Danfoss: ‘A year above expectations’

NORDBORG, Denmark, 3 March 2022: Danfoss reported an increase in sales by 29% to EUR 7.5 billion in 2021. Making the announcement through a Press release, Danfoss described the performance as a record sales level.

The company said organic growth reached 18% year-over-year. The five-month period of ownership of Eaton’s hydraulics business added EUR 786 million to the top-line, the company said, adding that it delivered extensive growth in all regions. Investments in innovation (R&D) increased 23% to EUR 328 million, the company said. At the same time, it said, operating profits reached the highest level ever, with EBITA of EUR 969 million and EBITA margin of 12.8%. Net profit reached EUR 631 million, up 45%, it added.

“We have never seen better opportunities for Danfoss,” said Kim Fausing, President & CEO, Danfoss. “It is our ambition to be the leading technology partner for our customers in the green transition – decarbonising through energy efficiency, low emissions, and electrification. After all, the greenest energy is the energy that we don’t use.

Our momentum is clearly reflected in our 2021 annual results. Danfoss has delivered the best results in our history, and we are in a strong financial position.

“What makes me most proud is how our teams continue to deal with the pandemic and the significant challenges with the supply chain while delivering a transformational, record year. Unfortunately, these considerable challenges affected our customer service.

In addition, all three segments were affected by inflationary pressure. We will continue to do everything we can to serve our customers, and we will continue our high investments in capacity expansion, innovation and digitalisation of Danfoss.”

Danfoss said it assumes a positive outlook in the market in 2022, with a continued ambition to expand or maintain market share. The outlook includes a full year ownership of Eaton’s hydraulics business, it said. Sales are expected to be in the range of EUR 8.8-9.8bn for the full year, it said. The EBITA margin is expected to be in the range of 11.4-12.9%, following continued investments in the development of new products and solutions, it said.

The expected growth and profitability performance is dependent on the development of the pandemic, the global supply chain disruptions as well as the continuation of the current strong growth rates in the world economy, it added.

Regarding the conflict between Ukraine and Russia, the company said its first priority is to keep its people safe. We are monitoring the situation carefully and will act accordingly.

LightAir says subscription strategy is yielding results

STOCKHOLM, Sweden, 12 June 2021: LightAir said its strategic focus on sales of air purification to offices and schools in Sweden is continuing to yield results. The LightAir Health+ offer provides clean, virus-free air and is offered in Sweden primarily as a subscription service, it said, adding that the number of subscriptions is growing continuously, rising from about 60, last summer, and soon likely to exceed 300.

The positive market reception in Sweden is exemplified by how Enskilda Gymnasiet – an independent secondary school in operation for over 100 years – is now expanding its two subscriptions to 30, LightAir said. The school carried out a six-month evaluation, which documented how individuals with asthma and allergies experienced relief from problems and that other students and teachers experienced improved air quality, LightAir said. Evaluation comments mentioned reduced fatigue, improved concentration and less drowsiness, it added.

“We are located in central Stockholm and are aware that we operate in an environment that is particularly exposed to traffic pollution,” said Jonas Persson, Project Manager, Enskilda Gymnasiet. “It’s important that students can stay healthy, cope with the school day and don’t get fatigued by bad air. It’s especially important that they are alert when final exams roll around. Students with pollen allergies are prone to tire easily and perform poorly.”

According to LightAir, Enskilda Gymnasiet is now installing a total air purification capacity of over 20,000 cubic metres per hour, along with a corresponding virus inhibitor capacity. Subsequent to the sale of the purifiers, the service will be delivered in the form of a three-year subscription, LightAir said.

According to LightAir, its Health⁺ subscription offer is the most comprehensive service offer available and was established in the Swedish domestic market in 2020. The offer has since been awarded the International Facility Management Association’s Nordic Innovation Prize, not least since it has the distinction of being able to destroy viruses while they’re still airborne, the company said.

“More and more businesses and organizations are opening their eyes to the challenges of indoor air,” said Joakim Hansson, Business Area Manager, LightAir. “This is also shown concretely by how we expanded our subscription base from 5 to 60 last summer, and from 60 to 160 by year end. This summer we have high hopes of reaching our goal of 300 Swedish subscriptions.”

Added Lars Liljeholm, CEO, LightAir: “We see that our strategic plan is promising and starting to bear fruit, while we have a long way to go with stimulating challenges ahead of us. We will become increasingly better at utilizing the competitive advantages we have in the nascent corporate market, not least in terms of purification efficiency and noise levels, as well as with an attractive and trouble-free subscription offer. Professional solutions will be the engine of our future growth. Through an increasingly successful domestic market, we are laying the foundation for establishment in selected international markets.

“We are in the middle of the demanding – but enjoyable – work of building a leading position in the commercial segment. Initially, the new strategy will affect sales when we change our revenue model, but in the long run, this will be crucial for the company and value creation for our owners. With that said, the consumer market will still be an important part of the future LightAir we are now building, which is why we have also recruited cutting-edge expertise and are continuously developing our international ventures and e-commerce.”

China eyes a larger MEA footprint

Ten air conditioners will be sold per second in the next 30 years, says Moan Abraham, Vice President and General Manager for Air Conditioning, Hisense Middle East, quoting a key figure in the International Energy Agency’s “The Future of Cooling” report. The report forecasted that the global air conditioner market will grow from 1.6 billion to 5.6 billion by 2050. For Abraham, while the figure offers tremendous potential, it also poses a challenge for HVAC manufacturers, stressing that if the industry does not opt for energy-efficient systems from now on, the scenario in 2050 could be quite challenging with regard to heavy consumption. Abraham believes Chinese manufacturers could be well positioned to address this growing demand, with regard to both scale and energy efficiency.

Based on customs data published by the Chinese government, Abraham says that China is already taking a big portion of the air conditioning business, globally and that the number continues to grow for all major players. Mark Wang, General Manager of International Sales, Chigo, says the overall growth of China’s HVAC industry is expected to be around five per cent. Abraham says that Hisense alone has been able to increase its export shares by 50% in the last three years.

To further underscore the scale of Chinese exports, Abraham says that in 2018 alone, around 50 million sets were exported from China. In 2019, Abraham says, it is expected that 4.14 million units will be exported to the Middle East, and 3.19 million units to Africa. “If China is exporting [around] 50 million sets, and the Middle East and Africa is taking around 7.5 million sets, that’s a significant portion that the region is accounting for,” he says.

Growing presence in Middle East and Africa

Abraham says that the Middle East and African markets have been showcasing greater appreciation for Chinese brands. Gleaning from Hisense’s own experience in the region, Abraham says that in the past, the company was largely an OEM player but that since it has been focusing on its own brand, Hisense has achieved a good market share in the last 3-4 years. This, Abraham says, is owing to several reasons. First, he points to the gradual shift in public opinion. “The quality perception of China-made products have changed today,” he says. “You have government entities specifying China-made products – this means confidence. Basically, the quality and performance of Chinese ACs and brands have been quite high-end in the last few years. People are now recognising that the quality is next to none.” Secondly, Abraham points to affordability owing to economies of scale. “It’s not about buying low-cost products,” he says. “The product is more affordable, so people can buy. Again, the purchasing power increases and the affordability has come.” Abraham also points to reliability, stressing that Chinese brands’ move to partner with notable local companies has enhanced after-sales and maintenance services. Lastly, Abraham stresses that China has the capability to manufacture in big volumes, which allows it to remain competitive in big markets.

Abraham says that this offers a good opportunity for Chinese brands, as the demand will continue to grow, not only globally, as per forecasts, but in the region, as well, owing to a reduction in lifecycle of air conditioners, especially in residential applications. This, he says, can be attributed to three main factors: “Number one, it is exposed to harsh environments. The AC is taking a big beating in terms of performance. Also, usage – people are looking for extreme cooling.” In this regard, Abraham says there is a need to enhance consumer awareness with regard to moderate temperatures setting. “People want a set-point temperature of 16 degrees C,” he says. “This is bad for health and energy consumption. Some countries are putting some regulations, especially in Egypt, which limited thermostat setting to 20 degrees C. If regulation comes, you need to limit temperature setting to a certain level, and you can increase the efficiency   and life of ACs.”

Another cause for the reduction in life of air conditioners, Abraham says, is the lack of skilled personnel handling the maintenance of AC equipment in residential units. The third bottleneck, Abraham says, is the cost of repair as well as the response time of relevant personnel in the event there is a need for product replacements. “In peak season in the GCC region, a new air conditioner can be installed in 24 hours,” he says. “But if you have complaint relating to compressor failure, you may have to wait for 2-3 days.”

Opportunities in emerging market: Spotlight on Iraq

Chinese manufacturers are showing increasing interest in Middle East and Africa; however, it is not solely owing to the potential pipeline of projects. The growing importance the countries in the region is placing on energy efficiency has also piqued the interest of Chinese brands, which have become well-versed in navigating increasingly stringent regulations in China. Abraham says that in China, the government has cracked down on the supply chain of components to ensure that products meet certain environmental standards in view of the country’s commitment to the Paris Accord, leading to a spike in cost of products, as companies need to maintain certain standards of production. Sharing his observations on trends in China, Wang adds that the VRF market is also continuing to grow at good rate, and the proportion of VRFs, compared to conventional systems, will increase. Abraham echoes this, saying that in China, VRF systems are being sold in the market like a consumer product and that there are quality training systems for those entering the service industry.

A number of Chinese companies are leveraging this experience to address shifting standards in the region. Wang says: “With the enactment of Saudi Arabia’s new SASO energy efficiency standard, Bahrain and Oman have successively issued energy efficiency regulations similar to SASO. Kuwait has also raised the T4 energy efficiency standard that is expected to be implemented in September 2019.” As customers pay more and more attention to energy saving, Wang says, designers and consultants will also take this aspect into consideration when selecting air-conditioning systems, especially in green projects and government tenders. “The technical threshold of products is the basic requirement,” Wang says. “We are actively responding by the timely launch of related products.”

Wang says that in addition to key markets, such as Saudi Arabia, Chigo is committed towards reinforcing its presence in markets such as Syria, Palestine and, particularly, Iraq. “The political situation in Iraq from 2017 to 2018 has gradually stabilised and reconstruction has started,” he says. Wang adds that although there are challenges in the country, it will not be enough to stall the momentum the Iraqi market is undergoing, adding that the local market is evolving into a promising VRF market. Abraham echoes this, saying that as Iraq continues to develop an increasingly stable government, it will look to provide its citizens with basic services that will require further infrastructure, such as housing. “Those will be good drivers for most of the suppliers,” Abraham says. “If you look at Iraq today, 95% of what is imported is from China, and Iraq is a tough environment in terms of climate, so quality should be at the high end in order to gain the market in Iraq.”

Abraham says that for the most part, the Iraq market provides an even playing field for most suppliers, but that the differentiating factor is the partner of choice. “Local partner distributors’ knowledge in the market and relationships will play an important part in the development,” he says.

Speaking with regard to the goals of Hisense, Abraham says that the company aims to be named one of the top three brands in the next five years in the air conditioning category. The company aims to do this, he says, by offering innovative products, energy-efficient solutions and focusing on customer satisfaction, in addition to ensuring product quality, cooling performance and reduced downtime, all which will help in the company’s efforts to gain further market share. This, he says, is part of a brand’s evolution and part of its unfolding global narrative as a Chinese manufacturer taking on the global market. “It’s a journey,” he says. “You cannot build the Great Wall of China wall in one day.”