Annual Report 2020
Fiscal Year Ended March 31, 2020
INTRODUCTION
INTRODUCTION
As a group, we will overcome
difficult situations and find solutions to
social problems through air.
Founded in 1924, Daikin has continued to expand with a focus on the Air-Conditioning and
fluorochemicals businesses. We are the world's only general air-conditioning equipment manufacturer
with in-house divisions covering both air conditioning and refrigerants.
Daikin has more than 100 production bases around the world, and conducts business in more than
150 countries and regions.
Based on the "FUSION 20" slogan, "Co-create new value in the air and environment fields with wisdom
and passion," Daikin has promoted the strengthening of its environmental solutions business on a global
basis by the adoption of environmentally conscious products using inverter technology and refrigerants
with lower global warming potential. Despite the harsh business environment, in the fiscal year ended
March 31, 2020 (fiscal 2020), Daikin achieved record-high sales for a seventh consecutive fiscal year.
The current COVID-19 pandemic has brought about changes in economic activities and lifestyles.
The current COVID-19 pandemic has brought about changes in economic activities and lifestyles.
Taking needs into consideration, such as healthy and safe lifestyles, as well as increasing interest in air
quality and ventilation, Daikin will create new value in the air and environment fields—new value that
will be linked to improvements in its corporate value—by both finding solutions to social problems and
achieving business expansion.
CONTENTS
CONTENTS
Our Core Values/
Our Group Philosophy ............................... 1
Review of Operations
Financial Section
Overview of Global Development ............ 20
A Path to Unique Solutions ....................... 2
Air Conditioning ...................................... 21
Process of Value Creation .......................... 4
Chemicals ............................................... 26
Financial/Non-Financial Highlights ............ 6
At a Glance ................................................. 8
Oil Hydraulics .......................................... 28
Defense ................................................... 29
Market Size and Positioning of
Each Business .............................................. 9
Corporate Governance ............................. 30
Corporate Officers ................................... 33
Message from the CEO ............................ 10
CSR Management System ........................ 38
Eleven-Year Financial Highlights ............... 48
Financial Review ...................................... 50
Consolidated Balance Sheet .................... 60
Consolidated Statement of Income .......... 62
Consolidated Statement of
Comprehensive Income ......................... 63
Consolidated Statement of
Changes in Equity ................................. 64
Consolidated Statement of Cash Flows .... 66
Notes to Consolidated
Financial Statements .............................. 67
Independent Auditors’ Report ............... 100
Financial Strategy ..................................... 18
CSR (Corporate Social Responsibility) ..... 40
Corporate Data ..................................... 103
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 Core Values
Absolute Credibility
Enterprising Management
Harmonious Personal Relations
Our Group Philosophy
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”
Annual Report 2020
1
A Path to Unique Solutions
A Path to Unique Solutions
Founded in Osaka in 1924, Daikin operates in more than 150 countries worldwide, focusing on the Air-
Conditioning business. By providing solutions to the problems society and communities are facing while
achieving business growth, Daikin supports healthy and comfortable lifestyles. As a global corporation
creating new value in the air and environmental fields, Daikin continually meets the expectations and trust
of people throughout the world.
Three Core Technologies Daikin has developed three advanced air-conditioning technologies
that form the basis for next-generation technology.
Heat Pump
Absorbs and transfers
heat from the air
Inverter
Contributes to greater
energy saving and
comfort
Refrigerant
Control
Efficient
heat transmission
Business Scale (at March 31, 2020)
Employees
Group Companies
Global Business Presence Worldwide Production Bases
Consolidated
Subsidiaries: 313
(Japan: 29, Non-Japan: 284)
More than 150
Countries
More than 100
Factories
Net Sales
(Fiscal 2020)
¥2,550.3 billion 80,369
Business Results
Net Sales
Operating Income
Net Sales
(¥ billion)
3,000
2,000
1,000
1,787.7
156.5
Acquisition of U.S.
Acquisition of U.S.
residential air-conditioning
residential air-conditioning
manufacturer Goodman
manufacturer Goodman
1,291.1
128.1
Acquisition of
Acquisition of
OYL Group
OYL Group
Financial crisis
Financial crisis
538.8
42.0
Achieved six consecutive years of record high sales
Achieved six consecutive years of record high sales
2013〜2018 年
2013〜2018 年
2014 – 2019
2014 – 2019
and operating income
and operating income
14 consecutive years of
14 consecutive years of
increased earnings starting in 1995
increased earnings starting in 1995
Achieved nine consecutive years of increases
Achieved nine consecutive years of increases
in net sales and operating income from 2011
in net sales and operating income from 2011
FUSION 05
FUSION 10
FUSION 15
FUSION 20
2,550.3
265.5
Operating
Income
(¥ billion)
300
2,481.1
276.3
250
200
150
100
50
0
(Years Ended
March 31)
1925
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Ensuring a Competitive Edge through High Levels of Product Competitiveness and Production Technologies
Business and
Technology
Development
1924
Founding of Osaka Kinzoku Kogyosho
Limited Partnership
1935
Development of fluorocarbon refrigerant
1975
Launch of “Hikari Kurieru” air purifier
1982
Launch of Japan's first multi-type air-conditioning
system for buildings
1937
Development of Japan's first Freon-type
refrigerator
1999
Launch of “Ururu Sarara” world’s first waterless
humidifying room air conditioner
1942
Freon production begins
1951
Launch of Japan's first packaged air conditioner
1958
Entry into the room air-conditioning business
2002
Nationwide expansion of the fluorocarbon
recovery and destruction business
2002
Launch of “ECOCUTE” heat-pump water heater
Accelerating the Pace of Global Expansion while Expanding the Scale of Business during the 2000s
Daikin’s
Evolution and
Strategies
2007
Acquisition of OLY Group, a major global
air-conditioning manufacturer
2011
Acquisition of Turkish air-conditioning
manufacturer Airfel
2008
Business alliance with Gree Electric Appliances,
China’s top air-conditioning manufacture
2012
Acquisition of U.S. residential air-conditioning
manufacturer Goodman
2008
Acquisition of German heating
manufacturer ROTEX
2015
Granting of worldwide free access to basic
patents for using R32 refrigerant
2
FUSION 05 to 20 (Fiscal 2002 – Fiscal 2021)
FUSION 05
FUSION10
FUSION15
FUSION 20
Be a Company that Attracts
People, Capital, and Information
Establish a position as the global No. 2 in
mainstay businesses, and build a
foundation for future growth, including
reaching an aggregate market value of
¥1 trillion.
Be the Global No.1 Air-
conditioning Company
• Expand environment-related
businesses
• Business alliances and tie-ups,
M&A
Be a Truly Global Excellent Company
• Full-fledged entry into emerging markets
and volume zone products
• Solutions Business / Environment
Innovation Business
• Accelerate growth through business
alliances and tie-ups, M&A
Strengthen Existing Businesses
and Expand Business Domains
2,550.3
265.5
Operating
Income
(¥ billion)
300
2,481.1
276.3
Net Sales
(¥ billion)
3,000
2,000
1,000
1,787.7
156.5
Acquisition of U.S.
Acquisition of U.S.
residential air-conditioning
residential air-conditioning
manufacturer Goodman
manufacturer Goodman
1,291.1
128.1
Acquisition of
Acquisition of
OYL Group
OYL Group
Financial crisis
Financial crisis
250
200
150
100
50
0
(Years Ended
March 31)
1925
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
14 consecutive years of
14 consecutive years of
increased earnings starting in 1995
increased earnings starting in 1995
Achieved nine consecutive years of increases
Achieved nine consecutive years of increases
in net sales and operating income from 2011
in net sales and operating income from 2011
FUSION 05
FUSION 10
FUSION 15
FUSION 20
2014 – 2019
2014 – 2019
2013〜2018 年
2013〜2018 年
Achieved six consecutive years of record high sales
Achieved six consecutive years of record high sales
and operating income
and operating income
538.8
42.0
2004
World's first successful application of streamer electric
discharge technology
2005
Opening of China's first dedicated showroom for
large-scale air conditioners
2006
Launch in Europe of “Daikin Altherma” air-to-water heat
pump system
2007
Launch of “DESICA” world's first humidity control air
conditioner without water drainage or supply pipes
2009
Establishment of the Daikin McQuay Applied
Development Center in the U.S.
2010
Establishment of the Shanghai R&D Center
2011
Opening of the Solution Plaza Fuha Tokyo
2012
Launch of “Urusara 7” world's first residential air conditioner
using new R32 refrigerant
2013
Opening of the Solution Plaza Fuha Osaka
2014
Launch of cooling-only inverter air conditioners for developing
countries
2015
Establishment of Technology Innovation Center
2017
Establishment of Daikin Texas Technology Park, a production
and technology development base
2015
Acquisition of the refrigerant business in Europe from
major Belgian chemical group Solvay
2016
Acquisition of U.S. filter manufacturer Flanders
2016
Acquisition of Italian refrigerator/freezer
manufacturer Zanotti
2016
Acquisition of Scandinavian filter manufacturer Dinair
2019
Acquisition of Austrian refrigerating and freezing
showcases manufacturer AHT
Annual Report 2020
3
Process of Value Creation
Process of Value Creation
Through efforts to find solutions to social problems
through our business, Daikin provides new value,
and aims for sustainable growth.
Social Problems
Daikin Can Help Solve
INPUT
Daikin Group’s Business Ac tivities
Financial Capital
Daikin aims to be a corporate group that creates new value in the air and environment fields.
Intensification of
climate change
Expansion and
concentration of
energy and
power demand
Worsening of air
pollution
• Stable and sound financial
structure
Total assets ¥2.67 trillion
Shareholders' equity ratio 53.8%
Manufactured Capital
• Market-localized manufacturing
system over 100 manufacturing
bases globally
• PDS manufacturing style for
multiproduct mixed production
• Efficient production structure
utilizing module manufacturing lines
• Building of digital factories
• Advancement in “small-scale
monozukuri”
Intellectual Capital
• Heat pump, inverter, refrigerant
control technologies
• Development centers in
25 locations worldwide
• Proactive R&D investment
R&D Expenses ¥ 68 . 0 billion
Human Capital
• Diverse workforce
Employees over 80,000
Ratio of overseas employees
exceeds 80%
• Business operations that are
integrated and localized
• Global human resource development
Social and Relationship Capital
• Sales and service network
• Conducting business in more than
150 countries and regions
• Proactive collaboration with industry,
government and academia
The University of Tokyo, Osaka
University, Tsinghua University, etc.
Hitachi, Ltd., Mitsui & Co., Ltd., NEC
Corporation, etc.
Natural Capital
• Efficient use of energy, materials
and water
Energy consumption 14,921TJ
Material consumption 1,170,000t
Water intake 11,580,000m3
4
After-sales Service,
Recovery, Recycling
Recovery and recycling
of refrigerants
Provide services based on the
concept of continuous connection
with customers and capture
replacement demand
Procurement
Global bulk purchasing and
local procurement
Promote CSR procurement
Usage
Provide comfortable air and spaces
Reduce environmental loads
Strategy
FUSION 20
Sales,
Transportation,
Installation
Proposal-type business for existing
sales network developed globally
Development of service
personnel that have solid
technical capabilities
E S G
Other(Oil hydraulics, Defense, electronics)Details▶P.28〜Air ConditioningDetails▶P.21〜ChemicalsDetails▶P.26〜FiltersDetails▶P.9〜 Global society is continually changing, and directly faces many problems related to climate change
and other issues. Through its business, Daikin Group provides society with new value, and by
contributing to the realization of a sustainable society, seeks growth for itself as well.
Daikin Group’s Business Ac tivities
OUTPUT (Fiscal 2020)
Daikin's Aims for Value Creation
Daikin aims to be a corporate group that creates new value in the air and environment fields.
P Environmentally conscious
products
P Energy service solutions
Procurement
P IAQ/Air Environment
Engineering
Global bulk purchasing and
local procurement
Promote CSR procurement
P Expansion into
next-generation
automotive field
Strategy
FUSION 20
Development,
Design
Pursue comfort and environmental
performance
Product development to meet
local needs
Create new value
P Development of
composite materials
P Development of new
refrigerants
P Air filter business
P Power and industrial
(P&I) business
P IAQ products utilizing
synergies from
air-conditioning
and chemicals
Manufacturing
Multiproduct mixed production
Reduce environmental loads
P Range of energy-
efficient oil hydraulic
equipment
P New business in fields
with private demand
P Visual R&D systems
E S G
P Pursue CSR Management
Details▶P. 30〜, P. 38〜
Net sales ¥2.55 trillion
Overseas sales ratio 77%
Operating
income ¥265.5 billion
Operating
income margin 10.4%
Income before
income taxes ¥256.2 billion
Equity ratio 53.8%
ROE 12.0%
Free cash flow (FCF)
¥146.0 billion
Ratio of highly skilled engineers
1 in 3.2 (Daikin Industries only)
No. of patent applications
More than 1,470
(Fiscal 2018, Daikin Industries only)
No. of female managers
63 (Daikin Industries only)
Ratio of non-Japanese subsidiaries
with local nationals
as president
47.1%
Customer satisfaction (Base year = 1.00)
Japan = 1.14 (Compared to Fiscal 2016)
Meetings with institutional
investors/
analysts over 400 Events
Environmentally conscious products
as percentage of sales
(residential air conditioners) 97%
Reduction in greenhouse gas emissions due to
adoption of environmentally conscious products
68 million tonnes of CO2
Reduction in greenhouse gas emissions
from production/
development stage 76% reduction
(compared to Fiscal 2006)
Reduction in CO2 emissions due to
forest conservation
7 million tonnes of CO2
Provide new value that makes
people and space healthier and
more comfortable while at
the same time reducing
environmental impact.
Sustainable Development
Goals (SDGs) Daikin is
Contributing to
6 of the 17 Sustainable Devel-
opment Goals Daikin is Contrib-
uting to through Its Business
Value Creation for the Earth
Reduce environmental impact through
all business activities and contribute
alleviating climate change
Value Creation for Cities
Contributing to solving energy-related
issues arising from urbanization and con-
tribute to the creation of sustainable cities
Value Creation for People
Pursue new possibilities for air and
contribute to healthy, comfortable
lifestyles
Human Resource Development
Supports Value Creation
Foster human resources who spur
innovation and who spread newly
created value around the world
Contribute to the growth of
employees and local citizens
• Training of highly skilled personnel
• Job creation
• Contribution to local economic
development
• Creation of new products and
services that help raise people’s
lifestyles
Ensure healthy lives and pro-
mote well-being for all at all
ages
Prevention of heatstroke and
infectious diseases, measures
against air pollution, increase in
productivity, etc.
Ensure access to affordable,
reliable, sustainable and
modern energy for all
Increase in energy efficiency,
use and spread of renewable
energy, etc.
Build resilient infrastructure,
promote sustainable industri-
alization and foster innovation
ZEB (net-zero energy buildings)
initiatives, promotion of energy
management and demand
response, etc.
Ensure sustainable consump-
tion and production patterns
Initiatives for energy efficiency
during production, recycling,
resource efficiency, etc.
Take urgent action to combat
climate change and its impacts
Spread of inverter products,
refrigerants with lower global
warming potential, and heat
pump products
Annual Report 2020
5
Other(Oil hydraulics, Defense, electronics)Details▶P.28〜Air ConditioningDetails▶P.21〜ChemicalsDetails▶P.26〜FiltersDetails▶P.9〜 Financial and Non-Financial Highlights
Financial and Non-Financial Highlights
Daikin Industries, Ltd. and Consolidated Subsidiaries
Years Ended March 31
Net Sales/Operating Income,
Operating Income Margin
①売上高／営業利益・営業利益率（億円）（％）
Operating Income
Net Sales
Operating Income Margin
ROE/ROA
ROE
ROA
④ROE ／ ROA
(¥ billion)
3,000
2,000
1,000
0
(%)
15
2,550.3
10.4
10
2016
2017
2018
2019
2020
265.5
5
0
(%)
20
15
10
5
0
12.0
6.4
2016
2017
2018
2019
2020
Steady progress was made on the full fiscal year plan through to the third quar-
ter. Revenue increased while earnings decreased for the full fiscal year reflecting
the abrupt halt in economic activity from the start of the fourth quarter as a
result of the global COVID-19 pandemic.
The Air Conditioning business is looking to undertake R&D as well as capital,
acquisition, and other strategic investments on the back of a forecast increase in
demand going forward. By steadily reaping returns on the aforementioned
investments, we will work to boost our performance on a continuous basis and
improve ROE/ROA.
Total Shareholders’ Equity/
Shareholders’ Equity Ratio
②自己資本・自己資本比率
Total Shareholders’ Equity
Shareholders’ Equity Ratio
Interest-Bearing Liabilities/
Liability with Interest Ratio
⑥有利子負債／有利子負債比率
Interest-Bearing Liabilities
Liability with Interest Ratio
(¥ billion)
1,500
1,000
500
0
1,435
53.8
2016
2017
2018
2019
2020
(%)
60
40
20
0
(¥ billion)
750
500
250
0
(%)
30
553.8
20.8
20
2016
2017
2018
2019
2020
10
0
Daikin’s shareholders’ equity ratio came in at 53.8% for the fiscal year under
review, exceeding 50% for the third consecutive year. The Company is taking
positive steps to ensure its financial stability.
While our liability with interest ratio was temporarily high due to major acquisi-
tions between 2010 and 2019, we have continued to steadily reduce the balance
of interest-bearing liabilities by generating free cash flow and making effective
use of Group funds.
Free Cash Flow
⑤フリーキャッシュフロー
Capital Investments/
Research and Development Expenses
③設備投資／研究開発費
Capital Investments
Research and Development Expenses
(¥ billion)
150
100
50
0
146.0
2016
2017
2018
2019
2020
In addition to increasing earnings and improving investment efficiency, efforts are
also being made to generate cash flow from a working capital perspective. This
includes thoroughly reducing the balances of accounts receivable and inventory.
6
(¥ billion)
150
100
50
0
132.0
68.0
2016
2017
2018
2019
2020
From a capital investment perspective, energies are being directed toward
upgrading and expanding sales networks and newly constructing plants while
boosting production capacity, focusing on emerging countries and key markets
where there has been remarkable growth. As far as research and development
expenses are concerned, Daikin recognizes that strengthening technological
competitiveness is the lifeblood of a manufacturer. On this basis, the Company is
coordinating with its eight development sites worldwide and the Technology and
Innovation Center (TIC) that serves as the Group’s development control tower,
and is accelerating the development of distinctive technologies and products.
DOE/Cash Dividends per Share,
Dividend Payout Ratio
⑦DOE ／ 1 株当たり配当金・配当性向
Cash Dividends per Share
DOE
Dividend Payout Ratio
Number of Patent Applications
Japan
Overseas
⑧特許出願件数
(¥)
180
120
60
0
160
27.4
3.3
2016
2017
2018
2019
2020
(%)
30
20
10
0
(Number)
1,000
750
500
250
0
957
513
2015
2016
2017
2018
2019
*
Together with making every effort to maintain a ratio of dividends to sharehold-
er equity (DOE) of 3.0% or higher based on the principle of always providing sta-
ble dividends to shareholders, we will continue striving in our mission to provide
shareholders with even greater return by aiming for an increasingly higher level
of dividend payout ratio.
Daikin is working to stimulate employees’ motivation to invent, spur the cre-
ation of intellectual property, increase the quality and quantity of patents in
competitive fields, and increase the number of overseas patents in key techno-
logical fields in particular in emerging countries.
* The latest figures for the fiscal year ended March 31, 2019.
Number and Percentage of Women in
Management Positions
⑨女性管理職と比率
Women in Management Positions
Percentage
Number and Percentage of Overseas
Bases Where Local Nationals Are
President or Executive
⑩海外拠点の現地採用社長・取締役数と比率
Executive
President ratio
Executive ratio
President
60
40
20
0
63
5.4
(%)
6
4
2
0
2016
2017
2018
2019
2020
90
60
30
0
48.6
47.1
68
32
2016
2017
2018
2019
2020
(%)
60
40
20
0
One of the Company’s most important policies revolves around the empower-
ment of women in its workforce. Daikin is implementing various measures to
accelerate the development of women in management and executive positions,
change the mindset of men in management, and support the early return to
work of its female employees after childcare leave.
As Daikin’s business globalizes, the Company is actively promoting more employ-
ees at overseas bases to managerial positions. Daikin holds the Global Daikin
Leadership Development Program as a development measure to give locally hired
managers the opportunity to run Daikin subsidiaries in their own countries.
Through the Adoption of Environmentally
Conscious Products, Contribute to Reducing
Greenhouse Gas Emissions
⑪環境調和商品の普及による温室効果ガス排出抑制貢献量
Greenhouse Gas Emissions
(during development and production)
⑫温室効果ガス排出量（開発・生産時）
(million tonnes of CO2)
80
68
60
40
20
0
2016
2017
2018
2019
2020
(million tons of CO2)
2.0
1.5
1.0
0.5
0
1.28
2016
2017
2018
2019
2020
Daikin’s air conditioners, a mainstay product, emit particularly high levels of
greenhouse gas emissions when in use. Accordingly, the Company is focusing on
promoting the use of inverters and air conditioners that use low-global warming
refrigerants. In fiscal 2020, Daikin reduced greenhouse gas emissions by 68 mil-
lion tons-CO2, compared to its target of limiting greenhouse gas emissions to 60
million tons-CO2 by fiscal 2021.
While Daikin emits two kinds of greenhouse gases during development and pro-
duction processes: CO2 from energy use, and fluorocarbons, every effort is being
made to minimize environmental impact through production activities. Daikin
achieved a 76% reduction (to 1.28 million tons-CO2) in greenhouse gas emissions
in fiscal 2020, compared to its target of a 70% reduction (to 1.58 million tons-
CO2) from the fiscal 2006 level in development and production greenhouse gas
emissions for the Group as a whole in fiscal 2021.
Annual Report 2020
7
At a Glance
At a Glance
Daikin Industries, Ltd. and Consolidated
Subsidiaries Years Ended March 31
Air Conditioning
90.6%
Percentage
of Net Sales
Chemicals
7.1%
Oil Hydraulics
1.6%
Defense
0.7%
Net Sales and Operating Income
Major Products
Description
Air Conditioning
(¥ billion)
2,500
2,000
1,500
1,000
500
0
236.2
2,309.1
2,309.1
(¥ billion)
250
200
150
100
50
0
2016 2017 2018 2019 2020
• 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
• Refrigerating and freezing
showcases
Since becoming the first in Japan
to manufacture packaged air-
conditioning systems in 1951,
Daikin has supported comfortable
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.
Chemicals
(¥ billion)
200
160
120
80
40
0
23.823.8
179.9
179.9
(¥ billion)
35
28
21
14
7
0
• Fluorocarbons
• Fluoroplastics
• Fluoroelastomers
• Fluoropaints
• Fluoro coating agents
• Semiconductor-etching
products
• Water and oil repellent
agents
• Pharmaceuticals and
intermediates
• Dry air suppliers
In 1933, Daikin was the first
in Japan to engage in research on
fluorinated refrigerants. Today,
our activities range from research
and development to
commercialization, and we offer a
lineup of 1,800 fluorine
compounds including gas, resin
and rubber.
2016 2017 2018 2019 2020
Oil Hydraulics
(¥ billion)
40
30
20
10
0
3.3
37.737.7
(¥ billion)
6.0
4.5
3.0
1.5
0
2016 2017 2018 2019 2020
Defense
(¥ billion)
20
15
10
5
0
1.31.3
18.718.7
(¥ billion)
1.6
1.2
0.8
0.4
0
2016 2017 2018 2019 2020
8
• 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.
• Warheads for Japan’s
Ministry of Defense/
Warhead parts used in
guided missiles for training
purposes
• Home-use oxygen therapy
equipment
Daikin’s superior machining
and quality control technologies
are used in the production of
defense-related products and
other industries where high levels
of precision and performance are
critical.
Market Size and Positioning of Each Business
Market Size and Positioning of Each Business
Creation of synergies by utilizing the affinity of the Filter business with
existing businesses, including Air Conditioning and Chemicals.
Air
Conditioning
Refrigerants
IAQ (Indoor Air Quality)
Three pillars of
revenue
Chemicals
Filters＊
＊ (Note: Filters are included in the Air
Conditioning business segment)
Air Conditioning Business
Chemicals Business
Global HVAC&R* Market Scale (Daikin estimates)
Global Fluorochemicals Market (Daikin estimates)
Filter Media(PTFE)
Air-conditioning equipment
Air-conditioning- related
空調事業 世界の HVAC&R 市場規模
Refrigeration
Heating/water heater
2015
Approx.
¥ 31 trillion
→
2020
Approx.
¥ 39 trillion
(hundred of
million of yen)
120,000
100,000
80,000
60,000
40,000
20,000
0
Average annual
Average annual
growth
growth
5%
Average annual
Average annual
growth
growth
7%
Average annual
Average annual
growth
growth
3%
Average annual
Average annual
growth
growth
2%
Average annual
Average annual
growth
growth
8%
Average annual
Average annual
growth
growth
7%
'15
'20
Japan
'15
'20
North
America
'15
'20
China
'15
'20
Europe
'15
'20
Asia/
Oceania
'15
'20
Other
化学事業 世界のフッ素化学市場規模
2015
Approx.
¥ 730 billion
→
2020
Approx.
¥ 800 billion
(hundred of
million of yen)
3,500
2,800
2,100
1,400
700
0
'15 '20
Japan
'15 '20
Americas
'15 '20
China
'15 '20
Europe
'15 '20
Asia/Developing
countries
Heating, Ventilating, Air-conditioning and Refrigerating
＊Heating, Ventilating, Air-conditioning and Refrigerating
Filter Business
Global Air Filter Market Scale (Daikin estimates)
Global Power & Industrial (P&I) Market Scale (Daikin estimates)
(hundred of
million of yen)
2,500
2,000
1,500
1,000
500
0
エアフィルタ市場規模
2015
Approx.
¥ 450 billion
→
2020
Approx.
¥ 550 billion
MFAS Business (Dust collection for gas turbines)
APCS (Large dust collection system)
APCP (Small dust collector)
2015
Approx.
¥ 600 billion
2020
Approx.
¥790 billion
'15 '20
Japan
'15 '20
North America
'15 '20
Europe
'15 '20
Asia
Annual Report 2020
9
P&I市場規模 Message from the CEO
Masanori Togawa
President and CEO
Minimizing the impact from COVID-19 to ensure an improvement in sales
Quickly implementing strategies to adapt to changing conditions and
targeting further growth by turning challenges into opportunities
As the spread of COVID-19 increases in severity, we will exercise our strength as a team to face this
unprecedented crisis and create measures both defensive and offensive with the goal of being able
to adapt to and overcome any situation. Daikin remains committed to achieving growth in our
business and solving social issues by effectively responding to new needs in air quality.
10
Sympathies and gratitude
We would like to express our deepest sympathies to those
sincere gratitude to those dedicated to preventing the spread of
suffering from COVID-19, as well as their families and friends. On
infections, including those operating in the fields of medicine and
behalf of the Company, I would also like to extend our most
government.
Fiscal 2020 earnings and measures
designed to minimize the impact of COVID-19
Amid a harsh operating environment characterized by a
As COVID-19 began to spread around the world from the end
slowdown in the Chinese economy, the adverse effects from
of January 2020, one of my first acts as CEO was to assume
growing trade friction between the US and China, and reduced
leadership at the newly established response headquarters and
automotive-related demand, Daikin in fiscal 2020 enacted
alongside efforts to ensure the safety and health of our
strategies aimed at achieving targets in our strategic management
employees, quickly implement measures aimed at collecting, and
plan, "FUSION 20," expanded sales in all operating regions
then acting on, information that seemed to be changing by the
around the world and advanced total cost reductions, allowing
minute. Economic activity in China came to a standstill from late
the Company to meet its targets and secure sales and profit
February with the halting of production and the markets, which
growth through the third quarter. The effects from the COVID-19
had a profound impact on our Company's sales. Economic activity
pandemic from the fourth quarter resulted in sales for the year in
was also sharply curtailed in Europe, with measures such as border
full reaching ¥ 2,550. 3 billion, up 2. 8 % year on year, with
closings and lockdowns going into effect first in Italy and then
operating profit coming in at ¥ 265 .5 billion, down 3.9 % year on
throughout the region. As the number of people infected rapidly
year. The COVID-19 pandemic adversely impacted sales by about
expanded, there were forecasts for a sharp decline in earnings,
¥ 45.0 billion and operating profit by about ¥ 22.0 billion, so if we
though we were able to reduce sales opportunity losses by rapidly
were to exclude the effects from the outbreak, sales and profit
adjusting to supply chain disruptions in China and maintaining the
would have been up for a tenth consecutive year and at an historic
supply of our products. In addition to focusing on an expansion in
high performance for the seventh consecutive year. Net income
sales in Asia, the United States, and Japan, where the impact from
attributable to owners of the parent dipped sharply in fiscal 2020,
the outbreak was relatively limited at the time, we were able to
due in part to the booking of extraordinary losses on impairment
minimize the impact on earnings for the year through a variety of
losses in the US filter business. Absent this factor, net income
other measures, including those promoting further cost
would have been down just 3. 8 % year on year.
reductions.
FY 2020 Forecast, Result, and Action Plan
Forecast
FY 2020
Result
COVID-19 Effect
FY 2021
Action Plan
(Announced in May 2020)
Sales
2,610.0 B JPY
(+5% year on year)
2,550.3B JPY
(+2. 8% year on year)
- 45.0 B JPY
2, 330.0 B JPY
(- 9% year on year)
Operating
Profit
285.0 B JPY
(+3% year on year)
10.9% profit margin
265.5B JPY
(-3.9% year on year)
10. 4% profit margin
-22.0 B JPY
150.0 B JPY
(- 4 4% year on year)
6 . 4% profit margin
Annual Report 2020
11
Message from the CEO
Action plan for fiscal 2021
As the global economy is impacted by a decline in demand due
lasting throughout the year. We have formulated our fiscal 2021
the global spread of COVID-19 and the emergent effects from
targets in line with our current outlook and have taken into
restrictions on economic activity, there remains some degree of
account actual conditions and realities in each business and region.
uncertainty as to when the spread of the virus and the resultant
Accordingly, our action plan, announced in May, is in line with
restrictions will be curtailed and how long it will take for demand
conditions that are close to the second scenario, in which the
to recover once that curtailment is assured. That said, I believe it is
effects of the COVID-19 pandemic extend through the first half of
management's job to set goals and take action based on the reality
the year.
of the present and not to assume that because the future is
With the launch of this action plan in fiscal 2021, we believe we
unclear, action should be left for a later date.
have the potential to spur a rapid V-shaped recovery, depending of
We have considered four scenarios in when assessing the level
course on market trends and the severity of the effects from the
of impact from the COVID-19 pandemic and studied a variety of
COVID-19 pandemic. On the other hand, we are also prepared
counter measures for each. The first scenario envisages the effects
should the effects from the pandemic extend through the third
of the outbreak being brought under control in the first quarter of
quarter of the year, or in our worst-case scenario, throughout the
fiscal 2021, the second sees the effects last through the first half
entire year. Given the need to be able to respond flexibly to ever-
of the fiscal year, the third assumes the effects last through the
changing conditions, we intend to review our action plan every
third quarter, and the fourth assumes the worst, with the effects
one or two months, depending on the need.
"FUSION 20": Results so far and our efforts in the last year of the plan
The key aspects of FUSION center on the Company's ability to
through the implementation of 176 business division themes and
thoroughly execute initiatives in line with the planned strategy and
ten Group-wide follow-up themes. Our fiscal 2021 targets focused
maintain its commitment to achieving quantitative targets while at
on sales of ¥ 2. 8 trillion and operating profit of ¥ 325.0 billion
the same time promoting the advancement of flexibility in
through January, when the effects from COVID-19 first emerged.
management. This flexibility allows the Company to anticipate
Excluding the effects from exchange rates, reduced demand as a
changes in the operating environment and market trends as they
result of a slowdown in the Chinese economy and semiconductor-
occur and accordingly review key strategies in a timely manner.
related demand we are targeting sales and operating profit for the
The environment in which the Group operates is changing faster
final year of "FUSION 20" of ¥ 2.9 trillion and ¥ 348 .0 billion,
than previously expected, due in part to the rapid advancement of
respectively.
technologies such as IoT and AI, as well as a growing worldwide
We are spending the current year formulating our next strategic
commitment to solving environmental issues, including issues
management plan, "FUSION 25." To achieve further growth, we
related to reducing greenhouse gas emissions. Daikin sees these
believe it necessary to not only maintain our current initiatives, but
changes in the operating environment as opportunities and in
also develop and implement new measures with the future in
June 2018 formulated its three-year "FUSION 2020" plan with
mind.
the aim of strengthening our core businesses, expanding the
We expect our mainstay air conditioner business, which includes
scope of our business, and changing our business structure. In line
the service and solutions business, as well as the air quality-related
with these goals, we have continued to implement the measures
business, to be a growth business even after COVID-19 is brought
contained within plan and maintained related forward investment.
under control. We also believe it to be a business that can
Even amid a tough operating environment, we focused in fiscal
contribute to the needs of society and the resolution of social
2020 on achieving the goals outlined in the "FUSION 20" plan
issues by supporting the health and safety of all.
Management Approach for the COVID-19
In addition to our focus on generating the results targeted for
strengthen our operating structure in response to the challenges
the final year in the "FUSION 20" strategic management plan,
presented by COVID-19. Moreover, given the difficulty in
Daikin is enacting near-term measures and working to reform and
predicting the operating environment moving forward, we have
12
launched six emergency projects addressing important
strengths in services that connect us directly to our customers to
management issues, and are working to further strengthen
create new businesses that provide a safe and healthy atmosphere
co-creation and cooperation within the group on a global basis,
to all.
enact reforms to existing procedures and follow-up efforts, speed
Based on the "FUSION 20" theme, we are building strategies in
decision making, and increase overall speed and dynamic energy.
the face of the rapidly escalating effects stemming from the
We also recognize that the air-conditioning services business is a
COVID-19 pandemic. The first of these involve 43 defensive
socially significant business that provides a life line to people, and
measures, including those aimed at reducing fixed costs and
in addition to focusing on capturing growing demand during the
providing rapid support to our dealers and business partners. The
economic downturn, we are committed to leveraging our
second involves 31 proactive measures, including those aimed at
Management Approach for the COVID 19 Crisis
Measures Based on the Impact of the Sudden COVID-19 Outbreak
(cid:12255) Defensive measures: 43 themes
(Thorough suppression of fixed costs, rapid support to dealers and business partners, etc.)
(cid:12255) Proactive measures: 31 themes
(Strengthening of sales via the Internet, development of measures focused on changes in consumer mood and behavior)
(cid:12255) Constitution strengthening and reform: 17 themes
(Establishment of a lean, robust fixed cost structure, increased operational efficiency by utilizing AI and IoT in reform of
business processes.)
Six Emergency Projects Addressing Important Management Issues
❶ Strengthening procurement, manufacturing, inventory, and logistics globally
❷ Outperforming rivals in response to global changes and declining demand; and strengthening sales
and marketing capabilities to increase market share while maintaining selling price
❸ Expanding sales of air and ventilation products; developing and launching new differentiated
products; and creating solutions on a global level to thoroughly capture the growing demand
resulting from greater awareness for air quality and ventilation
❹ Drastically cutting fixed costs (breakeven point and dramatic reduction in ratio of fixed costs to
sales)
❺ Prioritizing large-scale investments (capital investments and investments / loans) in the
unprecedented uncertainty for the future of the business environment
❻ Raising funds by having a detailed knowledge of the capital demand for the entire Group
Strategic Themes for Fusion 20
(cid:12255) 176 themes by business division Sales
(cid:12255) 10 Group-wide follow up themes Operating Profit
2 , 800 B JPY
325B JPY
Excluding the effect of foreign currency and
decreased demand, the standard for the final
year of Fusion 20 aims for sales of 2,900 B JPY
and operating profit of 348 B JPY.
Annual Report 2020
13
Message from the CEO
strengthening sales using the Internet and developing services and
products in line with changes in consumer sentiment and behavior
after COVID-19 is brought under control. The third focuses on 17
measures targeting the reform and strengthening of the Daikin
Group business structure, including those establishing a light yet
robust fixed-cost structure and those increasing operational
efficiency in the business process by advancing the use of
technologies such as IoT and AI.
In addition to overcoming the current tough operating
environment, we aim to lead our rivals in achieving a rapid
V-shaped recovery when demand picks up after the effects from
COVID-19 are brought under control, and recognizing that the key
to winning is in understanding what kind of offensive measures
we should take, how to turn a crisis into an opportunity to
implement structural reforms, and how best to improve our
competitive capabilities.
One of our goals in fiscal 2021 is to further strengthen our light
yet robust operating structure by accelerating efforts beyond
those in the action plan and entrenching fixed cost reductions,
while at the same time differentiating ourselves from the
competition through investment prioritization, and the active
pursuit of R&D, capex and the hiring and training of human
resources that are capable of contributing to the next generation
of innovative ideas.
Addressing important management issues:
six emergency projects and three important measures
Daikin has launched six emergency projects addressing
important in the Company's effort to achieve growth, even after
management issues as part of its aim to strengthen co-creation
COVID-19 is brought under control.
and cooperation, fundamentally reform existing procedures and
In the first project (strengthening procurement, manufacturing,
follow-up efforts, and increase speed and dynamic power within
inventory, and logistics globally), the goal is to create a structure
the Group. The six emergency projects are: 1) Strengthening
where it is possible to have an almost instantaneous
procurement, manufacturing, inventory, and logistics globally; 2 )
understanding of conditions regarding procurement, production,
Outperforming rivals in response to global changes and declining
logistics, and sales in the five key regions of Asia/Oceania, Europe,
demand; and strengthening sales and marketing capabilities to
North America, China, and Japan, and where the Company can
increase market share while maintaining selling price; 3 )
quickly create and implement optimized measures to limit excess
Expanding sales of air and ventilation products; developing and
inventories and sales opportunity losses based on shifts in demand
launching new differentiated products; and creating solutions on
or changes in logistics or regulations. Moreover, should lockdowns
a global level to thoroughly capture the growing demand resulting
occur again and demand deteriorates accordingly, the system
from greater awareness for air quality and ventilation; 4 )
would be able to enact production adjustments on a global scale
Drastically cutting fixed costs (sharp reduction in break even point
to prevent excess inventories from being formed.
and in ratio of fixed costs to sales); 5 ) Prioritizing large-scale
In regard to the second project (strengthening sales and
investments (capital investments and investments/loans) in the
marketing capabilities to increase market share in response to
unprecedented uncertainty for the future of the business
global changes and declining demand while maintaining selling
environment; and 6 ) Raising funds by having a detailed
price), topping our rivals and increasing market share is key to
knowledge of the capital demand for the entire Group.
securing earnings in an environment characterized by reduced
Within the six emergency projects, three are especially
demand and a shrinking market. In this sense, the strength of the
14
ties in our sales network is worth noting. With that in mind, we
quality, ventilation, air purification, disinfection, and cleaning as
are focused on bolstering support for our sales network,
global interest grows amid the COVID-19 pandemic. Production
understanding trends in the markets and at our competitors in
of residential air purifiers has greatly expanded amid a sharp
each region, as well as sales network conditions through close
increase in demand in all operating regions, though our efforts in
contact with our customers, and implementing measures that
this area focus not just on this, but also on promoting solutions,
exceed those of our competitors. In addition, we will work to
the rapid development of products, and a firm understanding of
expand sales through new sales methods, including through the
customer needs in potential markets. While demand for air-
use of telecommuting, e-commerce, and other means that have
conditioning equipment appears likely to temporarily drop, we aim
been rapidly adopted with the increase in working from home.
to increase sales in line with growing demand related to air
The third project (expanding sales of air and ventilation
quality. Finally, we are taking a medium- to long-term perspective
products; developing and launching new differentiated products;
and are also working on the development of high-performance
and creating solutions on a global level to thoroughly capture the
filters and air purification units that fundamentally improve air
growing demand resulting from greater awareness for air quality
quality.
and ventilation) focuses on capturing demand related to air
Concrete measures for co-creation in three areas
As we focus on opportunities in an era characterized by
addition to technology held by the University of Tokyo and having,
ongoing changes, including the rapid progress of new
access to the entrepreneurs associated with University-linked
technologies such as IoT and AI, climate change, and an increased
venture companies, of which there are about 370, to rapidly move
focus on environmental issues, we believe co-creation essential to
original ideas into practical use, we are working to develop a
generating change on our own. More specifically, we believe that
system in which workers would be able to move freely between
in a period of rapid change, we cannot find all the answers by
our company, the University, and our overseas affiliates. To create
ourselves, and when taking on the challenge of creating value, we
solutions that can be recognized as new value, we believe that it is
should also seek to incorporate new ideas and knowledge. With
essential to make the best use of external resources, including
this in mind, our efforts to transform our business are centered on
start-ups with advanced technologies, innovative ideas, and the
the idea of co-creation in three areas. The first of these is "co-
spirit to take on new challenges. With this in mind, Daikin in
creation with our customers," which includes working to expand
November 2019 established the Corporate Venture Capital Office
our business by revising the "product-out" strategy and adopting
(CVC Office) with investment capacity of ¥11.0 billion over five
a "market-in," and "customer-in" philosophy for each customer
years at the Technology Innovation Center (TIC), our R&D facility,
and company on an individual basis. The second area of focus is
to promote co-creation efforts with start-up companies. The first
"co-creation within the Group." In this area we will aim to achieve
project in this effort involved a ¥ 300 million investment in
the highest level of optimization, including in research,
WASSHA, a company developing an electrical power service
development, production, sales, services, and marketing by
business through the rental of LED lanterns in the non-electrified
strengthening Groupwide collaboration and focusing our
areas of Tanzania. The project involves the development of a
collective efforts on creating new value. Finally, the third area of
subscription-based business in which the mobile phones that are
focus is "co-creation with the outside world." In an era of rapid
in growing use in the area are used to rent LED lanterns and solar
change, it is imperative that we accelerate technological and
panels for charging purposes. Customers are charged through
product development through open innovation. In short, we
their mobile device in advance and only for the time they actually
believe that if you try to go it alone, you and your company will
use the equipment. We believe the WASSHA project can be seen
not be able to adapt to the changes in the business environment
as a leading effort in addressing a growing social need in
or the ongoing evolution of technology. With this in mind, we are
emerging economies, such as those in Asia and Africa, where air
collaborating with venture companies and academic institutions to
conditioners are not yet commonly used but where there are
not only contribute to the resolution of the previously mentioned
expectations for their increased use as part of the region's
social issues, but also the construction of a new business model.
infrastructure moving forward. Through efforts such as these,
Based on this concept, we launched an industry-academia
Daikin hopes to provide new value to the world as a global leader
collaborative effort with the University of Tokyo in February 2018
in air conditioning.
as a concrete example of "co-creation with the outside world." In
Annual Report 2020
15
Message from the CEO
Contributing to the resolution of
social issues to build a sustainable society
In support of the Paris Agreement adopted in 2015 , Daikin is
Driven by economic growth in emerging markets, demand for
committed to providing safe and healthy air as part of its
air conditioning is expected to expand more than three times by
"Environmental Vision 2050," which targets the complete
the year 2050. We believe it is our mission to provide healthy and
elimination of greenhouse gas emissions by 2050 . The spread of
comfortable air environments for people around the world while
COVID-19 has also increased global interest in air purification and
working to reduce the impact of global warming by as much as
ventilation, and we intend to respond quickly to this growing need
possible. In fiscal 2019, we launched “Environmental Vision
with solutions that make the most of our technologies, products,
2050” with the goal of reducing greenhouse gas emissions to
and services.
almost zero. We believe that through the development and
Moreover, as ESG (environmental, social, governance) investment
dissemination of products and services that contribute to the
gains ground, investor focus increasingly appears centered on the
conservation of energy and the prevention of global warming, we
climate change-related actions of companies. In other words, the
are contributing to the reduction of greenhouse gas emissions in
perspective for selection in investment is shifting from how well a
society and at the same time further developing our business.
company is doing in terms of earnings to how the Company is
Daikin announced its support and agreement with the
contributing to the resolution of social issues focused on common
global goals, including SDGs and the goals of the Paris Agreement.
Moving forward, I think stakeholders in general will be increasingly
recommendations of the Task Force on Climate-related Financial
Disclosures (TCFD*) in May 2019 . Together with the disclosure of
financial information, we are committed to disclosing information
focused on how companies act in regard to resolving social issues.
related to our ESG efforts, including in regard to climate change. In
Over the past few years, Daikin has been looking for ways to
particular, we analyze the risks and opportunities climate change
grow our business while balancing the positives and negatives
presents to our business, and then reflect these findings in our
resulting from the spreading use of air conditioners.
management strategy and risk management. We also disclose our
Air conditioning has transformed the indoor environment in
progress in related efforts and target further growth in our
particularly hot areas, and in the process has become an important
business as we work toward the decarbonization of society.
part of the infrastructure supporting modern society. Through our
business, we have been able to contribute to people's health by
preventing heat stroke and improving air quality while also
contributing to regional economic development by improving
worker efficiency. On the other hand, the increased use of air
conditioning also increases the volume of electricity usage and
contributes to global warming.
Shareholder returns
＊ TCFD was established by the Financial Stability Board in 2015. It recommends that
companies evaluate business risks and business opportunities linked to climate change as
well as identify financial impacts and make related disclosures.
Daikin showed an ongoing improvement in earnings through
to flexibly revise our approach to our business and review our
the third quarter of fiscal 2020. Even with the spread of
action plan in line with the trends in an ever-changing business
COVID-19 in the fourth quarter, we were able to minimize its
environment.
impact and pay an annual dividend in line with our ¥160 forecast.
We will continue to strive toward maintaining a consolidated
While the full impact from the spread of COVID-19 remains
dividend on equity (DOE) ratio of 3.0 % based on a policy aimed
uncertain, we have made a firm start in fiscal 2021 by formulating
at ensuring stable and continuous dividend payments. We will
an action plan with specific measures based on actual conditions
determine our fiscal 2021 dividend forecast based on a
at each of our businesses and locations. Depending of course on
comprehensive assessment of business performance, funding
market trends and the eventual scope of the COVID-19 impact,
demand, and the payout ratio.
we are targeting a rapid V-shaped recovery in earnings while also
We will announce our forecasts for the impact on demand from
making preparations should the effects from the pandemic prove
the COVID-19 pandemic as soon as we can assess its impact on
more enduring than initially expected. We have not to set a
earnings with a sufficient degree of certainty.
forecast for the fiscal 2021 dividend at this time, mainly as we aim
16
A message to the stakeholders
With the full impact from the COVID- 19 pandemic still
On this note, we thank you for your understanding and kindly
unknown, I believe the operating environment moving forward is
ask for your continued support as we move forward.
likely to remain severe. However, the Daikin Group will strive to
respond flexibly to the ever-changing situation, working together
as one to overcome the difficulties in front of us and secure both
short-term earnings and medium- to long-term growth.
I am proud of the characteristic strength we have shown as a
company in the face of this crisis. In addition, when looking ahead
to the world after COVID-19, I believe we will advance toward our
goal of ensuring growth by demonstrating this strength and
contributing to a society in which people live and work in both
health and safety.
Masanori Togawa
President and CEO
June 2020
Annual Report 2020
17
Financial Strategy
Deepening and Promoting "Ratio Management" Company Wide
Capital Cost-Oriented Financial Strategy
Daikin undertakes "ratio management" focusing on capital costs
to increase corporate value. The background behind introducing
"ratio management" started with our intention to pivot away
from emphasizing monetary amounts (i.e., net sales, operating
profit) on P/L statements, aiming to become global No. 1 under
explaining DVA to employees in terms of corporate value rising when
profits generated from business activities over an entire year exceed
capital costs.
Companywide ROIC Tree
ROIC was introduced as an internal management indicator to
"FUSION" launched in 1996 . We then began "ratio
monitor capital efficiency beginning with reducing inventories and
management" to focus more on operating profit "margin,"
to facilitate greater implementation among employees.
profitability, and financial structure based on our aim to "become
More specifically, we have positioned ROIC as an internal
an attractive company that draws together people, capital, and
management indicator linked to Companywide ROE targets and
information" under the revamped FUSION in 1999.
then apply it to each business target as a means to specifically
"Ratio management" involves overseeing "profitability, cash, and
show how ROIC is connected to the duties of each employee. For
financial structure" as a set using indicators such as free cash flow
and DVA*1 along with ROE and ROA. Regarding DVA, we have
shifted to ROIC (return on invested capital) and free cash flow as
example, during employee training we describe ROIC as a tree to
explain concepts such as how inventory reduction improves ROIC
and the relationship between selling prices and costs to increase
management indicators for each division in recent years, as all
profitability. Beyond Japanese employees, we use the "ROIC Tree"
segments have reached the black.
＊1 DVA: Daikin economic value added
concept to explain to foreign staff how ROIC is linked to their
daily duties.
We adopted DVA with the start of ratio management as an indicator
that resonates easily by simplifying and fostering employee
understanding of EVA (economic value added). Beyond simplifying
the calculation formula, we focused on promoting DVA internally by
We promote 10 key Companywide themes essential for achieving
"FUSION 20" final year targets; 1-7 listed below show the
connection between seven of those themes and the ROIC Tree.
ROIC Tree
Profitability
ROIC (Return on Invested Capital)
Asset efficiency
Net sales/operating profit margin
Invested capital turnover rate
Marginal profit ratio
Fixed ratio
No. of days working
capital is held
Fixed asset turnover rate
① Maximize variable cost C/D
② Implement selling price
increase
③ Control logistics cost surge,
implement C/D measures,
revamp SCM
④ Reduce fixed costs
⑤ Enhance product quality
Financial Analysis over the Past Decade
Daikin achieved a V-shaped recovery amid major economic
changes following the collapse of Lehman Brothers, achieving ten
consecutive years of sales growth from fiscal 2011 through fiscal
2020 and nine consecutive years of operating profit for nine years
straight through to fiscal 2019. This breakthrough earnings growth
reflects Daikin's penetration of the North American air-conditioning
market after acquiring major US air-conditioning manufacturer
Goodman in 2012. In addition, we position operating profit
margin as an indicator of profitability under "Ratio Management"
and set a target of 12.0 % for the final year target of "FUSION
20," while operating profit margin rose to 11.1% in fiscal 2019.
We are working to reach targets for ROE of 14 .0 % and ROA of
8 . 4%, both of which serve as indicators of asset efficiency.
⑦ Accelerate investment returns
No. of days
inventory is held
No. of days
receivables are held
⑥ Reduce inventories
Management Indicators from Fiscal 2011
(%)
18
ROE
ROA
Operating profit margin
15.7%
15.7%
14.5%
14.5%
13.9%
13.9%
13.1%
13.1% 13.1%
13.1%
13.4%
13.4%
10.7%
10.7%
10.0%
10.0%
11.3% 11.1%
11.3%
11.1%
11.1% 11.1%
8.3%8.3%
7.8%7.8%
8.8%8.8%
6.5%6.5%
4.0%4.0%
1.7%1.7%
6.7%6.7%
3.6%3.6%
6.9%6.9%
5.0%5.0%
6.1%6.1%
5.6%5.6%
3.0%3.0%
7.8%7.8%
7.3%7.3%
6.8%6.8%
12.0%
12.0%
10.4%
10.4%
6.4%6.4%
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019 (FY)
15
12
9
6
3
0
18
In fiscal 2021, the final year of "FUSION 20 ," we will work to
R&D at normal levels of ¥130 billion and ¥ 70 billion, respectively,
enhance our financial structure through both defensive and
as we view such investment as vital for future growth.
offensive measures to reach the plan's targets despite severe
Nevertheless, we will flexibly determine the feasibility of
conditions caused by COVID-19.
investment by carefully monitoring conditions and prioritizing
Daikin's market capitalization has grown by around 20 times
investment. As for capital investments, we plan to keep
over the 25 years between end-March 1995 and end-March
aggressively investing in enhancing production capacity targeting
2020 , being ranked eighth in market cap growth over the 30
North America, India, and SE Asia—all of which are key markets
years of the Heisei Era (1989 -2019 ).
for the air conditioning business—and growth markets for the
Notes: For companies listed on Japanese stock exchanges.
Comparisons between January 9, 1989 and April 26 , 2019
(source: Nikkei).
Investment & Shareholder Returns
In the latter half of the "FUSION 20" three-year plan, we
chemicals business.
As for shareholder returns, by striving to maintain a
consolidated ratio of dividend to net assets (Dividend on Equity,
DOE) of 3.0 % while at the same time aiming for an even higher
consolidated dividend payout ratio, we will introduce initiatives to
further increase returns to our shareholders with the core goal of
targeted growth investment of around ¥ 600 billion including
stable and continuous dividends.
capital investments and R&D (investment plan: ¥ 362 billion; R&D:
¥ 220 billion). Investments for M&A will continue to be
aggressively implemented as part of our business strategy.
In addition to increasing production capacity, strengthening
product development, and enhancing the sales and after sales
service systems, we will work to strengthen business
In fiscal 2020, despite economic conditions deteriorating
sharply in the fourth quarter, annual dividend came to ¥160
owing to solid earnings growth seen through the third quarter.
Internal reserves will be applied to strategic investments in order
to expand business and increase competitiveness such as
reinforcing management practices, promoting global businesses,
competitiveness through such activities as accelerating the air-
and accelerating eco-conscious product development.
conditioning solutions business using IoT/AI, building a digital
factory, strengthening and improving environmental technologies
to comply with tighter environmental regulations, acquiring
advanced technologies through open innovation, and hiring and
developing IT-related personnel.
Total Shareholder Return (TSR)
Daikin's TSR outperformed TOPIX and TOPIX Machinery over a
three-, five-, and ten-year period and TSR also surpassed cost of
In fiscal 2021, conditions remain severe with no end in sight for
equity capital owing to stable shareholder returns and strong
the COVID-19 outbreak, yet we target capital investments and
share price performance.
Total shareholder return (TSR* 2 )
(Index)
Daikin
TOPIX
TOPIX Machinery
TSR (Annualized)
1 year
Holding period
TSR（年率）
保有期間
Daikin
TOPIX
ダイキン
TOPIX
TOPIX 機械
TOPIX
Machinery
3 years
5 years
10 years
Cumulative
Annualized
Cumulative
Annualized
Cumulative
Annualized
2.8% 21.9%
6.8% 72. 5% 11.5% 269. 6% 14.0%
-9.5% - 0 . 4% -0.1%
1. 8%
0.4% 78 . 4%
6.0%
3年
16 . 8%
8 .1%
10 .1%
5年
17. 9 %
8 . 0 %
6 . 8%
10年
17. 8%
9.7%
12.1%
-11.2% - 8 . 5% -2.9% -3 . 0% -0.6% 84 .7%
6.3%
＊ Annualized rate is the geometric mean of cumulative returns.
600
550
500
450
400
350
300
250
200
150
100
50
0
2010/3
2011/3
2012/3
2013/3
2014/3
2015/3
2016/3
2017/3
2018/3
2019/3
■ Trading
volume
(thousand
shares)
72,000
60,000
48,000
36,000
24,000
12,000
0
2020/3
＊2 TSR (Total Shareholder's Return): Factors in capital gains and dividends when measuring the total return generated by a stock
＊ TSR is calculated by Daikin using cumulative dividends and share price fluctuations whereas TOPIX is calculated using share prices indices including dividends (formulated by
the Company based mainly on Bloomberg data)
＊ Graph values are indexed market prices in terms of TSR, with March 31, 2010 closing price data set at 100 (holding period through end-March 2020 )
Annual Report 2020
19
Management Indicators from Fiscal 2011
(%)
ROE
ROA
Operating profit margin
18
15
12
9
6
3
0
15.7%
15.7%
14.5%
14.5%
13.9%
13.9%
13.1% 13.1%
13.1%
13.1%
13.4%
13.4%
10.7%
10.7%
10.0%
10.0%
11.3%
11.3% 11.1%
11.1% 11.1%
11.1%
7.8%7.8%
7.3%7.3%
6.8%6.8%
6.1%6.1%
5.6%5.6%
12.0%
12.0%
10.4%
10.4%
6.4%6.4%
8.3%8.3%
7.8%7.8%
8.8%8.8%
6.9%6.9%
5.0%5.0%
6.7%6.7%
3.6%3.6%
3.0%3.0%
6.5%6.5%
4.0%4.0%
1.7%1.7%
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019 (FY)
Review of Operations
Overview of Global Development
Conducting business in more than 150 countries and regions, Daikin has built more than 100
production bases underpinned by market-oriented production methods.
Global Bases
Deployed Area: Conducting business in more than 150 countries and regions
Employees:
Employees:
80,369
Consolidated Subsidiaries:
Consolidated Subsidiaries:
313
Europe
9,407
78
7
China
18 ,996
36
4
Other Regions
(Latin America, Middle East, Africa, etc.)
5,134
61
Asia/Oceania
16,456
51
4
Japan
12,879
29
4
United States
17,497
58
6
Employees
Consolidated Subsidiaries
Global R&D Centers (Air Conditioning Business Only)
Expansion of Global Business Foundation
Japan
Non-Japan
Net Sales
Subsidiaries
Employees
2001
33%
2019
77%
2001
40 %
2019
91%
2001
38 %
2019
84 %
Note: Percentages in the center of each graph indicate the overseas ratio in domestic and overseas totals.
20
Air Conditioning
Japan
Business History
In 1951 , Daikin launched Japan’s first packaged air conditioner.
Since then, we have pressed forward and diversified to provide
air-conditioning systems that meet the needs of factories and
ships, vehicles, buildings and residential housing. Daikin has
Market Environment
The air-conditioning market in Japan is mature, and is anchored
by replacement demand. As Japan’s economy in fiscal 2020 is
colored by increasingly darker shades recession, on top of the
impact from a hike to the consumption tax, the spread of
COVID-19 has had a chilling effect on consumption and investor
sentiment.
Business Conditions
Together with capturing special procurements for industry-use
air-conditioning systems for public elementary and junior high
schools, we bolstered sales of “FIVE STAR ZEAS,” “machi Multi,”
and “MULTI CUBE” products. Residential-use systems saw
demand for a wide-range of the product lineup. Market share
expanded on the back of the wall-mounted “Urusara X” with
internal cleaning function for the indoor unit and “risora,” which
pursues both functionality and design.
expanded its market share with a fine-tuned sales network and the
pursuit of a broad lineup of high-value-added products that offer
energy conservation and comfort.
Production and Development Sites
We are advancing high-end technology to raise energy efficiency
and comfort. In addition, using “DAIKIN LAUNCH X,” our newly
established online platform, we can accurately ascertain the
opinions of users, and swiftly apply them to product develop-
ment. Daikin is also moving forward on IoT and AI to facilitate
functions such as automated operation.
Products and Services in Line with Needs
• “Urusara X,” a wall-mounted air conditioner that utilizes AI for
automated control of temperature and humidity
• “MULTI CUBE” enables individual control of temperature and
air volume, even in large spaces such as factories
• “Assisnet Service” and “Kirei Watch” utilize IoT to inspect,
maintain and manage industrial air-conditioning systems
Room air conditioner “Urusara X” that
automatically controls temperature and
humidity
“risora” that pursues both design
and functionality
Strategy Going Forward
In addition to special procurements by schools coming full circle,
there has also been the impact incurred by the spread of
COVID-19, and we anticipate that demand will decline. As
concerns with regard to air quality rise, we will work to boost
market share and raise profitability by expanding sales of
high-value-added products based on promoting the appeal of
ventilator function. In tandem with continuing to build upon a
flexible production structure, we will move forward on strength-
ening support for our dealerships.
New Value, New Solutions & Growth
The portable air conditioner “Carrime,” representing Daikin’s first determination to
commercialize a product through the cloud funding service Makuake, has been
honored by the world-renown design award iF DESIGN AWARD 2020, receiving the
product category award. “Carrime” is a portable heat pump type air conditioner
that can be hand-carried to a variety of locations, including kitchens, garages and
other sites where it is difficult to install conventional air conditioners. In this product
we have pursued an uncompromising design that is both easy to carry and blends in
well with interior settings, that is compact, yet realizes full-blown cooling.
“Carrime” portable air conditioner
Annual Report 2020
21
OutlookCurrent status Air Conditioning
Business History
Americas
Daikin made its first attempt to enter the U.S., the world’s largest air-
conditioning market, in the 1980s. However, given the well-entrenched
culture of ducted air conditioning, market entry proved difficult and a
withdrawal was unavoidable. We subsequently revisited the idea of
establishing a U.S. presence during our advance to establish business globally,
and after entering the year 2000, with the acquisition of the O.Y.L. Industries
Bhd and Goodman Global Group, Inc., added ducted air conditioning
products to our lineup marking the start of full-fledged operations in the U.S.
Market Environment
The air-conditioning market in the U.S. is similar to Japan in that it
relies mainly on replacement demand. During the first half of fiscal
2020, demand was underpinned by personal consumption, but
from March onward it stalled due to the spread of COVID-19.
Business Conditions
In the mainstay residential unitary product market Daikin success-
fully expanded its own distributer network and sales were brisk. In
the ductless product domain, sales rose for low-cost models in the
residential market. With “VRV”, we bolstered our direct-to-user
sales activities. In Applied Systems, in addition to growing equip-
ment sales, we also expanded our services business.
Production and Development Sites
At Goodman’s new factory, “Daikin Texas Technology Park,” we
are working to strengthen production capabilities and raise
productivity. We are fortifying functionality as a digital factory
by applying the latest Daikin technology and also spreading this
to production sites in other regions. By newly establishing
development sites we are enhancing our ability to develop
products that meet customer needs.
Products and Services in Line with Needs
• Middle-zone (SEER* 15-17) inverter units
• “Daikin One” smart thermostat
• Development of “VRV” for the residential market
• Air conditioners for cold regions that can work when the
external temperature is down to -15 degrees
* SEER: An acronym describing the Seasonal Energy Efficiency Ratio for cooling performance
“Daikin One” smart thermostat that
provides an air-conditioning solution
for an entire home
VRV system solution for the residential
market
Strategy Going Forward
The spread of COVID-19 is stagnating personal consumption and
capital investment, and demand is in decline. Given this situa-
tion, we will introduce new residential unitary products that will
serve specifically as replacements, strengthening technological
online support for dealers and working to increase market share.
In addition, we will pursue higher profit margins by enhancing
productivity at new factories and reducing fixed costs.
New Value, New Solutions & Growth
In April 2020, Daikin made a substantial investment in Locix Inc., a Silicon Valley-based
startup venture.
Locix employs spatial intelligence solutions that use a combination of indoor posi-
tioning technology, advanced AI, and Wi-Fi to acquire and analyze location, as well as
spatial and visual data, to enable actionable insights. With this allocation, Daikin aims
to reduce labor hours at installation sites through automated remote monitoring
services, and by detecting and analyzing the presence and movement of people and
assets in an office building. In this way Daikin expects to see a solutions business for
office spaces emerge.
Examples of Locix location information sensors
22
Current statusOutlook Review of Operations
China
Business History
Daikin entered the China market in the mid-1990 s when there
were already numerous Japanese air conditioner manufacturers
with a presence there. Daikin, the latecomer, differentiated itself by
applying its energy on establishing an image as a high-end brand,
and in building up its own dealer network. Moreover, we
introduced ceiling-embedded indoor units and residential multi-
split room air conditioners in our efforts to create a new type of air
conditioning culture.
Market Environment
In fiscal 2020, the economy in China was already slowing down on
account of trade friction with the U.S., and then added to this was
the spread of COVID-19, which from February led to stagnation,
and a sudden stall of economic activities.
Business Conditions
In the residential market, we pushed forward with the launch of
“PROSHOP” specialty outlets located in regional cities where
growth could be anticipated. In addition to products for mid- to
high-end residences, we also enhanced our lineup of products for
general residences. In the commercial market, the servicing and
maintenance business expanded in line with the progress made to
link devices to IoT, while we accelerated our pivot to the solutions
business.
Production and Development Sites
We are focusing efforts on deploying the latest technology and
services, and putting the Internet to use, we are introducing
services such as “Intelligent VRV,” a system that offers centralized
control of air conditioners, failure prediction and other services. In
addition, for those residences and shops that place special empha-
sis on interior spaces, we continue to introduce products with
exceptional design.
Products and Services in Line with Needs
• “New Life Multi” series for mid- to high-end residences allows
simple selection and connectivity to not only air conditioners, but
to floor heaters, bathroom dryers and others
• “Intelligent VRV” provides centralized control of air conditioners,
failure prediction and other services via the Internet
“New Life Multi” series targeting middle- to upper-class residences
(left: kitchen use; right: closet use)
Strategy Going Forward
We will continue to develop sales outlets in regional cities, while
working to expand sales of IoT products and grow our servicing
and maintenance business that utilizes operational data. In
parallel with these efforts, we will also respond to rapidly rising
air-quality needs triggered by the spread of COVID-19. In addi-
tion, we will keep an eye on the status of market recovery and
aim for business expansion.
New Value, New Solutions & Growth
In our efforts to enhance communication with customers, we have established a
comprehensive customer center in Shanghai, and also utilize telephone and SNS
channels. Going beyond a passive response for repairs, such as with conventional
call centers, we also work to actively contact customers likely to visit outlets or
exhibits, and Daikin product users, which will lead to sales and replacement orders.
Moreover, we are also performing sales activities in coordination with “PROSHOP”
specialty outlets that aggregate query information. We continue to press forward
with AI, and of the approximately 4,500 chat queries that take place in a month,
70% are handled via automated response.
Comprehensive customer center in Shanghai
Annual Report 2020
23
Current statusOutlook Air Conditioning
Business History
Europe/The Middle East/Africa
Our presence in Europe started by establishing a production and
sales base in Belgium in the early 1970 s. We succeeded in
bolstering sales in Italy, Spain, France, and other nations all across
the EU, and the scale of our business grew rapidly. After entering
the year 2000, we also expanded into the Heating business and
Refrigerator and Freezer business.
Market Environment
Despite Brexit issues in the UK and political instability in the
Middle East giving rise to uncertainties, the European economy in
fiscal 2020 was growing gradually. However, from February, Italy
became an epicenter of the COVID-19 pandemic, and this led to
severe economic deterioration.
Business Conditions
Given rising environmental consciousness, sales of high-value-add-
ed products increased. Sales of R32 refrigerant models for residen-
tial use expanded. Commercial sales also grew on the back of “VRV”
that uses recycled refrigerants and for refrigerant-saving models.
Heating business sales were favorable, and market share rose,
owing to sales of heat pump type hot water heating systems.
Production and Development Sites
In Europe, which is highly environmentally conscious, we are
taking the initiative to enhance our lineup with R32 models and
refrigerant-saving models, staying a step ahead of competitors.
We are also working on making heat pump type hot water heat-
ing system highly efficient, as they have experienced growing
demand in recent years. In the Refrigerator and Freezer business,
we continue to develop and launch products that set themselves
apart with CO2 refrigerant and other environmental measures.
Products and Services in Line with Needs
• R32 model lineup ahead of other companies via room air
conditioners and “SkyAir” (air conditioning for shops)
• “VRV L∞P” that uses recycled refrigerant
• “Daikin Altherma” heat pump type hot water heating system
that leads to the suppression of greenhouse gas emissions.
• One-stop system proposals that cover the entire cold chain,
from food shipping to storage
Accelerating the pace of overall cold
chain business development
Refrigerant reclamation and destruction
facility in Germany, part of a scheme for
the recovery, reclamation and
destruction of refrigerant
Strategy Going Forward
The constraints placed on economic activities, including the
lockdown of cities to combat the spread of COVID-19, portends
falling demand. We aim to boost sales of environmentally con-
scious products for residential and industrial use. Moreover, we
will endeavor to raise market share in the Heating business by
promoting the environmental characteristics of heat pump type
hot water heating system. In the Refrigerator and Freezer busi-
ness we will be uniting with Zanotti and AHT to accelerate
business development across the cold chain.
New Value, New Solutions & Growth
Since November 2019, Daikin has partnered with WASSHA Inc., a company using IoT
technology to develop an electrical power service business in Africa, to start a field trial
of a new business model in Tanzania.
In the field trial, Daikin will introduce high-efficiency air conditioners to small stores and
ordinary homes in Tanzania through a subscription method, and verify business feasibility,
based on WASSHA’s fee collection technology that works with mobile money. This will facili-
tate greater possibilities for the spread of air conditioners, even in low-income markets.
In June 2020, the two companies established a new company, “Baridi Baridi Inc.,”
and have since commenced full-fledged business activities.
Business model utilizing the subscription method
in Africa
24
Current statusOutlook Review of Operations
Asia and Oceania
Business History
Daikin began product exports and knockdown production from the
1960s, and from the 1990s, strengthened its sales network in
countries around the region and advanced the introduction of
energy-conserving and cooling-only models tailored to regional
needs. From 2010 onward, air conditioning demand soared in line
with economic development, and Daikin reinforced its production
capabilities with the establishment of plants in Thailand, India,
Malaysia and Vietnam.
Market Environment
Asia is in the process of air-conditioning equipment adoption,
making this a promising market for growth. The economy in Asia
in fiscal 2020, already buffeted by a drop in emerging market
currencies, was further hit by the spread of COVID-19, particularly
due to its reliance on China, and economic stagnation followed.
Business Conditions
From major metropolises to regional cities in each country, togeth-
er with enhancing our sales network, we fortified service struc-
tures and moved forward to increase our sales force personnel. In
residential-use models, we expanded sales of products that stood
out, such as cooling-only inverter air conditioners. Sales of indus-
trial-use models also grew in each of the key countries as we
promoted proposal sales tailored to applications and made efforts
to nurture dealerships.
Production and Development Sites
In addition to cooling-only inverter air conditioners, we actively
develop products that meet the needs of particular regions, such
as air conditioners that can stand up to the over-50-degree heat
of India, and air conditioners that can cool multiple rooms with
the limited power supplies of Indonesia.
Products and Services in Line with Needs
• Cooling-only inverter air conditioners that strengthen cost
competitiveness
• Air conditioners that can operate in oppressive outside tem-
peratures and that can be transported over bad roads
• Air conditioners that stand up to unstable power supply situa-
tions
Burgeoning Asian market
Increasing production capacity in Asia,
where air-conditioning demand is
expanding
Strategy Going Forward
As the spread of COVID-19 causes demand to fall, Daikin will
continue its work to expand sales of products that stand out,
and to enhance and nurture its dealerships. In addition, we will
continue to strengthen relationships with dealers by ensuring a
stable supply of products, use technology and sales promotion
support, and enhance training through online measures, while
pursuing increased market share.
New Value, New Solutions & Growth
The penetration rate for air conditioners in India currently stands at less than 10%, while
in 10 to 15 years that is expected to rise to the 60% level. This means that demand can
be anticipated to surge. Moreover, this is a market with a huge demand for maintenance
and servicing, given power fluctuations caused by frequent electricity outages and
breakdowns of heat exchangers due to air pollution. Daikin has established its second
Indian training center, which raises the number of service staff that can be trained in a
year 1.7 times, to 50,000. We are also pressing forward on staff training in Vietnam
and other locations, and by 2025, aim to increase service staff training in Asia to
200,000 per year.
Accelerating human resource development in India
Annual Report 2020
25
Current statusOutlook Chemicals
Pursuing comprehensive cost-cutting such as reaping the
benefits of softer raw materials prices amid severe
business conditions led by lower semiconductor and
automotive-related demand
Business Environment
Overall in the Chemicals segment net sales fell year over year due to
the decline in demand worldwide in the semiconductor and auto-
motive-related markets, the downturn in the gas market in Europe,
and the impact of the spread of COVID-19 from the fourth quarter.
Initiatives
In fiscal 2020, we strengthened connections among our global
business facilities, pursued application development themes, imple-
mented business expansion themes, and promoted materials devel-
opment with end-users based on the Daikin Group policy “3 Struc-
tures of Collaborative Innovation.” However, our existing businesses
have been impacted by deteriorating operating conditions.
As for fluorocarbon gas, the impact of the drop in sales mainly
due to the accumulation of distribution inventory was significant
in the European market, where demand had been strong in the
previous fiscal year. As a result, overall sales of gas decreased
substantially year on year.
Despite relatively strong LAN cable-related demand, net sales of
fluoropolymers decreased year on year due to declining demand
for semiconductor and automotive-related applications world-
wide. Net sales of fluoroelastomers also decreased year on year
due to the impact of falling demand in the automotive field mainly
in the U.S., European, and Chinese markets.
Among fine chemicals, overall sales were down compared to
the previous fiscal year due to sluggish sales for anti-fouling
surface coating agents, mainly in Asia, and stagnant demand for
oil and water repellents in China and the United States.
Fluorinated materials contributing to the next-generation automotive trend “CASE”
Fluorinated materials supporting the miniaturization of semiconductor integrated
circuits
26
Current status Review of Operations
We will pursue initiatives to increase market share by capturing
rising demand in the rapidly developing Chinese semiconductor
market while accelerating the development of applications
in the telecommunications field with the spread of 5G
Objective
We will accelerate the development of applications in the telecom-
munication and semiconductor fields—for which medium- to
long-term growth looks promising—as well as for next-generation
automotive materials.
Business Strategy
In addition to uncertainty about when the semiconductor and
automotive markets will recover, business conditions are expected
to remain severe, including constrained individual consumption
and capital expenditures caused by the impact of COVID-19.
Daikin will continue working to increase its share of the semi-
conductor and telecommunication markets, develop next-genera-
tion automotive lithium-ion batteries, and bolster spec-in activities.
In addition, Daikin will take advantage of the COVID-19 outbreak
to develop businesses that meet market needs including higher
demand for oil and water repellent agents used in protective
medical clothing and masks as well as greater demand for tablet
computers with the spread of online education and remote
working as part of “new lifestyles.”
Accelerating the development of applications for fluorinated materials with
excellent electrical properties in line with the spread of 5G
“OPTOOL” delivers excellent antifouling performance on touch screen surfaces
New Value, New Solutions & Growth
Using AI to Accelerate Product Development
Daikin Industries is accelerating the transformation of product development
processes, such as using simulation technologies developed in-house. The
fruits of our AI usage are emerging, such as achieving a more than eight-fold
improvement in efficiency by drawing on the expertise and experience of
researchers accumulated to date, verifying ideas through considerable
experimental repetition, and utilizing MI (materials informatics) technology
for selecting new materials synthesis routes. Looking ahead, we will accelerate
the use of AI technology in R&D, including sensory evaluation using image
analysis and materials design/process optimization using MI. Enhancing its
relationships with industry and academia, Daikin will work to accelerate early market releases and application development by
shortening new product development processes, thus leading to further business contributions.
Annual Report 2020
27
Outlook Oil Hydraulics
Reported Record-high Sales in the Hydrostatic
Transmissions (HST) Business
Business Environment
In terms of sales of oil hydraulic equipment for industrial machinery,
the business environment of the Oil Hydraulics business was harsh
due to factors that included the prolonged impact of the trade
friction between the United States and China and the effects of
stagnant demand mainly in the automobile industry. Demand for oil
hydraulic equipment for construction machinery to customers in
North America was firm.
Initiatives
The Oil Hydraulics business comprises a range of oil hydraulic
equipment to facilitate the smooth movement of various types of
machinery, contributing to energy efficiency and electrical power
savings.
In fiscal 2020, for our industrial machinery customers we pro-
moted product development in accordance with user needs while
working on market development, efforts to increase market share,
and sales expansion. We also worked on productivity improve-
ments and monozukuri reform by the operation of a new plant
and process integration.
In the HST business, we reported record-high sales due to
expansion in sales to customers in North America.
Aim to increase domestic market share and accelerate
expansion of global business scale
Target
In addition to customer development through the introduction of
new products, we aim to expand sales by meeting the needs, which
have been growing in recent years, for labor saving features and
automation as well as for predictive maintenance and the status
monitoring of equipment and machinery.
Business Strategy
In fiscal 2021, amid an expected significant decline in demand
from lower capital investment, mainly in Japan and North Ameri-
ca, we will work to improve our business structure. For example,
we will achieve this by enhancing our product capabilities through
industry-academia collaboration and strengthening our sales and
marketing capabilities.
We will also promote business expansion on a global basis and
strengthen the newly launched e-commerce efforts in North
America, where maintenance, repair and operation (MRO) busi-
ness is being developed.
In the HST business, we aim to further expand sales by introduc-
ing new products for priority markets in Europe and the United
States.
New Value, New Solutions & Growth
“Rakufil” Long-life Filters for Oil Cooling Units Developed
In collaboration with Nippon Muki, we have developed “Rakufil” long-life filters for oil
cooling units.
Conventional oil cooling unit filters are prone to clogging and require frequent clean-
ing of the cooling fins as well as the replacement of the filter once every two weeks.
“Rakufil” eliminates the need to clean the cooling fins, because the filter microfibers
collect oil mist and dust. In addition, since a large amount of mist can be collected by
the proprietary filter element molding, the filter replacement frequency is once a year,
and thus a significantly longer service life has been achieved.
28
“Rakufil” frees users of the need to maintain
the cooling fins on oil cooling units.
Current statusOutlook Defense
Review of Operations
Increase Sales in Defense and Civilian Fields
Business Environment
Ten years have passed since launching home-use oxygen therapy
equipment on the market, with the number of units exceeding
30,000.
Initiatives
In the Defense Systems business, Daikin designs and manufac-
tures products for Japan’s Ministry of Defense based on the
defense budget, with products supplied including various types
of ordnance used for drills, and aircraft parts. In the private-sec-
tor, Daikin manufactures and sells home-use oxygen therapy
equipment. Daikin provides respiration synchronizers and oxygen
concentrators, products that require the highest levels of preci-
sion, performance, functionality, and quality.
In fiscal 2020, Daikin released and has seen sales growth for
the world’s first oxygen concentrators equipped with communi-
cation functions that detect a patient’s respiratory rate. More-
over, in the ten years since the launch of home-use oxygen
therapy equipment on the market, the number of units has
grown and, in turn, has increased earnings in the overhaul
business.
Work to increase sales of home-use oxygen therapy equipment
in Japan and China
Target
We aim to expand the overhaul business while increasing for
differentiated home-use oxygen therapy equipment.
Business Strategy
Assuming a decline in orders from Japan’s Ministry of Defense, we
will work to increase earnings in fiscal 2020 through aggressive
efforts to increase sales of differentiated products in civilian fields.
Our oxygen concentrators are equipped with respiratory rate
detection functions able to remotely identify changes in patient
symptoms, and amid rising expectations among physicians, we
aim to increase market share by enhancing our lineup of differenti-
ated products. In the overhaul business, we target further earn-
ings growth by raising customer satisfaction through improved
operational efficiency.
New Value, New Solutions & Growth
Launch of the Oxygen Concentrator Equipped with Respiratory
Rate Detection Function and Pulse Oximeter Capable of Measuring
Blood Oxygen Levels without Drawing Blood
Daikin developed and began selling oxygen concentrators that not only monitor usage
time and flow rate settings, but are also equipped with a respiratory rate detection
function. In May 2020 we are launching the Litetec DP1 pulse oximeter, which through
the use of light is able to easily measure blood oxygen levels without drawing blood.
Moving forward, we intend to expand our product lineup through the effective use of IT.
Annual Report 2020
29
Current statusOutlook Corporate Governance
Corporate Governance
Basic Policy of Corporate Governance
The Daikin Group strives to raise corporate value through corpo-
rate governance. We carry out decision-making with foresight, as
well as by executing business with greater speed, transparency,
and soundness in response to challenges and changes in the busi-
ness environment.
We strive to improve our current integrated management frame-
work, under which directors assume responsibility for both busi-
ness execution and management. In this way, we fulfill our
responsibility for management, making strategic decisions quickly
and providing appropriate supervision. We also seek to improve
the monitoring function conducted by third parties, including
multiple external directors.
We aim for management with greater speed, soundness, and
transparency. We will continue to boost corporate value by seeking
and implementing new ways to achieve optimal corporate gover-
nance, pursuing best practices in all facets and at all levels of the
Daikin Group.
Regarding Japan’s Corporate Governance Code set by the Tokyo
Stock Exchange, Daikin has already implemented all the principles
contained in the revisions of June 1, 2018, including “enhancing
information disclosure,” “maintaining the effectiveness of the
Board of Directors and the Audit and Supervisory Board,” “defining
roles and responsibilities 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 System
Rather than adopting a U.S.-style “committee system” that com-
pletely separates decision making and business oversight from
operational execution, the Daikin Group has adopted an “integrat-
ed management” system in its aim to promote a higher level of
management, in view of the special characteristics of the Group’s
business and in judging that this is a more-effective means of
accelerating decision making and operational execution.
“Integrated management” means that the directors jointly take
charge of both management responsibilities and business execu-
tion responsibilities.
Directors also bear responsibility for the execution and completion
of their own decisions by carrying out their decision making, business
execution, and supervision/guidance in an “integrated” manner. The
multiple outside directors provide monitoring of the status of busi-
ness execution from an independent perspective and take respon-
sibility to support “integrated management” from the standpoint
of transparency and integrity by offering appropriate oversight and
advice with regard to decision making. In addition, the Group has
introduced an “executive officer system” to accelerate the speed
of execution based on autonomous judgments and directions in
units handling each region, division, and function. Appointments
of executive officers are carried out by the Board of Directors.
Appointment of Directors
When appointing directors, the Daikin Group gives emphasis to
factors ranging from the globalization of the Group’s businesses
and the broadening of its business fields to a diverse range of
background factors, such as nationality, gender, and career history.
As of the end of June 2020, there were 11 directors (including
one female and one non-Japanese directors) who carry out expedi-
tious and strategic decision making as well as sound oversight and
guidance throughout the Group.
30
Daikin’s Board of Directors includes four external directors (as of
end of June 2020), conditional upon them not having a relation-
ship of interest with the Company. Daikin seeks outside directors
that can provide oversight and advice from a high-level perspective
based on a wealth of experience and deep insight. Accordingly,
Daikin appoints outside directors with business experience, mainly
as directors at listed companies, and that do no have concurrent
outside director position at five or more companies.
To ensure that the external directors can effectively contribute to
Daikin’s corporate governance system, assistants to the external
directors are assigned in the Company. They strive to provide the
external directors with 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 partic-
ularly 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 and has
established the Audit and Supervisory Board. As of end of June
2020, 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 mem-
bers are the same as those for external directors and include inde-
pendence 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 can express diverse opinions.
To ensure effective audit functions, the Audit and Supervisory
Board receives reports on important issues related to management
and performance when necessary and also investigates relevant
units, confirms approval of documents, and regularly exchanges
opinions with representative directors, executive officers, and the
accounting auditors. In addition, the Audit and Supervisory Board
Member Office has been established, and the staff perform their
duties under the orders and direction of the Audit and Supervisory
Board members. The opinions of the Audit and Supervisory Board
are respected on matters related to personnel transfers, work eval-
uations, and other matters pertaining to Audit and Supervisory
Board Member Office staff members.
Corporate Governance Structure (as of the end of June 2020)
Shareholders’ Meeting
Appointment,
dismissal
Appointment,
dismissal
Appointment, dismissal
Accounting
Auditor
Audit &
Supervisory
Board
Audit
Group
Auditors
Meeting
Internal Control Committee,
Corporate Ethics and Risk
Management Committee,
Information Disclosure
Committee,
CSR Committee
Board of Directors
HRM Advisory Committee
Compensation Advisory Committee
Group Steering Meeting
Group Management Meeting
Appointment,
supervision
Executive
Officers Meeting
(The rest is abbreviated)
Tatsuo Kawada
Akiji Makino
Ryu Yano
Toru Nagashima
Chiyono Terada
Tatsuo Kawada
Akiji Makino
Shingo Torii
External Director/Audit and Supervisory Board Members’ Principal Activities
Name
Position
Principal Activities
Chiyono Terada
External Director
Ms. Terada attended 14 of the 15 Board of Directors meetings held during fiscal 2020. Based on her
abundant experience in management and high-level insight, she can provide appropriate supervision of
the Company's management from an independent perspective; provides management with 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 15 of the 15 Board of Directors meetings held during fiscal 2020. Based on his
abundant experience in management and high-level insight, he can provide appropriate supervision of
the Company's management from an independent perspective and actively provides suggestions, from
his broad and sophisticated perspective regarding changes in business models, innovation, and other matters.
Mr. Makino attended 15 of the 15 Board of Directors meetings held during fiscal 2020. Based on his abundant
experience in management and high-level insight, he can provide appropriate supervision of the Company’s
management from an independent perspective and actively provides suggestions from his broad and sophisti-
cated 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 15 Board of Directors meetings held and 12 of the 14 Board of Auditors
meetings held during fiscal 2020. Based on his abundant experience and high-level insight as a corporate
manager, particularly from his broad and sophisticated perspective developed over many years of experi-
ence in business overseas, he provides the necessary input in a timely fashion.
Mr. Nagashima attended 14 of the 15 Board of Directors meetings held and 14 of the 14 Board of
Auditors meetings held during fiscal 2020. Based on his abundant experience in management and
high-level insight, he provides the necessary input in a timely fashion based especially on his broad and
sophisticated perspective developed through experience in the management of global companies and
manufacturing enterprises.
Reasons for Election as External Director/Audit and Supervisory Board Member
Name
Position
Reasons for Election
External Director Ms. Terada has served as President and Representative Director of Art Group Holdings, Co., Ltd. Based on
her abundant experience and high-level insight as a corporate manager, and with her broad and sophisti-
cated perspective, she appropriately carries out her management duties and measures to further promote
the achievements of female employees, taking a consumers’ standpoint, including on the importance of the
corporate brand. Ms. Terada was elected as external director to continue to contribute to the Company’s
corporate value looking forward.
Mr. Kawada has served as Chairman and CEO of Seiren Co., Ltd., and has abundant experience and
high-level insight as a corporate manager. His experience includes changing his company’s business model,
innovation creation, and transforming corporate cultures. Mr. Kawada was elected as external director to
make use of this experience and to provide appropriate supervision of the conduct of management from
an independent perspective, and, by offering proposals in relation to the overall management of the
Company from his broad and sophisticated perspective, to contribute to increasing Daikin’s corporate value.
Mr. Makino has served as Chairman and CEO 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. Mr. Makino was elected as external director to draw on this 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 sophisticated perspective,
contribute to increasing Daikin’s corporate value.
Mr. Torii has served as Representative Director and Vice Chairman of the Board of Suntory Holdings Limited
and has abundant experience and deep insight as a corporate manager into corporate management that
anticipates customer needs, improving corporate value through ESG activities, etc. Mr. Torii was elected as
external director to draw on this background and experience to provide appropriate supervision of the con-
duct of management from an independent point of view, and, offering proposals regarding management
from his broad and sophisticated perspective, contribute to increasing Daikin’s corporate value.
Mr. Yano has served as Chairman of the Board and Representative Director at Sumitomo Forestry Co., Ltd.,
and has abundant experience and deep insight as a corporate manager. Mr. Yano carries out his duties
from a broad and sophisticated perspective cultivated, in particular, from his wealth of overseas business
experience. Mr. Yano was elected as external auditor to draw on his experience to supervise overall man-
agement at Daikin and to significantly upgrade the appropriateness of the audit function.
Mr. Nagashima has served as President and Representative Director of the Board at Teijin Limited, and
has abundant experience and high-level insight as a corporate manager, particularly in the field of imple-
menting paradigm shifts from manufacturing to services. Mr. Nagashima was elected as external auditor
to draw on his experience to significantly upgrade the appropriateness of the audit function.
Ryu Yano
External Audit
and Supervisory
Board Member
Toru Nagashima
Note: All of the Company’s external directors and external auditors meet the qualifications for independence established by the Tokyo Stock Exchange
Annual Report 2020
31
Corporate Governance
Corporate Governance
Agile Management Support System
Daikin’s three main management bodies are the Board of Directors,
the Group Steering Meeting, and the Executive Officers Meeting
and by keeping the number of directors at a minimum they secure
expeditious decision making based on substantial discussion.
The Board of Directors, along with providing healthy business exe-
cution and appropriate supervision and guidance, is the decision-
making institution for all matters related to the Group as a whole, as
stipulated by laws and regulations and by the articles of incorpora-
tion. Individual interviews conducted with directors confirm the via-
bility of their effectiveness. In fiscal 2020, the Board of Directors met
15 times, and the average attendance rates of external directors and
external Audit and Supervisory Board members at those meetings
were 98% and 87%, respectively.
The top deliberative unit in the Group’s management system is
the Group Steering Meeting. This unit determines the direction for
important management guidelines and management strategies in
a rapid and timely manner. In fiscal 2020, it met nine times.
The Executive Officers Meeting was established as a place where
we can expedite thorough deliberations and prompt implementation
of important management issues, and it met 17 times in fiscal 2020.
In addition, to respect and protect the interests of diverse stake-
holders 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.
Evaluation of the effectiveness of the Board of Directors
Daikin analyzes the effectiveness and appropriateness of the Board
of Directors and the corporate governance system through inter-
views with the Directors and Corporate Auditors and deliberations
by the Board of Directors. The Board of Directors of Daikin is
assessed on its ability “to perform appropriate decision making
through open and active discussions and play an effective role in
improving corporate value over the medium-to-long term”.
We will continue to improve board effectiveness, as well as engage
in other initiatives, including discussions of cross-Group strategies and
issues and enhanced reports of the status of business execution.
Corporate Officer Renumeration
To ensure the transparent management of its corporate officer per-
sonnel and remuneration processes, Daikin has established the HRM
Advisory Committee and the Compensation Advisory Committee.
These committees engage in discussions and deliberations regarding
issues including corporate officer nomination criteria, candidates, and
remuneration. As of July 2020, both committees comprised six mem-
bers, including four external directors, one in-house director, and one
executive officer in charge of personnel, with the committee chairman
being chosen from the external directors.
The remuneration of directors and Audit and Supervisory Board
members is based on the report of the Compensation Advisory
Committee within the maximum limit of total remuneration deter-
mined by the Annual General Meeting of Shareholders. 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.
In response to the expectations of shareholders and in accor-
dance with management policy, compensation for in-house direc-
tors is structured to maintain the motivation of in-house directors
32
at a high level continuously over the medium- to long-term so as
to contribute to enhancing the Daikin Group’s corporate value.
Performance-linked remuneration reflects short-term Group perfor-
mance and performance of divisions in which a director is in
charge, and stock options reflect medium- to long-term perfor-
mance. External directors and corporate auditors receive fixed
compensation only.
Daikin determines compensation levels based on the relative
position of its performance and remuneration levels compared to
other leading manufacturing companies in Japan after reviewing
the data from a specialized external institution on the remunera-
tion of corporate officers active in just under 300 Japanese compa-
nies listed on the First Section of the Tokyo Stock Exchange. The
three indices used by the Company are the sales growth rate, oper-
ating income margin and ROE, as well as the medium-to -long
term increase in corporate value.
Total Compensation for Directors
and Audit and Supervisory Board Members (Fiscal 2020)
Position
Total
Compensation
(Millions of yen)
Directors (excluding external directors)
Audit and Supervisory Board Members
(excluding external Audit & Supervisory
Board members)
External Corporate Officers
1,136
70
78
Total of different types of compensation
(Millions of yen)
Fixed
compensation
Stock
Options
484
70
78
154
—
—
Performance-
linked
compensation
496
—
—
Persons
paid
9
3
5
Corporate Officers with Compensation over ¥100 Million
(Fiscal 2020)
Name
Total
Consolidated
Compensation
(Millions of yen)
Noriyuki Inoue
Masanori Togawa
Ken Tayano
Masatsugu Minaka
Jiro Tomita
Kanwal Jeet Jawa
421
284
167
139
156
108
Total Consolidated Compensation
by Type (Millions of yen)
Position
Company
Fixed
compensation
Stock
Options
Director Daikin Industries, Ltd.
Director Daikin Industries, Ltd.
Director Daikin Industries, Ltd.
Chairman
Consolidated Subsidiary,
Daikin (China)
Investment Co., Ltd.
Director Daikin Industries, Ltd.
Director
Consolidated Subsidiary,
Daikin Europe N.V.
Director Daikin Industries, Ltd.
Director Daikin Industries, Ltd.
Director
Consolidated Subsidiary
Daikin Airconditioning
India Pvt. Ltd.
189
123
85
11
5
73
59
12
54
38
38
19
—
19
—
19
10
—
Performance
linked
compen-
sation
193
123
51
—
34
6
77
—
31
Accounting Auditor Compensation (Fiscal 2020)
Auditing expenses
246 million yen
Group-Wide Governance
To meet governance needs on a Group-wide basis, including com-
panies acquired through M&A, Daikin holds meetings of the Group
Steering Meeting to ensure the thorough sharing of important
management policies and basic strategies. Moreover, Daikin aims
for corporate action based on unified Group objectives by promot-
ing and strengthening support for the resolution of challenges of
Group companies. In addition, to strengthen Group-based auditing
and supervisory functions, Daikin is working to enhance its man-
agement at the Group Auditors meetings, which comprise audit
managers from major Group companies. From the perspective of
further strengthening corporate governance and Group manage-
ment as a multinational company, Daikin has appointed a Chief
Global Group Officer, who works to further improve the Group’s
cohesiveness.
Corporate Officers
Corporate Officers
As of end of June 2020
Directors
Noriyuki Inoue
Chairman of the Board and
Chief Global Group Officer
Masanori Togawa
Representative Director,
President and CEO
Date of Birth March 17, 1935
Number of the Company shares owned (Thousands of shares)
March 1957 Entered the Company
February 1979 Director of the Company
February 1985 Managing Director of the Company
June
June
May
June
June
June
1989 Senior Managing Director of the Company
1994 President, Representative Director of the Company
1995 Chairman of the Board and President,
Representative Director of the Company
1996 President, Representative Director of the Company
2002 Representative Director, Chairman of the Board
and CEO of the Company
2014 Chairman of the Board and Chief Global Group
Officer of the Company (Current position)
67
Significant Concurrent Posts
External Director of Hankyu Hanshin Holdings, Inc.
Chairman of The Daikin Foundation for Contemporary Arts
Chairman of Specified Nonprofit Corporation of Kansai
Philharmonic Orchestra
Date of Birth January 11, 1949
Number of the Company shares owned (Thousands of shares)
10
Responsibilities and Assigned Items
Chairman of the Internal Control Committee
April
June
June
July
June
June
1973 Entered the Company
2002 Director of the Company
2004 Director and Senior Executive Officer of the Company
2006 Member of the HRM and Compensation Advisory
Committee of the Company (Current position)
2007 Director and Senior Executive Officer of the Company
2011 Representative Director, President and COO of
the Company
June
2014 Representative Director, President and CEO of
the Company (Current position)
July
2016 Chairman of the Internal Control Committee of
the Company (Current position)
Date of Birth January 8, 1947
Number of the Company shares owned (Thousands of shares)
June
June
June
July
1976 Founded Art Hikkoshi Center
2
1977 Established Art Hikkoshi Center Co., Ltd.
Significant Concurrent Posts
(Currently, Art Corporation), became a President
and Representative Director of the above company
2002 Director of the Company (Current position)
2006 Chairman of the HRM and Compensation Advisory
Committee of the Company (Current position)
President and Representative Director of Art Group Holdings
Honorary Chairman of Art Corporation
Chairman and Representative Director of Art Childcare Corporation
April
2018 President and Representative Director of Art
Group Holdings (Current position)
December 2019 Honorary Chairman of Art Corporation
(Current position)
Chiyono Terada
Member of the Board (External)
Date of Birth January 27, 1940
Number of the Company shares owned (Thousands of shares)
March 1962 Entered Fukui Seiren Kako Co., Ltd. (Currently,
—
Seiren Co., Ltd.)
August 1981 Director of the above company
August 1985 Managing Director of the above company
August 1987 President of the above company
June
2003 President and COO of the above company
October 2005 President, CEO and COO of the above company
June
2011 Chairman, President, CEO and COO of the
above company
June
2014 Chairman and CEO of the above company
Significant Concurrent Posts
Chairman and CEO of Seiren Co., Ltd.
External Director of Hokuriku Electric Power Company
External Audit & Supervisory Board Member of Hokuhoku
Financial Group, Inc.
External Director of FUJIFILM Holdings Corporation
Tatsuo Kawada
Member of the Board (External)
June
July
(Current position)
2016 Director of the Company (Current position)
2016 Member of the HRM and Compensation Advisory
Committee of the Company (Current position)
Annual Report 2020
33
Corporate Officers
Corporate Officers
Date of Birth September 14, 1941
Number of the Company shares owned (Thousands of shares)
March 1965 Entered Iwatani Corporation
2
June
June
June
June
April
June
June
June
July
1988 Director of the above company
1990 Executive Director of the above company
1994 Senior Executive Director of the above company
1998 Executive Vice President of the above company
2000 President of the above company
2004 President and Executive Officer of the above company
2012 Chairman, CEO and Executive Officer of the
above company
2016 Director of the Company (Current position)
2016 Member of the HRM and Compensation Advisory
Committee of the Company (Current position)
April
2019 Chairman and CEO of Iwatani Corporation
(Current position)
Akiji Makino
Member of the Board (External)
Significant Concurrent Posts
Chairman and CEO of Iwatani Corporation
Chairman of the Board of Iwatani Industrial Gases Corporation
Date of Birth January 18, 1953
Number of the Company shares owned (Thousands of shares)
April
June
1980 Entered ITOCHU Corporation
1
1983 Entered Suntory Limited (Currently, Suntory
Significant Concurrent Posts
April
June
June
June
May
June
June
Holdings Limited)
March 1992 Director of the above company
March 1999 Managing Director of the above company
March 2001 Representative Director and Senior Managing
Executive Officer of the above company
March 2003 Representative Director and Executive Vice
President of the above company
October 2014 Representative Director and Vice Chairman of the
Board of the above company (Current position)
June
2020 Director of the Company (Current position)
Date of Birth January 12, 1947
1970 Entered the Company
2000 Associate Officer of the Company
Representative Director and Vice Chairman of the Board of
Suntory Holdings Limited
External Director of ROHTO Pharmaceutical Co., Ltd.
External Director of Zojirushi Corporation
December 2014 Chairman of the Board of Daikin Fluorochemicals
(China) Co., Ltd. (Current position)
Number of the Company shares owned (Thousands of shares)
2002 Senior Associate Officer of the Company
2004 Senior Executive Officer of the Company,
5
Representative of China business of the Company
(Current position), Member of Global Air-
Conditioning Committee of the Company
(Current position)
2009 Chairman of the Board and President of Daikin
(China) Investment Co., Ltd. (Current position)
2011 Director and Senior Executive Officer of the Company
2013 In charge of air conditioning business in Japan of
the Company (Current position)
Responsibilities and Assigned Items
Responsible for Domestic Air-Conditioning Business,
Representative of China Region, Chairman of the Board and
President of Daikin (China) Investment Co., Ltd., Chairman of the
Board of Daikin Fluorochemicals (China) Co., Ltd., and Member of
Global Air-Conditioning Committee
June
2014 Representative Director and Senior Executive
Officer of the Company (Current position)
Date of Birth July 9, 1953
October 1983 Entered the Company
Number of the Company shares owned (Thousands of shares)
8
July
2005 Director and President of Daikin Europe N.V.
Responsibilities and Assigned Items
(Current position)
June
2007 Associate Officer of the Company, Member of
Global Air-Conditioning Committee of the
Company (Current position)
June
June
June
2008 Executive Officer of the Company
2010 Senior Executive Officer of the Company
2011 Director and Senior Executive Officer (Current
position), Representative of air conditioning in
Europe, the Middle East and Africa of the
Company (Current position)
Representative of Air-Conditioning Operations in the Europe/
Middle East/Africa Region (excluding East Africa), Director and
President of Daikin Europe N.V., and Member of Global Air-
Conditioning Committee
Shingo Torii
Member of the Board (External)
Ken Tayano
Representative Director, Senior
Executive Officer
Masatsugu Minaka
Member of the Board, Senior
Executive Officer
34
Date of Birth August 7, 1949
April
June
1970 Entered the Company
2008 Associate Officer of the Company
November 2009 Director and Vice President of Daikin Europe N.V.
2010 Executive Officer of the Company
September 2019 Chairman of the Board (non-resident) of
Goodman Global Group, Inc. (Current position)
Number of the Company shares owned (Thousands of shares)
5
2010 Director and Senior Executive Officer of the Company
Responsibilities and Assigned Items
2011 Director and Senior Executive Officer of the Company
2015 In charge of Global Operation Division of the
Company (Current position), In charge of Production
Engineering of the Company (Current position)
Responsible for Global Operations Division, Production Engineering
and PD Affiliation Alliance Promotion, Chairman of the Board
(non-resident) of Goodman Global Group, Inc.
May
June
June
June
Jiro Tomita
Member of the Board, Senior
Executive Officer
June
2016 Director and Senior Executive Officer of the
Company (Current position)
June
2017 In charge of PD Affiliation Alliance Promotion of
the Company (Current position)
Date of Birth December 23, 1958
April
June
June
June
June
June
1982 Entered the Company
2004 Executive Officer of the Company
2008 Director and Senior Executive Officer of the Company
2010 Senior Executive Officer of the Company
2012 Director and Senior Executive Officer of the Company
2015 In charge of R&D in North America (including applied
solutions, commercial & industrial refrigeration, filter
and dust collection) of the Company
June
June
June
2018 Senior Executive Officer of the Company, In
charge of Applied Solution Business of the
Company (Current position), In charge of Daikin
Open Innovation Lab Silicon Valley of the
Company (Current position)
2019 Senior Executive Officer of the Company
2020 Director and Senior Executive Officer of the
Company (Current position)
Number of the Company shares owned (Thousands of shares)
June
2017 In charge of R&D in North America of the
8
Company (Current position), In charge of Applied
R&D Center of the Company (Current position),
General Manager of Silicon Valley Technology
Office of the Company
Responsibilities and Assigned Items
Responsible for Applied Solution Business, R&D in North America,
Applied R&D Center, Responsibility of Daikin Open Innovation Lab
Silicon Valley
Date of Birth November 10, 1959
Number of the Company shares owned (Thousands of shares)
1997 Regional Director (Asia Pacific) of Carrier Aircon Limited
—
2001 Regional Vice President (North&East) of Voltas Limited
Responsibilities and Assigned Items
Takashi Matsuzaki
Member of the Board, Senior
Executive Officer
2005 Senior Vice President of the above company
2006 Managing Director of Uniflair India Pvt. Ltd.
May
2010 Deputy Managing Director & COO of Daikin
Airconditioning India Pvt. Ltd.
September 2010 Managing Director & COO of the above company
July
2017 Managing Director & CEO of the above company
(Current position)
June
2018 Member of the Board and Associate Officer of
the Company
June
2019 Member of the Board and Senior Associate
Officer of the Company (Current position)
Kanwal Jeet Jawa
Member of the Board and
Senior Associate Officer
Regional General Manager of Air-Conditioning Business in India/
East Africa, Managing Director & CEO of Daikin Airconditioning
India Pvt. Ltd.
Annual Report 2020
35
Corporate Officers
Corporate Officers
Audit & Supervisory Board Members
Date of Birth April 21, 1940
June
2020 Chief Advisor of the above company (Current
April
1963 Entered Sumitomo Forestry Co., Ltd.
December 1988 Director of the above company
June
June
1992 Managing Director of the above company
1995 Representative Director and Senior Managing
position)
Number of the Company shares owned (Thousands of shares)
—
Director of the above company
Significant Concurrent Posts
April
1999 Representative Director and President of the
above company
June
2002 Representative Director and Executive Officer of
the above company
April
2010 Representative Director and Chairman of the
Board of the above company
June
2013 Audit & Supervisory Board member of the
Company (Current position)
April
2020 Director and Corporate Advisor of Sumitomo
Forestry Co., Ltd.
Ryu Yano
Audit & Supervisory Board
Member (External)
Chief Advisor of Sumitomo Forestry Co., Ltd.
Date of Birth January 2, 1943
Number of the Company shares owned (Thousands of shares)
April
June
June
1965 Entered Teijin Limited
2000 Director of the above company
2001 Managing Director of the above company
November 2001 President & Representative Director COO of the
above company
June
2002 President & Representative Director CEO of the
above company
June
April
June
June
2008 Chairman of the Board of the above company
2013 Director & Advisor of the above company
2013 Senior Advisor of the above company
2016 Audit & Supervisory Board member of the
Company (Current position)
April
2018 Honorary Advisor of Teijin Limited (Current position)
Date of Birth January 21, 1952
February 1982 Entered the Company
June
2002 Director, General Manager of Global Operations
Division of the Company, General Manager of DT
Alliance Promotion Secretariat of the same
division of the Company
June
2004 Executive Officer, Member of Global Air-
Conditioning Committee of the Company
September 2004 Chairman and Member of the Board of Daikin
U.S. Corporation
June
2007 Senior Executive Officer of the Company, General
Manager of New York Office of the Company,
President and Member of the Board of Daikin
Holdings (USA), Inc., President and Member of
the Board of Daikin U.S. Corporation
Date of Birth July 31, 1960
August 1989 Entered the Company
July
2011 Department Manager of Accounting Group of
Finance and Accounting Division of the Company,
Director and President of Daikin Accounting
Solutions Co., Ltd.
June
June
2016 Associate Officer of the Company
2019 Audit & Supervisory Board member of the
Company (Current position)
—
Significant Concurrent Posts
Honorary Advisor of Teijin Limited
June
2015 Audit & Supervisory Board member of the
Company (Current position)
Number of the Company shares owned (Thousands of shares)
8
Number of the Company shares owned (Thousands of shares)
1
Toru Nagashima
Audit & Supervisory Board
Member (External)
Kosei Uematsu
Audit & Supervisory Board
member (Standing)
Hisao Tamori
Audit & Supervisory Board
member (Standing)
36
Executive Officers
Position (s)
Name
Responsibilities and Assigned Items
Senior Executive Officer Yoshihiro Mineno
Responsible for Filter business training, General Manager of Global Operations Division,
Director (non-resident) of Goodman, Global Group, Inc., Director (non-resident) of Daikin
Holdings (Houston), Inc.
Senior Executive Officer Koichi Takahashi
Responsible for Finance and Accounting/Budget Operations, IT Development, IoT and AI
business promotion, General Manager of the Finance and Accounting Division
Senior Executive Officer Yoshikazu Tayama
General Manager of Budget and Administration Group in Finance and Accounting Division
Senior Executive Officer Masayuki Moriyama
Responsible for Applied Solution Business in China/ASEAN/Oceania Region, Refrigeration
business, Director of Daikin (China) Investment Co., Ltd., COO of McQuay China
Senior Executive Officer
Satoshi Funada
Responsible for Service Operations, General Manager of Air-Conditioning Sales Division
Senior Executive Officer Naofumi Takenaka
Responsible for Human Resources, and General Affairs
Senior Executive Officer Yasushi Yamada
Responsible for Safety
Executive Officer
Katsuyuki Sawai
Responsible for CSR, Global Environment Affairs, Public Relations, General Manager of
Public Relations Tokyo Office, Chairman of CSR Committee
Executive Officer
Hitoshi Jinno
General Manager of Filter Division
Executive Officer
Kota Miyazumi
Responsible for Marketing, Corporate Communication, General Manager of Marketing
Research Division, Director of Planning Group in Marketing Research Division, and Chairman
of Information Disclosure Committee
Executive Officer
Tsutomu Morimoto
Responsible for Goodman Group Business, Executive Secretarial Department
Executive Officer
Yuji Yoneda
Responsible for Air-Conditioning Product Development (including Applied Solution Business
and Refrigeration Business) and General Manager of Technology and Innovation Center
Executive Officer
Masaki Saji
General Manager of Human Resources Division and Department Manager of Diversity
Promotion Group in Human Resources Division
Executive Officer
Masafumi Yamamoto
Responsible for Corporate Ethics, Compliance, Legal Affairs, Information Security, General
Manager of the Legal Affairs, Compliance and Intellectual Property Center Chairman of
Corporate Ethics and Risk Management Committee
Executive Officer
Akira Murai
Responsible for Defense systems business, SCM, Logistics, Co-Creation Projects member of
Technology and Innovation Center, and General Manager of Yodogawa plant
Executive Officer
Makio Takeuchi
Responsible for Global Procurement
Executive Officer
Yoshiyuki Hiraga
Responsible for Chemical Business and Chemical Environment/Safety
Executive Officer
Toshio Ashida
Responsible for Corporate Planning, electronics business, Strategy office of Technology and
Innovation Center
Executive Officer
Hideki Maruoka
Responsible for Oil Hydraulics business
Executive Officer
Shigeki Morita
Responsible for PL/Quality (Air Conditioning/Applied/Refrigeration), Alliance Promotion with
Gree Electric Appliances Inc., General Manager of Air-Conditioning Manufacturing Division,
and General Manager of Sakai Plant
Executive Officers
Katsumi Kawahara
Deputy General Manager of Technology and Innovation Center (Responsible for promoting
industry, government and academia collaboration)
Executive Officers
Shoji Uehara
Deputy General Manager of Global Operations Division
Executive Officers
Hiroaki Ueda
General Manager of Corporate Planning
Annual Report 2020
37
CSR Management System
CSR Management System
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. The Daikin Group sets key CSR themes for internal use and 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.
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: “stakeholders concerns
and impact,” which includes stakeholder engagement and global guidelines and requirements from the SRI research institution,
and the “Importance to Daikin” based on management philosophy as well as mid-and-long-term management strategies.
S
t
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,
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t
s
Biodiversity protection
Measures against atmospheric
pollution
Response to climate
change
Most Important
Respect for human rights
Stakeholder engagement
Communities
Effective use of resources and energy
New value creation
Product quality and safety
Management of chemical substances
Customer satisfaction
Anti-corruption
Occupational safety and health
Human resource development
Free competition and fair
business dealings
Labor-management relations
Workplace diversity
Supply chain management
Corporate governance
Information security
Important
Waste and water-use reduction
Importance to Daikin
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 Provision” themes and five“Fundamental” themes. Attention to these initiatives in manage-
ment activities is incorporated into our strategic management plan, “FUSION 20” and implemented across the entire Group.
Daikin Group CSR
CSR for Value Provision
Fundamental CSR
We aim to provide a healthy,
comfortable air environment
to all across the world,
through efforts to minimize
environmental impact.
P Environment
P New Value Creation
P Customer Satisfaction
P Human Resources
We are responding to societal
demands for greater transpar-
ency and more open business
practices.
P Corporate Governance
P Respect for Human Rights
P Supply Chain Management
P Stakeholder Engagement
P Communities
38
MaterialityNine Key CSR Themes
CSR Action Plan 2020
Key CSR Themes
FY2021 Target
FY2020 Result
Introduce state-of-the-art technologies to
the market in order to address environmental
and energy issue
• Reduced emissions of greenhouse gas by 60 million
tons of CO2 through the distribution of environmentally
conscious products globally
• Reduced emissions of greenhouse gas resulting from
the manufacturing process across the entire Group by
70% from fiscal 2006 levels
• Implementing and expanding environmental activities in
coordination with stakeholders
We measure our contribution to reducing emissions
of greenhouse gas based on the distribution of envi-
ronmentally conscious products and our reduction in
greenhouse gas resulting from the manufacturing
process. Daikin reduced greenhouse gas by 68 million
tons of CO2, representing a reduction of greenhouse
gas emissions of 76% from fiscal 2006 levels.
Share dreams and ambitions inside and out-
side Daikin to realize a healthy, comfortable
lifestyle through air
• Connecting society and customers via IoT and AI and
creating new value through open innovation
The amount of investment to create new value is
measured based on the amount of new technology
created. Research and Development expenses reached
¥68.0 billion and the number of patent applications
were 957 in Japan and 513 overseas in fiscal 2018 on a
unconsolidated basis.
Provide peace of mind and reliability through
a focus on customer orientation, experience,
performance, and advanced technologies
• Build a service network encompassing the entire globe
• Building product development capabilities that can sat-
isfy the needs of customers worldwide
• Maintaining optimum levels of quality
We measure satisfaction through the after-sales ser-
vice customer satisfaction rating. With the customer
satisfaction rating in the last fiscal year taken as 1,
the customer satisfaction ratings were: Japan 1.14
(compared to fiscal 2016); Singapore 1.00 (compared
to fiscal 2016); Indonesia 1.03 (compared to fiscal
2018); India 1.13 (compared to fiscal 2017); and Spain
1.12 (compared to 2017).
E
Environmental
Environment
New Value
Creation
Customer
Satisfaction
Human
Resources
Respect for
Human
Rights
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s
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P
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V
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f
R
S
C
R
S
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F
S
Social
Respect individual personalities and values,
and maximize the potential of each employee
so that they can benefit Daikin and society as
a whole
• Achieve a ratio of excellent or advanced skilled engi-
neers in manufacturing of four to one
• Increase the ratio of local presidents
• Reducing the frequency of industrial accidents to zero
Thoroughness of respect for human rights
Supply Chain
Management
Conduct CSR procurement
Stakeholder
Engagement
Engage in dialogue with stakeholders and reflect this dia-
logue into management
Communities
Contribution to environmental conservation, education
support, and cooperation with the local community
G
Governance
Corporate
Governance
Thoroughness of compliance
Degree of independence from the company, diversity,
and transparency of the Board of Directors (Daikin
Industries, Ltd. only)
As a means of fostering our human resources, we
measure the number of personnel that are at a level
to provide guidance in monozukuri (creating things),
maintain diversity and move toward appointing more
presidents at local overseas production facilities. In
the area of occupational, health and safety, we mea-
sure the safety of operations at production facilities.
We achieved a ratio of excellent or advanced skilled
engineers in manufacturing of 3.2 to one (unconsoli-
dated), a ratio of local presidents of 47% (overseas
Group companies) and frequency rate of industrial
accidents throughout the Group of 1.26.
We measure how thoroughly respect for human
rights has been adopted by our employees through
the completion rate for the self-assessment. The com-
pletion rate for the self-assessment was 99%.
To measure the level of implementation of the CSR by
suppliers, we created a questionnaire for suppliers.
We began running this survey of CSR through the
procurement process in fiscal 2019. The CSR procure-
ment ratio in fiscal 2020 was 97%.
As an indication of our performance in the area of
engagement, we track the number of events held by
our Air Conditioner Forums (Konwakai), an event that
comprehensively covers the industry and provides an
opportunity for dialogue between experts in air con-
ditioning. The Air Conditioner Forum was held six
times across five different regions worldwide (125
participants from 31 countries participated and
attendees included university professors and experts
in their field).
The amount of support in terms of donations both
financial and material provides an indication of our
contribution to regional society. This amount across
the entire Group stands at ¥1.5 billion.
We measure the status of our efforts in corporate
governance compliance through the completion rate
by employees of the self-assessment. The completion
rate for the self-assessment was 99%.
We also have an eleven-member Board of Directors,
including four external directors, one female member,
and one non-Japanese member. (Unconsolidated)
Annual Report 2020
39
CSR (Corporate Social Responsibility)
CSR (Corporate Social Responsibility)
Environment
Materiality of Environmental Measures
While air conditioners, the main product of the Daikin Group, sup-
port the enhancement of economic growth and quality of life in
hot regions, they consume a lot of electricity during use and also
have an impact on climate change through the fluorocarbon used
as a refrigerant. In recognition of this, the Daikin Group strives to
contribute to the sustainable growth of global society as the only
comprehensive air-conditioner manufacturer that develops and
manufactures both air conditioners and refrigerants. The Daikin
Group focuses on the spread of environmentally conscious prod-
ucts using inverter technology, refrigerants with lower global
warming potential worldwide and its services solution business.
Daikin’s Initiatives
• Promotion of Eco-Friendly Technologies and Products
The Daikin Group develops and distributes environmentally con-
scious products globally that satisfy either or both a reduction in
power consumption by 30% or more compared to conventional
models and use of refrigerants with a lower global warming poten-
tial of a third or less compared to conventional refrigerants.
In fiscal 2020, the percentage of sales of environmentally con-
scious products related to residential air conditioners was 97%,
representing a reduction in emissions of greenhouse gases* of 68
million tons of CO2. As a measure to reduce CO2 emissions result-
ing from the energy consumption of air conditioners, Daikin is
working to broaden the global distribution of inverter units. For
example, in Southeast Asia, Daikin has developed low-cost inverter
units targeting regions requiring cooling-only air conditioners, and,
due to a rising energy-conservation consciousness along with
strengthened regulations and steeply rising electricity prices, these
low-cost inverter units are flourishing. Also, in Latin America and
the Middle East, Daikin is cooperating with government and industry
bodies to support the establishment of energy efficiency assessment
standards, through the introduction of indicators, standards, and an
improved energy labelling system.
* Difference between emissions from the total sales by Daikin of environmentally conscious
products and a baseline of emissions from air conditioners using non-inverter units and con-
ventional refrigerants, combustion-type heating, and hot water heaters.
• Supporting the Rollout of R32 Refrigerant in Emerging Economies
Daikin is supporting the conversion of refrigerants even in emerg-
ing countries to expand the use of R-32. In addition, in 2011 we
offered free access to 93 patents for the application of R-32 equip-
ment and in 2019 we offered free access to about 180 patents, so
that air conditioning manufacturers around the world can develop
equipment using R-32. As of December 2019, Daikin has sold
approximately 23 million units of R-32 residential air conditioner
and heat pump, while the total market including other manufac-
turers is estimated to exceed 100 million units.
• Target Achieved: GHG Emissions Reduced by 76% Compared
with Fiscal 2006
The greenhouse gases (GHGs) emitted by Daikin in its development
and production processes are roughly categorized into CO2 due to
energy use and fluorocarbons. With a view to reducing CO2 emis-
sions by 75% in fiscal 2026 compared with fiscal 2006, the
Company set a 70% reduction target for fiscal 2021.
In fiscal 2020, for example, Daikin Device Czech Republic s.r.o.
switched all the power used to green power, and Daikin Malaysia
Sdn. Bhd. added a 1MW solar power system. In addition, although
production volume in fiscal 2020 was almost unchanged compared
with that of the previous year, the Company was able to reduce
CO2 emissions from energy by 1% on a year-on-year basis. As a
result, GHG emissions in fiscal 2020 were 1.28 million tons-CO2 (a
76% reduction from fiscal 2006).
• Solidarity with TCFD Recommendations
In May 2019, Daikin announced its support and agreement with
the recommendations of the Task Force on Climate-related
Financial Disclosures (TCFD).
As a comprehensive air conditioning manufacturer, Daikin has
endeavored to mitigate the environmental impact of air condition-
ers—for example by promoting the widespread adoption of ener-
gy-saving inverter technology and the low global warming
potential refrigerant R32—in the belief that “a company cannot
grow its business unless it contributes to solving environmental
problems.” We will analyze the risks and opportunities that climate
change presents to our business and reflect them in our manage-
ment strategies and risk management. At the same time, we will
also disclose our progress in this area in an appropriate manner
and aim for further growth while contributing to the decarboniza-
tion of society as a whole.
New Value, New Solutions & Growth
New Service Aimed at Refrigerant Circular Economy
Amid the progress being made in Europe with fluorinated greenhouse gas (F-gas) regulations* on the total consumption of hydrofluorocarbon
(HFC) refrigerants, Daikin launched a service that enables the circular use of refrigerant. Previously reclaimed and destroyed when air conditioners
are discarded, refrigerant can now be reused repeatedly by removing any impurities and reclaimed. Daikin has established a new refrigerant recla-
mation facility in Germany by leveraging its strengths of having both an air conditioning business and a chemical business, and has also estab-
lished a channel in cooperation with UK-based company A-Gas, which recovers and reclaims refrigerant. In June 2019, Daikin launched the “VRV
L∞P” commercial-use, multi-type air conditioner that uses recycled refrigerant and sold 14,000 units in 10 months. The Company has reduced the
amount of new refrigerant contained in commercial use, multi-type air conditioners sold in Europe by approximately 40%. To further promote the
recycling of refrigerant, we are proposing a package service that combines refrigerant collection with the sale of VRV L∞P as the replacement
when an air conditioner is being discarded. We are working to provide peace of mind to customers who are concerned about future refrigerant
shortages by temporarily holding the recovered refrigerant and guaranteeing the stock of necessary refrigerant during maintenance.
* Under the European F-gas regulations, the total consumption of HFCs ([production + amount imported – amount exported] converted to global warming impact) is being gradually reduced.
40
Environmental Vision 2050
In the Paris Agreement adopted in 2015, the declared goals were to reduce greenhouse
gas emissions to zero in the second half of this century and to keep the global average
temperature rise below 2°C compared with before the Industrial Revolution. To demon-
strate its approval of the Paris Agreement, the Daikin Group has formulated its
“Environmental Vision 2050” to aim for zero greenhouse gas emissions in 2050.
Reflected in the latter half of “FUSION 20,” our three-year Strategic Management Plan,
we have also started to develop a medium- to long-term strategy targeting 2030.
Open Innovation
IoT and AI
Through
products
Through
solutions
Daikin
Environmental
Vision 2050
We will provide safe, healthy
air environments while striving
to reduce greenhouse gas
emissions to zero.
Open Innovation
IoT and AI
Open Innovation
IoT and AI
Through
the power
of air
Development of Medium- to Long-Term Strategy toward Realization of Environmental Vision 2050
To create new added value from the air generated by our products across the world and to aim for zero greenhouse gas emissions by means
of our products and solutions, we analyzed the future of the air-conditioning business. From the results of that analysis, we are developing
and implementing measures under “FUSION,” our Strategic Management Plan formulated with an eye toward 2030.
Through products
Through solutions
Through the power of air
Philosophy toward net zero greenhouse gas emissions
Image: The power of air
s
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G
Through
products
More energy-efficient products
Development and adoption of refrigerants with lower
global warming potential
Reduce environmental impact throughout the entire
life cycle, including production
Through
solutions
Reduction through
energy-efficient
construction and spread
of renewable energy
Currently
2030
2050
Offset
Use of energy management to carry out efficient
operation of buildings with centralized systems for
energy efficiency and renewable energy
Provision of energy services throughout the value
chain
Offset the remainder by:
Switching refrigerants, recovering and
recycling refrigerants
Spreading use of heat-pump heating
Protecting forests
Conducting renewable energy businesses
Others
Bountiful air
Highly productive office environments
Rooms that enhance power of
concentration
Rooms that help people sleep better
l
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A
Health, comfortable air
Reducing sleep disorders
Rooms that reduce stress
Rooms that reduce heat shock
Safe, secure air
Protecting people’s health from
atmospheric pollution
Reducing risk of infectious diseases
Preventing heat stroke
Diversifying needs
Growth Strategy Based on Risks and Opportunities
The forecast for rapidly increasing demand for air condition — Daikin’s main business — presents us with a huge opportunity. But along with
this comes risks for the continuation of our air conditioning business: increased air conditioning means greater energy needs, increasing elec-
tricity provision costs, and higher greenhouse gas emissions.
We aim to respond to these risks by turning them into opportunities. We will do this by reducing our environmental impact by, for exam-
ple, developing and spreading the use of high-efficiency air conditioners, creating solutions for buildings that utilize energy effectively
throughout the entire facility, and developing and spreading the use of refrigerants with lower global warming potential. In this way, we aim
to protect the environment while growing our business.
IEA The Future of Cooling Forecast
In May 2018, the International Energy Agency
(IEA) released The Future of Cooling. The
report looks at air conditioning and how the
rise in its use is driving global energy demand.
According to The Future of Cooling, esti-
mates are for air conditioning demand to rise
rapidly and for energy demand for space
cooling to triple by 2050.
Worldwide air conditioner stock (number of units) and electricity demand
(100 millions units)
60
2050
6,200TWh
(TWh)
6,000
Energy demand for space
cooling to triple by 2050
2015
2,020TWh
50
40
30
20
10
0
4,000
2,000
0
1990
2000
2010
2020
2030
2040
2050 (Year)
Other
Middle East
Mexico
Brazil
Indonesia
India
China
United States
Note: Compiled by Daikin
based on Graph figures
IEA The Future of Cooling.
Annual Report 2020
41
CSR (Corporate Social Responsibility)
CSR (Corporate Social Responsibility)
New Value Creation
Materiality of New Value Creation
Daikin Group believes that to achieve sustainable growth in an
environment where change and progress in both globalization and
technology are accelerating remarkably, it is important to provide
unparalleled new value. Making use of IoT and AI technology, we
aim to integrate cutting-edge technologies from different fields
through open innovation. We will pursue new value to make peo-
ple and indoor spaces healthy and comfortable through technolo-
gies and products that contribute to the resolution of social issues
such as energy, the environment, and health.
Daikin’s Initiative
• Aiming for Innovation in Field Work with Remote Work
Support Solution
In November 2019, Daikin and Fairy Devices Inc., a venture compa-
ny with links to The University of Tokyo, jointly started efforts to
bring about improvements in work efficiency and work quality by
creating connected workers1 in service operations, such as the
maintenance and repair of air conditioners. This is an effort to
jointly solve problems in service operations by linking the voice rec-
ognition, Edge AI, and data analysis technologies that Fairy Devices
possesses with the frontline knowledge that Daikin has been culti-
vating on a global scale.
Specifically, our two companies have developed a remote work
support solution, which combines the Fairy Devices-developed
THINKLETTM wearable smart devices and a technology stack2 with a
Daikin-developed business support web app and enables skilled
service engineers to support and train remote workers. With this
solution, we will improve the technical prowess and judgment of
each and every worker not only in Japan but throughout the world
and realize high-efficiency, high-quality field work without the
need for any reworking while aiming for the early development of
excellent service engineers.
1 A collective term for field workers who can obtain a variety of information and receive vari-
ous kinds of support by wearing wearable devices and sensors.
2 A platform, such as an API or AI engine, capable of bringing together a variety of technolo-
gies and making them function individually or in an integrated manner in a digital product.
• Co-creation toward “Comfortable, Healthy Spaces”
In 2016, Daikin teamed up with RIKEN, Japan’s only comprehensive
research institution dedicated to the natural sciences, to launch the
RIKEN-DAIKIN Wellness Life Collaboration Program. The program
also engages in research to extend healthy life expectancy under the
theme of “comfortable, healthy spaces.” In 2019, an agreement
was signed with RIKEN subsidiary RIKEN Innovation Co., Ltd. with
the aim of implementing the results of R&D and creating innovation.
• Comprehensive Collaboration Aims to Realize Co-created
Innovation
In 2016, we established the Daikin Collaborative Research Institute
at Osaka University and in 2017, as a new initiative in the field of
information science, launched the Daikin Information Science
Research Unit (Di-CHiLD), a program in which Osaka University
researchers and Daikin engineers work together to realize co-creat-
ed innovation. In fiscal 2020, we put out an open call for research
themes covering all the faculties, including not only chemistry,
engineering, and information science but also pharmaceutical sci-
ences and the humanities. Meanwhile, from the research themes
we have been conducting so far, we have established the technol-
ogy in six themes and are moving to the demonstration phase on
the way to commercialization.
In March 2020, Daikin entered into comprehensive collaborative
cooperation with Doshisha University in Kyoto aimed at practical
R&D on the theme of environmental issues. Toward reducing GHG
emissions, a theme that Daikin addresses through its business, the
Company will utilize Doshisha University’s unique knowledge of
environmental technologies and related fields aiming to return the
academic results to society as well as the university’s practical aca-
demic research capabilities that are aiming for practical use in the
real world. Both parties will work on the practical application of
CO2 capture, decomposition, and reuse technologies, and further
increase the efficiency of air conditioners. They will also foster col-
laborative innovation human resources through joint research.
New Value, New Solutions & Growth
Ideathon for African Start-up Companies Held
In December 2019, Daikin and Samurai Incubate Inc. held the “AirTech BootCamp Africa” ideathon that targeted start-up companies
across Africa. Aiming to expand its business in Africa, where significant economic growth is expected in the years to come, the
Company held this event for the purpose of creating innovative ideas that would bring about the more widespread adoption of air
conditioning products. Of the 160 companies that had applied, the nine companies that made it through the selection process partici-
pated in this event, and lively discussions and presentations of various ideas were conducted. In the same way as previous global devel-
opment strategies, in Africa the Company aims to develop local human resources, build strong sales and service networks, and expand
its business with a lineup of high-quality products with excellent energy efficiency. In the meantime, along with companies that pro-
posed good ideas at this event, Daikin is also looking into the possibilities of expanding its business by building new business models
and considering the verification of ideas locally.
42
Customer Satisfaction
Materiality of Customer Satisfaction
Daikin is developing business in over 150 countries around the world.
To provide maximum satisfaction to customers in each individual
country, Daikin takes into consideration climate, culture, and regula-
tions to provide products and services that meet local needs. At the
same time, it is vital to maintain the highest standards of quality. To
more precisely match customer needs, Daikin is focused on cus-
tomer-oriented business activities and regularly addresses the frank
opinions of customers worldwide, making use of their views in
areas such as product development.
Daikin’s Initiatives
• Implementing Global Quality Guidelines
In its Global Quality Guarantee Rules, the Daikin Group has pre-
scribed its basic stance on quality standards across its Group com-
panies and outlined the responsibility and authority structure to
ensure the seamless implementation of measures for quality moni-
toring and correction. We have acquired ISO9001 certification at
all production facilities, and, through our quality management sys-
tem, we thoroughly implement quality maintenance and manage-
ment in all development, procurement, and production divisions.
Furthermore, we are also working to enhance quality with the
cooperation of our outsourcing partners.
To assess the operating status of the quality management sys-
tem, the Daikin Group conducts evaluations through internal
audits and maintains a continuous cycle of implementation, evalu-
ation, and improvement.
In addition, every year, we plan and implement a quality assur-
ance program for the fiscal year that outlines quality priority mea-
sures and targets for each business division based on the Group’s
annual policy guidelines.
• Developing Our Service Structure in Japan and Abroad
The Daikin Contact Center is a general inquiry service that accepts
inquiries regarding repair requests, technical consultations, and
purchasing information 24 hours a day, 365 days a year, from cus-
tomers in Japan.
In fiscal 2020, a video manual was newly added to the customer
support page of the website so that it is possible to check operat-
ing conditions that are difficult to determine using the instruction
manual alone.
Overseas also, we respond to the various demands in each coun-
try and region by establishing an after-sales service network under
the slogan “fast, accurate and friendly.” We are working to
improve customer satisfaction by establishing a call center and pro-
viding technical information on our website.
• Collecting and Reflecting the Views of Customers
The Daikin Group measures customer satisfaction through its after-
sales services and uses these results to enhance customer satisfac-
tion.
In Japan, we conduct our fureiai surveys (relationship surveys),
and, in fiscal 2020, the overall satisfaction score was 4.63 out of a
total of 5.0 points, our highest rating to date. We believe this
result reflects our education and training in such areas as “enhanc-
ing technical capabilities” and “improving our response to custom-
ers” as well as a focus on “speed from reception to completion”
and “repairs completed in one visit.”
Customer feedback is also utilized in product development. The
Company opened its DAIKIN LAUNCH X online platform in
November 2019, via which product release information, including
for products still under development, is publicized and the pros
and cons of sales as well as specifications are decided based on
user evaluations and opinions. The “Carrime” portable air condi-
tioner arose from feedback that said “I want to spend time com-
fortably in places where it is difficult to install air conditioners,”
which garnered a lot of support through crowdfunding and led to
its commercialization.
• Global Product Development System to Meet Diverse
Regional Needs
The functions and performance required of air conditioners vary
greatly from region to region, depending on factors that include
the climate, culture, power supply situation, and income levels. To
rapidly develop products in line with such local circumstances, we
have R&D centers in 25 locations around the world and have
established a system that allows us to offer local products at com-
petitive prices. We also share the know-how gained at each base
and utilize that expertise throughout the entire Group to accelerate
the development of products that satisfy our customers.
Positioned as the second mother R&D center in response to the
theme of a distribution base in each region of the world and focus-
ing key technology that was previously managed by Japan and allo-
cating it to fields of excellence in each region such as for India where
outside temperatures are very high and for heating in Europe.
New Value, New Solutions & Growth
Developing Products That Support Digital Society through Co-creation with Customers
Due to the rapid spread of information and telecommunications networks, there is a demand for technology that can send large amounts of
data quickly and compactly. Daikin is taking on the challenge of value creation in cooperation with customers in order to contribute to the evo-
lution of the information and communications field by taking advantage of the characteristics of fluorine. In addition to satisfying the costs and
ease of processing required by our direct component processing manufacturers and manufacturing equipment manufacturers in the semicon-
ductor field, where higher degrees of miniaturization and integration are being investigated, Daikin has in recent years focused on activities
developing innovation proposals as a development partner. We are working together to solve the technical issues of end-user semiconductor
device manufacturers. For example, the integration rate of semiconductors has increased more than 10-fold in the last 10 years. Daikin’s etching
agent also contributes to the miniaturization of semiconductor circuits, which have played a part in technological innovation. We will engage in
the proposal of solutions that utilize fluorine chemical technology, which contributes to the development of society, in the years to come.
Annual Report 2020
43
CSR (Corporate Social Responsibility)
CSR (Corporate Social Responsibility)
• Grand Prize at Contact Center Awards 2019
Daikin Contact Center won the Grand Prize, the highest award in
the operation category at the Contact Center Awards 2019 event
sponsored by RIC Telecom Co., Ltd. Daikin’s unique operator
recruitment efforts and AI-based system construction were among
those factors that were highly rated.
Human Resources
Importance of Initiatives Related to Human Resources
In response to the expectations of our various stakeholders and for
the Daikin Group to realize on a global level its strengths in the
“environment”, “new value creation” and “customer satisfaction”,
the personnel who can take on the responsibility to perform these
activities are critical. Therefore, Daikin has positioned “People-
Centered Management” as its foundation and to respect individuals
and their values we are promoting the creation of an organization
that can maximize the power that each individual possesses.
Daikin’s Initiative
• Enhancing Opportunities for Human Resource Development
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 experience,” we have
positioned OJT as the basis of human resource development and,
including Off-JT*, are working to enhance growth opportunities.
We are also focusing on nurturing the human resources for the
next generation of skills that will become the basis of manufactur-
ing. The goal is to have one in every four employees in our global
production rated as “outstanding skilled workers and highly skilled
workers”. In fiscal 2020, the number of qualified personnel in Japan
was one in 3.2 people. In conjunction with the expansion of our
business overseas, we are also strengthening our global training.
Meanwhile, we are working to enhance training opportunities that
includes Off-JT such as: the Daikin Leadership Development
Program, which fosters the executives who can play an active role on
the front line of our global business; overseas base practical training
to develop young, globally minded human resources; and the
“Daikin Information and Communications Technology College,” an
in-house lecture to train the personnel responsible for technological
and business development in the AI field.
* Off-the-Job Training, a method of learning away from work to gain extra
knowledge and skills.
• Appointment of Local People in Executive Positions
at Overseas Facilities
In conjunction with the globalization of the Daikin Group’s busi-
ness, we are also advancing with efforts to globalize our manage-
ment team and are aggressively promoting local employees at
overseas bases to executive and positions. In fiscal 2020, the ratio
of local presidents at overseas bases was 47%, and the ratio of
directors was 49%.
• Promoting Achievements of Non-Japanese National
Employees
Having 93 non-Japanese national employees working in Japan as
of March 31, 2020, Daikin is working to create environments in
which employees are able to fully harness their abilities regardless
of nationality. In fiscal 2020, we held Japanese classes, set up a
consultation desk, held workshops to facilitate non-Japanese
national employee networking, and conducted cross-cultural com-
munication seminars to learn tips on how to demonstrate their
abilities at a Japanese company. We also created a guidebook that
provides tips on how to work together geared toward the work-
places where non-Japanese national employees are assigned.
• Management System Established to Reduce Workplace
Related Accidents to Zero
To ensure operational and employee safety at its production facili-
ties in each region worldwide, the Group has created occupational
health and safety management systems (OHSAS) at 59 facilities
and is acquiring certification for international standards, such as
OHSAS 18001.
Chaired by the director in charge of safety, the Global Safety
Meeting is held twice a year with the aim of improving safety levels
of the entire group. With the aim of achieving zero workplace acci-
dents, the Company is implementing safety education and training
and undertaking safety patrols at each site in Japan and overseas.
In fiscal 2020, the frequency rate of industrial accidents through-
out the Group was 1.26, an improvement of 0.12 from fiscal 2019.
New Value, New Solutions & Growth
Developing IoT/AI Human Resources That Create Innovation
By fiscal 2022, Daikin plans to conduct training for about 1,000 people, including existing and new employees, to ensure they can use IoT/AI.
With the cooperation of Osaka University, with which Daikin had signed a comprehensive cooperation agreement centering on the field of
information science, we started the in-house Daikin Information and Communications Technology College course in 2017. In addition to lec-
tures from professors of Osaka University to learn the basic knowledge of AI and how to use AI technology, the course develops experts who
can use IoT/AI in business development and technology development. This is supported by incorporating Project-Based Learning (PBL), which
draws on actual issues from each department. Since fiscal 2019, we have also been conducting IoT/AI human resource development courses
for new employees. Not only demonstrating knowledge and skills, they are expected to play an active role as “bridge people” who promote
the use of IoT/AI on a Companywide basis and create connections between inside and outside the Company and between Company depart-
ments. We are also working to improve internal literacy so that these human resources can play an active role.
44
• Identification of Most Important Risks and Planning and
Implementing Countermeasures
With the rapid expansion of Daikin’s business, the Daikin Group
introduced its risk management system, to gain an overall picture
of risks from a global perspective in an accurate and prompt man-
ner and to reduce risk across the entire Group. Each division and
main Group company overseas and in Japan identify and select
critical risks through risk assessments, and each Group company
works to reduce this risk. The status of risk reduction measures is
shared with and reported to the Corporate Ethics and Risk
Management Committee.
For example, in fiscal 2020, Daikin Industries made efforts
toward key themes such as “Natural disaster risk,” “Product liability
and quality risk,” “Intellectual property risk,” “Control of information
leaks,” and “Overseas crisis management.”
Corporate Ethics and Risk Management
Corporate Ethics and Risk Management
Board of Directors
Corporate Ethics and
Risk Management Committee
Officer in Charge of Compliance
and Corporate Ethics
Officer in Charge
Divisions and
Group
Companies
Legal Affairs, Compliance and
Intellectual Property Center
P
r
o
m
o
t
i
o
n
E
x
e
c
u
t
i
o
n
People in Charge of Corporate
Ethics and Risk Management
Compliance and Risk Management
Leaders Meeting
Compliance and
Risk Management Leaders
• Launch of Educational Program to Maximize the Talents of Women
Daikin commenced two educational programs with Osaka
University in October 2019. Under the Leadership Development
Program for Female Engineers, our young female engineers learn
their own unique style of leadership with female graduate stu-
dents. Under the Childcare Leave Career Advancement Support
Program, Daikin employees take classes at Osaka University during
childcare leave.
These are pioneering examples of educational programs jointly
conducted by a university and a company, which are leading to the
advancement of women’s careers and skills.
CSR Management/
Compliance Risk Management
CSR Management
The Daikin Group established the important themes of “CSR for value
provision” and “Fundamental CSR,” to enable it to realize sustainable
development both as a corporation and a member of society. 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 activities and monitors the exe-
cution of those activities and promotes comprehensive and
Groupwide CSR.
Compliance Risk Management
• Taking an Integrated Approach to Promoting Compliance
and Risk Management
At the Daikin Group, the Internal Control Committee, chaired by
the President, checks and confirms that internal controls, including
risk management, are functioning properly Groupwide. Chaired by
the officer in charge of corporate ethics and compliance, the
Corporate Ethics and Risk Management Committee is held twice a
year in Japan as a general rule and comprises each department
head and the presidents of major Group companies to ensure the
management of operational risk and thorough compliance.
Overseas Group companies formulate and develop comprehen-
sive common rules to tackle compliance and risk management. The
issues faced by each company and the progress toward resolution
are reported to the Corporate Ethics and Risk Management
Committee.
In fiscal 2020, compliance meetings were held in Asia, Oceania,
Europe, and China to share information on self-assessment as well
as on education and training initiatives.
• The Thorough Implementation of Group Conduct Guidelines
The Daikin Group established its Group Conduct Guidelines that
clearly outlines required conduct for individual officers and employ-
ees and, to ensure thorough compliance, appointed a Compliance
and Risk Management Leader (CRL) for each division and for each
of the main Group companies in Japan and overseas. CRLs encour-
age adherence to the Group Conduct Guidelines, while regularly
checking the status of compliance and risk management and shar-
ing information, and they are focused on fostering a “culture free
of compliance violations” and to elevating “mechanisms to ensure
that there are no compliance violations.”
Annual Report 2020
45
CSR (Corporate Social Responsibility)
CSR (Corporate Social Responsibility)
Human Resources
Based on the laws and ordinances of countries and regions around
the world, the Daikin Group respects basic human rights in accor-
dance with the various international norms. The Daikin Group partic-
ipates in the United Nations Global Compact for supporting, and
putting into practice, universally accepted principles relating to such
matters as human rights and labor. We respect human rights, diverse
values, and the individual’s sense of work, and have stipulated in
Group Conduct Guidelines against child labor and forced labor.
• Respect for Human Rights in the Self-Assesment
The Daikin Group is committed to respecting the human rights of
all its employees as stipulated in Group Conduct Guidelines that
clearly outlines the conduct to be adhered to by each and every
officer and employee. We have identified the human rights issues
of our business and have begun to appraise the risks that should
be prioritized across the entire value chain. Also, to ensure compli-
ance with the Group Conduct Guidelines, we established an item
relating to respect for human rights in the annual self-assesment
that checks to ensure there are no human rights violations and,
where necessary, establishes measures to address any issues.
An item was also included in the Supply Chain CSR Promotion
Guidelines, formulated in 2017, and we are also asking for thor-
ough compliance from our suppliers.
• Protection of Personal Privacy
The Daikin Group has established guidelines for the protection of
personal information, and based on these guidelines, each Group
company develops its own systems to promote the guidelines and
rules. In fiscal 2020, on the basis of the tightening of regulations
and the development of laws in each country—including the
General Data Protection Regulation (GDPR), which is the regulation
covering all EU residents—we worked to improve the systems of
local subsidiaries and establish internal rules, not only in Europe
and North America, where traditionally strict measures have been
required, but also in China, Southeast Asia, and Latin America.
• Regular Human Rights Awareness and Education
Daikin conducts human rights education and awareness activities
each year for all of its directors, new employees, including those of
affiliates, and newly appointed managers. In addition, we publish a
series of human rights articles in the Company newsletter to raise
awareness of human rights.
In fiscal 2020, the Company held training for executives under
the theme of “Perspectives Required by Companies in the
Development of Action Plans Based on the Guiding Principles on
Business and Human Rights” by outside experts. This training
deepened officers’ knowledge on human rights.
• Establishment of Help-Line for Corporate Ethics
Daikin Industries has established a help-line for corporate ethics
that gives consultations and receives opinions on general corporate
ethics from employees. We also conduct harassment training
geared toward department heads and managers, including training
for newly appointed managers, to alert them with regard to the
handling of information when consulted.
We have in place a system for taking prompt measures by which
the Legal Affairs Department investigates the content of reports
and tip-offs and decides on measures to prevent recurrence follow-
46
ing discussions with the department in charge.
To make the existence of the help-line for corporate ethics com-
mon knowledge, its contact information is listed on the
Compliance Card carried by employees.
Supply Chain Management
In 1992, the Daikin Group established the Basic Procurement
Guidelines and is working to ensure fair trade with its suppliers.
In 2017, we established the Supply Chain CSR Promotion
Guidelines and recognize that our social responsibility extends
beyond the Group to the entire supply chain. In line with this, we
are promoting CSR initiatives related to the environment, quality,
occupational safety, and human rights.
• Implementation of the Supply Chain CSR Promotion Guidelines
Supply Chain CSR Promotion Guidelines that the Daikin Group
implemented in April 2017 are guidelines to promote CSR at sup-
pliers also, and aim to achieve stable, sustained business growth. In
addition to general requirements such as management and compli-
ance with laws and regulations, suppliers are requested to work on
CSR across the board, including environment, quality, occupational
health and safety, human rights, and the prohibition of trade with
conflict zones.
In fiscal 2020, a CSR survey was conducted targeting domestic
and overseas suppliers, which account for 80% of the total pro-
curement amount. The CSR procurement implementation rate in
Japan was 97%.
We are also working to instill an understanding within the
Company of CSR procurement. In Japan, we conducted CSR pro-
curement education for all procurement buyers in fiscal 2019.
Overseas, we had held CSR procurement briefing sessions for CSR
procurement managers at 14 locations in the United States,
Canada, Mexico, and China by fiscal 2020.
• Enhancing Quality from Suppliers and Supporting the
Development of Human Resources
For the Daikin Group to provide products that satisfy the trust of
customers, cooperation from suppliers is vital. Therefore, while
working hard within a strong relationship of trust with all suppliers,
the Daikin Group endeavors to continue to meet its mutual expec-
tations as well as to build relationships in which we can both grow
and develop.
Both in Japan and overseas the Daikin Group conducts regular
inspections of product quality at the local manufacturing facilities
of our suppliers, and through dialogue in relation to improved
quality, we support the enhancement of technological capabilities
along with the efforts to enhance quality in coordination with sup-
pliers. Moreover, the Group supports efforts to prevent work-
place-related accidents through measures such as holding regular
meetings on safety.
Daikin Malaysia Sdn. Bhd. regularly visits its suppliers to support
their quality improvements. By providing guidance on how to ana-
lyze the factors in the event of a quality problem, Daikin Malaysia
is supporting suppliers to enable them to conduct appropriate
investigations, analyses, and countermeasures to improve quality.
Engineers from Daikin in Japan accompany local staff and offer
guidance. This assistance is useful not only for our business part-
ners but also for improving the quality improvement skills of engi-
neers at Daikin Malaysia.
Stakeholder Engagement
Regional Society
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 suppliers, our
employees, and everyone in the regional societies that our business
evolution affects. In addition, the spread of air-conditioning tech-
nologies and the enhancement of the environmental 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 these
stakeholders through proactive dialogue, so management can use
this information in our business.
• Continuing Exchange of Opinions with Experts
Since 1995, the Daikin Group has held the Air Conditioner Forum
(Konwakai) 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 expanded the extent of these events to five regions
and held forums in Europe, China, the United States, Asia/Oceania,
and Central America/South America. Exchanging opinions with
experts from each region about environmental and energy issues,
we use that information in our technology as well as product and
business development. In fiscal 2020, we held a total of six events
in five regions at which 125 people from a total of 31 countries
participated.
At the fiscal 2020 Latin American Air Conditioner Forum, which
was held for the first time in Brazil, the largest market in the
region, 24 experts from the Brazilian and Japanese governments
and international organizations participated under the theme of air
conditioning solutions to realize a sustainable society.
• 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 lev-
els of its trade receivables and inventories. Furthermore, Daikin
works to stably maintain its consolidated ratio of dividends on
equity (DOE) at 3.0%.
Every year, we hold a Sustainability Briefing at which we explain
the Company’s sustainability efforts and seek opinions. In fiscal
2020, more than 70 analysts and institutional investors participated,
and we explained how we contribute to the sustainable develop-
ment goals (SDGs) through our business and exchanged opinions.
To make it easier for shareholders to exercise their voting rights
at ordinary general meetings of shareholders, the Japanese and
English versions of convocation notices are posted on our website
and that of the Tokyo Stock Exchange prior to being sent. The
exercise of voting rights on PCs, smartphones and mobile phones
is also possible.
The Daikin Group is made up of 313 consolidated subsidiaries
worldwide and is expanding business in over 150 countries. The
expansion of this global business is accelerating in line with the
growth in demand for air conditioners, particularly in emerging
countries and regions such as China, India, and Latin America. The
basic policy for overseas operations is to develop a strong bond
with regions through respect for their local cultural and historical
backgrounds and is premised on increasing employment in the
local region and cooperation with local companies. With our
employees taking the initiative, we carry out social activities mainly
in the areas of “environmental conservation,” “education sup-
port,” and “cooperation with the local community” and are con-
tributing to the resolution of social issues from a global perspective
based on sustainable development goals (SDGs).
• Forest and Biodiversity Preservation
To protect the environment in the vicinity of our facilities through-
out the world, the Daikin Group is working to preserve biodiversity
through its efforts to conserve forests and other natural assets such
as the oceans and rivers.
For example, Daikin Industries participates in the Osaka
Prefectural Government’s “Adopt a Forest System” and has been
conducting activities to improve the prefecture’s ecosystems by
re-establishing satoyama (a forested natural area forming the bor-
der between the mountains and the habited regions). In fiscal
2020, 130 people participated in the activity. Daikin Compressor
Industries, Ltd. (Thailand) also conducts conservation activities for
mangrove forests. This contributes to conservation of biodiversity
and protects the lives of people engaged in traditional fishing.
• Supporting the Regional Revitalization of Okinawa
Since 1988, Daikin Industries has held the “Daikin Orchid Ladies
Golf Tournament,” and, through promoting sports, we are helping
to revitalize Okinawa and encourage economic exchange with the
local area. In conjunction with this tournament, we solicit dona-
tions 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.In 2020, the
pro-am tournament and the main tournament, along with all the
official pre-tournament evening events, were canceled due to the
spread of COVID-19. However, with the support of those who had
been planning to participate in the official pre-tournament evening
events and the pro-am tournament, we were able to present the
Orchid Bounty.
Annual Report 2020
47
Eleven-Year Financial Highlights
Eleven-Year Financial Highlights
Daikin Industries, Ltd. and Consolidated Subsidiaries
Years Ended March 31
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 the 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
2010
2010
2011
2011
2012
2012
2013
2013
2014
2014
2015
2015
2016
2016
2017
2017
2018
2018
20192019
¥1,023,964
¥1,160,331
¥1,218,701
¥1,290,903
¥1,787,679
¥1,915,014
¥2,043,691
¥2,043,969
¥2,290,561
¥2,481,109
¥2,550,305
319,301
275,263
28,220
44,038
96,462
19,391
¥129,227
(39,848)
89,379
(34,942)
361,665
286,210
30,771
75,455
127,168
19,873
¥78,411
(23,306)
55,105
(37,623)
371,902
290,709
32,987
81,193
131,719
41,172
¥44,967
(62,955)
(17,988)
(1,113)
388,046
299,419
33,569
88,627
140,151
43,585
¥103,161
(218,386)
(115,225)
143,520
568,323
411,786
40,177
156,537
235,439
92,787
649,902
459,314
42,892
190,588
268,354
119,675
¥179,713
¥160,423
(80,835)
98,878
(38,249)
(77,331)
83,092
(83,073)
711,576
493,704
46,138
217,872
302,075
136,987
¥226,186
(105,493)
120,693
(85,422)
730,935
500,166
53,870
230,769
315,798
153,939
¥267,663
(128,823)
138,840
(73,544)
798,829
545,089
62,051
253,740
348,574
189,052
¥223,740
(127,459)
96,281
(93,955)
868,923
592,668
65,216
276,255
375,570
189,049
¥250,009
(165,773)
84,236
(68,721)
Millions of Yen
20202020
884,898
619,385
67,968
265,513
393,999
170,731
¥302,167
(156,187)
145,980
(169,934)
¥1,139,656
¥1,132,507
¥1,160,564
¥1,735,836
¥2,011,870
¥2,263,990
¥2,191,105
¥2,356,149
¥2,475,708
¥2,700,891
¥2,667,513
399,313
496,179
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
554,371
1,296,553
585,642
1,416,075
553,807
1,434,968
¥ 66.44
1,701.29
306
32.00
¥ 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
¥ 646.53
4,433.62
329
140.00
¥ 646.39
4,841.15
288
160.00
¥ 583.61
4,904.46
499
160.00
31.19%
31.17%
30.52%
30.06%
31.79%
33.94%
34.82%
35.76%
34.87%
35.02%
34.70%
4.30
9.42
4.01
43.54
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
11.08
15.22
15.70
52.37
11.13
15.14
13.94
52.43
10.41
15.45
11.98
53.79
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.
5. Effective from April 1, 2018, the consolidated financial statements for the fiscal year ended March 31, 2018 have been revised in accordance with a change in accounting policy.
Net Sales
Operating Income
(¥ billion)
2,500
2,000
1,500
1,000
500
0
10
11
12
13
14
15
16
17
18
19
20
48
(¥ billion)
300
250
200
150
100
50
0
10
11
12
13
14
15
16
17
18
19
20
Net Income Attributable to
Owners of the Parent
(¥ billion)
200
150
100
50
0
10
11
12
13
14
15
16
17
18
19
20
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 the 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
2010
2010
20112011
20122012
2013
2013
20142014
20152015
20162016
2017
2017
2018
2018
2019
2019
Millions of Yen
2020
2020
¥1,023,964
¥1,160,331
¥1,218,701
¥1,290,903
¥1,787,679
¥1,915,014
¥2,043,691
¥2,043,969
¥2,290,561
¥2,481,109
¥2,550,305
319,301
275,263
28,220
44,038
96,462
19,391
¥129,227
(39,848)
89,379
(34,942)
361,665
286,210
30,771
75,455
127,168
19,873
¥78,411
(23,306)
55,105
(37,623)
371,902
290,709
32,987
81,193
131,719
41,172
¥44,967
(62,955)
(17,988)
(1,113)
388,046
299,419
33,569
88,627
140,151
43,585
¥103,161
(218,386)
(115,225)
143,520
568,323
411,786
40,177
156,537
235,439
92,787
649,902
459,314
42,892
190,588
268,354
119,675
¥179,713
¥160,423
(80,835)
98,878
(38,249)
(77,331)
83,092
(83,073)
711,576
493,704
46,138
217,872
302,075
136,987
¥226,186
(105,493)
120,693
(85,422)
730,935
500,166
53,870
230,769
315,798
153,939
¥267,663
(128,823)
138,840
(73,544)
798,829
545,089
62,051
253,740
348,574
189,052
¥223,740
(127,459)
96,281
(93,955)
868,923
592,668
65,216
276,255
375,570
189,049
¥250,009
(165,773)
84,236
(68,721)
884,898
619,385
67,968
265,513
393,999
170,731
¥302,167
(156,187)
145,980
(169,934)
¥1,139,656
¥1,132,507
¥1,160,564
¥1,735,836
¥2,011,870
¥2,263,990
¥2,191,105
¥2,356,149
¥2,475,708
¥2,700,891
¥2,667,513
399,313
496,179
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
554,371
1,296,553
585,642
1,416,075
553,807
1,434,968
¥ 66.44
1,701.29
306
32.00
¥ 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
¥ 646.53
4,433.62
329
140.00
¥ 646.39
4,841.15
288
160.00
¥ 583.61
4,904.46
499
160.00
31.19%
31.17%
30.52%
30.06%
31.79%
33.94%
34.82%
35.76%
34.87%
35.02%
34.70%
4.30
9.42
4.01
43.54
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
11.08
15.22
15.70
52.37
11.13
15.14
13.94
52.43
10.41
15.45
11.98
53.79
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.
5. Effective from April 1, 2018, the consolidated financial statements for the fiscal year ended March 31, 2018 have been revised in accordance with a change in accounting policy.
Research and Development Expenses
Shareholders’ Equity
Total Assets
(¥ billion)
75
60
45
30
15
0
10
11
12
13
14
15
16
17
18
19
20
(¥ billion)
1,500
1,200
900
600
300
0
10
11
12
13
14
15
16
17
18
19
20
(¥ billion)
3,000
2,500
2,000
1,500
1,000
500
0
10
11
12
13
14
15
16
17
18
19
20
Annual Report 2020
49
Financial Review
Financial Review
Summary of the Period
Performance by Business Segment
During the fiscal year ended March 31, 2020, the overall world
economy expanded moderately in the first half of the period.
In the fourth quarter, however, the global economy slowed
sharply due to the COVID-19 pandemic. The U.S. economy experi-
enced a slowdown in personal consumption and negative growth
from January to March 2020. The European economy was also hit
by a serious economic downturn, particularly in the automobile
industry. The Chinese economy stalled due to trade friction with
the United States and the impact of COVID-19. The economies of
Asia and emerging countries, which are highly dependent on
China, also faced a significant slowdown. The Japanese economy
has entered a recessionary phase since last autumn as consumer
and investment sentiment cooled due to the impact of the spread
of COVID-19, in addition to the consumption tax rate hike against
a backdrop of an increasingly slowing economy. In response to the
spread of COVID-19, the Daikin Group worked to minimize the
impact on its business and management including sales, produc-
tion, and procurement.
Amid this environment, consolidated net sales rose to ¥2,550.4
billion (a year on year increase of 2.8%) due in part to the Daikin
Group’s solid performance up to the third quarter. As for profits,
consolidated operating income fell to ¥265.5 billion (a decline of
3.9% from the previous fiscal year) due partly to COVID-19 and
other factors. Net income attributable to owners of the parent
decreased 9.7%, to ¥170.7 billion partly due to the effect of
recording of an impairment loss despite a gain on sales of invest-
ment securities.
Air-Conditioning and Refrigeration Equipment
Total sales of the Air-Conditioning and Refrigeration Equipment
segment increased 3.9% from the previous fiscal year, to ¥2,309.1
billion. Operating income edged down 0.6% year on year, to
¥236.2 billion.
• Japan
In the Japanese commercial air-conditioning equipment market,
activity within the industry rose year on year due to firm demand
for the installation of air conditioning at public elementary and
middle schools. In the market for stores and offices, the Daikin
Group worked to strengthen sales through such measures as
expanding indoor unit variation in the “SkyAir” series and
strengthening proposals for the “machi Multi” series, multi-split
type air conditioners that feature individual operation and a slim
design. In the market for buildings and facilities, observing an
increase in the need for work environment improvements, the
Group increased sales of proposal-based products to meet user
applications, including the “VRV” series, which has high ener-
gy-saving performance and installation flexibility, and “MULTI
CUBE,” which realizes comfortable individual air conditioning in
large spaces such as factories. As a result, net sales of commercial
air-conditioning systems exceeded that of the previous fiscal year.
In the Japanese residential air-conditioning equipment market,
industry demand fell short of the previous fiscal year as a result of
a drop in demand due to the rebound from the rush in demand
prompted by the consumption tax hike in September as well as the
warm winter. Against this demand background, the Group marked
the 20th anniversary of the launch of the “Ururu Sarara” series,
which features the Group’s unique water supply-free humidifica-
tion technology, by expanding its product lineup with the launch of
“Urusara X,” which uses this technology to improve cleanliness,
“Urusara mini,” which is suitable for bedrooms and children’s
rooms, and “Ururu air purifier.” Furthermore, the Group improved
the value and promotion of products, including expanding the
product lineup of “risora,” an air conditioner combining design
Domestic and Overseas Sales
Operating Income
and Operating Income Margin
Net Income Attributable to
Owners of the Parent
(¥ billion)
2,500
2,000
1,500
1,000
500
0
2016
2017
2018
2019
2020
(¥ billion)
280
(%)
12
(¥ billion)
200
210
140
70
0
2016
2016
2017
2017
2018
2018
2019
2019
2020
2020
9
6
3
0
150
100
50
0
2016
2017
2018
2019
2020
Domestic
Overseas sales
Operating income
Operating income margin
50
"2016" 5022 15414.5
"2017" 5184 15255
"2018" 5427 17478
"2019" 5851 18960
"2020" 5969 19533
with functionality. Nonetheless, net sales of residential air-condi-
tioning systems were flat year on year.
• Americas Region
In the Americas, although the spread of COVID-19 had an impact
in March, the effects on the entire year was limited, and net sales
increased year on year as a whole due to the success of sales strat-
egies in addition to strong demand. Net sales of residential air-con-
ditioning systems rose year on year as a result of new product
launches such as a mini-split in a low-cost model and “FIT,” the
industry’s first unitary product with a side discharge inverter, and
efforts to develop a new sales network and to increase selling pric-
es. In the market for large buildings (Applied Systems), net sales
increased year on year as reinforcement of the sales network and
enhancement of the product lineup underpinned by strong market
growth led to an increase in sales for systems mainly for rooftops
and also to the expansion of the after sales service business.
• China
In China, sales were higher than the previous fiscal year up to the
third quarter thanks to the development of product and sales strat-
egies in response to rapid changes in the market environment to
take advantage of the effects of softening raw material market
conditions, and the promotion of cost reductions as the expansion
of in-house production. However, in the fourth quarter, production
and sales were suspended in February due to the spread of COVID-
19, and sales declined in March due to market disruption despite a
recovery in production. As a result, net sales decreased from the
previous fiscal year. In the residential-use market, in order to
respond to changes, the Group strengthened its “PROSHOP” spe-
cialty shops by shifting sales resources mainly to the regional cities
where growth is anticipated. In addition, the Group worked to
expand sales of residential multi-split type air conditioners by
enhancing its product lineup for the general residential market in
addition to the “New Life Multi” series aimed at the mid-range
and high-end residential market. In the commercial-use market,
while there was a decline in large-scale real estate investment, the
Group responded to steady demand for retail properties such as
restaurants and renovations of small and medium-sized properties
and captured renewal demand through the introduction of
“Intelligent VRV systems” that use the Internet to connect with
customers in the mature markets of big cities. In the Applied
Systems air-conditioning equipment market, the Group promoted
proposal-based sales in fields with growing demand, such as the
field for data centers.
• Asia/Oceania Region
In Asia and Oceania, net sales for March fell year on year due to
the suspension or restriction of business activities in Malaysia, the
Philippines, India, and other countries as a result of governmental
decrees in response to the spread of COVID-19. Meanwhile,
throughout the year, the Group worked to develop independent
dealer networks covering urban and regional areas and implement
measures aimed at differentiating the Group from its competitors
by improving its service technology strengths. As a result, net sales
increased year on year for the entire region.
• Europe/The Middle and Near East/Africa
In Europe, net sales increased year on year as a whole. Net sales of
residential air-conditioning systems increased year on year due to
strong sales in the northern European regions including northern
France, Belgium, the Netherlands, and Germany as a result of the
summer heat wave and reinforcement of the Group’s sales capabil-
ities. Net sales of residential heating systems increased significantly
year on year, boosted by various countries promoting heat pump
hot water heating systems that are effective at reducing CO2 emis-
sions. Net sales of commercial air-conditioning systems also grew
year on year due to the expansion of sales to stores, offices, and
hotels by visiting contractors and architectural firms in each coun-
try, reinforcing ‘spec-in’ activities, strengthening project manage-
ment of inquiries, and further promoting differentiated products
using environmentally-conscious, recycled refrigerant and air condi-
tioners using R32 refrigerant. However, net sales for March fell
year on year as a result of restrictions on economic activity due to
the announcement of state of emergency declarations and border
closures in various countries in response to the spread of COVID-19
Selling, General
and Administrative Expenses
(¥ billion)
640
480
320
160
0
2016
2017
2018
2019
2020
Sales by Segment
Segment Profit
(¥ billion)
2,500
2,000
1,500
1,000
500
0
2016
2017
2018
2019
2020
(¥ billion)
300
200
100
0
2016
2017
2018
2019
2020
Air conditioning
Chemicals
Other
Air conditioning
Chemicals
Other
Annual Report 2020
51
Financial Review
Financial Review
in Italy and throughout Europe.
In the Middle and Near East and Africa, amid the economic
slowdown in Dubai, which is a major market, net sales in local cur-
rencies were at the same level as the previous fiscal year, led by
Egypt and Saudi Arabia, which had strengthened their own sales
systems. However, net sales after translation into yen decreased
from the previous fiscal year due to the effect of exchange rates. In
Turkey, although demand for air-conditioning systems has been
sluggish due to the economic downturn following the plunge of
the Turkish lira in August 2018, net sales in the local currency
increased year on year due to strong sales of heating equipment.
However, yen-equivalent net sales decreased year on year due to
the impact of the sharp depreciation of the Turkish lira.
In the marine vessels business, net sales rose year on year due to
lation of distribution inventory was significant in the European
market, which was affected by the rebound following the rush
demand in the previous fiscal year. As a result, overall sales of gas
decreased substantially year on year.
Other Operations
Overall sales of the “Others” segment increased 5.4% compared
to the previous fiscal year to ¥61.3 billion. Operating income
decreased 8.5% year on year to ¥5.5 billion.
Sales of oil hydraulic equipment for industrial machinery fell year
on year due to stagnant demand in the Japanese, Asian, European,
and U.S. markets. On the other hand, sales of oil hydraulic equip-
ment for construction machinery and vehicles were up year on year
due to robust sales to key customers in Japan.
an increase in unit sales of marine container refrigeration units.
In defense systems-related products, sales of ammunition to the
Ministry of Defense rose. As a result, net sales increased year on
year. Net sales of home oxygen equipment were also up year on
year due to robust sales of oxygen concentrators.
In the electronics business, net sales grew year on year, as a result
of strong sales of “SpaceFinder,” a database system for the design
and development sectors in line with customer needs such as solu-
tions for quality issues, shortened design and development periods,
and support for cost reductions, as well as favorable sales of the
related new product “Smart Innovator” and CG creation systems.
Chemicals
Overall sales of the Chemicals segment decreased 10.4% from the
previous fiscal year, to ¥179.9 billion and operating income fell
26.9% year on year, to ¥23.8 billion. The general conditions for
overall sales of fluorochemical products was harsh and affected by
the decline in demand worldwide, mainly in the semiconductor
and automotive fields and the downturn in the gas market in
Europe, and this combined with the impact of the spread of
COVID-19 from the fourth quarter. Despite relatively strong LAN
cable-related demand, net sales of fluoropolymers decreased year
on year due to declining demand for semiconductor and automo-
tive-related applications worldwide. Net sales of fluoroelastomers
also decreased year on year due to the impact of falling demand in
the automotive field mainly in the U.S., European, and Chinese
markets. Among specialty chemicals, net sales of anti-fouling sur-
face coating agents fell year on year due to sluggish sales, mainly
in Asia. With regard to oil and water repellents, net sales fell year
on year due to stagnant demand in China and the United States.
As a result of these factors, overall sales of specialty chemicals
were down compared to the previous fiscal year. As for fluorocar-
bon gas, the impact of the drop in sales mainly due to the accumu-
Cash Dividends per Share
Total Assets
Working Capital and Current Ratio
(¥)
200
150
100
50
0
52
2016
2017
2018
2019
2020
(¥ billion)
3,000
2,000
1,000
0
2016
2017
2018
2019
2020
(¥ billion)
600
400
200
0
2016
2016
2017
2017
2018
2018
2019
2019
2020
2020
Working capital
Current ratio
(%)
240
160
80
0
Currency Exchange Rates
In foreign currency markets, the yen’s average annual exchange
rate was ¥2 higher against the U.S. dollar and ¥7 higher against
the euro compared to the previous fiscal year. The average rates for
the fiscal year under review were US$1=¥109 and ¢1=¥121.
Fluctuations in currency exchange rates resulted in a decrease of
¥75.0 billion in sales and ¥20.0 billion in operating income below
what they would have been in the absence of fluctuations.
Yen-U.S. dollar rate
Yen-euro rate
2019
¥111
¥128
2020
¥109
¥121
SG&A Expenses and Operating Income
As a result of increases in personnel costs and other factors, SG&A
expenses rose 4.5% over the previous fiscal year, to ¥619.4 billion.
Consolidated operating income declined 3.9% year on year, to
¥265.5 billion, while the operating income margin came in at 10.4%.
Assets, Liabilities, and Total Equity
Assets
At the end of fiscal 2020, consolidated total assets amounted to
¥2,667.5 billion, down ¥33.4 billion from the previous fiscal
year-end.
Current assets were down ¥13.2 billion from the end of the previ-
ous fiscal year, to ¥1,304.4 billion, because of a decrease in trade
notes receivable and other factors. Noncurrent assets decreased
¥20.2 billion from the previous fiscal year-end, to ¥1,363.1 billion,
due mainly to a decline in investment securities resulting from sales.
Liabilities and Net Assets
Consolidated total liabilities decreased ¥49.1 billion compared to
the end of the previous fiscal year, to ¥1,204.9 billion. This was
largely due to the decline in short-term borrowings and other fac-
tors. Net assets grew ¥15.7 billion from the previous fiscal year-
end, to ¥1,462.6 billion, due to net income attributable to owners
of the parent and other factors. As a result of the aforementioned,
the shareholders’ equity ratio climbed from 52.4% as of the end of
the previous fiscal year, to 53.8%. Net assets per share improved
to ¥4,904.46 from ¥4,841.15 for the previous fiscal year.
Total interest-bearing liabilities stood at ¥553.9 billion as of
March 31, 2020, down ¥31.8 billion compared to the end of the
previous fiscal year. This mainly reflected the decrease in short-
term borrowings and other factors. The interest-bearing liability
ratio (interest-bearing liabilities / total assets) decreased from
21.7% to 20.8%.
Cash Flows
During the fiscal year under review, net cash provided by operating
activities was ¥302.2 billion, an increase of ¥52.2 billion from the
previous fiscal year, principally due to a decrease in the amount of
increase in trade receivables. Net cash used in investing activities
was ¥156.2 billion, a decrease of ¥9.6 billion from the previous fis-
cal year, primarily due to a decrease in expenditures for the acquisi-
tion of consolidated subsidiaries. Net cash used in financing
activities was ¥169.9 billion, an increase of ¥101.2 billion from the
previous fiscal year, mainly due to a decrease in short-term borrow-
ings. After including the effect of foreign exchange rate change to
these results, net decrease in cash and cash equivalents for the fis-
cal year under review, amounted to ¥46.0 billion, a decrease of
¥56.2 billion from the previous fiscal year.
Capital Investment
Adhering to the basic strategy of “Focusing Management
Resources on More Profitable Areas,” the Daikin Group’s capital
expenditures were mainly allocated to the Air-Conditioning and
Refrigeration Equipment and Chemicals segments, with the total
amounting to ¥132.0 billion. In the air-conditioning and refrigera-
tion equipment field, Daikin invested ¥11.1 billion, centered on
Total Share holders’ Equity and
Shareholders’ Equity Ratio
Free Cash Flow
Capital Investment
and Depreciation and Amortization
(¥ billion)
1,500
1,000
500
0
(%)
60
(¥ billion)
150
40
100
20
50
2016
2016
2017
2017
2018
2018
2019
2019
2020
2020
0
0
0
2016
2017
2018
2019
2020
Shareholders’ equity
Shareholders’ equity ratio
(¥ billion)
150
100
50
0
2016
2017
2018
2019
2020
Capital investment
Depreciation and amortization
(excluding amortization of goodwill)
Annual Report 2020
53
Financial Review
Financial Review
research and development as well as the rationalization of room air
conditioners and package air conditioners. At Goodman Global
Group, Inc., investments of ¥17.7 billion were made primarily to
increase capacity and to attain rationalization objectives. In the
chemicals field, Daikin invested ¥9.3 billion, mainly to increase
capacity and meet rationalization objectives. In addition, Daikin
Fluorochemicals (China) Co., Ltd. made investments of ¥8.5 billion
for increasing capacity.
The main sources of funds for these investments were bank bor-
rowings and retained earnings. Note that the Daikin Group did not
make any major disacquisitions of equipment or facilities during
the fiscal year under review.
Building on the wealth of data gained from open spaces, in
2019 the Company established “point 0 marunouchi,” a member-
ship-type workspace being field trialed to realize the “office of the
future,” which is the first project of “CRESNECT,” a co-creation
platform for spatial data, in a bid to generate new value and ser-
vices while harnessing the know-how inherent within each partici-
pating partner.
Through this initiative, positive steps will be taken to substantial-
ly increase the efficiency and pace of research and development,
and to create differentiated products in each region worldwide. In
fiscal 2020, R&D expenses included in Groupwide SG&A expenses
as well as the cost of goods sold came to ¥68.0 billion.
R&D Expenses
In view of the rising concern about global warming on a worldwide
scale and issues related to energy, the Daikin Group working mainly
through its Technology and Innovation Center (TIC) engages in lead-
ing-edge technology research and development programs designed
to proactively contribute to the resolution of global environmental
issues, while also expanding the Group’s business operations. In
2018, Daikin concluded an “academia-industry collaboration agree-
ment” with the University of Tokyo. Through this comprehensive col-
laboration, both organizations are going beyond joint research and
development to create a vision for the future, conducting reciprocal
personnel exchange and working together on venture companies
related to the University of Tokyo, among other endeavors, in what
will become a far-ranging relationship. In addition, Daikin has
already formed collaborative ties with a number of other tertiary
institutions including Kyoto University and a comprehensive collabo-
ration contract with Osaka University to train human resources in the
utilization of AI focusing on the information sciences field, and
Tsinghua University and Peking University in China in efforts to pro-
mote academia-industry collaboration. The Company is also pursu-
ing opportunities through cooperation with the corporate sector. By
actively advancing collaborative ties, Daikin is endeavoring to gener-
ate innovation, help resolve a wide range of complex social issues,
and create new businesses.
Air-Conditioning and Refrigeration Equipment
R&D expenses for air-conditioning and refrigeration operations
totaled ¥59.1 billion.
Daikin has newly launched the “Ururu Sarara” series brand line of
air-conditioning products for residential and commercial air condi-
tioners with superior humidity control technology, which is essential
for creating healthy and comfortable spaces. From November 2019,
the Company also conducted a steady stream of launches with the
wall-mounted room air conditioners “Urusara X” and “Urusara
mini,” the dehumidifying streamer air purifier “Ururu Sarara air puri-
fier” and “Ururu Sarara ZEAS,” a store and office air conditioner.
Daikin was quick off the mark to discern the importance of
humidity in air and space, and in 1999 we launched “Ururu
Sarara,” the world’s first room air conditioner loaded with humidity
control technology. Marking its 20th anniversary, the development
of this brand has heightened an awareness of humidity among
consumers, and is providing support through the creation of
healthy and comfortable spaces throughout the year in a variety of
environments, whether they be living rooms or bedrooms, chil-
dren’s rooms, offices or stores, hospitals or whatever spaces in
which people live. In “Urusara X,” Daikin has put to use a humidity
control technology to regulate humidification and dehumidifica-
tion, and has developed a technology to clean heat exchangers in
room air conditioners. This means that indoor units will maintain
their cleanliness throughout the year, whether it be in summer or
Research and
Development Expenses
(¥ billion)
80
60
40
20
00
0
54
2016
2017
2018
2019
2020
ROE
(%)
16
12
8
4
0
2016
2017
2018
2019
2020
ROA
(%)
8
6
4
2
0
2016
2017
2018
2019
2020
air-conditioning equipment design, through installation to test run-
ning. By having customers utilize “DK-BIM” (Daikin BIM – building
information modeling), which supports the design of air-condition-
ing systems by using the cloud to automate calculation and assign-
ment of air-conditioning burden, and create materials, or other
applications such as “air conditioning delivery specification creation
support (provisional name).” Daikin aims to substantially reduce
manhours at every point along the process, until the completion of
air-conditioning equipment.
To improve upon conventional equipment in terms of energy
conservation, installation tasks and low-maintenance features,
Daikin developed a “beltless type” of air-conditioning system for
facilities such as plants and warehouses characterized by large
spaces. Conventional air conditioners for facilities requires adjust-
ments and maintenance by seasoned technicians, and incurs costs
and manhours as well. However, by adopting a “direct-drive meth-
od” that directly connects the fan and motor, this product enables
major reductions to these drawbacks. Moreover, even with opera-
tions to replace the existing equipment, which accounts for a
majority of the market, being equipped with a function that auto-
matically adjusts air volume means that installation time is drasti-
cally shortened. Labor shortages in connection with installation
and maintenance have in recent times become an issue shared
throughout the air-conditioning industry. Going forward, as an
air-conditioning equipment manufacturer, Daikin will continue to
generate products that work to solve this problem.
In Applied Systems, Daikin released to the North American mar-
ket new medium- and large-sized rooftop units that offer
enhanced efficiency and customization in September 2019. In
addition, Daikin launched air cooled chillers equipped with a
free-cooling function that offers high-energy saving performance
making its design optimal for the rapidly growing data center cool-
ing market in March 2020. In Europe, against a backdrop of
increasingly stringent control of fluorine gas, Daikin first sent to
market a turbo chiller that adopts R513A refrigerant in December
2019, and then in quick succession in January 2020, a scroll heat
pump chiller that adopts R32 refrigerant. Continuing on from the
previous year, Daikin expanded adoption of low-GWP refrigerants.
In China, Daikin released large-scale turbo chillers that expand the
range of use from general air conditioning units equipped with
new compressors to high-temperature heat pumps and ice storage
in December 2019. In November 2019, Daikin also launched mag-
netic bearings for turbo chillers that adopt low-pressure refrigerant
with a low environmental impact, which is in demand in South
East Asia and other overseas markets.
winter. Air supply systems also come equipped with a ventilation
function, making for a comfortable interior environment with room
air conditioning that brings air in from outside. While “Urusara
mini” has a humidifying function on par with that of “Urusara X,”
it has a thin-type indoor unit design. The Company is developing
this as an Ururu Sarara entry model for bedrooms and small rooms.
“Ururu Sarara air purifier” features humidification, dehumidifica-
tion, air purifying and deodorizing functions. Moreover, Daikin has
newly developed an interlocking function for its wall-mounted air
conditioners, and even those units not equipped with humidity
regulating technology are able to dehumidify or humidify.
In addition, residential air-conditioning equipment includes the
“risora,” a wall-mounted air conditioner that pursues harmony
with interior settings and comes with a front panel that is available
in the customer’s preferred color, while in June 2019 the Company
jointly made plans with Sangetsu Co., Ltd. to offer “risora custom
style,” a fee-based service that replicates the textured surfaces of
wood, marble, leather or other materials. Customers can enjoy
selecting combinations of wallpaper and room air conditioners in
tune with their image of what the interior should be, which con-
tributes to a space that only they themselves could create.
In commercial air-conditioning equipment, Daikin launched the
“FIVE STAR ZEAS” series and the “Eco-ZEAS” series as new models
in the “SkyAir” lineup of air conditioners for stores and offices to
realize greater cleanliness and energy conservation in April 2020.
The new products are equipped with “mold proof with water”
function, and when the cooling and dehumidifying cooling modes
are turned off, dust in the heat exchanger is washed away by
condensed water and the air conditioner’s interior is cleansed
with blower operation and heating that dries the interior portion.
In consideration of creating healthy, clean spaces, Daikin combines
this with “Streamer Internal Cleaning,” which it launched in April
2018 to suppress the growth of mold, a cause of unpleasant odors
inside indoor units. The high-capacity type (8-10 horsepower) is
the first in the industry to adopt R32 refrigerant, which has a low
impact on global warming, raising environmental performance.
With an energy-saving performance of approximately 20% higher
than conventional equipment, and at a compact 19kg (8 horse-
power), burden is alleviated not just for users, but for builders as
well.
Daikin released “VRV X” series models in April 2020 for use in
medium- to large-scale buildings. Natural disasters such as extreme
heat and typhoons have increased in recent years, and with an eye
toward the increasingly harsh conditions in which outdoor units
are placed, we have reinforced the frame structure of this model so
that it can better stand up to earthquakes and windy conditions. In
tests it successfully cleared a seismic intensity of seven and wind
speeds up to 60m/s. In addition, being equipped with a high-effi-
ciency microchannel heat exchanger it can maintain its rated cool-
ant capacity in exterior temperatures up to 41ºc, providing a stable
cooling function even in environments of intense heat.
In response to the shortages of equipment installers in recent
years, Daikin has reduced the installation workload by adopting
the “gradient-free method” for both “VRV X” and “Skyair.” This
method simplifies the drain piping work that had been a large bur-
den when installing indoor units. Moreover, Daikin’s aim is to
enhance operational efficiencies from the process of developing
Annual Report 2020
55
Financial Review
Financial Review
Chemicals
R&D expenses for Chemicals operations totaled ¥6.7 billion.
Daikin conducts R&D for new products and new applications
based on its rich experience in fluorine products and fluorochemi-
cal technology. In the fluoropolymer resin and fluoroelastomer
fields, fluorochemicals exhibit good heat resistance, low drug reac-
tivity, and dielectric properties. Using these properties, Daikin is
developing new differentiated products for automotive, semicon-
ductor, wire and cable (IT field), and other applications. Daikin also
develops coatings based on the non-adhesive and chemical resis-
tant properties of fluoride-based substances, and develops textile
treatment materials and carpet treatment materials based on the
water and oil repellent properties. In addition, Daikin engages in a
wide range of fluoride-related R&D, including the development of
liquid crystal related materials based on the functionality of fluo-
rine-containing compounds and the provision of contracted syn-
thesis research for pharmaceutical intermediates. In the coolants
field, Daikin is accelerating the development of next-generation
coolants that utilize artificial intelligence and that comply with
environmental regulations. In addition to these developments, as
part of R&D in peripheral areas aimed at developing new tech-
niques and applications, Daikin is working on the development of
film process products and multilayered materials and conducts
advanced materials research related to the medical, optical, envi-
ronmental, electric power battery, and energy areas. Through these
initiatives, Daikin is endeavoring to further secure the global No. 1
position and become the sole provider of fluorochemical solutions.
Especially, in the automotive battery field, Daikin is making concert-
ed efforts to grow its ties globally and further expand its markets.
By furthering and accelerating its R&D, the TIC, which has the
mission of new product development in Daikin’s Chemicals busi-
ness, is seeking to develop technologies that will lead on next-gen-
eration themes.
Other Operations
R&D expenses for the Other operations totaled ¥2.1 billion.
In oil hydraulics, Daikin is drawing on the special features of its
hybrid oil hydraulic systems technology, which combines oil
hydraulic technology and inverter technology to realize energy
conservation and high functionality that could not be realized with
previously existing hydraulic systems. In addition, besides the medi-
um- to low- and small-volume markets, where Daikin is working to
expand the adoption in Japan and overseas, the Group is also
developing units for high-pressure and high-volume applications.
In the industrial press and other industrial machinery applications,
Daikin’s “Super Unit” has won high acclaim for its low electric
power consumption. It also contributes to improvement in the
workplace environment and reduction in environmental impact
because of its lower noise, reduced heat emission, and smaller
tank size. Moreover, Daikin has launched a large-scale extruder sys-
tem that equals electric power as a motive force for its responsive-
ness and energy conservation. By expanding the lineup of units in
this series to meet the special needs of countries in Asia and other
regions for handling multiple voltages and other features, Daikin
will promote the adoption of this system for presses and other
machines and move forward with sales expansion globally.
Also, Daikin is proceeding with the development of an energy
56
conservation system for use on special vehicles. One of these units,
a hydraulic hybrid system for use on vehicles, has already been
adopted. In addition to conventional hydraulic systems, Daikin is
proceeding with the development of advanced environmentally
responsive products and technology that go beyond existing
frameworks and will find applications globally.
In defense systems, Daikin mainly conducts R&D related to artil-
lery shell and guided missiles components, for Japan’s Ministry of
Defense, as well as equipment used in home oxygen therapy.
Dividend Policy and Dividends
Applicable to the Fiscal Year
The Company will continue to focus on expanding its businesses
while investing its assets strategically and improving its financial
structure by such means as proceeding with the reduction of over-
all costs and enhancing its fiscal position. Through these initiatives,
we are committed to being a truly global and excellent company
while at the same time further improving our corporate value and
enhancing profit returns to our shareholders.
Specifically, by striving to maintain a consolidated ratio of divi-
dend to net assets (Dividend on Equity, DOE) of 3.0% while at the
same time aiming for an even higher consolidated dividend payout
ratio, we will introduce initiatives to further increase returns to our
shareholders with the core goal of stable and continuous dividends.
In addition, internal reserves will be applied to strategic invest-
ments to expand business and increase competitiveness such as
reinforcing management structure, promoting global businesses,
and accelerating eco-conscious product development.
For the fiscal year ended March 31, 2020, the Company has pro-
posed an annual cash dividend of ¥160 (¥80 for the interim divi-
dend and ¥80 for the year-end dividend).
For the fiscal year ending March 31, 2021, the Company’s annu-
al cash dividend plans are pending.
Outlook for Fiscal 2021
Upon entering March, the World Health Organization (WHO)
issued a declaration to the effect that COVID-19 had become a
pandemic, and its spread in and outside of Japan continues
unabated. Amidst limitations on outdoor and commercial activities,
and restrictions on moving between countries that are growing
stricter worldwide, depressed sentiment toward consumption,
fragmentation of supply chains and other issues have led to a rapid
contraction of overall economic activities. Given ominous signs that
the impact of COVID-19 will be prolonged, it appears that the
future of the world economy will continue to be severe. However,
Daikin is focusing its efforts on the business operation front, such
as with production, procurement, and sales, so as to minimize
impact on the Group and to swiftly recover when the pandemic
has abated. The Group will also be making efforts to discover new
markets and opportunities in order to further contribute to the
world as a manufacturer of air conditioners.
On top of this, for this year (2020), the Daikin Group aims to
generate results by setting “Accelerating Our 3 Structures of
Collaborative Innovation, Let Us Win in this Era of Change!” (Three
Structures: customer, internal and external) as the Group’s New
Year’s slogan. The Group will work together to continue to refine
its efforts to strengthen sales and marketing capabilities, improve
product development, production, procurement, and quality capa-
bilities, enhance the capabilities of its human resources, and reduce
both fixed and variable costs in each region around the world.
Furthermore, the Daikin Group will respond to the changes in the
structure of the economy and society brought about by escalating
global competition and advances in the digital economy. The
Group will do this by creating new products and services through
mutual communication with customers, engaging in academic-in-
dustrial collaboration in technology development, and collaborat-
ing with other members of industry, including venture capital
companies, to acquire differentiated technologies and build new
business segments.
In addition, the International Energy Agency (IEA) foresees
demand for air conditioning more than tripling by 2050, from
today’s levels, in line with the development of emerging countries.
While this represents a huge opportunity for the Daikin Group with
its main business in air conditioning, there is the worldwide issue of
global warming and along with that, climate change. Amidst grow-
ing demand for decarbonization, issues such as curbing energy con-
sumption associated with air conditioning, lowering the use of fossil
fuels, and preventing leaks of refrigerants that cause greenhouse
effects. Conversely, if no action were to be taken to control green-
house gas emissions, these could become a risk for the Group.
Daikin aims to respond to these risks by reducing its environmental
impact by, for example, developing and spreading the use of refrig-
erants with lower global warming potential, developing and spread-
ing the use of high-efficiency air conditioners, and creating solutions
for buildings that utilize energy efficiently throughout the entire
facility. In 2018, the Daikin Group formulated its “Environmental
Vision 2050” to aim for zero greenhouse gas emissions in 2050,
while offering a safe and healthy air environment. Daikin announced
its support and agreement with the recommendations of the Task
Force on Climate-related Financial Disclosures (TCFD) in May 2019.
An important issue is the impact climate change will exert on busi-
ness continuity, and as such, Daikin analyzes the risks and opportuni-
ties it will have on business, and together with reflecting that to
management strategy, the Group contributes to solutions to climate
change and other social problems while also aiming for further
growth.
For the fiscal year ending March 31, 2021, Daikin forecasts an
8.6% decrease in consolidated net sales, to ¥2,330.0 billion, with
operating income expected to fall 43.5% year on year, to ¥150.0
billion, and net income attributable to owners of the parent con-
tracting 41.4%, to ¥100.0 billion. The estimated exchange rates
for the fiscal year are ¥108 to the US dollar and ¥120 to the euro.
Principal Risks Associated with the
Daikin Group’s Operations
Management recognizes the following principal risks that may
influence decisions made by investors given their significant impact
on business conditions as stated in the securities report, and among
matters pertaining to accounting status, consolidated companies’
financial status and business performance, as well as cash flows.
The following have been determined as of the end of the con-
solidated fiscal year under review.
(1) Risks related to the market environment
Risks related to changes in the market environment
The Group develops, procures, manufactures, and sells goods and
services in each of its business domains, chiefly air conditioning, as
it grows its business globally. In principal countries and regions
throughout the world, the Group strives to raise market share by
strengthening its sales network, offer competitive products and
services, and to cut fixed costs in order to expand its business and
enhance profitability.
Nonetheless, in the event of rising instability in the political situa-
tion, economic contraction, inclement weather, sweeping pandem-
ic or other cause of deteriorating market conditions, there is a
possibility that demand will decline in countries and regions in
which the Group has operations, or also for its products, and that
business expansion and increases in profitability will not progress
as planned. As a result, there is a possibility of an impact on the
Group’s financial situation and management performance.
Risks related to fluctuations in currency exchange rates
and funds procurement environment
Overseas sales accounted for a high ratio of the Daikin Group’s
consolidated net sales in fiscal 2020. The acceleration of global
business development going forward is expected to further elevate
this overseas sales ratio. Consolidated financial statements are pre-
pared by translating local currency-denominated items for Group
operations in each global region, including sales, expenses, and
assets. Accordingly, depending on currency exchange rates at the
time of the currency translation, there may be an impact on yen
translation values even when there has been no change in local
currency-denominated figures. In addition, because the Group
engages in foreign currency-denominated transactions in raw
materials and parts procurement and in the sale of goods and ser-
vices, there is a possibility that fluctuations in currency exchange
rates could impact manufacturing costs and sales performance. To
avoid such currency exchange rate-related risks, the Group under-
takes short-term risk hedging via forward exchange contracts and
similar instruments. Daikin also undertakes medium- to long-term
measures to continuously adjust procurement and manufacturing
operations and optimize them for changing currency exchange-
rate trends, and to balance imports and exports in each currency.
Through this, the Group works to realize a business structure
that is not greatly impacted by fluctuations in currency exchange
rates.
In addition, the Daikin Group procures funds necessary for its
business activities through loans from financial institutions, or by
using commercial paper or bonds. When the economic environ-
ment fluctuates, the lending posture of financial institutions and
the situation in funds procurement markets will change, and there
is the risk that necessary funds cannot be procured, or that the
funding rate will rise. In response to such risks, we set commitment
lines, and use interest swaps and other measures to fix the interest
rate, among other efforts. However, there is a possibility that fund
procurement costs will rise, and that there will be an impact on the
Group’s financial situation and management performance.
Annual Report 2020
57
Financial Review
Financial Review
Risk related to fluctuation in market value of securities
The Daikin Group takes a strategic approach to holding corporate
stock that can be anticipated to enhance Company value.
However, stock market trends could cause a decline in the value of
these stocks , and potentially impact the Group’s financial situation
and management performance.
(2) Risks related to business activities
Risks related to technology, products, and services
The Daikin Group aims to generate customer value and social
value, and makes concerted efforts to develop the technology,
products, and services that will consistently lead to customer satis-
faction. However, the emergence of new technology, products or
services that differ from those anticipated by the Group, or abrupt
changes to the market such as rapidly escalating competition,
including from new market entrants, may lead to the necessity to
amend or transform technology or product strategy.
result of a deteriorated brand image, there is a possibility of an
adverse impact on the Group’s financial situation and management
performance.
Risks related to procurement
In the event management conditions at suppliers deteriorates, or if
natural disasters or accidents occur, the Daikin Group makes efforts
to ensure that raw materials, parts, and other items are supplied in
a stable and timely manner, and at reasonable prices. This can be
achieved by diversifying its suppliers and dispersing sourcing geo-
graphically, as well as by creating parts commonalities and stan-
dardization, among other efforts. However, in the short term, it
may be difficult to take the measures described above, and in the
event of an unforeseen situation, the Group could experience
shortages of raw materials and parts, delays in delivery, and other
problems. In this case, there is a possibility that this may have an
impact on the Group’s business.
In that event, delays in bringing about new products or services,
In addition, the Daikin Group and its suppliers set prices of raw
or launching new businesses, will cause the Group to lose its
advantageous position against competitors or new market
entrants. As a result, this may impact the Group’s financial situa-
tion and management performance.
Risks related to acquisitions and alliances with other companies
The Daikin Group has in the past utilized corporate acquisitions, in
addition to organic growth leveraging existing management
resources in order to grow its business globally and to strengthen
its product lineup and sales structure. Going forward, to expand its
business domains and accelerate the transformation of its business
structure, it will aggressively undertake alliances, collaboration, and
M&A activities. In the project evaluation stage, the Group not only
assessed strategy toward business expansion but also considered
the risk in terms of business operation, and following project exe-
cution, will strive to ensure that business integration occurs
smoothly. Nonetheless, after a project is executed, there is a possi-
bility that integration will not proceed according to plan due to a
deteriorating market environment, the inability to fully utilize the
management resources of the target company, and the lack of
smooth cooperation with the target company, or other reason. As
a result, there is a possibility that there will be an impact on the
Group’s financial situation and management performance.
Product and service quality and responsibility
The Daikin Group operates in over 150 countries worldwide, and
endeavors to provide products and services that are in tune with
local needs. In addition, it undertakes strict design overviews and
quality audits for each respective region, and does its utmost to
assure quality and safety. However, by any chance that a problem
with regard to safety arises, it gives first consideration to the safety
of the customer. To prevent reoccurrence or expansion of the acci-
dent, the Group will repair or exchange, and will through newspa-
pers or other means notify and disclose information to sales
vendors and other relevant third parties, fulfilling its responsibilities
based on the Product Liability Law.
As these countermeasures may incur large expense, we have
enrolled in product liability insurance, however, in the event that
expenses exceed the limit of compensation or if sales decline as a
materials and parts in accordance with a contract. The Group
strives to enable procurement at stable prices through long-term
contracts and other means, although abrupt changes in the supply
and demand environment or fluctuations in exchange rates may
make sharp rises in procurement prices unavoidable.
In such an event, there is a possibility that there will be an impact
on the Group’s financial situation and management performance.
Legal regulations
The Daikin Group, which operates in over 150 countries world-
wide, is subject to laws and regulations covering competition, the
prevention of bribery, labor and safety, the environment, and other
areas in all nations and regions around the world. In each country
the introduction of ever more severe laws and regulations and
changes in the legal interpretations and operating guidelines of
local authorities may lead to limitations of the Group’s business
activities. The Group conducts an array of training sessions with
the aim of thorough compliance, along with the introduction of an
annual “self-check” to confirm whether or not daily business is
being performed in adherence to laws and regulations. Together
with raising a consciousness of compliance, the Group conducts
audits and confirms the status of adherence.
Nonetheless, in the event that violations of the law occur, there
is a possibility that the Group will face administrative action for the
payment of monetary penalties. In addition, a decline in brand
image has the potential to impact the Group’s financial situation
and management performance.
Information security
In the course of carrying out its business, the Daikin Group obtains
confidential information from third parties and personal informa-
tion from customers, in addition, the Group also handles its own
proprietary confidential information. For that reason, there is a
possibility of unauthorized access by hackers or being the subject
of a cyber-attack that causes external leaks of personal or confi-
dential information, which could halt production lines at each loca-
tion or logistics systems, and exert a serious impact on business.
To prevent any of these situations from arising, the Group is put-
ting into place countermeasures that include strengthening infor-
58
earthquakes, tsunamis, typhoons, torrential rain, and other natural
disasters. In preparation for such natural disasters, the Company
takes measures to reinforce each business site against earthquakes,
and also acts to put in place countermeasures against tsunamis,
significant rainfall, flooding, and other disasters. In addition, it also
formulates disaster prevention regulations pertaining to natural
disasters, and periodically conducts disaster prevention training in
efforts to minimize the impact of natural disasters. Nonetheless,
there is a possibility that a major natural disaster will significantly
impact business activities, and that harm will come to the Group’s
employees, production facilities, systems, and other assets. At
overseas locations as well, in addition to various types of natural
disasters, terrorism, riots, wars, and other incidents could conceiv-
ably cause harm not only to the Group’s business bases, but also to
supply chains and customers. This holds a possibility of hindering
the Group’s business activities and causing delays.
Furthermore, an enormous risk for the Daikin Group’s business
has become the spread of contagious disease. This year the Group
has been buffeted by the worldwide spread of COVID-19, and
among the things that have had a major impact have been the sus-
pension of operations at certain plants located outside of Japan,
product warehouses that have gone into lockdown, delayed logis-
tics, and fallen sales. When the pandemic will abate remains
unclear, and it is also difficult to predict to what extent the impact
will be on the Group’s business activities. However, the Group has
made securing the health and safety of its employees the top prior-
ity, and has promoted working from home while pressing forward
with efforts to bolster health management at work sites. Along
with this, the Group has put in place various measures to minimize
impact of the spread of the pandemic, and in line with dissipation,
intends to swiftly recover business activities.
In the event the Group should be hit with the aforementioned
natural disasters or the spread of contagious disease, there is a
possibility of an impact on the Group’s financial situation or man-
agement performance.
mation security systems, thoroughly controlling confidential
notifications, restricting external access, maintaining internal regu-
lations, and conducting education and training. However, in the
event such situations were to occur, there may be requirements to
pay large-scale damages or fines. Moreover, the payment of enor-
mous countermeasure costs has the potential to impact the
Group’s financial situation and management performance.
(3) Risks related to climate change and other
environmental issues
Based on the Group Philosophy to “Be a Company that Leads in
Applying Environmentally Friendly Practices,” the Daikin Group
develops and spreads energy-conserving, high-efficiency air condi-
tioners and refrigerants with lower global warming potential, and
generates solutions for the efficient use of energy throughout entire
buildings. In this way it is taking aggressive action to curb green-
house gas (CO2, fluorocarbons) emissions, and to protect the global
environment. However, given deepening global environmental prob-
lems, in the event that regulations covering use and emissions of
greenhouse effect-causing refrigerant gas, and regulations pertain-
ing to energy conservation become more stringent, there is a possi-
bility of increased costs necessary to adhere to such regulations. In
addition, in the event that taking a sufficient response to these regu-
lations is difficult and delays occur, product sales may be hindered,
and there may be an impact on smooth business operations.
In addition, The Daikin Group takes every possible measure to
prevent environmental pollution from our business activities,
including not only compliance with regulations but also the estab-
lishment of even stricter voluntary standards. However, in the event
that chemical substances released by the Group effectively give rise
to environmental problems, it will be necessary to respond by
undertaking purification treatment, paying damages, and other
measures, and it is possible that costs will be incurred to address
such situations.
The emergence of such risks entails a possibility of an impact on
the Group’s financial situation and management performance.
(4) Others
Impairment of long-lived assets
The Daikin Group records various tangible and intangible long-lived
assets, including assets used in operations and goodwill arising
from acquisitions. These assets are assessed for any indication of
impairment loss. If there is an indication of impairment, steps are
taken to estimate the total amount of undiscounted future cash
flows to determine the existence of loss. The undiscounted future
cash flows required to make these determinations are based on
management plans and are estimated after factoring in future
uncertainties. If an impairment loss is recognized in the future due
to fluctuations in business performance or other factors, the finan-
cial position and results of operations of the Group may be affect-
ed. Meanwhile, the Group monitors its performance on an
ongoing basis and strives to take action before it becomes difficult
to recover investments.
Natural disasters, etc.
The Daikin Group possesses R&D, manufacturing, sales, and service
bases around the world. In recent years, Japan has experienced
Annual Report 2020
59
Consolidated Balance Sheet
Consolidated Balance Sheet
Daikin Industries, Ltd. and Consolidated Subsidiaries
Daikin Industries, Ltd. and Consolidated Subsidiaries
March 31, 2020
March 31, 2020
ASSETS
2020
2019
LIABILITIES AND EQUITY
2020
2019
LIABILITIES AND EQUITY
2020
2019
Millions of Yen
Millions of Yen
Millions of Yen
CURRENT ASSETS:
CURRENT LIABILITIES:
CURRENT LIABILITIES:
PROPERTY, PLANT AND EQUIPMENT:
PROPERTY, PLANT AND EQUIPMENT:
Total current liabilities
Total current liabilities
693,958
768,816
693,958
768,816
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Notes 8 and 16)
Short-term investments (Note 16)
Trade receivables (Notes 7, 8 and 16):
Notes
Accounts
Allowance for doubtful receivables
Inventories (Note 3)
Prepaid expenses and other current assets
Total current assets
Land
Buildings and structures
Machinery and equipment
Furniture and fixtures
Lease assets (Note 15)
Construction in progress
Total
Accumulated depreciation
INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 5, 8 and 16)
companies
Goodwill (Note 6)
Customer relationships
Other intangible assets
Deferred tax assets (Notes 2 and 12)
Assets for retirement benefits (Note 9)
Other assets
Total investments and other assets
¥ 367,189
592
¥ 321,152
Cash and cash equivalents (Notes 8 and 16)
49,641
Short-term investments (Note 16)
Trade receivables (Notes 7, 8 and 16):
48,613
Notes
392,142
Accounts
(10,562 )
Allowance for doubtful receivables
433,783
69,658
Inventories (Note 3)
Prepaid expenses and other current assets
58,725
389,106
(9,148 )
436,358
74,783
1,304,427
Total current assets
1,317,605
Short-term borrowings (Notes 8 and 16)
¥ 321,152
Current portion of long-term debt (Notes 8 and 16)
49,641
Current portion of long-term lease obligations (Note 15)
Trade payables (Note 16):
¥ 367,189
592
Notes
Accounts
48,613
392,142
(10,562 )
Income taxes payable (Note 16)
433,783
Provision for product warranties
69,658
Accrued expenses (Note 7)
Other current liabilities (Note 7)
1,304,427
58,725
389,106
(9,148 )
436,358
74,783
1,317,605
56,891
Land
444,781
Buildings and structures
631,138
Machinery and equipment
193,840
Furniture and fixtures
Lease assets (Note 15)
3,614
Construction in progress
46,120
Total
1,376,384
(796,403 )
Accumulated depreciation
43,492
374,356
582,500
200,912
3,427
34,824
1,239,511
(756,548 )
LONG-TERM LIABILITIES:
Long-term debt (Notes 8 and 16)
Long-term lease obligations (Note 15)
Liabilities for retirement benefits (Note 9)
Deferred tax liabilities (Notes 2 and 12)
Other long-term liabilities
56,891
444,781
631,138
193,840
3,614
46,120
1,376,384
(796,403 )
43,492
374,356
582,500
200,912
3,427
34,824
1,239,511
(756,548 )
157,329
EQUITY (Notes 10, 11 and 21):
157,329
17,439
companies
281,969
Goodwill (Note 6)
Customer relationships
169,766
90,921
Other intangible assets
26,794
Deferred tax assets (Notes 2 and 12)
Assets for retirement benefits (Note 9)
12,885
26,002
Other assets
198,698
Investment securities (Notes 5, 8 and 16)
Common stock - authorized 500,000,000 shares; issued 293,113,973 shares
Investments in and advances to unconsolidated subsidiaries and associated
Capital surplus
24,647
24,647
17,439
Stock acquisition rights
322,319
322,319
281,969
Retained earnings
189,365
189,365
169,766
Treasury stock, at cost: 529,837 shares in 2020 and 605,740 shares in 2019
106,457
106,457
90,921
Accumulated other comprehensive income (loss):
25,057
25,057
26,794
Unrealized gains on available-for-sale securities
14,510
14,510
12,885
Deferred gains on derivatives under hedge accounting
19,270
19,270
26,002
Foreign currency translation adjustments
Remeasurements of defined benefit plans
900,323
783,105
783,105
Total investments and other assets
900,323
198,698
¥
48,938
Short-term borrowings (Notes 8 and 16)
Current portion of long-term debt (Notes 8 and 16)
Current portion of long-term lease obligations (Note 15)
Trade payables (Note 16):
¥ 146,066
105,900
92,386
17,301
1,242
Notes
Accounts
10,007
179,837
19,894
Income taxes payable (Note 16)
Provision for product warranties
Accrued expenses (Note 7)
Other current liabilities (Note 7)
117,162
142,069
52,850
14,541
189,994
25,576
52,602
135,180
111,229
Millions of Yen
2020
2019
¥
48,938
105,900
17,301
¥ 146,066
92,386
1,242
10,007
179,837
19,894
52,850
142,069
117,162
323,185
58,483
13,219
90,087
25,990
85,032
83,899
1,887
29,765
(2,797 )
(5,052 )
(7,687 )
14,541
189,994
25,576
52,602
135,180
111,229
335,989
9,959
11,098
101,956
26,223
85,032
83,650
1,721
57,686
619
63,808
(5,232 )
1,254,073
1,133,101
(2,265 )
(2,589 )
1,254,073
1,133,101
(2,265 )
(2,589 )
85,032
83,899
1,887
29,765
(2,797 )
(5,052 )
(7,687 )
85,032
83,650
1,721
57,686
619
63,808
(5,232 )
Common stock - authorized 500,000,000 shares; issued 293,113,973 shares
Capital surplus
Stock acquisition rights
Retained earnings
Treasury stock, at cost: 529,837 shares in 2020 and 605,740 shares in 2019
Accumulated other comprehensive income (loss):
Unrealized gains on available-for-sale securities
Deferred gains on derivatives under hedge accounting
Foreign currency translation adjustments
Remeasurements of defined benefit plans
LONG-TERM LIABILITIES:
323,185
Long-term debt (Notes 8 and 16)
Long-term lease obligations (Note 15)
Liabilities for retirement benefits (Note 9)
Deferred tax liabilities (Notes 2 and 12)
Other long-term liabilities
90,087
58,483
13,219
25,990
335,989
101,956
26,223
11,098
9,959
EQUITY (Notes 10, 11 and 21):
Net property, plant and equipment
579,981
Net property, plant and equipment
482,963
Total long-term liabilities
579,981
482,963
Total long-term liabilities
510,964
485,225
510,964
485,225
COMMITMENTS AND CONTINGENT LIABILITIES (Notes 15 and 17)
COMMITMENTS AND CONTINGENT LIABILITIES (Notes 15 and 17)
INVESTMENTS AND OTHER ASSETS:
Investments in and advances to unconsolidated subsidiaries and associated
TOTAL
TOTAL
¥ 2,667,513
¥ 2,700,891
TOTAL
¥ 2,667,513
¥ 2,700,891
TOTAL
¥ 2,667,513
¥ 2,700,891
¥ 2,667,513
¥ 2,700,891
Subtotal
Noncontrolling interests
Total equity
1,436,855
Subtotal
1,417,796
Noncontrolling interests
25,736
29,054
1,462,591
Total equity
1,446,850
1,436,855
1,417,796
25,736
29,054
1,462,591
1,446,850
See notes to consolidated financial statements.
See notes to consolidated financial statements.
- 4 -
- 4 -
60
PROPERTY, PLANT AND EQUIPMENT:
PROPERTY, PLANT AND EQUIPMENT:
Total current liabilities
693,958
768,816
Total current liabilities
693,958
768,816
Daikin Industries, Ltd. and Consolidated Subsidiaries
Daikin Industries, Ltd. and Consolidated Subsidiaries
March 31, 2020
Millions of Yen
2020
ASSETS
2019
LIABILITIES AND EQUITY
2020
2019
2020
LIABILITIES AND EQUITY
2019
Millions of Yen
Millions of Yen
CURRENT ASSETS:
CURRENT LIABILITIES:
¥ 321,152
Cash and cash equivalents (Notes 8 and 16)
¥ 367,189
Short-term borrowings (Notes 8 and 16)
¥ 321,152
¥ 367,189
¥
49,641
Short-term investments (Note 16)
592
Current portion of long-term debt (Notes 8 and 16)
49,641
592
Trade receivables (Notes 7, 8 and 16):
Current portion of long-term lease obligations (Note 15)
48,613
392,142
(10,562 )
433,783
69,658
Notes
58,725
Accounts
389,106
Trade payables (Note 16):
Notes
Allowance for doubtful receivables
(9,148 )
Accounts
Inventories (Note 3)
436,358
Income taxes payable (Note 16)
Prepaid expenses and other current assets
Provision for product warranties
74,783
Accrued expenses (Note 7)
48,613
392,142
(10,562 )
433,783
69,658
58,725
389,106
(9,148 )
436,358
74,783
Total current assets
1,304,427
1,317,605
Total current assets
Other current liabilities (Note 7)
1,304,427
1,317,605
March 31, 2020
ASSETS
CURRENT ASSETS:
Cash and cash equivalents (Notes 8 and 16)
Short-term investments (Note 16)
Trade receivables (Notes 7, 8 and 16):
Notes
Accounts
Allowance for doubtful receivables
Inventories (Note 3)
Prepaid expenses and other current assets
Land
Buildings and structures
Machinery and equipment
Furniture and fixtures
Lease assets (Note 15)
Construction in progress
Total
Accumulated depreciation
INVESTMENTS AND OTHER ASSETS:
Investment securities (Notes 5, 8 and 16)
companies
Goodwill (Note 6)
Customer relationships
Other intangible assets
Deferred tax assets (Notes 2 and 12)
Assets for retirement benefits (Note 9)
Other assets
56,891
444,781
631,138
193,840
3,614
46,120
Land
43,492
Buildings and structures
374,356
LONG-TERM LIABILITIES:
Machinery and equipment
582,500
Long-term debt (Notes 8 and 16)
Furniture and fixtures
200,912
Lease assets (Note 15)
3,427
Construction in progress
34,824
Long-term lease obligations (Note 15)
Liabilities for retirement benefits (Note 9)
Deferred tax liabilities (Notes 2 and 12)
Other long-term liabilities
1,376,384
1,239,511
Total
(796,403 )
Accumulated depreciation
(756,548 )
56,891
444,781
631,138
193,840
3,614
46,120
43,492
374,356
582,500
200,912
3,427
34,824
1,376,384
1,239,511
(796,403 )
(756,548 )
Investments in and advances to unconsolidated subsidiaries and associated
Investments in and advances to unconsolidated subsidiaries and associated
Total investments and other assets
783,105
900,323
Total investments and other assets
Remeasurements of defined benefit plans
783,105
900,323
17,439
281,969
169,766
90,921
26,794
12,885
26,002
companies
24,647
Goodwill (Note 6)
322,319
Customer relationships
189,365
Other intangible assets
106,457
Capital surplus
Stock acquisition rights
Retained earnings
Treasury stock, at cost: 529,837 shares in 2020 and 605,740 shares in 2019
106,457
90,921
Deferred tax assets (Notes 2 and 12)
25,057
Accumulated other comprehensive income (loss):
26,794
Assets for retirement benefits (Note 9)
14,510
Unrealized gains on available-for-sale securities
12,885
Other assets
19,270
Deferred gains on derivatives under hedge accounting
26,002
Foreign currency translation adjustments
17,439
281,969
169,766
24,647
322,319
189,365
25,057
14,510
19,270
Subtotal
Noncontrolling interests
Total equity
TOTAL
¥ 2,667,513
TOTAL
¥ 2,700,891
TOTAL
¥ 2,667,513
¥ 2,700,891
See notes to consolidated financial statements.
See notes to consolidated financial statements.
Common stock - authorized 500,000,000 shares; issued 293,113,973 shares
48,938
105,900
17,301
CURRENT LIABILITIES:
¥ 146,066
92,386
1,242
Short-term borrowings (Notes 8 and 16)
Current portion of long-term debt (Notes 8 and 16)
Current portion of long-term lease obligations (Note 15)
Trade payables (Note 16):
10,007
179,837
19,894
52,850
142,069
117,162
Notes
Accounts
14,541
189,994
25,576
52,602
135,180
111,229
Income taxes payable (Note 16)
Provision for product warranties
Accrued expenses (Note 7)
Other current liabilities (Note 7)
Millions of Yen
2020
2019
¥
48,938
105,900
17,301
¥ 146,066
92,386
1,242
10,007
179,837
19,894
52,850
142,069
117,162
14,541
189,994
25,576
52,602
135,180
111,229
323,185
58,483
13,219
90,087
25,990
LONG-TERM LIABILITIES:
335,989
9,959
11,098
101,956
26,223
Long-term debt (Notes 8 and 16)
Long-term lease obligations (Note 15)
Liabilities for retirement benefits (Note 9)
Deferred tax liabilities (Notes 2 and 12)
Other long-term liabilities
323,185
58,483
13,219
90,087
25,990
335,989
9,959
11,098
101,956
26,223
85,032
83,899
1,887
1,254,073
(2,265 )
29,765
(2,797 )
(5,052 )
(7,687 )
1,436,855
25,736
1,462,591
85,032
Common stock - authorized 500,000,000 shares; issued 293,113,973 shares
83,650
Capital surplus
Stock acquisition rights
1,721
Retained earnings
1,133,101
Treasury stock, at cost: 529,837 shares in 2020 and 605,740 shares in 2019
(2,589 )
Accumulated other comprehensive income (loss):
85,032
83,899
1,887
1,254,073
(2,265 )
Unrealized gains on available-for-sale securities
Deferred gains on derivatives under hedge accounting
Foreign currency translation adjustments
Remeasurements of defined benefit plans
57,686
619
63,808
(5,232 )
Subtotal
1,417,796
Noncontrolling interests
29,054
1,446,850
Total equity
29,765
(2,797 )
(5,052 )
(7,687 )
1,436,855
25,736
1,462,591
85,032
83,650
1,721
1,133,101
(2,589 )
57,686
619
63,808
(5,232 )
1,417,796
29,054
1,446,850
¥ 2,667,513
TOTAL
¥ 2,700,891
Net property, plant and equipment
579,981
482,963
Net property, plant and equipment
579,981
482,963
Total long-term liabilities
510,964
485,225
Total long-term liabilities
510,964
485,225
INVESTMENTS AND OTHER ASSETS:
157,329
Investment securities (Notes 5, 8 and 16)
198,698
EQUITY (Notes 10, 11 and 21):
157,329
198,698
EQUITY (Notes 10, 11 and 21):
COMMITMENTS AND CONTINGENT LIABILITIES (Notes 15 and 17)
COMMITMENTS AND CONTINGENT LIABILITIES (Notes 15 and 17)
- 4 -
- 4 -
¥ 2,667,513
¥ 2,700,891
Annual Report 2020
61
Consolidated Statement of Income
Consolidated Statement of Income
Daikin Industries, Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2020
NET SALES (Note 7)
COST OF SALES (Note 14)
Gross profit
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES (Notes 6,
7 and 14)
Operating income
OTHER (EXPENSES) INCOME:
Interest and dividend income
Interest expense
Equity in earnings of associated companies
Exchange gains (losses)
Subsidy income
Gains on sales of land
Losses on disposals of property, plant and equipment and other
intangible assets
Loss on sales of land
Losses on impairment of long-lived assets (Note 4)
Gains on sales of investment securities (Note 5)
Impairment losses on investment securities (Notes 5 and 16)
Gains on reversal of stock acquisition rights
Gains on insurance claims
Losses from natural disasters
Other – net
Other expenses – net
Millions of Yen
2020
2019
¥ 2,550,305
¥ 2,481,109
1,665,407
1,612,186
884,898
868,923
619,385
592,668
265,513
276,255
13,114
(11,008 )
166
461
3,239
658
(454 )
(23,555 )
10,810
(579 )
25
255
(2,465 )
(9,333 )
12,249
(11,852 )
2,119
(4,848 )
2,570
0
(803 )
(7 )
40
(315 )
(679 )
582
(944 )
INCOME BEFORE INCOME TAXES
256,180
275,311
INCOME TAXES (Note 12):
Current
Deferred
Total income taxes
NET INCOME
NET INCOME ATTRIBUTABLE TO NONCONTROLLING
INTERESTS
81,132
(2,150 )
77,607
2,039
78,982
79,646
177,198
195,665
(6,467 )
(6,616 )
NET INCOME ATTRIBUTABLE TO OWNERS OF THE PARENT
¥ 170,731
¥ 189,049
AMOUNTS PER COMMON SHARE (Note 19):
Basic net income
Diluted net income
Cash dividends applicable to the year
See notes to consolidated financial statements.
- 5 -
62
Yen
¥583.61
583.22
160.00
¥646.39
645.95
160.00
Consolidated Statement of Comprehensive Income
Consolidated Statement of Comprehensive Income
Daikin Industries, Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2020
NET INCOME
OTHER COMPREHENSIVE LOSS (Note 18):
Unrealized losses on available-for-sale securities
Deferred 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
COMPREHENSIVE INCOME
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of the parent
Noncontrolling interests
See notes to consolidated financial statements.
Millions of Yen
2020
2019
¥ 177,198
¥ 195,665
(27,921 )
(3,416 )
(69,587 )
(2,457 )
(16,899 )
(109 )
(8,109 )
448
(495 )
(103,876 )
(1,167 )
(25,836 )
¥ 73,322
¥ 169,829
¥68,079
5,243
¥163,451
6,378
- 6 -
Annual Report 2020
63
Consolidated Statement of Changes in Equity
Consolidated Statement of Changes in Equity
Daikin Industries, Ltd. and Consolidated Subsidiaries
Daikin Industries, Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2020
Year Ended March 31, 2020
Outstanding
Number of
Common
Shares Issued
Common
Stock
Capital
Surplus
Outstanding
Number of
Stock
Common
Acquisition
Shares Issued
Rights
Retained
Common
Stock
Earnings
Treasury
Capital
Surplus
Stock
Unrealized
Stock
Gains on
Available-for-
Acquisition
Rights
Sale Securities
Foreign
Unrealized
Currency
Gains on
Remeasurements
Derivatives
Remeasurements
Foreign
Currency
Retained
under Hedge
Treasury
Translation
Available-for-
of Defined Benefit
under Hedge
Translation
Noncontrolling
of Defined Benefit
Noncontrolling
Earnings
Accounting
Stock
Adjustments
Sale Securities
Plans
Accounting
Total
Adjustments
Interests
Plans
Total Equity
Total
Interests
Total Equity
Accumulated Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Income (Loss)
Millions of Yen
Deferred Gains
(Losses) on
BALANCE, APRIL 1, 2018
BALANCE, APRIL 1, 2018
292,436,934
¥ 85,032
¥ 84,389
¥ 1,511
292,436,934
¥ 987,547
¥ 85,032
¥ (2,894 )
¥ 84,389
¥ 1,511
¥ 74,586
¥ 987,547
¥ 728
¥ (2,894 )
¥ 72,834
¥ 74,586
¥ (5,669 )
¥ 728
¥ 1,298,064
¥ 72,834
¥ 26,258
¥ (5,669 )
¥ 1,324,322
¥ 1,298,064
¥ 26,258
¥ 1,324,322
Net income
Cash dividends, ¥160 per share
Effect of change of the fiscal year-end
of certain consolidated subsidiaries
(Note 2.a)
Repurchase of treasury stock
Disposal of treasury stock
Change in parent's ownership interest
due to transactions with
noncontrolling interests
Net change in the year
BALANCE, MARCH 31, 2019
Net income
Cash dividends, ¥160 per share
Effect of change of the fiscal year-end
of certain consolidated subsidiaries
(Note 2.a)
Repurchase of treasury stock
Disposal of treasury stock
Change in parent's ownership interest
due to transactions with
noncontrolling interests
Net change in the year
BALANCE, MARCH 31, 2020
Net income
Cash dividends, ¥160 per share
Effect of change of the fiscal year-end
of certain consolidated subsidiaries
(Note 2.a)
(201 )
71,500
Repurchase of treasury stock
Disposal of treasury stock
Change in parent's ownership interest
178
due to transactions with
noncontrolling interests
(917 )
189,049
(42,407 )
(1,088 )
(201 )
71,500
(2 )
178
307
(917 )
Net change in the year
210
210
(16,900 )
(109 )
(9,026 )
(16,900 )
437
(109 )
(25,388 )
(9,026 )
2,796
437
(22,592 )
(25,388 )
2,796
BALANCE, MARCH 31, 2019
292,508,233
85,032
83,650
292,508,233
1,721
1,133,101
85,032
(2,589 )
83,650
1,721
57,686
1,133,101
619
(2,589 )
63,808
57,686
(5,232 )
619
1,417,796
63,808
29,054
(5,232 )
1,446,850
1,417,796
29,054
1,446,850
Net income
Cash dividends, ¥160 per share
Effect of change of the fiscal year-end
of certain consolidated subsidiaries
(Note 2.a)
(97 )
76,000
Repurchase of treasury stock
Disposal of treasury stock
Change in parent's ownership interest
287
due to transactions with
noncontrolling interests
(38 )
170,731
(49,731 )
(28 )
(97 )
76,000
(2 )
287
326
(38 )
Net change in the year
166
166
(27,921 )
(3,416 )
(68,860 )
(27,921 )
(2,455 )
(3,416 )
(102,486 )
(68,860 )
(3,318 )
(2,455 )
(105,804 )
(102,486 )
(3,318 )
BALANCE, MARCH 31, 2020
292,584,136
¥ 85,032
¥ 83,899
¥ 1,887
292,584,136
¥ 1,254,073
¥ 85,032
¥ (2,265 )
¥ 83,899
¥ 1,887
¥ 29,765
¥ 1,254,073
¥ (2,797 )
¥ (2,265 )
¥ (5,052 )
¥ 29,765
¥ (7,687 )
¥ (2,797 )
¥ 1,436,855
¥ (5,052 )
¥ 25,736
¥ (7,687 )
¥ 1,462,591
¥ 1,436,855
¥ 25,736
¥ 1,462,591
Millions of Yen
Deferred Gains
(Losses) on
Derivatives
189,049
(42,407 )
(1,088 )
170,731
(49,731 )
(28 )
(2 )
307
(2 )
326
189,049
(42,407 )
(1,088 )
(2 )
485
(917 )
(28 )
(2 )
613
(38 )
189,049
189,049
(42,407 )
(42,407 )
(1,088 )
(1,088 )
(2 )
485
(2 )
485
(917 )
(917 )
(28 )
(2 )
613
(28 )
(2 )
613
(38 )
(38 )
170,731
(49,731 )
170,731
170,731
(49,731 )
(49,731 )
189,049
(42,407 )
(1,088 )
(2 )
485
(917 )
(22,592 )
170,731
(49,731 )
(28 )
(2 )
613
(38 )
(105,804 )
See notes to consolidated financial statements.
See notes to consolidated financial statements.
64
- 7 -
- 7 -
Daikin Industries, Ltd. and Consolidated Subsidiaries
Daikin Industries, Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2020
Year Ended March 31, 2020
Outstanding
Outstanding
Number of
Number of
Stock
Stock
Common
Common
Common
Common
Capital
Capital
Acquisition
Acquisition
Shares Issued
Shares Issued
Stock
Stock
Surplus
Surplus
Rights
Rights
Retained
Earnings
Retained
Earnings
Treasury
Treasury
Stock
Stock
Millions of Yen
Millions of Yen
Accumulated Other Comprehensive Income (Loss)
Accumulated Other Comprehensive Income (Loss)
Unrealized
Unrealized
Gains on
Gains on
Available-for-
Available-for-
Sale Securities
Sale Securities
Deferred Gains
Deferred Gains
(Losses) on
(Losses) on
Derivatives
Derivatives
under Hedge
under Hedge
Accounting
Accounting
Foreign
Foreign
Currency
Currency
Translation
Translation
Adjustments
Adjustments
Remeasurements
of Defined Benefit
Plans
Remeasurements
of Defined Benefit
Plans
Total
Total
Noncontrolling
Noncontrolling
Interests
Interests
Total Equity
Total Equity
BALANCE, APRIL 1, 2018
BALANCE, APRIL 1, 2018
292,436,934
292,436,934
¥ 85,032
¥ 85,032
¥ 84,389
¥ 84,389
¥ 1,511
¥ 1,511
BALANCE, MARCH 31, 2019
BALANCE, MARCH 31, 2019
292,508,233
292,508,233
85,032
85,032
83,650
83,650
1,721
1,721
Net income
Net income
Cash dividends, ¥160 per share
Cash dividends, ¥160 per share
Effect of change of the fiscal year-end
Effect of change of the fiscal year-end
of certain consolidated subsidiaries
of certain consolidated subsidiaries
(Note 2.a)
(Note 2.a)
Repurchase of treasury stock
Repurchase of treasury stock
Disposal of treasury stock
Disposal of treasury stock
Change in parent's ownership interest
Change in parent's ownership interest
due to transactions with
due to transactions with
noncontrolling interests
noncontrolling interests
Net change in the year
Net change in the year
Net income
Net income
Cash dividends, ¥160 per share
Cash dividends, ¥160 per share
Effect of change of the fiscal year-end
Effect of change of the fiscal year-end
of certain consolidated subsidiaries
of certain consolidated subsidiaries
(Note 2.a)
(Note 2.a)
Repurchase of treasury stock
Repurchase of treasury stock
Disposal of treasury stock
Disposal of treasury stock
Change in parent's ownership interest
Change in parent's ownership interest
due to transactions with
due to transactions with
noncontrolling interests
noncontrolling interests
Net change in the year
Net change in the year
(201 )
(201 )
71,500
71,500
(97 )
(97 )
76,000
76,000
178
178
(917 )
(917 )
287
287
(38 )
(38 )
BALANCE, MARCH 31, 2020
BALANCE, MARCH 31, 2020
292,584,136
292,584,136
¥ 85,032
¥ 85,032
¥ 83,899
¥ 83,899
¥ 1,887
¥ 1,887
See notes to consolidated financial statements.
See notes to consolidated financial statements.
¥ 987,547
¥ 987,547
¥ (2,894 )
¥ (2,894 )
¥ 74,586
¥ 74,586
¥ 728
¥ 728
¥ 72,834
¥ 72,834
¥ (5,669 )
¥ (5,669 )
¥ 1,298,064
¥ 1,298,064
¥ 26,258
¥ 26,258
¥ 1,324,322
¥ 1,324,322
189,049
189,049
(42,407 )
(42,407 )
(1,088 )
(1,088 )
(2 )
(2 )
307
307
189,049
189,049
(42,407 )
(42,407 )
(1,088 )
(1,088 )
(2 )
(2 )
485
485
189,049
(42,407 )
189,049
(42,407 )
(1,088 )
(1,088 )
(2 )
(2 )
485
485
210
210
(16,900 )
(16,900 )
(109 )
(109 )
(9,026 )
(9,026 )
437
437
(917 )
(917 )
(25,388 )
(25,388 )
2,796
2,796
(917 )
(917 )
(22,592 )
(22,592 )
1,133,101
1,133,101
(2,589 )
(2,589 )
170,731
170,731
(49,731 )
(49,731 )
(28 )
(28 )
(2 )
(2 )
326
326
57,686
57,686
619
619
63,808
63,808
(5,232 )
(5,232 )
1,417,796
1,417,796
29,054
29,054
1,446,850
1,446,850
170,731
170,731
(49,731 )
(49,731 )
170,731
(49,731 )
170,731
(49,731 )
(28 )
(2 )
(28 )
(2 )
613
613
(28 )
(28 )
(2 )
(2 )
613
613
166
166
(27,921 )
(27,921 )
(3,416 )
(3,416 )
(68,860 )
(68,860 )
(2,455 )
(2,455 )
(38 )
(38 )
(102,486 )
(102,486 )
(3,318 )
(3,318 )
(38 )
(38 )
(105,804 )
(105,804 )
¥ 1,254,073
¥ 1,254,073
¥ (2,265 )
¥ (2,265 )
¥ 29,765
¥ 29,765
¥ (2,797 )
¥ (2,797 )
¥ (5,052 )
¥ (5,052 )
¥ (7,687 )
¥ (7,687 )
¥ 1,436,855
¥ 1,436,855
¥ 25,736
¥ 25,736
¥ 1,462,591
¥ 1,462,591
- 7 -
- 7 -
Annual Report 2020
65
Consolidated Statement of Cash Flows
Consolidated Statement of Cash Flows
Daikin Industries, Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2020
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 of 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 13)
Cash and cash equivalents acquired from acquisition of newly consolidated subsidiaries, net of considerations paid
Proceed from merger
Increase in investments in and advances to an unconsolidated subsidiary and associated companies
Payments for transfer of business
Payments for acquisition of investment securities
Proceeds from sales of investment securities (Note 5)
Net increase in time deposits
Other – net
Net cash used in investing activities
FINANCING ACTIVITIES:
Net (decrease) increase in short-term borrowings
Proceeds from long-term debt
Repayments of long-term debt (Note 13)
Cash dividends paid to owners of the parent
Cash dividends paid to noncontrolling interests
Repayments of lease obligations
Other – net
Net cash used in financing activities
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
DECREASE IN CASH AND CASH EQUIVALENTS RESULTING FROM EXCLUSION OF SUBSIDIARIES FROM CONSOLIDATION
EFFECT OF CHANGE OF THE FISCAL YEAR-END OF CONSOLIDATED SUBSIDIARIES (Note 2.a)
CASH AND CASH EQUIVALENTS, END OF YEAR
See notes to consolidated financial statements.
- 8 -
Millions of Yen
2020
2019
¥ 256,180
¥ 275,311
(87,360 )
128,486
23,555
(10,810 )
579
454
(166 )
591
(14,315 )
(1,624 )
1,695
(6,365 )
11,347
6,223
2,606
(8,909 )
45,987
302,167
(98,095 )
3,963
(13,190 )
(99 )
(1,595 )
22,585
(52,908 )
(16,848 )
(156,187 )
(93,943 )
102,562
(98,196 )
(49,731 )
(9,859 )
(20,919 )
152
(169,934 )
(71,415 )
99,315
(40 )
315
803
(2,119 )
(36,847 )
(38,790 )
(4,920 )
291
8,619
9,213
13,126
(137 )
(2,716 )
(25,302 )
250,009
(85,487 )
1,822
(67,932 )
21
48
(80 )
(6,161 )
(1,444 )
47
(592 )
(6,015 )
(165,773 )
100,640
(118,172 )
(42,407 )
(4,414 )
(1,520 )
(2,848 )
(68,721 )
(22,029 )
(5,286 )
(45,983 )
10,229
367,189
357,027
(47 )
(7 )
(67 )
¥ 321,152
¥ 367,189
66
Notes to Consolidated Financial Statements
Notes to Consolidated Financial Statements
Daikin Industries, Ltd. and Consolidated Subsidiaries
Year Ended March 31, 2020
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 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 2019 consolidated financial statements
to conform to the classifications used in 2020.
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 313 (291 in 2019) 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 20 (19 in 2019)
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 9 (10 in
2019) subsidiaries and 9 (9 in 2019) 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.
For the year ended March 31, 2020, Tewis Smart Systems, S.L. changed its fiscal year-end
from December 31 to March 31. The Company included the subsidiary's operating results for
the 12-month period in the consolidated statement of income and included their operating
results for the 3-month period in the consolidated statement of changes in equity by directly
charging to retained earnings as the effect of the change in fiscal year-end of certain
consolidated subsidiary.
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.
- 9 -
Annual Report 2020
67
Notes to Consolidated Financial Statements
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 ("U.S. GAAP") (Financial Accounting Standards Board
Accounting Standards Codification) 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; (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; and (e) recording a gain or loss through profit or loss on the sale of
an investment in an equity instrument for the difference between the acquisition cost and selling
price, and recording impairment loss through profit or loss for other-than-temporary declines in
the fair value of an investment in an equity instrument, where a foreign subsidiary elects to
present in other comprehensive income subsequent changes in the fair value of an investment
in an equity instrument.
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 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; (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; and (e) recording a gain or loss through profit or
loss on the sale of an investment in an equity instrument for the difference between the
acquisition cost and selling price, and recording impairment loss through profit or loss for other-
than-temporary declines in the fair value of an investment in an equity instrument, where a
foreign associate elects to present in other comprehensive income subsequent changes in the
fair value of an investment in an equity instrument.
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 a capital surplus as long as the parent retains control over its subsidiary.
- 10 -
68
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.
f. Allowance for Doubtful Receivables – The allowance for doubtful receivables 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 value.
h. Property, Plant and Equipment – Property, plant and equipment is 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 dependent on 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 adjusted 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 – Non-ownership finance lease transactions and right-of-use assets within the scope of
IFRS 16 "Leases" and Accounting Standards Update (ASU) 2016-02 "Leases" are capitalized
by recognizing lease assets and lease obligations in the consolidated balance sheet.
All other leases are accounted for as operating leases.
- 11 -
Annual Report 2020
69
Notes to Consolidated Financial Statements
From the beginning of the fiscal year ended March 31, 2020, the foreign consolidated
subsidiaries have applied "Leases" (IFRS 16, January 13, 2016; ASU 2016-02, February 25,
2016). Following the application of these accounting standards, as of March 31, 2020, "property,
plant and equipment" increased by ¥63,099 million, "current portion of long-term lease
obligations" under "current liabilities" increased by ¥15,951 million, and "long-term lease
obligations" under "non-current liabilities" increased by ¥48,129 million. In addition, ¥12,257
million of leasehold interests in land hitherto included in "other intangible assets" under
"intangible assets" have been included in "land" under "property, plant and equipment" from
fiscal year under review.
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 6 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 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 cost of employee stock options is measured 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 non-employees 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.
- 12 -
70
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 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.
With regard to the items for which a review of the non-consolidated taxation system was made
in accordance with the transition to the group tax sharing system established under the "Act for
Partial Revision of the Income Tax Act, etc." (Act No. 8 of 2020) and the transition to the group
tax sharing system, pursuant to the treatment of Paragraph 3 of "Practical Solution on the
Treatment of Tax Effect Accounting for the Transition from the Consolidated Taxation System to
the Group Tax Sharing System" (PITF No. 39, March 31, 2020), the provisions of Paragraph 44
of "Implementation Guidance on Tax Effect Accounting" (ASBJ Guidance No. 28, February 16,
2018) do not apply to the Company and some domestic subsidiaries, and the amounts of
deferred tax assets and deferred tax liabilities are based on the provisions of the tax law before
amendment.
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, retrospectively adjusted for stock splits.
Diluted net income per share 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).
- 13 -
Annual Report 2020
71
Notes to Consolidated Financial Statements
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
year.
w. New Accounting Pronouncements
Revenue Recognition – On March 30, 2018, the ASBJ issued ASBJ Statement No. 29,
"Accounting Standard for Revenue Recognition," and ASBJ Guidance No. 30, "Implementation
Guidance on Accounting Standard for Revenue Recognition." The core principle of the standard
and guidance is that an entity should recognize revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. An entity should recognize
revenue in accordance with that core principle by applying the following steps:
Step 1: Identify the contract(s) with a customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price to the performance obligations in the contract
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation
The Group expects to apply the accounting standard and guidance for annual periods beginning
on April 1, 2021, and is in the process of measuring the effects of applying the accounting
standard and guidance in future applicable periods.
Fair Value Measurement – On July 4, 2019, the ASBJ issued ASBJ Statement No. 30,
"Accounting Standard for Fair Value Measurement" and ASBJ Guidance No. 31,
"Implementation Guidance on Accounting Standard for Fair Value Measurement," and revised
related ASBJ Statements and ASBJ Guidance (the "New Accounting Standards"). Under the
New Accounting Standards, non-marketable available-for-sale equity securities are stated at fair
value, while under the current accounting standards, non-marketable available-for-sale
securities are stated at cost. The Group expects to apply the New Accounting Standards for
annual periods beginning on April 1, 2021, and is in the process of measuring the effects of
applying the Standards in future applicable periods.
x. Additional Information
Decline in demand due to worldwide expansion of new coronavirus (COVID-19) infectious
disease and effects of regulations on economic activity have now manifested. It is unclear when
the spread of infection will end and when demand will recover after it ends. Although it is difficult
to predict the extent of the impact on our Group's business activities, the Company made
accounting estimates such as impairment of long-lived assets based on the assumption that the
impact of COVID-19 will generally continue into the first half of the following fiscal year.
3.
INVENTORIES
Inventories at March 31, 2020 and 2019 consisted of the following:
Finished products and merchandise
Semi-finished products and work in process
Raw materials and supplies
Total
Millions of Yen
2020
2019
¥ 292,580
49,686
91,517
¥ 293,446
50,746
92,166
¥ 433,783
¥ 436,358
- 14 -
72
4. LONG-LIVED ASSETS
The Group recognized impairment losses for the year ended March 31, 2020. The details were as
follows:
March 31, 2020
Use
Location
Asset Category
Millions of
Yen
Other
Business use
North Carolina, United States
Goodwill
Customer relationships
¥ 12,965
10,590
Total
¥ 23,555
At Flanders Holdings LLC, a consolidated subsidiary engaged in the manufacture and sale of filter
and clean equipment, goodwill and customer relationships were recorded upon the acquisition of
equity interest based on anticipated excess earnings. However, the business conducted by the
subsidiary is under-performing compared with the business plan established at the time of the
acquisition despite the subsidiary's efforts to strengthen its production and sales structure. As a
result of the conservative review of its medium-term business plan, the book value has been
reduced to the recoverable value, and the amount of such reduction has been recognized as
impairment losses.
The recoverable amounts of these assets were measured by value in use, and the discount rate
used to determine the present value of future cash flows was 8.8%.
No impairment loss was recognized for the year ended March 31, 2019.
5. MARKETABLE AND INVESTMENT SECURITIES
The acquisition costs and aggregate fair values of marketable available-for-sale securities included
in investment securities at March 31, 2020 and 2019 were as follows:
Securities classified as
available-for-sale:
Equity securities
Debt securities
Millions of Yen
2020
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
¥ 98,394
300
¥ 46,087
¥ (6,299 )
¥ 138,182
300
Total
¥ 98,694
¥ 46,087
¥ (6,299 )
¥ 138,482
Securities classified as
available-for-sale:
Equity securities
Debt securities
Millions of Yen
2019
Cost
Unrealized
Gains
Unrealized
Losses
Fair Value
¥ 110,707
300
¥ 79,198
¥ (2,340 )
¥ 187,565
300
Total
¥ 111,007
¥ 79,198
¥ (2,340 )
¥ 187,865
- 15 -
Annual Report 2020
73
Marketable available-for-sale securities that were sold during the year ended March 31, 2020 were as follows:
Marketable available-for-sale securities that were sold during the year ended March 31, 2020 were as follows:
Millions of Yen
March 31, 2020
March 31, 2020
Available-for-sale:
Equity securities
Available-for-sale:
Realized
Realized
Proceeds
Millions of Yen
Gains
Losses
Proceeds
¥22,585
Realized
Gains
¥10,810
Realized
Losses
There were no marketable available-for-sale securities that were sold during the year ended March 31, 2019.
Equity securities
¥10,810
¥22,585
Notes to Consolidated Financial Statements
Marketable available-for-sale securities that were sold during the year ended March 31, 2020 were as follows:
Marketable available-for-sale securities that were sold during the year ended March 31, 2020 were as follows:
March 31, 2020
Proceeds
Marketable available-for-sale securities that were sold during the year ended March 31, 2020 were as follows:
March 31, 2020
Available-for-sale:
Millions of Yen
Realized
Millions of Yen
Gains
Realized
Gains
¥10,810
Millions of Yen
¥10,810
Realized
Gains
Realized
Losses
Realized
Losses
Realized
Losses
Proceeds
¥22,585
¥22,585
Proceeds
There were no marketable available-for-sale securities that were sold during the year ended March 31, 2019.
Equity securities
Equity securities
Available-for-sale:
March 31, 2020
There were no marketable available-for-sale securities that were sold during the year ended March 31, 2019.
The impairment losses on marketable available-for-sale securities for the years ended March 31, 2020 and 2019 were ¥579 million and ¥44 million, respectively.
There were no marketable available-for-sale securities that were sold during the year ended March 31, 2019.
The impairment losses on marketable available-for-sale securities for the years ended March 31, 2020 and 2019 were ¥579 million and ¥44 million, respectively.
Available-for-sale:
6. GOODWILL
The impairment losses on marketable available-for-sale securities for the years ended March 31, 2020 and 2019 were ¥579 million and ¥44 million, respectively.
Equity securities
¥10,810
¥22,585
The impairment losses on marketable available-for-sale securities for the years ended March 31, 2020 and 2019 were ¥579 million and ¥44 million, respectively.
6. GOODWILL
There were no marketable available-for-sale securities that were sold during the year ended March 31, 2019.
Amortization expenses for goodwill were ¥30,684 million and ¥26,992 million for the years ended March 31, 2020 and 2019, respectively, which were included in selling, general and administrative expenses.
Amortization expenses for goodwill were ¥30,684 million and ¥26,992 million for the years ended March 31, 2020 and 2019, respectively, which were included in selling, general and administrative expenses.
7. RELATED PARTY TRANSACTIONS
Amortization expenses for goodwill were ¥30,684 million and ¥26,992 million for the years ended March 31, 2020 and 2019, respectively, which were included in selling, general and administrative expenses.
The impairment losses on marketable available-for-sale securities for the years ended March 31, 2020 and 2019 were ¥579 million and ¥44 million, respectively.
Amortization expenses for goodwill were ¥30,684 million and ¥26,992 million for the years ended March 31, 2020 and 2019, respectively, which were included in selling, general and administrative expenses.
7. RELATED PARTY TRANSACTIONS
6. GOODWILL
Material transactions and balances with related parties for the years ended March 31, 2020 and 2019 were as follows:
7. RELATED PARTY TRANSACTIONS
Material transactions and balances with related parties for the years ended March 31, 2020 and 2019 were as follows:
Material transactions and balances with related parties for the years ended March 31, 2020 and 2019 were as follows:
(1) 2020
Material transactions and balances with related parties for the years ended March 31, 2020 and 2019 were as follows:
Amortization expenses for goodwill were ¥30,684 million and ¥26,992 million for the years ended March 31, 2020 and 2019, respectively, which were included in selling, general and administrative expenses.
(1) 2020
7. RELATED PARTY TRANSACTIONS
(a) The Company
(1) 2020
Material transactions and balances with related parties for the years ended March 31, 2020 and 2019 were as follows:
(a) The Company
Representative Director of Art Group
delivery business
Representative Director of Art Group
delivery business
(b) The Company's consolidated subsidiaries
Name
Millions of Yen
Ownership of the
Company (%)
Ownership of the
Transactions
Description of Transaction
Transactions
(1) 2020
Transactions
Name
Description of Transaction
Millions of Yen
2020
(a) The Company
Name
Chiyono Terada
Transactions
Commissions for moving business and
Description of Transaction
2020
Chiyono Terada
Commissions for moving business and
Description of Post
Resulting Account Balances
Account
Description of Post
External Director/President and
Resulting Account Balances
Representative Director of Art Group
Account
¥466 Accrued expenses and other
External Director/President and
Holdings, Co., Ltd.
current liabilities
Representative Director of Art Group
¥466 Accrued expenses and other
Holdings, Co., Ltd.
Description of Post
current liabilities
2020
2020
¥39
(b) The Company's consolidated subsidiaries
External Director/President and
Chiyono Terada
Transactions
Name
Millions of Yen
Description of Transaction
Millions of Yen
2020
(b) The Company's consolidated subsidiaries
Name
Chiyono Terada
Transactions
Representative Director of Art Group
Holdings, Co., Ltd.
Description of Post
Resulting Account Balances
Account
Description of Post
External Director/President and
Resulting Account Balances
Representative Director of Art Group
Account
Accrued expenses and other
Holdings, Co., Ltd.
current liabilities
Representative Director of Art Group
Accrued expenses and other
Holdings, Co., Ltd.
Description of Post
Accounts receivable
current liabilities
External Director/President and
2020
2020
¥ 8
¥ 8
44
Commissions for moving business and
Description of Transaction
2020
¥ 74
Chiyono Terada
Commissions for moving business and
Sales of products
delivery business
¥ 74
332
Company (%)
0.00
Commissions for moving business and
Description of Transaction
2020
¥466 Accrued expenses and other
Account
2020
¥39
0.00
Commissions for moving business and
delivery business
Millions of Yen
¥466 Accrued expenses and other
¥39
current liabilities
¥39
Ownership of the
delivery business
Transactions
current liabilities
Resulting Account Balances
Company (%)
Description of Transaction
2020
Account
2020
0.00
Commissions for moving business and
Millions of Yen
¥466 Accrued expenses and other
¥39
Ownership of the
delivery business
Transactions
Company (%)
Ownership of the
Description of Transaction
Transactions
Company (%)
0.00
Commissions for moving business and
Description of Transaction
2020
¥ 74
Accrued expenses and other
Account
2020
¥ 8
delivery business
0.00
Ownership of the
Commissions for moving business and
Sales of products
delivery business
Transactions
Millions of Yen
Millions of Yen
2020
Resulting Account Balances
Account
2020
Resulting Account Balances
Millions of Yen
2020
current liabilities
Resulting Account Balances
Account
2020
Resulting Account Balances
current liabilities
Millions of Yen
¥ 74
Accrued expenses and other
¥ 8
332
Accounts receivable
current liabilities
Resulting Account Balances
44
2020
Account
332
Accounts receivable
¥ 74
Accrued expenses and other
current liabilities
2020
44
¥ 8
Representative Director of Art Group
delivery business
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.
Sales of products
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.
Name
Company (%)
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.
0.00
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.
Sales of products
Commissions for moving business and
Description of Transaction
Chiyono Terada
44
delivery business
(2) 2019
External Director/President and
Accounts receivable
332
Representative Director of Art Group
Holdings, Co., Ltd.
(2) 2019
(a) The Company
Sales of products
332
Accounts receivable
44
6. GOODWILL
6. GOODWILL
7. RELATED PARTY TRANSACTIONS
(1) 2020
(a) The Company
(a) The Company
Name
Description of Post
Chiyono Terada
Name
External Director/President and
Description of Post
Ownership of the
Company (%)
Ownership of the
Company (%)
0.00
Chiyono Terada
External Director/President and
Holdings, Co., Ltd.
0.00
(b) The Company's consolidated subsidiaries
Holdings, Co., Ltd.
(b) The Company's consolidated subsidiaries
Name
Description of Post
Chiyono Terada
Name
External Director/President and
Description of Post
Ownership of the
Company (%)
Ownership of the
Company (%)
0.00
Chiyono Terada
External Director/President and
Holdings, Co., Ltd.
0.00
Representative Director of Art Group
Holdings, Co., Ltd.
(2) 2019
(2) 2019
(a) The Company
(a) The Company
Name
Description of Post
Chiyono Terada
Name
External Director/Chief Executive Officer
Description of Post
Company (%)
0.00
Chiyono Terada
External Director/Chief Executive Officer
0.00
Ownership of the
Company (%)
Ownership of the
(a) The Company
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.
Millions of Yen
Millions of Yen
Ownership of the
(2) 2019
Transactions
Name
Description of Transaction
Millions of Yen
2019
(a) The Company
Name
Chiyono Terada
Transactions
Commissions for moving business and
Description of Transaction
2019
Commissions for moving business and
Chiyono Terada
Name
Description of Post
Resulting Account Balances
Account
Description of Post
External Director/Chief Executive Officer
Resulting Account Balances
(CEO) and President of Art Corporation
Account
¥524 Accrued expenses and other
External Director/Chief Executive Officer
current liabilities
¥524 Accrued expenses and other
(CEO) and President of Art Corporation
Description of Post
current liabilities
2019
2019
¥47
Company (%)
Ownership of the
Transactions
Description of Transaction
Transactions
Millions of Yen
2019
Resulting Account Balances
Account
2019
Resulting Account Balances
Company (%)
0.00
Commissions for moving business and
Description of Transaction
2019
¥524 Accrued expenses and other
Account
2019
¥47
0.00
Commissions for moving business and
delivery business
Millions of Yen
¥524 Accrued expenses and other
¥47
current liabilities
¥47
Ownership of the
delivery business
Transactions
current liabilities
Resulting Account Balances
Company (%)
Description of Transaction
2019
Account
2019
(CEO) and President of Art Corporation
delivery business
(CEO) and President of Art Corporation
delivery business
- 16 -
- 16 -
74
Chiyono Terada
External Director/Chief Executive Officer
0.00
Commissions for moving business and
¥524 Accrued expenses and other
¥47
(CEO) and President of Art Corporation
delivery business
- 16 -
current liabilities
- 16 -
- 16 -
Marketable available-for-sale securities that were sold during the year ended March 31, 2020 were as follows:
Marketable available-for-sale securities that were sold during the year ended March 31, 2020 were as follows:
Marketable available-for-sale securities that were sold during the year ended March 31, 2020 were as follows:
March 31, 2020
March 31, 2020
March 31, 2020
Proceeds
Gains
Proceeds
Proceeds
Losses
Gains
Gains
Millions of Yen
Millions of Yen
Millions of Yen
Realized
Realized
Realized
Realized
Realized
Realized
Losses
Losses
Available-for-sale:
Available-for-sale:
Available-for-sale:
Equity securities
Equity securities
Equity securities
¥22,585
¥10,810
¥22,585
¥22,585
¥10,810
¥10,810
There were no marketable available-for-sale securities that were sold during the year ended March 31, 2019.
There were no marketable available-for-sale securities that were sold during the year ended March 31, 2019.
There were no marketable available-for-sale securities that were sold during the year ended March 31, 2019.
The impairment losses on marketable available-for-sale securities for the years ended March 31, 2020 and 2019 were ¥579 million and ¥44 million, respectively.
The impairment losses on marketable available-for-sale securities for the years ended March 31, 2020 and 2019 were ¥579 million and ¥44 million, respectively.
The impairment losses on marketable available-for-sale securities for the years ended March 31, 2020 and 2019 were ¥579 million and ¥44 million, respectively.
Amortization expenses for goodwill were ¥30,684 million and ¥26,992 million for the years ended March 31, 2020 and 2019, respectively, which were included in selling, general and administrative expenses.
Amortization expenses for goodwill were ¥30,684 million and ¥26,992 million for the years ended March 31, 2020 and 2019, respectively, which were included in selling, general and administrative expenses.
Amortization expenses for goodwill were ¥30,684 million and ¥26,992 million for the years ended March 31, 2020 and 2019, respectively, which were included in selling, general and administrative expenses.
Material transactions and balances with related parties for the years ended March 31, 2020 and 2019 were as follows:
Material transactions and balances with related parties for the years ended March 31, 2020 and 2019 were as follows:
Material transactions and balances with related parties for the years ended March 31, 2020 and 2019 were as follows:
6. GOODWILL
6. GOODWILL
6. GOODWILL
7. RELATED PARTY TRANSACTIONS
7. RELATED PARTY TRANSACTIONS
7. RELATED PARTY TRANSACTIONS
(1) 2020
(1) 2020
(1) 2020
(a) The Company
(a) The Company
(a) The Company
Millions of Yen
Millions of Yen
Millions of Yen
Ownership of the
Ownership of the
Ownership of the
Company (%)
Company (%)
Description of Transaction
Transactions
Transactions
Transactions
2020
Description of Transaction
Description of Transaction
Resulting Account Balances
2020
2020
Account
Account
Account
2020
Resulting Account Balances
Resulting Account Balances
Commissions for moving business and
delivery business
delivery business
0.00
0.00
delivery business
Commissions for moving business and
Commissions for moving business and
¥466 Accrued expenses and other
¥466 Accrued expenses and other
¥466 Accrued expenses and other
¥39
current liabilities
current liabilities
current liabilities
Millions of Yen
Millions of Yen
Millions of Yen
Ownership of the
Ownership of the
Ownership of the
Company (%)
Company (%)
Description of Transaction
Transactions
Transactions
Transactions
2020
Description of Transaction
Description of Transaction
Resulting Account Balances
2020
2020
Account
Account
Account
2020
Resulting Account Balances
Resulting Account Balances
Name
Name
Name
Description of Post
Description of Post
Description of Post
Company (%)
Chiyono Terada
Chiyono Terada
Chiyono Terada
External Director/President and
External Director/President and
External Director/President and
0.00
Representative Director of Art Group
Representative Director of Art Group
Representative Director of Art Group
Holdings, Co., Ltd.
Holdings, Co., Ltd.
Holdings, Co., Ltd.
(b) The Company's consolidated subsidiaries
(b) The Company's consolidated subsidiaries
(b) The Company's consolidated subsidiaries
Name
Name
Name
Description of Post
Description of Post
Description of Post
Company (%)
Chiyono Terada
Chiyono Terada
Chiyono Terada
External Director/President and
External Director/President and
External Director/President and
0.00
Representative Director of Art Group
Representative Director of Art Group
Representative Director of Art Group
Holdings, Co., Ltd.
Holdings, Co., Ltd.
Holdings, Co., Ltd.
(2) 2019
(2) 2019
(2) 2019
(a) The Company
(a) The Company
(a) The Company
Name
Name
Name
Description of Post
Description of Post
Description of Post
Company (%)
Chiyono Terada
Chiyono Terada
Chiyono Terada
External Director/Chief Executive Officer
External Director/Chief Executive Officer
External Director/Chief Executive Officer
0.00
(CEO) and President of Art Corporation
(CEO) and President of Art Corporation
(CEO) and President of Art Corporation
Commissions for moving business and
delivery business
delivery business
0.00
0.00
delivery business
Commissions for moving business and
Commissions for moving business and
¥ 74
Accrued expenses and other
Accrued expenses and other
Accrued expenses and other
¥ 74
¥ 74
current liabilities
¥ 8
current liabilities
current liabilities
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.
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.
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.
Millions of Yen
Millions of Yen
Millions of Yen
Sales of products
Sales of products
Sales of products
332
Accounts receivable
332
332
44
Accounts receivable
Accounts receivable
Ownership of the
Ownership of the
Ownership of the
Company (%)
Company (%)
Description of Transaction
Transactions
Transactions
Transactions
2019
Description of Transaction
Description of Transaction
Resulting Account Balances
2019
2019
Account
Account
Account
2019
Resulting Account Balances
Resulting Account Balances
2020
2020
¥39
¥39
2020
2020
¥ 8
¥ 8
44
44
Commissions for moving business and
delivery business
delivery business
0.00
0.00
delivery business
Commissions for moving business and
Commissions for moving business and
¥524 Accrued expenses and other
¥524 Accrued expenses and other
¥524 Accrued expenses and other
¥47
current liabilities
current liabilities
current liabilities
- 16 -
- 16 -
- 16 -
2019
2019
¥47
¥47
Annual Report 2020
75
(b) The Company's consolidated subsidiaries
Name
Description of Post
Ownership of the
Company (%)
Chiyono Terada
External Director/CEO and President of Art
0.00
Corporation
Millions of Yen
2020
2019
¥ 48,938
¥ 136,066
10,000
¥ 48,938
¥ 146,066
Millions of Yen
2020
2019
¥ 10,000
30,000
10,000
10,000
15,000
15,000
¥ 40,000
10,000
10,000
30,000
10,000
10,000
6,400
Bank overdrafts and notes to banks
Commercial paper
Total
average interest rate of commercial paper at March 31, 2019 was (0.01)%.
Long-term debt at March 31, 2020 and 2019 consisted of the following:
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
0.13% unsecured bonds, due 2026
0.18% unsecured bonds, due 2029
Unsecured loans from government-sponsored banks, with
interest of 1.75%, due through 2019
Unsecured loans from banks and others, payable in foreign
currencies, with interest ranging from 0.00% to 4.50% (2020)
and from 0.00% to 3.75% (2019), due through 2026
214,083
171,971
Unsecured loans from banks and others with interest ranging
from 0.17% to 3.49% (2020) and from 0.17% to 3.69%
(2019), due through 2023
Total
Less current portion
125,002
429,085
(105,900 )
140,004
428,375
(92,386 )
Long-term debt, less current portion
¥ 323,185
¥ 335,989
Notes to Consolidated Financial Statements
(b) The Company's consolidated subsidiaries
(b) The Company's consolidated subsidiaries
Millions of Yen
Description of Transaction
2019
Transactions
Name
Name
Chiyono Terada
Chiyono Terada
Commissions for moving business and
¥ 69
delivery business
Sales of products
Resulting Account Balances
Description of Post
Account
Description of Post
2019
External Director/CEO and President of Art
Corporation
Accrued expenses and other
External Director/CEO and President of Art
current liabilities
Corporation
Accounts receivable
247
¥ 6
30
Ownership of the
Ownership of the
Company (%)
Company (%)
0.00
0.00
Transactions
Transactions
Description of Transaction
Description of Transaction
Millions of Yen
Millions of Yen
2019
2019
Resulting Account Balances
Resulting Account Balances
Account
2019
Account
2019
Commissions for moving business and
Commissions for moving business and
Sales of products
Sales of products
delivery business
delivery business
¥ 69
Accrued expenses and other
¥ 69
Accrued expenses and other
current liabilities
247
247
Accounts receivable
current liabilities
Accounts receivable
¥ 6
¥ 6
30
30
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.
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.
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.
8. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings of the Group at March 31, 2020 and 2019 consisted of the following:
8. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
8. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings of the Group at March 31, 2020 and 2019 consisted of the following:
Short-term borrowings of the Group at March 31, 2020 and 2019 consisted of the following:
Bank overdrafts and notes to banks
Commercial paper
Bank overdrafts and notes to banks
Commercial paper
Total
Total
Millions of Yen
Millions of Yen
2020
2020
¥ 48,938
¥ 48,938
¥ 48,938
¥ 48,938
2019
2019
¥ 136,066
10,000
¥ 136,066
10,000
¥ 146,066
¥ 146,066
Unused short-term bank credit lines were ¥204,415 million at March 31, 2020. The weighted-average interest rates of bank overdrafts and notes to banks at March 31, 2020 and 2019 were 1.02% and 0.49%, respectively. The weighted-
Unused short-term bank credit lines were ¥204,415 million at March 31, 2020. The weighted-average interest rates of bank overdrafts and notes to banks at March 31, 2020 and 2019 were 1.02% and 0.49%, respectively. The weighted-
average interest rate of commercial paper at March 31, 2019 was (0.01)%.
Unused short-term bank credit lines were ¥204,415 million at March 31, 2020. The weighted-average interest rates of bank overdrafts and notes to banks at March 31, 2020 and 2019 were 1.02% and 0.49%, respectively. The weighted-
average interest rate of commercial paper at March 31, 2019 was (0.01)%.
Long-term debt at March 31, 2020 and 2019 consisted of the following:
Long-term debt at March 31, 2020 and 2019 consisted of the following:
Millions of Yen
Millions of Yen
2020
2020
1.86% unsecured bonds, due 2019
0.72% unsecured bonds, due 2019
1.86% unsecured bonds, due 2019
0.38% unsecured bonds, due 2021
0.72% unsecured bonds, due 2019
1.20% unsecured bonds, due 2022
0.38% unsecured bonds, due 2021
0.68% unsecured bonds, due 2024
1.20% unsecured bonds, due 2022
0.21% unsecured bonds, due 2026
0.68% unsecured bonds, due 2024
0.13% unsecured bonds, due 2026
0.21% unsecured bonds, due 2026
0.18% unsecured bonds, due 2029
0.13% unsecured bonds, due 2026
Unsecured loans from government-sponsored banks, with
0.18% unsecured bonds, due 2029
interest of 1.75%, due through 2019
Unsecured loans from government-sponsored banks, with
Unsecured loans from banks and others, payable in foreign
interest of 1.75%, due through 2019
currencies, with interest ranging from 0.00% to 4.50% (2020)
Unsecured loans from banks and others, payable in foreign
and from 0.00% to 3.75% (2019), due through 2026
currencies, with interest ranging from 0.00% to 4.50% (2020)
Unsecured loans from banks and others with interest ranging
and from 0.00% to 3.75% (2019), due through 2026
from 0.17% to 3.49% (2020) and from 0.17% to 3.69%
Unsecured loans from banks and others with interest ranging
(2019), due through 2023
from 0.17% to 3.49% (2020) and from 0.17% to 3.69%
Total
(2019), due through 2023
Less current portion
Total
Less current portion
Long-term debt, less current portion
Long-term debt, less current portion
¥ 10,000
30,000
¥ 10,000
10,000
30,000
10,000
10,000
15,000
10,000
15,000
15,000
15,000
214,083
214,083
125,002
429,085
125,002
(105,900 )
429,085
(105,900 )
¥ 323,185
¥ 323,185
2019
2019
¥ 40,000
10,000
¥ 40,000
10,000
10,000
30,000
10,000
10,000
30,000
10,000
10,000
10,000
6,400
6,400
171,971
171,971
140,004
428,375
140,004
(92,386 )
428,375
(92,386 )
¥ 335,989
¥ 335,989
- 17 -
76
- 17 -
- 17 -
(b) The Company's consolidated subsidiaries
(b) The Company's consolidated subsidiaries
Ownership of the
Ownership of the
Name
Name
Description of Post
Description of Post
Company (%)
Chiyono Terada
Chiyono Terada
External Director/CEO and President of Art
External Director/CEO and President of Art
0.00
Corporation
Corporation
Company (%)
Description of Transaction
Transactions
Transactions
2019
Description of Transaction
Resulting Account Balances
2019
Account
Account
2019
Resulting Account Balances
Millions of Yen
Millions of Yen
Commissions for moving business and
Commissions for moving business and
¥ 69
0.00
delivery business
delivery business
Sales of products
Sales of products
247
Accrued expenses and other
¥ 69
current liabilities
Accounts receivable
¥ 6
current liabilities
30
Accounts receivable
247
Accrued expenses and other
2019
¥ 6
30
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.
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.
8. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
8. SHORT-TERM BORROWINGS AND LONG-TERM DEBT
Short-term borrowings of the Group at March 31, 2020 and 2019 consisted of the following:
Short-term borrowings of the Group at March 31, 2020 and 2019 consisted of the following:
Bank overdrafts and notes to banks
Bank overdrafts and notes to banks
¥ 48,938
¥ 136,066
¥ 48,938
Commercial paper
Commercial paper
10,000
¥ 136,066
10,000
Total
Total
¥ 48,938
¥ 146,066
¥ 48,938
¥ 146,066
Millions of Yen
Millions of Yen
2020
2019
2020
2019
Unused short-term bank credit lines were ¥204,415 million at March 31, 2020. The weighted-average interest rates of bank overdrafts and notes to banks at March 31, 2020 and 2019 were 1.02% and 0.49%, respectively. The weighted-
Unused short-term bank credit lines were ¥204,415 million at March 31, 2020. The weighted-average interest rates of bank overdrafts and notes to banks at March 31, 2020 and 2019 were 1.02% and 0.49%, respectively. The weighted-
average interest rate of commercial paper at March 31, 2019 was (0.01)%.
average interest rate of commercial paper at March 31, 2019 was (0.01)%.
Long-term debt at March 31, 2020 and 2019 consisted of the following:
Long-term debt at March 31, 2020 and 2019 consisted of the following:
1.86% unsecured bonds, due 2019
1.86% unsecured bonds, due 2019
0.72% unsecured bonds, due 2019
0.72% unsecured bonds, due 2019
0.38% unsecured bonds, due 2021
0.38% unsecured bonds, due 2021
1.20% unsecured bonds, due 2022
1.20% unsecured bonds, due 2022
0.68% unsecured bonds, due 2024
0.68% unsecured bonds, due 2024
0.21% unsecured bonds, due 2026
0.21% unsecured bonds, due 2026
0.13% unsecured bonds, due 2026
0.13% unsecured bonds, due 2026
0.18% unsecured bonds, due 2029
0.18% unsecured bonds, due 2029
Millions of Yen
Millions of Yen
2020
2019
2020
2019
¥ 40,000
10,000
10,000
¥ 10,000
30,000
30,000
10,000
10,000
10,000
10,000
15,000
15,000
¥ 40,000
10,000
10,000
30,000
10,000
10,000
¥ 10,000
30,000
10,000
10,000
15,000
15,000
Unsecured loans from government-sponsored banks, with
Unsecured loans from government-sponsored banks, with
interest of 1.75%, due through 2019
interest of 1.75%, due through 2019
6,400
6,400
Unsecured loans from banks and others, payable in foreign
Unsecured loans from banks and others, payable in foreign
currencies, with interest ranging from 0.00% to 4.50% (2020)
currencies, with interest ranging from 0.00% to 4.50% (2020)
and from 0.00% to 3.75% (2019), due through 2026
and from 0.00% to 3.75% (2019), due through 2026
214,083
171,971
214,083
171,971
Unsecured loans from banks and others with interest ranging
Unsecured loans from banks and others with interest ranging
from 0.17% to 3.49% (2020) and from 0.17% to 3.69%
from 0.17% to 3.49% (2020) and from 0.17% to 3.69%
(2019), due through 2023
(2019), due through 2023
Total
Total
Less current portion
Less current portion
125,002
429,085
(105,900 )
140,004
125,002
428,375
429,085
(92,386 )
(105,900 )
140,004
428,375
(92,386 )
Long-term debt, less current portion
Long-term debt, less current portion
¥ 323,185
¥ 335,989
¥ 323,185
¥ 335,989
- 17 -
- 17 -
Annual Report 2020
77
Notes to Consolidated Financial Statements
Annual maturities of long-term debt outstanding at March 31, 2020 were as follows:
2021
2022
2023
2024
2025
2026 and thereafter
Total
Millions of
Yen
¥ 105,900
74,816
152,222
16,031
26,015
54,101
¥ 429,085
The assets pledged as collateral at March 31, 2020 and 2019 were as follows:
Time deposits
Note receivables
Debt corresponding to the above:
Note payables
Millions of Yen
2020
2019
¥ 368
1,279
¥ 677
2,246
2,685
4,033
In addition, investment securities pledged as collateral for the investee's borrowings from financial
institutions at March 31, 2020 and 2019 were as follows:
Investment securities
Millions of Yen
2020
¥800
2019
¥800
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.
9. 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.
- 18 -
78
1. Defined benefit plans
(1) The changes in defined benefit obligations for the years ended March 31, 2020 and 2019
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
Effect of change of the fiscal year-end
Foreign currency translation adjustments
Others
Millions of Yen
2020
2019
¥ 110,871
5,961
1,424
2,300
(5 )
(6,576 )
199
(2,800 )
96
¥ 107,786
5,330
1,326
6
771
(4,456 )
837
(15 )
(723 )
9
Balance at end of year
¥ 111,470
¥ 110,871
(2) The changes in plan assets for the years ended March 31, 2020 and 2019 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 losses
Contributions from the employer
Benefits paid
Foreign currency translation adjustments
Others
Millions of Yen
2020
2019
¥ 116,790
3,522
(2,022 )
3,888
(6,046 )
(2,222 )
(16 )
¥ 114,476
3,568
(410 )
3,620
(3,938 )
(582 )
56
Balance at end of year
¥ 113,894
¥ 116,790
(3) The changes in defined benefit obligation for the years ended March 31, 2020 and 2019
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
2020
2019
¥ 2,507
972
(719 )
¥ 2,506
832
(831 )
¥ 2,760
¥ 2,507
- 19 -
Annual Report 2020
79
Notes to Consolidated Financial Statements
(4) Reconciliations between the liabilities recorded in the consolidated balance sheet and the
balances of defined benefit obligation and plan assets at March 31, 2020 and 2019 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
2020
2019
¥ (105,617 )
113,894
8,277
(8,611 )
¥ (106,176 )
116,790
10,614
(7,202 )
Net amount of liabilities and assets recorded in the
consolidated balance sheet
¥
(334 )
¥
3,412
Liabilities for retirement benefits
Assets for retirement benefits
¥ (13,219 )
12,885
¥ (11,098 )
14,510
Net amount of liabilities and assets recorded in the
consolidated balance sheet
¥
(334 )
¥ 3,412
(5) The components of net periodic benefit costs for the years ended March 31, 2020 and 2019
were as follows:
Millions of Yen
2020
2019
Service cost
Interest cost
Expected return on plan assets
Recognized net actuarial losses
Amortization of past service cost
Periodic benefit cost calculated by the simplified method
Others
¥ 5,961
1,424
(3,522 )
266
(65 )
972
152
¥ 5,330
1,326
(3,568 )
1,286
(127 )
831
88
Total
¥ 5,188
¥ 5,166
(6) Amounts recognized in other comprehensive income (before income tax effect) in respect
of defined benefit plans for the years ended March 31, 2020 and 2019 were as follows:
Past service cost
Net actuarial gains (losses)
Total
Millions of Yen
2020
2019
¥ 308
3,160
¥ 873
(1,476 )
¥ 3,468
¥
(603 )
(7) Amounts recognized in accumulated other comprehensive income (before income tax
effect) in respect of defined benefit plans for the years ended March 31, 2020 and 2019
were as follows:
Millions of Yen
2020
2019
¥
631
9,579
¥ 323
6,419
¥ 10,210
¥ 6,742
Unrecognized past service cost
Unrecognized net actuarial gains
Total
- 20 -
80
(8) Plan assets
(a) Components of plan assets
Plan assets at March 31, 2020 and 2019, 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
2020
2019
1 %
0
38
16
18
1
26
2 %
2
35
18
19
5
19
Total
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, 2020 and 2019 were as follows:
Discount rate
Expected rate of return on plan assets
Expected rate of future salary increases
Mainly 0.3%
Mainly 2.5%
Mainly 3.5%
Mainly 0.3%
Mainly 2.5%
Mainly 3.5%
2020
2019
2. Defined contribution plan
The amounts of contribution required for the defined contribution plan paid by the Group were
¥5,976 million and ¥5,913 million for the years ended March 31, 2020 and 2019, respectively.
10. 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 certain limitations 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.
- 21 -
Annual Report 2020
81
Notes to Consolidated Financial Statements
(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.
(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. Purchase of treasury stock acquisition rights are presented as either a
separate component of equity and any purchased stock acquisition rights deducted directly from
stock acquisition rights.
11. STOCK OPTIONS
The stock options outstanding at March 31, 2020, were as follows:
Stock Option
Persons
Granted
Number of
Options Granted
Date of
Grant
Exercise
Price
Exercise Period
2014 Stock Option 9 directors
310,000 shares 2014.7.14 ¥6,715 From July 15, 2016
45 employees
2015 Stock Option 9 directors
53,200 shares 2015.7.13
46 employees
2016 Stock Option 8 directors
58,100 shares 2016.7.14
53 employees
2017 Stock Option 8 directors
48,800 shares 2017.7.14
53 employees
2018 Stock Option 7 directors
42,700 shares 2018.7.13
59 employees
2019 Stock Option 7 directors
46,100 shares 2019.7.12
54 employees
to July 14, 2020
¥1 From July 14, 2018
to July 13, 2030
¥1 From July 15, 2019
to July 14, 2031
¥1 From July 15, 2020
to July 14, 2032
¥1 From July 14, 2021
to July 13, 2033
¥1 From July 13, 2022
to July 12, 2034
- 22 -
82
The stock option activity was as follows:
The stock option activity was as follows:
2012 Stock
Option
2013 Stock
Option
2012 Stock
2014 Stock
Option
Option
2013 Stock
2015 Stock
Option
Option
2014 Stock
2016 Stock
Option
Option
2015 Stock
2017 Stock
Option
Option
2016 Stock
2018 Stock
Option
Option
2017 Stock
2019 Stock
Option
Option
2018 Stock
Option
2019 Stock
Option
Shares
Shares
Year Ended March 31, 2019
Year Ended March 31, 2019
Vested
Vested
April 1, 2018 - Outstanding
April 1, 2018 - Outstanding
4,000
27,000
4,000
50,000
27,000
53,200
50,000
58,100
53,200
48,800
Granted
Exercised
Canceled
Granted
Exercised
Canceled
(4,000 )
(27,000 )
(4,000 )
(10,000 )
(27,000 )
(30,500 )
(10,000 )
(30,500 )
58,100
42,700
48,800
42,700
March 31, 2019 - Outstanding
March 31, 2019 - Outstanding
40,000
22,700
40,000
58,100
22,700
48,800
58,100
42,700
48,800
42,700
Year Ended March 31, 2020
Year Ended March 31, 2020
Vested
Vested
April 1, 2019 - Outstanding
April 1, 2019 - Outstanding
40,000
22,700
40,000
58,100
22,700
48,800
58,100
42,700
Granted
Exercised
Canceled
Granted
Exercised
Canceled
(32,000 )
(10,500 )
March 31, 2020 - Outstanding
March 31, 2020 - Outstanding
8,000
12,200
(32,000 )
(33,500 )
(1,000 )
8,000
23,600
(10,500 )
(800 )
48,000
12,200
(33,500 )
(1,000 )
(700 )
23,600
42,000
Exercise price
Average stock price at exercise
Fair value price at grant date
Exercise price
Average stock price at exercise
Fair value price at grant date
¥2,186
¥12,956
¥676
¥4,500
¥12,491
¥1,220
¥2,186
¥6,715
¥12,956
¥14,520
¥676
¥1,697
¥4,500
¥1
¥12,491
¥14,280
¥1,220
¥7,726
¥6,715
¥1
¥14,520
¥14,436
¥1,697
¥7,859
¥1
¥1
¥14,280
¥7,726
¥10,711
¥1
¥1
¥14,436
¥7,859
¥11,670
48,800
46,100
(800 )
48,000
46,100
42,700
(700 )
42,000
46,100
46,100
¥1
¥1
¥1
¥1
¥10,711
¥12,777
¥11,670
¥12,777
The assumptions used to measure the fair value of 2019 Stock Option
The assumptions used to measure the fair value of 2019 Stock Option
Estimate method:
Volatility of stock price:
Estimated remaining outstanding period:
Estimated dividend:
Risk-free interest rate:
Estimate method:
Volatility of stock price:
Estimated remaining outstanding period:
Estimated dividend:
Risk-free interest rate:
Black-Scholes option-pricing model
Black-Scholes option-pricing model
29.7%
29.7%
9 years
9 years
¥160 per share
¥160 per share
(0.2)%
(0.2)%
- 23 -
- 23 -
Annual Report 2020
83
Notes to Consolidated Financial Statements
12.
INCOME TAXES
The Company and its domestic subsidiaries are subject to Japanese national and local income taxes
that, in the aggregate, resulted in a normal effective statutory tax rate of approximately 30.6% for the
years ended March 31, 2020 and 2019.
The tax effects of significant temporary differences and tax loss carryforwards that resulted in
deferred tax assets and liabilities at March 31, 2020 and 2019 were as follows:
Millions of Yen
2020
2019
Deferred tax assets:
Provision for product warranties
Tax loss carryforwards
Software and other intangible assets
Unrealized profit on inventories
Inventories
Accrued bonus
Investment securities
Liabilities for retirement benefits
Deferred revenue
Allowance for doubtful receivables
Foreign income tax credit
Other
Total of tax loss carryforwards and temporary differences
Less valuation allowance for tax loss carryforwards
Less valuation allowance for temporary differences
Total valuation allowance
¥ 13,625
11,655
10,256
9,271
6,059
4,628
3,871
3,538
2,933
2,343
70
22,445
90,694
(8,707 )
(6,374 )
(15,081 )
¥ 12,795
10,427
8,668
9,307
5,135
4,368
5,421
2,498
3,100
1,994
77
20,293
84,083
(8,206 )
(6,947 )
(15,153 )
Total deferred tax assets
¥ 75,613
¥ 68,930
Deferred tax liabilities:
Intangible assets
Undistributed earnings of consolidated subsidiaries
Unrealized gains on available-for-sale securities
Assets for retirement benefits
Deferred gains on sales of property
Other
¥ 64,092
40,385
10,131
4,131
1,705
18,462
¥ 68,816
39,862
19,342
4,662
1,722
11,425
Total deferred tax liabilities
¥ 138,906
¥ 145,829
Net deferred tax liabilities
¥ (63,293 )
¥ (76,899 )
84
- 24 -
The expiration of tax loss carryforwards, related valuation allowances, and the resulting net deferred
tax assets as of March 31, 2020 were as follows:
Millions of Yen
March 31, 2020
One Year
or Less
After
One Year
through
Two Years
After
Two Years
through
Three Years
After
Three Years
through
Four Years
After
Four Years
through
Five Years
After
Five Years Total
Deferred tax assets
relating to tax loss
carryforwards
Less valuation
¥ 134
¥ 37
¥ 137
¥ 384
¥ 265 ¥10,698 ¥ 11,655
allowances for tax
loss carryforwards (130 )
(29 )
(137 )
(248 )
(190 ) (7,973 )
(8,707 )
Net deferred tax
assets relating to
tax loss
carryforwards
4
8
136
75 2,725 2,948
A reconciliation of the difference between the normal effective statutory tax rate and the actual
effective tax rate is not disclosed since the difference is less than 5% of the normal effective
statutory income tax rate for the year ended March 31, 2020.
A reconciliation between the normal effective statutory tax rate and the actual effective tax rate
reflected in the accompanying consolidated statement of income for the year ended March 31, 2019,
was as follows:
Normal effective statutory income tax rate
2019
30.6 %
Differences in foreign subsidiaries' tax rates
(5.5 )
Taxes and tax effects on dividends from foreign subsidiaries
3.7
Amortization of goodwill
2.7
Tax credit for research and development
(2.2 )
Permanently non-deductible expenses, such as entertainment expenses 0.5
Valuation allowance
0.1
Permanently non-taxable income, such as dividend income
(0.1 )
Other – net
(0.9 )
Actual effective income tax rate
28.9 %
- 25 -
Annual Report 2020
85
Notes to Consolidated Financial Statements
13. SUPPLEMENTAL CASH FLOW INFORMATION
The Group acquired Cool International Holding GmbH and its subsidiaries during the year ended
March 31, 2019.
Reconciliation between cash paid for the equity interest of Cool International Holding GmbH 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
Noncontrolling interests
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
2019
¥ 25,233
93,823
30,137
(16,188 )
(61,077 )
140
72,068
(7,358 )
¥ 64,710
Repayments of long-term debt included ¥40,389 million for repayments of long-term debt by Cool
International Holding GmbH and the other companies which the Group acquired for the year ended
March 31, 2019.
14. RESEARCH AND DEVELOPMENT COSTS
Research and development costs included in cost of sales and selling, general and administrative
expenses were ¥67,968 million and ¥65,216 million for the years ended March 31, 2020 and 2019,
respectively.
- 26 -
86
15. LEASES
The Group mainly leases certain buildings, land and vehicles.
Obligations for future minimum payments on non-cancelable operating leases at March 31, 2020
was as follows:
Due within one year
Due after one year
Total
Millions of
Yen
Operating
Leases
¥ 1,172
7,716
¥ 8,888
(Note) As foreign consolidated subsidiaries have adopted IFRS 16 "Leases" or ASU 2016-02
"Leases" since the fiscal year ended March 31, 2020, they are included in the book
value by type of "property, plant and equipment" in the consolidated balance sheet for
the fiscal year.
16. FINANCIAL INSTRUMENTS AND RELATED DISCLOSURES
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 papers 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 risk from changes in interest rates, which is hedged by mainly using
interest rate swaps.
- 27 -
Annual Report 2020
87
Notes to Consolidated Financial Statements
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.
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 were based on quoted price in active markets. If a
quoted price were not available, another rational valuation technique were used instead. Instruments
whose fair values could not be readily determined were not included in the following.
Cash and cash equivalents
Short-term investments
Trade notes and accounts receivable
Investment securities
Total
Trade notes and accounts payable
Short-term borrowings
Income taxes payable
Long-term debt
Lease obligations
Total
Derivatives
Cash and cash equivalents
Short-term investments
Trade notes and accounts receivable
Investment securities
Total
Trade notes and accounts payable
Short-term borrowings
Income taxes payable
Long-term debt
Lease obligations
Total
Derivatives
Millions of Yen
March 31, 2020
Carrying
Amount
Fair Value
Unrealized
Loss
¥ 321,152
49,641
440,755
138,482
¥ 321,152
49,641
440,755
138,482
¥ 950,030
¥ 950,030
¥ 189,844
48,938
19,894
429,085
75,784
¥ 189,844
48,938
19,894
430,452
78,156
¥ 1,367
2,372
¥ 763,545
¥ 767,284
¥ 3,739
¥(6,055 )
¥(6,055 )
Millions of Yen
March 31, 2019
Carrying
Amount
Fair Value
Unrealized
Loss
¥ 367,189
592
447,831
187,865
¥ 367,189
592
447,831
187,865
¥ 1,003,477
¥ 1,003,477
¥ 204,535
146,066
25,576
428,375
11,201
¥ 204,535
146,066
25,576
431,326
12,776
¥ 2,951
1,575
¥ 815,753
¥ 820,279
¥ 4,526
- 28 -
¥969
¥969
88
Assets
Cash and cash equivalents
The carrying values of cash and cash equivalents approximate fair value because of their short
maturities.
Short-term investments
The carrying values of short-term investments 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 5.
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.
Lease obligations
The fair market value of lease obligations is calculated by discounting the total amount of principal
and interest by the interest rate that would be used if similar new lease transactions were entered
into.
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.
- 29 -
Annual Report 2020
89
Notes to Consolidated Financial Statements
Derivative transactions to which hedge accounting is not applied
Millions of Yen
March 31, 2020
Contract
Amount
Due after
One Year
Fair
Value
Unrealized
Gain (Loss)
¥
(86 )
(223 )
(3,753 )
38
10
0
205
(98 )
(63 )
(7 )
842
670
1
(33 )
(10 )
(3 )
2
2
1
3
(24 )
0
¥
(86 )
(223 )
(3,753 )
38
10
0
205
(98 )
(63 )
(7 )
842
670
1
(33 )
(10 )
(3 )
2
2
1
3
(24 )
0
¥(102 )
¥(102 )
Millions of Yen
March 31, 2019
Contract
Amount
Due after
One Year
Fair
Value
Unrealized
Gain (Loss)
¥
5
(11 )
(142 )
98
3
(2 )
(3 )
5
(3 )
0
(43 )
(0 )
(44 )
10
3
0
(0 )
50
(1 )
¥
5
(11 )
(142 )
98
3
(2 )
(3 )
5
(3 )
0
(43 )
(0 )
(44 )
10
3
0
(0 )
50
(1 )
¥47
¥47
Contract
Amount
¥ 5,470
22,901
49,711
5,144
453
15
4,088
1,567
2,753
2,738
4,591
4,990
653
445
392
1,474
175
114
122
1,172
2,143
186
¥985
Contract
Amount
¥ 9,881
14,697
33,144
1,729
753
196
3,089
1,264
1,893
863
420
128
4,886
1,221
830
2
1,568
1,976
241
¥722
- 30 -
Forward exchange contracts:
Selling: GBP
EUR
USD
AUD
NZD
ZAR
CZK
HKD
SGD
MYR
TRY
IDR
INR
NOK
QAR
PHP
HUF
THB
CNY
AED
Buying: CNY
EUR
Commodity futures contracts:
Buying: Metal
Forward exchange contracts:
Selling: GBP
EUR
USD
AUD
NZD
ZAR
CZK
HKD
SGD
MYR
TRY
BRL
IDR
INR
PHP
THB
AED
Buying: CNY
EUR
Commodity futures contracts:
Buying: Metal
90
Derivative transactions to which hedge accounting is applied
Millions of Yen
March 31, 2020
Contract
Amount
Due after
One Year
Fair
Value
¥ 218
(1,155 )
39
263
158
(71 )
Hedged
Item
Contract
Amount
Receivables
Receivables
Receivables
Receivables
Receivables
Payables
¥ 7,533
34,299
5,224
5,519
2,962
9,033
Forward exchange contracts:
Selling: GBP
EUR
USD
CZK
TRY
Buying: CNY
Interest rate swaps:
Fixed-rate payment, floating-rate
receipt
Fixed-rate payment, floating-rate
receipt (*)
Commodity futures contracts:
Buying: Metal
Long-term
debt
Long-term
debt
Raw
materials
¥141,417
¥92,680
¥ (872 )
63,000
10,000
¥ 13,708
¥ (2,006 )
Millions of Yen
March 31, 2019
Contract
Amount
Due after
One Year
Fair
Value
¥(158 )
92
(4 )
77
6
101
Hedged
Item
Contract
Amount
Receivables
Receivables
Receivables
Receivables
Receivables
Payables
¥ 6,307
32,091
1,620
5,704
1,418
7,576
Long-term
debt
Long-term
debt
Raw
materials
¥173,215
¥154,886
¥722
63,000
63,000
¥ 7,223
¥161
Forward exchange contracts:
Selling: GBP
EUR
USD
CZK
TRY
Buying: CNY
Interest rate swaps:
Fixed-rate payment, floating-rate
receipt
Fixed-rate payment, floating-rate
receipt (*)
Commodity futures contracts:
Buying: Metal
(*) 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
Millions of Yen
Carrying Amount
2020
2019
Nonlisted equity securities
Investments in limited partnerships and other investments
¥ 11,060
1,076
¥ 9,549
1,284
Total
¥ 12,136
¥ 10,833
- 31 -
Annual Report 2020
91
Notes to Consolidated Financial Statements
Maturity analysis for financial assets and securities with contractual maturities
Cash and cash equivalents
Short-term investments
Trade notes and accounts receivable
Investment securities:
Available-for-sale securities with
contractual maturities (corporate
bonds)
Total
¥ 811,545
¥ 3
Millions of Yen
March 31, 2020
Due after
One Year
through
Five Years
Due after
Five Years
through Ten
Years
Due after
Ten Years
¥ 3
Due in
One Year
or Less
¥ 321,152
49,641
440,752
Millions of Yen
March 31, 2019
Due after
One Year
through
Five Years
Due after
Five Years
through Ten
Years
Due after
Ten Years
¥ 39
Due in
One Year
or Less
¥ 367,189
592
447,792
¥ 300
¥ 300
¥ 300
¥ 300
Cash and cash equivalents
Short-term investments
Trade notes and accounts receivable
Investment securities:
Available-for-sale securities with
contractual maturities (corporate
bonds)
Total
¥ 815,573
¥ 39
Please see Note 8 for annual maturities of long-term debt.
17. COMMITMENTS AND CONTINGENT LIABILITIES
Commitments for capital expenditures outstanding at March 31, 2020 totaled approximately ¥25,689
million.
The Group had the following contingent liabilities at March 31, 2020 and 2019.
Trade notes endorsed
Millions of Yen
2020
2019
¥1,835
¥1,733
- 32 -
92
18. COMPREHENSIVE INCOME
The components of other comprehensive income (loss) for the years ended March 31, 2020 and
2019 were as follows:
Unrealized losses on available-for-sale securities:
Losses arising during the year
Reclassification adjustments to profit or loss
Amount before income tax effect
Income tax effect
Total
Deferred losses on derivatives under hedge accounting:
(Losses) gains 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:
Losses arising during the year
Total other comprehensive loss
Millions of Yen
2020
2019
¥ (26,901 )
(10,231 )
(37,132 )
9,211
¥ (27,921 )
¥ (23,504 )
4
(23,500 )
6,601
¥ (16,899 )
¥
¥
(3,859 )
(568 )
(4,427 )
1,011
(3,416 )
¥
¥
505
(698 )
(193 )
84
(109 )
¥ (69,568 )
(19 )
(69,587 )
¥ (69,587 )
¥ (8,393 )
284
(8,109 )
¥ (8,109 )
¥
¥
(3,670 )
202
(3,468 )
1,011
(2,457 )
¥
¥
(556 )
1,159
603
(155 )
448
¥
(495 )
¥ (1,167 )
¥ (103,876 )
¥ (25,836 )
- 33 -
Annual Report 2020
93
Notes to Consolidated Financial Statements
19. NET INCOME PER SHARE
Reconciliations of the differences between basic and diluted net income per share (EPS) for the
years ended March 31, 2020 and 2019 were as follows:
Millions of
Yen
Net Income
Thousands
of Shares
Weighted-
Average
Shares
Yen
EPS
Year Ended March 31, 2020
Basic EPS:
Net income available to common shareholders
¥ 170,731
292,546 ¥ 583.61
Effect of dilutive securities:
Stock options
Diluted EPS:
193
Net income for computation
¥ 170,731
292,739 ¥ 583.22
Year Ended March 31, 2019
Basic EPS:
Net income available to common shareholders
¥ 189,049
292,470 ¥ 646.39
Effect of dilutive securities:
Stock options
Diluted EPS:
197
Net income for computation
¥ 189,049
292,667 ¥ 645.95
20. 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."
- 34 -
94
19. NET INCOME PER SHARE
Reconciliations of the differences between basic and diluted net income per share (EPS) for the
years ended March 31, 2020 and 2019 were as follows:
Millions of
Thousands
Yen
of Shares
Yen
Weighted-
Average
Shares
Net Income
EPS
Net income available to common shareholders
¥ 170,731
292,546 ¥ 583.61
Net income for computation
¥ 170,731
292,739 ¥ 583.22
193
Year Ended March 31, 2020
Basic EPS:
Effect of dilutive securities:
Stock options
Diluted EPS:
Year Ended March 31, 2019
Basic EPS:
Net income available to common shareholders
¥ 189,049
292,470 ¥ 646.39
Effect of dilutive securities:
Stock options
Diluted EPS:
197
Net income for computation
¥ 189,049
292,667 ¥ 645.95
20. 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."
- 34 -
Annual Report 2020
95
Notes to Consolidated Financial Statements
3.
3.
3.
3.
Information about sales, profit, assets and other items
Information about sales, profit, assets and other items
Information about sales, profit, assets and other items
Information about sales, profit, assets and other items
Millions of Yen
Millions of Yen
Millions of Yen
Millions of Yen
March 31, 2020
March 31, 2020
March 31, 2020
March 31, 2020
Reportable Segment
Reportable Segment
Reportable Segment
Reportable Segment
Sales:
Sales:
Sales:
Sales:
Sales to external customers
Sales to external customers
Sales to external customers
Sales to external customers
Intersegment sales
Intersegment sales
Intersegment sales
Intersegment sales
Total
Total
Total
Total
Segment profit
Segment profit
Segment profit
Segment profit
Segment assets
Segment assets
Segment assets
Segment assets
Other:
Other:
Other:
Other:
Depreciation
Depreciation
Depreciation
Depreciation
Amortization of goodwill
Amortization of goodwill
Amortization of goodwill
Amortization of goodwill
Investment balance in unconsolidated
Investment balance in unconsolidated
Investment balance in unconsolidated
Investment balance in unconsolidated
Air
Air
Air
Air
Conditioning
Conditioning
Conditioning
Conditioning
Chemicals
Chemicals
Chemicals
Chemicals
Total
Total
Total
Total
Other
Other
Other
Other
Total
Total
Total
Total
Reconciliations
Reconciliations
Reconciliations
Reconciliations
Consolidated
Consolidated
Consolidated
Consolidated
¥ 2,309,117
¥ 2,309,117
¥ 2,309,117
¥ 2,309,117
871
871
871
871
2,309,988
2,309,988
2,309,988
2,309,988
236,185
236,185
236,185
236,185
2,228,944
2,228,944
2,228,944
2,228,944
¥ 179,884
¥ 179,884
¥ 179,884
¥ 179,884
13,850
13,850
13,850
13,850
193,734
193,734
193,734
193,734
23,770
23,770
23,770
23,770
239,069
239,069
239,069
239,069
¥ 2,489,001
¥ 2,489,001
¥ 2,489,001
¥ 2,489,001
14,721
14,721
14,721
14,721
2,503,722
2,503,722
2,503,722
2,503,722
259,955
259,955
259,955
259,955
2,468,013
2,468,013
2,468,013
2,468,013
¥ 61,304
¥ 61,304
¥ 61,304
¥ 61,304
699
699
699
699
62,003
62,003
62,003
62,003
5,549
5,549
5,549
5,549
35,297
35,297
35,297
35,297
¥ 2,550,305
¥ 2,550,305
¥ 2,550,305
¥ 2,550,305
15,420
15,420
15,420
15,420
2,565,725
2,565,725
2,565,725
2,565,725
265,504
265,504
265,504
265,504
2,503,310
2,503,310
2,503,310
2,503,310
¥ (15,420 )
¥ (15,420 )
¥ (15,420 )
¥ (15,420 )
(15,420 )
(15,420 )
(15,420 )
(15,420 )
9
9
9
9
¥ 2,550,305
¥ 2,550,305
¥ 2,550,305
¥ 2,550,305
2,550,305
2,550,305
2,550,305
2,550,305
265,513
265,513
265,513
265,513
164,203
164,203
164,203
164,203
2,667,513
2,667,513
2,667,513
2,667,513
¥ 81,373
¥ 81,373
¥ 81,373
¥ 81,373
30,497
30,497
30,497
30,497
¥14,618
¥14,618
¥14,618
¥14,618
187
187
187
187
¥ 95,991
¥ 95,991
¥ 95,991
¥ 95,991
30,684
30,684
30,684
30,684
¥1,802
¥1,802
¥1,802
¥1,802
¥ 97,793
¥ 97,793
¥ 97,793
¥ 97,793
30,684
30,684
30,684
30,684
¥ 97,793
¥ 97,793
¥ 97,793
¥ 97,793
30,684
30,684
30,684
30,684
subsidiaries and associated companies
subsidiaries and associated companies
subsidiaries and associated companies
subsidiaries and associated companies
accounted for using the equity method
accounted for using the equity method
accounted for using the equity method
accounted for using the equity method
Investment in property, plant and
Investment in property, plant and
Investment in property, plant and
Investment in property, plant and
13,760
13,760
13,760
13,760
9,434
9,434
9,434
9,434
23,194
23,194
23,194
23,194
23,194
23,194
23,194
23,194
equipment and intangible assets
equipment and intangible assets
equipment and intangible assets
equipment and intangible assets
101,113
101,113
101,113
101,113
28,209
28,209
28,209
28,209
129,322
129,322
129,322
129,322
2,633
2,633
2,633
2,633
131,955
131,955
131,955
131,955
Millions of Yen
Millions of Yen
Millions of Yen
Millions of Yen
March 31, 2019
March 31, 2019
March 31, 2019
March 31, 2019
Reportable Segment
Reportable Segment
Reportable Segment
Reportable Segment
Air
Air
Air
Air
Conditioning
Conditioning
Conditioning
Conditioning
Chemicals
Chemicals
Chemicals
Chemicals
Total
Total
Total
Total
Other
Other
Other
Other
Total
Total
Total
Total
Reconciliations
Reconciliations
Reconciliations
Reconciliations
Consolidated
Consolidated
Consolidated
Consolidated
¥ 2,222,173
¥ 2,222,173
¥ 2,222,173
¥ 2,222,173
714
714
714
714
2,222,887
2,222,887
2,222,887
2,222,887
237,646
237,646
237,646
237,646
2,230,118
2,230,118
2,230,118
2,230,118
¥ 200,790
¥ 200,790
¥ 200,790
¥ 200,790
18,124
18,124
18,124
18,124
218,914
218,914
218,914
218,914
32,534
32,534
32,534
32,534
230,736
230,736
230,736
230,736
¥ 2,422,963
¥ 2,422,963
¥ 2,422,963
¥ 2,422,963
18,838
18,838
18,838
18,838
2,441,801
2,441,801
2,441,801
2,441,801
270,180
270,180
270,180
270,180
2,460,854
2,460,854
2,460,854
2,460,854
¥ 58,146
¥ 58,146
¥ 58,146
¥ 58,146
646
646
646
646
58,792
58,792
58,792
58,792
6,066
6,066
6,066
6,066
41,009
41,009
41,009
41,009
¥ 2,481,109
¥ 2,481,109
¥ 2,481,109
¥ 2,481,109
19,484
19,484
19,484
19,484
2,500,593
2,500,593
2,500,593
2,500,593
276,246
276,246
276,246
276,246
2,501,863
2,501,863
2,501,863
2,501,863
¥ (19,484 )
¥ (19,484 )
¥ (19,484 )
¥ (19,484 )
(19,484 )
(19,484 )
(19,484 )
(19,484 )
9
9
9
9
¥ 2,481,109
¥ 2,481,109
¥ 2,481,109
¥ 2,481,109
2,481,109
2,481,109
2,481,109
2,481,109
276,255
276,255
276,255
276,255
199,028
199,028
199,028
199,028
2,700,891
2,700,891
2,700,891
2,700,891
Sales:
Sales:
Sales:
Sales:
Sales to external customers
Sales to external customers
Sales to external customers
Sales to external customers
Intersegment sales
Intersegment sales
Intersegment sales
Intersegment sales
Total
Total
Total
Total
Segment profit
Segment profit
Segment profit
Segment profit
Segment assets
Segment assets
Segment assets
Segment assets
Other:
Other:
Other:
Other:
Depreciation
Depreciation
Depreciation
Depreciation
Amortization of goodwill
Amortization of goodwill
Amortization of goodwill
Amortization of goodwill
Investment balance in unconsolidated
Investment balance in unconsolidated
Investment balance in unconsolidated
Investment balance in unconsolidated
subsidiaries and associated companies
subsidiaries and associated companies
subsidiaries and associated companies
subsidiaries and associated companies
accounted for using the equity method
accounted for using the equity method
accounted for using the equity method
accounted for using the equity method
Investment in property, plant and
Investment in property, plant and
Investment in property, plant and
Investment in property, plant and
equipment and intangible assets
equipment and intangible assets
equipment and intangible assets
equipment and intangible assets
¥57,166
¥57,166
¥57,166
¥57,166
26,792
26,792
26,792
26,792
¥13,489
¥13,489
¥13,489
¥13,489
200
200
200
200
¥70,655
¥70,655
¥70,655
¥70,655
26,992
26,992
26,992
26,992
¥1,667
¥1,667
¥1,667
¥1,667
¥72,322
¥72,322
¥72,322
¥72,322
26,992
26,992
26,992
26,992
13,552
13,552
13,552
13,552
10,097
10,097
10,097
10,097
23,649
23,649
23,649
23,649
23,649
23,649
23,649
23,649
68,982
68,982
68,982
68,982
15,914
15,914
15,914
15,914
84,896
84,896
84,896
84,896
2,266
2,266
2,266
2,266
87,162
87,162
87,162
87,162
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
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
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
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.
Hydraulics segment, the Defense segment and the Electronics segment.
Hydraulics segment, the Defense segment and the Electronics segment.
Hydraulics segment, the Defense segment and the Electronics segment.
2. "Reconciliations" include unallocated items and intersegment eliminations. The unallocated corporate assets included in "Reconciliations"
2. "Reconciliations" include unallocated items and intersegment eliminations. The unallocated corporate assets included in "Reconciliations"
2. "Reconciliations" include unallocated items and intersegment eliminations. The unallocated corporate assets included in "Reconciliations"
2. "Reconciliations" include unallocated items and intersegment eliminations. The unallocated corporate assets included in "Reconciliations"
amounted to ¥175,010 million and ¥211,637 million at March 31, 2020 and 2019, respectively, which consisted mainly of the Company's cash,
amounted to ¥175,010 million and ¥211,637 million at March 31, 2020 and 2019, respectively, which consisted mainly of the Company's cash,
amounted to ¥175,010 million and ¥211,637 million at March 31, 2020 and 2019, respectively, which consisted mainly of the Company's cash,
amounted to ¥175,010 million and ¥211,637 million at March 31, 2020 and 2019, respectively, which consisted mainly of the Company's cash,
time deposits and investment securities.
time deposits and investment securities.
time deposits and investment securities.
time deposits and investment securities.
3. The aggregated amount of segment profit equals operating income in the consolidated statement of income.
3. The aggregated amount of segment profit equals operating income in the consolidated statement of income.
3. The aggregated amount of segment profit equals operating income in the consolidated statement of income.
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.
4. Intersegment sales are recorded at values that approximate market prices.
4. Intersegment sales are recorded at values that approximate market prices.
4. Intersegment sales are recorded at values that approximate market prices.
23,194
23,194
23,194
23,194
131,955
131,955
131,955
131,955
¥72,322
¥72,322
¥72,322
¥72,322
26,992
26,992
26,992
26,992
23,649
23,649
23,649
23,649
87,162
87,162
87,162
87,162
96
- 35 -
- 35 -
- 35 -
- 35 -
Other
Total
Total
Reconciliations
Reconciliations
Other
Total
Consolidated
Consolidated
Reconciliations
Total
Reconciliations
Reconciliations
Reconciliations
Consolidated
Consolidated
Consolidated
Consolidated
¥ 2,550,305
¥ 2,550,305
¥ 61,304
¥ 61,304
¥ 61,304
699
699
699
62,003
62,003
62,003
5,549
5,549
5,549
35,297
35,297
35,297
¥ 2,550,305
¥ 2,550,305
¥ 61,304
¥ 2,550,305
15,420
699
15,420
¥ (15,420 )
15,420
¥ (15,420 )
2,565,725
2,565,725
62,003
(15,420 )
2,565,725
(15,420 )
265,504
265,504
9
265,504
5,549
9
2,503,310
2,503,310
164,203
2,503,310
164,203
35,297
¥ 2,550,305
¥ (15,420 )
¥ (15,420 )
¥ (15,420 )
15,420
¥ (15,420 )
2,550,305
2,550,305
(15,420 )
(15,420 )
(15,420 )
2,550,305
2,550,305
2,565,725
2,550,305
(15,420 )
9
9
265,513
9
265,513
9
265,504
265,513
265,513
265,513
2,667,513
164,203
164,203
2,667,513
164,203
2,667,513
164,203
2,667,513
2,503,310
2,667,513
¥ 2,550,305
¥ 2,550,305
¥ 2,550,305
2,550,305
265,513
2,667,513
¥ 2,550,305
accounted for using the equity method
accounted for using the equity method
accounted for using the equity method
accounted for using the equity method
accounted for using the equity method
accounted for using the equity method
13,760
13,760
9,434
9,434
13,760
13,760
13,760
13,760
23,194
23,194
9,434
9,434
9,434
9,434
23,194
23,194
23,194
23,194
23,194
23,194
23,194
23,194
23,194
23,194
23,194
23,194
23,194
23,194
23,194
23,194
¥1,802
¥1,802
¥1,802
¥1,802
¥ 97,793
¥ 97,793
¥ 97,793
30,684
30,684
30,684
¥ 97,793
30,684
¥ 97,793
¥ 97,793
30,684
30,684
¥ 97,793
¥ 97,793
¥ 97,793
30,684
30,684
30,684
¥ 97,793
30,684
2,633
2,633
2,633
2,633
131,955
131,955
131,955
131,955
131,955
131,955
131,955
131,955
131,955
131,955
Other
Total
Total
Reconciliations
Reconciliations
Other
Total
Consolidated
Consolidated
Reconciliations
Total
Reconciliations
Reconciliations
Reconciliations
Consolidated
Consolidated
Consolidated
Consolidated
3.
3.
Information about sales, profit, assets and other items
Information about sales, profit, assets and other items
Information about sales, profit, assets and other items
Information about sales, profit, assets and other items
Information about sales, profit, assets and other items
Information about sales, profit, assets and other items
3.
3.
3.
3.
Millions of Yen
Millions of Yen
Millions of Yen
Millions of Yen
Millions of Yen
Millions of Yen
March 31, 2020
March 31, 2020
March 31, 2020
March 31, 2020
March 31, 2020
March 31, 2020
Reportable Segment
Reportable Segment
Reportable Segment
Reportable Segment
Reportable Segment
Reportable Segment
Air
Air
Air
Air
Air
Air
Conditioning
Conditioning
Chemicals
Chemicals
Conditioning
Conditioning
Conditioning
Conditioning
Chemicals
Chemicals
Chemicals
Total
Total
Chemicals
Other
Other
Total
Total
Total
Total
Total
Total
Other
Other
Sales:
Sales:
Sales:
Sales:
Sales:
Sales:
Sales to external customers
Sales to external customers
Sales to external customers
Sales to external customers
Sales to external customers
Sales to external customers
¥ 2,309,117
¥ 2,309,117
¥ 179,884
¥ 179,884
¥ 2,309,117
¥ 2,309,117
¥ 2,309,117
¥ 2,309,117
¥ 2,489,001
¥ 2,489,001
¥ 179,884
¥ 179,884
¥ 179,884
¥ 61,304
¥ 61,304
¥ 179,884
¥ 2,489,001
¥ 2,489,001
¥ 2,489,001
¥ 2,550,305
¥ 2,550,305
¥ 2,489,001
Intersegment sales
Intersegment sales
Intersegment sales
Intersegment sales
Intersegment sales
Intersegment sales
871
871
13,850
13,850
871
871
871
14,721
14,721
13,850
13,850
13,850
871
13,850
699
699
14,721
14,721
14,721
15,420
15,420
14,721
Total
Total
Total
Total
Total
2,309,988
2,309,988
Total
193,734
193,734
2,309,988
2,309,988
2,309,988
2,309,988
2,503,722
2,503,722
193,734
193,734
193,734
62,003
62,003
193,734
2,503,722
2,503,722
2,503,722
2,565,725
2,565,725
2,503,722
Segment profit
Segment profit
Segment profit
Segment profit
Segment profit
Segment profit
236,185
236,185
23,770
23,770
236,185
236,185
236,185
236,185
259,955
259,955
23,770
23,770
23,770
5,549
5,549
23,770
259,955
259,955
259,955
265,504
265,504
259,955
Segment assets
Segment assets
Segment assets
Segment assets
Segment assets
Segment assets
2,228,944
2,228,944
239,069
239,069
2,228,944
2,228,944
2,228,944
2,228,944
2,468,013
2,468,013
239,069
239,069
239,069
35,297
35,297
239,069
2,468,013
2,468,013
2,468,013
2,503,310
2,503,310
2,468,013
Other:
Other:
Other:
Other:
Other:
Other:
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
¥ 81,373
¥ 81,373
¥14,618
¥14,618
¥ 81,373
¥ 81,373
¥ 81,373
¥ 81,373
¥ 95,991
¥ 95,991
¥14,618
¥14,618
¥14,618
¥1,802
¥1,802
¥14,618
¥ 95,991
¥ 95,991
¥ 95,991
¥ 97,793
¥ 97,793
¥ 95,991
Amortization of goodwill
Amortization of goodwill
Amortization of goodwill
Amortization of goodwill
Amortization of goodwill
Amortization of goodwill
30,497
30,497
187
187
30,497
30,497
30,497
30,497
30,684
30,684
187
187
187
187
30,684
30,684
30,684
30,684
30,684
30,684
Investment balance in unconsolidated
Investment balance in unconsolidated
Investment balance in unconsolidated
Investment balance in unconsolidated
Investment balance in unconsolidated
Investment balance in unconsolidated
subsidiaries and associated companies
subsidiaries and associated companies
subsidiaries and associated companies
subsidiaries and associated companies
subsidiaries and associated companies
subsidiaries and associated companies
Investment in property, plant and
Investment in property, plant and
Investment in property, plant and
Investment in property, plant and
Investment in property, plant and
Investment in property, plant and
equipment and intangible assets
equipment and intangible assets
equipment and intangible assets
equipment and intangible assets
equipment and intangible assets
equipment and intangible assets
101,113
101,113
28,209
28,209
101,113
101,113
101,113
101,113
129,322
129,322
28,209
28,209
28,209
2,633
2,633
28,209
129,322
129,322
129,322
131,955
131,955
129,322
Millions of Yen
Millions of Yen
Millions of Yen
Millions of Yen
Millions of Yen
Millions of Yen
March 31, 2019
March 31, 2019
March 31, 2019
March 31, 2019
March 31, 2019
March 31, 2019
Reportable Segment
Reportable Segment
Reportable Segment
Reportable Segment
Reportable Segment
Reportable Segment
Air
Air
Air
Air
Air
Air
Conditioning
Conditioning
Chemicals
Chemicals
Conditioning
Conditioning
Conditioning
Conditioning
Chemicals
Chemicals
Chemicals
Total
Total
Chemicals
Other
Other
Total
Total
Total
Total
Total
Total
Other
Other
Sales:
Sales:
Sales:
Sales:
Sales:
Sales:
Sales to external customers
Sales to external customers
Sales to external customers
Sales to external customers
Sales to external customers
Sales to external customers
¥ 2,222,173
¥ 2,222,173
¥ 200,790
¥ 200,790
¥ 2,222,173
¥ 2,222,173
¥ 2,222,173
¥ 2,222,173
¥ 2,422,963
¥ 2,422,963
¥ 200,790
¥ 200,790
¥ 200,790
¥ 58,146
¥ 58,146
¥ 200,790
¥ 2,422,963
¥ 2,422,963
¥ 2,422,963
¥ 2,481,109
¥ 2,481,109
¥ 2,422,963
Intersegment sales
Intersegment sales
Intersegment sales
Intersegment sales
Intersegment sales
Intersegment sales
714
714
18,124
18,124
714
714
714
18,838
18,838
18,124
18,124
18,124
714
18,124
646
646
18,838
18,838
18,838
19,484
19,484
18,838
Total
Total
Total
Total
Total
2,222,887
2,222,887
Total
218,914
218,914
2,222,887
2,222,887
2,222,887
2,222,887
2,441,801
2,441,801
218,914
218,914
218,914
58,792
58,792
218,914
2,441,801
2,441,801
2,441,801
2,500,593
2,500,593
2,441,801
Segment profit
Segment profit
Segment profit
Segment profit
Segment profit
Segment profit
237,646
237,646
32,534
32,534
237,646
237,646
237,646
237,646
270,180
270,180
32,534
32,534
32,534
6,066
6,066
32,534
270,180
270,180
270,180
276,246
276,246
270,180
Segment assets
Segment assets
Segment assets
Segment assets
Segment assets
Segment assets
2,230,118
2,230,118
230,736
230,736
2,230,118
2,230,118
2,230,118
2,230,118
2,460,854
2,460,854
230,736
230,736
230,736
41,009
41,009
230,736
2,460,854
2,460,854
2,460,854
2,501,863
2,501,863
2,460,854
Other:
Other:
Other:
Other:
Other:
Other:
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
Depreciation
¥57,166
¥57,166
¥13,489
¥13,489
¥57,166
¥57,166
¥57,166
¥57,166
¥70,655
¥70,655
¥13,489
¥13,489
¥13,489
¥1,667
¥1,667
¥13,489
¥70,655
¥70,655
¥70,655
¥72,322
¥72,322
¥70,655
Amortization of goodwill
Amortization of goodwill
Amortization of goodwill
Amortization of goodwill
Amortization of goodwill
Amortization of goodwill
26,792
26,792
200
200
26,792
26,792
26,792
26,792
26,992
26,992
200
200
200
200
26,992
26,992
26,992
26,992
26,992
26,992
Investment balance in unconsolidated
Investment balance in unconsolidated
Investment balance in unconsolidated
Investment balance in unconsolidated
Investment balance in unconsolidated
Investment balance in unconsolidated
subsidiaries and associated companies
subsidiaries and associated companies
subsidiaries and associated companies
subsidiaries and associated companies
subsidiaries and associated companies
subsidiaries and associated companies
Investment in property, plant and
Investment in property, plant and
Investment in property, plant and
Investment in property, plant and
Investment in property, plant and
Investment in property, plant and
equipment and intangible assets
equipment and intangible assets
equipment and intangible assets
equipment and intangible assets
equipment and intangible assets
equipment and intangible assets
68,982
68,982
15,914
15,914
68,982
68,982
68,982
68,982
15,914
15,914
15,914
84,896
84,896
2,266
2,266
15,914
84,896
84,896
84,896
87,162
87,162
84,896
Hydraulics segment, the Defense segment and the Electronics segment.
Hydraulics segment, the Defense segment and the Electronics segment.
Hydraulics segment, the Defense segment and the Electronics segment.
Hydraulics segment, the Defense segment and the Electronics segment.
Hydraulics segment, the Defense segment and the Electronics segment.
Hydraulics segment, the Defense segment and the Electronics segment.
time deposits and investment securities.
time deposits and investment securities.
time deposits and investment securities.
time deposits and investment securities.
time deposits and investment securities.
time deposits and investment securities.
3. The aggregated amount of segment profit equals operating income in the consolidated statement of income.
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.
4. Intersegment sales are recorded at values that approximate market prices.
4. Intersegment sales are recorded at values that approximate market prices.
4. Intersegment sales are recorded at values that approximate market prices.
4. Intersegment sales are recorded at values that approximate market prices.
4. Intersegment sales are recorded at values that approximate market prices.
¥1,667
¥1,667
¥1,667
¥1,667
¥72,322
¥72,322
¥72,322
26,992
26,992
26,992
¥72,322
26,992
¥72,322
¥72,322
26,992
26,992
¥72,322
¥72,322
¥72,322
26,992
26,992
26,992
¥72,322
26,992
accounted for using the equity method
accounted for using the equity method
accounted for using the equity method
accounted for using the equity method
accounted for using the equity method
accounted for using the equity method
10,097
10,097
13,552
13,552
13,552
13,552
13,552
13,552
10,097
10,097
10,097
23,649
23,649
10,097
23,649
23,649
23,649
23,649
23,649
23,649
23,649
23,649
23,649
23,649
23,649
23,649
23,649
23,649
23,649
23,649
2,266
2,266
2,266
2,266
87,162
87,162
87,162
87,162
87,162
87,162
87,162
87,162
87,162
87,162
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
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
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
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
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
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
2. "Reconciliations" include unallocated items and intersegment eliminations. The unallocated corporate assets included in "Reconciliations"
2. "Reconciliations" include unallocated items and intersegment eliminations. The unallocated corporate assets included in "Reconciliations"
amounted to ¥175,010 million and ¥211,637 million at March 31, 2020 and 2019, respectively, which consisted mainly of the Company's cash,
amounted to ¥175,010 million and ¥211,637 million at March 31, 2020 and 2019, respectively, which consisted mainly of the Company's cash,
2. "Reconciliations" include unallocated items and intersegment eliminations. The unallocated corporate assets included in "Reconciliations"
2. "Reconciliations" include unallocated items and intersegment eliminations. The unallocated corporate assets included in "Reconciliations"
2. "Reconciliations" include unallocated items and intersegment eliminations. The unallocated corporate assets included in "Reconciliations"
amounted to ¥175,010 million and ¥211,637 million at March 31, 2020 and 2019, respectively, which consisted mainly of the Company's cash,
amounted to ¥175,010 million and ¥211,637 million at March 31, 2020 and 2019, respectively, which consisted mainly of the Company's cash,
amounted to ¥175,010 million and ¥211,637 million at March 31, 2020 and 2019, respectively, which consisted mainly of the Company's cash,
2. "Reconciliations" include unallocated items and intersegment eliminations. The unallocated corporate assets included in "Reconciliations"
amounted to ¥175,010 million and ¥211,637 million at March 31, 2020 and 2019, respectively, which consisted mainly of the Company's cash,
3. The aggregated amount of segment profit equals operating income in the consolidated statement of income.
3. The aggregated amount of segment profit equals operating income in the consolidated statement of income.
3. The aggregated amount of segment profit equals operating income in the consolidated statement of income.
3. The aggregated amount of segment profit equals operating income in the consolidated statement of income.
- 35 -
- 35 -
- 35 -
- 35 -
- 35 -
- 35 -
Annual Report 2020
97
¥ 2,481,109
¥ 2,481,109
¥ 58,146
¥ 58,146
¥ 58,146
646
646
646
58,792
58,792
58,792
6,066
6,066
6,066
41,009
41,009
41,009
¥ 2,481,109
¥ 2,481,109
¥ 58,146
¥ 2,481,109
646
19,484
19,484
¥ (19,484 )
19,484
¥ (19,484 )
2,500,593
2,500,593
58,792
(19,484 )
2,500,593
(19,484 )
276,246
276,246
9
276,246
6,066
9
2,501,863
2,501,863
199,028
2,501,863
199,028
41,009
¥ 2,481,109
¥ (19,484 )
¥ (19,484 )
¥ (19,484 )
19,484
¥ (19,484 )
2,481,109
2,481,109
(19,484 )
(19,484 )
(19,484 )
2,481,109
2,481,109
2,500,593
2,481,109
(19,484 )
9
9
276,255
9
276,255
9
276,246
276,255
276,255
276,255
2,700,891
199,028
199,028
2,700,891
199,028
2,700,891
199,028
2,700,891
2,501,863
2,700,891
¥ 2,481,109
¥ 2,481,109
¥ 2,481,109
2,481,109
276,255
2,700,891
¥ 2,481,109
Notes to Consolidated Financial Statements
4. Supplemental information
(1) Information about geographical areas
(a) Sales
Japan
USA
China
Millions of Yen
March 31, 2020
Asia and
Oceania Europe
Other
Consolidated
¥596,978 ¥666,305 ¥341,284 ¥395,462 ¥405,611 ¥144,665 ¥2,550,305
Japan
USA
China
Millions of Yen
March 31, 2019
Asia and
Oceania Europe
Other
Consolidated
¥585,107 ¥625,041 ¥379,628 ¥387,093 ¥366,670 ¥137,570
¥2,481,109
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, 2020
Asia and
Oceania Europe
Other
Consolidated
¥165,554 ¥176,687 ¥80,095 ¥83,741 ¥58,710 ¥15,194
¥579,981
Japan
USA
China
Millions of Yen
March 31, 2019
Asia and
Oceania Europe
Other
Consolidated
¥161,703 ¥134,542 ¥70,657 ¥61,803 ¥44,607 ¥9,651
¥482,963
(2) Significant impairment losses on long-lived assets by reportable segment
Millions of Yen
March 31, 2020
Air
Conditioning
Chemicals
Other
Eliminations
and
Corporate
Consolidated
Impairment losses on
long-lived assets ¥23,555
¥23,555
- 36 -
98
(3) Information about goodwill
(a) Balance of goodwill by reportable segment
Goodwill for each reportable segment at March 31, 2020 and 2019 was as follows:
Millions of Yen
2020
Air
Conditioning
Chemicals
Other
Eliminations
and
Corporate
Goodwill
¥281,061
¥908
Millions of Yen
2019
Air
Conditioning
Chemicals
Other
Eliminations
and
Corporate
Goodwill
¥321,183
¥1,136
21. SUBSEQUENT EVENT
a. Borrowing of Significant Amount of Funds
Consolidated
¥281,969
Consolidated
¥322,319
The Company entered into a syndicated loan financing arrangement on May 26, 2020. The
following is the overview of the syndicated loan.
Overview of the syndicated loan
(1) Amount of borrowing:
¥200,000 million
(2) Lender:
Sumitomo Mitsui Banking Corporation and
other 17 financial institutions
(3) Date of contract conclusion: May 26, 2020
(4) Date of borrowing:
May 29, 2020
(5) Due date:
May 31, 2022
(Provided, however, that repayment before maturity is
permitted)
(6) Use of funds:
The Group's ongoing operations
(7) Applicable interest rate:
Tibor＋0.3%
(8) Provision of security:
None
b. Appropriations of Retained Earnings
Resolutions approved by the Company's Board of Directors' at the meeting held on May 12,
2020 are subject to approval at the general shareholders' meeting planned to be held on June
26, 2020.
Payment of year-end cash dividends of ¥80 per share to shareholders at March 31, 2020,
totaling ¥23,407 million is to be settled.
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Annual Report 2020
99
Independent Auditor’s Report
Independent Auditor’s Report
100
Annual Report 2020
101
Independent Auditor’s Report
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Corporate Data
Corporate Data
(As of March 31, 2020)
Company Name
Daikin Industries, Ltd.
Head Office
Tokyo Office
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
Fiscal Year-End Date
March 31 on an annual basis
Date of Founding
October 25, 1924
Date of Establishment
February 11, 1934
Paid-in Capital
¥85,032 million
Number of Shares
of Common Stock Issued
293,113 thousand
Number of Shareholders
27,028
Major Shareholders
• 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 7)
• Japan Trustee Services Bank, Ltd. (Trust Account 5)
• Japan Trustee Services Bank, Ltd. (Retirement Benefit Trust Account for The Norinchukin Bank, re-entrusted by
Sumitomo Mitsui Trust Bank, Limited)
• MUFG Bank, Ltd.
• JP Morgan Chase Bank 385151 (Standing proxy Mizuho Bank Settlement Sales Department)
• Japan Trustee Services Bank, Ltd. (Trust Account 4)
• Government of Norway (Standing proxy Citibank, N. A., Tokyo Branch)
Number of Subsidiaries
and Affiliated Companies
Subsidiaries: 313 Affiliates: 20
Number of Employees
80,369 (Consolidated)
Stock Exchange Listing
Tokyo
Advertising Method
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 circumstanc-
es, 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
Annual Report 2020
103
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 Japanhttp://www.daikin.comAnnual Report 2019 DAIKIN INDUSTRIES, LTD.