1st Half-year, 2014 Danfoss delivers good half-year...

www.danfoss.com2014www.danfoss.com

1st Half-year, 2014Danfoss delivers good half-year results

Danfoss at a glance Danfoss is a world-leading supplier of technologies that meet the growing need for food supply, modern infra-structure, efficient energy utilization, and climate-friendly solutions.

The Group is divided into two business segments: Danfoss Climate & Energy and Danfoss Power Solutions. Danfoss Climate & Energy's key expertise lies in food refrigeration, air-conditioning systems, controls for electric motors, heating systems for buildings, and components for renew-able energy, including solar and wind energy. Danfoss Power Solutions' key expertise is in hydraulic systems and components for powering mobile machinery used in agriculture, construction, materials handling, and specialty equipment.

Danfoss is a privately-owned company that has grown and improved its skills and expertise in energy-efficient solutions over the past 80 years. Danfoss sells its products in more than 100 countries and employs some 22,500 people worldwide.

Danfoss… • Approximate headcount: 22,500 • Products sold in over 100 countries worldwide • Has 59 factories in 17 countries and sales offices in 58 countries • Headquartered in Nordborg, Denmark

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Danfoss A/S – 1st Half-year, August 28, 2014

CONTENTS

FINANCIAL HIGHLIGHTS

FINANCIAL REVIEW

SEGMENTS

OUTLOOK FOR 2014

SUSTAINABILITY

INCOME STATEMENT

BALANCE SHEET

CASH FLOW STATEMENT

SPECIFICATION OF EQUITY

NOTES

QUARTERLY FINANCIAL HIGHLIGHTS

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Financial Highlights

Danfoss A/S – Regnskabsmeddelelse 2012, 29. august 2013 – DRAFT VERSION Side 2

Hoved- og nøgletal Mill. DKK (unless otherwise stated)

Q2 2013 Q2 2014Change

in %

1st half-year 2013

1st half-year 2014

Change in % 2013

Profit and loss accounts:

Net sales 8,752 8,617 -2% 16,815 16,920 1% 33,628Operating profit before depreciation, amortization, impairment andother operating income and expenses 1,408 1,450 3% 2,515 2,851 13% 5,549Operating profit before depreciation, amortization and impairment (EBITDA) 1,336 1,446 8% 2,393 2,785 16% 5,296Operating profit excl. other income and expenses 987 1,043 6% 1,665 2,038 22% 3,870Operating profit (EBIT) 907 1,040 15% 1,545 1,951 26% 3,616Financial income/expenses -133 -84 37% -170 -164 4% -369Profit before tax 778 959 23% 1,380 1,792 30% 3,255Net profit 556 632 14% 979 1,187 21% 2,285

Balance sheet:Total non-current assets 16,691 18,029 8% 16,052Assets 28,450 29,064 2% 26,116Total shareholders’ equity 10,445 11,783 13% 11,443Net interest-bearing debt 6,721 6,639 -1% 4,116Net assets 17,089 15,953 -7% 15,476Capital expenditure 272 258 -5% 463 506 9% 1,210

Cash flow statement:Cash flow from operating activities 1,265 1,071 -15% 4,444Cash flow from investing activities -340 -2,673 *** -917Acqquisition of intangible assets and property, plant and equipment. -471 -455 -3% -1,003Acquisition of subsidiaries and activities 0 0 0% -1Free Cash flow 925 -1,602 -273% 3,527Free cash flow before M&A 918 660 *** 3,513Cash flow from financing activities -974 1,340 -238% -3,623

Key figures:Organic net sales growth ( %) -1 3 -2 5 1EBITDA margin excl. other operating income etc. (%) 16.1 16.8 0.7 15.0 16.8 1.9 16.5EBITDA margin (%) 15.3 16.8 1.5 14.2 16.5 2.2 15.7EBIT margin excl. other operating income etc. (%) 11.3 16.8 5.5 9.9 12.0 2.1 11.5EBIT margin (%) 10.4 12.1 1.7 9.2 11.5 10.8Equity ratio (%) 36.7 40.5 3.8 43.8Leverage ratio (%) 64.3 56.3 -8 36.0Net interest bearing debt to EBITDA ratio 1.2 1.2 0.0 0.8Number of employees (end of period) 23,155 22,633 -522 22,463

12.1 0.8

2.3



Danfoss Group

Omsætning, EBIT excl OOIE - koncernen

0

400

800

1,200

1,600

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2,400

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4,000

8,000

12,000

16,000

20,000

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H1 2011 H1 2012 H1 2013 H1 2014

Mill. DKKMill. DKK

Net sales & EBIT excl. other operating income and expenses - YTD

Total net sales EBIT excl. other operating income and expenses

Medarbejdere - koncernen .

55

412

3,920

4,889

5,415

7,772

22,463

59

422

4,077

5,002

5,319

7,754

22,633

0 5,000 10,000 15,000 20,000 25,000

Africa-Middle East

LatinAmerica

North Americaincl. Mexico

Asia-Pacific

Denmark

Europe excl.Denmark

DanfossGroup

H1 2014 Q4 2013


Omsætning fordelt på regioner -koncernen

Other Europe 10%

EU 40%

North America 26%

Latin America 4%

Africa - Middle East 2%

Asia - Pacific 18%

Landeomsætning koncern 2013 2014Pct. Fordeling H1 H1Øvrige Europa Other Europe 10% 10%EU EU 40% 40%Nordamerika North America 25% 26%Latinamerika Latin America 5% 4%Afrika/Mellemøsten Africa - Middle East 2% 2%Asien/Pacific Asia - Pacific 18% 18%Verden World 100% 100%

Danfoss delivers good half-year results

The Group continues the positive trend from the recent quarters and delivers good first half-year 2014 results. Sales are above last year and earnings have improved by 22%.

Financial reviewIn the first half-year of 2014, Danfoss generated good total net sales of DKK 16,920m against DKK 16,815m in the same period of 2013. This is equal to 5% growth in local currency and 1% in DKK. The growth in sales was driven by generally high demand for Danfoss' energy-efficient solutions. Particularly, Danfoss’ hydraulic business, Danfoss Power Solutions, saw the increasing demand from first quarter continue into second quarter. Also the Power Electronics business, which among other things produces variable speed drives for control of electric motors, and the Refrigeration and Air-conditioning business, which supplies energy-saving components for a wide range of refrigeration and air-conditioning systems, had strong sales in the half-year.

From a regional point of view, especially the BRIC countries continued, as expected, to be impacted by weakened exchange rates. The overall development in the markets confirmed the expected scenario, with growth in the BRIC countries gradually slowing down and the mature markets gaining a stronger momentum. Particularly remarkable is the continuing strong development in North America. Compared to last year, the region delivered growth of 9% in local currency. With close to one-quarter of the net sales coming from North America the regained momemtum in the region is very positive for the Group. The tendency of growth slowly picking up in the region started already in the second half of 2013. In Europe, markets are still struggling to regain consistent traction, and growth rates were modest.

At the segment level, Danfoss Power Solutions showed strong performance in the first two quarters. The segment had sales growth of 7% in local currency and 3% in DKK.In Danfoss Climate & Energy, the results of the half-year were also strong. The segment had sales growth of 4% in local currency and a 1% decline in DKK, and profitability was significantly improved.

The Group’s operating profit before other income and expenses for the first two quarters

was DKK 2,038m against DKK 1,665m in the same period in 2013. The impact from slightly lower fixed expenses, increased organic growth, procurement savings combined with continuous productivity improvements were the main drivers behind the improved earnings.

Sales distribution by regions Net sales & EBIT excl. other operating income and expenses – YTD


Balance SheetThe Group’s equity amounted to DKK 11,783m against DKK 10,445m at June 30, 2013.

The equity ratio at June 30, 2014 was 40.5% against 36.7% in the same period last year.

Total assets amounted to DKK 29,064m against DKK 28,450m at June 30, 2013.

Net interest-bearing debt stood at DKK 6,639m at June 30, 2014, compared with DKK 6,721m last year. The level of debt is equal to 1.2 × EBITDA of the last four quarters, which is within the target range of from 0 to 2 times EBITDA for the last four quarters.

In conclusion, the balance sheet remained strong.

Cash FlowsImpacted by increased capex and increased working capital due to higher sales the free cash flow before M&A was DKK 660m for the first half-year against DKK 918m in the same period last year. Free cash flow was DKK −1,602m against DKK 925m in the same period last year. The amount consisted of cash flow from operating activities of DKK 1,071m in and cash flow from investing activities of DKK −2,673m including the acquisition of 20% of the shares in the German SMA Solar Technology AG.

Innovation Danfoss continues the high level of investments in research and development of new products and technologies. The development of energy-efficient and performance- enhancing solutions in the Group's core business areas is a cornerstone in the quest for profitable growth. In the first half-year of 2014, Danfoss invested DKK 638m in innovation, compared to DKK 704m in the same period last year. The investment in innovation was equal to 3.8% of the Group’s net sales.


R&D - koncernen

0%

1%

2%

3%

4%

5%

6%

7%

0

100

200

300

400

500

600

700

H1 2010 H1 2011 H1 2012 H1 2013 H1 2014

Research & Development investments - YTD

Danfoss Group - mDKK Danfoss Group - % of net sales

Dansk Engelsk Q2 2010 Q2 2011 Q2 2012 Q2 2013 Q2 2014

Account#P199999 Total net sales Koncern Group 14,969 17,451 17,222 16,815 16,920

Account#R101400 Research and develop Koncern Group 514

Account#K806110Cost split of fixed expenses Koncern Group 583 628 689 633

Account#R101450p

development costs Koncern Group 13 24 15 5

Account#R101400development costs (Used until June Danfoss Group - Danfoss Group - 514 596 652 704 638

Danfoss Group - Danfoss Group - 3.4% 3.4% 3.8% 4.2% 3.8%

Research & Development investments – YTD


EmployeesDanfoss had a total of 22,633 employees at June 30, 2014 against 22,463 at the beginning of the year.


Danfoss Group

Omsætning, EBIT excl OOIE - koncernen

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H1 2011 H1 2012 H1 2013 H1 2014

Mill. DKKMill. DKK



Medarbejdere - koncernen .

55

412

3,920

4,889

5,415

7,772

22,463

59

422

4,077

5,002

5,319

7,754

22,633

0 5,000 10,000 15,000 20,000 25,000

Africa-Middle East

LatinAmerica

North Americaincl. Mexico

Asia-Pacific

Denmark

Europe excl.Denmark

DanfossGroup

H1 2014 Q4 2013


Danfoss Climate & Energy

Danfoss Climate & Energy consists of five divisions: Danfoss Refrigeration & Air Conditioning Controls, Danfoss Power Electronics, Danfoss Heating Solutions, Danfoss Commercial Compressors and Danfoss District Energy. All five divisions are leading players in the climate and energy sector. The entire segment is focused on providing energy-efficient and climate-friendly solutions for a number of selected business sectors. The divisions play a leading role in R&D, production, sales and service of mechanical and electronic products sold on the global market for cooling and air conditioning, comfort and heating, and control of electric motors, and for a number of industries in which energy efficiency is important.

In the first half-year of 2014, Danfoss Climate & Energy had net sales of DKK 10,583m, corresponding to a 4% growth in local currency. The growth was driven by solid performance in most regions with North America standing out with 8% growth in local currency. In Europe, the segment’s biggest market, sales were at last year’s level. The Power Electronics business and the Refrigeration and Air-conditioning business recorded increasing demand, while the heating business showed slightly declining growth rates.

EBIT before other income and expenses was improved from DKK 914m in the first half-year of 2013 to DKK 1265m, an improvement equal to 38%, corresponding to an EBIT margin of 11.7% against 8.3% in 2013. Full impact from adjustments of fixed expenses carried out in the second half of 2013, procurement savings, a positive trend in businesses and markets with a high profit margin and continuous productivity improvements were the main drivers of the significant improvement of earnings in the segment.



Omsætning, EBIT excl. OOIE - CE

0

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H1 2011 H1 2012 H1 2013 H1 2014

Mill. DKKMill. DKK



Tabel Climate & Energy

DKK Mill. (unless otherwise stated)

H1 2013 H1 2014Change in

%

1st half-year 2013

1st half-year 2014

Change in % 2013

Net sales 5,697 5,504 -3% 10,665 10,583 -1% 22,330Operating profit (EBIT) 571 674 18% 885 1,239 40% 2,554EBIT Margin 10.0% 12.2% 8.3% 11.7% 11.4%Capital expenditure 213 184 -14% 354 374 6% 814Number of employees 14,379 13,411 -7% 13,657


Omsætning fordelt på regioner – CE

Other Europe 14%

EU 44%North America

14%

Latin America 5%

Africa - Middle East 3%

Asia - Pacific 20%

Landeomsætning Climate & Energy 2013 2014Pct. Fordeling H1 H1Øvrige Europa Other Europe 14% 14%EU EU 43% 44%Nordamerika North America 13% 14%Latinamerika Latin America 6% 5%Afrika/Mellemøsten Africa - Middle East 3% 3%Asien/Pacific Asia - Pacific 20% 20%Verden World 100% 100%



Omsætning, EBIT excl. OOIE - CE

0

200

400

600

800

1,000

1,200

1,400

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

H1 2011 H1 2012 H1 2013 H1 2014

Mill. DKKMill. DKK



Tabel Climate & Energy



%

1st half-year 2013

1st half-year 2014

Change in % 2013

Net sales 5,697 5,504 -3% 10,665 10,583 -1% 22,330Operating profit (EBIT) 571 674 18% 885 1,239 40% 2,554EBIT Margin 10.0% 12.2% 8.3% 11.7% 11.4%Capital expenditure 213 184 -14% 354 374 6% 814Number of employees 14,379 13,411 -7% 13,657


Q2 2014 Q2 2013



Power Solutions

Omsætning, EBIT excl. OOIE– Power solutions

0

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1,000

1,200

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0

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3,000

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H1 2011 H1 2012 H1 2013 H1 2014

Mill. DKKMill. DKKNet sales & EBIT excl. other operating income and expenses - YTD


Tabel Sauer-Danfoss



%

1st half-year 2013

1st half-year 2014

Change in % 2013

Net sales 2,972 3,039 2% 5,991 6,193 3% 10,989Operating profit (EBIT) 488 504 3% 1,001 1,090 9% 1,593EBIT Margin 16.4% 16.6% 16.7% 17.6% 14.5%Capital expenditure 56 65 101 118 17% 377Number of employees 6,302 6,192 -2% 6,320


Omsætning fordelt på regioner – Power Solutions

Other Europe 4%

EU 31%

North America 46%

Latin America 3%

Asia - Pacific 16%

Landeomsætning Sauer-Danfoss 2013 2014Pct. Fordeling H1 H1Øvrige Europa Other Europe 4% 4%EU EU 31% 31%Nordamerika North America 46% 46%Latinamerika Latin America 4% 3%Afrika/Mellemøsten Africa - Middle East 0% 0%Asien/Pacific Asia - Pacific 15% 16%Verden World 100% 100%


Power Solutions

Omsætning, EBIT excl. OOIE– Power solutions

0

200

400

600

800

1,000

1,200

1,400

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

H1 2011 H1 2012 H1 2013 H1 2014

Mill. DKKMill. DKKNet sales & EBIT excl. other operating income and expenses - YTD


Tabel Sauer-Danfoss



%

1st half-year 2013

1st half-year 2014

Change in % 2013

Net sales 2,972 3,039 2% 5,991 6,193 3% 10,989Operating profit (EBIT) 488 504 3% 1,001 1,090 9% 1,593EBIT Margin 16.4% 16.6% 16.7% 17.6% 14.5%Capital expenditure 56 65 101 118 17% 377Number of employees 6,302 6,192 -2% 6,320


Danfoss Power Solutions

Danfoss Power Solutions consists of three divisions – Danfoss Hydrostatics, Danfoss Work Function and Danfoss Controls – and four stand-alone business operations. Danfoss Power Solutions is a global leader in hydraulic products for mobile machinery. The divisions of the segment all hold a leading position in R&D, design, manufacture and sale of innovative and performance-enhancing hydraulic and electronic systems and components used in mobile machinery operating in the agriculture, construction, materials handling, and specialty equipment markets.

Danfoss Power Solutions continued the strong performance in the first two quarters of 2014. Driven by the growing need for better infrastructure and demand for agriculture machinery, the segment continued to see strong demand for its energy-efficient, advanced hydraulic solutions. For the half-year, net sales were DKK 6,194m against DKK 5,991m in the same period last year, corresponding to 8% growth in local currency and 3% growth in DKK. With the exception of a decline in Brazil, the segment recorded growth in all its primary markets with North America and China both delivering double-digit growth rates at 10 and 12%, respectively, in local currency.

EBIT before other income and expenses was improved from DKK 1,001m in the first half-year of 2013 to DKK 1,035m, an improvement equal to 8%, corresponding to an EBIT margin of 17.6% against 16.7% in 2013. Continuous improvements of the productivity and a positive trend in business were the main drivers of the continued strong earnings in the segment.

Q2 2014 Q2 2013


Outlook for 2014

Danfoss expects the moderate global economic growth and the low visibility to continue the rest of the year. Accordingly, moderate growth is also expected in the Group's markets. Sales are expected to be negatively affected by exchange rate fluctuations, especially in the first half of 2014. Danfoss expects to retain profitability levels through continual operational improve-ments and targeted strategic initiatives already launched.

Net sales for 2014 are thus expected to show moderate growth in local currency terms.

Operating profit for 2014 is expected to increase in line with net sales.


Sustainability

Due to the fact that in 2013 Danfoss gained full ownership of Sauer-Danfoss, now renamed Danfoss Power Solutions, information and data from the business segment is now included in this section. This means that the 2014 sustainability figures cannot immediately be compared with previous periods. Previous periods are included in the explanations below, where relevant. Figures for Danfoss Climate & Energy are shown in brackets.

Resource consumption and CO2 emissionsDanfoss continued the work to reduce CO2 emissions at its 15 largest factories in accordance with the objective to cut emissions by 25% (relative to the 2007 level) by 2025.Over the course of the first six months of the year, Danfoss emitted 100,600 tons (61,600 tons) of CO2 from its factories. Emissions amounted to 62,400 tons in the same period of 2013. The increase was caused by the fact that Danfoss Power Solutions’ factories are included in the 2014 figures.In the period, Danfoss consumed electricity amounting to 175 million kWh (99.9 million kWh) compared to 100.1 million kWh in the year-earlier period of 2013, here the increase was also due to incorporation of Danfoss Power Solutions. The energy consumption for heating was 96.1 million kWh (78.5 million kWh) in the first half of the year compared to 82.7 million kWh in the same period of 2013.In the first six months of 2014, Danfoss’ water consumption for processing and sanitary purposes was 368,000 m3 (284,000 m3) against 286,500 m3 in the first half of 2013.

Responsible supplier managementIn the first half of 2014, an additional 188 suppliers signed or re-signed Danfoss’ Code of Conduct. In total, 2126 suppliers of direct materials and 2421 suppliers of indirect materials have signed the Code of Conduct. In the first half of 2014, the strengthened work to get more suppliers in compliance with Danfoss’ Code of Conduct requirements has resulted in 44 closed audit reports across the world, hereof 25 in China alone. A closed audit report is only possible when all non-compliances raised during on-site audits have been successfully closed and sufficient documentation has been provided – through on-site or desktop verification.

Work-related lost time accidentsThe number of accidents, which led to more than one day’s absence in the first half of 2014, is 80 compared to 68 in the same period in 2013. Accident frequency, which is defined as the number of work accidents with absence per 1 million working hours, was 4.5 in the period. The corresponding figure in the first half of 2013 was 4.7; and 4.7 for the whole of 2013.

Absence as a result of work accidents is defined as the number of lost hours per 1,000 working hours, and this amounted to 0.35 in the first half of 2014 compared to 0.6 in the same period of 2013. The average absence among employees who had been involved in a work accident was approximately 10 days in the period. This is a reduction from an average of 16 days per accident in the first six months of 2013.



Resultatopgørelse

Mill. DKK

Q2 2013 Q2 2014

1st half-year 2013

1st half-year 2014 2013

Net sales 8,752 8,617 16,815 16,920 33,628Cost of sales -5,670 -5,677 -11,095 -11,049 -21,766Research and development costs -355 -313 -689 -633 -1,359Gross profit 2,727 2,627 5,031 5,238 10,503

Distribution expenses -1,322 -1,196 -2,548 -2,414 -5,063Administration expenses -418 -388 -818 -786 -1,570Operating profit excl. other income and expenses 987 1,043 1,665 2,038 3,870

Other operating income and expenses -80 -3 -120 -87 -254Operating profit (EBIT) 907 1,040 1,545 1,951 3,616

Income from associates and joint ventures after tax 4 3 5 5 8Financial income/expenses -133 -84 -170 -164 -369Profit before tax 778 959 1,380 1,792 3,255

Corporate tax expenses -222 -327 -401 -605 -970Net profit 556 632 979 1,187 2,285

Income statement


Balance

Mill. DKK

Q2 2013 Q2 2014 2013

Assets

Non-current assetsIntangible fixed assets 8,514 7,963 8,054Tangible fixed assets 6,719 6,246 6,506Non-current financial assets 1,458 3,820 1,492Total non-current assets 16,691 18,029 16,052

Current assetsInventories 4,371 4,234 3,849Accounts receivable 6,564 6,323 5,478Cash and cash equivalents 824 478 737Total current assets 11,759 11,035 10,064

Total assets 28,450 29,064 26,116

Liabilities and shareholders' equity

Total shareholders’ equity 10,445 11,783 11,443

LiabilitiesNon-current liabilities 10,442 8,574 6,472Current liabilities 7,563 8,707 8,201Total liabilities 18,005 17,281 14,673

Total liabilities and shareholders’ equity 28,450 29,064 26,116



Balance

Mill. DKK

Q2 2013 Q2 2014 2013

Assets

Non-current assetsIntangible fixed assets 8,514 7,963 8,054Tangible fixed assets 6,719 6,246 6,506Non-current financial assets 1,458 3,820 1,492Total non-current assets 16,691 18,029 16,052

Current assetsInventories 4,371 4,234 3,849Accounts receivable 6,564 6,323 5,478Cash and cash equivalents 824 478 737Total current assets 11,759 11,035 10,064

Total assets 28,450 29,064 26,116

Liabilities and shareholders' equity

Total shareholders’ equity 10,445 11,783 11,443

LiabilitiesNon-current liabilities 10,442 8,574 6,472Current liabilities 7,563 8,707 8,201Total liabilities 18,005 17,281 14,673

Total liabilities and shareholders’ equity 28,450 29,064 26,116

Balance sheet



Pengestrømsopgørelse Mill. DKK

1st half-year 2013

1st half-year 2014 2013

Profit before tax 1,380 1,792 3,255Adjustments for non-cash transactions 979 809 2,287Changes in working capital -560 -963 296Cash flow generated from operations 1,799 1,638 5,838Financial income -9 9 29Financial expenses -133 -141 -259Dividends received 7 7 7Cash flow from operations before tax 1,664 1,513 5,615Paid tax -399 -442 -1,171Cash flow from operating activities 1,265 1,071 4,444

Acquisition of intangible fixed assets -55 -54 -91Acquisition of tangible fixed assets -432 -452 -1,118Proceeds from sale of tangible fixed assets 16 51 205Acquisition of subsidiaries etc. 0 0Proceeds from disposal of subsidiaries etc. 0 0Acquisition (-) and sale of other investments etc. 131 -2,218 87Cash flow from investing activities -340 -2,673 -917

Free Cash flow 925 -1,602 3,527

Repayment of (-)/proceeds from interest-bearing debt 3,720 2,196 1,179Financing by shareholders:Repurchase (-)/sale of own shares -111 -10 -116Add./disp. of minority interests -4,086 0 -4,092Dividends paid to shareholder in the Parent Company -396 -789 -396Dividends paid to minority shareholders -101 -57 -198Cash flow from financing activities -974 1,340 -3,623

Net change in cash and cash equivalents-49 -262 -96

Cash and cash equivalents (beginning of period) 888 737 888Foreign exchange adjustment of cash and cash equivalents -15 3 -55Cash and cash equivalents (end of period) 824 478 737

Cash flow statement


Specifikation af egenkapital

Mill. DKK

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Balance at 1 January 2013 1,020 370 -41 -257 -275 10,638 10,065 400 11,855 2,338 14,193

Comprehensive income in 2013

Net profit 1,237 1,237 800 2,037 248 2,285

Other comprehensive income

Foreign exchange adjustments when converting foreign currencies

-472 -472 -472 -78 -550

Fair value adjustment of hedging instruments 80 149 229 229 -2 227Actuarial gain/loss (-) on 0 0 0pension and healthcare plans 209 209 209 -2 207Tax on Other comprehensive income -20 -37 -80 -137 -137 -137Other comprehensive income 60 -360 129 -171 -171 -82 -253Comprehensive income in the period 60 -360 1,366 1,066 800 1,866 166 2,032

Transactions with owners

Dividends to shareholders 4 4 -400 -396 -179 -575Purchase of minority interest -2,623 -2,623 -2,623 -1,469 -4,092Capital increase/purchase of treasury shares 2 39 -156 -156 -115 -115Total transactions with owners 2 39 -156 -2,619 -2,775 -400 -3,134 -1,648 -4,782Balance at 31 December 2013 1,022 409 19 -617 -431 9,385 8,356 800 10,587 856 11,443

Net profit 0 0 0 0 0 1,063 1,063 1,063 125 1,188



0 0 0 71 0 0 71 0 71 8 79

Fair value adjustment of hedging instruments 0 0 -72 -24 0 0 -96 0 -96 -96Actuarial gain/loss (-) on 0 0 0 0 0 0pension and healthcare plans 0 0 0 3 3 0 3 3Tax on other comprehensive income 0 0 17 6 0 -1 22 0 22 22Other comprehensive income -55 53 2 0 0 8 8Comprehensive income in the period -55 53 0 1,065 1,063 0 1,063 133 1,196


Dividends to shareholders 0 0 0 0 0 11 -800 -789 -57 -846Capital increase/purchase of treasury shares 1 54 0 0 -65 -65 0 -10 -10Total transactions with owners 1 54 -65 0 -54 -800 -799 -57 -856Balance at 30 June 2014 1,023 463 -36 -564 -496 10,450 9,365 0 10,851 932 11,783



Specifikation af egenkapital

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uit

y

Balance at 1 January 2013 1,020 370 -41 -257 -275 10,638 10,065 400 11,855 2,338 14,193

Comprehensive income in 2013

Net profit 1,237 1,237 800 2,037 248 2,285



-472 -472 -472 -78 -550

Fair value adjustment of hedging instruments 80 149 229 229 -2 227Actuarial gain/loss (-) on 0 0 0pension and healthcare plans 209 209 209 -2 207Tax on Other comprehensive income -20 -37 -80 -137 -137 -137Other comprehensive income 60 -360 129 -171 -171 -82 -253Comprehensive income in the period 60 -360 1,366 1,066 800 1,866 166 2,032


Dividends to shareholders 4 4 -400 -396 -179 -575Purchase of minority interest -2,623 -2,623 -2,623 -1,469 -4,092Capital increase/purchase of treasury shares 2 39 -156 -156 -115 -115Total transactions with owners 2 39 -156 -2,619 -2,775 -400 -3,134 -1,648 -4,782Balance at 31 December 2013 1,022 409 19 -617 -431 9,385 8,356 800 10,587 856 11,443

Net profit 0 0 0 0 0 1,063 1,063 1,063 125 1,188



0 0 0 71 0 0 71 0 71 8 79

Fair value adjustment of hedging instruments 0 0 -72 -24 0 0 -96 0 -96 -96Actuarial gain/loss (-) on 0 0 0 0 0 0pension and healthcare plans 0 0 0 3 3 0 3 3Tax on other comprehensive income 0 0 17 6 0 -1 22 0 22 22Other comprehensive income -55 53 2 0 0 8 8Comprehensive income in the period -55 53 0 1,065 1,063 0 1,063 133 1,196


Dividends to shareholders 0 0 0 0 0 11 -800 -789 -57 -846Capital increase/purchase of treasury shares 1 54 0 0 -65 -65 0 -10 -10Total transactions with owners 1 54 -65 0 -54 -800 -799 -57 -856Balance at 30 June 2014 1,023 463 -36 -564 -496 10,450 9,365 0 10,851 932 11,783

Specification of equity


Notes

Accounting policiesDanfoss prepares its annual and interim reports in accordance with IFRS (International Financial Reporting Standards). For a detailed description of the accounting policies applied, see Danfoss' 2013 annual report. Please note that this interim report is not presented in accordance with IAS 34 “Interim financial reporting” and that the financial data are unaudited.

Exchange rates appliedThe interim report is presented in Danish kroner. The figures in the income statement have been translated into DKK using the average exchange rates of the reporting period. The balance sheet has been translated using the end-of-period exchange rates.


Valutakurser Currency 1st half-year

2013 Ending rates

1st half-year 2014

Ending rates2013

Ending rates

1st half-year 2013

Average rates

1st half-year 2014

Average rates2013

Average rates

EUR 7.46 7.46 7.46 7.46 7.46 7.46GBP 8.76 9.33 8.92 8.77 9.08 8.78USD 5.73 5.48 5.41 5.68 5.44 5.62


Quarterly financial highlights


Hoved- og nøgletal pr. kvartal Mill. DKK (unless otherwise stated) Q1 2013 Q2 2013 Q3 2013 Q4 2013 2013 Q1 2014 Q2 2014Profit and loss accounts

Net sales 8,063 8,752 8,712 8,100 33,628 8,303 8,617Operating profit before depreciation, amortization, impairment andother operating income and expenses 1,106 1,408 1,688 1,347 5,549 1,401 1,450Operating profit before depreciation, amortization and impairment (EBITDA) 1,057 1,336 1,587 1,316 5,296 1,339 1,446Operating profit excl. other income and expenses 679 987 1,273 931 3,870 996 1,043Operating profit (EBIT) 638 907 1,172 899 3,616 911 1,040Financial income/expenses -36 -133 -96 -103 -369 -80 -83Profit before tax 603 778 1,079 796 3,255 833 959Net profit 422 556 708 598 2,285 555 632

Balance sheetTotal non-current assets 17,024 16,691 16,127 16,052 16,052 15,760 18,029Assets 28,546 28,450 27,472 26,116 26,116 26,436 29,064Total shareholders’ equity 14,637 10,445 10,942 11,443 11,443 11,946 11,783Net interest-bearing debt 2,767 6,721 5,421 4,116 4,116 3,913 6,639Net assets 17,332 17,089 16,284 15,476 15,476 15,785 15,953Capital expenditure 191 272 286 461 1,210 248 258

Cash flow statementCash flow from operating activities 435 1,265 2,623 4,444 4,444 405 1,071Cash flow from investing activities -56 -340 -505 -917 -917 -178 -2,673 acquisition of intangible assets and property, plant and equipment -167 -471 -612 -1,003 -1,003 -223 -455 acquisition of subsidiaries and activities 0 0 2 -1 -1 0 0Free Cash flow 378 925 2,118 3,527 3,527 227 -1,602Free cash flow before M&A 365 918 2,121 3,513 3,513 228 660Cash flow from financing activities -530 -974 -2,202 -3,623 -3,623 -490 1,340

Key figuresOrganic net sales growth ( %) -4 -1 3 5 1 7 3EBITDA margin excl. other operating income etc. (%) 13.7 16.1 19.4 16.6 16.5 16.9 16.8EBITDA margin (%) 13.1 15.3 18.2 13.6 15.7 16.1 16.8EBIT margin excl. other operating income etc. (%) 8.5 11.3 14.6 9.1 11.5 12.0 12.1EBIT margin (%) 7.9 10.4 13.5 8.2 10.8 11.0 12.1Equity ratio (%) 51.3 36.7 39.8 43.8 43.8 45.2 40.5Leverage ratio (%) 18.9 64.3 49.5 36.0 36.0 32.8 56.3Net interest bearing debt to EBITDA ratio 0.5 1.2 1.0 0.8 0.8 0.7 1.2

Geographical segmentsTotal net salesEU 3,268 3,377 3,405 3,265 13,316 3,473 3,368Rest of Europe 803 944 1,153 1,011 3,911 742 872Asia 1,242 1,551 1,604 1,493 5,890 1,324 1,528North America 2,081 2,113 1,811 1,660 7,666 2,151 2,212Africa 51 68 65 47 230 60 70Pacific 128 128 149 134 538 120 121Latin America 400 449 435 401 1,685 339 344Middle East 90 122 90 89 392 94 102Total 8,063 8,752 8,712 8,100 33,628 8,303 8,617

Number of employeesEurope excl. Denmark 7,973 8,041 7,972 7,772 7,772 7,727 7,754North America incl. Mexico 3,994 4,039 3,946 3,920 3,920 3,861 4,077Latin America 441 427 418 412 412 424 422Asia-Pacific incl. China 4,894 4,950 4,936 4,889 4,889 4,887 5,002Africa - Middle East 57 58 58 55 55 58 59Denmark 5,684 5,640 5,512 5,415 5,415 5,329 5,319Total 23,043 23,155 22,842 22,463 22,463 22,286 22,633Total exclusive sold companies/activities 23,043 23,155 22,842 22,463 22,463 22,286 22,633

Contact address:

Danfoss A/S 6430 Nordborg Tel.: 7488 2222 Fax: 7449 0949 E-mail:[email protected]

Further information is available on Danfoss' website: www.danfoss.com

Date of publication: August 28, 2014

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