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Financial statement 2008: Global crisis cuts growth and accounting technique results in zero-profit

30 March 2009

”The Danfoss Group had a poor 2008. In the fourth quarter, we were hit surprisingly hard by the global crisis. The profit was particularly hit by the negative development of Sauer-Danfoss’ profit during the second half-year. Moreover, accounting adjustments performed in connection with our takeover of the controlling interest in Sauer-Danfoss reduced the official result. So, we will have to note that 2008 ended with a pre-tax and an after-tax deficit. At an overall level, the result is not satisfactory. However, it is positive that there are no indications that Danfoss has lost market shares and that our three divisions – in spite of historically poor market conditions – have managed to create an operating profit of more than 1bn DKK.

We see no signs that the situation will improve in 2009 which means that we have had to introduce a number of measures to cut costs. An unfortunate effect is that we have had to cut a large number of jobs in Denmark and in our global organisation. These and other measures will not entirely impact until 2010, which is why we should expect Danfoss to be in the red in 2009. This is of course also due to the fact that we will have to perform substantial accounting adjustments, like we did in 2008, after the acquisition of the controlling interest in Sauer-Danfoss.”

Niels B. Christiansen, President and CEO, Danfoss A/S

Highlights from 2008:

The comparison figures are affected by the fact that Sauer-Danfoss is not included in the 2007 figures, whereas Sauer-Danfoss is fully consolidated from and including July 1, 2008.

Net sales were 27.1bn DKK, which equals growth of 22%. When adjusted for acquisitions, divestments and foreign currency translations growth amounted to 2%, compared to 12% in the same period the year before.
The profit before other income and expenses was 687m DKK from 1,634m DKK in the year before. As a result of the financial crisis, the profit before other income and expenses showed a deficit of 337m DKK in the fourth quarter compared with a surplus of 361m DKK in 2007. The profit before other operating income and operating expenses for Danfoss (excl. Sauer-Danfoss) was 1,146m DKK compared with 1,634m DKK in 2007.
The profit before tax ended at a deficit of 125m DKK, and the profit for the year was a deficit of 157m DKK. Excluding Sauer-Danfoss, Danfoss’ profit for the year was 342m DKK.

Expectations for 2009:
The global setback is expected to continue to put its mark on the Group’s markets in 2009 which, consequently, will be characterised by reluctance, major uncertainty and nervousness. Danfoss estimates that the current situation will continue over the next two years.

In spite of Sauer-Danfoss’ effect on the entire year, net sales are expected to fall slightly compared with 2008.
In total, following the recognition of Sauer-Danfoss, Danfoss expects to end 2009 with a negative result.

Please address any enquiries regarding this announcement to:

President and CEO Niels B. Christiansen (+45 74 88 75 50) or
Chief Reputation Officer Ole M. Daugbjerg (+45 74 88 20 08).

>	Danfoss A/S Financial statement 2008 (125 Kb)

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