Annual Report 2017
Fiscal Year Ended March 31, 2017
Meeting Your Expectations and Earning
Your Trust by Both Solving Problems of
Society and Expanding Our Business
Focusing on the air-conditioning and fluorochemicals business,
Daikin Industries, Ltd. operates in more than 150 countries,
contributing to healthy and comfortable lives through the providing of
air conditioners and a wide range of other products and services.
Constantly refining the atmosphere- and environment-related
technologies that it has developed since its founding,
Daikin strives to both solve problems of society and expand its business.
That is how Daikin Industries’ corporate value is born.
Under the “FUSION 20” strategic management plan started
in fiscal 2017, Daikin Industries is working to meet your expectations
and earn your trust by contributing to the sustainable development
of global society through new value co-created
by bringing together not only internal expertise of our Group
but also external expertise obtained via open innovation.
Contents
Our Group Philosophy/
Process of Value Creation ...................... 1
Financial Highlights .................................. 2
At a Glance ............................................... 3
A Message from the CEO ......................... 4
Interview with the CEO ............................ 6
Review of Operations
Air Conditioning .................................... 10
Chemicals ............................................. 14
Oil Hydraulics ........................................ 16
Defense ................................................. 17
Corporate Governance ........................... 18
Directors, Audit and Supervisory
Board Members, and
Executive Officers ................................ 21
ESG Summary .......................................... 22
CSR (Corporate Social Responsibility) .... 24
Financial Section
Eleven-Year Financial Highlights ............... 32
Financial Review .................................... 34
Consolidated Balance Sheet .................. 42
Consolidated Statement of Income ........ 44
Consolidated Statement of
Comprehensive Income ....................... 45
Consolidated Statement of
Changes in Equity ............................... 45
Consolidated Statement of
Cash Flows .......................................... 46
Notes to Consolidated
Financial Statements ............................ 47
Independent Auditors’ Report ............... 73
Corporate Data ..................................... 74
Forward-Looking Statements
This annual review contains statements regarding the future plans and strategies of Daikin Industries, Ltd. (the Company), as well as the Company’s future performance. These
statements are not statements of past facts but are based on judgments made by the Company on the basis of information known at the time. Therefore, readers should refrain
from drawing conclusions based only on these statements regarding the future performance of the Company. The actual future performance of the Company may be influenced
by economic trends, strong competition in the industrial sectors where it conducts its operations, foreign currency exchange rates, and changes in taxation and other systems. For
these reasons, these forward-looking statements are subject to latent risk and uncertainty.
Our Group Philosophy
1. Create New Value by Anticipating the Future Needs of Customers
2. Contribute to Society with World-Leading Technologies
3. Realize Future Dreams by Maximizing Corporate Value
4. Think and Act Globally
5. Be a Flexible and Dynamic Group
1. Flexible Group Harmony 2. Build Friendly yet Competitive Relations with Our Business Partners to Achieve Mutual Benefit
6. Be a Company that Leads in Applying Environmentally Friendly Practices
7. With Our Relationship with Society in Mind, Take Action and Earn Society’s Trust
1. Be Open, Fair, and Known to Society 2. Make Contributions that Are Unique to Daikin to Local Communities
8. The Pride and Enthusiasm of Each Employee Are the Driving Forces of Our Group
1. The Cumulative Growth of All Group Members Serves as the Foundation for the Group’s Development
2. Pride and Loyalty 3. Passion and Perseverance
9. Be Recognized Worldwide by Optimally Managing the Organization and its Human Resources,
under Our Fast & Flat Management System
1. Participate, Understand, and Act 2. Offer Increased Opportunities to Those who Take on Challenges
3. Demonstrate Our Strength as a Team Composed of Diverse Professionals
10. An Atmosphere of Freedom, Boldness, and “Best Practice, Our Way”
Process of Value Creation
Environmental
Awareness
Air
conditioning as
a part of society’s
infrastructure
enables the creation
of comfortable
lives.
When our
products are used,
a large amount of
electricity is
consumed.
Reducing
the impact on
climate change is
a top-priority issue
for us.
Strategic Assumptions
Strategy: “FUSION 20”
FY2021 Goals
Direction for Group
Development
SWOT
Strengths
• Heat pump technology
• Inverter technology
• Refrigerant control
technology
• Sales and service network
• Development and
production closest to
market
Weaknesses
• Sales skewed towards
main products
(air conditioners)
Opportunities
• Global cooperation on
climate change
(Paris Agreement)
• Setting of sustainable
development goals
(UN SDGs)
Threats
• Changes in de facto
standards for
air conditioning
12 Group Strategies
Basic Approaches
Existing business domains
(AC, Chemicals, Filters)
2. AC in Asia
4. Filters
1. AC in North America
3. Chemicals
New business domains/structure
(Environment/Energy, IAQ/AE Engineering)
5. New businesses to quickly produce results
Heating/Water Heaters, Energy Solutions
6. Strategic business in the long-term Commercial
Refrigeration, Next-generation Refrigerants/Gas,
IAQ/Air Environment (AE) Engineering
Technologies and monozukuri
7. Differentiated technologies/products with the
Technology and Innovation Center
8. Enhanced monozukuri in the AC business
Corporate management
9. Lean and competitive fixed-cost structure
10. Optimal inventory aiming at cash flow
maximization
11. Financial operation standardization and IT
integration
Unique corporate philosophy
12. Enhanced HR based on people-centered
management
Contribute to
solving problems
of customers and
society while
working to achieve
sales of ¥3.0
trillion and an
operating income
margin of 12%
Create new value
and contribute to
the sustainable
development of
society through
our business
An enterprise
group that will
"Co-Create New
Value in the Air
and Environment
Fields"
Corporate Governance, Environment, New Value Creation, Customer Satisfaction, Human Resources, Compliance Risk Management, Risk Management,
CSR Promotion System, Respect for Human Rights, Supply Chain Management, Stakeholder Engagement, Regional Society
1
ESGDAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017 Financial Highlights
Daikin Industries, Ltd. and Consolidated Subsidiaries
Years Ended March 31
Operating Results (for the year):
Net sales
Gross profit
Operating income
Net income attributable to owners of parent
Cash Flows (for the year):
Net cash provided by operating activities
Net cash used in investing activities
Free cash flow (Note)
Net cash used in financing activities
Financial Position (at year-end):
Total assets
Total shareholders’ equity
Per Share Data (yen):
Net income (basic)
Shareholders’ equity
Cash dividends
Cash flow per share
Ratios (%):
Gross profit margin
Operating income margin
Return on shareholders’ equity (ROE)
Shareholders’ equity ratio
Note: Free cash flow = Net cash provided by operating activities + net cash used in investing activities
Millions of Yen
2016
2017
¥2,043,691
¥2,043,969
711,576
217,872
136,987
¥226,186
(105,493)
120,693
(85,422)
730,935
230,769
153,939
¥267,663
(128,823)
138,840
(73,544)
¥2,191,105
¥2,356,149
1,014,409
1,111,636
¥ 469.23
¥ 526.81
3,473.54
3,802.10
120.00
413
130.00
475
34.82%
35.76%
10.66
13.44
46.30
11.29
14.48
47.18
Net Sales, Gross Profit,
and Gross Profit Margin
Operating Income and
Operating Income Margin
(¥ billion)
2,400
1,800
1,200
600
0
(%)
40
30
20
10
0
(¥ billion)
250
200
150
100
50
0
ROE
（%）
15
12
9
6
3
0
(%)
15
12
9
6
3
0
2013 2014 2015
2016 2017
2013 2014 2015 2016 2017
2013 2014 2015 2016 2017
Net Sales
Gross Profit
Gross Profit Margin
Operating Income
Operating Income Margin
2
At a Glance
Percentage of Net Sales E
Air-Conditioning 90.0%
Chemicals 7.7%
Defense 0.8%
Oil Hydraulics 1.5%
Net Sales and Operating Income
Major Products
Description
Air-Conditioning
(¥ billion)
2,000
208.7
1,835.4
1,500
1,000
500
0
(¥ billion)
200
150
100
50
0
2013
2014
2015
2016
2017
• Room air-conditioning systems
• Air purifiers
• Heat-pump hot-water-supply and room-heating
systems
• Packaged air-conditioning systems
• Multiple air-conditioning systems for office
buildings
• Air-conditioning systems for facilities and plants
• Absorption refrigerators
• Freezers
• Water chillers
• Turbo refrigerator equipment
• Air-handling units
• Air filters
• Industrial dust collectors
• Marine-type container refrigeration
Chemicals
(¥ billion)
180
120
60
0
18.3
156.8
(¥ billion)
24
16
8
0
• Fluorocarbons
• Fluoroplastics
• Fluoroelastomers
• Fluoropaints
• Fluoro coating agents
• Semiconductor-etching products
• Water and oil repellent agents
• Pharmaceuticals and intermediates
• Dry air suppliers
Since becoming the first in Japan
to manufacture packaged
air-conditioning systems in 1951,
Daikin has supported comforta-
ble living based on the strengths
of technologies that it has itself
nurtured as the world’s sole
manufacturer to create a full line
of products from refrigerants to
air conditioners.
In 1933, Daikin was the first
in Japan to engage in research
on fluorinated refrigerants. Today,
our activities range from research
and development to commercial-
ization, and we offer a lineup of
1,800 fluorine compounds.
2013
2014
2015
2016
2017
Oil Hydraulics
(¥ billion)
(¥ billion)
40
0
30
20
10
0
2.6
31.5
4
3
2
1
0
2013
2014
2015
2016
2017
• Oil hydraulic pumps
• Oil hydraulic valves
• Cooling equipment and systems
• Inverter controlled pump motors
• Hydrostatic transmissions
• Centralized lubrication units and systems
Daikin’s unique hydraulic
technologies offer outstanding
energy-conservation performance
and are contributing to the
development of industry by
unleashing the potential of
power control.
Defense
(¥ billion)
0.1
15.8
20
15
10
5
0
(¥ billion)
• Warheads for Japan’s Ministry of Defense/
Warhead parts for guided missiles
• Home-use oxygen therapy equipment
0.8
0.6
0.4
0.2
0
2013
2014
2015
2016
2017
Daikin’s superior machining
and quality control technologies
are used in the production of
defense-related products and
other industries where high lev-
els of precision and performance
are critical.
3
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017 For the success of our “FUSION 20” strategic management
plan, we will further strengthen management and steadily
implement policies leading to new growth and development
of the Group.
In fiscal 2017, we were able to achieve a
good performance despite the severe busi-
ness environment. Maintaining that momen-
tum, we will move forward with the
“FUSION 20” priority policies of thor-
oughly strengthening existing
businesses, expanding into new
business domains, and trans-
forming our business structure.
June 2017
Masanori Togawa
President and CEO
A Message from the CEO
4
For the success of our “FUSION 20” strategic management
plan, we will further strengthen management and steadily
implement policies leading to new growth and development
of the Group.
In fiscal 2017, the degree of recovery
seen varied between countries and
regions, but overall the world economy
tended to slow, and the business environ-
ment was severe due to factors such as
the rapid rise of the yen in the first half.
Viewing this kind of difficult business
environment as a good chance to further
strengthen management for the future,
Daikin moved ahead with the fundamen-
tal reinforcement of sales and marketing
capabilities, aggressive introduction of
differentiated products, and reduction of
total costs. As a result, we were able to
greatly raise the level of Group profitabili-
ty, setting new records for both net sales
and income on a consolidated basis for
the fourth consecutive year.
Also in fiscal 2017, we started our
“FUSION 20” (fiscal 2017 to fiscal 2021)
strategic management plan and imple-
mented various policies aimed at new
growth and development of the Group.
In our core business of air conditioning,
with the goal of becoming a top player in
air conditioning in North America, our
subsidiary Goodman Global Group, Inc.
began full-scale operation of the Daikin
Texas Technology Park, which integrates
its four factories and two logistics cen-
ters. This facility introduced cutting-edge
production lines (known as module
lines), shortened the production cycle,
and introduced a system that can
respond immediately to production vol-
ume changes. In addition, the utilization
of new technology such as AI and IoT has
greatly increased production-process
efficiency. The start-up of the new factory
strengthened our production capacity,
cost-competitiveness, and R&D functions,
and it enabled us to introduce innovative
products not previously seen in the North
American market.
In Asia, demand from middle-income
classes continues to expand, and, in
order to build an organization that can
handle the expansion of sales, we are
moving forward at a rapid pace with
sales network improvements, sales
personnel increases, factory expansion,
and new factory construction.
We were also able to further strength-
en our business bases in filter business
and commercial refrigeration business,
two areas we are developing as key
future income sources. In filter business,
we are accelerating efforts to create syn-
ergy now that we have acquired Flanders
Holdings LLC (of the United States),
which is strong in high-performance
filters for the pharmaceutical and food
industries, and Dinar AB (of Sweden),
which manufactures and sells air filters
primarily for Northern Europe, the largest
filter market in Europe. In commercial
refrigeration business, we were able to
further expand the range of our
European business through the acquisi-
tion of Zanotti S.p.A. (of Italy), which is
strong in refrigerators and freezers for
food distribution.
We have also strengthened our global
R&D organization so that we can continue
to provide innovative products and ser-
vices and new value to our customers.
We will enhance our Technology and
Innovation Center (based in Osaka),
which serves as a control tower for global
technology and product development
and which drives our technology strategy
preparation/promotion, differentiated
technology search/development, and
technical staff acquisition/development,
etc. In addition, in order to improve the
AI and IoT technology that we need for
the coming era, we are establishing a
Silicon Valley Technology Office, and we
will implement industry-pioneering open
innovation strategies, such as actively
promoting industry, government, and
academia collaboration aimed at merging
the technology of different fields.
While the world economy can be
expected to expand steadily in fiscal
2018, there is also uncertainty about
the future due to factors such as politi-
cal risk in the United States and Europe
and geopolitical risk in the Middle East
and Asia. In this operating environment,
we will continue to thoroughly
strengthen our core business and work
to expand into new business domains
as specified in our basic strategy
“FUSION 20,” and we will strive for
even greater medium- and long-term
growth and development by making
forward- looking investments based on
careful consideration of priorities.
We look forward to your continuing
support and understanding.
5
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017
Interview with the CEO
For the success of “FUSION 20,” Daikin will
secure short-term profit, while seeking additional
medium- and long-term growth and development
through forward-looking investments with
carefully defined priorities.
“FUSION 20” proclaimed that Daikin will “Co-Create New Value in the Air and Environment Fields with
Wisdom and Passion.” Making an all-out effort in pursuit of a number of strategic themes, Daikin will aim
for sustainable global growth, while also fulfilling its social responsibilities as a company.
Q1
Could you please review Daikin’s
fiscal 2017 performance and the
progress status of the “FUSION 20”
strategic management plan?
Solid results for new growth
and development
Togawa: Fiscal 2017 consolidated net sales
were ¥2,043,969 million and operating
income was ¥230,769 million, so Daikin
achieved a record-setting performance for
the fourth consecutive year and income and
profit increases for the seventh consecutive
year. I believe that we were able to further
strengthen our management practices by
improving our sales and marketing power,
by aggressively introducing high-value-add-
ed products, and by moving forward with
total cost reductions centered in global
procurement.
In our main business of air conditioning,
we expanded sales in many key regions
(Japan, the Americas, China, Asia, and
Europe), and in “FUSION 20”’s priority
regions of the Americas and Asia, sales (on
a local currency basis) grew greatly to 115%
and 113% of the previous year’s levels,
respectively. Along with the strengthening
of existing business, using measures that
included M&A, Daikin was also able to
move forward steadily with another priority
strategy, the building of a base for expan-
sion of our business domains and transfor-
mation of our business structure.
Looking back at fiscal 2017, for our
existing core business and for our new
businesses, I feel it was a year in which
we achieved solid results in preparing for
the new growth and development of the
Group.
A pressing management issue at the
moment is to, first of all, achieve quanti-
tative targets defined for intermediate
points (fiscal 2019 medium-term imple-
mentation plan) so that we can realize
“FUSION 20.” Consequently, for the two
years of fiscal 2018 and 2019, Daikin will
execute forward-looking investments for
the purpose of securing short-term profit
while also building an infrastructure for
the future.
“FUSION 20” Goals and Medium-term Implementation Plan
Goals
(FY2021)
To achieve sales of ¥3.0 trillion and an operating income margin of 12%,
• Enhance existing businesses (AC, Chemicals, Filters)
• Expand new businesses (Heating/Water Heaters, Energy Solutions, Commercial Refrigeration, Next-generation Refrigerants/Gas,
IAQ/Air Environment (AE) Engineering)
Medium-term
implemen tation
plan for FY2019
Net sales
Operating income
Operating income margin
FCF (3-year cumulative)
ROE
Exchange rates
FY2017 Result
FY2018 Plan
FY2019 Target
(¥ billion)
2,044.0
230.8
11.3%
—
14.5%
2,190.0
243.0
11.1%
—
—
2,500.0
270.0
10.8%
+270.0
13.5%
USD1=JPY108 EUR1=JPY119
RMB1=JPY16.1
USD1=JPY108 EUR1=JPY118
RMB1=JPY16.0
USD1=JPY110 EUR1=JPY125
RMB1=JPY17.0
Investment plan
• Actively make investments mainly in North America
and Asia in prioritized order
Investment plan
(3-year cumulative)
FY2017–19
325.0
6
Q2
What are the main policies you
expect to follow for the
forward-looking investments?
Three themes for aggressive
forward-looking investments
Togawa: Daikin’s forward-looking invest-
ments can be divided overall into three
main themes.
The first theme is to “strengthen the
production organization in air-conditioning
business.” To prepare for further business
expansion in the United States, we will
build additional production capacity
(Daikin Texas Technology Park) at
Goodman Global Group, Inc. In Asia,
where there is rapidly increasing demand
from the growing middle-income classes,
we will build a new factory (in Vietnam)
and expand existing factories (in Thailand,
India, and Malaysia).
The second theme is to “strengthen the
global R&D organization.” Daikin’s main
focus here is to further improve underlying
technologies and accelerate the develop-
ment of differentiated products. We will
further enhance the functions of our
Technology and Innovation Center (TIC) in
Osaka, Japan, which serves as the mother
facility for global R&D, and we will establish
a structure in which the TIC is the technolo-
gy and product development control tower
leading our eight development sites world-
wide. In the United States, we are establish-
ing a North American R&D center and a
Silicon Valley Technology Office, and we are
also working to enhance the applied develop-
ment center.
The third theme is to “acquire new
technology, such as AI and IoT.” To do this,
Daikin will accelerate open innovation
through the active use of industry,
government, and academia collaboration.
Trends in Capital Expenditure, Depreciation,
and Research and Development Expenses
Capital Expenditure and Depreciation
Research and Development Expenses
(¥ billion)
120
90
60
30
0
(¥ billion)
60
50
40
30
20
10
0
2013
2014
2015
2016
2017
2018
(plan)
2013
2014
2015
2016
2017
2018
(plan)
Capital Expenditure
Depreciation
7
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017
not only production capacity but also
cost-competitiveness. In addition, the new
manufacturing know-how and production
technology developed by the initiative will
raise the productivity of our Group as a
whole by being put to good use globally at
other new factories now being planned.
Q4
M&A occurred in rapid succession
in fiscal 2017. What were the aims
of that M&A?
Realizing synergy via business
domain expansion
Togawa: In our filter business in fiscal
2017, we acquired the U.S. company
Flanders Holdings LLC and the Swedish
company Dinar AB. The United States is
the world’s largest filter market, and
Europe is the second largest.
Daikin is seeking to create synergy
between these two companies and
American Air Filter Company, Inc. (a sub-
sidiary of O.Y.L. INDUSTRIES BHD, which
was acquired in 2007) and Nippon Muki
Co., Ltd. (acquired in 2009). Our aim is to
become the global No. 1 in filter business
by having these companies introduce new
products that utilize the strengths of each
and by raising cost-competitiveness with
centralized purchasing and a production
system that manufactures products as
close to the market as possible.
In our commercial refrigeration business,
Daikin acquired the Italian company
Zanotti S.p.A. The aim is to expand our
business by making mutual use of the sales
and service networks of Daikin and
Zanotti. There is a high level of environ-
mental awareness in Europe, and custom-
ers are looking for the development of
refrigerators and freezers that place the
smallest possible burden on the environ-
ment. We think that incorporating energy-
saving technology developed by Daikin for
air-conditioning equipment will help
expand our business and also be very
meaningful as a contribution to society.
In order to expand Daikin’s business
domains in the future, we will also pro-
mote fundamental strengthening measures
(M&A and alliances/collaboration with
other companies) for our heating business
and energy solution business, etc.
Q5
Please give us some background and
policy information concerning the
need to move quickly in developing
and acquiring new technology.
Moving forward aggressively with
industry, government, and academia
collaboration as well
Togawa: In our air-conditioning business,
Daikin did global rollouts of base models
developed in Japan, and made adaptations
at development sites in each region to
handle local needs. However, with changes
occurring rapidly in each market, it is criti-
cal for Daikin to create differentiated prod-
ucts at a faster pace, and, therefore, it is a
pressing need to put in place differentiated
technology. At the new Silicon Valley
Technology Office mentioned earlier, we
will introduce the latest technology (AI, IoT,
etc.) at an early stage, and we will also
acquire, bolster, and train technical
Q3
In the United States, Goodman
Global Group, Inc. has begun
full-scale operation of the Daikin
Texas Technology Park. Please give
us an overview.
A productivity increase by approxi-
mately 50% over the current level
Togawa: At the Daikin Texas Technology
Park, we have introduced a new produc-
tion line, called the “Module Line,” which
enables us to flexibly handle demand fluc-
tuations. This line has brought together
the best of today’s state-of-the-art produc-
tion technology, including IoT technology
and manufacturing know-how accumulat-
ed by our Group at production sites world-
wide. By the final fiscal year of “FUSION
20,” initiatives such as this are expected to
increase productivity by about 50% over
the current level and also strengthen
8
will intensify its efforts to reduce emissions,
with a CO2 emission reduction target of
60 million tons for fiscal 2021.
Daikin supports the United Nations Global
Compact, which sets forth 10 principles
concerning the four areas of human rights,
labor, the environment, and anti-corruption.
As we expand our business globally, Daikin
will, of course, act in accordance with the
laws and ordinances of each country as well
as international norms, and we will also
maintain high levels of transparency,
soundness, and ethics, with the value
chain as a whole taken into account.
In addition, at Daikin, the identification
of concerns and expectations via a dialogue
with stakeholders (i.e., stakeholder
engagement) is considered as an important
foundation for CSR, and we put into practice
management that contributes to the
development of all parties involved
through symbiosis with each region.
Using atmosphere- and environ-
ment-related technology to both solve
problems of society and expand our busi-
ness, Daikin will contribute to the sustainable
development of global society. We hope
you will look forward to our future progress
under “FUSION 20” as we will work to cre-
ate new value for the atmosphere and the
natural environment.
June 2017
Masanori Togawa
President and CEO
personnel in various fields, including
leading-edge fields essential for the
coming era.
In addition, in order to lead the industry
with an open innovation strategy, we
believe that Daikin should move quickly in
acquiring new technology by aggressively
promoting comprehensive alliances with
universities possessing advanced knowl-
edge and by collaborating with leading-
edge AI and IoT companies, new business
ventures, and the world’s top-class
research institutions.
In view of its favorable performance, in
fiscal 2017, Daikin paid a ¥60 interim divi-
dend and a ¥70 final dividend for an annu-
al total of ¥130 per share, which is ¥10
higher than in the previous fiscal year. We
plan to pay a total dividend of ¥130 per
share for fiscal 2018 (a ¥65 interim divi-
dend and a ¥65 final dividend).
Under a policy of paying dividends on
a steady and continuing basis, Daikin will
work to maintain its consolidated ratio of
dividends on equity (DOE) at a level of
3.0%, while also seeking to further increase
its consolidated dividend payout ratio.
Q6
What are your thoughts on returns
to shareholders?
Basic policy of using both dividends
and enterprise value increases for
returns to shareholders
Togawa: Under “FUSION 20,” Daikin will
further strengthen its position in its core
business, and it will concentrate manage-
ment resources in clearly defined priority
areas, such as boldly taking up the
challenge of entering new businesses.
For future growth and development, there
are many themes that we will work on, and
in fiscal 2018 we are planning capital
investment of ¥100 billion and R&D
expenses of ¥57 billion. For total investment
(capital investment and loans and other
investments) over the three years from fiscal
2017 to 2019, the initial plan was ¥325
billion. We expect to exceed that number,
but we will also continue to thoroughly
strengthen our financial position with
measures such as reducing interest-bearing
liabilities and increasing the efficiency of
working capital. Through this combination
of offense and defense, Daikin will work
both to achieve “FUSION 20” goals and
to further enhance its enterprise value and
returns to shareholders.
Q7
Please tell us your thoughts on
CSR and give us a message for
stakeholders.
Contribute to the sustainable
development of society through
environmental protection,
compliance, and symbiosis with
regional societies
Togawa: Daikin’s core business of air
conditioning is already indispensable to
society’s infrastructure. On the other
hand, we are also aware that restraining
the impact on global warming by reducing
air-conditioning power consumption is the
social issue that we should give the most
attention. We are promoting the spread
of the use of air conditioners utilizing R32
refrigerant, which has a lower impact on
global warming than other refrigerants,
and we are also working to expand global
sales of inverter air conditioners, which
have higher energy conservation perfor-
mance. Combined, these initiatives suc-
ceeded in reducing fiscal 2017 CO2
emissions by approximately 45 million
tons. Throughout the world, and especially
in emerging countries, the use of air
conditioners will increase, but Daikin
9
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017
Review of Operations
Air Conditioning
Current
Record high results on global sales expansion
despite negative impact from the strong yen
Net sales in the air-conditioning equipment business rose slightly during fiscal 2017 from the
previous fiscal year, with expanded sales in major regions offsetting the negative impact
from the strong yen.
Japan
Americas
Sales in Japan rose 4% year on year
Sales in the Americas rose 3% year
amid increased industry demand for
on year. In a favorable business climate
both residential and commercial units
supported by firm consumer spending,
for replacements and upgrades to more
Daikin strengthened its sales network,
energy-efficient systems, as well as the
and achieved year-on-year gains in unit
heat wave in western Japan.
sales volume and market share for its
Daikin achieved record high
mainstay unitary products, both high-
revenue and earnings on efforts
volume zone and high-efficiency units.
to expand sales of high-value-
In the growing ductless market, Daikin
added products, including the
strengthened relationships with architec-
residential Urusara 7 model and
tural firms and contractors, expanding
commercial FIVE STAR ZEAS sys-
sales of new VRV products for the high-
tem using the R32 refrigerant, as
end, residential-use market. Sales of
well as variable refrigerant volume
applied units (commercial-use large-scale
(VRV) units for buildings in cold
air conditioners) also rose from the previ-
regions.
ous fiscal year on continued efforts to
strengthen the sales and service network.
Expanded residential unitary
lineup of high-efficiency
products with inverters
10
Expanded sales of Urusara 7 products with excellent energy-saving and environmental performance to
differentiate from competitors and provide high added value
Air Conditioning
China
Sales in China declined 5% from the
previous fiscal year, but operating
income rose due to cost reduction
efforts. In residential-use air condition-
ers, Daikin leveraged the solutions and
construction capabilities of its retail/con-
sumer-oriented PROSHOPs to expand
sales in the mid- to high-end market,
mainly the “New Life Multi Series” resi-
dential multi-air units designed to meet
varied customer lifestyles. In the com-
mercial-use market, Daikin enhanced its
solutions capabilities with a new VRV
model, and appealed to architectural
firms with further built-in specifications.
Sales of applied units increased despite
the slowdown in large-scale real estate
investment, mainly for small and mid-
sized projects due to an expanded prod-
Daikin PROSHOP specialist retailers provide one-stop solutions, including design,
installation, and after-services.
Expanding sales in the growing market of Asia
uct lineup, and strengthened service
heater business, sales of heat pump-type
was particularly high in Vietnam, India,
business.
Europe
water heating units rose in Germany and
Indonesia, and Thailand for both residen-
Italy, with increased sales of combustion
tial and commercial air conditioners. In
heaters (gas boilers) in Turkey.
Australia, sales expanded for high-end,
residential-use VRV units.
Sales in Europe were on a par with the
previous fiscal year. In residential-use air
Asia/Oceania
conditioners, sales of high-value-added
Sales in the Asia/Oceania region were on
products using the R32 refrigerant
a par with the previous fiscal year. In resi-
increased amid demand growth since the
dential-use air conditioners, sales were
2015 heat wave. In the commercial-use
firm for inverter air conditioners with
market, unit sales volume increased as a
exceptional energy efficiency. In the com-
result of efforts to strengthen sales capa-
mercial-use market, Daikin gained posi-
bilities by country, and capturing renewal
tive results from enhanced efforts for
demand with the launch of new VRV
built-in specifications in VRVs, and devel-
products to meet regional needs. In the
opment of sales offices. Sales growth
11
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017 Air Conditioning
Future
Proactive up-front investments mainly in North
America and Asia to drive further business expansion
Daikin anticipates revenue and earnings gains in fiscal 2018 as a result of global sales
expansion, comprehensive cost reductions, and sales price strategies, offsetting a substantial
negative impact from higher material costs.
Japan
in the Tokyo metropolitan area ahead
Daikin will work to increase earnings
of the 2020 Tokyo Olympics, and
through expanded sales of high-value-
increase its market share.
added products and comprehensive
pricing strategies, as well as fundamen-
Americas
tally strengthening sales capabilities by
With stable market growth expected as
market and sales channel. For residen-
a result of firm consumer spending and
tial-use air conditioners, Daikin will
capital investment, Daikin will accelerate
increase sales of its uniquely differentiat-
measures to strengthen competitiveness
ed products, such as the Urusara 7 and
and expand its business, including
multi-air conditioners that offer superior
enhancing cost-competitiveness with
design. In the commercial market,
the start of full-fledged operations of
Daikin will work to expand sales of
its new production plan, developing
high-value-added systems, and establish
region-specific products around expanded
eco-related businesses such as inspection
R&D functions, and building its own
services for compliance with CFC emissions
wholesale base.
regulations. For applied units, Daikin will
seek to capture redevelopment demand
Shifting production into full gear at our new U.S.
plant to aim for further business expansion
12
Building a recycling-oriented business that goes beyond simple device sales
Air Conditioning
China
Daikin will expand its network of retail
and consumer-oriented shops, including
the PROSHOPs that handle residential
multi-air conditioners, from urban
areas to regional cities, and accelerate
community-oriented sales activities.
For residential-use air conditioners,
Daikin will expand its “New Life Multi
Series” lineup, and implement new
measures such as opening interactive
showrooms. In the commercial market,
Daikin will launch new energy-efficient
variable refrigerant volume (VRV) units,
and new types of applied units. Further,
Daikin aims to increase profits by
increasing the ratio of units made
in-house, expanding the number of units
procured locally, accelerating cost reduction
efforts, and shifting to integrated develop-
Enhancing our ability to supply products to meet increasing middle-class demand
Expanding our business to include commercial freezers and refrigerators
ment, production, sales, and service.
Daikin will seek to maximize synergistic
and launch new residential multi-air
benefits with the recently acquired firm
units to meet the needs of middle-class
Europe
Zanotti S.p.A. of Italy.
With demand for air conditioning
expected to expand at a moderate pace
Asia/Oceania
consumers in Vietnam and Thailand.
In the commercial market, Daikin will
launch differentiated products such as
on the back of firm consumer spending,
With demand for air conditioning
cooling VRV units in India. For applied
Daikin will work to increase sales by
expected to expand significantly among
units, Daikin will establish a foundation
launching differentiated products utilizing
the growing middle-income classes,
for business expansion by strengthening
the R32 refrigerant, and strengthening its
Daikin will continue to strengthen its
local production structures, enhancing
sales network. In the heater business,
national sales networks and increase the
product lineups, and developing service
Daikin will introduce new types of highly
number of sales personnel. In India and
businesses.
energy-efficient, heat pump-type water
Thailand, Daikin will enhance its supply
heating units, and expand sales of com-
capacity to increase sales. In terms of
bustion heaters (gas boilers). In the com-
products, Daikin will strengthen its
mercial freezer and refrigerator business,
lineup of air-conditioning inverters,
13
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017 Chemicals
Current
Sales expansion in growth markets
and comprehensive cost reductions
Net sales in the Chemicals business during fiscal 2017 declined 3.4% from the previous fiscal year.
Despite efforts to expand sales in well-performing sectors, such as fluoroplastics resins for use in
semiconductors, fluoroelastomers for automotive applications, and anti-smudge surface coating
agents for smartphone touch screens, results were adversely affected by price pressure from com-
petitors in China and the United States, and the negative impact from the strong yen.
In the fluorocarbon gas business, overall
In the fluoroelastomer business, despite
sales of refrigerant gas rose from the
a recovery in sales for automotive applica-
previous fiscal year on higher sales to
tions, mainly in Japan and China, overall
the after-sales market in the United
sales declined as a result of the considerable
States.
negative impact from the strong yen.
In the fluoroplastics resin business,
In the chemical products business,
Daikin captured semiconductor-related
sales of the OPTOOL™ anti-smudge
demand in Japan and the rest of Asia,
surface coating agent for smartphones
but overall sales declined as a result of
were favorable as Daikin captured positive
intensifying competition in the U.S. LAN
demand in China, but overall sales
cable market and downward price pres-
declined as a result of a slowdown in
sure on commodities in China.
water and oil repellent agents.
Anti-smudge surface coating agent for smartphones
14
Chemicals
Future
Revenue and earnings growth expected from
the strengthening of sales capacity, new product
launches, and application development
Daikin anticipates a sales increase of 5% in its Chemicals business in fiscal 2018.
Although orders from major customers
specifications with the aim of increasing
for the OPTOOL™ anti-smudge surface
market share.
coating agent are expected to decline,
Concentrating on the United States,
this will be offset by expanded sales of
the largest market for air conditioning,
fluoroplastics resin in the continually
Daikin will focus on after-sales businesses
favorable semiconductor market, a
such as the recovery and recycling of
regaining of market share with the
refrigerant gas, and establish a recycling-
launch of new water and oil repellents,
oriented business encompassing the life
and application development tailored to
cycle of refrigerants and air-conditioning
customer needs.
equipment.
In the semiconductor market in
Further, in Asian markets where demand
particular, Daikin will capture growing
for fluorochemicals products is growing,
demand from the utilization of the
Daikin will conduct detailed marketing and
Internet of Things (IoT), strengthen its
sales activities by industry sector.
supply capacity, and promote built-in
Highly chemically resistant fluoroplastics products are essential for semiconductor manufacturing equipment.
15
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017
Oil Hydraulics
Current
Steady sales and record earnings amid sluggish
demand in Japan and China
The oil hydraulics business comprises a
Net sales in the oil hydraulics business
range of oil hydraulic equipment to sup-
declined in fiscal 2017 from the previous
port the smooth movement of various
fiscal year. Sales of oil hydraulic equip-
types of machinery, contributing to
ment for construction equipment and
energy efficiency and electricity savings.
vehicles increased to major customers in
Daikin units are used mainly in industrial
Japan and the United States, but perfor-
machinery such as factory processing
mance was significantly impacted by a
equipment, construction equipment such
slowdown in demand for products for
as power shovels, and small vehicles such
industrial equipment in Japan and China.
as tractors.
Oil cooling units adopting
energy-saving technology
Future
Strengthen the business foundation in the
United States and Europe, and accelerate global
business expansion
During fiscal 2018, Daikin will focus on
and operation (MRO) and hydrostatic
launching new products and strengthening
transmissions (HST) businesses, and
solutions-oriented sales capabilities in
accelerate expansion of both businesses.
order to further strengthen its position
Europe is also being positioned as a
in the Japanese market for oil hydraulic
priority market, with comprehensive
equipment used in industrial machinery.
marketing activities conducted in a rapid
Outside Japan, mainly in the United
manner to facilitate full-scale market
States, Daikin will strengthen the foun-
entry. Daikin will also further strengthen
dations for the maintenance, repair,
its service structure in Japan and overseas.
Hydraulic devices to drive
construction machinery
and automobiles
16
Defense
Current
Steady sales of home-use oxygen therapy
equipment, mainly in Japan
Daikin designs and manufactures
synchronizers and oxygen concentrators,
products for Japan’s Ministry of Defense
products that require the highest levels
based on the defense budget, including
of precision, performance, functionality,
various types of artillery shells, warheads,
and quality.
and fuses, as well as aircraft parts. These
Net sales in this segment declined
precision processing technologies are also
from the previous fiscal year. Sales of
leveraged for private-sector purposes,
home-use oxygen therapy equipment
including the manufacture and sale of
increased in Japan, but sales of practice
home-use oxygen therapy equipment.
ammunition to the Ministry of Defense
Daikin provides patients suffering from
declined.
chronic respiratory failure with respiration
Future
Accelerate business expansion in
the private sector
With the Japanese government scaling
fiscal year. In the Chinese market,
back orders for practice ammunition,
Daikin will collaborate with local firms
Daikin will accelerate its shift to the pri-
to enhance its sales capabilities, and
vate sector. In Japan, Daikin will expand
strengthen product solutions and
sales of the new oxygen concentrator
cost-competitiveness, including the
launched at the end of the previous
possibility of supplying OEM products.
17
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017 Corporate Governance
Basic Policy of Corporate Governance
Through its corporate governance, the Daikin Group works to
raise corporate value by carrying out its decision making with
foresight and by executing business with increasingly greater
speed, transparency, and soundness, all in line with Group man-
agement challenges and the changing business environment.
Aiming for management with even greater speed, soundness,
and transparency, we will continue to boost corporate value by
seeking and implementing new ways to achieve optimal corpo-
rate governance as we undertake best practices in all facets and
at all levels of the Daikin Group.
Regarding Japan’s Corporate Governance Code, Daikin has
already implemented the principles of “enhancing information
disclosure,” “making effective use of independent external
directors,” and “the policy of having constructive dialogue with
shareholders.” Going forward, Daikin will continue to enhance
these initiatives.
Management and Operational Execution Systems
Rather than adopting a U.S.-style “committees system” that
completely separates decision making from operational execu-
tion, the Daikin Group has adopted an “integrated manage-
ment” system, in view of the special characteristics of the Group’s
business, judging that this is a more-effective means of accelerat-
ing decision making and operational execution. The “integrated
management” system is a system that calls for directors to bear
responsibility for management duties as well as for operational
execution duties through speedy, strategic decision making and
sound, appropriate supervision and guidance. Directors also bear
responsibility for the execution and completion of their decisions
by carrying out their decision making, business execution, and
supervision/guidance in an “integrated” manner.
Daikin also appoints multiple external boards of directors
who monitor the Group’s business execution status from an
independent standpoint and gives appropriate guidance and
advice on decision making, and are responsible for supporting
the “integrated management” system in terms of transparency
and sound management. In addition, the Group has introduced
an “executive officer system” to accelerate the speed of execu-
tion based on autonomous judgments and directions in units
handling each region, division, and function.
The Group appoints directors, while giving emphasis to the
diversity of directors’ backgrounds regarding characteristics such
as nationality, gender, and career history.
As of the end of June 2017, there were 11 directors (including
one female and one non-Japanese director), ensuring practical
and prompt debate through a smaller number.
Daikin’s Board of Directors includes three external directors (as
of June 2017), conditional upon their being free of any conflict
of interest.
Daikin seeks to recruit external directors who can provide
supervision and advice from a sophisticated perspective on a
broad range of issues, based on their abundant experience and
deep insight. Accordingly, we nominate external directors with
primarily director and similar experiences in listed companies.
18
None of Daikin’s external directors have five or more concurrent
posts.
To ensure that the external directors can effectively contribute
to Daikin’s corporate governance system, assistants to the exter-
nal directors are assigned in the Management Planning Office.
They strive to provide the external directors with Daikin-related
information, early notice of Board of Directors meetings, and
prior notice of Board of Directors meeting agenda items, as well
as implementing prior explanations of particularly important
agenda items. In addition, when external directors are unable to
attend a Board of Directors meeting, the assistants provide them
with related materials and subsequent explanations of meeting
proceedings.
Audit System
Daikin employs an Audit and Supervisory Board System. As of
June 2017, Daikin’s four Audit and Supervisory Board members
included two external Audit and Supervisory Board members.
The principal nomination criteria for external Audit and
Supervisory Board members are the same as those for external
directors and include independence from the Company in terms
of not having a relationship of interest with the Company.
The Audit and Supervisory Board members attend meetings of
the Board of Directors, as well as other important meetings, and
receive reports. In addition, they are able to express diverse opin-
ions.
To ensure effective audit functions, the Audit and Supervisory
Board receives reports on important issues related to manage-
ment and performance when necessary and also investigates
relevant units, confirms approval of documents, and regularly
exchanges opinions with representative directors, executive offi-
cers, and the independent auditors. In addition, the Audit and
Supervisory Board Member Office has been established to assist
the auditors, with the staff performing their duties under the
orders and direction of the Audit and Supervisory Board mem-
bers. The opinions of the Audit and Supervisory Board are
respected with regard to personnel transfers, work evaluations,
and other matters pertaining to Audit and Supervisory Board
Member Office staff members.
Accounting
Auditor
Board of
Corporate
Auditors
Corporate
Auditors
Group
Auditors
Meeting
Shareholders’ Meeting
Audit
Appointment, dismissal
Board of Directors
Internal Control Committee,
Corporate Ethics and Risk
Management Committee,
Information Disclosure
Committee, CSR Committee
Appointment,
supervision
HRM Advisory Committee
Compensation Advisory Committee
Group Steering
Meeting
Group
Management
Meeting
Executive
Officers Meeting
Executive Officers
(The rest is abbreviated)
External Director/Audit and Supervisory Board Members’ Principal Activities
Name
Position
Principal Activities
Chiyono Terada
Tatsuo Kawada
Akiji Makino
Ryu Yano
Toru Nagashima
External Director Ms. Terada attended 16 of the 16 Board of Directors meetings held during the fiscal year. Based on her abundant experi-
ence and deep insight as a corporate manager, she provides appropriate supervision of Company management from an
independent perspective; advises management from the consumers’ point of view, including the importance of the
Company’s corporate brand; and makes proactive proposals for measures to further promote achievements of female
employees.
Mr. Kawada attended 12 of the 13 Board of Directors meetings held during the fiscal year. Based on his abundant experi-
ence in management and high-level insight, he is able to provide appropriate supervision of management from an inde-
pendent perspective and actively provides suggestions, from his broad and sophisticated perspective regarding changes in
business models, innovation, and other matters.
Mr. Makino attended 13 of the 13 Board of Directors meetings held during the fiscal year. Based on his abundant experi-
ence in management and high-level insight, he is able to provide appropriate supervision of the Company’s management
from an independent perspective and actively provides suggestions from his broad and sophisticated perspective regarding
matters in the fields of energy, the natural environment, and service businesses.
External Audit
and Supervisory
Board Member
Mr. Yano attended 12 of the 16 Board of Directors meetings held during the fiscal year as well as 13 of the 15 Board of
Auditors meetings held. Based on his abundant experience and deep insight as a corporate manager, he accurately audits
the supervision of the conduct of management by the directors. From his broad and advanced perspective developed over
many years of experience overseas, he makes necessary statements in a timely fashion.
Mr. Nagashima attended 13 of the 13 Board of Directors meetings held and 10 of the 10 Board of Auditors meetings held
during the fiscal year. Based on his abundant experience in management and high-level insight, he makes necessary state-
ments in a timely fashion based especially on his broad and sophisticated experience in the management of global compa-
nies and manufacturing enterprises.
Reasons for Election as External Director/Audit and Supervisory Board Member
Name
Position
Reasons for Election
Chiyono Terada
External Director Ms. Terada has abundant experience and deep insight as a corporate manager, and, drawing on her background, she
Tatsuo Kawada
Akiji Makino
Ryu Yano
Toru Nagashima
provides appropriate supervision from an independent perspective. She has an excellent understanding of the consumers’
perspective, including the importance of the corporate brand, and makes proactive proposals for measures to further
promote achievements of female employees. The Company management wants Ms. Terada to continue to contribute
to the Company’s corporate value looking forward and, therefore, was elected as external director.
Mr. Kawada has served as representative director of SEIREN CO., LTD., and has abundant experience and deep insight as a
corporate manager. His experience includes changing his company’s business model, innovation creation, and reforming
corporate cultures. The Company management wants Mr. Kawada to provide appropriate supervision of the conduct of
management from an independent perspective, and, by offering proposals regarding management from his broad and
high-level perspective, contribute to increasing Daikin’s corporate value. He has, therefore, been elected as external
director.
Mr. Makino has served as representative director of Iwatani Corporation and has abundant experience and deep insight as
a corporate manager, especially in the fields of energy and the natural environment as well as the services business. The
Company management wants Mr. Makino to draw on his background and experience to provide appropriate supervision
of the conduct of management from an independent point of view, and, offering proposals regarding management from
his broad and high-level perspective, contribute to increasing Daikin’s corporate value. He has, therefore, been elected as
external director.
External Audit
and Supervisory
Board Member
Mr. Yano has served as representative director at Sumitomo Forestry Co., Ltd., and has abundant experience and deep
insight as a corporate manager, particularly in the field of expanding business operations overseas. The Company manage-
ment wants Mr. Yano to draw on his experience to supervise overall management and to significantly upgrade the
appropriateness of the audit function. He has, therefore, been elected as external auditor.
Mr. Nagashima has served as representative director at TEIJIN LIMITED, and has abundant experience and deep insight
as a corporate manager, particularly in the field of implementing paradigm shifts from manufacturing to services. The
Company management wants Mr. Nagashima to draw on his experience to significantly upgrade the appropriateness of
the audit function. He has, therefore, been elected as external auditor.
Note: All of the Company’s external directors and external auditors meet the qualifications for independence established by the Tokyo Stock Exchange.
Agile Management Support System
Daikin has three main management bodies—the Board of
Directors, the Group Steering Meeting, and the Executive
Officers Meeting—which minimize the number of directors and
ensures speedy decision making based on the virtual discussion.
The Board of Directors is the decision-making institution for all
matters related to the Group as a whole that are stipulated by
laws and regulations and by the articles of incorporation, and it
also performs supervision and guidance to ensure sound and
appropriate operational execution. The Board of Directors appro-
priately makes decisions based on open and active discussions
and performs an effective role in increasing corporate value over
the medium-to-long term. They also perform self-evaluation on
the effectiveness of the Board of Directors on a regular basis. In
fiscal 2017, it met 16 times, and the average attendance rates of
external directors and external Audit and Supervisory Board
members at those meetings were 98% and 88%, respectively.
19
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017 The top deliberative unit in the Group’s management system is
the Group Steering Meeting. This unit determines the direction
of important management policies and strategies in a rapid and
timely manner, thereby accelerating the resolution of issues.
In fiscal 2017, it met 12 times.
In principle, all of the Executive Officers attend the Executive
Officers Meeting, and it met 11 times in fiscal 2017.
In addition, to respect and protect the interests of diverse
stakeholders other than stockholders, Daikin has, based on the
Board of Directors, established its Internal Control Committee,
Corporate Ethics and Risk Management Committee, Information
Disclosure Committee, and CSR Committee.
Corporate Officer Remuneration, Etc.
To ensure the transparent management of its corporate officer
personnel and remuneration processes, Daikin has established
the HRM Advisory Committee and the Compensation Advisory
Committee. These committees engage in discussions and delib-
erations regarding issues including corporate officer nomination
criteria, corporate officer candidates, and remuneration. As of
the end of June 2017, the committees consist of five members,
including three external directors, one in-house director, and one
executive officer, with the committee chairman being chosen
from the external directors.
The remuneration of directors and Audit and Supervisory
Board members is determined so as to fall within the aggregate
remuneration ceiling for directors and Audit and Supervisory
Board members as set by a resolution at the general sharehold-
ers’ meeting. Based on a report from the Compensation
Advisory Committee, the directors’ remuneration is determined
by a resolution of the Board of Directors, while the Audit and
Supervisory Board members’ remuneration is determined by a
resolution of the Audit and Supervisory Board.
Directors’ remuneration consists of “fixed compensation,”
“performance-linked compensation” that reflects the Group’s
short-term performance (net sales and operating income) and
each director’s job responsibilities, and “stock options” that
reflect the Group’s medium- to long-term performance. The
remuneration of external directors and corporate auditors
consists of “fixed compensation” only.
Compensation levels are determined based on consideration
of Daikin’s performance and remuneration levels compared to
those of other leading manufacturing companies in Japan after
analyzing and comparing data from an outside specialized insti-
tution on the remuneration of corporate officers active in
approximately 200 Japanese companies listed on the First
Section of the Tokyo Stock Exchange. In addition, responding to
shareholders’ expectations, in order to maintain the motivation
of in-house directors at a high level continuously over the
medium-to-long term towards enhancing the Daikin Group’s
performance and corporate value, the performance-linked
compensation of such directors is given at a somewhat higher
ratio than average to ensure the incentive is sufficient.
20
11
2
7
Position
Directors
(excluding external
directors)
Audit and
Supervisory Board
Members
(excluding external
directors)
Total Compensation for Directors
and Audit and Supervisory Board Members (Fiscal 2017)
Total
Compensation
(Millions of yen)
Total Compensation by Type (Millions of yen)
Basic
Stock
Options
Bonus
Number of
Individuals
1,220
750
120
350
66
66
70
—
—
—
—
External Directors
70
Corporate Officers Receiving Total Compensation
and Other Exceeding ¥100 Million (Fiscal 2017)
Total
Consolidated
Compensation
(Millions
of yen)
380
250
176
121
131
108
Position
Company
Name
Director
Director
Director
Chair-
man
Daikin
Industries, Ltd.
Daikin
Industries, Ltd.
Daikin
Industries, Ltd.
Consolidated
Subsidiary, Daikin
(China) Investment
Co., Ltd.
Director
Daikin
Industries, Ltd.
Director
Director
Director
Consolidated
Subsidiary,
Daikin Europe N.V.
Daikin
Industries, Ltd.
Daikin
Industries, Ltd.
Total Consolidated Compensation
by Type (Millions of yen)
Basic
Stock
Options
245
153
108
10
7
66
79
65
26
26
13
—
13
—
13
11
Bonus
107
70
43
—
34
—
38
31
Name
Noriyuki
Inoue
Masanori
Togawa
Ken
Tayano
Masatsugu
Minaka
Jiro Tomita
Takashi
Matsuzaki
Total Compensation and Other for Independent Accounting
Auditors (Fiscal 2017)
Audit expense
209 (Millions of yen)
Group Governance
To meet governance needs on a Group basis including M&A-
related Group companies, Daikin holds meetings of the Group
Steering Meeting. By working to thoroughly ensure that all Group
units share the Group’s important management policies and basic
strategy and by endeavoring to promote and strengthen support
for the resolutions of challenges of Group companies, the Group
Steering Meeting seeks to make the Group undertake corporate
activities based on unified objectives. Principal Group companies
appoint Group auditors to participate in Group Auditors’ meetings,
which seek to strengthen Groupwide auditing and auditing func-
tions by undertaking activities to strengthen the operation of those
functions.
To further strengthen corporate governance and Group man-
agement as a multinational company, Daikin has appointed a
Chief Global Group Officer, who endeavors to further improve
the Group’s cohesiveness.
Directors, Audit and Supervisory Board Members, and Executive Officers (As of June 29, 2017)
Position(s)
Name
Responsibilities & Principal Jobs
Chairman of the Board
and Chief Global Group Officer
Noriyuki Inoue
President and CEO,
Member of the Board
Masanori Togawa
Chairman of Internal Control Committee
Member of the Board (external)
Chiyono Terada
President of Art Corporation
Member of the Board (external)
Tatsuo Kawada
Chairman and CEO of SEIREN CO., LTD.
Member of the Board (external)
Akiji Makino
Chairman and CEO at Iwatani Corporation
Member of the Board
and Senior Executive Officer
Member of the Board
and Senior Executive Officer
Member of the Board
and Senior Executive Officer
Member of the Board
and Senior Executive Officer
Member of the Board
and Senior Executive Officer
Member of the Board
(non-resident)
Ken Tayano
Responsible for Domestic Air-Conditioning Business, Representative of China Region, Chairman and President
of Daikin (China) Investment Co., Ltd., Chairman of Daikin Fluorochemicals (China) Co., Ltd.,
and Member of Global Air-Conditioning Committee
Masatsugu Minaka
Representative of Air-Conditioning Operations in the Europe/Middle East/Africa Region, President of Daikin Europe
N.V., and Member of Global Air-Conditioning Committee
Jiro Tomita
Responsible for Global Operations Division, Manufacturing Technology and Promoting PD Alliances
Takashi Matsuzaki
Responsible for North America Research and Development and Applied R&D Center and General Manager of Silicon
Valley Technology Office
Koichi Takahashi
Responsible for Accounting, Finance, Budget Operations and IT Development, General Manager of the Finance and
Accounting Division
Yuan Fang
Regional General Manager of Air-Conditioning Business in emerging nations in the ASEAN and Oceania Regions of
Global Operations Division, Vice Chairman and Vice President of Daikin (China) Investment Co., Ltd., Chairman of
Daikin Airconditioning (Hong Kong) Limited
Audit and Supervisory Board Member
(external)
Audit and Supervisory Board Member
(external)
Ryu Yano
Chairman of the Board of Sumitomo Forestry Co., Ltd.
Toru Nagashima
Advisor of TEIJIN LIMITED
Audit and Supervisory Board Member
Kenji Fukunaga
Audit and Supervisory Board Member Kosei Uematsu
Senior Executive Officer
Junichi Sato
Representative of Air-Conditioning Operations in Central America and South America (including American Air Filter)
and Member of Global Air-Conditioning Committee
Senior Executive Officer
Senior Executive Officer
Senior Executive Officer
Yukio Hayashi
Responsible for Liaison Business and Defense Systems Business and General Manager of Tokyo Office
Shigeki Hagiwara
Responsible for Applied Solution Business, Service Operations and Training
Yoshikazu Tayama
General Manager of Budget and Administration Group, Finance and Accounting Division
Senior Executive Officer
Masayuki Moriyama
Senior Executive Officer
Yoshihiro Mineno
Responsible for Applied Solution Business in China, ASEAN and Oceania Regions, Director and Vice President of
Daikin (China) Investment Co., Ltd., COO of McQuay China
General Manager of Global Operations Division, Director (non-resident) of Goodman Global Group, Inc., Director of
Daikin Holdings (Houston), Inc.
Senior Executive Officer
Senior Executive Officer
Satoshi Funada
General Manager of Air-Conditioning Sales Division
Yasushi Yamada
Responsible for Safety
Executive Officer
Katsuyuki Sawai
Executive Officer
Hitoshi Jinno
Responsible for Corporate Communication, Human Resources, and General Affairs and General Manager
of Shiga Plant
Responsible for PL/Quality, Air-Conditioning/Applied/Refrigeration, Responsible for Alliance Promotion with Gree
Electric Appliances Inc., General Manager of Air-Conditioning Manufacturing Division, and General Manager of
Sakai Plant
Executive Officer
Executive Officer
Executive Officer
Executive Officer
Kota Miyazumi
Responsible for Corporate Planning, General Manager of Marketing Research Division, Director of Planning Group in
Marketing Research Division
Tsutomu Morimoto
Responsible for Executive Secretarial Department, Goodman Group Business
Yuji Yoneda
Responsible for Air-Conditioning Research and Development (including Applied Solution Business and Refrigeration
Business) and General Manager of Technology and Innovation Center
Masaki Saji
General Manager of Human Resources Division and Department Manager of Diversity Promotion Group
Executive Officer
Masafumi Yamamoto
Executive Officer
Makio Takeuchi
Responsible for CSR, Global Environment Affairs, Corporate Ethics, Compliance, Legal Affairs, General Manager of
the Legal Affairs, Compliance and Intellectual Property Center, Chairman of CSR Committee, Chairman of Corporate
Ethics and Risk Management Committee and Chairman of Information Disclosure Committee
Responsible for Global Procurement, Deputy Manager of Air-Conditioning Manufacturing Division (Research and
Development), Responsible for Refrigeration Division, Research and Development, Co-Creation Projects member of
Technology and Innovation Center
Executive Officer
Executive Officer
Yoshiyuki Hiraga
Responsible for Chemical Business and Chemical Environment/Safety
Toshio Ashida
General Manager of Corporate Planning
21
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017 ESG Summary
The Daikin Group’s core business of air conditioning is essential for economic development and a comfortable lifestyle, and
demand for air conditioning continues to expand in developing nations and around the world. As an industry-leading spe-
cialized manufacturer, the Daikin Group sets CSR priority themes for the sustainable development of society. By evaluating
the overall impact on society, Daikin provides people around the world with comfortable and rich lifestyles, while working
to limit environmental impact by leveraging its accumulated technologies.
Materiality
In fiscal 2016, along with the establishment of a strategic management plan known as “FUSION 20,” the Group’s relevance has been
evaluated. In the course of this evaluation, priority themes were selected according to two core topics: “The interests of stakeholders
and what impacts on them,” which includes stakeholder engagement and global guidelines and requirements from the SRI research
institution, and the “Importance of Daikin” based on management philosophy as well as mid-and-long-term management strategies.
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Importance for Daikin
Nine Priority Initiatives
With the Group’s relevance established as the CSR priority for sustainable development of both the corporation and society, the Group
has focused on four“Value Delivery” themes and five“Grounding” themes. Attention to these initiatives in management activities is
incorporated into our strategic management plan, “FUSION 20.”
Daikin Group CSR
22
Dealing with Climate ChangeEfficient Use of Resources and EnergyNew Value CreationEnsuring Product Quality and SafetyPursuit of Customer SatisfactionMost ImportantImportantCSR for Value ProvisionFundamental CSR
ESG Positioning/Objectives
EEnvironmental
Environment p. 24
Introduce state-of-the-art technologies to the market in
order to address environmental and energy issues
P Promote spread of the use of environmentally friendly
products worldwide
SSocial
New Value Creation p. 25
Share dreams and ambitions inside and outside Daikin to
realize a healthy, comfortable lifestyle through air
P Provide value to the Earth
P Provide value to cities
P Provide value for people’s health and comfort
Customer Satisfaction p. 26
Provide peace of mind and reliability through a focus on
customer orientation, experience, performance, and
advanced technologies
P Build a service network covering the entire globe
P Build product development capabilities that can satisfy
customer needs worldwide
P Achieve the optimum level of quality
Through the global spread of environmentally friendly prod-
ucts, reduce greenhouse gas emissions by 60 million tons of
CO2 in fiscal 2021
P By fiscal 2021, reduce the Group’s production-time green-
house gas emissions to one-fourth of the fiscal 2006 level
(75% reduction)
P Implement and expand environmental activities carried out
in collaboration with stakeholders
Human Resources p. 27
Respect individual personalities and values, and maximize the
potential of each employee
P Maintain and expand hiring
P Build an organization in which employees with diverse
characteristics can each work with energy and motivation
and can each grow in a way that maximizes their potential
Respect for Human Rights p. 29
Taking into account the laws and regulations of each country
and region, understand the diverse international standards
concerning human rights and respect basic human rights
Supply Chain Management p. 29
Understand Daikin’s social responsibility as encompassing the
entire supply chain, not just the environmental burden, quali-
ty assurance, and labor safety and health within the Group
Stakeholder Engagement/Regional Society p. 30
Develop strong bonds with local communities as a member
of the regional society operating a business while respecting
the culture and history of each country and region
GGovernance
Corporate Governance p. 18
Accelerate decision making and execution with respect to
management tasks and the management environment while
at the same time promoting higher levels of transparency and
soundness, thereby seeking to increase corporate value
Environment
A priority task for us is to contribute to the resolution of environmental and
energy problems by bringing leading-edge technologies together with mar-
kets. By promoting the spread of environmentally friendly products, in fiscal
2017 we reduced greenhouse gas emissions by 45 million tons of CO2, and
our sales ratio for environmentally friendly home air conditioners rose to 74%.
New Value Creation
As initiatives to create new value meeting the expectations of customers and
society, in fiscal 2017 our R&D expenses were ¥53.9 billion (consolidated:
¥46.1 billion in fiscal 2016), and, in fiscal 2016, we applied for 1,116 pat-
ents (non-consolidated: 1,292 in fiscal 2015).
Customer Satisfaction
Reflecting our efforts to provide the highest level of customer satisfaction, in
fiscal 2017 our after-sales service customer satisfaction rating (Japan) was
4.13 out of a total of 5.0 points (fiscal 2016: 4.05), and we had operations
in more than 150 countries and production facilities at over 90 locations.
Human Resources
We recognize that by respecting individuality and value systems and by
drawing out the unlimited potential of individuals, we make both our orga-
nization and society stronger. In fiscal 2017, our percentage of female man-
agers (non-consolidated) was 4.4% (fiscal 2016: 3.6%), our percentage of
local employees serving as presidents at overseas bases was 52% (fiscal
2016: 51%), and the number of construction technology personnel we have
developed reached 16,000 (Japan, China, and Malaysia).
23
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017 CSR (Corporate Social Responsibility)
Energy Conservation and Refrigerant Conversion Support
in Emerging Countries
In emerging countries, where the use of air conditioning is pro-
jected to expand along with economic growth, promoting the
use of energy-efficient products and low environmental impact
refrigerants will make a considerable contribution to controlling
global warming overall. Accordingly, Daikin is attempting to
enhance people’s understanding of R32, working in cooperation
with the Japanese government and international organizations,
for example, by holding seminars for Indian government officials
and air-conditioning industry groups. In addition, we have con-
ducted training for 3,600 local AC installation and service engi-
neers on how to appropriately handle R32, promoting the
enhancing of technical levels. We are implementing the same
level of support in Thailand and Malaysia.
In fiscal 2017, Daikin was entrusted by Japan’s Ministry of
the Environment with a survey aimed at supporting developing
countries. In collaboration with the United Nations Environment
Programme, we sampled 40 Sri Lankan factories and carried out
a basic survey on the spread of energy-efficient air-conditioning
units and the building of schemes for the recovery, recycling, and
disposal of refrigerants. Over 70 participants from government,
academia, and industry took part in the seminar that was held to
report on the findings.
ZEB Demonstration Tests
The implementation of the Net Zero Energy Building (ZEB) that
maintains a pleasant air-conditioning experience while having an
energy consumption of zero is being accelerated worldwide.
Even in Japan, the government aims to make new public build-
ings ZEB by 2020. In order to achieve this, as energy-saving in air
conditioning, that accounts for more than 40% of a building’s
energy consumption is vital, Daikin is proceeding with ZEB
demonstration tests at the Technology and Innovation Center
(TIC) established in 2015. In fiscal 2017, at a building in the TIC,
we achieved an overall 72% reduction of energy consumption in
comparison with standard values and an 82% reduction when
taking into account solar power.
In addition, in July 2016, the TIC obtained the highest-
ranked Platinum certification for Leadership in Energy and
Environmental Design (LEED), the world’s most widely used
certification system for environmentally friendly buildings.
Environment
L Materiality of Environmental Measures
While air conditioners, the main product of the Daikin Group,
support the enhancement of economic growth and quality of life
in hot regions, they consume a lot of electricity during use and
have an impact on climate change through the fluorocarbon
used as a refrigerant. For this reason, the Daikin Group believes
that providing for both business development and environmental
protection is essential for the sustainable growth of society, and
we are taking steps to reduce emissions of greenhouse gases
throughout the entire supply chain. We are working to develop
and provide products and services that mitigate climate change,
and promote technical training aimed at supporting widespread
market adoption.
L Daikin’s Initiatives
Promotion of Eco-Friendly Technologies and Products
Daikin is aiming to reduce CO2 emissions from the energy
consumption of air conditioners through promoting the wider
usage of inverter units globally.
In addition, based on our accumulation of research on refrig-
erants and investigations into its adoption, we have determined
that at present R32, with approximately a third of the global
warming impact of existing refrigerants, is the refrigerant best
suited for residential and commercial air conditioners, and have
adopted it at Daikin. Furthermore, Daikin has designated a total
of 93 basic patents related to the manufacture and sale of air
conditioners using R32 as a refrigerant for royalty-free use
worldwide.
As of the end of March 2017, Daikin has sold more than 10
million R32 AC units worldwide in 52 countries. We estimate
that the global market for R32 AC units, including the products
of competitors, has expanded to more than 27 million units.
Accordingly, together with the wider usage of inverter units, we
calculate there has been a contribution towards the suppressing
of 45 million tons of CO2.
Daikin Receives the METI Minister Award
in the Energy Conservation Grand Prize
In fiscal 2016, Daikin’s “Retrofit System” received the top
award, Japan’s Ministry of Economy, Trade and Industry
(METI) Minister’s Award in the product/business sector of the
Energy Conservation Grand Prize, sponsored by the Energy
Conservation Center. This system, which has been designed
for existing Daikin multiple air-conditioning systems for
office buildings with five years or more having passed from
installation, is the world’s first service to replace pressure
units and energy-efficient control software with the latest
specification items. Currently, there are approximately one
million eligible units worldwide. This is expected to reduce
greenhouse gas emissions as, while utilizing the advantages
of conventional maintenance, annual power consumption
may be reduced by a maximum of 15% through only the
replacement of main components.
24
New Value Creation
L Materiality of New Value Creation
In today’s society, globalization and technological change and
advancements are progressing at a remarkable pace, making dif-
ferentiation from rival products difficult. To achieve sustainable
growth, a company must integrate cutting-edge technologies,
and generate technologies and products that contribute to the
resolution of social issues such as energy, the environment, and
health. Companies need to offer the world unprecedented new
value.
Daikin is deepening its collaborative creation across a broad
range in the areas of energy, space, and the environment, in pur-
suit of new value creation centered on air conditioning. Daikin’s
diverse workforce, along with external researchers and engi-
neers, shares dreams and ambitions, offers the world new value
through the power of air, and resolves social issues.
L Daikin’s Initiatives
Expanding Filter Business
Air pollution in emerging economies as a result of PM2.5
and the tightening of regulations related to air hygiene in the
pharmaceutical and food industries are generating the need to
improve atmospheric environments in indoor spaces worldwide.
Daikin is responding to these needs by integrating air-condition-
ing and filter technologies with its engineering capabilities to
expand its filter business, in addition to air-conditioning business.
It is said that a person spends more than 90% of the day
indoors. The scale and type of the spaces our filter business cov-
ers extend from offices and residential buildings to large-scale
industrial facilities, such as power stations and steelworks, and
are contributing to the enhancement of a diverse range of
atmospheric environments.
Responding to Increasingly Sophisticated Needs
In addition to the development and selling of air-conditioning
and filter products, Daikin utilizes its engineering capabilities that
combine technologies with product systems while engaging in
dialogue with customers, and thereby proposes optimum atmo-
spheric environments that respond to the needs of its customers.
In addition, Daikin is enhancing its total support framework,
including maintenance.
Going forward, Daikin will not only meet already visible needs,
but also proactively respond to the increasingly sophisticated
needs that contribute to health and pleasant experiences, such
as the construction of “spaces to better focus in” and “relaxing
spaces” for offices and residences, and will create new value.
Upgrading and Expanding the Technology and Innovation
Center (TIC)
The TIC is the Daikin Group’s core facility for technological
development, bringing together engineers from various fields. In
order to accelerate the Group-wide sophistication of component
technologies and development of differentiated products, we are
upgrading and expanding the TIC’s framework as a global con-
trol tower to enhance collaborations among development loca-
tions around the world, as well as strengthening the functions
of our global locations.
The stimulation of open innovation is also one of the roles of
the TIC, and it proactively promotes cooperation and partner-
ships with companies, universities, and research institutions that
possess unique technologies in varied industries and fields.
Centered on the TIC, Daikin is moving beyond the boundaries
of conventional air-conditioning technologies and will step even
into physiology and psychology to conduct research on relation-
ships between the air environment and human body, working to
generate new lifestyle values.
Implementing Open Innovation
In October 2016, Daikin began joint research with NEC on
creating atmospheres and spaces that increase intellectual
productivity through the utilization of AI/IoT. In addition to
such numerous collaborations with other companies, we are
pushing forward comprehensive collaboration and research
with universities and research institutions in Japan and
abroad, with the TIC playing a central role. In 2016, within
RIKEN (Institute of Physical and Chemical Research), we
established the “RIKEN-DAIKIN Wellness Life Collaboration
Program” and began research in the life sciences field, such
as on the construction of anti-fatigue spaces.
25
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017
Developing Our Service Structure in Japan and Abroad
The Daikin Contact Center accepts inquiries regarding repair
requests, technical consultations, and purchasing information 24
hours a day, 365 days a year, from customers in Japan.
Overseas, we have put in place an after-sales service structure
based on the principle of “fast, reliable, and friendly” in order to
respond to the variety of requests specific to each country or
region. We are working to enhance customer satisfaction
through such measures as establishing call centers and providing
technical information online.
Utilizing the Views of Our Customers
In Japan, we regularly conduct customer surveys for each busi-
ness in order to understand the level of customer satisfaction.
In fiscal 2017, our air-conditioning business obtained an over-
all satisfaction score of 4.13 out of a total 5.0 points, its highest
score to date. We believe this is the result of our efforts to “put
customers first” and training programs focused on speedy
repairs, technical capabilities, and customer service skills.
In addition, we share the views of our customers received by
the Daikin Contact Center with our development division, con-
tinually soliciting and analyzing feedback to utilize in the further
enhancement of our products and services.
Our Chemicals business was evaluated highly in fiscal 2017 in
such areas as quality, delivery deadlines, technical service, and
communication with customers.
Responding to the “Fluorocarbon Emission Control Law”
In April 2015, the Fluorocarbon Emission Control Law, designed
to limit greenhouse-gas emissions, became effective. As a result,
the owners of commercial-use air conditioners became obligated
with various management responsibilities, such as inspections.
Accordingly, Daikin is leveraging its expertise to list all the
many air-conditioning units of its customers, including those of
other manufacturers, and provide support on identifying which
units the law applies to, as well as undertaking simple inspec-
tions and periodic inspections on the units on behalf of our
customers.
In addition, since June 2016, we have been providing the
industry’s first periodic inspection and repair warranty system,
“Fluorocarbon Care,” which also covers the products of other
manufacturers.
Customer Satisfaction
L Materiality of Customer Satisfaction
Daikin is developing business in over 150 countries around the
world. With consideration to the climate, culture, and regula-
tions of each area, Daikin works to provide products and services
that meet local needs. However, in order to satisfy customers,
not only just providing products and services of superior perfor-
mance and quality, but also exceeding the expectations of cus-
tomers is important. In particular, we believe that anticipating
problems that occur during the life cycle of a product, from pur-
chase, use, replacement, to disposal, and appropriately resolving
such problems as a specialist company, will lead to a high level
of customer satisfaction.
L Daikin’s Initiatives
Working Out Global Quality Guidelines
The Daikin Group has prescribed its basic stance on quality stan-
dards across the Group companies as well as responsibilities and
authorities for the efficient implementation of quality monitoring
and corrective measures in its Global Quality Guarantee Rules.
We have acquired ISO9001 certification at all production facili-
ties, and thoroughly implement a management system for the
maintenance of quality levels in all development, procurement,
and production divisions. Furthermore, we are also working to
enhance quality with the cooperation of our outsourcing part-
ners.
To assess the operating status of the quality management sys-
tem, the Daikin Group conducts internal audits and operates a
continual cycle of implementation, evaluation, and improve-
ment.
Each year, quality priority measures and targets for each busi-
ness division based on the Group’s annual policy guidelines are
set, establishing and implementing a quality program for the
fiscal year.
First “Service Olympics” Held
The Daikin Group is increasing the number of its service engi-
neers in countries and regions along with the expansion of
the global market. Aiming to further enhance the services of
these engineers, we held the first “Service Olympics” in
November 2016.
A total of 28 service engineers selected from 20 different
countries undertook written and practical examinations and
were evaluated on both. Through the Service Olympics, we
could gain an understanding of the level of each country and
region, give feedback to the participants on factors which
decreased scores, and provide guidance on how to further
raise their levels.
26
Human Resources
L Importance of Initiatives Related to Human Resources
Daikin has advanced with rapid globalization in the last 10 years,
and the number of employees working overseas has increased
substantially. In order to meet the expectations of its various
stakeholders in the midst of this effort and to realize the
strengths of the Daikin Group including the “Environment,”
“New Value Creation,” and “Customer Satisfaction,” “human
resources” have become of utmost importance as the team
responsible for these activities.
Daikin has positioned “People-Centered Management,” which
emphasizes that the source of a company’s competitiveness is its
people, at its very core, and gets its organizational strength by
respecting individuality and value systems, and by drawing out
the unlimited potential of individuals.
L Daikin’s Initiatives
Human Resource Development Policy
One of the corporate philosophies of the Daikin Group is the
idea that “the cumulative growth of all Group members serves
as the foundation for the Group’s development.” In addition,
based on the concept that “people grow through job experi-
ence,” we have positioned OJT as the basis of human resource
development and, including off-the-job training (Off JT), are
working to enhance growth opportunities.
In our “Overseas Base Practical Training,” which cultivates
global human resources, young employees are dispatched to
countries different from that of their birth, broadening their
horizons through practical work experience and developing the
future pillars of the global business. As of fiscal 2017, we have
sent 221 employees from Japan abroad, and 15 employees from
abroad to Japan.
In the “Daikin Leadership Development Program,” we train
executives who can play an active role on the front lines of
global business operations.
Contributing to the Development
of Air-Conditioning Engineers in India
Since 2000, Daikin India has held technical training not only
for its service engineers but also for the service engineers of
retail and service cooperation stores that handle the prod-
ucts of other manufacturers. In fiscal 2017, a total of more
than 20,000 people participated.
The production of air conditioners that can withstand such
rough environments as “frequent blackouts and voltage fluc-
tuations” and “fugitive dust lodging in heat exchange equip-
ment in India,” and the development of engineers regarding
the installation, maintenance, and repair of such units are
urgent tasks. We believe that contributing to resolving the
local social challenge of lacking air-conditioning engineers
both in quality and in quantity will lead to sustainable
growth.
Promotion of Local Personnel at Overseas Bases
In conjunction with the globalization of the Daikin Group’s
business, we are also advancing with efforts to globalize our
management team, and are aggressively promoting local
employees at overseas bases to executive and managerial
positions.
As of the end of fiscal 2017, local employees accounted for
52% of the presidents at our overseas bases and 50% of the
directors. Furthermore, 15 of our 20 sales companies in Europe
have local employees serving as presidents.
Accelerating the Active Role of Women in Japan
In Japan, Daikin is aiming to further the active role of women
and is working toward a work environment that allows all
employees to fully exhibit their capabilities regardless of gender.
As a goal, by the end of fiscal 2021, we aim to have at least
one female director of Daikin Industries, and to increase our per-
centage of female managers to 10% (approximately 100 people)
from the current level of 4.4% (47 people). We are also promot-
ing the early cultivation of female managers and reforming the
awareness of male managers and female employees. In addition,
in order to prevent childbirth and child rearing becoming career
breaks, we are enhancing our measures that support the early
return from maternity leave.
In fiscal 2017, we held a total of five “female employee devel-
opment management training” sessions aimed at approximately
150 male managers and leaders with female subordinates.
Daikin Industries has been recognized for its excellence in
these efforts to promote women and, in August 2016, was certi-
fied as a highest ranked “Eruboshi” company, accredited by
the Minister of Health, Labour and Welfare. In addition, in March
2017, Daikin was selected by the Ministry of Economy, Trade and
Industry (METI) and the Tokyo Stock Exchange as a “Nadeshiko
Brand” (excellent company in promoting the advancement
of women in the workplace) for the fourth time in three
consecutive years.
Acquired OHSAS18001 Certification
In order to ensure operational and employee safety, the Daikin
Group is independently creating occupational health and safety
management systems (OHSAS) at each base worldwide, and is
acquiring certification for international standards, such as
OHSAS18001. As of the end of fiscal 2017, 3 manufacturing
facilities in Japan and 24 companies overseas have received
certification.
We hold Groupwide joint safety and security meetings twice
a year for the purpose of improving safety levels and sharing
expertise. Every Daikin facility also carries out its own safety
activities, such as education and safety patrols, aimed at achiev-
ing zero workplace accidents. In 2016, the frequency rate of
industrial accidents throughout the Group was 1.50, an improve-
ment of 0.4 from 2015.
27
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017
The Corporate Ethics and Risk Management Committee is
chaired by the director in charge of corporate ethics and compli-
ance, and is configured from the managers of each division and
the presidents of each of the main Group companies in Japan.
As a general rule, the committee meets twice a year to identify
issues and promote their solutions, together with also receiving
reports on the status of overseas Group companies.
A Compliance Risk Management Leader (CRL), appointed
in each division and for each of the main Group companies in
Japan and overseas, promotes compliance based on the Group
Code of Conduct, which sets forth the conduct of corporate
officers and employees. In addition, regular CRL meetings are
held to share information and ensure the Group Code of
Conduct is adhered to, aiming to foster a “culture free of com-
pliance violations” and to elevate “mechanisms to ensure that
there are no compliance violations.”
Enhancing Activities throughout the Group
Daikin Industries also participates in the compliance committees
of each region overseas. With the goal of mutually confirming
situations in Japan and abroad as well as sharing information,
efforts are made to enhance compliance and risk management
activities throughout the Group.
L Risk Management Promotion System
With the rapid expansion of Daikin’s business, the overall picture
of risks from a global perspective must be understood in an
accurate and prompt manner, and alleviated. To achieve this, we
have introduced a Groupwide risk management.
First, each division and main Group company implement risk
assessments to identify and select critical risks, and formulate the
necessary countermeasures. In addition, each company identifies
critical risks from the assessment results, and efforts are made to
develop and implement risk-reducing countermeasures.
For example, in fiscal 2017, Daikin Industries made efforts
toward the key themes such as “Earthquake Risk,” “PL Quality
Risk,” “Intellectual Property Risk,” “Information Leakage Risk,”
“Overseas Crisis Management,” and “Risk of Improper
Accounting.”
CSR Management/Compliance Risk
Management/Risk Management Promotion
System
L CSR Management
The CSR of the Daikin Group is based on being thorough in its
corporate ethics and compliance. Together with carrying out our
responsibilities to society, we are working toward resolving social
problems through our business activities.
The CSR & Global Environment Center, a staff division, was
established under the CSR Committee (chairman: director in
charge of CSR), which sets the overall direction of CSR activities
and monitors the execution of those activities, and promotes
comprehensive and Groupwide CSR activities.
In order to integrate management strategies with CSR, we
identified materiality (important themes) in conjunction with the
formulation of the “FUSION 20” strategic management plan
(fiscal 2017-21). Surveying the value chain and taking into
consideration changes in the external environment, such as
expectations and requests from outside and the acceleration
of business expansion, we divided materiality broadly into
“value-providing CSR” and “fundamental CSR,” incorporating
them into the “FUSION 20” plan.
L Compliance Risk Management
Thorough Compliance and Risk Management
At the Daikin Group, the Internal Control Committee, chaired by
the President, checks and confirms that internal controls, includ-
ing risk management, are functioning properly Groupwide. In
addition, the Corporate Ethics and Risk Management Committee
promotes the management of individual operational risk and
thorough compliance.
Self-Inspection of Code of Conduct Compliance
The Daikin Group has established its own “self-inspection”
system in which each employee annually carries out a self-
check on compliance with the Group Code of Conduct. Based
on the results, organizational issues are identified and the
necessary countermeasures are implemented. These issues
and countermeasures are reported to and shared with the
Corporate Ethics and Risk Management Committee.
In addition to the self-inspection, compliance with the
Group’s Code of Conduct and laws and ordinances is also
confirmed in the Legal Department’s legality audit and the
Audit Department’s operational audit.
28
Respect for Human Rights/
Supply Chain Management
L Respect for Human Rights
Based on the laws and ordinances of countries and regions
around the world, the Daikin Group respects basic human rights
in accordance with the various international norms.
The Daikin Group participates in the United Nations Global
Compact for supporting and putting into practice universally
accepted principles relating to such matters as human rights and
labor. Our Group Code of Conduct stipulates policies for respect-
ing human rights, diverse values, and sense of work, and policies
for no child labor or forced labor.
In addition, upon specifying humans rights issues within the
Group’s business, we evaluate the risk across the whole value
chain and work to prioritize the identification of risks that need
resolving.
Respect for Human Rights in the Self-Inspection
An item relating to respect for human rights was included as
part of the self-inspection that is conducted each year from the
viewpoint of compliance, and now the inspection includes con-
firming that there are no human rights violations or other such
problems.
Such an item was also included in the Supply Chain CSR
Promotion Guidelines, devised in April 2017, and we are also
asking our suppliers to be thorough.
In addition, Group companies overseas are also creating their
own Corporate Ethics Handbooks based on the Group Code of
Conduct, and are making efforts to ensure total respect for
human rights in the workplace.
The Daikin Group also participates in the activities of the
Global Compact Network Japan, through which we learn from
experts and cases at other companies regarding global human
rights issues, and this helps us improve our own efforts in this
area.
Regular Human Rights Awareness and Education
Daikin Industries conducts human rights education and aware-
ness activities each year for all of its directors, new employees,
including those of affiliates, and newly appointment managers.
In addition, we also publish a series of human rights articles in
the Company newsletter to raise awareness of human rights.
At Daikin America, focus is centered on creating a workplace
environment that respects coworkers, and all employees are pro-
vided with opportunities to be educated in this area each year.
L Supply Chain Management
At the Daikin Group, we believe that our scope of social respon-
sibility includes our entire global supply chain. In 1992, the
Daikin Group established the Basic Procurement Guidelines. In
addition to being thorough in green procurement and fair trade
practices with our suppliers, we promote CSR activities from
perspectives such as quality, human rights, and labor.
Establishment of “Supply Chain CSR Promotion Guidelines”
Among CSR activities in our supply chain, we are endeavoring
in particular to understand CO2 emission levels and to properly
control substances subject to international regulations, such
as designated chemical substances and conflict minerals.
In April 2017, we established and implemented the Supply
Chain CSR Promotion Guidelines. These are guidelines for the
promotion of CSR, aimed at stable continuation and growth of
business. In addition to general compliance requirements, the
said Guidelines cover the whole of CSR, such as environmental
protection, respect for human rights, occupational health and
safety, and prohibition of trade with conflict zones, and we are
asking our suppliers to promote such efforts.
Furthermore, we plan to evaluate such efforts with the
cooperation of our suppliers.
Growth and Development alongside Suppliers
In order to provide products that satisfy the trust of our custom-
ers, the cooperation of our suppliers is vital. Working hard to
build strong relationships of trust with all suppliers, the Daikin
Group endeavors to continue to meet our mutual expectations,
and to build relationships in which we can both grow and
develop.
Daikin Group companies both in Japan and abroad periodical-
ly conduct dialog at the production sites of our suppliers on
quality audits and quality improvements, collaborating with our
suppliers on quality improvement efforts through support for
enhancing the required technological capabilities, etc. We also
hold safety-related briefing sessions and support efforts to
prevent work-related accidents before they occur.
For example, McQuay China (Shenzhen) provided suppliers
with quality control training in fiscal 2017, and 41 persons from
37 companies participated in the session. Through lectures by
external instructors and discussions on quality control, we clari-
fied the core points of the fiscal 2018 quality control activities.
29
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017
Stakeholder Engagement/Regional Society
L Stakeholder Engagement
The Daikin Group’s main stakeholders are the customers to
whom we provide products and services, the shareholders and
investors who have a direct impact on our business, our suppli-
ers, our employees, and everyone in the regional societies that
our business evolution affects. In addition, the spread of air-con-
ditioning technologies and the enhancement of the environmen-
tal friendliness of our products and services involve national and
local governments and industry associations. The Daikin Group
believes that it is important to understand the concerns and
expectations of its stakeholders through proactive communica-
tion and report such voices to management so that it can utilize
them in our business.
Continuing Exchange of Opinions with Experts
Since 1995, the Daikin Group has held “air-conditioner forums”
in Japan where it can exchange opinions relating to the “future
of air conditioning” with experts in the field. In addition, in light
of the rapid global development of our business, since fiscal
2008, we have also held forums in Europe, China, the United
States, Asia/Oceania, and Central America/South America.
Exchanging opinions with experts from each region about envi-
ronmental and energy issues, we utilize that information in our
technology as well as product and business development.
In fiscal 2017, we held discussions in Asia/Oceania and
Europe, regarding energy conservation and indoor air quality
within buildings. Furthermore, in Central America/South
America, we held the first exchange of opinions with govern-
ment officials and university professors from various countries on
“promotion of energy conservation environmental technology
for a sustainable society,” introducing Daikin’s relevant
technologies and efforts.
Responsibility to Shareholders and Investors
To live up to the expectations of shareholders and investors, the
Daikin Group believes that it must increase its corporate value.
It therefore emphasizes free cash flow as a source of corporate
value and focuses on augmenting its profitability while lowering
the levels of its trade receivables and inventories.
Furthermore, Daikin works to stably maintain its consolidated
ratio of dividends on equity (DOE) at 3.0%. In addition, to
increase its management transparency toward shareholders
and investors, Daikin is executing diverse kinds of IR activities.
Furthermore, to enable shareholders to exercise voting rights
easily at general shareholders’ meetings, Daikin provides share-
holders with invitations to meetings early and produces English-
language versions, as well as enabling shareholders to exercise
their voting rights via personal computers and mobile phones.
L Regional Society
The Daikin Group is made up of 245 consolidated subsidiaries
worldwide and is expanding business in over 150 countries.
Premised on fulfilling our social responsibility of expanding
regional employment and cooperating with local companies, our
basic policy is to develop strong bonds with local communities as
a member of the regional society operating a business while
respecting the culture and history of each country and region.
With our employees taking the initiative, we carry out social
activities mainly in the areas of “environmental protection,”
“supporting education,” and “living symbiotically with the local
region” and are contributing to the resolution of social issues
from a global perspective based on sustainable development
goals (SDGs).
Environmental Protection
Forest and Biodiversity Preservation
Daikin has been carrying out the “Forests for the Air” project for
protecting forests in seven locations across the world in partner-
ship with Conservation International, an international NGO, and
the Shiretoko Nature Foundation. In the Shiretoko Peninsula,
Indonesia, Brazil, Cambodia, India, China, and Liberia, we work
with governments, NGOs, employees, and customers among
others to provide support for the coexistence of the lifestyles of
local residents and forest biodiversity, contributing to achieving
SDGs. By 2024, we will preserve 11 million hectares of forests
and inhibit seven million tons of CO2.
In addition, we are also making efforts toward tree-planting
activities, the conservation activities for nature such as seas
and rivers, and biodiversity conservation in the vicinity of our
production and sales locations around the world.
Supporting Education
Cooperating in the Education of Future Generations
Since 2010, Daikin has offered a “Circle of Life” environmental
education program for elementary school children centered on
a theme of biodiversity. As well as providing elementary schools
with educational materials, Daikin employees visit schools to
teach lessons. In fiscal 2017, 27 schools participated (approxi-
mately 2,000 students) in the program, and 15 schools were
visited by our employees.
In addition, since fiscal 2016, we have been cooperating in
the “Mirai no Hakase” training laboratory, a scientist develop-
ment program held by Osaka Prefecture University and aimed
at junior high school students in Sakai City, Osaka Prefecture.
Moreover, Daikin Group plants around the world are accept-
ing tours from children and students, the future generations.
30
Symbiosis with Regional Societies
Supporting the Regional Revitalization of Okinawa
Since 1988, Daikin Industries has held the “Daikin Orchid Ladies
Golf Tournament,” and, through sports, we are endeavoring to
revitalize Okinawa and encourage economic interchange with
the local area.
In conjunction with this tournament, we solicit donations that
we then present as an “Orchid Bounty” on an ongoing basis to
individuals and organizations that promote such areas as the
arts, culture, education, and sports in Okinawa.
Holding “Bon Festival” in Japan and Abroad
Daikin has deepened interchange with local residents through
regional festivals and sports, building relationships of trust. As
part of those efforts, the Bon Festival, which is planned and
operated by Daikin employees, is a large event that attracts
attention by numerous local residents. In addition to manufac-
turing plants in Japan, the festival is also held at our main pro-
duction bases in China, the United States, and other areas.
Contributing to Local Communities around the World
Employees from Daikin Group locations around the world are
working toward contributing to society by meeting local needs,
such as through volunteering activities. In fiscal 2017, for exam-
ple, in China, we held a Christmas party at a welfare facility for
people with disabilities, donating presents and putting on per-
formances. In addition, in Europe, we sent financial aid and relief
supplies, such as emergency air conditioners, to areas affected
by the central Italy earthquakes.
31
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017
Eleven-Year Financial Highlights
Daikin Industries, Ltd. and Consolidated Subsidiaries
Years Ended March 31
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Millions of Yen
Operating Results (for the year):
Net sales
Gross profit
Selling, general and administrative expenses
Research and development expenses (Note 1)
Operating income
EBITDA (Note 2)
Net income attributable to owners of parent
Cash Flows (for the year):
Net cash provided by operating activities
Net cash used in investing activities
Free cash flow (Note 3)
Net cash provided by (used in) financing
activities
Financial Position (at year-end):
Total assets
Total interest-bearing liabilities
Total shareholders’ equity
Per Share Data (yen):
Net income (basic)
Shareholders’ equity
Free cash flow
Cash dividends
Ratios (%):
Gross profit margin
Operating income margin
EBITDA margin
Return on shareholders’ equity (ROE)
Shareholders’ equity ratio
¥911,749
312,688
231,934
27,204
80,754
115,315
45,420
¥ 83,725
(305,251)
(221,526)
¥1,291,081
441,549
313,451
32,075
128,098
179,469
74,822
¥1,202,420
363,660
302,266
30,535
61,394
118,325
21,755
¥1,023,964
319,301
275,263
28,220
44,038
96,462
19,391
¥103,329
(76,428)
26,902
¥62,238
(99,302)
(37,065)
¥129,227
(39,848)
89,379
245,975
3,367
48,382
(34,942)
(37,623)
(1,113)
143,520
(38,249)
(83,073)
(85,422)
(73,544)
¥1,161,364
456,074
397,542
¥1,210,094
356,928
545,641
¥1,117,418
417,919
471,686
¥1,139,656
399,313
496,179
¥ 172.66
1,511.47
(842)
28.00
¥ 262.24
1,867.79
94
38.00
¥ 74.51
1,615.98
(127)
38.00
¥ 66.44
1,701.29
306
32.00
34.30%
8.86
12.65
12.31
34.23
34.20%
9.92
13.90
15.87
45.09
30.24%
5.11
9.84
4.28
42.21
31.19%
4.30
9.42
4.01
43.54
¥1,160,331
¥1,218,701
¥1,290,903
¥1,787,679
¥1,915,014
¥2,043,691
¥2,043,969
361,665
286,210
30,771
75,455
127,168
19,873
¥78,411
(23,306)
55,105
371,902
290,709
32,987
81,193
131,719
41,172
¥44,967
(62,955)
(17,988)
388,046
299,419
33,569
88,627
140,151
43,585
568,323
411,786
40,177
156,537
235,439
92,787
649,902
459,314
42,892
190,588
268,354
119,675
711,576
493,704
46,138
217,872
302,075
136,987
730,935
500,166
53,870
230,769
315,798
153,939
¥103,161
(218,386)
(115,225)
¥179,713
¥160,423
(80,835)
98,878
(77,331)
83,092
¥226,186
(105,493)
120,693
¥267,663
(128,823)
138,840
¥1,132,507
¥1,160,564
¥1,735,836
¥2,011,870
¥2,263,990
¥2,191,105
¥2,356,149
372,481
487,876
389,891
502,309
705,871
618,118
693,944
801,854
662,413
1,024,725
608,981
1,014,409
609,430
1,111,636
¥ 68.14
1,672.74
189
36.00
¥ 141.37
1,725.64
(62)
36.00
¥ 149.73
2,123.10
(396)
36.00
¥ 318.33
2,748.08
339
50.00
¥ 410.19
3,511.34
285
100.00
¥ 469.23
3,473.54
413
120.00
¥ 526.81
3,802.10
475
130.00
31.17%
30.52%
30.06%
31.79%
33.94%
34.82%
35.76%
6.50
10.96
4.04
43.08
6.66
10.81
8.30
43.28
6.87
10.86
7.78
35.61
8.76
13.17
13.07
39.86
9.95
14.01
13.10
45.26
10.66
14.78
13.44
46.30
11.29
15.45
14.48
47.18
Notes: 1. R&D expenses are included within general and administrative expenses and manufacturing expenses.
2. EBITDA = Operating income + depreciation and amortization.
3. Free cash flow = Net cash provided by operating activities + net cash used in investing activities.
4. Accompanying a change in accounting policy, effective from April 1, 2014, the consolidated financial statements for the fiscal year ending March 31, 2014 and subsequent years have been revised.
Operating Income
Net Income Attributable to
Owners of Parent
(¥ billion)
240
180
120
60
0
(¥ billion)
160
120
80
40
0
07 08 09 10 11 12 13 14 15 16
17
07 08 09 10 11 12 13 14 15 16
17
07 08 09 10 11 12 13 14 15 16
17
Net Sales
(¥ billion)
2,000
1,500
1,000
500
0
32
Operating Results (for the year):
Net sales
Gross profit
Selling, general and administrative expenses
Research and development expenses (Note 1)
Operating income
EBITDA (Note 2)
Net income attributable to owners of parent
Cash Flows (for the year):
Net cash provided by operating activities
Net cash used in investing activities
Free cash flow (Note 3)
Net cash provided by (used in) financing
activities
Total assets
Financial Position (at year-end):
Total interest-bearing liabilities
Total shareholders’ equity
Per Share Data (yen):
Net income (basic)
Shareholders’ equity
Free cash flow
Cash dividends
Ratios (%):
Gross profit margin
Operating income margin
EBITDA margin
Return on shareholders’ equity (ROE)
Shareholders’ equity ratio
¥911,749
¥1,291,081
¥1,202,420
¥1,023,964
312,688
231,934
27,204
80,754
115,315
45,420
441,549
313,451
32,075
128,098
179,469
74,822
¥ 83,725
(305,251)
(221,526)
¥103,329
(76,428)
26,902
363,660
302,266
30,535
61,394
118,325
21,755
¥62,238
(99,302)
(37,065)
319,301
275,263
28,220
44,038
96,462
19,391
¥129,227
(39,848)
89,379
¥1,161,364
¥1,210,094
¥1,117,418
¥1,139,656
456,074
397,542
356,928
545,641
417,919
471,686
399,313
496,179
¥ 172.66
1,511.47
(842)
28.00
¥ 262.24
1,867.79
94
38.00
¥ 74.51
1,615.98
(127)
38.00
¥ 66.44
1,701.29
306
32.00
34.30%
34.20%
30.24%
31.19%
8.86
12.65
12.31
34.23
9.92
13.90
15.87
45.09
5.11
9.84
4.28
42.21
4.30
9.42
4.01
43.54
Notes: 1. R&D expenses are included within general and administrative expenses and manufacturing expenses.
2. EBITDA = Operating income + depreciation and amortization.
3. Free cash flow = Net cash provided by operating activities + net cash used in investing activities.
4. Accompanying a change in accounting policy, effective from April 1, 2014, the consolidated financial statements for the fiscal year ending March 31, 2014 and subsequent years have been revised.
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Millions of Yen
¥1,160,331
361,665
286,210
30,771
75,455
127,168
19,873
¥1,218,701
371,902
290,709
32,987
81,193
131,719
41,172
¥1,290,903
388,046
299,419
33,569
88,627
140,151
43,585
¥1,787,679
568,323
411,786
40,177
156,537
235,439
92,787
¥1,915,014
649,902
459,314
42,892
190,588
268,354
119,675
¥2,043,691
711,576
493,704
46,138
217,872
302,075
136,987
¥2,043,969
730,935
500,166
53,870
230,769
315,798
153,939
¥78,411
(23,306)
55,105
¥44,967
(62,955)
(17,988)
¥103,161
(218,386)
(115,225)
¥179,713
(80,835)
98,878
¥160,423
(77,331)
83,092
¥226,186
(105,493)
120,693
¥267,663
(128,823)
138,840
245,975
3,367
48,382
(34,942)
(37,623)
(1,113)
143,520
(38,249)
(83,073)
(85,422)
(73,544)
¥1,132,507
372,481
487,876
¥1,160,564
389,891
502,309
¥1,735,836
705,871
618,118
¥2,011,870
693,944
801,854
¥2,263,990
662,413
1,024,725
¥2,191,105
608,981
1,014,409
¥2,356,149
609,430
1,111,636
¥ 68.14
1,672.74
189
36.00
¥ 141.37
1,725.64
(62)
36.00
¥ 149.73
2,123.10
(396)
36.00
¥ 318.33
2,748.08
339
50.00
¥ 410.19
3,511.34
285
100.00
¥ 469.23
3,473.54
413
120.00
¥ 526.81
3,802.10
475
130.00
31.17%
6.50
10.96
4.04
43.08
30.52%
6.66
10.81
8.30
43.28
30.06%
6.87
10.86
7.78
35.61
31.79%
8.76
13.17
13.07
39.86
33.94%
9.95
14.01
13.10
45.26
34.82%
10.66
14.78
13.44
46.30
35.76%
11.29
15.45
14.48
47.18
Research and Development Expenses
Shareholders’ Equity
Total Assets
(¥ billion)
60
50
40
30
20
10
0
(¥ billion)
1,200
900
600
300
0
(¥ billion)
2,500
2,000
1,500
1,000
500
0
07 08 09 10 11 12 13 14 15 16
17
07 08 09 10 11 12 13 14 15 16
17
07 08 09 10 11 12 13 14 15 16
17
33
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017
Financial Review
Summary of the Period
Japan
The global economy slowed down overall during fiscal 2017, as recoveries
In the Japanese commercial air-conditioning equipment market, industry
varied from country to country and region to region. In the United States,
demand rose year on year, pushed upward by the impact of the heat wave in
robust personal consumption drove the economy, while in Japan the econo-
western Japan and the government’s subsidy system for replacement to
my showed a moderate recovery trend, backed by improvement in corporate
high-performance, energy-saving equipment. The Daikin Group captured
earnings and a recovery in exports. Meanwhile, the Chinese economy slowed
demand for air conditioners for stores and offices, especially those of “FIVE
moderately, while highly resource-dependent emerging economies continued
STAR ZEAS” and “Eco-ZEAS” models, and net sales increased year on year.
to experience stagnation. In addition, with the rapid strengthening of the yen
In the Japanese residential air-conditioning equipment market, industry
in the first half of fiscal 2017, currency exchange rates were highly volatile.
demand increased year on year due to robust demand that began in the first
Amid this environment, the Daikin Group’s consolidated net sales
half from the impact of the heat wave in western Japan and continued into
slightly increased compared to the previous fiscal year to ¥2,044.0 billion,
the third quarter onward. The Daikin Group utilized the brand power of its
due to strong sales in the air-conditioning business in each region, while the
room air conditioner Urusara 7, an energy-saving, high-value-added product,
yen appreciated against other currencies, including the Chinese yuan, U.S.
in an effort to expand sales for all models of residential air conditioners, and
dollar, and euro, which had a negative impact, such as a decrease in the
net sales exceeded that of the previous fiscal year.
yen-equivalent. As for profits, sales volume increased in each region and
gross margin rates improved through cost reductions, despite a factor of
Europe (Including Turkey, the Middle East, and Africa)
profit decline due to conversion to the yen-equivalent. As a result, consoli-
In Europe, while sales were strong, net sales after converting to the
dated operating income increased by 5.9%, to ¥230.8 billion, and net
yen-equivalent remained flat year on year in the region as a whole. Net sales
income attributable to the owners of the parent company increased by
of residential air-conditioning systems increased year on year in the local cur-
12.4%, to ¥153.9 billion.
rency, owing to the increased demand stemming from the heat wave in
2015, which remained strong. Commercial air-conditioning equipment sales
Performance by Business Segment
were also strong because of the capturing of demand for the renewal and
• Air-Conditioning and Refrigeration Equipment
replacement of existing air-conditioning systems in main countries, although
Total sales of the Air-Conditioning and Refrigeration Equipment segment
the European economy remained sluggish. Despite stagnant demand in
increased to ¥1,835.4 billion, up 0.4% from the previous fiscal year.
France, which is a major market, net sales of heat pump hot water heating
Operating income increased 7.7%, to ¥208.8 billion.
systems grew in Europe overall in the local currency from the previous fiscal
year due to significant sales growth in Italy and other countries.
Domestic and Overseas Sales
Operating Income
and Operating Income Margin
Net Income Attributable to
Owners of Parent
(¥ billion)
2,400
1,800
1,200
600
0
0
(¥ billion)
240
180
120
60
0
(%)
12
(¥ billion)
160
9
6
3
0
120
80
40
0
2013 2014 2015 2016 2017
2013 2014 2015 2016 2017
2013 2014 2015 2016 2017
Domestic
Overseas sales
Operating income
Operating income margin
34
In emerging economy markets, while sales in the Middle East and Africa
conditioners that offer enhanced product appeal, including energy-saving
were strong, net sales after converting to the yen-equivalent decreased year
performance; enhancing advertising and ‘spec-in’ for architectural firms; and
on year in the region as a whole. Net sales increased year on year in the
broadening the range of the target markets to extend from new construction
local currency, thanks to efforts to boost orders for private-sector projects
to replacement. In the large-building (Applied Systems) air-conditioning
amid a series of temporary suspensions or delays, particularly for large-scale
equipment market, the Group expanded sales by carrying out sales activities
government projects, due to prolonged stagnation of crude oil prices and
in a wide range of projects, from large to small- to medium-scale, based on
growing geopolitical risks. In Turkey, net sales increased year on year in the
an enhanced product lineup and reinforced after-sales service business.
local currency, as a result of boosting orders for small to medium-scale com-
mercial projects and strengthening sales of residential air-conditioning sys-
Asia/Oceania Region
tems. This was despite a series of delays in delivery, mainly for large-scale
In Asia and Oceania, net sales after converting to the yen-equivalent
projects and others, and amid the continuing political unrest that followed
remained flat year on year in the region as a whole. Nevertheless, net sales
the attempted coup détat in July.
in the local currency increased considerably year on year thanks to efforts
China
such as dealer development, expanded sales of differentiated energy-saving
products that met local needs, and the reinforcement of the service structure,
In China, while economic growth has been slowing down, the Group intensi-
which led to the capturing of demand among the growing middle class. In
fied its retail sales to capture firm personal consumption. Net sales in the
the residential air-conditioning systems, sales of inverter-type, cooling-only
local currency rose year on year in all regions and for all products. Although
air conditioners with exceptional energy-saving performance were strong,
net sales after converting to the yen-equivalent fell slightly year on year due
and sales grew particularly in Thailand, Vietnam, Indonesia, and India. Sales
to the depreciation of the Chinese yuan, operating income increased year on
of multi-split type room air conditioners for buildings grew due to enhanced
year owing to cost reductions promoted in the production division. In the
‘spec-in’ activities and greater focus on dealer development.
residential-use market, the Group focused on its own specialty “PROSHOPs”
and leveraged its proposal and installation capabilities, which are its
Americas Region
strengths, to expand sales mainly in the mid-range and high-end residential
In the Americas, net sales increased year on year in the region as a whole
market with the “New Life Multi Series,” residential multi-split type room air
due to strong sales. Net sales of residential air-conditioning systems rose
conditioners that propose a variety of lifestyles for customers. In the commer-
year on year as a result of favorable weather in the first half and efforts to
cial-use market, the Group expanded sales by carrying out model changes to
expand the sales network. For light commercial equipment (commercial
the mainstay “VRV-X” series, commercial multi-split type room air
air-conditioning equipment for medium-sized buildings), Daikin has pushed
Selling, General
and Administrative Expenses
(¥ billion)
500
400
300
200
100
0
0
Sales by Segment
Segment Profit
(¥ billion)
2,400
1,800
1,200
600
0
0
(¥ billion)
240
180
120
60
0
2013 2014 2015 2016 2017
2013 2014 2015 2016 2017
2013 2014 2015 2016 2017
Air conditioning
Chemicals
Other
Air conditioning
Chemicals
Other
35
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017
forward with sales policies by routes, and sales were above the previous
• Other Operations
fiscal year. In the market for Applied Systems, backed by a higher level of
Overall sales of the “Others” segment fell by 2.9% year on year, to ¥51.8
demand than in the previous fiscal year, net sales grew year on year thanks
billion. Operating income increased by 6.3% year on year, to ¥3.8 billion.
to sales of Applied Systems, mainly rooftops equipped with inverters, in addi-
Sales of oil hydraulic equipment for industrial machinery fell year on year
tion to growth in the after-sales service business.
due to the impact of stagnant demand in the Japanese market.
• Chemicals
Sales of oil hydraulic equipment for construction machinery and vehicles
remained flat against the previous fiscal year due to the impact of produc-
Overall sales of the Chemicals segment decreased by 3.4%, to ¥156.8 bil-
tion volume adjustments by Chinese agricultural machinery manufacturers,
lion, and operating income decreased by 11.2% year on year, to ¥18.3 bil-
despite robust sales to key customers in Japan and the United States.
lion.
In the specialized machinery businesses, sales of home oxygen equipment
Demand for fluoropolymers was robust for semiconductor-related applica-
were strong, while sales of ammunition to Japan’s Ministry of Defense
tions in Japan and elsewhere in Asia. However, overall sales of fluoropoly-
decreased, resulting in a decline in net sales compared to the previous fiscal
mers fell year on year. This was due to foreign exchange rate impact, price
year.
competition in the U.S. market from rival companies and products made in
In the electronics system business, net sales were on a par with the
China, and intensified competition in the LAN cable market.
previous fiscal year, as sales especially of database systems for design
Fluoroelastomers were affected significantly by foreign exchanges, and
and development sectors expanded.
sales fell year on year, despite robust demand in automotive fields in each
region around the world.
Currency Exchange Rates
Sales of specialty chemicals were down, compared with the previous fiscal
During the fiscal year, the yen appreciated against the U.S. dollar and the
year. Net sales of oil and water repellents fell significantly year on year due
euro. The average exchange rates for the yen were ¥108 to one U.S. dollar
to delays in switchovers to new products as well as the impact of foreign
and ¥119 to one euro. The impact of exchange rate fluctuations on Company
exchange, among other factors. Sales of anti-fouling surface coating agents
sales was minus ¥193.6 billion, and the effect on operating income was
used in devices, such as touch panels, increased year on year, supported by
minus ¥37.0 billion.
strong demand in China. Sales of etchant for cleaning semiconductors
increased year on year due to sales growth in Japan and elsewhere in Asia
where related demand was favorable.
As for fluorocarbon gas, overall sales of gas increased substantially year
on year as a result of growth in sales for after-sales service in the Americas.
Yen-U.S. dollar rate
Yen-euro rate
Fiscal 2016
Fiscal 2017
¥120
¥133
¥108
¥119
Cash Dividends per Share
Total Assets
Working Capital and Current Ratio
(¥ billion)
2,400
1,800
1,200
600
0
0
(¥ billion)
600
400
200
0
(%)
240
160
80
0
2013 2014 2015 2016 2017
2013 2014 2015 2016 2017
2013 2014 2015 2016 2017
Working capital
Current ratio
(¥)
140
120
100
80
60
40
20
0
36
SG&A Expenses and Operating Income
owners of the parent company and other factors. As a result, the sharehold-
Selling, general and administrative expenses rose 1.3%, to ¥500.2 billion,
ers’ equity ratio increased to 47.2%, from 46.3% at the end of the previous
because of an increase in R&D expenses, and rose to 24.5% of net sales.
fiscal year, and net assets per share increased to ¥3,802.10, from ¥3,473.54
Consolidated operating income rose 5.9%, to ¥230.8 billion, and the
at the end of the previous fiscal year.
operating income ratio increased 0.6 percentage point, to 11.3%.
Cash Flows
Assets, Liabilities, and Total Equity
During the fiscal year under review, net cash provided by operating activities
• Assets
was ¥267.7 billion, an increase of ¥41.5 billion from the previous fiscal year,
At the end of fiscal 2017, consolidated total assets amounted to ¥2,356.1
principally due to an increase in income before income taxes and a decrease
billion, up ¥165.0 billion from the previous fiscal year-end. Current assets
in income taxes paid. Net cash used in investing activities was ¥128.8 bil-
were up ¥93.1 billion from the previous year-end, to ¥1,159.9 billion,
lion, an increase of ¥23.3 billion from the previous fiscal year, primarily due
because of an increase in cash and deposits. Noncurrent assets increased by
to an increase in payment for acquisition of consolidated subsidiaries. Net
¥71.9 billion from the previous fiscal year-end, to ¥1,196.3 billion, due to an
cash used in financing activities was ¥73.5 billion, a decrease of ¥11.9 bil-
increase in buildings and structures, as well as other factors.
lion from the previous fiscal year, mainly due to an increase in proceeds from
long-term loans payable. After including the effect of foreign exchange rate
• Assets, Liabilities, and Total Equity
change to these results, cash and cash equivalents at the end of the fiscal
Consolidated total liabilities increased by ¥66.9 billion from the end of the
year under review amounted to ¥344.1 billion, an increase of ¥52.9 billion
previous fiscal year and amounted to ¥1,220.5 billion at the end of fiscal
from the previous fiscal year.
2017 because of an increase in notes and accounts payable and other
factors.
Capital Investment
In addition, interest-bearing debt increased by ¥0.4 billion mainly due to
Concentrating management assets in business fields that offer high profit-
an increase in short-term loans payable and amounted to ¥609.4 billion at
ability is the Daikin Group’s fundamental strategy.
fiscal year-end. The interest-bearing debt ratio (interest-bearing debt divided
In fiscal 2017, the Group made total capital investment of ¥90.3 billion,
by total assets) decreased to 25.9%, compared with 27.8% at the end of
largely in the air-conditioning/refrigeration equipment and chemicals busi-
the previous fiscal year, as a result of an increase in total assets due to an
ness fields.
increase in cash and deposits.
In the air-conditioning and refrigeration equipment field, Daikin invested
Net assets increased by ¥98.1 billion from the previous fiscal year-end, to
¥9.1 billion, centered on the research and development and rationalization
¥1,135.6 billion, because of the recording of net income attributable to
of room air conditioners and package air conditioners. At Goodman Global
Total Share holders’ Equity and
Shareholders’ Equity Ratio
Free Cash Flow
Capital Investment
and Depreciation and Amortization
(¥ billion)
1,200
900
600
300
0
(%)
48
36
24
12
0
(¥ billion)
150
100
50
0
-50
-100
-150
(¥ billion)
120
90
60
30
0
0
2013 2014 2015 2016 2017
2013 2014 2015 2016 2017
2013 2014 2015 2016 2017
Shareholders’ equity
Shareholders’ equity ratio
Capital investment
Depreciation and amortization
(excluding amortization of goodwill)
37
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017
Group, Inc., investments of ¥31.3 billion were made primarily to increase
high-function materials and materials suitable for an environmentally friendly
capacity.
society. Furthermore, the Group is also enhancing the development functions
In the chemicals field, the Group invested ¥7.4 billion, primarily to
of its global locations, including in Europe and China, utilizing new technolo-
increase capacity and for rationalization objectives. In addition, Daikin
gies created by the Japanese domestic research and development depart-
Fluorochemicals (China) Co., Ltd., made ¥2.5 billion in investments for
ment in the development of products that suit local needs. Through these
increasing capacity.
efforts, Daikin will endeavor to substantially increase the efficiency and
The main sources of funds for these investments were bank borrowings
speed of research and development to produce differentiated products
and retained earnings. Note that the Daikin Group did not make any major
around the world.
disacquisitions of equipment or facilities during the fiscal year under review.
In fiscal 2017, R&D expenses included in cost of goods sold and SG&A
expenses amounted to ¥53.9 billion.
R&D Expenses
In response to an increase in worldwide concern regarding global warming
• Air-Conditioning and Refrigeration Equipment
and energy issues, the Group is engaged in leading-edge research and devel-
R&D expenses for air-conditioning and refrigeration equipment operations
opment programs designed to proactively contribute to the resolution of
totaled ¥45.9 billion.
global environmental issues, while also expanding the Group’s business
The wall-mounted-type Urusara 7, which is for residential use, demon-
operations. In 2015, the Group established its Technology and Innovation
strates its pleasant airflow control, which prevents direct flows to the people
Center (TIC), which is the core facility for the technology and product devel-
in the room (for cooling: circulation airflow; for heating: vertical direct airflow),
opment of the Group. This center is designed to conduct research and devel-
and has been well received. In addition to the above conventional features,
opment on cutting-edge technologies and basic technologies and also to
when cooling, whole room temperature irregularities have now been quickly
develop and provide customers with new value-added and differentiated
resolved without direct flows to people by employing a combination of the
products by combining not only expertise within the Group but also the
circulation and vertical direct airflows. With this airflow control and Daikin’s
world’s wisdom, including that of industries, academia, and the government.
original waterless humidifier system technology and cooling dehumidifying
In addition to heat-pump and inverter technologies for air conditioning, the
control that further enhance pleasant air-conditioning experiences, we have
TIC has integrated energy-saving solutions business research centered on the
created spaces enveloped in comfort.
development and air conditioning of air-conditioning control systems, utiliz-
In addition, we launched the UX Series, a wall-mounted indoor unit multi-
ing green architecture/renewable energy areas, new product development in
ple air-conditioning system for residential use. An industrial designer and
processing material areas, and cutting-edge IT. The TIC has also gathered
Daikin Europe employed a design that blends easily into walls and a curved
together development on new applications for fluoride and development on
front panel based on the concept of “harmony with the interior,” due to the
ROE
(%)
16
12
8
4
0
ROA
(%)
8
6
4
2
0
Research and
Development Expenses
(¥ billion)
60
50
40
30
20
10
0
38
2013 2014 2015 2016 2017
2013 2014 2015 2016 2017
2013 2014 2015 2016 2017
growing awareness over residential interior design. Furthermore, by connect-
fluoride-based substances. Daikin is developing water and oil repellent tex-
ing the UX Series and hydronic floor heating to multiple air-conditioning sys-
tiles treatment materials as well as carpet treatment materials. Daikin is also
tems, we have realized energy conservation and pleasant air-conditioning
developing materials for LCD-related applications that draw on the function-
experiences through interlocking control, in addition to design. As a result,
ality of fluorocompounds, and has received an order for a project to develop
Daikin was awarded the Energy Conservation Grand Prize for fiscal 2015 by
intermediate materials for medical use. In these and a wide range of other
the Energy Conservation Center, Japan.
areas, Daikin engages in fluoride-related R&D.
In the commercial-use air-conditioner business, we launched the VRV X
In addition to the development of materials, as part of R&D in peripheral
series, a multiple air-conditioning system for office buildings. Through review-
areas to develop technologies and applications, Daikin is working on the
ing the coolant circuit and enhancing running efficiency during low-load
development of film process products, multilayered materials, and advanced
operating periods, we have substantially reduced annual electric power costs.
materials research related to the medical, optical, and environmental areas,
In addition, for ceiling cassette type indoor units, we have employed the fun-
probing the depths of fluoro-related research and applications. Especially in
damentally reviewed “active circulation airflow” to realize warm and pleas-
the energy field, Daikin is concentrating on developing such products as
ant heating from the feet up. Furthermore, responding to the needs for the
electrolyte solutions, additives, positive electrode binders, gaskets, and other
simple adoption of air-conditioning systems that lack airflows, such as radi-
components needed to increase the capacity and safety of lithium ion
ant air-conditioning and built-in floor heating systems, we have added a
secondary batteries.
chilled water producing “chilled water unit” to our product lineup.
In the refrigerant field, we accelerated R&D related to next-generation
For applied equipment, in North America, in addition to cost reductions,
refrigerants to cope with environmental regulations and developed the new
we launched next-generation magnetic bearing turbo refrigerator equipment
refrigerant R407H for freezers and refrigerators. R407H is a non-ozone
that also conforms to the high requirements for lifts. In addition, we demon-
depleting and non-flammable refrigerant and has approximately 62% lower
strated an industry-leading level of full-load performance for high-efficiency
global warming potential (GWP) than the commonly used R404A refrigerant.
two-stage turbo refrigerator equipment with refrigeration capacities of
Going forward, we will continue to engage in the development of even lower
1,500RT. In China, we developed module and turbo refrigeration equipment
GWP refrigerants. To accelerate and promote R&D in these areas, the
to meet the expected demand for the renewal and replacement of existing
Chemicals Division is responsible for ensuring the implementation of new
equipment.
product development, and the TIC is exploring the next generation of themes
Responding to environmental needs, we launched DC inverter cooling
that will lead to the Chemicals business.
dedicated chillers, high-efficiency air-cooled magnetic bearing chillers, and
ultrahigh-efficiency heat-pump chillers. In Europe, we developed our inverter
• Other Operations
screw chillers, which demonstrate an industry-leading level of efficiency, and,
R&D expenses for Other operations totaled ¥1.8 billion.
for secondary side products, we progressed with simple selection and the
In oil hydraulics, Daikin is commercializing a large-capacity series of prod-
development of overwhelmingly highly efficient products, launching an
ucts and developing new applications by leveraging the special characteris-
air-handling unit aimed at hospitals and the hygiene market.
tics of its hybrid oil hydraulic system technology that combines oil hydraulic
For air-handling units, we developed a ceiling-embedded type to meet the
technology and inverter technology to realize energy conservation and high
needs for distributed ventilation.
functionality that could not be attained with previously existing hydraulic
• Chemicals
systems. In the industrial press business, Daikin’s “Super Unit” has won high
acclaim for its low electric power consumption and resulting energy conser-
R&D expenses for Chemicals operations totaled ¥6.2 billion.
vation. It also features low noise and lower heat emissions, and it contrib-
Daikin conducts R&D for new products and new applications based on
utes to the work environment through the use of a reduced-size oil tank, and
rich experience in fluorine products and fluorochemical technology. In fluoro-
reduces the burden on the environment. In addition, Daikin has launched a
polymer resins and fluororubbers, using fluorochemicals’ good properties in
large-scale extruder system that equals electric power as a motive force for
heat resistance, low drug reactivity, and dielectric properties, Daikin is devel-
its responsiveness and energy conservation. This system can handle multiple
oping new differentiated products for automotive, semiconductor, wire and
voltages and has other features needed in Asia and other regions where
cable (IT field), and other applications. In coating materials development,
adaptation to local conditions is needed. Daikin will expand this system’s
Daikin makes use of the non-adhesive and chemical resistance properties of
lineup, and it is being adopted in many locations where presses and other
39
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017
machines are needed. Daikin is adapting its products to additional uses
Amid this business environment, for this year (2017), we set “Integrate
globally and will move forward with sales expansion.
new power with our solid foundation to enhance our corporate value” as the
Also, Daikin is proceeding with the development of an energy conserva-
Group’s New Year’s slogan with the aim of generating results amid the
tion system for use on special vehicles. One of these units, a hydraulic hybrid
uncertain outlook in the global situation. We will refine our efforts to
system for use on vehicles, has already been adopted. In addition to conven-
strengthen our sales and marketing capabilities, improve product develop-
tional hydraulic systems, Daikin is proceeding with the development of
ment, production, procurement, and quality capabilities, and enhance our
advanced environmentally responsive products that go beyond the existing
human resources capabilities, which we have continued to implement, and
frameworks and will find applications globally.
further promote initiatives aimed at greater growth.
In defense systems, Daikin conducts R&D related to artillery shell and
We should work toward reinforcing our production system, global
guided missile components mainly for Japan’s Ministry of Defense.
research and development framework, and securing new technologies by
making investments after ascertaining areas of common ground between
Dividend Policy and Dividends Applicable to the Fiscal Year
pursuing medium- to long-term growth under “FUSION 20,” the Group’s
Daikin continues to make strategic investments and expand its business,
strategic management plan, and securing short-term profit.
while also proceeding with such structural reforms as those to promote com-
For the fiscal year ending March 31, 2018, we forecast a 7.1% increase in
prehensive cost reductions and strengthen its financial position. The aim of
consolidated net sales, to ¥2,190 billion, with operating income rising 5.3%,
these initiatives is to become a truly global excellent company and, at the
to ¥243.0 billion, and net income attributable to owners of the parent com-
same time, substantially augment corporate value.
pany increasing 3.9%, to ¥160.0 billion. The estimated exchange rate for the
Specifically, in accordance with its fundamental goal of providing a stable
fiscal year ending March 31, 2018, is based on the assumption that US$1
and continuous return to shareholders, Daikin is striving to keep its consoli-
equals ¥108 and 1 euro equals ¥118.
dated ratio of dividends on equity (DOE) at levels of 3% or above while also
seeking to increase its consolidated dividend payout ratio and thereby
Principal Risks Associated
further expand shareholder returns.
with the Daikin Group’s Operations
Internal reserves will be applied to strengthen the Daikin Group’s business
Sharp changes in politico-economic conditions
and financial position to accelerate the development of global businesses,
or supply-demand relationships in principal markets
further the development of environment-friendly products, and make strate-
The Group develops, manufactures, sells, and procures goods and services
gic investments to expand business activities and strengthen competitive-
throughout the world, and there is a possibility that Group performance
ness.
could be impacted due to changes in the business environment in the mar-
For the fiscal year ended March 31, 2017, Daikin increased its total cash
kets or regions in which the Group operates, such as political or economic
dividend by ¥10 per share, to ¥130 per share (comprising an interim divi-
trends, the introduction of more-stringent environmental regulations,
dend of ¥60 per share and a year-end dividend of ¥70 per share). For the
increased competition from competitors, or sudden rises in the cost of raw
current fiscal year ending March 31, 2018, the Company plans to distribute
materials. In addition, Daikin is attempting to further expand its manufactur-
a total annual dividend of ¥130 per share (comprising an interim dividend of
ing and sales network and enhance Groupwide profitability through invest-
¥65 per share and a year-end dividend of ¥65 per share).
ment such as the acquiring of air-conditioning equipment dealers or
Outlook for Fiscal 2018
companies, such as the Goodman Global Group, Inc. (completed in 2012),
and the establishment of manufacturing facilities. However, there is a possi-
While the global economy is expected to steadily expand going forward,
bility that the Group’s performance could be impacted, depending on the
against the backdrop of the economic recovery in the United States and
state of progress of such activities.
robust Chinese, Indian, and ASEAN economies, the outlook is also uncertain
due to factors such as political risks in the United States and Europe and
geopolitical risks in the Middle East and Asia.
40
Cold summer weather and other unusual weather patterns
innovations related to quality, costs, and product development speed. The
accompanied by changes in demand for air conditioners
Group also has purchased liability insurance to cover unexpected quality-
Air-conditioning and refrigeration operations accounted for 89.8% of the
related claims, but, in the case that a major quality claim situation were
Daikin Group’s consolidated net sales in fiscal 2017. Therefore, the Group
to occur, there is a possibility that it could have an impact on the Group’s
strives to accurately monitor weather information and weather-related
performance.
demand trends in the world’s principal markets. It also employs flexible man-
ufacturing methods and marketing policies designed to minimize the impact
Major problems in manufacturing
of those demand trends on its performance. However, depending on the
The Group strives to implement thorough preventative maintenance mea-
magnitude of demand changes resulting from cold summer weather or other
sures at all its production facilities, regardless of whether they are in Japan
unusual weather patterns, there is a possibility that the Group’s performance
or overseas. In addition, particularly with respect to the Chemicals business,
could be impacted.
the Group is working to strengthen its facility safety audits, security manage-
ment systems, and other related systems. Moreover, with respect to manufac-
Large fluctuations in currency exchange rates
turing problems, the Group has purchased insurance to cover facility damage
Overseas sales accounted for 74.6% of the Daikin Group’s consolidated net
and foregone earnings, but, in the case that a major problem were to occur
sales in fiscal 2017. The acceleration of global business development going
in manufacturing operations, there is a possibility that it could have an
forward is expected to further elevate this overseas sales ratio. Consolidated
impact on the Group’s performance.
financial statements are prepared by translating local currency-denominated
items for Group operations in each global region, including sales, expenses,
Major changes in the market prices of securities
and assets. Accordingly, depending on currency exchange rates at the time of
and other assets
the currency translation, there may be an impact on yen translation values
The Group’s holdings of securities are primarily holdings designed to
even when there has been no change in local currency-denominated figures.
strengthen collaborative business expansion measures in cooperation with
In addition, because the Group engages in foreign currency-denominated
business partners and to strengthen relationships with business partners.
transactions in raw materials and component procurement and in the sale of
However, in the case of large fluctuations in securities markets, bankruptcies
goods and services, there is a possibility that changes in currency exchange
of business partners, and similar situations, there is a possibility that it could
rates could impact manufacturing costs and sales performance. To avoid such
have an impact on the Group’s performance.
currency exchange rate-related risks, the Group undertakes short-term risk
hedging via forward exchange contracts and similar instruments. Daikin
Impairment of long-lived assets
also undertakes medium- to long-term measures to continuously adjust
In connection with its business assets, goodwill generated on the occasion
procurement and manufacturing operations and optimize them for changing
of corporate acquisitions, and similar items, the Group records various types
currency exchange-rate trends, and to balance imports and exports in each
of tangible and intangible long-lived assets. With respect to these assets, in
currency. Through this, the Group works to realize a business structure that
cases going forward when such factors as performance trends and market
is not greatly impacted by changes in currency exchange rates. However,
price drops prevent the generation of expected cash flows, there may be
currency exchange rate-related risks cannot be completely avoided.
cases in which the assets in question may require impairment treatment.
In the case of such impairment of long-lived assets, there is a possibility
Major product quality claims
that it could have an impact on the Group’s performance.
The Group strives to ensure thorough quality management for all its prod-
ucts, regardless of whether they are manufactured in Japan or overseas. With
Natural disasters
respect to new product development, all four related elements—design,
In the case that such natural disasters as major earthquakes and typhoons
production technology, and purchasing units and suppliers—work in an
occur and exert an impact on the Group’s manufacturing, marketing, and
integrated manner to concurrently move ahead with the collaborative
distribution bases, there is a possibility that it could have an impact on the
development of process innovation measures, aiming to implement
Group’s performance.
41
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017 Consolidated Balance Sheet
Daikin Industries, Ltd. and Consolidated Subsidiaries
March 31, 2017
ASSETS
Current assets:
Cash and cash equivalents (Notes 9 and 17)
Trade receivables (Notes 8, 9 and 17):
Notes
Accounts
Allowance for doubtful receivables
Inventories (Note 3)
Deferred tax assets (Note 13)
Prepaid expenses and other current assets
Total current assets
Property, plant and equipment:
Land
Buildings and structures
Machinery and equipment
Furniture and fixtures
Lease assets (Note 16)
Construction in progress
Total
Accumulated depreciation
Net property, plant and equipment
Investments and other assets:
Investment securities (Notes 6, 9 and 17)
Investments in and advances to unconsolidated subsidiaries and associated companies
Goodwill (Note 7)
Customer relationships
Other intangible assets
Deferred tax assets (Note 13)
Assets for retirement benefits (Note 10)
Other assets
Total investments and other assets
Total
See notes to consolidated financial statements.
42
Millions of Yen
2017
2016
¥ 344,094
¥ 291,206
51,154
317,907
(8,216)
358,303
35,786
60,857
50,730
304,917
(6,279)
333,652
33,987
58,556
1,159,885
1,066,769
37,589
335,654
515,027
167,119
4,610
29,592
36,364
280,346
495,660
163,060
5,692
50,132
1,089,591
1,031,254
(665,064)
424,527
(646,154)
385,100
179,206
20,260
330,876
135,774
70,314
5,048
13,034
17,225
170,487
19,100
329,753
124,672
64,436
3,475
11,540
15,773
771,737
739,236
¥2,356,149
¥2,191,105
LIABILITIES AND EQUITY
Current liabilities:
Short-term borrowings (Notes 9 and 17)
Current portion of long-term debt (Notes 9 and 17)
Current portion of long-term lease obligations (Note 16)
Trade payables (Note 17):
Notes
Accounts
Income taxes payable (Note 17)
Deferred tax liabilities (Note 13)
Provision for product warranties
Accrued expenses (Note 8)
Other current liabilities (Note 8)
Total current liabilities
Long-term liabilities:
Long-term debt (Notes 9 and 17)
Long-term lease obligations (Note 16)
Liabilities for retirement benefits (Note 10)
Deferred tax liabilities (Note 13)
Other long-term liabilities
Total long-term liabilities
Commitments and contingent liabilities (Notes 16 and 18)
Equity (Notes 11, 12 and 22):
Common stock—authorized, 500,000,000 shares; issued 293,113,973 shares in 2017 and 2016
Capital surplus
Stock acquisition rights
Retained earnings
Treasury stock, at cost: 739,660 shares in 2017 and 1,075,356 shares in 2016
Accumulated other comprehensive income (loss):
Unrealized gain on available-for-sale securities
Deferred loss on derivatives under hedge accounting
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Subtotal
Noncontrolling interests
Total equity
Total
Millions of Yen
2017
2016
¥ 57,699
¥ 54,675
77,178
1,798
8,971
164,176
27,770
23,769
49,751
108,279
107,286
626,677
72,941
1,943
7,959
148,079
11,511
24,581
46,567
98,801
96,670
563,727
463,292
477,492
9,463
11,940
87,994
21,174
1,930
10,982
78,029
21,475
593,863
589,908
85,032
84,545
1,080
837,968
(3,160)
53,042
(120)
61,037
(6,708)
85,032
83,585
1,119
720,548
(4,598)
46,320
(2,124)
93,798
(8,152)
1,112,716
1,015,528
22,893
21,942
1,135,609
1,037,470
¥2,356,149
¥2,191,105
43
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017
Consolidated Statement of Income
Daikin Industries, Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2017
Net sales (Note 8)
Cost of sales (Note 15)
Gross profit
Selling, general and administrative expenses (Notes 7, 8 and 15)
Operating income
Other (expenses) income:
Interest and dividend income
Interest expense
Exchange gains (losses)
Gain on sales of land
Losses on disposals of property, plant and equipment and other intangible assets
Losses on impairment of long-lived assets (Note 4)
Gains on sales of investment securities (Note 6)
Impairment losses on investment securities (Notes 6 and 17)
Gains on reversal of stock acquisition rights
Loss on restructuring of subsidiaries
Other—net
Other (expenses) income—net
Income before income taxes
Income taxes (Note 13):
Current
Deferred
Total income taxes
Net income
Net income attributable to noncontrolling interests
Net income attributable to owners of parent
Amounts per common share (Note 20):
Basic net income
Diluted net income
Cash dividends applicable to the year
See notes to consolidated financial statements.
44
Millions of Yen
2017
2016
¥2,043,969
¥2,043,691
1,313,034
1,332,115
730,935
500,166
230,769
10,431
(9,910)
330
452
(927)
25
(561)
(160)
230,609
70,217
471
70,688
159,921
(5,982)
711,576
493,704
217,872
10,637
(8,495)
(11,279)
(1,078)
(491)
112
(605)
4
(1,294)
800
(11,689)
206,183
59,389
4,702
64,091
142,092
(5,105)
¥ 153,939
¥ 136,987
Yen
¥526.81
526.43
130.00
¥469.23
468.84
120.00
Consolidated Statement of Comprehensive Income
Daikin Industries, Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2017
Net income
Other comprehensive loss (Note 19):
Unrealized gains (losses) on available-for-sale securities
Deferred gains (losses) on derivatives under hedge accounting
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Share of other comprehensive loss in affiliates accounted for using the equity method
Total other comprehensive loss
Millions of Yen
2017
2016
¥159,921
¥142,092
6,721
2,004
(32,609)
1,448
(1,142)
(23,578)
(21,498)
(1,659)
(86,963)
(5,573)
(809)
(116,502)
Comprehensive income
¥136,343
¥ 25,590
Total comprehensive income attributable to:
Owners of parent
Noncontrolling interests
See notes to consolidated financial statements.
¥131,348
¥ 22,489
4,995
3,101
Consolidated Statement of Changes in Equity
Daikin Industries, Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2017
Outstanding
Number of
Common
Shares Issued
Common
Stock
Capital
Surplus
Stock
Acquisition
Rights
Retained
Earnings
Treasury
Stock
Millions of Yen
Accumulated Other Comprehensive Income (Loss)
Unrealized
Gain
on Available-
for-Sale
Securities
Deferred
Loss on
Derivatives
under Hedge
Accounting
Foreign
Currency
Translation
Adjustments
Remeasure-
ments of
Defined
Benefit Plans
Total
Noncontrol-
ling Interests
Total
Equity
Balance, April 1, 2015
291,833,321 ¥85,032
¥83,444
¥ 993
¥617,129 ¥(5,221)
¥67,819
¥ (464)
¥179,566
¥(2,580)
¥1,025,718 ¥22,594
¥1,048,312
Net income
Cash dividends, ¥120 per share
Repurchase of treasury stock
(53,704)
Disposal of treasury stock
259,000
Change in parent’s ownership
interest due to transactions
with noncontrolling interests
Net change in the year
183
(42)
136,987
(33,568)
(479)
1,102
136,987
(33,568)
(479)
1,285
136,987
(33,568)
(479)
1,285
(42)
(42)
126
(21,499)
(1,660)
(85,768)
(5,572)
(114,373)
(652)
(115,025)
Balance, March 31, 2016
292,038,617
85,032
83,585
1,119
720,548 (4,598)
46,320
(2,124)
93,798
(8,152)
1,015,528
21,942
1,037,470
Net income
Cash dividends, ¥130 per share
Repurchase of treasury stock
Disposal of treasury stock
Net change in the year
153,939
(36,519)
(304)
336,000
960
(3)
1,441
153,939
(36,519)
(3)
2,401
153,939
(36,519)
(3)
2,401
(39)
6,722
2,004
(32,761)
1,444
(22,630)
951
(21,679)
Balance, March 31, 2017
292,374,313 ¥85,032 ¥84,545
¥1,080 ¥837,968 ¥(3,160)
¥53,042
¥ (120) ¥ 61,037
¥(6,708) ¥1,112,716 ¥22,893 ¥1,135,609
See notes to consolidated financial statements.
45
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017
Consolidated Statement of Cash Flows
Daikin Industries, Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2017
Operating activities:
Income before income taxes
Adjustments for:
Income taxes—paid
Depreciation and amortization
Losses on impairment of long-lived assets
Gains on sales of investment securities
Impairment losses on investment securities
Losses on disposals of property, plant and equipment and other intangible assets
Equity in (earnings) losses of unconsolidated subsidiaries and associated companies
Changes in assets and liabilities, net of effects of the purchase of subsidiaries:
Trade notes and accounts receivable
Inventories
Other current assets
Assets for retirement benefits
Trade notes and accounts payable
Accrued expenses
Other current liabilities
Liabilities for retirement benefits
Other—net
Total adjustments
Net cash provided by operating activities
Investing activities:
Payments for purchases of property, plant and equipment
Proceeds from sales of property, plant and equipment
Payments for acquisition of newly consolidated subsidiaries,
net of cash and cash equivalents acquired (Note 14)
Proceed from sales of shares of subsidiary resulting in change in the scope of consolidation
Payment for acquisition of shares of an associated company
Payments for transfer of business
Proceed from transfer of business
Payments for acquisition of investment securities
Proceeds from sales of investment securities (Note 6)
Other—net
Net cash used in investing activities
Financing activities:
Net decrease in short-term borrowings
Proceeds from long-term debt
Repayments of long-term debt (Note 14)
Cash dividends paid to owners of parent
Cash dividends paid to noncontrolling interests
Proceeds from issuance of shares to noncontrolling interests
Other—net
Net cash used in financing activities
Effect of exchange rate changes on cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
See notes to consolidated financial statements.
46
Millions of Yen
2017
2016
¥230,609
¥206,183
(55,253)
85,029
(25)
927
(920)
(13,440)
(23,384)
364
(1,333)
14,406
8,940
16,432
1,289
4,022
37,054
267,663
(88,335)
2,253
(32,998)
705
(1,870)
(165)
46
(8,459)
(128,823)
(1,243)
60,295
(91,263)
(36,519)
(4,265)
233
(782)
(73,544)
(12,408)
52,888
291,206
¥344,094
(72,930)
84,203
491
(112)
605
1,078
83
(19,940)
1,494
(2,869)
7,998
10,318
7,733
10,166
708
(9,023)
20,003
226,186
(96,697)
992
(1,311)
(358)
(3,182)
121
(2,587)
193
(2,664)
(105,493)
(2,839)
(40,076)
(33,568)
(6,529)
(2,410)
(85,422)
(31,015)
4,256
286,950
¥291,206
Notes to Consolidated Financial Statements
Daikin Industries, Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2017
1. BASIS OF PRESENTATION OF CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements of Daikin Industries, Ltd. (the “Company”) have been prepared in accordance
with the provisions set forth in the Japanese Financial Instruments and Exchange Act and its related accounting regulations and in
accordance with accounting principles generally accepted in Japan (“Japanese GAAP”), which are different in certain respects as to
the application and disclosure requirements of International Financial Reporting Standards (IFRSs).
In preparing these consolidated financial statements, certain reclassifications and rearrangements have been made to the
Company’s consolidated financial statements issued domestically in order to present them in a form which is more familiar to
readers outside Japan.
In addition, certain reclassifications have been made in the 2016 consolidated financial statements to conform to the
classification used in 2017.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Principles of Consolidation and Accounting for Investments in Unconsolidated Subsidiaries and Associated
Companies - The accompanying consolidated financial statements include the accounts of the Company and its significant
subsidiaries (collectively, the “Group”).
Under the control and influence concepts, those companies in which the Company, directly or indirectly, is able to exercise
control are fully consolidated, and those companies over which the Group has the ability to exercise significant influence are
accounted for by the equity method.
The Group applies the equity method of accounting for investments in unconsolidated subsidiaries and associated companies
except for certain insignificant companies. Investments in such insignificant companies are stated at cost, except investments for
which the value has been permanently impaired, for which appropriate write-downs are recorded. If these subsidiaries and
associated companies had been consolidated or accounted for using the equity method, respectively, the effect on the
accompanying consolidated financial statements would not have been material.
All significant intercompany balances and transactions have been eliminated in consolidation. All material unrealized profit
included in assets resulting from transactions within the Group is eliminated.
b. Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements - In
accordance with the Accounting Standards Board of Japan (“ASBJ”) Practical Issues Task Force (“PITF”) No. 18, “Practical Solution
on Unification of Accounting Policies Applied to Foreign Subsidiaries for the Consolidated Financial Statements,” the accounting
policies and procedures applied to a parent company and its subsidiaries for similar transactions and events under similar
circumstances should, in principle, be unified for the preparation of the consolidated financial statements. However, financial
statements prepared by foreign subsidiaries in accordance with either IFRSs or generally accepted accounting principles in the
United States of America (Financial Accounting Standards Board Accounting Standards Codification—”FASB ASC”) tentatively
may be used for the consolidation process, except for the following items which should be adjusted in the consolidation process
so that net income is accounted for in accordance with Japanese GAAP, unless they are not material: (a) amortization of goodwill;
(b) scheduled amortization of actuarial gain or loss of pensions that has been recorded in equity through other comprehensive
income; (c) expensing capitalized development costs of research and development; and (d) cancellation of the fair value model
of accounting for property, plant and equipment and investment properties and incorporation of the cost model of accounting.
c. Unification of Accounting Policies Applied to Foreign Associated Companies for the Equity Method - In accordance
with ASBJ Statement No. 16, “Accounting Standard for Equity Method of Accounting for Investments,” adjustments are to be
made to conform the associate’s accounting policies for similar transactions and events under similar circumstances to those of the
parent company when the associate’s financial statements are used in applying the equity method unless it is impracticable to
determine such adjustments. In addition, financial statements prepared by foreign associated companies in accordance with either
IFRSs or generally accepted accounting principles in the United States of America (“U.S. GAAP”) tentatively may be used in
applying the equity method if the following items are adjusted so that net income is accounted for in accordance with Japanese
GAAP, unless they are not material: (a) amortization of goodwill; (b) scheduled amortization of actuarial gain or loss of pensions
that has been recorded in equity through other comprehensive income; (c) expensing capitalized development costs of research
and development; and (d) cancellation of the fair value model of accounting for property, plant and equipment and investment
properties and incorporation of the cost model of accounting.
47
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017
d. Business Combinations - Business combinations are accounted for using the purchase method. Acquisition-related costs,
such as advisory fees or professional fees, are accounted for as expenses in the periods in which the costs are incurred. If the initial
accounting for a business combination is incomplete by the end of the reporting period in which the business combination occurs,
an acquirer shall report in its financial statements provisional amounts for the items for which the accounting is incomplete. During
the measurement period, which shall not exceed one year from the acquisition, the acquirer shall retrospectively adjust the
provisional amounts recognized at the acquisition date to reflect new information obtained about facts and circumstances that
existed as of the acquisition date and that would have affected the measurement of the amounts recognized as of that date. Such
adjustments shall be recognized as if the accounting for the business combination had been completed at the acquisition date.
A parent’s ownership interest in a subsidiary might change if the parent purchases or sells ownership interests in its subsidiary.
The carrying amount of noncontrolling interest is adjusted to reflect the change in the parent’s ownership interest in its subsidiary
while the parent retains its controlling interest in its subsidiary. Any difference between the fair value of the consideration received
or paid and the amount by which the noncontrolling interest is adjusted is accounted for as capital surplus as long as the parent
retains control over its subsidiary.
The Group acquired 100% of the equity interest of Flanders Holdings LLC on April 27, 2016 and accounted for this acquisition
by the purchase method of accounting (see Note 5).
e. Cash Equivalents - Cash equivalents are short-term investments that are readily convertible into cash and exposed to
insignificant risk of changes in value.
Cash equivalents include time deposits, which mature within three months of the date of acquisition. Time deposits that mature
in more than three months, but within a year of the date of acquisition, are recorded as short-term investments. The Group had no
short-term investments at March 31, 2017 and 2016.
f. Allowance for Doubtful Accounts - The allowance for doubtful accounts is stated in amounts considered to be appropriate
based on the past credit loss experience and an evaluation of potential losses in receivables outstanding.
g. Inventories - Inventories of the Company and its consolidated domestic subsidiaries are stated at the lower of cost, principally
determined by the average method, or net selling value. Inventories of consolidated foreign subsidiaries are stated at the lower of
cost, principally determined by the average method, or market.
h. Property, Plant and Equipment - Property, plant and equipment are stated at cost. Depreciation of property, plant and
equipment of the Company and its consolidated subsidiaries is principally computed by the straight-line method based on the
estimated useful lives of the assets.
The range of useful lives is from 15 to 50 years for buildings and structures, and from 5 to 15 years for machinery and
equipment. The useful lives for lease assets are the terms of the respective leases.
i. Asset Retirement Obligations - An asset retirement obligation is recorded for a legal obligation imposed either by law or
contract that results from the acquisition, construction, development and normal operation of a tangible fixed asset and is
associated with the retirement of such tangible fixed asset. The asset retirement obligation is recognized as the sum of the
discounted cash flows required for the future asset retirement and is recorded in the period in which the obligation is incurred if
a reasonable estimate can be made. If a reasonable estimate of the asset retirement obligation cannot be made in the period the
asset retirement obligation is incurred, the liability should be recognized when a reasonable estimate of the asset retirement
obligation can be made. Upon initial recognition of a liability for an asset retirement obligation, an asset retirement cost is
capitalized by increasing the carrying amount of the related fixed asset by the amount of the liability. The asset retirement cost
is subsequently allocated to expense through depreciation over the remaining useful life of the asset. Over time, the liability is
accreted to its present value each period. Any subsequent revisions to the timing or the amount of the original estimate of
undiscounted cash flows are reflected as an adjustment to the carrying amount of the liability and the capitalized amount of
the related asset retirement cost.
j. Long-Lived Assets - The Group reviews its long-lived assets for impairment whenever events or changes in circumstance
indicate the carrying amount of an asset or asset group may not be recoverable. An impairment loss is recognized if the carrying
amount of an asset or asset group exceeds the sum of the undiscounted future cash flows expected to result from the continued
use and eventual disposition of the asset or asset group. The impairment loss would be measured as the amount by which the
carrying amount of the asset exceeds its recoverable amount, which is the higher of the discounted cash flows from the continued
use and eventual disposition of the asset or the net selling price at disposition.
k. Leases - Finance lease transactions are capitalized by recognizing lease assets and lease obligations in the balance sheet.
In March 2007, the ASBJ issued ASBJ Statement No. 13, “Accounting Standard for Lease Transactions,” which revised the
previous accounting standard for lease transactions. The revised accounting standard permits leases that existed at the transition
date and do not transfer ownership of the leased property to the lessee to continue to be accounted for as operating lease
transactions.
48
The Company and its consolidated domestic subsidiaries applied the revised accounting standard effective April 1, 2008. In
addition, the Company and its consolidated domestic subsidiaries continue to account for leases that existed at the transition date
and that do not transfer ownership of the leased property to the lessee as operating lease transactions.
All other leases are accounted for as operating leases.
l. Investment Securities - All marketable securities held by the Group are classified as available-for-sale securities and are
reported at fair value, with unrealized gains and losses, net of applicable taxes, reported in a separate component of equity. The
cost of securities sold is principally determined based on the moving-average method.
Non-marketable available-for-sale securities are stated at cost principally determined by the moving-average method.
For other-than-temporary declines in fair value, available-for-sale securities are reduced to net realizable value by charging such
losses to income.
m. Goodwill and Intangible Assets - Goodwill and intangible assets arise principally from business combinations. Goodwill
represents the excess of the purchase price over the fair value of the identifiable net assets acquired. Goodwill is amortized over a
period of 9 to 20 years. Intangible assets primarily include customer relationships. Customer relationships are amortized using the
straight-line method over the estimated useful lives (mainly 30 years).
n. Provision for Product Warranties - The Group repairs or exchanges certain products without charge under specific
circumstances. The provision for product warranties is stated in amounts considered to be appropriate based on the past
experience and an evaluation of potential losses on the product warranties.
o. Employees’ Retirement Benefits - The Company and its consolidated domestic subsidiaries have non-contributory funded
pension plans covering substantially all of their employees. Certain consolidated foreign subsidiaries have pension plans.
The Company accounts for the liability for retirement benefits based on the projected benefit obligations and plan assets at the
balance sheet date. The projected benefit obligations are attributed to periods on a benefit formula basis. Actuarial gains and
losses and past service costs that are yet to be recognized in profit or loss are recognized within equity (accumulated other
comprehensive income), after adjusting for tax effects and are recognized in profit or loss over certain periods (mainly 10 years) no
longer than the expected average remaining service period of the employees. The discount rate is determined using a single
weighted-average discount rate reflecting the estimated timing and amount of benefit payment.
p. Stock Options - The Company measures the cost of employee stock options based on the fair value at the date of grant and
recognized as compensation expense over the vesting period as consideration for receiving goods or services. The Company
accounts for stock options granted to nonemployees based on the fair value of either the stock options of the goods or services
received. In the consolidated balance sheet, the stock options are presented as a stock acquisition right as a separate component
of equity until exercised.
q. Foreign Currency Transactions - All short-term and long-term monetary receivables and payables denominated in foreign
currencies are translated into Japanese yen at the exchange rates at the consolidated balance sheet date. The foreign exchange
gains and losses from translation are recognized in the consolidated statement of income to the extent that they are not hedged
by forward exchange contracts.
r. Foreign Currency Financial Statements - The balance sheet accounts of the consolidated foreign subsidiaries are translated
into Japanese yen at the current exchange rate as of the balance sheet date except for equity, which is translated at the historical
rate. Revenue and expense accounts of the consolidated foreign subsidiaries are translated into Japanese yen at the average
exchange rate. Differences arising from such translations are shown as “foreign currency translation adjustments” under
accumulated other comprehensive income in a separate component of equity.
s. Bonuses to Directors and Audit & Supervisory Board Members - Bonuses to Directors and Audit & Supervisory Board
Members are accrued at the year-end to which such bonuses are attributable. Accrued bonuses are included in accrued expenses.
t. Income Taxes - The provision for current income taxes is computed based on income before income taxes included in the
consolidated statement of income. The asset and liability approach is used to recognize deferred tax assets and liabilities for the
expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and
liabilities. Deferred taxes are measured by applying currently enacted tax laws to the temporary differences.
The Company applied ASBJ Guidance No. 26, “Guidance on Recoverability of Deferred Tax Assets,” effective April 1, 2016.
There was no impact from this for the year ended March 31, 2017.
49
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017 u. Derivative Financial Instruments - The Group uses foreign exchange forward contracts, currency swaps and currency options
to manage foreign exchange risk associated with certain assets and liabilities denominated in foreign currencies.
The Group uses mainly interest rate swaps and interest rate options to manage its exposure to fluctuations in interest rates.
The Group uses commodity futures contracts to manage the risk of fluctuation of commodity prices for materials.
The Group does not enter into derivatives for trading or speculative purposes.
Derivative financial instruments are classified and accounted for as follows: (1) derivatives are principally recognized as either
assets or liabilities and measured at fair value, and gains or losses on derivative transactions are recognized in the consolidated
statement of income and (2) for derivatives used for hedging purposes, if such derivatives qualify for hedge accounting because of
high correlation and effectiveness between the hedging instruments and the hedged items, gains or losses are deferred until
maturity of the hedged transactions.
The interest rate swaps that qualify for hedge accounting and meet specific matching criteria are not remeasured at market
value but the differential paid or received under the swap agreements is recognized and included in interest expense or income.
v. Amounts Per Common Share - Basic net income per common share is computed by dividing net income attributable to
common shareholders by the weighted-average number of common shares outstanding for the period, retroactively adjusted for
stock splits.
Diluted net EPS of common stock assumes full exercise of the outstanding stock options which have a dilutive effect at the
beginning of year (or at the time of issuance).
Cash dividends per share presented in the accompanying consolidated statement of income are dividends applicable to the
respective fiscal years including dividends to be paid after the end of the year.
w. New Accounting Pronouncements
Leases - On January 13, 2016, the International Accounting Standards Board issued IFRS 16 Leases. On February 25, 2016, the
Financial Accounting Standards Board issued Accounting Standards Update (ASU) 2016-02 Leases (Topic 842). These standards
require lessees to recognize most leases on the balance sheet thereby resulting in the recognition of lease assets and liabilities. The
Company expects to apply IFRS 16 for annual periods beginning on or after January 1, 2019. The Company expects to apply ASU
2016-02 for annual periods beginning after December 15, 2019 and for the first quarter within annual periods beginning after
December 15, 2020. The Group is currently assessing the impact that these new standards will have on the consolidated financial
statements.
3. INVENTORIES
Inventories at March 31, 2017 and 2016 consisted of the following:
Finished products and merchandise
Semifinished products and work in process
Raw materials and supplies
Total
Millions of Yen
2017
2016
¥249,487
¥232,018
42,250
66,566
40,028
61,606
¥358,303
¥333,652
50
4. LONG-LIVED ASSETS
The Group reviewed its long-lived assets for impairment for the years ended March 31, 2017 and 2016. Impairment losses
recognized were mainly as follows:
March 31, 2016
Use
Location
Asset Category
Millions of Yen
Held for use
Settsu City, Osaka Prefecture
Machinery and equipment
¥450
The Group recognized impairment losses recorded in other expenses for those assets as the profitability of oil hydraulics business
for industrial machinery is expected to decline due to economic downturn and sluggish demand in the Chinese market. The
carrying amounts of the related assets were written down to the recoverable amount. The recoverable amounts of these assets
were measured at value in use and the discount rate used for computation of the present value of future cash flows was 5%.
No impairment loss was recognized for the year ended March 31, 2017.
5. BUSINESS COMBINATIONS
Acquisition of an Entity during the Year Ended March 31, 2017
1. Outline of the business combination:
(1) Name and business contents of the acquiree:
Flanders Holdings LLC
Name:
Business contents: Manufacture and sale of air filters and other related products
(2) Main reason for the business combination:
With this acquisition, Flanders Holdings LLC (hereinafter, “Flanders”) will be integrated into American Air Filter Company, Inc.
(hereinafter, “AAF”), enabling AAF to leverage its global sales network to market cleanroom equipment and high-end air filter
products, which are the main products of Flanders. In addition to making AAF the leading manufacturer in the United States,
which is reportedly the largest air filter market in the world, this integration will also position AAF as a leading company in the
global market.
(3) Date of the business combination:
April 27, 2016
(4) Legal form of the business combination:
Acquisition of equity interests for cash considerations
(5) Name of the acquiree after business combination:
Flanders Holdings LLC
(6) Ratio of equity interests acquired:
100%
(7) Basis for determination of the acquirer:
AAF, a subsidiary of the Company, is regarded as the acquiring company since AAF acquired all equity interests of Flanders for
cash consideration.
2. Period of operating results of the acquiree included in the consolidated financial statements:
From April 27, 2016, to March 31, 2017
3. Amount and breakdown of the acquisition costs:
Payment for acquisition of equity interests: Cash US$209 million (¥23,287 million)
4. Amount and breakdown of the main acquisition related costs:
Expenses related directly to the acquisition, including mainly advisory expenses: US$6 million (¥719 million)
5. Amount of goodwill recognized, reason for recognition, and method and period for amortization of goodwill:
(1) Amount of goodwill recognized: US$171 million (¥18,990 million)
(2) Reason for recognition: Future business activities are expected to generate excess profitability.
(3) Method and period for amortization of goodwill: Straight-line method over 13 years
51
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017 6. Amount and breakdown of the assets acquired and the liabilities assumed at the acquisition date:
Current assets
Fixed assets
Total assets
Current liabilities
Long-term liabilities
Total liabilities
Millions of USD
$107
418
$525
$222
93
$315
Millions of
Yen
¥11,880
46,492
¥58,372
¥24,703
10,382
¥35,085
7. Amount of identifiable intangible assets other than goodwill, its details and major weighted-average useful life:
Customer relationships
Trademarks
Technologies
Total
Millions of USD
$130
18
2
$150
Millions
of Yen
¥14,466
2,003
256
¥16,725
Weighted Average
Useful Life
15
Non-amortizable
11
8. Even if this business combination had been completed as of April 1, 2016, the beginning of the fiscal year ended
March 31, 2017, the Company believes the effect of consolidating this entity on the financial statements would be
minor. Therefore, the pro forma financial information is omitted.
6. MARKETABLE AND INVESTMENT SECURITIES
The acquisition costs and aggregate fair values of marketable available-for-sale securities included in investment securities at March
31, 2017 and 2016 were as follows:
Securities classified as available-for-sale:
Equity securities
Debt securities
Total
Securities classified as available-for-sale:
Equity securities
Debt securities
Total
Millions of Yen
2017
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
¥99,121
¥71,961
¥(2,300)
¥168,782
325
1
326
¥99,446
¥71,962
¥(2,300)
¥169,108
Millions of Yen
2016
Cost
Unrealized
Gains
Unrealized
Losses
Fair
Value
¥98,754
¥63,907
¥(2,975)
¥159,686
350
1
351
¥99,104
¥63,908
¥(2,975)
¥160,037
52
Available-for-sale securities that were sold during the years ended March 31, 2017 and 2016 were as follows:
March 31, 2017
Available-for-sale:
Equity securities
March 31, 2016
Available-for-sale:
Equity securities
Millions of Yen
Proceeds
Realized
Gains
Realized
Losses
¥40
¥25
Millions of Yen
Proceeds
Realized
Gains
Realized
Losses
¥168
¥98
The impairment loss on marketable available-for-sale securities for the year ended March 31, 2016 was ¥0.1 million. No
impairment loss was recognized for the year ended March 31, 2017.
7. GOODWILL
Amortization expenses for goodwill were ¥25,735 million and ¥26,282 million for the years ended March 31, 2017 and 2016,
respectively, which were included in selling, general and administrative expenses.
8. RELATED PARTY TRANSACTIONS
Material transactions and balances with related parties for the years ended March 31, 2017 and 2016 were as follows:
(1) 2017
(a) The Company
Name
Description of Post
Ownership of
the Company
(%)
Chiyono Terada External Director/Chief
0.00
Executive Officer
(CEO) and President of
Art Corporation
(b) The Company’s consolidated subsidiaries
Name
Description of Post
Ownership of
the Company
(%)
Chiyono Terada External Director/CEO
0.00
and President of Art
Corporation
Millions of Yen
Transactions
Resulting Account Balances
Description of Transaction
Commissions for moving
business and delivery business
2017
¥488
Account
Accrued expenses
and other current
liabilities
2017
¥47
Millions of Yen
Transactions
Resulting Account Balances
Description of Transaction
Commissions for moving
business and delivery business
2017
¥ 56
Account
Accrued expenses
and other current
liabilities
2017
¥ 5
Sales of products
143
Accounts receivable
22
The terms and conditions applicable to the above-mentioned transactions have been determined on an arm’s-length basis and
by reference to the normal market price.
53
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017 (2) 2016
(a) The Company
Name
Description of Post
Ownership of
the Company
(%)
Chiyono Terada External Director/Chief
0.00
Executive Officer
(CEO) and President of
Art Corporation
(b) The Company’s consolidated subsidiaries
Name
Description of Post
Ownership of
the Company
(%)
Chiyono Terada External Director/CEO
0.00
and President of Art
Corporation
Millions of Yen
Transactions
Resulting Account Balances
Description of Transaction
2016
Account
Commission for moving
business and delivery business
¥535
Accrued expenses
and other current
liabilities
2016
¥76
Millions of Yen
Transactions
Resulting Account Balances
Description of Transaction
2016
Account
Commission for moving business
and delivery business
¥ 55
Accrued expenses
and other current
liabilities
2016
¥ 5
Sales of products
119
Accounts receivable
16
The terms and conditions applicable to the above-mentioned transactions have been determined on an arm’s-length basis and
by reference to the normal market price.
9. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings of the Group at March 31, 2017 and 2016 consisted of the following:
Bank overdrafts and notes to banks
Commercial paper
Total
Millions of Yen
2017
¥57,699
¥57,699
2016
¥40,675
14,000
¥54,675
Unused short-term bank credit lines were ¥178,048 million at March 31, 2017. The weighted-average interest rates of bank
overdrafts and notes to banks at March 31, 2017 and 2016 were 2.51% and 1.00%, respectively. The weighted-average interest
rate of commercial paper at March 31, 2016 was 0.00%.
54
Long-term debt at March 31, 2017 and 2016 consisted of the following:
1.42% unsecured bonds, due 2016
0.46% unsecured bonds, due 2017
1.86% unsecured bonds, due 2019
0.72% unsecured bonds, due 2019
0.38% unsecured bonds, due 2021
1.20% unsecured bonds, due 2022
0.68% unsecured bonds, due 2024
0.21% unsecured bonds, due 2026
Unsecured loans from government-sponsored banks, with interest of 1.75%, due through 2019
Millions of Yen
2017
¥ 10,000
40,000
10,000
10,000
30,000
10,000
10,000
20,000
2016
¥ 30,000
10,000
40,000
10,000
10,000
30,000
10,000
20,000
Unsecured loans from banks and others, payable in foreign currencies, with interest ranging from
0.00% to 4.00% (2017) and from 0.90% to 4.00% (2016), due through 2026
171,256
140,816
Unsecured loans from banks and others with interest ranging from 0.11% to 3.60% (2017) and from
0.15% to 3.62% (2016), due through 2023
Total
Less current portion
229,214
540,470
(77,178)
249,617
550,433
(72,941)
Long-term debt, less current portion
¥463,292
¥477,492
Annual maturities of long-term debt outstanding at March 31, 2017 were as follows:
Year Ending March 31
2018
2019
2020
2021
2022
2023 and thereafter
Total
Millions of Yen
¥ 77,178
78,208
92,442
94,625
63,605
134,412
¥540,470
At March 31, 2017, investment securities with book values of ¥800 million, time deposit with a book value of ¥193 million and
note receivables with book values of ¥399 million were pledged as collateral without corresponding borrowings.
As is customary in Japan, additional securities must be provided if requested by a lending bank. Certain banks have the right to
offset cash deposited against any debt or obligation that becomes due, or, in case of default and certain other specified events,
against all other debt payable to them. To date, none of the lenders have ever exercised these rights with respect to debt of the
Group.
55
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017
10. SEVERANCE INDEMNITIES AND PENSION PLANS
Under the Group’s severance indemnities and pension plans, employees terminating their employment are, in most circumstances,
entitled to severance and pension payments based on their average pay during their employment, length of service and certain
other factors.
The Group accounts for part of the defined benefit obligations and benefit costs for retirement lump-sum payment using the
simplified method.
1. Defined benefit plans
(1) The changes in defined benefit obligations for the years ended March 31, 2017 and 2016 were as follows (excluding
the benefit plans for which the simplified method was applied):
Balance at beginning of year
Service cost
Interest cost
Net actuarial losses
Past service cost
Benefits paid
Effect of changes in the scope of consolidation
Foreign currency translation adjustments
Others
Balance at end of year
Millions of Yen
2017
¥95,395
4,751
1,164
4,647
(3,752)
165
(3,205)
(6)
2016
¥91,059
5,229
1,913
3,688
150
(4,072)
266
(3,018)
180
¥99,159
¥95,395
(2) The changes in plan assets for the years ended March 31, 2017 and 2016 were as follows (excluding the benefit
plan for which the simplified method was applied):
Balance at beginning of year
Expected return on plan assets
Net actuarial gains (losses)
Contributions from the employer
Benefits paid
Effect of changes in the scope of consolidation
Foreign currency translation adjustments
Others
Balance at end of year
Millions of Yen
2017
2016
¥ 98,679
¥102,450
3,269
4,257
3,068
(3,342)
(231)
(2,726)
(17)
3,796
(4,690)
3,186
(3,576)
(2,488)
1
¥102,957
¥ 98,679
(3) The changes in defined benefit obligation for the years ended March 31, 2017 and 2016 using the simplified
method were as follows:
Balance at beginning of year
Periodic benefit cost
Benefits paid
Balance at end of year
Millions of Yen
2017
¥2,726
1,196
(1,219)
¥2,703
2016
¥2,674
1,046
(994)
¥2,726
56
(4) Reconciliations between the liabilities recorded in the consolidated balance sheet and the balances of defined
benefit obligation and plan assets at March 31, 2017 and 2016 were as follows (including the benefit plan for
which the simplified method was applied):
Funded defined benefit obligation
Plan assets
Total
Unfunded defined benefit obligation
Millions of Yen
2017
¥ (95,868)
102,957
7,089
(5,994)
2016
¥(92,760)
98,679
5,919
(5,361)
Net amount of liabilities and assets recorded in the consolidated balance sheet
¥ 1,095
¥ 558
Liabilities for retirement benefits
Assets for retirement benefits
Net amount of liabilities and assets recorded in the consolidated balance sheet
¥ (11,939)
13,034
¥ 1,095
¥(10,982)
11,540
¥ 558
(5) The components of net periodic benefit costs for the years ended March 31, 2017 and 2016 were as follows:
Service cost
Interest cost
Expected return on plan assets
Recognized net actuarial losses (gains)
Amortization of past service cost
Periodic benefit cost calculated by the simplified method
Others
Subtotal (net periodic benefit costs)
Total
Millions of Yen
2017
¥4,751
1,163
(3,269)
2,039
(144)
1,196
(4)
5,732
¥5,732
2016
¥5,229
1,913
(3,796)
(103)
(218)
1,046
255
4,326
¥4,326
(6) Amounts recognized in other comprehensive income (before income tax effect) in respect of defined benefit plans
for the years ended March 31, 2017 and 2016 were as follows:
Past service cost
Net actuarial (losses) gains
Total
Millions of Yen
2017
¥ 432
(2,826)
¥(2,394)
2016
¥ 205
7,887
¥8,092
(7) Amounts recognized in accumulated other comprehensive income (before income tax effect) in respect of defined
benefit plans for the years ended March 31, 2017 and 2016 were as follows:
Unrecognized past service cost
Unrecognized net actuarial losses
Total
Millions of Yen
2017
¥ (680)
9,617
¥8,937
2016
¥ (1,112)
12,443
¥11,331
57
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017 (8) Plan assets
(a) Components of plan assets
Plan assets at March 31, 2017 and 2016, consisted of the following:
Domestic debt securities
Domestic equity securities
Foreign debt securities
Foreign equity securities
Insurance assets (general account)
Cash and deposits
Alternative investments
Total
2017
6%
8
22
20
17
1
26
2016
6%
8
25
18
17
1
25
100%
100%
(b) Method of determining the expected rate of return on plan assets
To determine the expected long-term rate of return on plan assets, we consider current and target asset allocations, as well as
historical and expected returns on various categories of plan assets.
(9) Assumptions used for the years ended March 31, 2017 and 2016 were as follows:
Discount rate
Expected rate of return on plan assets
Expected rate of future salary increases
2017
Mainly 0.3%
Mainly 2.5%
Mainly 3.5%
2016
Mainly 0.3%
Mainly 2.5%
Mainly 3.5%
2. Defined contribution plan
The amounts of contribution required for the defined contribution plan paid by the Company and its subsidiaries were ¥4,965
million and ¥4,742 million for the years ended March 31, 2017 and 2016, respectively.
11. EQUITY
Japanese companies are subject to the Companies Act of Japan (the “Companies Act”). The significant provisions in the
Companies Act that affect financial and accounting matters are summarized below:
(a) Dividends
Under the Companies Act, companies can pay dividends at any time during the fiscal year in addition to the year-end dividend
upon resolution at the shareholders’ meeting. For companies that meet certain criteria including (1) having a Board of Directors, (2)
having independent auditors, (3) having an Audit & Supervisory Board, and (4) the term of service of the directors being prescribed
as one year rather than the normal two-year term by its articles of incorporation, the Board of Directors may declare dividends
(except for dividends-in-kind) at any time during the fiscal year if the company has prescribed so in its articles of incorporation.
However, the Company cannot do so because it does not meet all the above criteria.
The Companies Act permits companies to distribute dividends-in-kind (non-cash assets) to shareholders subject to a certain
limitation and additional requirements.
Semiannual interim dividends may also be paid once a year upon resolution by the Board of Directors if the articles of
incorporation of the Company so stipulate. The Companies Act provides certain limitations on the amounts available for dividends
or the purchase of treasury stock. The limitation is defined as the amount available for distribution to the shareholders, but the
amount of net assets after dividends must be maintained at no less than ¥3 million.
(b) Increases/Decreases and Transfer of Common Stock, Reserve and Surplus
The Companies Act requires that an amount equal to 10% of dividends must be appropriated as a legal reserve (a component of
retained earnings) or as additional paid-in capital (a component of capital surplus), depending on the equity account that was
charged upon the payment of such dividends, until the aggregate amount of legal reserve and additional paid-in capital equals
25% of the common stock. Under the Companies Act, the total amount of additional paid-in capital and legal reserve may be
reversed without limitation. The Companies Act also provides that common stock, legal reserve, additional paid-in capital, other
capital surplus and retained earnings can be transferred among the accounts within equity under certain conditions upon
resolution of the shareholders.
58
(c) Treasury Stock and Treasury Stock Acquisition Rights
The Companies Act also provides for companies to purchase treasury stock and dispose of such treasury stock by resolution of the
Board of Directors. The amount of treasury stock purchased cannot exceed the amount available for distribution to the
shareholders which is determined by a specific formula.
Under the Companies Act, stock acquisition rights are presented as a separate component of equity.
The Companies Act also provides that companies can purchase both treasury stock acquisition rights and treasury stock. Such
treasury stock acquisition rights are presented as a separate component of equity or deducted directly from stock acquisition rights.
12. STOCK OPTIONS
The stock options outstanding at March 31, 2017, were as follows:
Number of
Options Granted
290,000 shares
Date of Grant
Exercise Price
Exercise Period
2010.7.14
¥3,050
Stock Option
2010 Stock Option
2011 Stock Option
2012 Stock Option
2013 Stock Option
2014 Stock Option
2015 Stock Option
2016 Stock Option
Persons
Granted
8 directors
41 employees
10 directors
39 employees
10 directors
41 employees
10 directors
38 employees
9 directors
45 employees
9 directors
46 employees
8 directors
53 employees
296,000 shares
2011.7.14
¥2,970
300,000 shares
2012.7.13
¥2,186
286,000 shares
2013.7.12
¥4,500
310,000 shares
2014.7.14
¥6,715
53,200 shares
2015.7.13
¥ 1
58,100 shares
2016.7.14
¥ 1
From July 15, 2012
to July 14, 2016
From July 15, 2013
to July 14, 2017
From July 14, 2014
to July 13, 2018
From July 13, 2015
to July 12, 2019
From July 15, 2016
to July 14, 2020
From July 14, 2018
to July 13, 2030
From July 15, 2019
to July 14, 2031
59
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017 The stock option activity was as follows:
2009
Stock
Option
2010
Stock
Option
2011
Stock
Option
2012
Stock
Option
2013
Stock
Option
2014
Stock
Option
2015
Stock
Option
2016
Stock
Option
Shares
Year Ended March 31, 2016
Vested
April 1, 2015—Outstanding
8,000
16,000
36,000
87,000
286,000
310,000
Granted
Exercised
Canceled
March 31, 2016—Outstanding
Year Ended March 31, 2017
Vested
(4,000)
(10,000)
(16,000)
(51,000)
(178,000)
(4,000)
6,000
20,000
36,000
108,000
310,000
53,200
53,200
April 1, 2016—Outstanding
6,000
20,000
36,000
108,000
310,000
53,200
Granted
Exercised
Canceled
(6,000)
(20,000)
(19,000)
(76,000)
(215,000)
58,100
March 31, 2017—Outstanding
Exercise price
Average stock price at exercise
¥3,250
¥8,486
¥3,050
¥ 2,970
¥ 2,186
¥8,817
¥10,512
¥10,270
17,000
32,000
¥4,500
¥9,391
95,000
¥6,715
¥9,708
53,200
¥ 1
58,100
¥ 1
Fair value price at grant date
¥ 899
¥1,113
¥ 935
¥ 676
¥1,220
¥1,697
¥7,726
¥7,859
The assumptions used to measure the fair value of 2016 Stock Option
Estimate method:
Black-Scholes option-pricing model
Volatility of stock price:
39.9%
Estimated remaining outstanding period: 9 years
Estimated dividend:
Risk-free interest rate:
¥120 per share
0.3%
60
13. INCOME TAXES
The Company and its domestic subsidiaries are subject to Japanese national and local income taxes that, in the aggregate, resulted
in normal effective statutory tax rates of approximately 30.8% and 33.0% for the years ended March 31, 2017 and 2016,
respectively.
The tax effects of significant temporary differences and tax loss carryforwards that resulted in deferred tax assets and liabilities at
March 31, 2017 and 2016 were as follows:
Deferred tax assets:
Provision for product warranties
Inventories
Investment securities
Tax loss carryforwards
Deferred revenue
Software and other intangible assets
Accrued bonus
Liabilities for retirement benefits
Allowance for doubtful receivables
Foreign income tax credit
Other
Less valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Intangible assets
Undistributed earnings of consolidated subsidiaries
Unrealized gain on available-for-sale securities
Assets for retirement benefits
Deferred gains on sales of property
Other
Total deferred tax liabilities
Net deferred tax liabilities
Millions of Yen
2017
2016
¥ 14,696
14,552
¥ 14,946
14,293
6,911
9,908
6,485
6,012
3,973
2,487
1,747
184
6,774
5,641
5,505
5,345
3,529
2,246
1,425
733
20,614
(16,728)
17,664
(16,669)
¥ 70,841
¥ 61,432
¥ 69,574
¥ 64,087
33,483
16,727
4,216
1,375
16,395
33,019
14,694
3,574
1,187
10,019
¥141,770
¥ (70,929)
¥126,580
¥ (65,148)
A reconciliation between the normal effective statutory tax rates and the actual effective tax rates reflected in the accompanying
consolidated statement of income for the year ended March 31, 2016 was as follows:
Normal effective statutory income tax rate
Differences in foreign subsidiaries’ tax rates
Amortization of goodwill
Taxes and tax effects on dividends from foreign subsidiaries
Valuation allowance
Permanently non-taxable income, such as dividend income
Tax credit for research and development
Permanently non-deductible expenses, such as entertainment expenses
Other - net
Actual effective income tax rate
2016
33.0%
(6.5)
4.0
3.7
(1.4)
(1.2)
(1.1)
0.5
0.1
31.1%
61
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017
A reconciliation of the difference between the normal effective statutory tax rates and the actual effective tax rates is not
disclosed since the difference is less than 5% of the normal effective statutory income tax rate for the year ended March 31, 2017.
On November 18, 2016, the Tax Reform Act was enacted in Japan to change the normal effective statutory tax rate used in the
calculation of deferred tax assets and deferred tax liabilities for the year ended March 31, 2017, from the figures used for the year
ended March 31, 2016. It resulted in a change in the deferred tax liabilities (net of deferred tax assets) and income taxes—deferred
recorded in the year ended March 31, 2017. The effect of this change on the consolidated financial statements is not material.
At March 31, 2017, the Company and certain consolidated subsidiaries had tax loss carryforwards aggregating ¥30,698 million,
which are available to be offset against taxable income of the Company and such subsidiaries in future years. These tax loss
carryforwards, if not utilized, will expire as follows:
Year Ending March 31
2018
2019
2020
2021
2022
2023 and thereafter
Total
Millions of Yen
¥ 1,292
315
696
825
573
26,997
¥30,698
14. SUPPLEMENTAL CASH FLOW INFORMATION
The Group acquired Flanders Holdings LLC and its subsidiaries during the year ended March 31, 2017.
Reconciliation between cash paid for the equity interest of Flanders Holdings LLC and payment for the acquisition of these newly
consolidated subsidiaries, net of cash and cash equivalents acquired, was as follows:
Current assets
Fixed assets
Goodwill
Current liabilities
Long-term liabilities
Cash paid for the equity interest
Cash and cash equivalents of consolidated subsidiaries
Payment for acquisition of equity interest of newly consolidated subsidiaries,
net of cash and cash equivalents acquired
Millions of Yen
2017
¥11,880
27,501
18,991
(24,703)
(10,382)
23,287
(834)
¥22,453
Repayments of long-term debt included ¥18,336 million for repayments of long-term debt by Flanders Holdings LLC and the
other companies which the Group acquired for the year ended March 31, 2017.
15. RESEARCH AND DEVELOPMENT COSTS
Research and development costs included in cost of sales and selling, general and administrative expenses were ¥53,870 million
and ¥46,138 million for the years ended March 31, 2017 and 2016, respectively.
62
16. LEASES
The Group leases certain computer equipment and other assets.
Obligations under finance leases and future minimum payments under noncancelable operating leases at March 31, 2017 were
as follows:
Due within one year
Due after one year
Total
17. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES
Millions of Yen
Finance
Leases
¥ 1,798
9,463
¥11,261
Operating
Leases
¥17,091
39,719
¥56,810
Group policy for financial instruments
The Group uses financial instruments, mainly bank loans and bonds, based on its capital financing plan. Short-term bank loans and
commercial paper are used to fund the Group’s ongoing operations, and cash surpluses are invested in low-risk financial assets.
Derivatives are not used for speculative purposes, but to manage exposure to financial risks as described below.
Nature and extent of risks arising from financial instruments and risk management for financial instruments
Receivables, such as trade notes and trade accounts, are exposed to customer credit risk. The Group manages its credit risk from
receivables based on the internal policies, which include monitoring of payment terms and balances of major customers to identify
the default risk of the customers.
Payment terms of payables, such as trade notes and trade accounts, are less than one year.
Although receivables and payables in foreign currencies are exposed to the market risk of fluctuation in foreign currency
exchange rates, the net position of receivables and payables in each foreign currency is hedged by using mainly forward foreign
currency contracts and currency swaps. In addition, receivables and payables in foreign currencies which are expected from
forecasted transactions are hedged by using forward foreign currency contracts and currency swaps.
Investment securities, mainly equity instruments of customers and suppliers of the Group, are exposed to the risk of market price
fluctuations. Investment securities are periodically managed by monitoring market values and financial position of issuers.
Short-term bank loans and commercial paper are mainly used to fund the Group’s ongoing operations. Long-term bank loans
and bonds are used mainly for capital expenditures. Although the payables such as trade notes and trade accounts, bank loans and
bonds are exposed to liquidity risk, the Group manages the liquidity risk through adequate financial planning by the corporate
finance department. In addition, the Group has short-term bank credit lines. Some long-term bank loans are exposed to market
risks from changes in interest rates, which are hedged by mainly using interest rate swaps.
Derivatives mainly include forward foreign currency contracts, interest rate swaps and commodity futures contracts, which are
used to manage exposure to market risks from changes in foreign currency exchange rates of receivables and payables, interest
rates of bank loans, and market value fluctuation of raw materials.
Derivative transactions entered into by the Group have been made in accordance with internal policies which regulate the
authorization and credit limit amount.
Because the counterparties to these derivatives are limited to financial institutions with high creditworthiness, the Group does
not anticipate any losses arising from credit risk.
63
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017
Fair values of financial instruments
The carrying amounts, fair values and unrealized loss of significant financial instruments were as follows. Fair values of financial
instruments are based on quoted price in active markets. If a quoted price is not available, another rational valuation technique is
used instead. Instruments whose fair values cannot be readily determined are not included in the following.
Cash and cash equivalents
Trade notes and accounts receivable
Investment securities
Total
Trade notes and accounts payable
Short-term borrowings
Income taxes payable
Long-term debt
Total
Derivatives
Cash and cash equivalents
Trade notes and accounts receivable
Investment securities
Total
Trade notes and accounts payable
Short-term borrowings
Income taxes payable
Long-term debt
Total
Derivatives
Millions of Yen
March 31, 2017
Carrying
Amount
Fair
Value
Unrealized
Loss
¥344,094
¥344,094
369,061
169,108
¥882,263
¥173,147
57,699
27,770
540,470
¥799,086
369,061
169,108
¥882,263
¥173,147
57,699
27,770
546,631
¥805,247
¥ (1,363)
¥ (1,363)
Millions of Yen
March 31, 2016
¥6,161
¥6,161
Carrying
Amount
Fair
Value
Unrealized
Loss
¥291,206
¥291,206
355,647
160,037
¥806,890
¥156,038
54,675
11,511
550,433
¥772,657
¥ (3,444)
355,647
160,037
¥806,890
¥156,038
54,675
11,511
560,212
¥782,436
¥ (3,444)
¥9,779
¥9,779
Assets
Cash and cash equivalents
The carrying values of cash and cash equivalents approximate fair value because of their short maturities.
Trade notes and accounts receivable
The carrying values of trade notes and accounts receivable approximate fair value because of their short maturities.
Investment securities
The fair values of equity securities are measured at the quoted market prices of the stock exchange for the equity instruments, and
the fair values of debt securities are measured at the amounts to be received through maturity discounted at the Group’s assumed
corporate discount rate. Fair value information for investment securities by classification is included in Note 6.
64
Liabilities
Trade notes and accounts payable, short-term borrowings and income taxes payable
The carrying values of trade notes and accounts payable, short-term borrowings and income taxes payable approximate fair value
because of their short maturities.
Long-term debt
The fair values of bonds are determined at the quoted market prices of the over-the-counter market for the corporate bonds, and
the fair values of long-term loans are determined by discounting the cash flows related to the loans at the Group’s assumed
corporate borrowing rate. The fair values of long-term loans with floating interest rates, which are hedged by the interest rate
swaps that qualify for hedge accounting and meet specific matching criteria, are determined by discounting the cash flows related
to the loans and the interest rate swaps at the Group’s assumed corporate borrowing rate.
Derivatives
The fair values of derivatives are measured at the quoted price obtained from the financial institution.
The contracts or notional amounts of derivatives that are shown in the table below do not represent the amounts exchanged by
the parties and do not measure the Group’s exposure to credit or market risk.
Derivative transactions to which hedge accounting is not applied
Forward exchange contracts:
Selling: GBP
EUR
USD
AUD
ZAR
CZK
HKD
SGD
MYR
TRY
IDR
INR
Buying: CNY
Commodity futures contracts:
Buying: Metal
Millions of Yen
March 31, 2017
Contract
Amount
Due after
One Year
Fair
Value
Unrealized
Gain (Loss)
¥ (31)
¥ (31)
158
431
21
6
27
24
16
(3)
2
(8)
(37)
16
158
431
21
6
27
24
16
(3)
2
(8)
(37)
16
Contract
Amount
¥ 4,777
32,805
39,742
7,263
731
2,769
1,041
1,445
744
1,757
3,163
1,458
1,140
¥ 2,699
¥ 2
¥ 2
65
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017
Forward exchange contracts:
Selling: GBP
EUR
USD
AUD
ZAR
CZK
HKD
PLN
SGD
MYR
TRY
BRL
IDR
INR
Buying: CNY
MYR
Commodity futures contracts:
Buying: Metal
Derivative transactions to which hedge accounting is applied
Forward exchange contracts:
Selling: GBP
EUR
USD
ZAR
CZK
PLN
TRY
Buying: CNY
Interest rate swaps:
Millions of Yen
March 31, 2016
Contract
Amount
Due after
One Year
Fair
Value
Unrealized
Gain (Loss)
¥ 65
(49)
103
(281)
(15)
7
23
(0)
(55)
(58)
(48)
(3)
(59)
(6)
(67)
¥ 65
(49)
103
(281)
(15)
7
23
(0)
(55)
(58)
(48)
(3)
(59)
(6)
(67)
411
411
Contract
Amount
¥ 5,535
42,015
18,385
5,869
655
1,813
1,261
188
2,027
985
8,214
18
2,947
676
1,391
9,353
¥ 688
¥ (39)
¥ (39)
Millions of Yen
March 31, 2017
Contract
Amount
Due after
One Year
Fair
Value
¥ (5)
(276)
20
(10)
53
(30)
24
9
Hedged Item
Receivables
Receivables
Receivables
Receivables
Receivables
Receivables
Receivables
Payables
Contract
Amount
¥ 5,701
37,769
6,340
1,138
6,743
1,220
2,310
5,702
Fixed-rate payment, floating-rate receipt
Long-term debt
¥184,898
¥171,996
¥(1,773)
Fixed-rate payment, floating-rate receipt*
Long-term debt
129,200
98,000
66
Forward exchange contracts:
Selling: GBP
EUR
USD
ZAR
CZK
PLN
TRY
Buying: CNY
Interest rate swaps:
Millions of Yen
March 31, 2016
Contract
Amount
Due after
One Year
Fair
Value
¥ 291
(212)
73
6
(259)
(21)
(64)
(131)
Hedged Item
Receivables
Receivables
Receivables
Receivables
Receivables
Receivables
Receivables
Payables
Contract
Amount
¥ 7,378
41,319
2,455
885
7,596
1,156
3,528
4,521
Fixed-rate payment, floating-rate receipt
Long-term debt
¥174,601
¥162,776
¥(3,057)
Fixed-rate payment, floating-rate receipt*
Long-term debt
149,600
129,200
* The above interest rate swaps that qualify for hedge accounting and meet specific matching criterion are not remeasured at market value, but the differential paid or
received under the swap agreements is recognized and included in interest expense or income. In addition, the fair values of such interest rate swaps are included in long-
term debt.
Financial instruments whose fair values cannot be readily determinable
Nonlisted equity securities
Investments in limited partnerships and other investments
Total
Millions of Yen
Carrying Amount
2017
2016
¥ 9,413
¥ 9,565
685
885
¥10,098
¥10,450
The impairment losses on nonlisted equity securities for the year ended March 31, 2016 were ¥605 million.
Maturity analysis for financial assets and securities with contractual maturities
Cash and cash equivalents
Trade notes and accounts receivable
Investment securities:
Millions of Yen
March 31, 2017
Due in
One Year
or Less
¥344,094
369,032
Due after
One Year
through
Five Years
¥29
Due after
Five Years
through
Ten Years
Due after
Ten Years
Available-for-sale securities with contractual maturities (corporate bonds)
25
Total
¥713,151
¥29
Cash and cash equivalents
Trade notes and accounts receivable
Investment securities:
Due in
One Year
or Less
¥291,206
355,599
Available-for-sale securities with contractual maturities (corporate bonds)
25
Total
¥646,830
Please see Note 9 for annual maturities of long-term debt.
Millions of Yen
March 31, 2016
Due after
One Year
through
Five Years
Due after
Five Years
through
Ten Years
¥48
25
¥73
¥300
¥300
Due after
Ten Years
¥300
¥300
67
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017
18. COMMITMENTS AND CONTINGENT LIABILITIES
Commitments for capital expenditures outstanding at March 31, 2017 totaled approximately ¥7,922 million.
At March 31, 2017, contingent liabilities for trade notes endorsed and repurchase obligation for liquidation of notes receivables
totaled ¥4,118 million and ¥221 million, respectively.
19. COMPREHENSIVE INCOME
The components of other comprehensive loss for the years ended March 31, 2017 and 2016 were as follows:
Unrealized gains (losses) on available-for-sale securities:
Gains (losses) arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total
Deferred gains (losses) on derivatives under hedge accounting:
Gains (losses) arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total
Foreign currency translation adjustments:
Adjustments arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Total
Remeasurements of defined benefit plans:
Adjustments arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total
Share of other comprehensive income in affiliates accounted for using the equity method:
Adjustments arising during the year
Total other comprehensive loss
Millions of Yen
2017
2016
¥ 8,780
¥ (31,523)
(25)
8,755
(2,034)
(98)
(31,621)
10,123
¥ 6,721
¥ (21,498)
¥ 3,487
¥ (3,786)
(395)
3,092
(1,088)
1,278
(2,508)
849
¥ 2,004
¥ (1,659)
¥(32,921)
¥ (86,950)
312
(32,609)
¥(32,609)
(13)
(86,963)
¥ (86,963)
¥ 502
¥ (7,771)
1,892
2,394
(946)
(321)
(8,092)
2,519
¥ 1,448
¥ (5,573)
¥ (1,142)
¥ (809)
¥(23,578)
¥(116,502)
68
20. NET INCOME PER SHARE
Reconciliations of the differences between basic and diluted net income per share (EPS) for the years ended March 31, 2017 and
2016 were as follows:
Year Ended March 31, 2017
Basic EPS:
Millions of Yen
Thousands of Shares
Net Income
Weighted-
Average Shares
Yen
EPS
Net income available to common shareholders
¥153,939
292,208
¥526.81
Effect of dilutive securities:
Stock options
Diluted EPS:
214
Net income for computation
¥153,939
292,422
¥526.43
Year Ended March 31, 2016
Basic EPS:
Millions of Yen
Thousands of Shares
Net Income
Weighted-
Average Shares
Yen
EPS
Net income available to common shareholders
¥136,987
291,942
¥469.23
Effect of dilutive securities:
Stock options
Diluted EPS:
239
Net income for computation
¥136,987
292,181
¥468.84
21. SEGMENT INFORMATION
Under ASBJ Statement No. 17, “Accounting Standard for Segment Information Disclosures,” and ASBJ Guidance No. 20,
“Guidance on Accounting Standard for Segment Information Disclosures,” an entity is required to report financial and descriptive
information about its reportable segments. Reportable segments are operating segments or aggregations of operating segments
that meet specified criteria. Operating segments are components of an entity about which separate financial information is
available and such information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources
and in assessing performance. Generally, segment information is required to be reported on the same basis as is used internally for
evaluating operating segment performance and deciding how to allocate resources to operating segments.
1. Description of reportable segments
The Group’s reportable segments are those for which separate financial information is available and regularly evaluated by the
Company’s Board of Directors in order to decide how resources are allocated among the Group. Therefore, the Group’s reportable
segments consist of the Air Conditioning segment and the Chemicals segment.
The Air Conditioning segment manufactures, distributes and installs air conditioning and refrigeration equipment. The Chemicals
segment manufactures and distributes chemicals.
2. Methods of measurement for the amounts of sales, profit, assets and other items for each reportable segment
The accounting policies of each reportable segment are generally consistent with those disclosed in Note 2, “Summary of
Significant Accounting Policies.”
69
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017 Total
Segment profit
Segment assets
Other:
Depreciation
3. Information about sales, profit, assets and other items
Millions of Yen
March 31, 2017
Reportable Segment
Air
Conditioning
Chemicals
Total
Other
Total
Reconciliations
Consolidated
Sales:
Sales to external customers
¥1,835,377 ¥156,754
¥1,992,131 ¥51,838
¥2,043,969
¥2,043,969
Intersegment sales
389
12,265
12,654
520
13,174 ¥ (13,174)
1,835,766
169,019
2,004,785
52,358
2,057,143
(13,174)
2,043,969
208,750
18,302
227,052
3,750
230,802
(33)
230,769
1,943,887
191,049
2,134,936
34,641
2,169,577
186,572
2,356,149
Amortization of goodwill
25,735
25,735
25,735
¥ 46,057 ¥ 11,600
¥ 57,657 ¥ 1,621
¥ 59,278
¥ 59,278
25,735
Investment balance in
unconsolidated subsidiaries
and associated companies
accounted for using
the equity method
Investment in property,
plant and equipment
and intangible assets
11,596
6,709
18,305
18,305
18,305
76,389
12,552
88,941
1,404
90,345
90,345
Millions of Yen
March 31, 2016
Reportable Segment
Air
Conditioning
Chemicals
Total
Other
Total
Reconciliations
Consolidated
Sales:
Sales to external customers
¥1,828,012 ¥162,286
¥1,990,298 ¥53,393
¥2,043,691
¥2,043,691
Intersegment sales
614
10,295
10,909
500
11,409 ¥ (11,409)
1,828,626
172,581
2,001,207
53,893
2,055,100
(11,409)
2,043,691
193,786
20,621
214,407
3,529
217,936
(64)
217,872
1,798,333
189,508
1,987,841
35,370
2,023,211
167,894
2,191,105
Total
Segment profit
Segment assets
Other:
Depreciation
Amortization of goodwill
26,183
99
26,282
26,282
¥ 44,326 ¥ 12,055
¥ 56,381 ¥ 1,527
¥ 57,908
¥ 57,908
26,282
Investment balance in
unconsolidated subsidiaries
and associated companies
accounted for using
the equity method
Investment in property,
plant and equipment
and intangible assets
11,815
6,798
18,613
18,613
18,613
90,617
18,157
108,774
3,938
112,712
112,712
Notes: 1. The Other segment is the aggregation of other operating segments which are not included in the reportable segments and consists of the Oil Hydraulics segment,
the Defense segment and the Electronics segment.
2. “Reconciliations” include unallocated items and intersegment eliminations. The unallocated corporate assets included in “Reconciliations” amounted to ¥190,001
million and ¥173,176 million at March 31, 2017 and 2016, respectively, which consisted mainly of the Company’s cash, time deposits and investment securities.
3. The aggregated amount of segment profit equals operating income in the consolidated statement of income.
4. Intersegment sales are recorded at values that approximate market prices.
70
4. Supplemental information
(1) Information about geographical areas
(a) Sales
Japan
USA
China
Millions of Yen
March 31, 2017
Asia and
Oceania
Europe
Other
Consolidated
¥518,453
¥503,489
¥329,247
¥303,417
¥274,055
¥115,308
¥2,043,969
Japan
USA
China
Millions of Yen
March 31, 2016
Asia and
Oceania
Europe
Other
Consolidated
¥502,233
¥484,951
¥349,266
¥304,626
¥276,587
¥126,028
¥2,043,691
Note: Sales are classified by country or region based on the physical locations of customers.
(b) Property, plant and equipment
Japan
USA
China
Millions of Yen
March 31, 2017
Asia and
Oceania
Europe
Other
Consolidated
¥140,563
¥128,484
¥70,230
¥43,093
¥33,093
¥9,064
¥424,527
Japan
USA
China
¥140,641
¥91,187
¥77,981
Millions of Yen
March 31, 2016
Asia and
Oceania
¥34,957
Europe
¥31,379
Other
¥8,955
Consolidated
¥385,100
(2) Significant impairment losses on long-lived assets by reportable segment
Impairment losses on long-lived assets
Millions of Yen
March 31, 2016
Air
Conditioning
¥41
Chemicals
Other
¥450
Eliminations
and
Corporate
Consolidated
¥491
Note: The impairment losses reported in “Other” are related to the Oil Hydraulics segment.
71
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017 (3) Information about goodwill
(a) Balance of goodwill by reportable segment
Goodwill for each reportable segment at March 31, 2017 and 2016 was as follows:
Goodwill
Goodwill
Millions of Yen
2017
Chemicals
Other
Millions of Yen
2016
Chemicals
Other
Eliminations
and
Corporate
Eliminations
and
Corporate
Air
Conditioning
¥330,876
Air
Conditioning
¥329,753
Consolidated
¥330,876
Consolidated
¥329,753
22. SUBSEQUENT EVENTS
Resolutions approved by the Company’s Board of Directors at the meeting held on May 10, 2017 are subject to approval at the
general shareholders’ meeting planned to be held on June 29, 2017.
Appropriations of Retained Earnings
Payment of year-end cash dividends of ¥70 per share to shareholders at March 31, 2017, totaling ¥20,467 million is to be resolved.
72
Independent Auditors’ Report
73
DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2017 Corporate Data
(As of March 31, 2017)
Company Name
Head Office
Tokyo Office
Fiscal Year-End Date
Date of Founding
Date of Establishment
Paid-in Capital
Number of Shares
of Common Stock Issued
Daikin Industries, Ltd.
Umeda Center Bldg., 2-4-12, Nakazaki-Nishi, Kita-ku, Osaka 530-8323, Japan
Phone: 81-6-6373-4312 URL: http://www.daikin.com/
JR Shinagawa East Bldg., 2-18-1, Konan, Minato-ku, Tokyo 108-0075, Japan
Phone: 81-3-6716-0111
March 31 on an annual basis
October 25, 1924
February 11, 1934
¥85,032 million
293,113 thousand
Number of Shareholders
24,146
Major Shareholders
Number of Subsidiaries and
Affiliated Companies
Number of Employees
Stock Exchange Listing
Advertising Method
• The Master Trust Bank of Japan, Ltd. (Trust Account)
• Japan Trustee Services Bank, Ltd. (Trust Account)
• Sumitomo Mitsui Banking Corporation
• Japan Trustee Services Bank, Ltd. (Trust Account 5)
• Japan Trustee Services Bank, Ltd. Retirement Benefit Trust Account for The Norinchukin Bank
• The Bank of Tokyo-Mitsubishi UFJ, Ltd.
• CBNY-GOVERNMENT OF NORWAY
• Japan Trustee Services Bank, Ltd. (Trust Account 4)
• Trust & Custody Services Bank, Ltd. (Securities Inv. Trust Account)
• State Street Bank and Trust Company
Subsidiaries: 245 Affiliates: 18
67,036 (Consolidated)
Tokyo
The Company uses the electronic advertising method, posting advertisements on its website (http://
www.daikin.co.jp/e-koukoku/). However, when electronic advertising is not possible due to technical
problems or other circumstances, the Company will post advertisements in the Nikkei Shimbun.
Shareholder Register Administrator Mitsubishi UFJ Trust and Banking Corporation
3-6-3, Fushimicho, Chuo-ku, Osaka 541-8502, Japan
Ordinary General Meeting of
Shareholders
June
Auditor
Deloitte Touche Tohmatsu LLC
Trends in Daikin’s Stock Price
Daikin
(¥)
12,000
12,000
9,000
9,000
6,000
6,000
3,000
3,000
0
0
TOPIX
4,000
4,000
3,000
3,000
2,000
2,000
1,000
1,000
0
0
Trading Volume (Thousands of shares)
80,000
80,000
4
4
7
7
10
10
1
1
4
4
7
7
10
10
1
1
4
4
7
7
10
10
1
1
4
4
7
7
10
10
1
1
4
4
7
7
10
10
1
1
4
4
7
7
10
10
2011
2011
2012
2012
2013
2013
2014
2014
2015
2015
2016
2016
74
60,000
60,000
40,000
40,000
20,000
20,000
0
0
1
1
3
3
2017
2017
A
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n
u
a
l
R
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p
o
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t
2
0
1
7
D
A
I
K
I
N
I
N
D
U
S
T
R
I
E
S
,
L
T
D
.
This report is printed on paper certified by the Forest Stewardship Council (FSC) —an interna-
tional labeling scheme that provides a credible guarantee that the raw materials used in the
product come from an environmentally well-managed forest—and with vegetable ink for
waterless printing (non-VOC ink) that does not contain volatile organic compounds.
Printed in Japan
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