainly consist of provisions, derivatives and defined-benefit plans.

Note 22 Corporation tax
Note 22 Corporation tax

EURm

2022

2023

Corporation tax payable/receivable (-) as of January 1
Foreign exchange adjustment in foreign companies
Additions through acquisition 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

8
-233
-12
-1
314
-1
137

27
164
137

137
-2
1
-325
-6

289
2
96

23
119
96

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.

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Note 24 Contingent liabilities, assets and securities
Note 24 Contingent liabilities, assets and securities
Note 24

Contingent liabilities, assets and securities

Note 25 Related parties
Note 25

Related parties

Securities
Securities

EURm
EURm

Carrying amount of land and buildings pledged as security for bank loans and
Carrying amount of land and buildings pledged as security for bank loans and
mortgages
mortgages
Leasing assets pledged as security for leasing commitments
Leasing assets pledged as security for leasing commitments
Carrying amount of interest-bearing liabilities with security in assets
Carrying amount of interest-bearing liabilities with security in assets

2022
2022

2023
2023

138
138
262
262
335
335

172
172
304
304
381
381

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 connection with disposal of subsidiaries, ordinary guarantees and warranties have been issued. These guarantees and
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
warranties are considered to have no impact on the Group's financial position beyond what has been stated in the
Annual Report.
Annual Report.

Contingent liabilities
Contingent liabilities
The Danfoss Group is party to a small number of disputes, lawsuits and legal actions, including tax disputes. It is the view
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
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.
financial position beyond what has been recognized and stated in the Annual Report.

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 from 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 (2022: 3.3m). In the financial year, the Bitten & Mads Clausen's
Foundation purchased shares in Danfoss A/S at a value of EUR 3m from the company (2022: 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 2023, 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
Contractual obligations

EURm
EURm

Service contract commitment other than leases
Service contract commitment other than leases
Inventories
Inventories
Property, plant and equipment
Property, plant and equipment
Purchase commitments
Purchase commitments

2022
2022

281
281
246
246
226
226
753
753

2023
2023

258
258
589
589
215
215
1,062
1,062

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 (2022: 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.

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Note 25 Related parties (continued)
Related parties continued
Note 25

Transactions with associates and joint ventures

EURm

Sales of goods and services
Purchases of goods and services

2022

2023

9
17

23
16

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.

Note 26 Events after the balance sheet date
Events after the balance sheet date
Note 26

Subsequent to December 31, 2023, 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.

Note 27 General accounting policies

The general accounting policies set out below have been consistently applied in respect of the financial year and the
comparative figures.

Consolidated financial statements
The consolidated financial statements comprise the Parent Company, Danfoss A/S and subsidiaries in which Danfoss A/S
directly or indirectly holds more than 50% of the voting rights, or otherwise controls the company’s financial and operating
policies with a view to obtaining a yield or other benefits from its activities. Companies in which the Group has between 20%
and 50% of the voting rights and exercises a significant influence, but does not control, are considered associates or joint
ventures when the joint-venture conditions of IFRS 11 are met. When assessing whether Danfoss A/S exercises control or
significant influence or joint control, potential voting rights, which can be utilized at the balance sheet date, are taken into
account.

The consolidated financial statements are prepared by aggregating the financial statements of the Parent Company and the
individual subsidiaries, which have all been prepared in accordance with the accounting policies of Danfoss A/S.

Investments in subsidiaries are set off against the proportionate share of the subsidiaries’ fair value of the identifiable net
assets and recognized contingent liabilities at the acquisition date. On consolidation, intra-group income and expenses,
shareholdings, intra-group balances and dividends, and realized, and unrealized, profits and losses on transactions between
the consolidated companies are eliminated. Unrealized losses are eliminated in the same way as unrealized profits, provided
that no impairment has occurred.

In the consolidated financial statements, the items of subsidiaries are recognized in full. The minority interests’ proportionate
share of the profit/loss for the year is recognized as part of the Group’s profit/loss for the year and as a separate share of the
Group’s equity.

The companies included in the Group are disclosed in Note 28 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.

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Note 27 General accounting policies continued

Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rates at the balance
sheet date. Currency gains and losses arising on translation are recognized in the income statement under financial items.
Non-monetary assets and liabilities denominated in foreign currencies are recognized at the foreign exchange rates at the
transaction date.

On recognition in the Consolidated Financial Statements of companies with a functional currency other than EUR, the income
statements are translated at the exchange rates at the transaction date, and the balance sheet items are translated at the
exchange rates at the balance sheet date.

An average exchange rate for each month is used as the exchange rate at the transaction date to the extent that this does
not significantly distort the presentation of the underlying transactions. Foreign exchange differences arising on translation
of the opening balance of equity of such enterprises at the exchange rates at the balance sheet date and on translation of
the income statements from the exchange rates at the transaction date to the exchange rates at the balance sheet date are
recognized directly in equity under a separate translation reserve. The foreign exchange adjustment is allocated between the
equity of the Parent Company and of the minority shareholders.

Foreign exchange adjustments of balances, which are considered part of the total net investment in companies with a
different functional currency than EUR, are recognized directly in the equity under a separate reserve for foreign exchange
adjustments. Likewise, foreign exchange gains or losses are recognized in the consolidated financial statements (directly in
the equity under a separate reserve for foreign exchange adjustments) concerning the part of loans and derivative financial
instruments, which has been allocated for currency hedging of net investments made in these companies, and which
effectively protects against similar currency rate gains or losses on net investments in the company.

On disposal of wholly owned foreign units, the foreign exchange adjustments, which have been accumulated in equity via
other comprehensive income, and which can be ascribed to the unit, are reclassified from “Translation reserve” to the income
statement, together with any gains or losses from the disposal.

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.

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 on translation of foreign currency into EUR”.

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.

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Note 27 General accounting policies continued

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.

or consumption of goods during 2023. The adjustments have been made from the first recognition of the items in the
accounts, however, from January 1, 2022, at the earliest. Equity in Türkiye is adjusted for inflation, based on the accumulated
development of the price index until December 31, 2023, to reflect purchasing power on the balance sheet date. In the
income statement, all transactions in 2023 are adjusted for changes in the price index from the month of recognition in the
income statement to the price index per December 31.

Hyperinflation accounting
Danfoss has implemented IAS 29 on financial reporting in hyperinflationary economies regarding the Group's subsidiaries in
Türkiye (from 2022) and Argentina (from 2023).

Adjustments for Argentina follows the same principles as described for Türkiye, however beginning from January 1, 2023 at
the earliest.

Türkiye and Argentina are 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.

Time and practice for recognition
Implementation of IAS 29 was made retroactively with Türkiye, starting 1 January, 2022 and Argentina, starting January 1,
2023. The total impact is stated below:

The implementation of IAS 29 means that the accounting figures for subsidiaries in Türkiye and Argentina, in material respect,
are restated so that they reflect the current purchasing power at the end of the accounting period. In this regard, both
material 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.

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 be converted into the Group's presentational currency, EUR, using the exchange rate on the
balance sheet date. All Turkish and Argentinian material transactions in the financial year have thus been converted to EUR
using the exchange rate on 31 December, 2023, 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 Türkiye and Argentina is based on the development in the
available general price index in those countries, which consists of the Consumer Price Index (CPI).

The price index for Türkiye has changed so that the inflation amounted to 65% in 2023 (2022: 63%) . The exchange rate
between TRY and EUR has fallen from 0.050 at the beginning of the year to 0.031 at the end of the year. This constitutes a
decrease of 38% (2022: 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, 2023, or until the date of any departure

Impact on key figures

EURm

Income statement

External net sales

Profit before tax

Tax

Profit

Statement of financial position

Non-monetary assets

Equity

2022

2023

-15

-11

-26

-16

-25

-21

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Note 27 General accounting policies continued

Financial measures

In the Annual Report, Danfoss presents certain financial measures of the Group’s financial performance, financial position and
cash flows that are not defined according to IFRS. These non-IFRS financial measures may not be defined and calculated by
other companies using the same method and may not be comparable.
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:

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.

EBITDA margin
Operating profit (EBIT) before depreciation, amortization, impairment and profit from associates & joint ventures /net sales.

EBITA margin
EBITA /net sales.

EBIT margin
Operating profit (EBIT)/net sales.

Return on Invested Capital (ROIC)
Operating profit (EBIT)/average invested capital.

Invested Capital
Net interest-bearing debt added to shareholders’ equity.

Return on Invested Capital (ROIC) after tax
EBIT after tax/average invested capital excluding tax.

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

2022

2023

1,043

-3

1,252

-51

1,224

1,345

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.

Equity ratio
Equity/total assets.

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Note 27 General accounting policies continued

Leverage ratio
Interest-bearing debt/equity at year-end.

Net interest-bearing debt
Interest-bearing debt, including fair value of derivatives hedging the underlying debt, less interest-bearing assets.

EURm

Net interest-bearing debt

Borrowings

Cash and cash equivalents

Other receivables

Fair value of derivatives hedging the underlying debt

Net interest-bearing debt

2022

2023

3,144

-340

-20

384

3,168

3,006

-369

-15

249

2,871

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).

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

2022

2023

Free operating cash flow after financial items and tax

Cash flow from operating activities

Cash flow from investing activities

Acquisition of subsidiaries and activities

Proceeds from disposal of subsidiaries and activities

Proceeds from sale of other investments

Lease payments

Free operating cash flow after financial items and tax

1,053

-931

441

-12

-5

-81

465

1,355

-724

120

-71

692

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Note 28 Group companies

Per December 31, 2023
The companies are owned 100% by Danfoss unless
otherwise stated after the company name.1

Danfoss A/S, Nordborg, Denmark
(Parent Company)

Subsidiary
Associate or joint venture

Europe

Austria
Danfoss Gesellschaft m.b.H.

Belgium
Danfoss NV/SA
Danfoss Power Solutions BVBA
Hydro-Gear Europe BVBA – 60%

Bulgaria
Danfoss EOOD

Croatia
Danfoss d.o.o.

Czech Republic
BOCK Compressors Czech s.r.o.
Danfoss s.r.o.
Danfoss Power Solutions II s.r.o – in liquidation

Denmark
Aneo Retail Denmark A/S – 33% (associate)
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
Danfoss Redan A/S
Gemina Termix Production A/S
Issab Holding ApS
Semikron Danfoss Holding A/S – 61%
Sondex Holding A/S

Estonia
Danfoss AS

Finland
Danfoss Drives Oy
Danfoss Editron Oy
Danfoss Power Solutions Oy Ab
Leanheat Oy
Oy Danfoss Ab
Semikron Danfoss Oy – 61%
Sondex Tapiro Oy Ab

France
Danfoss S.a.r.l.
Danfoss Commercial Compressors S.A.
Danfoss Power Solutions S.A.S.
Danfoss Power Solutions II S.A.S.
Semikron Danfoss S.a.r.l. – 61%

Germany
BOCK GmbH
BOCK Blue GmbH
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 - Werk Offenbach GmbH – in liquidation
Semikron Danfoss GmbH – 61%
Semikron Danfoss Elektronik GmbH & Co. KG – 61%2
Semikron Danfoss Elektronik Verwaltungs GmbH – 61%
Semikron Danfoss International GmbH – 61%
SMA Solar Technology AG – 20% (associate)
Sondex Deutschland GmbH

Great Britain
Artemis Intelligent Power Ltd.
Danfoss Ltd.
Danfoss Power Solutions Ltd.
Danfoss Power Solutions II Ltd. – in liquidation
Danfoss Scotland Ltd.
Semikron Danfoss Limited – 61%
Senstronics Holding Ltd. – 50% (joint venture)
Senstronics Ltd. – 50% (joint venture)

Hungary
Danfoss Kft.

Iceland
Danfoss hf.

Italy
Danfoss S.r.l.
Danfoss Distribution Services S.r.l.
Danfoss Power Solutions S.r.l.
Danfoss Power Solutions II S.r.l.
Semikron Danfoss S.r.l. – 61%

Kazakhstan
Danfoss LLP

Latvia
SIA Danfoss

Lithuania
Danfoss UAB

The Netherlands
Danfoss B.V.
Danfoss Finance I B.V.
Danfoss Finance II B.V.
Danfoss Power Solutions B.V.
Danfoss Power Solutions II B.V.
Semikron Danfoss 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 Danfoss Sp. z.o.o. – 61%
Sondex Braze Sp. z.o.o.
Sondex Poland Sp. z.o.o. - in liquidation

Romania
Danfoss S.r.l.

Serbia
Danfoss d.o.o.

Slovakia
Danfoss Power Solutions a.s.
Danfoss, spol. s.r.o.
Semikron Danfoss, s.r.o. – 61%

Slovenia
Danfoss Trata, d.o.o.

Spain
Danfoss S.A.
Danfoss Power Solutions S.A.
Danfoss Power Solutions Telecontrol, S.L.U.
Semikron Danfoss, S.L – 61%

Sweden
Aneo Retail Sweden AB – 33% (associate)
Danfoss AB
Danfoss Power Solutions AB
EP Technology AB

1 No companies in Russia are included, as they are without activity
and considered insignificant.
2 This enterprise has exercised its right of exemption under Section 264b
of the German Handelsgesetzbuch (HGB). The consolidated financial
statements are published in Deutsche Bundesanzeiger.

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Note 28 Group companies continued

Switzerland
Danfoss AG
Semikron Danfoss AG – 61%

Ukraine
Danfoss T.o.v.

Africa – Middle East

Egypt
Danfoss Egypt LLC

South Africa
BOCK Compressors South Africa (Pty.) Ltd.
Danfoss (Pty.) Ltd.
Danfoss South Africa (Pty.) Ltd.
Sondex South Africa (Pty.) Ltd. – 80%

Türkiye
DAF Enerji Sanayi Ve Ticaret A. Ş.
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
Danfoss Inc.

USA
Daikin-Sauer-Danfoss America LLC – 45%
Danfoss LLC
Danfoss Power Solutions Inc.
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 Danfoss Inc. – 61%
Sondex Equipment Holding, LLC
Sondex Properties, Inc.
White Hydraulics, Inc.

Latin America

Argentina
Danfoss S.A.

Brazil
Aeroquip do Brasil Ltda.
Danfoss do Brasil Indústria e Comércio Ltda.
Danfoss Power Solutions Comércio e Indústria Ltda.
Semikron Danfoss Ltda. – 61%

Chile
Danfoss Industrias Ltda.

Colombia
Danfoss S.A.S.

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
Danfoss Power Solutions, S. de R.L. de C.V.

Asia-Pacific

Australia
BOCK Compressors Australia Pty. Ltd.
Danfoss (Australia) Pty. Ltd.
Danfoss Power Solutions Pty. Ltd.
Danfoss Power Solutions II Pty. Ltd.
Semikron Danfoss Pty. Ltd. – 61%
Sondex Australia Pty. Ltd.
Sondex Engineering Pty. Ltd.

P. R. of China
BOCK Compressors (Suzhou) Co., Ltd.
Danfoss (Anshan) Controls Co., Ltd.
Danfoss Brakes (Shanghai) Co., Ltd.
Danfoss (China) Investment Co., Ltd.
Danfoss (Jiaxing) Plate Heat Exchanger Co., Ltd.
Danfoss Micro Channel Heat Exchanger (Jiaxing) Co., Ltd.
Danfoss (Tianjin) 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 (Shanghai) Co., Ltd.
Danfoss Power Solutions Trading (Shanghai) Co.
Danfoss Power Solutions (Zhejiang) Co., Ltd.
Danfoss Shanghai Hydrostatic Transmission Co., Ltd. – 60%
Danfoss ( Tianjin) Fire Safety Co., Ltd.
Semikron Danfoss Electronics (Nanjing) Co., Ltd. – 61%
Semikron Danfoss Electronics (Zhuhai) Co., Ltd. – 61%
Sondex Heat Exchanger (Taicang) Co., Ltd.
Vacon (China) Drives Co., Ltd.
Zhejiang Holip Electronic Technology Co., Ltd.

Hong Kong
Danfoss Industries Limited - In liquidation
Semikron Danfoss (Hong Kong) Co., Ltd. – 61%

India
BOCK Compressors India Pvt. Ltd.
Danfoss Fluid Power Pvt. Ltd.
Danfoss Industries Pvt. Ltd.
Danfoss Power Solutions India Pvt. Ltd.
Danfoss Systems Ltd. – 98%
Semikron Danfoss 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 Danfoss K.K. – 61%

Malaysia
Danfoss Malaysia Sdn. Bhd.
Danfoss Power Solutions II Sdn. Bhd.

Philippines
Danfoss Philippines, Inc.

Singapore
BOCK Compressors Singapore Pte. Ltd.
Danfoss Power Solutions Pte. Ltd.
Danfoss Power Solutions II Pte. Ltd.
Danfoss Singapore Pte. Ltd.

South Korea
Danfoss Korea Ltd.
Danfoss Power Solutions Ltd.
Danfoss Power Solutions 2 Ltd.
Semikron Danfoss Co., Ltd. – 61%

Taiwan
Danfoss Co. Ltd.

Thailand
Danfoss (Thailand) Co. Ltd.

New Zealand
Danfoss (New Zealand) Ltd.
Danfoss Power Solutions II Ltd.

Vietnam
Danfoss Vietnam Co., Ltd.

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Financial statements

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PAGE 133

Management's review
for Danfoss A/S

PAGE 138-151

Parent notes

PAGE 134-137

Parent accounts

134
134
135
136
137

Income statement
Statement of comprehensive income
Statement of financial position
Statement of cash flows
Statement of changes in equity

Income statement
138 Note 1

Net sales, expenses
and other operating income

Capital employed
140 Note 2
142
Note 3
143 Note 4 Property, plant and equipment
145 Note 5 Leases

Investments
Intangible assets

Capital structure and financing
145 Note 6 Financial income and expenses
146 Note 7 Financial risks and instruments
147 Note 8

Change in liabilities arising from
financing activities

Tax
148
148
149

Note 9 Tax on profit
Note 10 Deferred tax
Note 11 Corporation tax

Other notes
149 Note 12 Adjustment for non-cash transactions
150 Note 13

Contingent liabilities, assets and
securities

150 Note 14 Related parties
150 Note 15 Events after the balance sheet date
151 Note 16 General accounting policies

for Danfoss A/S
151 Note 17 Material accounting estimates
for Danfoss A/S

Parent accounts
and notes

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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 the Danfoss’ Danish
activities and therefore includes a number of Danfoss’
Danish factories and Group functions. Danfoss A/S had 2,714
employees at the end of 2023.

Gender composition of leadership positions

Danfoss A/S is the Parent Company of the Danfoss Group and
is an important company and factor in achieving the Group’s
target of 30% women in leadership positions by 2025. To meet
the Group target, Danfoss A/S is part of the Group initiatives
in this area. Refer to the Management Review, “Our people” for
further details.

The profit before other operating income and expenses was
EUR 20m against EUR 130m in 2022. The company’s operating
profit was EUR 11m against EUR 116m the previous year.

For the Board of Directors, we refer to Management’s Review,
“Corporate governance” for further details.

Financial income and expenses increased to a net income of
EUR 636m against a net income of EUR 128m in 2022, mainly
due to an increase in received dividends, impact of foreign
exchange contracts and decreased impairment of subsidiaries.

Number of board members, shareholder-elected

Women in percentage of members

Target in percentage

Target year

25%

40%

2025

The profit after tax in 2023 was EUR 622m against EUR 200m
the previous year.

As for the Group, Danfoss A/S has the same target for next
Leadership levels (level 1 and 2), with the following status:

Equity was EUR 3,707m at the end of 2023 against EUR 3,290m
at the end of 2022. The increase was mainly attributable to
recognition of the profit for the year.

Number of leadership members

Women in percentage of leadership members

Danfoss A/S expects net sales for 2024 to be on a level with
the 2023 figures, and the company expects to report a profit
in 2024.

Target in percentage

Target year

14%

30%

2025

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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

Statement of comprehensive income
Statement of comprehensive income
January 1 to December 31
January 1 to December 31

Note

2022

2023

EURm

1,569

-1,153

416

1,452

-1,139

313

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

2022

2023

200

622

-7

Total comprehensive income

200

615

-123

-96

-67

130

-14

116

447

-319

244

-44

200

205

-5

200

-125

-95

-73

-9

776

-140

647

-25

622

246

376

622

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Statement of financial position
Statement of financial position
As of December 31
As of December 31

Statement of financial position

As of December 31

Note

2022

2023

EURm

Note

2022

2023

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

Derivative financial instruments (positive fair value)

Other receivables

Receivables

Cash and cash equivalents

Total current assets

316

340

4,765

5,421

132

140

925

1,160

240

1,532

333

392

5,150

5,875

129

218

607

922

297

1,348

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

Corporation tax

Other debt

Total current liabilities

Total liabilities

Total assets

6,953

7,223

Total liabilities and shareholders' equity

3,290

3,707

667

983

1,771

211

185

199

1,132

1,467

167

1,301

1,584

120

1,892

128

2,049

3,663

3,516

6,953

7,223

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Statement of cash flows
Statement of cash flows
January 1 to December 31
January 1 to December 31

EURm

Note

2022

2023

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
Foreign exchange adjustment of cash and cash equivalents
Cash and cash equivalents as of December 31

8
8

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

647
-526
-40
16
-30
660
-40
687

-61
-73

-122
2
-9
-263

-606

438
-3
3
-198
-366

58
240
-1
297

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Statement of changes in equity
Statement of changes in equity

EURm

Balance as of January 1, 2022

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

Net profit

Currency-translation adjustments

Total other comprehensive income

Total comprehensive income for the period

Dividends to shareholders

Purchase of treasury shares

Sale of treasury shares

Total transactions with owners

Balance as of December 31, 2023

Share
capital

134

Share
premium

Reserve for
capitalized
development
projects

Reserve own
shares

-309

133

Other
reserves

3,116

Reserves

2,940

-4

-2
2

-5

-1

-5

-2
2

134

-309

129

3,121

2,941

376

-7

369

376

-7

369

-3

134

-309

129

3,497

3,317

Proposed
dividends

189

205

-189

205

246

-205

246

Total
equity

3,273

200

-183

-2
2

-183

3,290

622

-7

615

-198

-3

-198

3,707

For further information on Equity and Share capital, see Statement of changes in equity and Note 16 Share capital, in Group section.

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Income statement
Note 1 Net Sales, expenses and other operating
Note 1
income

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

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

2022

2023

EURm

2022

2023

C. 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
Intangible assets

Classification of depreciation/impairment of tangible assets by functions:
Cost of sales
Selling and distribution costs
Administrative expenses
Tangible assets

42
42
84

41
1
42

10
42

44
36
80

41
3
44

27
1
8
36

1,262
307
1,569

1,111
341
1,452

2022

2023

277
3
9
22
311

2,826
2,814

4
1
5
14
24

1
25

272
6
9
23
310

2,757
2,714

4
1
5
17
27

1
28

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. Long-term bonuses equal rights earned, but not
necessarily paid out in the year. Severance payments of EUR 0m (2022: 2m) are included in bonuses, long-term.
Total remuneration for registered members of Executive Management amounts to EUR 20m (2022: 17m).

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Note 1 Net Sales, expenses and other operating
Note 1
income (continued)

Net Sales, expenses and other operating income continued

EURm

2022

2023

D. Other operating income and expenses

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

1
1
1
3

-5
-3
-9
-17

-14

-6
-4
-10

-9

EURm

2022

2023

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
0
1

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Capital employed
Note 2 Investments
Note 2

Investments

Note 2 Investments (continued)

EURm

2022

EURm

Investments in
subsidiaries

Receivables
from
subsidiaries

Investments in
associates and
joint ventures

Other
investments

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

2,971
1,246
-9

4,208

-119
15
-278

-382

1,124

-505

619

316

Carrying amount as of December 31

3,826

619

316

-16

Total

4,431
1,246
-514

5,163

-135
15
-278

-398

4,765

Additions for 2022 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.

Investments in
subsidiaries

Receivables
from
subsidiaries

Investments in
associates and
joint ventures

Other
investments

Costs as of January 1
Foreign exchange adjustments, etc.
Additions
Disposals

Costs as of December 31

Adjustments as of January 1
Impairment for the year
Disposal

Adjustments as of December 31

4,208
-9
119
-8

4,310

-382
-35
4

-413

619

315

934

316
-1

315

Carrying amount as of December 31

3,897

934

315

-16

Additions for the year to "Investments in subsidiaries" is mainly related to investment in Danfoss Deutschland GmbH.

2023

Total

5,163
-10
434
-8

5,579

-398
-35
4

-429

5,150

Impairment losses for 2022 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 for the year on "Investments in subsidiaries" of EUR 35m mainly relates to Sondex Holding A/S,
Danfoss Power Solutions Ltd. 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.

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Note 2 Investments (continued)
Note 2

Investments continued

Impairment tests
Where indicators for impairment were present at the end of 2023, 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 2022.
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.

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Note 3 Intangible assets
Note 3

Intangible assets

EURm

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

Cost as of January 1, 2023
Additions
Disposals
Cost as of December 31, 2023

Amortization and impairment losses as of January 1, 2023
Amortization
Disposals
Amortization and impairment losses as of December 31, 2023

Carrying amount as of December 31, 2023

Goodwill

Internally developed
software

Patents, trademarks
and other rights

Development
costs

Total
Other

Total

291
33
-6
318

120
35
-2
153

165

318
35
-16
337

153
35
-16
172

165

102

-3
99

24
7
-3
28

99
26

125

28
9

395
33
-9
419

146
42
-5
183

236

419
61
-16
464

183
44
-16
211

253

478
33
-9
502

149
42
-5
186

316

502
61
-16
547

186
44
-16
214

333

Of the "internally developed software" approximately 60% relates to the One ERP Program.

Impairment tests
Goodwill in Danfoss A/S of EUR 80m (2022: 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 2023, impairment tests have been performed on the carrying
amount of goodwill (assets with indefinite useful lives). The impairment tests were performed 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 Group section.

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 2022.

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Note 4 Property, plant and equipment
Property, plant and equipment
Note 4

EURm

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

Cost as of January 1, 2023
Transfers
Additions
Disposals
Cost as of December 31, 2023

Depreciation and impairment losses as of January 1, 2023
Depreciation
Disposals
Depreciation and impairment losses as of December 31, 2023

Carrying amount as of December 31, 2023

Land and
buildings

Plant and
machinery

Equipment

Assets under
construction

Total

319

5
5
-2
327

172

14
-2
184

143

327
30
24

381

184
11

195

186

299
1
5
7
-27
285

257
-5
12
-26
238

285
25
8
-23
295

238
14
-23
229

116

9
1
-5
121

54
5
16
-5
70

121

10
-20
111

70
11
-20
61

-19
72

99
-55
46

780
1

85
-34
832

483

42
-33
492

340

832

88
-43
877

492
36
-43
485

392

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Note 4 Property, plant and equipment (continued)
Note 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, 2022
Additions
Depreciation
Carrying amount related to right-of-use assets as of December 31, 2022

Carrying amount related to right-of-use assets as of January 1, 2023
Additions
Depreciation
Carrying amount related to right-of-use assets as of December 31, 2023

Further information on leases is provided in Note 5 Leases.

Land and
buildings

Equipment

Total

4
1
-1
4

4
8
-2
10

12
2
-8
6

6
8
-6
8

16
3
-9

10
16

-8
18

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Note 5 Leases
Note 5 Leases
Note 5

Leases

Lease liabilities are included as borrowings in the statement of financial position as follows:
Lease liabilities are included as borrowings in the statement of financial position as follows:

Capital structure and financing
Note 6 Financial income and expenses
Financial income and expenses
Note 6

2022
2022

2023
2023

EURm

2022

2023

EURm
EURm

Current
Current
Non-current
Non-current

6
6
4
4

4
4
15
15

Danfoss A/S mainly leases buildings and cars. Lease payments are generally fixed. With the exception of short-term leases and
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
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,
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.
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.
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
Management assesses whether or not it is reasonably certain that the option will be exercised after considering all relevant
facts and circumstances.
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
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.
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.
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, 2023, was EUR 10m (2022: 10m).
Total cash outflow for leases for the financial year ending December 31, 2023, was EUR 10m (2022: 10m).

Further information on lease payments, interest expense on lease liabilities, additions, depreciation charge, carrying amount
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,
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
Note 4 Property, plant and equipment, Note 7 Financial risks and instruments and Note 8 Change in liabilities arising from
financing activities.
financing activities.

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

360
54
24

3
6
447

-20
-4
-278
-17

-319

-37

660
86

29
1

776

-26

-37
-70
-7
-140

-96

The impact of derivatives/foreign exchange contracts of EUR 25m is included in Foreign exchange gains, net.
(2022: 8m included in Foreign exchange losses, net).

Further information on leases is provided in Note 5 Leases.

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Note 7 Financial risks and instruments
Financial risks and instruments
Note 7

Note 7 Financial risks and instruments (continued)

Financial instruments

Financial instruments by category

Below are relevant financial instrument specifications regarding Danfoss A/S. A description of financial risks can be found in
the Group section, see Note 17 Financial risks and instruments, to which reference is made.

EURm

Danfoss A/S' debt categories and maturities

EURm

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
3,420

g
n
y
r
r
a
C

t
n
u
o
m
a

777
64
27
2,284
10
185
40
2
3,389

Bank debt
Mortgage debt
Contingent consideration
Borrowings from subsidiaries
Finance lease liabilities
Trade payables
Trade payables to subsidiaries
Debt to ass./ JV.

2022

Maturity

0-1
year

1-5
years*)

Over 5
years

209
1
3
1,301
6
185
40
2
1,747

584
3
24
983
4

1,598

a
u
t
c
a
r
t
n
o
C

w
o
l
f
h
s
a
c

174
64
23
2,716
22
167
76
2
3,244

g
n
y
r
r
a
C

t
n
u
o
m
a

174
64
23
2,716
19
167
76
2
3,241

2023

Maturity

0-1
year

1-5
years*)

Over 5
years

103

17
1,132
13

1,265

6
1,584
5
167
76
2
1,911

*) 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.

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

Carrying
amount

2022

Fair
value

Carrying
amount

2023

Fair
value

316
316

4
8

61
140
925
26
240

478
478

4
8

61
140
925
26
240

315
315

4
14

48
218
607
35
297

436
436

4
14

48
218
607
35
297

1,392

1,205

851
40
2,284
365

846
40
2,284
365

257
76
2,716
362

Financial liabilities measured at amortized cost

3,540

3,535

3,411

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Note 7 Financial risks and instruments (continued)
Note 7

Financial risks and instruments continued

Note 8 Change in liabilities arising from financing
Note 8
activities

Change in liabilities arising from financing activities

Financial assets and liabilities measured at fair value are measured on a recurring basis and categorized into the following

EURm

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 valuation

Carrying amount as of January 1, 2022

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 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 2022.

Derivates as of December 31 for Danfoss A/S

EURm

USD

EUR

Other currencies

Forward exchange contracts

Interest rate swaps

Derivatives end of year

t
n
u
o
m
a

a
n
o
i
t
o
N

-202

-116

2022

d
e
z
i
n
g
o
c
e
r

)
-
(
s
s
o
L
/
n
a
G

t
n
e
m
e
t
a
t
s
e
m
o
c
n

-2

e
u
a
v
r
i
a
f

t
e
N

-2

2023

d
e
z
i
n
g
o
c
e
r

)
-
(
s
s
o
L
/
n
a
G

t
n
e
m
e
t
a
t
s
e
m
o
c
n

e
u
a
v
r
i
a
f

t
e
N

t
n
u
o
m
a

a
n
o
i
t
o
N

-290

336

-102

-150

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

Cash flows:
Cash repayment
Lease payments

Non-cash transactions:
Acquisitions and disposal of lease liabilities
Reclassification
Other
Carrying amount as of December 31, 2023

Short-term
borrowings

Long-term
borrowings

-64
-6
200

1
69
-1
211

-263
-5

5
142
-9
81

402

-5

338

1
-69

667

-338

12
-142

199

Total

414

-69
-6
538

-1
878

-601
-5

-9
280

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.

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Tax
Note 9 Tax on profit
Note 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

Note 10 Deferred tax
Note 10 Deferred tax
Note 10

Deferred tax

Changes in deferred taxes
Changes in deferred taxes

2022

2023

EURm
EURm

-39
-4
-1
-44

22.0%
25.6%
-32.5%
2.7%
0.2%
18.0%

-20
-1
-4
-25

22.0%
2.3%
-22.5%
1.4%
0.6%
3.8%

2022

2023

-44
-44

-25
-25

Deferred taxes as of January 1 (net) *)
Deferred taxes as of January 1 (net) *)
Adjustments concerning previous years
Adjustments concerning previous years
Deferred tax recognized in the income statement
Deferred tax recognized in the income statement
Deferred taxes as of December 31 (net) *)
Deferred taxes as of December 31 (net) *)

*) Liability (-)
*) Liability (-)

Specification of deferred taxes
Specification of deferred taxes

EURm
EURm

Property, plant and equipment and financial assets
Property, plant and equipment and financial assets
Liabilities
Liabilities

Set-off within the same legal entities and jurisdiction
Set-off within the same legal entities and jurisdiction
Deferred tax assets
Deferred tax assets

Intangible assets
Intangible assets
Property, plant and equipment and financial assets
Property, plant and equipment and financial assets
Current assets
Current assets
Liabilities
Liabilities
Deferred tax regarding Danish joint taxation
Deferred tax regarding Danish joint taxation

Set-off within the same legal entities and jurisdiction
Set-off within the same legal entities and jurisdiction
Deferred tax liabilities
Deferred tax liabilities

2022
2022

2023
2023

-47
-47
-3
-3
-4
-4
-54
-54

-54
-54
-6
-6
-1
-1
-61
-61

2022
2022

Deferred
Deferred
tax asset
tax asset

2023
2023

Deferred
Deferred
tax asset
tax asset

5
5
10
10
15
15
-15
-15
0
0

6
6
8
8
14
14
-14
-14
0
0

Deferred
Deferred
tax liability
tax liability

33
33
11
11
2
2
22
22
1
1
69
69
-15
-15
54
54

38
38
11
11
2
2
23
23
1
1
75
75
-14
-14
61
61

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Note 10 Deferred tax (continued)
Deferred tax continued
Note 10

Of the deferred tax liability of EUR 61m (2022: 54m), EUR 1m (2022: 1m) 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 8m (2022: 20m). 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
foreseeable future.

Note 11 Corporation tax
Note 11

Corporation tax

EURm

2022

2023

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:
Liabilities

-10
1
-4
39
26

26
26

26
-40
-2
20
4

4
4

Other notes
Note 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

2022

2023

84
4
-447
319
-26
-66

-776
140
30
-526

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Note 13 Contingent liabilities, assets and securities
Note 13

Contingent liabilities, assets and securities

Note 14 Related parties
Note 14

Related parties

Securities

EURm

For more information about related parties, see Note 25 Related parties, in Group section.

2022

2023

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

138
10
74

172
18
83

EURm

Purchases of goods and services

2022

2023

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.

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.

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

Transactions between Danfoss A/S and the subsidiaries

EURm

Sales of goods and services
Purchases of goods and services
Purchases of intangible assets and property, plant and equipment
Disposal of intangible assets and property, plant and equipment

2022

2023

1,556
696

1,475
760
26
2

2022

2023

169
72
72
313

141
66
43
250

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
Events after the balance sheet date
Note 15

Subsequent to December 31, 2023, 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.

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Note 16 General accounting policies for Danfoss A/S
Note 16

General accounting policies for Danfoss A/S

Note 17 Material accounting estimates for
Note 17 Material accounting estimates for Danfoss A/S
Danfoss A/S

Material accounting estimates for Danfoss A/S concern 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.

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.

Danfoss A/S is a public limited company domiciled in Denmark. The Annual Report for the period January 1 to
December 31, 2023, comprises the Financial Statements of Danfoss A/S.

The Financial Statements of Danfoss A/S have been prepared in accordance with the International Accounting
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.

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 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 is treated as goodwill.

Corporation tax and deferred tax
Danfoss A/S is jointly taxed with its Danish subsidiaries and sister companies. Current tax and deferred tax is allocated
between the jointly taxed companies. The jointly taxed companies are taxed under the tax prepayment scheme.

Reserve for capitalized development projects
Danfoss A/S has established a non-distributable reserve in equity regarding capitalized development projects.
This reserve will be reversed as the development projects have effect on the income statements. The amount is presented
net of deferred tax.

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Statements

CONTENT

153 Management’s statement
154 Independent Auditor’s Report
156 Independent limited assurance report

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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, 2023.

CEO and CFO

Board of Directors

The Annual Report has been prepared in accordance with
IFRS Accounting Standards as adopted by the EU and further
requirements in the Danish Financial Statements Act.

Kim Fausing

Jens Bjerg Sørensen, Chair

Jürgen Reinert

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, 2023, of the Group
and the Parent Company and of the results of the Group and
Parent Company operations and cash flows for 2023.

In our opinion, the consolidated ESG statements included
in the Management's Report represents a reasonable, fair,
and balanced representation of the Group's sustainability
performance and are prepared in accordance with the stated
accounting policies.

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 6, 2024

Jesper V. Christensen

Mads Clausen

Mika Vehviläinen

Mads-Peter Clausen

Henning Bjørklund

Karin Dohm

Marianne Godballe

Per Falholt

Henning Andreas Krogh

Connie Hedegaard

Bent Lewke

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Independent Auditor’s Report

To the Shareholders of Danfoss A/S

Opinion

Basis for Opinion

Statement on Management’s Review

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 31 December 2023 and of the results of the Group’s and the
Parent Company’s operations and cash flows for the financial
year 1 January to 31 December 2023 in accordance with IFRS
Accounting 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 1 January – 31 December 2023,
pp. 84-131 and 134-151, which comprise income statement,
statement of comprehensive income, statement of financial
position, statement of cash flows, statement of changes
in equity and notes, including material accounting policy
information, for both the Group and the Parent Company
(“financial statements”).

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.

Management is responsible for Management’s Review,
pp. 3-78 and p. 133.

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 IFRS Accounting 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.

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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 judgement and maintain professional scepticism
throughout the audit.

We also:

• Identify and assess the risks of material misstatement of the
financial statements, whether due to fraud or error, design
and perform audit procedures responsive to those risks, and
obtain audit evidence that is sufficient and appropriate to
provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than
for one resulting from error as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the
override of internal control.

• Obtain an understanding of internal control relevant to
the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Group’s
and the Parent Company’s internal control.

• Evaluate the appropriateness of accounting policies used

and the reasonableness of accounting estimates and related
disclosures made by Management.

• Conclude on the appropriateness of Management’s use

going concern. If we conclude that a material uncertainty
exists, we are required to draw attention in our auditor’s
report to the related disclosures in the financial statements
or, if such disclosures are inadequate, to modify our opinion.
Our conclusions are based on the audit evidence obtained
up to the date of our auditor’s report. However, future events
or conditions may cause the Group and the Parent Company
to cease to continue as a going concern.

• 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.

• 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.

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

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, 6 March, 2024

PricewaterhouseCoopers
Statsautoriseret Revisionspartnerselskab
CVR No 33 77 12 31

Lars Baungaard
State Authorised Public Accountant
mne23331

Mads Melgaard
State Authorised Public Accountant
mne34354

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Independent limited assurance report on the ESG data
points included in the consolidated ESG statements

To the Stakeholders of Danfoss A/S

What we are assuring

Danfoss engaged us to provide limited assurance on the
ESG data points included in the consolidated ESG statements
for the period 1 January - 31 December 2023 stated on p. 66
(the “ESG data points").

The scope of our work was limited to assurance over the
ESG data points for the period 1 January - 31 December 2023
stated in the 2023 Annual Report of Danfoss A/S on p. 66.

We express limited assurance in our conclusion.

Our conclusion

Based on the procedures we performed and the evidence we
obtained, nothing came to our attention that causes us not to
believe that the ESG data points for the period 1 January - 31
December 2023 for Danfoss A/S are prepared, in all material
respects, in accordance with the applied accounting policies
developed by Danfoss A/S as stated on pp. 67-72 and 74 (the
“ESG accounting policies”).

This conclusion is to be read in the context of what we state in
the remainder of our report.

Corresponding information

With effect from the current financial year, the ESG data
points have become subject to a limited assurance
engagement. Please note that the comparative ESG data
points stated in the consolidated ESG statements for the years
prior to 2023 have not been subject to assurance, which also
appears in the consolidated ESG statements.

Professional standards applied
and level of assurance

We performed a limited assurance engagement in accordance
with International Standard on Assurance Engagements
3000 (Revised) ‘Assurance Engagements other than Audits
and Reviews of Historical Financial Information’ and, in
respect of the greenhouse gas emissions, in accordance with
International Standard on Assurance Engagements 3410
‘Assurance engagements on greenhouse gas statements’.
The quantification of greenhouse gas emissions is subject
to inherent uncertainty because of incomplete scientific
knowledge used to determine the emissions factors and the
values needed to combine emissions of different gasses.

A limited assurance engagement is substantially less in scope
than a reasonable assurance engagement in relation to both
the risk assessment procedures, including an understanding
of internal control, and the procedures performed in response
to the assessed risks; consequently, the level of assurance
obtained in a limited assurance engagement is substantially
lower than the assurance that would have been obtained had
a reasonable assurance engagement been performed.

Our independence and quality control

We have complied with the independence requirements
and other ethical requirements in the International Ethics
Standards Board for Accountants’ International Code of Ethics
for Professional Accountants (IESBA Code), which is founded
on fundamental principles of integrity, objectivity, professional
competence and due care, confidentiality and professional
behaviour and ethical requirements applicable in Denmark.

PricewaterhouseCoopers applies International Standard
on Quality Management 1, ISQM 1, which requires the
firm to design, implement and operate a system of quality
management including policies or procedures regarding
compliance with ethical requirements, professional standards
and applicable legal and regulatory requirements.

Our work was carried out by an independent multidisciplinary
team with experience in sustainability reporting and
assurance.

Danfoss Annual Report 2023

Letter from the CEO

Danfoss at a glance

Our purpose

Our business

Our strategy

Sustainability

ESG statements

Financial statements

157 /158

Understanding reporting and
measurement methodologies

The ESG data points need to be read and understood together
with the ESG accounting policies. The ESG accounting
policies used for the preparation of the ESG data points are
the accounting policies developed by the company, which
Management is solely responsible for selecting and applying.

The absence of a significant body of established practice on
which to draw to evaluate and measure sustainability data
allows for different, but acceptable, measurement techniques
and can affect comparability between entities and over time.

Work performed

Management’s responsibilities

Hellerup, 6 March 2024

We are required to plan and perform our work in order
to consider the risk of material misstatement of the ESG
data points. In doing so and based on our professional
judgement, we:

∙ Evaluated the appropriateness of the ESG accounting

policies used, their consistent application in the ESG data
points;

∙ Made inquiries and conducted interviews with management
with responsibility for management and reporting of the
ESG data points to assess reporting and consolidation
process, use of company-wide systems and controls
performed;

∙ Performed limited substantive testing on a sample

basis to underlying documentation and evaluated the
appropriateness of quantification methods and compliance
with the ESG accounting policies used for preparing the
ESG data points at corporate head office and in relation
to selected Danfoss’ reporting sites;

∙ Performed analytical review and trend explanation of

the ESG data points; and

∙ Evaluated the obtained evidence.

Management of Danfoss A/S is responsible for:

• Designing, implementing and maintaining internal control

over information relevant to the preparation of the ESG data
points in the 2023 Annual Report that are free from material
misstatement, whether due to fraud or error;

• Establishing objective ESG accounting policies for preparing

the ESG data points;

• Measuring and reporting the information in the ESG data

points based on the ESG accounting policies; and
• The content of the consolidated ESG statements.

PricewaterhouseCoopers
Statsautoriseret Revisionspartnerselskab
CVR No 3377 1231

Lars Baungaard
State Authorised Public Accountant
mne23331

Mads Melgaard
State Authorised Public Accountant
mne34354

Our responsibility

We are responsible for:

∙ Planning and performing the engagement to obtain limited
assurance about whether the ESG data points for the period
1 January – 31 December 2023 are prepared, in all material
respects, in accordance with the ESG accounting policies;

∙ Forming an independent conclusion, based on the

procedures performed and the evidence obtained; and

∙ Reporting our conclusion to the stakeholders of Danfoss A/S.

Further information available
on Danfoss’ website: www.danfoss.com

Date of publication: March 6, 2024

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

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