Introduction to Danfoss

Introduction to Danfoss

Key facts 26,645 Employees USA, CHINA AND GERMANY Top three markets WORLDWIDE SALES in more than 100 countries PRIVATELY HELD Ownership 72 FACTORIES in more than 20 countries NORDBORG, DENMARK Headquarters 2 Group presentation, May 2018

2017 at a glance Results Regions Sales EURbn 5.8 Growth in local currency 12% EBIT margin 11.1% Western Europe Eastern Europe North America 37% Share of Group sales 9% Share of Group sales 24% Share of Group sales Asia-Pacific Latin America Africa-Middle East EBIT EURm 645 Net profit EURm 445 22% Share of Group sales 5% Share of Group sales 3% Share of Group sales 3 Group presentation, May 2018

Business segments DANFOSS POWER SOLUTIONS DANFOSS COOLING DANFOSS DRIVES DANFOSS HEATING #2 Market position #1 Market position #2 Market position #1 Market position 32% of Group net sales 27% of Group net sales 24% of Group net sales 17% of Group net sales 6,815 employees 22 factories in 11 countries 1.9bn EUR 6,396 employees 13 factories in 10 countries 1.6bn EUR 4,652 employees 11 factories in 7 countries 1.4bn EUR 5,339 employees 26 factories in 12 countries 1.0bn EUR 4 Group presentation, May 2018

Organization Danfoss Group Executive Team President & CEO Kim Fausing Executive Vice President & CFO Jesper V. Christensen Segment President, Danfoss Power Solutions Eric Alström Segment President, Danfoss Cooling Jürgen Fischer Segment President, Danfoss Drives Vesa Laisi Segment President, Danfoss Heating Lars Tveen Global Services Group Functions Segments Danfoss Power Solutions Danfoss Cooling Danfoss Drives Danfoss Heating Regions North America Central Europe North Europe China South Europe Asia Pacific Latin America Russia Eastern Europe Turkey, Middle East & Africa India Global Accounts 5 Group presentation, May 2018

Committed employees More than 26,000 employees dedicated to engineering solutions that make a difference to people and businesses worldwide High employee engagement (2017: 79 on 1-100 scale) 6 Group presentation, May 2018

Employees worldwide North America 3,957 Western Europe 10,360 Eastern Europe 4,769 Latin America 1,367 Africa-Middle East 281 Asia-Pacific 5,911 7 Group presentation, May 2018

Innovation that makes a difference The right technology can keep the world cool, hot, and powered up with the least amount of energy Massive investments in innovation 4.0% of net sales in 2017 Customer involvement from start to finish 50 product lines that meet needs and make a difference On average, Danfoss is granted a new patent every day 8 Group presentation, May 2018

Innovation that makes a difference Danfoss awarded for its Turbocor compressors In 2017, Danfoss was awarded for its innovative Turbocor technology: Bronze Winner in the Edison Awards and an Innovation Award at the China Refrigeration Expo. Danfoss is the pioneer and leader of oil-free, magnetic bearing, variable speed centrifugal compressors for high-efficiency air-conditioning chillers. Because Turbocor compressors are frictionless, with no wearing parts, the compressors maintain high performance over time, helping end-users to lower maintenance costs and achieve significant energy-savings compared with traditional systems. 9 Group presentation, May 2018

Innovation that makes a difference Smart heating with Danfoss Link TM Energy efficiency saves money, reduces air pollution, strengthens competitiveness and delivers short payback time on investments. Well-proven Danfoss technologies help increase energy efficiency. For example, Danfoss Link TM is the easiest way to smart heating, saves up to 30% on home heating costs, and enables people to control home heating from anywhere directly on a smartphone with the Danfoss Link TM app. Danfoss Link TM is the only system that effortlessly helps people control both electronic radiator thermostats and floor heating. 10 Group presentation, May 2018

Innovation that makes a difference Spearheading autonomous off-highway vehicles In the future, the way of transporting goods and people will eventually be without involvement from an operator. Autonomous vehicles are also expected to take over most off-road applications, which is why Danfoss has been on the autonomous driving technology path for some time. In 2017, DAVIS Danfoss Autonomous Vehicle Integration System was introduced at the trade fair for agricultural machinery, Agritechnica, in Germany. The early prototype introduction of DAVIS provided valuable feedback and insights from customers about their needs for autonomous driving systems of the future, and how Danfoss can take the lead when developing the autonomous driving technologies of tomorrow. 11 Group presentation, May 2018

Our history Founded in 1933 by Mads Clausen in Nordborg, Denmark Grown from a solo enterprise into a world-leader Made possible by clear focus on innovative engineering and early entry on emerging markets Cooling Heating Power Solutions Drives First product was an expansion valve for refrigeration systems (1933) Danfoss invented one of the first radiator thermostats in the world (1943) Entered hydraulics business with orbit motor for agricultural and construction machines (1964) First company to massproduce variable speed drives for controlling motors (1968) Later the hermetic compressor for refrigerators and f reezers followed (1952) Today, we are one of the world s leading producers of these and many other products 12 Group presentation, May 2018

Introduction to Danfoss Heating 13 Group presentation, May 2018

Danfoss Heating at a glance 26 FACTORIES IN 12 COUNTRIES 5,339 EMPLOYEES WORLDWIDE Danfoss Heating application areas Residential 1-2 family houses and multi-family houses Russia Commercial (Nonresidential) District energy networks NUMBER OF COUNTRIES IN WHICH OUR PRODUCTS ARE SOLD 100 TOP 5 MARKETS NORTH AMERICA EU UK Denmark Germany OTHER EUROPE China LATIN AMERICA AFRICA/MIDDLE EAST ASIA-PACIFIC Danfoss Growth Themes Core & Clear Strategy 14 Group presentation, May 2018

Danfoss Heating Segment Our inheritance and key milestones Acquisition of Sondex July 2016 Trata acquisition and concentration of controls production (Slovenia) Danfoss Heating Division established Gemina Termix acquisition light duty stations (Denmark) Ridan acquisition heat exchangers (Russia) Expansion of Anshan district heating production facility in China Stake acquired in Leanheat September 2016 1978 1995 2000 2001 2003 2004 2005 2007 2009 2013 2015 2016 2017 2018 Domestic thermostats and District heating controls form Danfoss heating division Acquisition of Anshan facility in China via IWK DEVI electrical heating acquisition (Denmark) LPM Group acquisition: HEX & large stations (Finland) Thermia acquisition: heat pumps (Sweden) Heating split into two divisions: District Energy (DEN) and Heating Solutions (HS DEN and HS combine forces, forming Danfoss Heating Segment Redan acquisition light duty stations (Denmark) Vertical Approach to Markets and Customers Launched January 2017 Early years, product line focus Rapid growth via M&A and Emerging Markets Two divisions, Core & Clear New chapter 15 Group presentation, May 2018

DHS Strategy Foundation for Heating s business Leadership in Advanced Components Scale and innovation Electronics & connected products Global strategies Increase customer focus and relevance Vertical Approach Stronger value propositions + analytics and services Local strategies 16 Group presentation, May 2018

Our Verticals MULTI- FAMILY SINGLE FAMILY NON- RESIDENTIAL DISTRICT ENERGY Radiator thermostats, floor heating, heat pumps, and smart heating solutions, balancing valves (hydronic balancing of the heating system), flat stations, domestic hot water systems, energy meters etc. RESIDENTIAL Radiator thermostats, floor heating, heat pumps, and smart heating solutions, balancing valves (hydronic balancing of the heating system), flat stations, domestic hot water systems, energy meters etc. HVAC digital and manual actuators, hydronic balancing valves, control valves, floor heating, hydronicor electrical floor heating, heat exchangers, radiator thermostats, heat pumps, pressure independent balancing and control valves, and electronic controllers. NON-RESIDENTIAL Substations, light and heavy duty stations, controls, flat stations, heat exchangers, and domestic hot water systems. All components that belong to a substation: control and balancing valves, heat exchangers, electronic controllers and monitoring systems. DISTRICT ENERGY 17 Group presentation, May 2018

District Energy remains a key infrastructure for energy efficiency District Energy 18 Group presentation, May 2018

District Energy District energy is an infrastructure for distributing heating and cooling to buildings in cities. Danfoss has since 1970 s been providing solutions such as substations and key components like heat exchangers that typically save 20-30% energy in district energy networks and end-consumption Substations Flat stations & DHW systems Plate Heat Exchangers Electronic controllers & Automatic controls 19 Group presentation, May 2018

Building a leading position in heat transfer Acquisition of Sondex in September 2016 One strong combined plate heat exchanger business Unmatched value proposition within heat transfer solutions 1,200 employees 20 Group presentation, May 2018

21 Group presentation, May 2018 21 Heating Segment Gasketed heat exchangers

Brazed heat exchangers SL Fishbone Plate Pattern XB Micro Plate Pattern * DW = Double Wall (Sonder Safe) 22 Group presentation, May 2018 22 Heating Segment

Significant energy saving potential in existing buildings in Europe with Danfoss products Multi-Family Houses Single-Family Houses 40% 28% 21% 33% Non-Residential Buildings 20% 41% Get The Basics Right Scenario Energy savings using TRV, automatic hydronic balancing High-Performance Scenario Energy savings. As Get The Basics + More advanced building automation and control measures Source: Ecofys, 2017: Optimising the energy use of technical building systems unleashing the power of the EPBD s Article 8 23 Group presentation, May 2018

District Energy remains a key infrastructure for energy efficiency District Energy 24 Group presentation, May 2018

25 Group presentation, May 2018 https://www.youtube.com/watch?v=d8jqphresf8