Integrated Report 2021
Fiscal Year Ended March 31, 2021
Offer new value for the
environment and air to realize
both contributions to a sustainable
society and Group growth
Founded in 1924, Daikin has continued to expand with a focus on its Air-Conditioning and fl uo-
rochemicals businesses. We are the world’s only general air-conditioning equipment manufacturer with
in-house divisions covering both air conditioning and refrigerants. We have continued to grow and
develop based on people-centered management, the pursuit of originality, and diversity management.
Based on the enterprising spirit espoused in our core values, our employees have worked in unison to
take on the challenge of achieving established goals. By demonstrating the ability to fully carry out our
duties, we have successfully refi ned our strengths in energy-saving and environmental as well as IAQ
technologies, robust sales network, and local production for local consumption model.
Under our fi ve-year FUSION 20 strategic management plan that ended in fi scal 2020, we had adopted
the two pillars of thoroughly strengthening our core businesses—air conditioning, chemicals, and fi l-
ters—and expanding our business domains while transforming our business structure. As a result, we
were able to steadily implement our key strategies while investing in growth for the future.
We are currently experiencing a once-in-a-century pandemic, and the COVID-19 crisis is causing
unprecedented environmental changes and a dramatic transformation of the consumer structure. We
are also experiencing major structural changes in society, such as the promotion of carbon neutrality.
As the world’s only manufacturer that develops and produces both air-conditioning equipment and
refrigerants, we have been contributing to the environment by providing differentiated products and
services that take advantage of our environmental and energy-saving technologies around the world.
However, we believe that it is essential to achieve both business growth and the goal of achieving net
zero greenhouse gas emissions by 2050.
In formulating FUSION 25, the strategic management plan that we started in fi scal 2021, we took into
account the major changes in the structure of the economy, industry and society 10 to 20 years into
the future, as well as the ideal state of the Daikin Group. Based on this back-casting approach, we
have set specifi c themes to be addressed during the fi ve years of FUSION 25.
While contributing to solving environmental and social issues, we will expand our business to achieve
further growth and development. Our goal is to realize contributions to both a sustainable society and
the growth of the Daikin Group.
Our Core Values
Absolute Credibility
Enterprising Management
Harmonious Personal Relations
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 Benefi t
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”
Integrated Report 2021
1
On Publishing the Integrated Report 2021
This is the fi rst time we published an integrated report to inform our shareholders and investors of the
Daikin Group’s efforts to enhance corporate value over the medium to long term. Through this report,
we hope to convey the Group’s aspiration and endeavors to help realize a sustainable society by bal-
ancing efforts to resolve environmental and social issues with the growth and development of its busi-
ness while collaborating with customers, business partners, employees, local communities, and other
stakeholders.
In the “Process of Value Creation,” we have clearly outlined the relationship between the six types of
capital and outcomes, as well as expressed our aim to achieve sustainable growth by working to solve
social issues through the Group’s unique strengths and business model. In the “Risks and Opportunities
That Affect Medium- to Long-Term Value Creation” section, we identifi ed important social issues that
could affect the Group’s medium- to long-term value creation in light of changes in the external envi-
ronment, and identifi ed related risks and opportunities. In the “Looking Back on Our Strategic Man-
agement Plan “FUSION”” section, we summarized our efforts, achievements, and progress to date. In
addition, the ““FUSION 25” Strategic Management Plan” section outlines the details of this strategic
management plan that began in fi scal 2021. Under FUSION 25, our goal is to “offer new value for the
environment and air to realize both contributions to a sustainable society and Group growth” with the
aim of continuing to grow and develop by expanding our business and strengthening profi tability while
contributing to the environment and society. We have also set our key strategic themes, including the
challenge to achieve carbon neutrality. The report outlines the specifi c measures, both fi nancial and
non-fi nancial, that Daikin will take to realize its vision for fi scal 2025, the fi nal year of the plan.
This report contains information that is of particular importance to enhancing the corporate value of
the Daikin Group. For more detailed information, please refer to our website.
Investor Relations
https://www.daikin.com/investor/
Environment & CSR
https://www.daikin.com/csr/
• Guidelines Used as Reference
In compiling this report, we draw on such references as the International Integrated
Reporting Council’s (IIRC) (reorganized as the Value Reporting Foundation in June
2021) “International Integrated Reporting Framework,” and the “Guidance for Col-
laborative Value Creation” issued by Japan’s Ministry of Economy, Trade and Industry.
2
CONTENTS
Our Core Values/Our Group Philosophy ...................... 1
Corporate Governance ................................................ 42
On Publishing the Integrated Report 2021 .................. 2
Message from the External Director .......................... 45
A Path to Unique Solutions ........................................... 4
Corporate Offi cers ....................................................... 46
Process of Value Creation .............................................. 6
Compliance/Risk Management ................................... 52
Financial/Non-Financial Highlights ............................... 8
Response to TCFD ........................................................ 53
At a Glance .................................................................. 10
Enhancing the Management Foundation
Strengthening Technology Development
Market Size and Positioning of Each Business .......... 11
Capabilities ................................................................. 54
Message from the CEO ................................................ 12
Looking Back on Our Strategic Management
Plan “FUSION” .............................................................. 20
Establishing a Robust Supply Chain ............................. 56
Promoting Digital Transformation for Innovation .......... 56
Creating Market Value/Enhancing Advocacy
Activities ..................................................................... 57
Improving HR Capabilities through Advanced
Diversity Management ................................................. 57
Risks and Opportunities That Affect Medium- to
Long-Term Value Creation ........................................... 22
Financial Section
Strategic Management Plan “FUSION 25”.................. 24
Financial Strategy ........................................................ 30
Review of Operations
Overview of Global Development ................................ 32
Air Conditioning .......................................................... 33
Chemicals .................................................................. 38
Oil Hydraulics .............................................................. 40
Defense ....................................................................... 41
Eleven-Year Financial Highlights ................................... 58
Financial Review .......................................................... 60
Consolidated Balance Sheet ........................................ 70
Consolidated Statement of Income .............................. 72
Consolidated Statement of Comprehensive Income ..... 73
Consolidated Statement of Changes in Equity ............. 74
Consolidated Statement of Cash Flows ........................ 76
Corporate Data ............................................................ 77
Fiscal year: In conjunction with the issue of the Company’s inaugural integrated report, Daikin has defi ned the fi scal year under review as fi scal 2020, the fi scal year
ended March 31, 2021.
Forward-Looking Statements
This Integrated Report 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 infl uenced by economic trends, strong compe-
tition 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.
Integrated Report 2021
3
A Path to Unique Solutions
Founded in Osaka in 1924, Daikin operates in more than 160 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 fi elds, Daikin continu-
ally 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
Effi cient
heat transmission
Business Scale (at March 31, 2021)
Net Sales (Fiscal 2020)
Employees
Group Companies
Global Business Presence
Worldwide Production Bases
¥2,493.4 billion 84,870
Consolidated
Subsidiaries: 315
(Japan: 30, Overseas: 285)
More than
Countries: 160
More than
Factories: 100
Business Results
Net Sales
Operating Income
538.8
42.0
FUSION 05
1924
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
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
1982
Launch of Japan’s fi rst multi-type air-conditioning
system for buildings
1935
Development of fl uorocarbon refrigerant
1937
Development of Japan’s fi rst Freon-type refrigerator
1942
Freon production begins
1951
Launch of Japan’s fi rst packaged air conditioner
1958
Entry into the room air-conditioning business
1975
Launch of “Hikari Kurieru” air purifi er
1999
Launch of “Ururu Sarara” world’s fi rst waterless
humidifying room air conditioner
2002
Nationwide expansion of the fl uorocarbon recovery
and destruction business
2002
Launch of “ECOCUTE” heat-pump water heater
2004
World’s fi rst successful application of streamer
electric discharge technology
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
2009
Acquisition of Japanese air fi lter manufacturer
NIPPON MUKI CO., LTD.
2008
Business alliance with Gree Electric Appliances,
China’s top air-conditioning manufacturer
2011
Acquisition of Turkish air-conditioning manufacturer
Airfel
2008
Acquisition of German heating manufacturer ROTEX
2012
Acquisition of U.S. residential air-conditioning
manufacturer Goodman
4
FUSION 05 to 20 (Fiscal 2001 – Fiscal 2020)
Details ▸ P.20
FUSION05
FUSION10
FUSION15
FUSION20
Securing our management
foundation
Become an attractive company that
draws together people, capital, and
information
Management innovation
Accelerate growth
Become the global No. 1 AC business
Become a truly global and excellent
company
Business domain expansion/
business structure conversion, and
enhancement of existing businesses
Co-create New Value in the Air and
Environment Fields with Wisdom and
Passion
Global spread of COVID-19
Global spread of COVID-19
2,481.1
276.3
Operating income
(¥ billion)
300
2,493.4
238.6
Net sales
(¥ billion)
3,000
1,787.7
156.5
Acquisition of U.S.
Acquisition of U.S.
residential air-conditioning
residential air-conditioning
manufacturer Goodman
manufacturer Goodman
2,000
1,291.1
128.1
OYL Group acquisition
OYL Group acquisition
Lehman Shock
Lehman Shock
1,000
2013 – 2018
2013 – 2018
Achieved six consecutive years of record high sales
Achieved six consecutive years of record high sales
and operating income
and operating income
14 consecutive years of
14 consecutive years of
increased earnings starting in 1994
increased earnings starting in 1994
Achieved nine consecutive years of increases
Achieved nine consecutive years of increases
in net sales and operating income from 2010
in net sales and operating income from 2010
FUSION 10
FUSION 15
FUSION 20
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
(FY)
2005
Opening of China’s fi rst 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 fi rst 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 fi rst 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
Granting of worldwide free access to basic patents for using R32
refrigerant
2015
Acquisition of the refrigerant business in Europe from major
Belgian chemical group Solvay
2016
Acquisition of U.S. fi lter manufacturer Flanders
2016
Acquisition of Italian refrigerator/freezer manufacturer Zanotti
2016
Acquisition of Scandinavian fi lter manufacturer Dinair
2019
Acquisition of Austrian refrigerating and freezing showcases
manufacturer AHT
Integrated Report 2021
5
250
200
150
100
50
0
Process of Value Creation
Through efforts to fi nd solutions to social problems through our
value, and aims for sustainable growth.
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.
Changes in society
INPUT
Year ended March 31, 2021
Business Model
Financial Capital
• Stable and sound fi nancial structure
Total assets
Total Shareholders’ Equity
¥3.24 trillion
¥1.67 trillion
Interest-Bearing Liabilities
¥751.2 billion
Cash and cash equivalents
¥736.1 billion
Manufactured Capital
• Market-localized production system
over 100 manufacturing bases globally
• Building of digital factories and an
effi cient production structure
• Aggressive capital investments
¥137.0 billion
Intellectual Capital
• Three core technologies
• Global research and development sites
39 sites
• R&D Expenses
¥71.7 billion
Human Capital
• Diverse workforce
84,870 employees
• Abundant global human resources
• Embedded Group philosophy
Social and Relationship Capital
• Conducting business in more than 160
countries
• Proactive collaboration with industry,
government and academia
• Relationships of trust with customers,
communities, suppliers, dealerships,
and dealers
Natural Capital
• Effective use of natural capital
Energy consumption
Material consumption
Water intake
14,108TJ
1,060,000t
9,560,000m3
• Environmental conservation activities
“Forests for the Air” Project
Intensifi cation
of climate
change
Expansion and
concentration
of energy and
power
demand
Increased
interest in IAQ
Occurrence of
natural
disasters
Transition to a
digital society
Offer new value for the environment and air to realize
and Group growth
Manufacturing
Multiproduct mixed production
Reduce environmental loads
“Vertically integrated
production” based on
in-house production of
core parts
Strategic
Management Plan
“FUSION 25”
“Market-localized
production” based on local
production for local
consumption
Procurement
Global bulk purchasing and local
procurement
Promote CSR procurement
Development, Design
Pursue comfort and environmental
performance
Product development to meet local needs
Create new value
Environmental Vision 2050
Details on the website
https://www.daikin.com/csr/
company/vision.html
CSR for Value Provision
• Environment
• New Value Creation
• Customer Satisfaction
• Human Resources
Details on the website
https://www.daikin.com/csr/
index.html
6
business, Daikin provides new
Daikin's Contribution to
Sustainable Development
Goals (SDGs)
(P.24~)
OUTPUT
OUTCOME
Year ended March 31, 2021
Year ended March 31, 2021
both contributions to a sustainable society
Net sales
Sales, Transportation,
Installation
Proposal-type business for existing sales
network developed globally
Development of service personnel that
have solid technical capabilities
“Integrated product
development” consisting of
manufacturing, sales, research,
and procurement
Product use
Provide comfortable air and spaces
Reduce environmental loads
“Robust sales network”
consisting of a dealer network
that expands globally
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
CSR Management
Fundamental CSR
• Corporate Governance
• Respect for Human Rights
• Supply Chain Management
• Stakeholder Engagement
• Communities
¥2.49 trillion
Operating income
¥238.6 billion
Operating income
margin
9.6%
Major Products
Room air-conditioning sys-
tems, packaged air-condi-
tioning systems, multiple
air-conditioning systems for
offi ce buildings, heat-pump
hot-water-supply and
room-heating systems, air
purifi ers, heat reclaim
ventilation
Air
Conditioning
(P.33~)
91%
Defense
(P.41)
1%
Oil
Hydraulics
(P.40)
1%
Ratio of
net sales
Chemicals (P.38~)
7%
• Meetings with institutional investors/
analysts over
400 Events annually
• 10-year TSR
839.9% (25.1% annually)
• No. of patent applications
(Fiscal 2019, Daikin Industries only)
More than 1,540
• No. of female managers
71
• Ratio of overseas bases where local
nationals are president
43%
• Ratio of excellent or advanced skilled
engineers in manufacturing
1 in 3.3 (Daikin Industries only)
• IoT and AI human resource training
centered on the Daikin Information and
Communications Technology College
• Shift to region-based procurement to
achieve local production for local
consumption
• Customer Satisfaction
Japan = 1.14
(when using Fiscal 2015 as 1.00)
• Safe and secure air
“Urusara X” room air-conditioning system
with ventilation capabilities
“Venti-air” Heat Reclaim Ventilator
• Total unit sales of R32 air-conditioning
systems
More than 28 million units sold in
over 100 countries worldwide
(as of December 2020)
• Through the adoption of environmentally
conscious products, contribute to
reducing greenhouse gas emissions
70 million tons- CO2
• Reduction ratio of greenhouse gas
emissions from development and
production
79% reduction (compared to Fiscal 2005)
• Contribution to CO2 emission reductions
through forest preservation
7 million tons-CO2
• Reductions in CO2 emissions due to
adoption of heat pump space and water
heaters
• Reductions in CO2 emissions due to
adoption of inverter units
▲ Capital
icons:
Financial
Manufactured
Intellectual
Human
Social and
Relationship
Natural
Integrated Report 2021
7
Financial and Non-Financial Highlights
Daikin Industries, Ltd. and Consolidated Subsidiaries
Years Ended March 31
Net Sales/Operating Income,
Operating Income Margin
Net Sales
Operating Income
Operating Income Margin
ROE/ROA
ROE
ROA
(¥ billion)
3,000
2,000
1,000
0
(%)
15
2,493.4
9.6
10
2017
2018
2019
2020
2021
238.6
5
0
(%)
20
15
10
5
0
10.1
5.3
2017
2018
2019
2020
2021
Despite the ongoing impact of the COVID-19 pandemic, Daikin achieved results that
The Air Conditioning business is looking to aggressively undertake R&D as well as capital,
exceeded those of the action plan by ensuring short-term performance and promoting
acquisition, and other strategic investments on the back of a forecast increase in demand
enhancements to the management structure.
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
Interest-Bearing Liabilities/
Liability with Interest Ratio
Total Shareholders’ Equity
Shareholders’ Equity Ratio
Interest-Bearing Liabilities
Liability with Interest Ratio
(¥ billion)
1,800
1,200
600
0
1,665.7
51.4
2017
2018
2019
2020
2021
(%)
60
40
20
0
(¥ billion)
900
600
300
0
751.2
23.2
2017
2018
2019
2020
2021
(%)
30
20
10
0
Daikin’s shareholders’ equity ratio came in at 51.4% for the fi scal year under review,
We have continued to steadily reduce the balance of interest-bearing liabilities by gener-
exceeding 50% for the fourth consecutive year. The Company is taking positive steps to
ating free cash fl ow and making effective use of Group funds. In preparation for contin-
ensure its fi nancial stability.
gencies coinciding with the spread of the COVID-19 pandemic, during the fi scal year
under review, we reinforced cash and cash equivalents through long-term borrowings.
Free Cash Flow
Capital Investments/
Research and Development Expenses
Capital Investments
Research and Development Expenses
(¥ billion)
300
200
100
0
215.0
2017
2018
2019
2020
2021
(¥ billion)
150
100
50
0
137.0
71.7
2017
2018
2019
2020
2021
In addition to increasing earnings and improving investment effi ciency, efforts are also
From a capital investment perspective, energies are being directed toward upgrading and
being made to generate cash fl ow from a working capital perspective. This includes thor-
expanding sales networks and newly constructing plants while boosting production
oughly reducing the balances of accounts receivable and inventory.
capacity, focusing on emerging countries and key markets where there has been remark-
able growth. As far as research and development expenses are concerned, Daikin recog-
nizes 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 prod-
ucts, including those for addressing global environmental problems.
8
Cash Dividends per Share/
DOE, Dividend Payout Ratio
Cash Dividends per Share
DOE
Dividend Payout Ratio
Number of Patent Applications
Japan
Overseas
(¥)
200
150
100
50
0
(%)
40
160
30.0
30
2017
2018
2019
2020
2021
3.0
20
10
0
(Number)
1,200
900
600
300
0
1,076
467
2016
2017
2018
2019
2020*
Together with making every effort to maintain a ratio of dividends to shareholder equity
Daikin is working to stimulate employees’ motivation to invent, spur the creation of intel-
(DOE) of 3.0% or higher based on the principle of always providing stable dividends to
lectual property, increase the quality and quantity of patents in competitive fi elds, and
shareholders, we will continue striving in our mission to provide shareholders with even
increase the number of overseas patents in key technological fi elds in particular in emerg-
greater return by aiming for an increasingly higher level of dividend payout ratio.
ing countries.
* The latest fi gures for the fi scal year ended March 31, 2020.
Number and Percentage of Women in
Management Positions
Number and Percentage of Overseas Bases Where
Local Nationals Are President or Executive
Women in Management Positions
Percentage
President
Executive
President ratio
Executive ratio
80
60
40
20
0
71
6.0
2017
2018
2019
2020
2021
(%)
8
6
4
2
0
120
80
40
0
48.2
42.9
68
30
2017
2018
2019
2020
2021
(%)
60
40
20
0
One of the Company’s most important policies revolves around the empowerment of
As Daikin’s business globalizes, the Company is actively promoting more employees at
women in its workforce. Daikin is implementing various measures to accelerate the devel-
overseas bases to managerial positions. Daikin holds the Global Daikin Leadership
opment of women in management and executive positions, change the mindset of men
Development Program as a development measure to give locally hired managers the
in management, and support the early return to work of its female employees after child-
opportunity to run Daikin subsidiaries in their own countries.
care leave.
Contribute to Reducing Greenhouse Gas
Emissions
Greenhouse Gas Emissions
(during development and production)
(million tons-CO2)
(million tons-CO2)
80
60
40
20
0
70
2017
2018
2019
2020
2021
2.0
1.5
1.0
0.5
0
1.08
2017
2018
2019
2020
2021
Daikin’s air conditioners, a mainstay product, emit particularly high levels of greenhouse
Every effort is being made to minimize environmental impact through production activi-
gas emissions when in use. Accordingly, the Company is focusing on promoting the use
of inverters and air conditioners that use low-GWP refrigerants. Daikin reduced green-
house gas emissions by 70 million tons-CO2, compared to its target of limiting green-
house gas emissions to 60 million tons-CO2 by the fi scal year ended March 31, 2021.
ties. Daikin achieved a 79% reduction (to 1.08 million tons-CO2) in greenhouse gas emis-
sions, compared to its target of a 70% reduction (to 1.58 million tons-CO2) from the
fi scal year ended March 2005 level in development and production greenhouse gas
emissions for the Group as a whole in the fi scal year ended March 2021.
Integrated Report 2021
9
At a Glance
Daikin Industries, Ltd. and Consolidated
Subsidiaries Years Ended March 31
Air Conditioning
91%
Percentage
of Net Sales
Chemicals
7%
Oil Hydraulics
1%
Defense
1%
Net Sales and Operating Income
Major Products
Description
Air Conditioning
• Room air-conditioning
• Absorption refrigerators
systems
• Air purifi ers
• Heat-pump hot-water-
supply and room-heating
systems
• Packaged air-conditioning
systems
• Multiple air-conditioning
systems for offi ce buildings
• Air-conditioning systems
for facilities and plants
• Freezers
• Water chillers
• Turbo refrigerator
equipment
• Air-handling units
• Air fi lters
• Industrial dust collectors
• Marine-type container
refrigeration
• Refrigerating and freezing
showcases
Since becoming the fi rst in
Japan to manufacture pack-
aged 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 prod-
ucts from refrigerants to air
conditioners.
• Fluorocarbons
• Fluoroplastics
• Fluoroelastomers
• Fluoropaints
• Fluoro coating agents
• Semiconductor-etching
products
• Water and oil repellent
agents
• Pharmaceuticals and
intermediates
• Dry air suppliers
• Oil hydraulic pumps
• Oil hydraulic valves
• Cooling equipment and
systems
• Inverter controlled pump
motors
• Hydrostatic transmissions
• Centralized lubrication
units and systems
• Warheads for Japan’s
Ministry of Defense/
Warhead parts used in
guided missiles for training
purposes
• Home-use oxygen therapy
equipment
In 1933, Daikin was the fi rst
in Japan to engage in
research on fl uorinated refrig-
erants. Today, our activities
range from research and
development to commercial-
ization, and we offer a lineup
of 1,800 fl uorine compounds
including gas, resin and
rubber.
Daikin’s unique hydraulic
technologies offer outstand-
ing energy-conservation per-
formance and are
contributing to the develop-
ment of industry by unleash-
ing the potential of power
control.
Daikin’s superior machining
and quality control technolo-
gies are used in the produc-
tion of defense-related
products and other industries
where high levels of reliability
and performance are critical.
223.1
2,273.8
2,273.8
(¥ billion)
250
(¥ billion)
2,500
2,000
1,500
1,000
500
0
2017 2018 2019 2020 2021
11.411.4
164.2
164.2
Chemicals
(¥ billion)
200
160
120
80
40
0
2017 2018 2019 2020 2021
2.0
(¥ billion)
32.932.9
Oil Hydraulics
(¥ billion)
40
30
20
10
0
200
150
100
50
0
(¥ billion)
35
28
21
14
7
0
6.0
4.5
3.0
1.5
0
(¥ billion)
1.6
1.2
0.8
0.4
0
2017 2018 2019 2020 2021
1.21.2
18.018.0
Defense
(¥ billion)
20
15
10
5
0
2017 2018 2019 2020 2021
10
Market Size and Positioning of Each Business
Creating synergies by utilizing the affi nity of the Air Conditioning,
Chemicals, and Filter businesses
Air
Conditioning
Refrigerants
IAQ (Indoor Air Quality)
of
Three pillars of
Th
revenue
Chemicals
Filters*
*
* (Note: Filters are included in the Air
Conditioning business segment)
Filter Media (PTFE)
Air Conditioning Business
Chemicals Business
Global HVAC&R* Market Scale (Daikin estimates)
Global Fluorochemicals Market (Daikin estimates)
2020
Approx.
¥34 trillion
2025
Approx.
¥43 trillion
2020
Approx.
¥620 billion
2025
Approx.
¥800 billion
(¥ billion)
20,000
15,000
10,000
5,000
0
Average annual
growth
7%
Average annual
growth
4%
Average annual
growth
1%
Average annual
growth
2%
Average annual
growth
5%
Average annual
growth
3%
'20
'25
Japan
'25
'20
North
America
'25
'20
China
'25
'20
Europe
'20
'25
Asia/
Oceania
'25
'20
Other
* Heating, Ventilating, Air-conditioning and Refrigerating
* Heating, Ventilating, Air-conditioning and Refrigerating
Filter Business
(¥ billion)
250
200
150
100
50
0
'20
'25
Japan
'25
'20
Americas
'25
'20
China
'25
'20
Europe
'20
'25
Asia/Developing
countries
Global Air Filter Market Scale (Daikin estimates)
Global Power & Industrial (P&I) Market Scale (Daikin estimates)
2020
Approx.
¥510 billion
2025
Approx.
¥600 billion
2020
Approx.
¥470 billion
2025
Approx.
¥560 billion
(¥ billion)
300
250
200
150
100
50
0
'20
'25
Japan
'20
'25
North
America
'25
'20
Europe
'20
'25
Asia
(¥ billion)
600
500
400
300
200
100
0
'20
'25
* P&I: Acronym for “Power
* P&I: Acronym for “Power
& Industry;” in the P&I
& Industry;” in the P&I
domain Daikin provides a
domain Daikin provides a
dust collection system
dust collection system
surrounding gas turbines
surrounding gas turbines
and engages in the
and engages in the
removal of dust and
removal of dust and
gases generated by steel
gases generated by steel
and other plants
and other plants
Integrated Report 2021
11
Message from the CEO
Through the key strategy themes adopted
under “FUSION 25,” we aim to expand our
business and further grow and develop
while contributing to the solving of
environmental and social issues
The Company has been achieving sustain-
able growth and development on the basis
of its FUSION strategic management plans.
Looking ahead to major changes in the
structure of the economy, industry, and
society, as well as the future ideal state of
the Daikin Group, under “FUSION 25” we
have identifi ed issues to be resolved and
set specifi c themes to be addressed during
the next fi ve years. Through these efforts,
we will contribute to a sustainable society
and realize the further growth and devel-
opment of the Group.
Masanori Togawa
President and CEO
12
Fiscal 2020 Results and FUSION 20 Overview
Achieved performance exceeding announced
values due to management approach in
confronting COVID-19 crisis
In fi scal 2020, the fi scal year ended March 31, 2021, amid the
Looking back at FUSION 20
To date, the Company has been aiming for sustainable devel-
opment through our unique FUSION management that encap-
sulates the meanings of balancing short-term profi tability and
uncertainties in the outlook due to the spread of COVID-19,
long-term growth potential, collaboration with global Group
we took the management position of confronting the crisis
companies and other companies and working together as one
immediately. Having established themes for “defensive and
on development, production, sales, and services. In particular,
proactive measures” and “constitution strengthening and
after showing where we were aiming to be in fi ve years’ time,
reform” as important issues to be tackled by the global Group
we have produced results and have led to growth and develop-
as a whole, I myself have been involved in enacting six emer-
ment by clarifying the key strategies toward those goals and
gency projects, efforts that led to the creation of results by the
the quantitative targets and execution themes for the follow-
entire Company. By carrying out fl exible management in
ing three years.
response to the ever-changing situation, we were able to man-
Under FUSION 20, which ran from fi scal 2015 to fi scal 2020,
age and also to achieve results that exceeded the announced
we worked on the thorough implementation of a twin-
values. Sales for the year in full reached ¥2,493.4 billion, up
pronged raft of measures, that is on the one hand strengthen-
¥33.4 billion against the announced forecast value but a 2.2%
ing our core businesses—Air Conditioning, Chemicals, and
decrease year on year. Operating profi t came in at ¥238.6 bil-
Filters—and on the other hand, the expansion of our business
lion, up ¥6.6 billion against forecast but a 10.1% decrease year
scope and the changing of our business structure, which were
on year.
adopted as priority themes. From the fourth quarter of fi scal
As a company that operates globally, the impact of the glob-
2019 onward, we have been greatly affected by the spread of
al COVID-19 pandemic has been very signifi cant, and we esti-
the COVID-19 pandemic, but even amid a severe business envi-
mate that it has had a negative impact of approximately
ronment, we focused on achieving FUSION 20 and the Group
¥350.0 billion on net sales and ¥150.0 billion on operating
as a whole tackled the diffi cult situation. I believe that we were
profi t. As a result, in fi scal 2020, both sales and profi ts
able to secure both short-term profi ts and medium- to long-
decreased compared with previous year. However, I believe that
term growth by steadily implementing our key strategies while
we were able to not only secure short-term results, but also to
investing in growth for the future.
further strengthen our management structure for future
In 2018, we formulated our Environmental Vision 2050,
growth and development through the measures we took amid
which has the goal of reducing greenhouse gas emissions to
the COVID-19 crisis.
almost zero toward 2050, and accelerated the development
FUSION 20 Results
FY2016
Actual
FY2017
Actual
FY2018
Actual
FY2019
FY2020
Actual
FUSION 20 Goals
Actual
20,440
22,906
24,811
25,503
29,000
24,934
2,308
2,537
2,763
2,655
3,480
2,386
11.3
11.1
11.1
10.4
12.0
9.6
Net sales
(100 million
yen)
Operating
profi t
(100 million
yen)
Operating
profi t
margin (%)
Integrated Report 2021
13
Message from the CEO
and adoption of products and services that contribute to the
and continue to work toward the realization of a sustainable
conservation of energy and the prevention of global warming.
society by balancing the solving of environmental and social
Under “FUSION 25”, we will further strengthen this initiative
issues with business growth.
Management Approach to Fiscal 2021
Compared with the past fi scal year, the social situation has
ly to the vagaries of the business environment.
calmed down slightly in fi scal 2021, but I feel that the uncer-
The business environment factors surrounding the Company
tainties about the future will continue for the time being with
in the current fi scal year include the uncertain impact from
no clear idea of how the situation will change. Although there
COVID-19, the signifi cant negative impacts brought by raw
are now the negative effects of lockdowns due to the reemer-
material market conditions and sharp rises in logistics costs,
gence of infections, there exists the possibility that the econo-
concerns about a slowdown in the residential air-conditioning
my will recover rapidly once the infection has been put under
market and a delay in the recovery of the commercial air-condi-
control by the widespread use of vaccines and the effects of
tioning market, all of which are placing the Company in a diffi -
large-scale economic measures taken by various countries. In
cult situation. Even under these circumstances, based on what
the current fi scal year, I believe it to be of the utmost impor-
we have been working on in fi scal 2020, I would like us to
tance that we take fl exible measures to respond to these
continue to adopt an aggressive stance and show a willingness
changes in the situation according to the circumstances but
to take on challenges toward the implementation of measures
with even greater speed than before. I will thus steer the man-
while aiming to accumulate results and achieve record-high
agement in a fl exible manner that enables us to respond quick-
performance.
Strategic Management Plan “FUSION 25”
In the course of formulating Strategic Management
Plan “FUSION 25”
In formulating “FUSION 25,” we took into account the major
changes in the structure of the economy, industry, and society,
and looked at the changes in the world’s economy and society
10 to 20 years into the future, as well as the ideal state of the
“promotion of Solutions business connected with customers,”
and “creating value with air.”
Changes in business environment surrounding the
Company
The fi rst major change is the growing importance of environ-
Daikin Group. Based on this back-casting approach, we have
mental and social contributions. Among the efforts to tackle
set specifi c themes to be addressed during the fi ve years of
various social issues, in particular the corporate responsibility to
“FUSION 25.” Unprecedented environmental changes and a
reduce CO2 emissions and decarbonization has become a
dramatic transformation of the consumer structure are being
major issue.
caused by the COVID-19 pandemic, which is said to be a once-
As the world’s only manufacturer of both air-conditioning
in-a-century event. In addition to geopolitical changes, we are
equipment and refrigerants, we have been contributing to the
also experiencing major structural changes in society, as the
environment by providing differentiated products and services
world moves toward a decarbonized society, or carbon neutral-
that take advantage of our energy-saving technologies around
ity. Companies are required to have a management stance and
the world and by popularizing products equipped with low
the business strategies to win out in the new normal era.
global warming potential (GWP) refrigerants. In the years to
Over the next fi ve years, we will contribute to solving envi-
come, however, I believe that it will be essential to achieve
ronmental and social issues, while expanding our business and
both business growth and the goal of achieving net zero
continuing to achieve growth and development. Our goal this
greenhouse gas emissions (carbon neutrality) by 2050.
time is to realize both contributions to a sustainable society
The second point is that the values and needs of customers
and to the Group’s growth. We have set three themes for our
are changing more rapidly than ever, from goods to experienc-
growth strategy: “challenge to achieve carbon neutrality,”
es and from ownership to use. I believe that the key to future
14
business expansion will be to create products that meet peo-
and create new air value, in addition to selling products featur-
ple’s new needs and to build Solutions business while aiming
ing performance that utilizes our unique technologies, such as
for qualitative growth.
air purifi cation and disinfection.
The third point is the expanding market needs for indoor air
The fourth point is the innovative advancement of technolo-
quality (IAQ) and ventilation. While the impact of COVID-19
gies, such as AI, 5G, and robotics, and the emergence of busi-
has reduced the movement of people and the opportunities for
ness models that utilize these latest technologies. I think it is
people to gather, new needs have emerged as people become
no exaggeration to say that the outcome depends on how we
more aware of safety and security as well as more concerned
can take advantage of rapidly advancing digital technology to
about health and comfort. As a manufacturer specializing in air
transform our business activities as a whole.
conditioning, I believe that one of our missions is to explore
9 Key Strategy Themes
Challenge to achieve carbon
neutrality
Growth strategy
Promotion of Solutions
business connected with
customers
Creating value with air
Businesses supporting our growth
Focus
region
Air Conditioning
business in North
America
Achieve the No. 1 in the AC
market in North America,
the largest market with
great opportunities
India
Position India, with a population
as large as China’s, as a major
hub for the future
Management foundation enhancement
Strengthening
technology development
capabilities
Establishing a robust
supply chain
Promoting digital
transformation for
innovation
Creating market value/
enhancing advocacy
activities
Improving HR capabilities through advanced diversity management
Integrated Report 2021
15
Message from the CEO
Three Growth Strategy Themes
Challenge to achieve carbon neutrality
As a raft of measures toward achieving carbon neutrality, we
will promote the expansion of our Heat Pump Space and Water
Promotion of Solutions business connected with
customers
In the Air Conditioning Solutions business, we will establish a
Heating business, the further expansion of sales of energy-sav-
business model that provides customers with experiences
ing devices equipped with inverters, the use of low-GWP
while accelerating the expansion of the business. While rein-
refrigerants, the establishment of the refrigerant eco-cycle
forcing the service, engineering, and other business founda-
(recovery, reclamation and destruction), and the reduction of
tions we have built to date, we will work to provide new
CO2 emissions during the manufacturing process. In the Heat
value, such as the provision of individually optimized air-con-
Pump Heating business, in particular, combustion-type and
ditioned spaces and improvements in comfort and safety, by
electric heaters are currently the mainstream in Europe and
directly connecting with users by application and market,
North America, and the ratio of heat pump space heating
such as hospitals and factories, and combining the use of
remains at around 10% of the market. By accelerating the shift
equipment operation data, energy management, and IAQ
to heat pump space and water heating systems in Europe and
technology. In addition, we will provide competitive solutions
North America, which are our top priority regions, we plan to
to reduce the electric power load by utilizing data through
double our Heat Pump Space and Water Heating business sales
the promotion of connected devices that take advantage of
by fi scal 2025 compared with fi scal 2020.
our technological strength as an air-conditioning specialist to
16
save manpower and improve effi ciency.
Although M&A have not been factored into the quantitative
In the refrigeration fi eld, we are planning to establish a one-
targets (for sales, operating profi t, and investment plans) at
stop Solutions business for stores that combines air condition-
this time, we are actively promoting alliances, collaborations,
ing and showcases to provide their customers with appropriate
and M&A to increase the speed of our business expansion. In
food temperature control and a safe and secure store environ-
particular, the areas that we want to focus on are heating and
ment. Furthermore, with regard to refrigeration, we would like
refrigeration service companies in Europe, service and engi-
to take on the challenges in building a highly profi table busi-
neering companies to expand our Solutions business in Asia
ness model as well as in solving social issues, such as reducing
and North America, and sales and wholesale companies to
food loss, by connecting the cold chain from the production
strengthen Goodman’s sales network. At this point, we are
area to the consumption area.
currently envisioning M&A totaling approximately ¥600 billion
over the next three years.
Creating value with air
Seizing the opportunity presented by demand for IAQ and ven-
tilation, which has been growing amid the COVID-19 crisis, we
will create a market for air purifi ers in each region of the world
Efforts to improve profi tability of mainstay
businesses
To invest in the growth strategy themes and thereby expand
and take on the challenge of selling one million units per year
our business, it is essential to further strengthen the profi tabili-
in each region. In addition to creating new products and ser-
ty of our existing businesses. Above all else, we will promptly
vices that enrich the healthcare fi eld and daily life, we will pro-
work to raise the profi tability of the Air Conditioning business
mote collaborative creation with external parties to tackle the
in North America.
business of pursuing new value with air.
I believe that we have been able to increase the competitive-
ness of our North American Air Conditioning business in terms
Execution of growth investments
To realize the “FUSION 25” growth strategies and take advan-
of sales, production, and products through the aggressive
investments we have made so far but, on the other hand, we
tage of the changes of the times as opportunities to expand
are still in the process of recovering our investments. Under
our business, we will make aggressive investments. We are
“FUSION 25,” we will strive to achieve an operating profi t mar-
planning to invest a cumulative total of ¥800 billion over the
gin of 10% or higher in fi scal 2025 while making further
next three years (a fi ve-year total of more than ¥1.3 trillion),
investments in growth to become the number one air-condi-
including capital investment and investments in R&D, digital
tioner manufacturer in North America.
technology, and human resources.
On the one hand, a US-based competitor is accelerating its
In addition to capital investment centered on increasing pro-
business expansion by initiatives that include becoming a spe-
duction capacity to support business expansion in each region
cialized air-conditioning company. On the other hand, howev-
of the world, we will concentrate our resources boldly on tech-
er, it is expected that energy-saving regulations will become
nological areas related to our growth strategy in R&D. In addi-
more stringent and environmental policies will be strength-
tion to strengthening our overseas R&D bases, by utilizing
ened, and thus we will take the initiative in changing the mar-
collaborative creation inside and outside the Company as well
ket by converting to inverters, heat pumps, and low-GWP
as by reforming our development process utilizing digital tech-
refrigerants, which are our strengths.
nology, we will advance environmental technologies, such as
At Goodman, we are expanding our business in the residen-
heat pumps and next-generation refrigerants, and create dif-
tial market and promoting the conversion to inverters by
ferentiated products one after another. I also believe that it
increasing sales of premium products as well as increasing pro-
will be essential to acquire and develop the talented human
ductivity in Goodman’s factory. At Daikin Applied Americas
resources who will provide the driving force behind these inno-
Inc., we plan to expand earnings by fully developing our
vations. Expanding our digital investments is not only designed
Solutions business in the applied market.
to accelerate business innovation, such as the promotion of
In Japan, we will aim to become the top company in all
our data-driven Solutions business and the creation of air
areas in the residential, commercial, and IAQ and ventilation
value. This time, they will also promote process innovation that
businesses. At the same time, we will accelerate our growth by
will lead to a shortening of development lead times, thereby
utilizing data to expand the Solutions business.
improving supply chain effi ciency and to strengthen our man-
In Europe, we will not only engage in equipment sales in all
agement foundation.
the fi elds of air conditioning, space and water heating, applied,
Integrated Report 2021
17
Message from the CEO
and refrigeration and freezing, but also aim to become a solu-
we will also aim for a state-of-the-art smart factory that utilizes
tions provider that can meet customer needs in areas such as
digital technology.
IAQ and energy.
Concerning the Air Conditioning business in Asia, which is
In the China business, we will work to maintain high profi t-
expected to display the world’s greatest market growth, we
ability. China is one of the most digitally advanced countries in
would like to establish an overwhelming number one position
the world, and we have been working to build a business
there. In India in particular, we would like to expand our busi-
model that includes sales and marketing activities that utilize
ness in the future and make it a major base of operations. We
digital technology. In addition to hybrid sales activities that
will strengthen our local production system, sales network, and
combine our unique strengths, such as offl ine sales via
product development to expand sales of energy-effi cient prod-
PROSHOP and online sales activities, we will work to expand
ucts and services while taking the lead in the market’s shift to
sales by system proposals that, for example, bundle ventilation
inverters and low-GWP refrigerants (R32).
and air purifi cation with IAQ sensors. In terms of production,
Responses to Social Issues
The last fi ve years have also been a period of major changes in
ate our efforts to reduce greenhouse gas emissions throughout
the structure of the economy, industry, and society. Their pace
the life cycle of our products, as efforts to realize a decarbon-
having been faster and the extent of the shift greater than
ized society are spreading worldwide.
expected, those changes are exerting an infl uence in a variety
The global air-conditioning market is expected to triple in
of ways, from the business activities of the Group to the way
size in the 30-year period to 2050 in step with the economic
we lead our own lives. Due to the increasing importance being
development of emerging countries and other factors. In 2018,
placed on environmental and social contributions, companies
we declared in our Environmental Vision 2050 by which we
are also required not only to pursue profi ts but also to help
aim to achieve net zero greenhouse gas emissions by 2050.
solve social issues set by the Sustainable Development Goals
Under “FUSION 25” we will further strengthen our efforts to
(SDGs).
not only fulfi ll our social responsibilities, but also to achieve
We have set a quantitative target under “FUSION 25”
business growth, making it sustainable.
because we believe that it is our top priority to further acceler-
Shareholder Returns
As a company that is expanding its business on a global basis,
V-shaped recovery in earnings that surpasses our pre-COVID
fi scal 2020 turned into a year in which Daikin was greatly
performance. In fi scal 2021, we are planning to pay an annual
affected by the worldwide spread of the COVID-19 pandemic.
dividend of ¥180 per share, comprising interim and year-end
Although sales and profi ts decreased compared with the previ-
dividends both of ¥90.
ous fi scal year, as a result of the Group working together as
On the basis of our implementing stable and continuous div-
one to tackle important issues, we were able to achieve results
idend payments, in the future as we have in the past we will
that exceeded the announced values and thus paid a year-end
strive to maintain a ratio of dividends to shareholder equity
dividend of ¥160 per share, in line with what had been previ-
(DOE) of 3% or higher and at the same time also aim for an
ously announced.
increasingly higher level of dividend payout ratio. In addition,
Based on our nimble yet robust management structure culti-
we will expand our business while making upfront investment
vated in the fi scal year under review, in fi scal 2021 we will con-
for further growth and development and strive to further
tinue to implement measures while adopting an aggressive
enhance shareholder returns by increasing corporate value and
stance and showing a willingness to take on challenges to
increasing market capitalization.
secure double-digit sales and profi t growth. We will aim for a
18
A Message to Our Stakeholders
Due to the resurgence of COVID-19 infections, the severe busi-
25” we will lead the low carbonization of the air-conditioning
ness environment is expected to continue. Even under these
industry, provide new value for the environment and air, con-
diffi cult circumstances, the Group will work together as one in
tribute to a sustainable society, and realize the growth of the
taking thorough measures while aiming to both secure short-
Group.
term earnings and achieve both medium- and long-term
On this note, we thank you for your understanding and
growth. In recent years, the increasing importance of environ-
kindly ask for your continued support as we move forward.
mental and social contributions, changes in customer needs
with regard to air quality, and advances in digital technology
have had a signifi cant impact on business activities, and quick
and fl exible responses are demanded. “FUSION 25” was for-
mulated as an execution-oriented management strategy with a
vision looking 10 and 20 years into the future, and then with a
view to realizing carbon neutrality in 2050. Through “FUSION
Masanori Togawa
President and CEO
June 2021
Integrated Report 2021
19
Looking Back on Our Strategic Management Plan “FUSION”
Over the past 20 years, we have achieved approximately a fi ve-fold increase in both net sales
and operating profi t.
Even in the face of the Lehman Shock and other severe conditions, we achieved growth by
steadily executing the FUSION plan. Now with operations in over 160 countries and more than
80,000 Group employees, we have achieved a more robust global business foundation.
Daikin’s Transformation of Growth
FUSION 05 (FY2001-FY2005)
FUSION 10 (FY2006-FY2010)
FUSION 15 (FY2011-FY2015)
FUSION 20 (FY2016-FY2020)
Goals
Securing our management
foundation
Become an attractive compa-
Become an attractive compa-
ny that draws together peo-
ny that draws together peo-
ple, capital, and information
ple, capital, and information
Management innovation
Accelerate growth
Become the global No. 1 AC business
Become the global No. 1 AC business
Become a truly global and excellent
Become a truly global and excellent
company
company
Daikin aims to be a world-
class, truly top-tier company
Maximization of corporate value to
realize global excellence
In light of the increasingly fast speed of
change,
Overview
• Establish a robust profi t structure
and fi nancial constitution
• Attain the global No. 1 and No. 2
positions in main businesses (Air
Conditioning and Chemicals )
• Conversion of business structure
to achieve sustainable growth
• Enhance technical capabilities
Achievements
Built a business foundation
for future growth and
development
• Established the No. 2 position in
the global market for our main
businesses
• Achieved market capitalization
of ¥1 trillion
• Ratio of overseas business grew
by 15% over fi ve years, expand-
ing to 46% of all revenue
• Dramatically enhanced Daikin’s
technological capabilities
• A world-leading, global No. 1 business
• Unprecedented creativity and value genera-
tion achieved through innovative technology
• High capital effi ciency with a robust profi t
capability and fi nancial structure
Setting environmental strategy themes and goals
that contribute to the natural environment
Additional and robust strategic themes to
become the global No. 1 AC company
Accelerated global development
• Overseas business ratio expanded to 61%
Expansion of environment-related
business
• Entered the heat pump space and water
heating business
• Market development through an open strat-
egy for environmental technology
Penetration of room air conditioners
equipped with inverters in the world’s larg-
est market by volume
Strengthened profi t structure
• Generated ¥100 billion in free cash fl ow by
reducing inventory (cumulatively over years,
from fi scal 2008 to fi scal 2010)
• Improved break-even point ratio and inter-
est-bearing liability ratio
• Pursue both scale and profi tability, growth
and differentiation, sophistication of propri-
etary technologies as well as the develop-
ment of low-cost technology and quality
suited to new markets
• Move to be a company that leverages
change and crises as springboards to pioneer
new paths, and to continuously evolve.
• Expanded sales through a fundamental
strengthening of sales and marketing capa-
bilities, and achieved a substantial increase in
operating income margin by advancing total
cost reductions
• Full-fl edged entry into emerging markets and
volume zone products
• Actively contributed to solutions to global
warming and other societal issues
The world’s fi rst practical application of
low global warming potential R32
refrigerant
• Expanded sales in regions throughout the
world based on sales of high-value-added
products and dealer development
Acquisition of
Airfel (2011)
Having acquired Airfel, with its
broad product lineup and
impressive sales network, we
boosted the momentum of
business development in the
Middle East.
Along with strengthening our
position in the Applied Systems
air-conditioning fi eld,
established a foundation for
business in North America and
Asia.
Promoted prevalence of air
conditioners equipped with
high-environmental-perfor-
mance inverters in China
OYL Group
acquisition
(2007)
Business
alliance with
Gree Electric
Appliances
(2008)
Acquisition of
Nippon Muki
(2009)
The acquisition of Nippon Muki,
which boasts the top share of
Japan’s air fi lter market,
accelerated development and
sales of highly functional
products.
Acquisition of
Goodman
(2012)
The acquisition of Goodman,
which boasts a top share of the
residential air-conditioning fi eld,
enabled Daikin’s full-fl edged
entry into the residential unitary
market. This secured a robust
sales network in North America.
Business domain expansion/
business structure conversion, and
enhancement of existing businesses
Co-create New Value in the Air and Envi-
Co-create New Value in the Air and Envi-
ronment Fields with Wisdom and Passion
ronment Fields with Wisdom and Passion
Swiftly responding to changes in the
business environment, we will focus on
strengthening efforts toward energy ser-
vice solutions, Indoor Air Quality (IAQ)
and Air Environment (AE) engineering
and increasing low-GWP refrigerants
• Accelerate Air Conditioning Solutions busi-
ness by leveraging IoT/AI technologies
• Expand business domains
• Take the initiative on environmental matters
• Further strengthen existing businesses
Business domain expansion/business
structure conversion
• Expanded Air Conditioning (AC) Solutions
business (Energy Service Solutions business,
Indoor Air Quality (IAQ) and Air Environment
(AE) Engineering business)
• Promoted leading initiatives for the environ-
ment (accelerated uptake of R32 refrigerant
and high-performance energy-saving
equipment)
• Strengthened Space and Water Heating busi-
ness, Commercial Refrigeration business
Enhancement of existing businesses (AC
business in North America, AC business
in Asia, Chemical Business, Filter
business)
Acquisition
of Flanders
(2016)
Acquisition
of Zanotti
(2016)
Acquisition
of AHT
(2019)
The acquisition of this air fi lter
manufacturer, which holds the top
share in the U.S., helped Daikin
obtain a wide-ranging lineup, from
business to residential equipment.
Acquiring Zanotti, with its large lineup
of refrigerator and freezer products in
Europe, ranging from industrial
equipment to transport and commercial
equipment, enabled Daikin to build a
business foundation that covers the
entire length of the cold chain.
AHT-manufactured showcases
complimented Daikin’s product lineup,
and brought business development that
covered the entire cold chain. This
accelerated one-stop solution
development, from air conditioners to
refrigeration and freezing equipment.
Results through business alliances,
partnerships, and M&A activities
Results through business alliances,
partnerships, and M&A activities
Results through business alliances,
partnerships, and M&A activities
Assessment
Achieved 12 consecutive years of
revenue growth, and record-setting
profi t for six years in a row. While
the plan’s fi nal goals for DVA* and
free cash fl ow remained unattained,
the Company substantially sur-
passed goals for net sales, operat-
ing income margin, ROE and ROA.
In fi scal 2007, interim goals were achieved a
year ahead of schedule, and a new record level
of profi t was established. The Lehman Shock of
fi scal 2008, however, caused the Company to
fall short of its fi nal goals, but by making con-
certed efforts to reform business structure and
reinforcing fi nancial structure, we were able to
achieve a “V”-shaped recovery in fi scal 2010.
* DVA: Daikin economic value added (reference on page 30)
While the Company was unable to reach the
plan’s fi nal goal in terms of net sales, the goal
for operating income was met a year ahead of
schedule, and the goal for operating income
margin was also substantially surpassed.
Progress was made in line with the schedule up
until fi scal 2018. From fi scal 2019, the Compa-
ny was hit by the impact of COVID-19, and the
Company’s efforts for net sales and operating
income fell short of the plan’s fi nal goals.
FY2005
FY2010
FY2015
FY2020
FUSION 05 Goals
Over ¥750.0 billion
Over ¥60.0 billion
(Over 8.0%)
Actual
¥792.9 billion
FUSION 10 Goals
¥1,900.0 billion
Actual
¥1,160.3 billion
FUSION 15 Goals
¥2,050.0 billion
Actual
¥2,043.7 billion
FUSION 20 Goals
¥2,900.0 billion
Actual
¥2,493.4 billion
¥67.1 billion
(8.5%)
¥190.0 billion
(10%)
¥75.5 billion
(6.5%)
¥190.0 billion
(9.3%)
¥217.9 billion
(10.7%)
¥348.0 billion
(12.0%)
¥238.6 billion
(9.6%)
46%
99
61%
191
75%
213
77%
315
More than 30 factories
More than 70 factories
More than 80 factories
More than 100 factories
21,747
¥1,086.9 billion
41,569
¥730.1 billion
60,805
¥2,465.7 billion
84,870
¥6,542.3 billion
Net sales
Operating
income
Overseas
business ratio
Consolidated
subsidiaries
Production
bases
Employees
Market
capitalization
* Excluding net sales and operating income, amounts are stated as of the end of each fi scal year.
20
300
250
200
150
100
50
0
Global spread of COVID-19
Global spread of COVID-19
2,481.1
276.3
Operating income
(¥ billion)
2,493.4
238.6
Business Results
Net sales
(¥ billion)
3,000
2,000
1,000
538.8
42.0
Net sales
Net sales
Operating income
Acquisition of U.S. residential
Acquisition of U.S. residential
air-conditioning manufacturer Goodman
air-conditioning manufacturer Goodman
1,787.7
156.5
1,291.1
128.1
OYL Group acquisition
OYL Group acquisition
Lehman Shock
Lehman Shock
2013 – 2018
2013 – 2018
Achieved six consecutive years of record high sales and operating income
Achieved six consecutive years of record high sales and operating income
14 consecutive years of increased earnings starting in 1994
14 consecutive years of increased earnings starting in 1994
Achieved ten consecutive years of increases in net sales and operating income from 2010
Achieved ten consecutive years of increases in net sales and operating income from 2010
FUSION 05
0
FUSION 10
FUSION 15
FUSION 20
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
(FY)
Looking Back on FUSION 20
Daikin took action to achieve key strategies regarding business domain expansion/business
structure conversion, and enhancement of existing businesses, leading to net sales and operat-
ing income progress as planned up to fi scal 2018.
Buffeted severely by the impact of COVID-19 from the fourth quarter of fi scal 2019, fi scal 2020, the
fi nal year of FUSION 20, saw the Company miss its planned targets for the latter half of FUSION 20,
in terms of both net sales and operating income. Nonetheless, even with the uncertain outlook
due to the pandemic, Daikin put in place both proactive and defensive measures, preparing man-
agement to be quick off the mark in recovering from the COVID-19 crisis and to strengthen busi-
ness structure. As a result, Daikin substantially exceeded original forecasts for fi scal 2020.
Net sales
Operating income
Operating income
margin
FY2016
Actual
¥2,044.0 billion
¥230.8 billion
FY2017
Actual
¥2,290.6 billion
¥253.7 billion
FY2018
Actual
¥2,481.1 billion
¥276.3 billion
FY2019
Actual
¥2,550.3 billion
¥265.5 billion
FY2020
FUSION 20 Goals
¥2,900.0 billion
¥348.0 billion
Actual
¥2,493.4 billion
¥238.6 billion
11.3%
11.1%
11.1%
10.4%
12.0%
9.6%
Business domain expansion/business structure conversion
Expansion of
the Air
Conditioning
(AC) Solutions
business
Energy Service Solutions business
Indoor Air Quality (IAQ) and Air
Environment (AE) Engineering
business
Business foundation strengthened through investing in sales and service networks as well
as developing technology for the Solutions business. Full-scale business development, pri-
marily in North America, which is the largest market
IAQ and AE business expanded in response to growing needs for safe and secure air and
space. Aiming to provide air and space value, advance our technology through external
collaborative creation such as technology development and demonstration tests.
Leading
initiatives for
the environment
Environmental Vision 2050 established in 2018 with the target of reducing greenhouse gas emissions to net zero by 2050. Widespread
uptake of R32 refrigerant and high-performance energy-saving equipment. Development started for next-generation refrigerants and
equipment. Support for the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) announced in 2019,
and disclosure of fi nancial information and ESG information including on climate change started.
Expansion of
business
domains
Space and Water Heating business
No. 1 market share in heat pump units achieved in Europe, the largest market.
Commercial Refrigeration business
Foundation established for the Refrigeration Solutions business in Europe through acquisi-
tion of Zanotti and AHT and other measures.
Enhancement of existing businesses
AC business in North America
AC business in Asia
Chemicals business
Filter business
Sales and market share expanded by
increased sales of unitary, VRV, and
Applied equipment. Initiatives promot-
ed for transforming the business struc-
ture into the Service Solutions business
in addition to equipment sales.
No. 1 position achieved in the resi-
dential and commercial Direct Expan-
sion business in many countries.
Measures implemented to expand the
Solutions business and become No. 1
in the Applied business.
Record-high profi t achieved in fi scal
2018. Investment decisions made for
future growth (establishing a 2nd
plant in China, augmenting the U.S.
plant, establishing the Innovation Cen-
ter in Europe). Business expanded
through applications development and
polymer alloy/non-fl uorine materials.
Filter Division established and the
North America, Europe, and Power &
Industrial (P&I) businesses reformed.
New product development started to
respond to IAQ needs.
Integrated Report 2021
21
Risks and Opportunities That Affect Medium- to Long-Term Value
Creation
Based on changes in the external environment, we identifi ed the important social issues that
affect the Daikin Group’s medium- to long-term value creation, and extracted the risks and
opportunities related to them. To respond appropriately to these risks and to take advantage of
any opportunities while working to resolve social issues, we will recognize the strategic themes
adopted in our “FUSION 25” strategic management plan as management materiality and real-
ize further value creation.
Changes in society
Issues
Intensifi cation of climate
change
● Reduction of global warming
Expansion and
concentration of energy
and power demand
● Reduction of energy/power
consumption
Increased interest in IAQ
● Preventing spread of infectious
diseases
● Value with air
Occurrence of natural
disasters
● Responses to supply chain disruptions
nss
Transition to a digital
society
● Building of a business model utilizing
digital technology
● Increasing the effi ciency of business
processes
22
Risks
Responses/Opportunities
Management Materiality
● Stricter environmental
regulations
● Tight supply and demand for
electricity
● Stricter regulations on energy
effi ciency
● New regulations on existing
air conditioners
● Suspension of plant
operations
● Stagnation of raw material/
parts procurement
● Obsolescence of existing
products
● Lack of human resources in
digital fi elds
● Development of products, services and technologies
that comply with environmental regulations
Three Growth
Strategy Themes
● Development of energy management / sustainable
urban development
Details ▸ P.26~29, P.54~55
Response to TCFD ▸ P.53
● Acceleration of conversion to inverters
● Product development and technological innovation
excelling in environmental performance
● Strengthening proposals for replacing environmentally
conscious products
● Strengthening of energy management
Details ▸ P.26~29, P.54~55
● Product development to provide a safe and secure
atmosphere
• Challenge to achieve
carbon neutrality
• Promotion of Solutions
business connected with
customers
• Creating value with air
One theme
for focus regions
• Air Conditioning business
in North America
Five themes to
enhance the
management foundation
● Creation of indoor air quality (IAQ)/air environment (AE)
that enriches people’s lives
• Strengthening technology
development capabilities
Details ▸ P.29
● Stable supply through “market-localized production”
on the basis of local production for local consumption
Details ▸ P.54~56
● Technological developments, development of products
and services, strengthening of sales activities that utilize
IoT/AI
• Establishing a robust
supply chain
• Promoting digital
transformation for
innovation
• Creating market value/
enhancing advocacy
activities
• Improving HR capabilities
through advanced diversity
management
● Providing solutions for effi cient energy management, etc.
Details ▸ P.24~
Details ▸ P.28~29, P.56
Strategic Management Plan “FUSION 25”
Integrated Report 2021
23
Strategic Management Plan “FUSION 25”
Formulating Strategic Management Plan “FUSION 25”
Daikin formulated Strategic Management Plan “FUSION 25” for the period covering fi scal 2021 to fi scal 2025.
The premises on which the Plan is formulated include changes in the external circumstances surrounding the
Company and the unique strengths that we have acquired to date. Based on these premises, the Plan illustrates
the strategies to be implemented over the next fi ve years by back-casting from the changes in the world that
will take place over the next ten to twenty years, and from the ideal state of the Group at this time.
Our goal is to “offer new value for the environment and air to realize both contributions to a sustainable
society and the Group’s growth.”
Specifi cally, we aim to expand the business and continue to achieve growth and development while contributing to
Assumptions
9 key strategy themes
Offer new value for the environment
3 growth strategy themes
Details ▸ P.26~29
While contributing to the environment and
society, expand business and improve profi tability
1
2
3
Challenge to achieve carbon neutrality
Promotion of Solutions business connected
with customers
Creating value with air
Viewing external
environmental changes as
a great opportunity,
capitalize on our strengths
to achieve further growth
and development
Businesses Supporting Growth
Air-conditioning (direct expansion, applied, and service businesses)
Air-conditioning (direct expansion, applied, and service businesses)
Establish a dominant position in existing regions and strengthen the
foundation in emerging regions
Japan
Europe
North America
India
ASEAN/
Oceania
China
Position India, with a population as large as China’s, as a major hub for
1 theme for focus regions
Details ▸ P.17, P.34
4
Air Conditioning business in North America
5 themes to enhance the management foundation
Strengthening Technology
Development Capabilities
Promoting digital
transformation for innovation
6
8
Establishing
Creating
activities
Improving HR capabilities through advanced
5
7
9
Changes in the external
Circumstances
Increased importance
of environmental and
social contributions
Consumption shift from goods to
experiences
Increased needs for IAQ and
ventilation
Innovative advances in digital, AI,
5G, and other technologies
Our strengths
Energy-saving, environmental,
IAQ technologies
Globally expanding robust sales
network
Local production for local
consumption model
People-Centered Management,
diversity management
Our Group Philosophy
24
the solutions for environmental and social issues. The three growth strategy themes for this purpose are “Challenge to
achieve carbon neutrality,” “Promotion of Solutions business connected with customers,” and “Creating value with
air,” while the one focus region theme for strengthening the existing business is the “Air Conditioning business in
North America.” In terms of India, a market for which signifi cant market growth is anticipated, we aim to transform
the country into a major base of operations through strengthened local production and business expansion.
In addition, we set fi ve themes to enhance the management foundation, namely “Strengthening technology
development capabilities,” “Establishing a robust supply chain,” “Promoting digital transformation for innova-
tion,” “Creating market value/enhancing advocacy activities,” and “Improving HR capabilities through
advanced diversity management.” By implementing these nine key strategy themes, we aim to come out
ahead in this age of a new normal and to create value.
and air to realize both contributions to a sustainable society and Group growth
Ideal value creation
Economic value
Environmental and social value
(cid:129) Expand the heat-pump and hot water heater and
inverter business
(cid:129) Spread the use of highly energy effi cient products
such as those using inverters
(cid:129) Promote the adoption of low-GWP refrigerants as
well as the recovery and recycling of fl uorocarbons
(cid:129) Reduce CO2 emissions in manufacturing, etc.
(cid:129) AC solutions
(cid:129) Refrigeration solutions
(cid:129) Establishing a large scale IAQ/Ventilation business
(cid:129) Creation of IAQ/AE that enrich people’s lives
Chemicals
Filter
Refrigeration
Oil Hydraulics
Defense Systems
Latin America
Africa
Middle East
the future
Electronics
Achieve the No. 1 in the AC market in
North America, the largest market
with great opportunities
(cid:129) Expand the residential and light commercial businesses
(cid:129) Expand the Solutions business
(cid:129) Transform the market through environmental materials
Details ▸ P.54~57
a robust supply chain
market value/enhancing advocacy
diversity management
FY 2025
Group targets
(Image)
Sales
3.6
trillion yen
Operating
profi t
430
billion yen
Operating profi t
margin
Approx.12%
Net CO2 emissions reductions
2025 target (from BAU)
30%+
Free humankind from heat
and cold
Directly connect with
customers and satisfy
individual application needs
Offer safe, reliable,
comfortable IAQ/AE
Contribute to reducing
food loss
Participate in international
rule making
Contribute to the growth of
employees and local
communities
Integrated Report 2021
25
Air-conditioning (direct expansion, applied, and service businesses)
Strategic Management Plan “FUSION 25”
9 key strategy themes
3 growth strategy themes
In aims of expanding the business and continuing to achieve growth and development while
we contribute to solutions for environmental and social issues, we set three growth strategy
themes, namely “Challenge to achieve carbon neutrality,” “Promotion of Solutions business
connected with customers,” and “Creating value with air.”
1 Challenge to achieve carbon neutrality
Challenge to achieve carbon neutrality
We formulated “Environmental Vision 2050” in aims of reduc-
ing greenhouse gas emissions to net zero by 2050. With the
base year set at 2019, our goals are to reduce net greenhouse
gas emissions*1 by 30% or more in 2025 and 50% or more in
2030, compared with emissions without measures (business as
usual (BAU)).
Along with perfecting advanced environmental technologies
and paving the way towards carbon neutrality to fulfi ll our
social responsibility, we will work to reduce power consump-
tion through the widespread use of heat pump space and
water heaters, inverter units, and provision of other ener-
gy-saving equipment. We will also work to transition to the use
of low-GWP refrigerants and establish a refrigerant eco-cycle
that includes recovery and reclamation aspects. The Heat Pump
Space and Water Heating business positions Europe and North
America, where combustion heaters are the main markets, as
the most important regions. In these regions, we will leverage
technologies cultivated in the Air Conditioning business to
accelerate the shift from combustion heaters to heat pump
space and water heaters. We will also undertake challenges
such as participating in the Smart City Project, which is expect-
ed to help expand markets and reduce CO2, as well as estab-
lishing new environment-related businesses, including energy
creation.
*1 Net greenhouse gas emissions = Emissions - Contribution to emissions
reductions
Challenge to Achieve Carbon Neutrality
Emissions increase as business
expands with the BAU scenario
Reduce
by 50%+
Reduce
by 30%+
Net emissions
Net emissions
(emission contribution)
(emission contribution)
Zero or below
Zero or below
2019
(Base year)
2025
2030
2050
Emissions
Contribution
to emissions
reductions*2
*2 Contribution to emissions reductions
Efforts to reduce CO2 emissions that contribute to society, including promotion of Daikin equipment with lower CO2 emissions (replacing other companies’ equip-
ment with higher CO2 emissions), energy creation, and forest conservation activities
26
1. CO2 reductions during manufacturing (development/production processes)
Reduce emissions of energy induced CO2 and HFCs/PFCs in development and production processes
• Make factories carbon neutral
2. Power consumption reductions during product use
Global acceleration of conversion to inverter units to lead other companies with environmental
products (energy-saving equipment)
• Residential AC (RA) inverter ratio: 75% in 2019
• Develop elemental technology with high energy effi ciency
98%+ in 2025
3. Heat Pump Space and Water Heating business
Positioning Europe and North America as the priority
regions to accelerate conversion of combustion heaters
to heat pump space and water heaters
Heat Pump Space and Water Heating
business sales
(¥ billion)
200
204.0
• Europe: Aim to achieve No. 1 share in major countries
• North America: Accelerate sales of inverter heat pump
unitary products
4. Refrigerant initiatives supporting the AC business
Various measures connecting to refrigerant-induced CO2
emissions reductions to lead the environmentally
conscious society and industry
• Globally promote switching to R32.
150
100
50
0
130.6
FY2020
FY2023
– R32 ratio in the global residential AC market : 83% in 2019
95%+ in 2025
• Establish the refrigerant eco-cycle (recovery, reclamation, destruction)
• Develop next-generation refrigerants/equipment
5. Challenge to create new environment-related business
Initiatives toward market expansion and CO2 reduction contributions
• Smart cities: Participate in projects around the world
• Energy creation: Enhance product lineup of micro-hydroelectric power generation
6. Technology development to realize a carbon
neutral society
Research on leading-edge technologies on CO2
decomposition, recovery, and reuse Specifi c
measures to obtain those technologies
• Explore technology for ambient temperature CO2
separation, direct recovery, and reuse
(collaborative innovation with Doshisha University)
• Establish a hypothesis for a net-zero CO2 emissions
society (collaborative innovation with the
University of Tokyo)
Smart city project in Singapore
Integrated Report 2021
27
Strategic Management Plan “FUSION 25”
2 Promotion of Solutions business connected with customers
Promotion of Solutions business connected with customers
In terms of air conditioning solutions, we will establish an
experience-based sales business model that satisfi es a diverse
range of customer needs by going beyond the provision of
equipment to include a combination of control, engineering,
and service. This effort will work to provide new value, such as
the provision of individually optimized spaces and improve-
ments in comfort and safety, by directly connecting with users
by application and market, such as hospitals and factories, and
by combining the use of equipment operation data, energy
management, and IAQ technology.
In terms of refrigeration solutions, we will repurpose the
energy-saving and environmental technologies we have culti-
vated in the Air Conditioning business. We will undertake the
challenge of establishing a store Solutions business through the
promotion of one-stop solutions that include everything from
air-conditioning equipment, refrigeration equipment, store
design, installation, service, and maintenance. We will also
1. AC solutions
1. AC solutions
undertake the challenge of deploying a business that connects
the entire cold chain from the place of production to the place
of consumption. These efforts will contribute to reductions in
food loss, ensuring food safety and security, and the solutions
to other social issues.
AC Solutions business sales
(¥ billion)
600
560.0
431.9
400
200
0
FY2020
FY2023
Refrigeration Solutions
business sales
(¥ billion)
200
160.0
150
100
50
0
110.8
FY2020
FY2023
Three solutions for service/inspections, value added proposals during equipment operation, and retrofi ts/replace-
ments to establish a business model that provides customers with experiences
(1) Basic service solutions: Repair service, supply of parts and materials, customer support
(2) Value added service solutions: Service, maintenance, IAQ diagnosis and improvements
(3) Replacement/turnkey solutions: Total replacement solutions responding to customer needs such as engineering
services combined with non-AC equipment and controls
Experience-based sales business model
Fusion 25 focus areas
Development/
Promotion
Facility design
Equipment
sales
Instrumentation/
Engineering
Installation
Service/
Inspection
Maintenance
Operations
management
Retrofi t/
Replacement
Design/
Installation
Equipment Business
(Products/system solutions)
(1) Basic service solutions
(2) Value-added service solutions
(3) Replacement/
turnkey solutions
Continue to stay connected with customers throughout the entire AC value chain
Reinforcing proposal and response capabilities for each vertical market. Providing solutions menu satisfying diverse customer needs
Offi ces
Schools
Hospitals
Hotels
Factories
Comfort from airfl ow, even
temperature distribution,
ventilation, sound insulation
Facility management and tech-
nical support where there is
no dedicated facility caretaker
Prevent entry and spread of
viruses/bacteria, reduce the
risk of cluster infection
Individual temperature con-
trol and advanced operabili-
ty, i.e., multilingual support
Nonstop, highly reliable oper-
ations/energy savings toward
achieving net zero carbon
2. Refrigeration solutions
Global business expansion by deploying energy saving and environmental technologies Daikin has cultivated in the
AC domain
(1) Store Solutions business in Europe
(2) Store Solutions business in Asia/Oceania markets with growth potential
(3) Entire Cold Chain business (from production to consumption)
28
Value offered through Daikin’s business entry
Initiatives towards CO2 emissions reductions, food loss control/reduction throughout the entire supply chain
Contributing to safe/secure food life
Temperature/humidity
Temperature/humidity,
freshness control
Temperature/humidity
Temperature
Production
sites
Transportation
Transit
points
Consumption
sites
Consumers
3 Creating Value with Air
Creating Value with Air
We aim to establish a large-scale, global IAQ and ventilation
business by creating new products and services that address
the increasing demand for IAQ and ventilation. In addition to
taking on the healthcare domain, for example supporting bet-
ter health by accumulating and analyzing air conditioner data
and vital data, we will engage in value creation through IAQ
and AE that enriches people’s lives.
1. Establishing a large-scale IAQ/Ventilation business
1. Establishing a large-scale IAQ/Ventilation business
Market creation from opportunities presented by growing IAQ/Ventilation demand
Creation of new products and services to establish a large-scale IAQ/Ventilation business
• Globally create a market for air purifi ers, and sell 1 million
units per year in each region
• Proposal optimal ventilation systems for each vertical mar-
ket to expand sales of Heat Reclaim Ventilation (HRV)
• Launch a global base model for air purifi ers, and comply
with standards and regulations in each region
Product portfolio for establishing a large scale IAQ/Ventilation business
Air purifi ers
ventilation units
Standard
Commercial
Standard
HRV
Disinfecting
Air conditioners
Rooftop
Negative air
pressure
Filters
Outside
installation HRV
Bio-antibody
IAQ/Ventilation business sales
(¥ billion)
300
290.0
197.7
200
100
0
FY2020
FY2023
Compact Air
handling units
Titanium apatite
Anti-virus
2. Creation of IAQ/AE that enrich people’s lives
2. Creation of IAQ/AE that enrich people’s lives
Accumulating and analyzing air-conditioning data and vital data to create value with IAQ/AE for people’s physical
and mental well-being
• Take on the challenge in the healthcare domain for people’s better health
— Establish a business through collaboration with universities and startups to establish methods for analyzing and improving health from
obtained vital data
• Validate the value with air for each vertical market
— Realization of air value for people to get better concentration, relaxation, and good sleep and PoC verifi cation for commercialization
• Pursue new value with air
— Examine a social integration course on creating value with air with the University of Tokyo
Integrated Report 2021
29
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 profi t) on P/L statements, aiming to become
global No. 1 under “FUSION” launched in 1996. We then
began “ratio management” to focus more on operating profi t
“margin,” profi tability, and fi nancial structure based on our
aim to “become an attractive company that draws together
people, capital, and information” under the revamped FUSION
in 1999.
“Ratio management” involves overseeing “profi tability, cash,
and fi nancial structure” as a set using indicators such as free
cash fl ow and DVA*1 along with ROE and ROA. Regarding
DVA, we have shifted to ROIC (return on invested capital) and
free cash fl ow as management indicators for each division in
recent years, as all segments have reached the black.
*1 DVA: Daikin economic value added
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 explaining DVA to employees
in terms of corporate value rising when profi ts generated from business
activities over an entire year exceed capital costs.
Companywide ROIC Tree
ROIC was introduced as an internal management indicator to
monitor capital effi ciency beginning with reducing inventories
and to facilitate greater implementation among employees.
More specifi cally, we have positioned ROIC as an internal
management indicator linked to Companywide ROE targets
and then apply it to each business target as a means to specifi -
cally show how ROIC is connected to the duties of each
employee. For 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 profi tability. In addition to staff in
Japan, we use the “ROIC Tree” concept to explain to the employ-
ees of overseas bases how ROIC is linked to their daily duties.
We promoted 10 key Companywide themes essential for
achieving FUSION 20 fi nal year targets; 1-7 listed below show
the connection between seven of those themes and the ROIC
Tree. In addition, given the uncertain outlook from amid the
COVID-19 pandemic of fi scal 2020, we are undertaking ROIC
Tree-linked measures, namely six emergency projects that
address important management issues as well as strategic 7
themes to be raised for fi scal 2021.
ROIC Tree
Profi tability
ROIC (Return on Invested Capital)
Asset effi ciency
Net sales/operating profi t margin
Invested capital turnover rate
Marginal profi t ratio
Fixed ratio
(1) Maximize variable cost C/D
(2) Implement selling price
(4) Reduce fi xed costs
(5) Enhance product quality
increase
(3) Control logistics cost surge,
implement C/D measures,
revamp SCM
No. of days working
capital is held
Fixed asset turnover rate
(7) Accelerate investment returns
No. of days
inventory is held
No. of days
receivables are held
(6) Reduce inventories
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 fi scal 2010 through
fi scal 2019 and nine consecutive years of operating profi t for
nine years straight through to fi scal 2018. This breakthrough
earnings growth refl ects 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 profi t margin as an indicator of profi t-
ability under Ratio Management and set a target of 12.0% as
the target of FUSION 20. While the operating profi t margin
rose to 11.1% in fi scal 2018, buffeted by the impact of
COVID-19, actual results for fi scal 2020 amounted to 9.6%.
Under FUSION 25, the goal we have set for ourselves is to
Management Indicators from Fiscal 2010
ROE
ROA
Operating profi t margin
(%)
18
15.7%15.7%
14.5%14.5%
13.9%13.9%
11.3%11.3% 11.1%11.1% 11.1%11.1%
12.0%12.0%
7.8%7.8%
7.3%7.3%
6.8%6.8%
10.1%10.1%
10.4%10.4%
6.4%6.4%
9.6%9.6%
5.3%5.3%
13.1%13.1% 13.1%13.1%
13.4%13.4%
10.7%10.7%
10.0%10.0%
6.1%6.1%
5.6%5.6%
8.3%8.3% 7.8%7.8%
8.8%8.8%
5.0%5.0%
6.7%6.7% 6.9%6.9%
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 2020
(FY)
15
12
9
6
3
0
30
reach an operating profi t margin around the 12.0% level by
2025, and with our medium-term action plan for fi scal 2023,
an operating profi t margin of 10.5%. For ROE, an indicator of
asset effi ciency, we are working toward the target of 11.0%.
Daikin’s market capitalization has grown by around 33 times
over the 26 years between the fi scal year ended March 1995
and the fi scal year ended March 2021, being ranked eighth*2
in market cap growth over the 30 years of the Heisei Era (1989
-2019 ).
*2 For companies listed on Japanese stock exchanges. Comparisons
between January 9, 1989 and April 26, 2019 (source: Nikkei).
Investment & Shareholder Returns
In fi scal 2021, we plan to invest ¥150 billion in capital
expenditures, record ¥115 billion in depreciation and amortiza-
tion, and ¥80 billion in R&D. Further business growth in the Air
Conditioning business will mean making investments to
expand production capacity in our plants in Vietnam and India,
as well as compliance with CARB*3 regulations in California, a
leading U.S. state in terms of the environment, and boosting
the capacity of plants in Applied Systems and other areas. In
the Chemicals business, we intend to proactively invest in pro-
duction capacity expansion in China and the U.S. to meet the
increasing demand for semiconductors and batteries. However,
due to the uncertain outlook caused by COVID-19, we will
keep a closer eye on determining priorities, timing of imple-
mentation, and amount of investments.
Under FUSION 25, we will continue aggressive investments
to realize our growth strategies and to leverage the changing
times as opportunities for business growth. Covering capital
investments, as well as investments into R&D, digital technolo-
gy, and human resources, we plan to invest a cumulative total
of ¥800 billion over the three-year period from fi scal 2021 to
fi scal 2023 and a cumulative ¥1.3 trillion over the fi ve-year
period to fi scal 2025. Moreover, we envision M&A activities
cumulatively amounting to approximately ¥600 billion over
three years.
As for shareholder returns, by striving to maintain a consoli-
dated ratio of dividend to net assets (Dividend on Equity, DOE)
of 3.0% while at the same time aiming for an even higher con-
solidated dividend payout ratio, we will introduce initiatives to
further increase returns to our shareholders with the core goal
of stable and continuous dividends. In fi scal 2020, the annual
dividend was set at ¥160. Internal reserves will be applied to
strategic investments in order to expand business and increase
competitiveness such as reinforcing management practices,
promoting global businesses, and accelerating eco-conscious
product development.
*3 CARB: California Air Resources Board
Total Shareholder Return (TSR)
Daikin’s TSR outperformed TOPIX and TOPIX Machinery over a
three-, fi ve-, and ten-year period and TSR also surpassed cost
of equity capital owing to stable shareholder returns and
strong share price performance.
Total shareholder return (TSR*4)
Daikin
TOPIX
TOPIX Machinery
TSR (Annualized)
Holding period
1 year
3 years
5 years
10 years
Cumulative
Annualized
Cumulative
Annualized
Cumulative
Annualized
Daikin
TOPIX
TOPIX Machinery
70.7%
42.1%
59.9%
94.3%
22.1%
23.8%
24.8% 174.3%
22.4% 839.9%
25.1%
6.9%
7.4%
62.3%
89.6%
10.2% 153.6%
9.8%
13.6% 195.3%
11.4%
Note: Annualized rate is the geometric mean of cumulative returns.
(Index)
1,200
1,100
1,000
900
800
700
600
500
400
300
200
100
0
2011/3
2012/3
2013/3
2014/3
2015/3
2016/3
2017/3
2018/3
2019/3
2020/3
■■ Trading
Trading
volume
volume
(thousand
(thousand
shares)
shares)
72,000
60,000
48,000
36,000
24,000
12,000
0
2021/3
*4 TSR (Total Shareholder’s Return): Factors in capital gains and dividends when measuring the total return generated by a stock
Notes: TSR is calculated by Daikin using cumulative dividends and share price fl uctuations 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, 2011 closing price data set at 100 (holding period through end-March 2021)
Integrated Report 2021
31
Review of Operations
Overview of Global Development
Conducting business in more than 160 countries and regions, Daikin has built more than 100
production bases underpinned by market-localized production methods.
Employees:
84,870
Consolidated Subsidiaries:
315
Europe
¥417.2 billion
9,947
75
12
China
¥369.8 billion
19,360
33
8
Japan
¥585.6 billion
13,318
30
5
Other Regions
(Latin America, Middle East, Africa, etc.)
¥128.4 billion
5,066
62
Asia/Oceania
¥351.0 billion
17,367
54
6
United States
¥641.3 billion
19,812
61
8
Sales
Employees
Consolidated Subsidiaries
Global R&D Centers (Total of Air Conditioning, Chemicals, Filter business)
Expansion of Global Business Foundation
Japan
Non-Japan
Net Sales
Subsidiaries
Employees
Note: Percentages in the center of each graph indicate the overseas ratio in domestic and overseas totals.
2001
33%
2020
77%
2001
40%
2020
90%
2001
38%
2020
84%
32
Air Conditioning
Japan
Business History
In 1951, Daikin launched Japan’s fi rst packaged air conditioner.
Since then, we have pressed forward and diversifi ed to provide
air-conditioning systems that meet the needs of factories and
ships, vehicles, buildings and residential housing. Daikin has
Current status
Market Environment
The air-conditioning market in Japan is mature and anchored
by replacement demand. In fi scal 2020, economic activity stag-
nated due to the spread of COVID-19 infections, and industry
demand for commercial use fell. In contrast, demand for resi-
dential products exceeded the previous year due to pent-up
demand and special cash payments, as well as the boost to
sales caused by the intense summer heat.
Business Conditions
In the residential-use market, we heightened the appeal of our
unique ventilation function and Streamer technology. Sales of
high value-added products such as “Urusara X” increased. In
the case of industry-use air-conditioning systems, we strength-
ened our system proposals, which combine air conditioners
and ventilation products, and expanded our market share. For
air purifi ers, we expanded the product lineup, and sales grew
signifi cantly by capturing strong demand.
Production and Development Sites
In response to growing interest in indoor air quality (IAQ) and
ventilation, we expanded our product lineup of room air condi-
tioners, air purifi ers, and heat reclaim ventilators. We also
quickly boosted production capacity for air purifi ers, for which
demand has expanded rapidly.
Outlook
Strategies for Fiscal 2021
In the residential-use market, we will expand sales of high-val-
ue-added products by strengthening promotion of ventilation
and air purifi cation functions within the reversal in demand.
For cold regions, we will launch new products and attempt to
further increase market share. For commercial-use products,
we will expand sales based on a recovery in demand accompa-
nying the resumption of economic activities. We intend to
expand the lineup of heat reclaim ventilators and Streamer
units, and increase sales. We will continue to expand sales of
air purifi ers for residential use and expand our lineup for com-
mercial use as well.
expanded its market share with a fi ne-tuned sales network and
the pursuit of a broad lineup of high-value-added products
that offer energy conservation and comfort.
Products and Services in Line with Needs
• “Urusara X” and “Urusara mini” room air conditioners
equipped with ventilation functions
• The “Ururu Sarara Air Purifi er” equipped with an antibacteri-
al humidifying fi lter* developed by utilizing the antibacterial
technology of Kobayashi Pharmaceutical Co., Ltd.
• Equipped with streamer technology, a UVC LED that irradi-
ates deep ultraviolet rays and an antibacterial HEPA fi lter, the
“UV Streamer Air Purifi er” features improved virus and bac-
teria suppression performance
• “Air Navigation” and “Consultation Services” that address
questions and issues relating to ventilation and IAQ
* Suppresses bacteria on the humidifying fi lter. Not effective against all bac-
teria.
UV Streamer Air Purifi er
FUSION25 Strategies
We will accelerate growth by building new sales models by uti-
lizing digital technologies that capture changes in market condi-
tions. We aim to establish a large-scale IAQ/ventilation business
by, for example, launching new heat reclaim ventilator products
suitable for renewal and retrofi tting as well as by heightening
the appeal of our unique ventilation function and streamer tech-
nology. In addition, we will enhance our solutions proposal
capabilities by application and market, while developing solu-
tions menus that meet diverse customer needs. Through such
efforts, we aim to have the No. 1 share in all areas and markets.
In addition, toward the realization of carbon neutrality, we will
promote the switch of our “VRV” and chiller products to R32
refrigerant while aiming to build a scheme for the recovery, rec-
lamation and destruction of refrigerants.
Integrated Report 2021
33
Review of Operations
Air Conditioning
Business History
Americas
Daikin made its fi rst attempt to enter the U.S., the world’s larg-
est air-conditioning market, in the 1980s. However, given the
well-entrenched culture of ducted air conditioning, market
entry proved diffi cult and a withdrawal was unavoidable. We
subsequently revisited the idea of establishing a U.S. presence
during our advance to establish business globally, and in the
2000s, 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-fl edged opera-
tions in the U.S.
Current status
Market Environment
The air-conditioning market in the U.S., having reached maturity,
is based mainly on replacement demand. In fi scal 2021, govern-
ment economic measures and strong personal spending bolstered
the economy, and demand was steady in the housing market.
Business Conditions
In ducted unitary for houses, supply tightened due to a suspen-
sion of operations at the Goodman factory put in place in April
to prevent the spread of COVID-19, and the subsequent
impact of a shortage of manufacturing personnel. From the
second half of the fi scal year, sales expanded with a normaliza-
tion in supply, although full-year sales fell below those of the
previous fi scal year. Ductless sales expanded in RA/SKY by cap-
turing rising demand from the need for improvement in living
spaces and higher demand due to favorable seasonal weather.
For VRV systems, we strengthened our efforts at online sales
activities, but were hit by lower demand from restaurants and
other areas. In Applied Systems, we took advantage of ventila-
tion needs and expanded our market share, primarily for air-
handling units.
Production and Development Sites
We continue to strive to secure and stabilize manufacturing
personnel at our Goodman factory, and our efforts to bolster
production capacity and productivity remain ongoing. We are
leveraging the latest production technology to bolster opera-
Outlook
Strategies for Fiscal 2021
In ducted unitary for houses, we will focus on sales utilizing
online tools and improving upon production capacity. We will
introduce new products equipped with inverters specialized for
replacement and expand sales. In ductless products, we will
strengthen our sales network for “VRV” systems centering on
the northeastern region. Staying a step ahead of the competi-
tion, in certain regions we will launch new room air conditioners
that adopt R32 refrigerant, and pursue the market mainstream-
ing of R32. In Applied Systems, we will respond to differing
application needs, and strengthen circular-type solution propos-
als, from sales and service of products to their replacement.
34
tions as a “digital factory,” and to roll this out to production
sites in other regions. Moreover, we are also enhancing prod-
uct development to meet regional needs.
Products and Services in Line with Needs
• “FIT” Middle-zone (SEER* 15-17) inverter unitary
• “Daikin One” smart thermostat
• IAQ products, including high-performance fi lters, UV lighting,
and ventilator equipment
* SEER: An acronym describing the Seasonal Energy Effi ciency Ratio for cool-
ing performance.
“FIT,” inverter unitary product for the middle zone
FUSION25 Strategies
Our goals for fi scal 2025 are to grow revenue up to the one-
trillion-yen level and to become the No. 1 player in the North
American air-conditioning market. In the residential-use mar-
ket, bolstering Goodman’s sales network will serve to expand
our business in volume markets, and in tandem with this, will
grow sales of premium residential-use products. In the light
commercial domain as well, we will further strengthen sales of
“VRV” and rooftop systems. In the Applied Systems market,
we will bring together a team of specialists in key applications
and market categories, and have full-scale development of the
Solutions business. In addition, seizing upon environmental
and energy effi ciency regulations as a business chance, we will
promote the spread of inverters, heat pumps and low-GWP
refrigerants in the market.
China
Business History
Daikin entered the China market in the mid-1990s 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 air conditioners in our efforts to create a
new type of air-conditioning culture.
Current status
Market Environment
In addition to heading toward an early return to normal follow-
ing COVID-19, the economy in China showed a recovery trend
because of government economic policies and monetary easing.
Business Conditions
In addition to strengthening our lineup of IAQ and ventilation
products, the needs for which are increasing, we promoted
sales through the utilization of online tools, and sales exceeded
those of the previous year. High profi tability was maintained by
cost reductions, including productivity improvements through
automation, and reduction of fi xed costs.
In the residential-use market, we focused on identifying new
customers by online events and sales that used live broadcasts,
and sales expanded for residential multi-split air conditioners. In
the commercial market, we collaborated with major developers of
large-scale projects and for stores and offi ces engaged in sales
activities that promoted ventilation, cleaning, and disinfection.
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 central-
ized control of air conditioners, failure prediction and other ser-
vices. We have also established a new Digital Innovation Center
and are working on the development of web strategies, the
construction of IT platforms, and big data analysis.
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 condi-
tioners, but to fl oor heaters, bathroom dryers and others
• “Intelligent VRV” provides centralized control of air condi-
tioners, failure prediction and other services via the Internet
• Compact heat reclaim ventilators and heat reclaim ventilators
that are synchronized with IAQ sensors for homes
• AI utilized to analyze data collected by IAQ sensors to predict
and notify CO2 concentration levels
“New Life Multi” series for mid- to high-end
residences
Outlook
Strategies for Fiscal 2021
Continuing to utilize online tools to promote sales, we will
develop a web strategy to acquire customer information, such
as building our own online site. Amid the growing interest in
IAQ and energy management, we will also enhance our lineup
of products and services. We will provide detailed solutions for
each market and customer, including air conditioning, ventila-
tion, and air quality improvement. In terms of production, we
are promoting conversion to smart factories by building a sys-
tem that can collect, store, and analyze a variety of data. We
will work to improve productivity and quality.
FUSION25 Strategies
By combining offl ine activities, such as comprehensive custom-
er centers and the New Life Station, with online sites and SNS,
we will accelerate the shift to new business models. We will
also integrate and analyze customer data by building our own
IT platform and digitizing the content of contract negotiations
to improve customer satisfaction and contract closing success
rates. Furthermore, we will strengthen our proposals for air
value centered on residential multi-split air conditioners and
“VRV” while expanding our business in all markets. As the only
global air-conditioning brand in China, we will create markets
to achieve continuous growth.
Integrated Report 2021
35
Review of Operations
Air Conditioning
Europe/The Middle East/Africa
Business History
Our presence in Europe started by establishing a production
and sales base in Belgium in the early 1970s. 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
Current status
Market Environment
In Europe, economic activities were stagnant due to lockdowns
in countries across the region, but pent-up demand drove a
return to brisk activity in the residential market. In addition, the
Heating business benefi ted from strong demand together with
incentives that worked to promote replacements of combus-
tion-type heaters with heat-pump-type heaters.
Business Conditions
In the residential-use market, Daikin captured the recovery in
demand in places such as France and Spain due to stable sup-
ply through localized production, and sales expanded.
Widespread sales were even seen in Germany, the Netherlands,
and Belgium. In the commercial-use market, system sales com-
bining ventilation equipment such as heat reclaim ventilators
strengthened, but a decline in demand at hotels, retail stores,
and offi ces impacted results. In the Heating business, sales sub-
stantially increased by utilizing a wide product lineup of heat-
pump-type heaters. We expanded market share by capitalizing
on favorable demand resulting from rising environmental
awareness and incentives. Applied Systems experienced strong
sales of R32 chillers with high environmental performance.
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 compet-
itors. We are also working on making heat-pump-type hot
Outlook
Strategies for Fiscal 2021
In the residential use market, we will work to expand sales of
high-value-added products by capturing the strong demand
backed by continued investment for living environments. In the
commercial-use market, we will strengthen sales to favorable
areas such as IT infrastructure amid the slow recovery in
demand. In the Heating business, we will strive to capture
strong demand and increase market share by strengthening
sales and marketing capabilities. In Applied Systems, we will
enlarge the lineup of R32 chillers. In the Refrigerator and
Freezer business, we intend to accelerate one-stop solution
development to each market. We will enhance sales of envi-
ronmentally conscious products using natural refrigerants such
as CO2 and propane.
36
entering the 2000s, we also expanded into the Heating busi-
ness and Refrigerator and Freezer business
water heating systems highly effi cient, as they have experi-
enced 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 envi-
ronmental measures.
Products and Services in Line with Needs
• R32 model lineup ahead of other companies via room air
conditioners and “SkyAir”
• Room air conditioners equipped with a ventilation function
• “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
Environmentally conscious, highly effi cient,
high-performance heat-pump heating
FUSION25 Strategies
Daikin will strive to capture demand driven by raising environ-
mental awareness and ongoing investments into living environ-
ments, and will launch and expand sales of differentiated
products. Backed by the fair winds of the European Green
Deal, together with substantially expanding the Heat Pump
Heating business, we will also work in the refrigeration domain
to bolster the business for one-stop solutions in stores, includ-
ing for air conditioning and ventilation. In all the HVAC&R mar-
kets, we aim to be a solutions provider capable of responding
with fl exibility to customer needs as pertain to IAQ and energy.
Moreover, we will also push forward on constructing a refriger-
ant eco-cycle (recovery, reclamation, destruction) among other
initiatives that take the lead in environmentally conscious soci-
ety and industry issues.
Asia/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 rein-
forced its production capabilities with the establishment of
plants in Thailand, India, Malaysia and Vietnam.
Current status
Market Environment
Asia is in the process of air-conditioning equipment adoption,
making it a market for growth. However, the region took a
substantial hit on the impact of falling demand and restrictions
on activities on account of the spread of COVID-19. In
Oceania, having succeeded in containing COVID-19 expansion,
demand was brisk.
Business Conditions
As countries around the Asian region felt the effects of cur-
tailed activities, we promoted dealer support by utilizing online
tools. Inventories were strategically held, and sales signifi cantly
recovered from the second half, but the results could not com-
pensate for the large decrease of the fi rst half, and sales
declined year on year. On another front, in Oceania, sales
expanded based on strong demand, and sales exceeded the
previous year.
In the residential-use market, we promoted sales utilizing our
own dealer sales channels, together with endeavoring to
strengthen relationships with dealers using such activities as
online training. In commercial use, we focused on sales for
public facilities, but sales declined due to sluggish capital
investment on account of the economic downturn, delays in
start of construction work due to insuffi cient workers at con-
struction sites, and postponement of construction.
Outlook
Strategies for Fiscal 2021
As the impact of the COVID-19 pandemic remains in Asia, we
aim to improve the percentage of inverter use by strengthening
development sales network in regional cities and sales activities
utilizing online tools. In the residential-use market where signs
of recovery in demand are being seen, we will expand sales of
high-value-added products by promoting air quality improve-
ment. In the commercial-use market, the focus is on sales for
public facilities where demand is anticipated because of gov-
ernment economic measures. In Applied Systems, we will aim
to expand sales by improving the service network and strength-
ening product capabilities.
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-de-
gree 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 situations
Dealer in India, where demand for air condi-
tioning is growing
FUSION25 Strategies
Together with building out our sales network and product line-
up in the Asian region, a market anticipated to experience fur-
ther growth, we will work to boost cost competitiveness and
to grow revenue streams. We also seek to increase sales of
products with high environmental performance, and that lead
the market in terms of adoption of inverters and R32 refriger-
ant. In the future, we aim to establish India as a major base,
while working to further fortify a top sales share and to realize
the No. 1 share in room air conditioning. Moreover, we will
strengthen ties between production sites, and in addition to
optimizing production throughout the region, will commence
production of air purifi ers in the region while endeavoring at
market creation.
Integrated Report 2021
37
Review of Operations
Chemicals
Current status
Although affected by reduced demand in the automotive market, there
were increased sales of surface antifouling agents for tablet PCs due to
the spread of remote working and of the repellent agents used in
medical protective clothing.
Market Environment
Although we strengthened sales activities for semiconductors
where the market is showing signs of a recovery as well as for
surface anti-fouling coating agents and water and oil repellent
agents, the impact of decreased demand due to COVID-19
was substantial. In the Chemicals segment overall net sales
declined over the previous fi scal year.
Business Conditions
In fi scal 2020, amid the ongoing global spread of COVID-19
infections, Daikin was able to take thorough measures against
infection and continue operations at all its production bases in
Japan and overseas. We also worked to secure points of con-
tact with our customers, for example by utilizing online tools to
develop sales activities.
By product, sales of fl uorocarbon gas dropped worldwide
due to a decrease in demand, causing sales to fall against the
previous fi scal year.
Fluoropolymers showed an increase in sales for infrastructure
in China, but in addition to a decrease in fi rst-half demand for
semiconductor and automotive markets, sales declined due in
part to a drop in construction and aircraft-related demand in
the United States. Fluoroelastomers saw sales expand to the
automotive market in China, but other regions were signifi -
cantly affected by a decrease in demand, causing sales to fall
against the previous fi scal year.
In fi ne chemicals, sales of surface antifouling agents focused
on tablet PCs, and sales expanded in China and Japan. Sales of
water and oil repellent agents grew for medical-related and
paper applications. Sales of etching gas expanded in China and
Japan by capturing demand in the recovery for the semicon-
ductor market.
“OPTOOL” anti-smudge coating used for the surfaces of information devices
“UNIDYNE” realizes non-woven fabrics with excellent water repellency and
alcohol resistance
38
Outlook
In addition to expanding sales to the semiconductor and automotive
markets, Daikin will implement upfront investments, such as increasing
production capacity in preparation for future increases in demand.
Targets
Daikin will strengthen the development of lithium-ion battery
materials for next-generation automobiles, demand for which is
expected to grow in the years to come, and applications in the
information and communications fi elds, while aiming to acceler-
ate further sales expansion and measures designed to increase
market share. We will also promote upfront investments to meet
the increasing demand in the semiconductor market.
Strategies for Fiscal 2021
In the semiconductor market, where demand is expected to
recover, Daikin will work to expand sales and increase market
share, and capture the movement toward domestic production
in China. In the automotive market, we are expanding sales of
environmentally conscious products such as rubber for high-ef-
fi ciency engines. In the information devices market, we will
strengthen spec-in activities for repellents for tablet PCs. We
will also strengthen spec-in activities for lithium-ion battery
materials and accelerate the process for producing results from
application developments.
In Japan, Daikin established the Integrated Production Center
at its Kashima Plant in April 2021, thereby bringing to fruition a
high-quality, highly effi cient production plant that utilizes IT. In
preparation for future increases in semiconductor demand, we
will also steadily implement upfront investments, such as
expanding a fl uoropolymer manufacturing plant in China.
FUSION25 Strategies
In addition to the accelerating movement toward the realiza-
tion of a carbon-free society, such as the setting of penetration
rate targets for EVs in each region of the world, the business
environment is changing faster than expected, as evidenced by,
for example, the movement of non-fl uorination becoming
apparent in food and apparel applications. Taking these chang-
es as an opportunity to expand our business, we will imple-
ment a variety of measures ahead of our competitors. In
addition to accelerating the creation of results centered on four
key markets (semiconductors, automotive, information com-
munications, and information devices) in applications develop-
ment, Daikin will also develop and expand sales of highly
functional, non-fl uorine materials for further business expan-
sion. We will also aggressively implement upfront investments,
such as increasing production capacity, in preparation for
growth in demand in the coming years.
Fluorine materials contribute to the higher performance of lithium-ion batteries
The Integrated Production Center at the Company’s Kashima Plant aims to
improve quality and productivity by integrating all of its people, organiza-
tions, and information
Integrated Report 2021
39
Review of Operations
Oil Hydraulics
Current status
Signifi cantly impacted by the spread of COVID-19, a harsh business
environment
Market Environment
Demand for hydraulic equipment for industrial machinery
declined as a result of stagnant capital investments. In hydrau-
lic equipment for construction and vehicles, demand declined
primarily in Japan, Europe, and the United States, triggered by
the spread of COVID-19.
Business Conditions
The Oil Hydraulics business comprises a range of oil hydraulic
equipment to facilitate the smooth movement of various types
of machinery, contributing to energy effi ciency. Amid the slow-
down in capital investment caused by the spread of COVID-19,
in fi scal 2021 Daikin strengthened cooperation with its dealers
in each market and worked to secure sales of oil hydraulic
equipment for industrial machinery. In the Hydrostatic
Transmissions (HST) business, we captured demand for agricul-
tural machinery in China and strengthened profi tability by
reviewing procurement and improving productivity.
Comprising a piston pump and motor developed for small vehicles,
an integrated, medium-duty hydraulic transmission
Outlook
Expand sales of high-effi ciency products by capturing growing
momentum for energy saving toward the elimination of carbon emissions
FUSION25 Strategies
In response to the growing momentum for energy saving
toward the elimination of carbon emissions, Daikin will expand
its lineup of high-effi ciency products that utilize the technolog-
ical capabilities cultivated so far. For industrial machinery, we
will expand our Solutions business in the United States and
improve profi tability in China and other Asian countries. In
addition, we will make a full-scale entry into the European
market centered on Germany and accelerate global business
expansion. In the HST business, we will strengthen custom-
er-oriented proposal sales in Japan and introduce highly effi -
cient and durable differentiated products for small construction
machinery in the United States to increase our market share.
Targets
In its sales of oil hydraulic equipment for industrial machinery,
Daikin will promote proposal sales by maintaining close con-
tacts with its customers while aiming to increase its market
share. We will make a full-scale entry into the European market
and accelerate our global expansion. In the HST business, we
will launch differentiated products mainly in the United States
and China, and strengthen spec-in activities.
Strategies for Fiscal 2021
In its sales of oil hydraulic equipment for industrial machinery,
Daikin will promote the development of dealers toward its full-
scale entry into the European market. In Japan, we will respond
to growing remote monitoring needs brought by the spread of
COVID-19 infections. We will introduce new products
equipped with sensors and communication functions, and
work to increase our market share. In the HST business, we will
strengthen spec-in activities centered on small-sized construc-
tion machinery in the United States and agricultural machinery
in China, both markets where strong demand is expected.
40
Defense
Current status
Sales of oxygen concentrators and pulse oximeters were favorable
In fi scal 2020, Daikin captured the demand from the switch
to home treatment for hospital inpatients and the demand for
medical facilities for people infected with COVID-19, causing
sales of oxygen concentrators to increase against the previous
fi scal year. Sales to the Ministry of Defense having decreased,
as a result the Defense Systems business as a whole fell below
the previous year’s level, but profi ts increased.
Market Environment
To secure more hospital beds for patients infected with COVID-
19, the switch to home treatment for inpatients with respirato-
ry diseases progressed, and demand for oxygen concentrators
remained fi rm. Also, there was an improved level of awareness
toward pulse oximeters, which measure oxygen saturation in
the blood without collecting blood.
Business Conditions
In the Defense Systems business, Daikin obtains orders from
Japan’s Ministry of Defense based on the defense budget, while
designing and manufacturing products. The products supplied
include various types of ordnance used for drills, and aircraft
parts. Daikin also manufactures and sells home-use oxygen ther-
apy equipment. Daikin provides respiration synchronizers and
oxygen concentrators, products that require the highest levels of
reliability, performance, functionality, and quality.
Pulse oximeters can easily measure cardiopulmonary function
Outlook
In addition to expanding sales of home-use oxygen therapy equipment,
Daikin will take on the challenge of expanding its business into the
healthcare domain
Targets
We aim to increase our market share by expanding sales of dif-
ferentiated products for the home-use oxygen therapy equip-
ment market.
Strategies for Fiscal 2021
In the medical/healthcare domain, Daikin will work to expand
sales of differentiated products that meet customer needs. We
will strengthen our sales capabilities and expand sales by
expanding the lineup and the durability as well as reliability of
the items of equipment that represent our strengths. In China,
we will widely promote our strengths and expand sales by uti-
lizing e-commerce and other means.
FUSION25 Strategies
In the fi eld of home-use oxygen therapy equipment, Daikin will
introduce differentiated products mainly in Japan and China
and work to increase its market share. In response to growing
interest in preventive medicine, we will start full-scale business
development in the healthcare domain. Utilizing the oxygen
control technology cultivated in the development and produc-
tion of our home-use oxygen therapy equipment, we will sell
equipment for hypoxic training. Utilizing vital data acquired
through devices, we also aim to develop new services that will
lead to the promotion of health in our daily lives.
Integrated Report 2021
41
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 business
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 fulfi ll our
responsibility for management, making strategic decisions quickly
and providing appropriate supervision. We also improve the moni-
toring 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,” “defi ning roles
and responsibilities of independent external directors,” and “the pol-
icy of having constructive dialogue with shareholders.” Going for-
ward, 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, busi-
ness execution, and supervision/guidance in an “integrated” man-
ner. The multiple external directors provide monitoring of the status
of business execution from an independent perspective and take
responsibility to support “integrated management” from the stand-
point of transparency and integrity by offering appropriate oversight
and advice with regard to decision making. In addition, the Group
has introduced an “executive offi cer system” to accelerate the speed
of execution based on autonomous judgments and directions in
units handling each region, division, and function. Appointments of
executive offi cers 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 fi elds to a diverse range of
background factors, such as nationality, gender, and career history.
As of the end of June 2021, 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.
Daikin’s Board of Directors includes four external directors (as of
the end of June 2021), conditional upon them not having a con-
fl ict of interest with the Company. Daikin seeks external directors
that can provide oversight and advice from a high-level perspective
based on a wealth of experience and deep insight. Accordingly,
Daikin appoints external directors with business experience, mainly
as directors at listed companies, and that do not hold concurrent
external director positions at fi ve or more companies.
42
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 the end of June
2021, 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 confl ict of
interest with the Company.
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, confi rms approval of documents, and regularly exchanges
opinions with representative directors, executive offi cers, and the
accounting auditors. In addition, the Audit and Supervisory Board
Member Offi ce has been established, and the staff perform their
duties under the orders and direction of 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 Offi ce staff.
Corporate Governance Structure (as of the end of June 2021)
Shareholders’ Meeting
Appointment,
dismissal
Appointment,
dismissal
Appointment, dismissal
Board of Directors
HRM Advisory Committee
Compensation Advisory Committee
Group Steering Meeting
Group Management Meeting
Accounting
Auditor
Audit &
Supervisory
Board
Audit
Group
Auditors
Meeting
Internal Control Committee,
Corporate Ethics and Risk
Management Committee,
Information Disclosure
Committee,
CSR Committee
Appointment,
supervision
Executive
Officers Meeting
(The rest is abbreviated)
Agile Management Support System
Daikin’s three main management bodies are the Board of Directors,
the Group Steering Meeting, and the Executive Offi cers 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
execution and appropriate supervision and guidance, is the deci-
sion-making institution for all matters related to the Group as a
whole, as stipulated by laws and regulations as well as the
Company’s Articles of Incorporation, and for other important man-
agement matters. In fi scal 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 91% and 100%, 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 thereby accelerating the pace at which
issues are resolved. In fi scal 2020, the Group Steering Meeting was
held six times.
The Executive Offi cers Meeting was established as a place where
we can expedite thorough deliberations and prompt implementation
of important management issues, and it met 20 times in fi scal 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 interviews
with the directors and Audit and Supervisory Board members and
deliberations by the Board of Directors. The Board of Directors of
the Company is assessed as “making appropriate decisions through
open and active discussions, and playing an effective role in
enhancing 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 Offi cer Remuneration
To ensure the transparent management of its corporate offi cer per-
sonnel and remuneration processes, Daikin has established the
HRM Advisory Committee and the Compensation Advisory
Committee. These committees engage in discussions and delibera-
tions regarding issues including corporate offi cer nomination crite-
ria, candidates, and remuneration. As of July 2021, both
committees comprised six members, including four external direc-
tors, one in-house director, and one executive offi cer in charge of
personnel, with the committee chairman being chosen from the
external directors.
The Compensation Advisory Committee reports its opinion to the
Chairman of the Board of Directors within the maximum limit
authorized at the Annual General Meeting of Shareholders, and the
Chairman of the Board of Directors determines the remuneration of
directors after receiving approval to reappointment from the Board
of Directors. Remuneration for Audit and Supervisory Board mem-
bers is determined through discussions among Audit and
Supervisory Board members within the maximum limit determined
by a resolution at the Annual General Meeting of Shareholders.
In response to the expectations of shareholders and in accor-
dance with management policy, offi cer compensation is structured
to motivate offi cers to continuously improve their performance over
the medium to long term, and to contribute to increasing the value
of the entire Group. Compensation for directors, excluding external
directors, consists of fi xed compensation, performance-linked
remuneration that refl ects short-term Group performance and the
performance of the division in which a director is in charge, and
stock compensation-type stock options that refl ect medium- to
long-term performance. In addition, the performance-linked ratio is
set higher than the market rate to ensure suffi cient incentives for
performance improvement. External directors and Audit and
Supervisory Board members receive fi xed 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
objective data from a specialized external institution on the remu-
neration of corporate offi cers active in approximately 300 Japanese
companies listed on the First Section of the Tokyo Stock Exchange.
In specifi c terms, the three indices used by the Company are the
sales growth rate, operating income margin and ROE, as well as the
medium-to-long term increase in corporate value.
Regarding performance-linked compensation for directors other
than external directors, three performance-linked indicators by
which to assess Companywide performance: net sales, operating
income margin, and operating income have been selected. These
indicators have a clear and mutual relation to Daikin Industries’
numerical management targets. Further, these indicators facilitate
comparison with the performance of other companies in the indus-
try. Net sales and operating income margin are calculated according
to single-year performance versus budget. Operating income is cal-
culated according to growth linked to medium- and long-term
management plans.
Performance-linked compensation for the chairman and presi-
dent uses a performance-linked coeffi cient derived from
Companywide performance-linked indicators. Performance-linked
compensation for directors other than the chairman or president is
determined using a performance-linked coeffi cient derived from
Companywide performance-linked indicators, adjusted by sin-
gle-year performance versus budget for net sales and operating
income for their respective divisions (serving as indicators that rep-
resent the targets of the work that each division carries out daily)
and individual priority initiatives carried out over the short, medium,
and long term.
The number of compensatory stock options paid to directors
excluding external directors is determined each fi scal year by divid-
ing a sum determined by taking into account the status and results
of each individual’s efforts on short-term, medium- and long-term
priority issues in the previous fi scal year and that is based upon the
standard for each position, by the average closing price of the most
recent share price. These are exercisable from three to 12 years
after the date of grant.
Total Compensation for Directors
and Audit and Supervisory Board Members (Fiscal 2020)
Position
Total
Compensation
(Millions of yen)
Total of different types of compensation
(Millions of yen)
Fixed
compensation
Stock
Options
Persons
paid
Performance-
linked
compensation
Directors (excluding
external directors)
Audit and Supervisory
Board Members
(excluding external
Audit & Supervisory
Board members)
External Corporate
Offi cers
1,217
518
178
520
70
92
70
92
—
—
—
—
8
2
6
Accounting Auditor Compensation (Fiscal 2020)
Auditing expenses
250 million yen
Group-Wide Governance
To meet governance needs on a Groupwide 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 unifi ed 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 Offi cer, who works to further improve the Group’s
cohesiveness.
Integrated Report 2021
43
Corporate Governance
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 fi scal 2020. Based on her abun-
Tatsuo Kawada
Akiji Makino
Shingo Torii
Ryu Yano
Toru Nagashima
dant experience in management and high-level insight, she can provide appropriate supervision of the Com-
pany’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 mea-
sures to further promote achievements of female employees.
Mr. Kawada attended 13 of the 15 Board of Directors meetings held during fi scal 2020. Based on his abun-
dant experience in management and high-level insight, he can provide appropriate supervision of the Com-
pany’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 14 of the 15 Board of Directors meetings held during fi scal 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 fi elds of energy, environment, and service businesses.
Mr. Torii attended 12 of the 13 Board of Directors meetings (held since appointment) during fi scal 2020.
Based on his abundant experience in management and high-level insight, he can provide appropriate supervi-
sion of the Company’s management from an independent perspective and actively provides suggestions from
his broad and sophisticated perspective, including views on corporate management for proactively capturing
customer needs and enhancement of corporate value through ESG activities.
External Audit
and Supervisory
Board Member
Mr. Yano attended 15 of the 15 Board of Directors meetings held and 15 of the 15 Board of Auditors meet-
ings held during fi scal 2020. Based on his abundant experience in management and high-level insight,
particularly from his broad and sophisticated perspective developed over many years of experience in business
overseas, he provides the necessary input in a timely fashion.
Mr. Nagashima attended 15 of the 15 Board of Directors meetings held and 15 of the 15 Board of Auditors
meetings held during fi scal 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 perspec-
tive 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
Tatsuo Kawada
External Director Mr. Kawada has served as Chairman and CEO of Seiren Co., Ltd., and has abundant experience and high-lev-
Akiji Makino
Shingo Torii
Yuko Arai
Ryu Yano
Toru Nagashima
el insight as a corporate manager. Mr. Kawada was elected as external director to make use of this experi-
ence 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, including views related to changing business models and innovation creation,
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. 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, by offering proposals regarding management from his broad and sophisticated perspective, includ-
ing views related to the fi elds of energy and environment as well as the services business, to 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, Mr. Torii 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, by offering proposals regarding management from his broad and
sophisticated perspective, including views regarding corporate management that anticipates customer needs
and improving corporate value through ESG activities, to contribute to increasing Daikin’s corporate value.
Ms. Arai has served as Director and Senior Vice President of ANA Akindo Co., Ltd., and has abundant experi-
ence and deep insight as a corporate manager. Ms. Arai was elected as external director to apply her experi-
ence to provide appropriate supervision of the conduct of management from an independent standpoint,
and, by offering proposals regarding overall management from her broad and sophisticated perspective,
including views on corporate management from customers’ perspectives and promotion of further participa-
tion by female employees, to contribute to increasing Daikin’s corporate value.
External Audit
and Supervisory
Board Member
Mr. Yano has served as Chief Advisor (former 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 management at Dai-
kin and to signifi cantly upgrade the appropriateness of the audit function.
Mr. Nagashima has served as Honorary Advisor (former Representative Director) at Teijin Limited, and has
abundant experience and high-level insight as a corporate manager, particularly in the fi eld of implementing
paradigm shifts from manufacturing products to creating services. Mr. Nagashima was elected as external
auditor to draw on his experience to supervise overall management at Daikin and to signifi cantly upgrade the
appropriateness of the audit function.
Note: All of the Company’s external directors and external auditors meet the qualifi cations for independence established by the Tokyo Stock Exchange
44
Message from the External Director
The Daikin Group strives to raise corporate value through corporate governance. We carry out
decision-making with foresight, as well as by executing business with greater speed, transparen-
cy, and soundness in response to challenges and changes in the business environment.
This year we spoke with Tatsuo Kawada, one of the Group’s external directors, about his
thoughts on the characteristics of Daikin’s Board of Directors and his expectations for the strate-
gic management plan “FUSION 25.”
Open and Active Discussions
Unique to Daikin
Tatsuo Kawada
External Director
Tatsuo Kawada is the Chairman of Seiren Co., Ltd. During his many
years as manager of this comprehensive textile manufacturer, he has
succeeded in changing the company’s business model, creating
innovation, and transforming the corporate culture. He has abun-
dant experience and a high level of insight as a corporate manager.
He has served as an external director of the Group since 2016.
Characteristics and Effectiveness of the Board of Directors
I feel that the Group’s Board of Directors is committed to appropriate decision-making through open and active discussions
based on the concept of “integrated management.” Under this concept, the Board members assume responsibility for both
business execution and management, where they fulfi ll these responsibilities by coordinating on all aspects of management
through rapid strategic decision-making and through sound, appropriate supervision.
My most important mission as an external director is to verify and ensure that decisions made by the Board of Directors are
without question appropriate and relevant. In addition to sharing an outline of the agenda with the external directors prior to
each Board meeting, the Group provides explanations on particularly important items ahead of time, which allows me to further
deepen my understanding of these issues. Moreover, I feel that the meetings are extremely open because the Board’s chairper-
son directs the proceedings in a manner that always provides an opportunity for participants to comment.
As a global corporation, the way in which the Group broadcasts its environmental initiatives will also become extremely
important in the future. Although the Board of Directors has already decided to endorse the TCFD and is investigating specifi c
measures to reduce greenhouse gas emissions in each business, I believe the Board of Directors will become more effective as it
continues to discuss CSR and SDGs activities in a manner that includes goals.
And as a Global Excellent Company, I look forward to the Board of Directors becoming increasingly engaged through more expan-
sive deliberations on cross-Group strategies and issues, as well as through more detailed reports on addressing risk, for example.
Strategic Management Plan “FUSION 25”
“FUSION 25” illustrates the Group’s growth strategies in terms of both fi nancial and non-fi nancial aspects, including “Challenge
to Achieve Carbon Neutrality,” “Promotion of Solutions Business Connected with Customers,” and “Creating Value with Air.” I
also believe the Plan is extremely clear in conveying its intent to solve social problems in light of the COVID-19 pandemic while
growing the business, and therefore expect to see the Group achieve sustained growth and development into the future.
In contrast to Japan with its declining population, developing countries in Southeast Asia and other regions, as well as Africa,
are likely to see further growth in the air-conditioning market. However, I felt, and therefore pointed out, that the Plan con-
tained too few descriptions of specifi c initiatives regarding the strategy for developing countries and Africa during the formula-
tion and review stages. Ultimately, in addition to covering the establishment of a dominant position in regions with existing
business operations, the Plan mentioned strengthening the foundation in developing countries and Africa, so I expect to see
specifi c developments here.
Along with the recent manifestation of industrial competition and trade competition between nations, I have also come to
recognize the importance of increasing the Group’s risk sensitivity as a global company and of refl ecting this in medium-term
planning, so I intend to monitor future developments in this area.
Integrated Report 2021
45
Corporate Officers
As of end of June 2021
Directors
Date of Birth March 17, 1935
Number of the Company shares owned 67,700
Signifi cant Concurrent Posts
External Director of Hankyu Hanshin Holdings, Inc.
Chairman of The Daikin Foundation for Contemporary Arts
Chairman of Specifi ed Nonprofi t Corporation of Kansai
Philharmonic Orchestra
March 1957 Entered the Company
February 1979 Director of the Company
February 1985 Managing Director of the Company
June
June
1989 Senior Managing Director of the Company
1994 President, Representative Director of the
Company
May
1995 Chairman of the Board and President,
Representative Director of the Company
1996 President, Representative Director of the
June
Company
June
2002 Representative Director, Chairman of the Board
and CEO of the Company
June
2014 Chairman of the Board and Chief Global Group
Offi cer of the Company (Current position)
Date of Birth
January 11, 1949
July
2016 Chairman of the Internal Control Committee of
the Company (Current position)
Number of the Company shares owned 10,300
Responsibilities and Assigned Items
Chairman of the Internal Control Committee
April
June
June
July
1973 Entered the Company
2002 Director of the Company
2004 Director and Senior Executive Offi cer of the
Company
2006 Member of the HRM Advisory Committee of the
Company (Current position), Member of the
Compensation Advisory Committee of the
Company (Current position)
June
2007 Director and Senior Executive Offi cer of the
Company
June
2011 Representative Director, President and COO of
the Company
June
2014 Representative Director, President and CEO of
the Company (Current position)
Noriyuki Inoue
Chairman of the Board and
Chief Global Group Offi cer
Masanori Togawa
Representative Director,
President and CEO
Date of Birth
January 27, 1940
July
March 1962 Entered Fukui Seiren Kako Co., Ltd. (Currently,
2016 Member of the HRM Advisory Committee of the
Company (Current position), Member of the
Compensation Advisory Committee of the
Company (Current position)
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
October 2005 President, CEO and COO of the above company
June
2011 Chairman, President, CEO and COO of the
2003 President and COO of the above company
above company
June
2014 Chairman and CEO of the above company
(Current position)
June
2016 Director of the Company (Current position)
Tatsuo Kawada
Member of the Board (External)
Number of the Company shares owned —
Signifi cant Concurrent Posts
Chairman and CEO of Seiren Co., Ltd.
External Director of Hokuriku Electric Power Company
External Director of FUJIFILM Holdings Corporation
Date of Birth September 14, 1941
April
2019 Chairman and CEO of Iwatani Corporation
March 1965 Entered Iwatani Corporation
June
June
June
June
April
June
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 Offi cer of the above
company
June
2012 Chairman, CEO and Executive Offi cer of the
above company
June
July
2016 Director of the Company (Current position)
2016 Member of the HRM Advisory Committee of the
Company (Current position), Member of the
Compensation Advisory Committee of the
Company (Current position)
(Current position)
Number of the Company shares owned 2,000
Signifi cant Concurrent Posts
Chairman and CEO of Iwatani Corporation
Chairman of the Board of Iwatani Industrial Gases Corporation
Representative Director and Chairman of the Board of Central
Sekiyu Gas Corporation Limited
Akiji Makino
Member of the Board (External)
46
Date of Birth
January 18, 1953
July
April
June
1980 Entered ITOCHU Corporation
1983 Entered Suntory Limited (Currently, Suntory
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 Offi cer 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)
Shingo Torii
Member of the Board (External)
2020 Member of the HRM Advisory Committee of the
Company (Current position), Member of the
Compensation Advisory Committee of the
Company (Current position)
Number of the Company shares owned 1,000
Signifi cant Concurrent Posts
Representative Director and Vice Chairman of the Board of
Suntory Holdings Limited
External Director of ROHTO Pharmaceutical Co., Ltd.
Outside Director of Zojirushi Corporation
Date of Birth
January 27, 1961
Number of the Company shares owned —
April
April
1979 Entered ALL NIPPON AIRWAYS CO., LTD.
2014 Corporate Executive Offi cer of the above
company
April
2016 Senior Executive Offi cer of the above company
Director and Senior Vice President of ANA Sales
Co., Ltd. (Currently, ANA Akindo Co., Ltd.)
2021 Director and Senior Vice President of ANA
Akindo Co., Ltd. (Current Position)
April
June
2021 Director of the Company (Current position)
Signifi cant Concurrent Posts
Director and Senior Vice President of ANA Akindo Co., Ltd.
Outside Director of Aichi Steel Corporation
Date of Birth
January 12, 1947
December 2014 Chairman of the Board of Daikin Fluorochemicals
April
June
June
June
1970 Entered the Company
2000 Associate Offi cer of the Company
2002 Senior Associate Offi cer of the Company
2004 Senior Executive Offi cer of the Company,
Representative of China business of the
Company (Current position), Member of Global
Air-Conditioning Committee of the Company
May
2009 Chairman of the Board and President of Daikin
(China) Investment Co., Ltd.
June
2011 Director and Senior Executive Offi cer of the
Company
June
2013 In charge of air conditioning business in Japan of
the Company (Current position)
June
2014 Representative Director and Senior Executive
Offi cer of the Company (Current position)
Date of Birth
July 9, 1953
October 1983 Entered the Company
July
June
2005 Director and President of Daikin Europe N.V.
2007 Associate Offi cer of the Company, Member of
Global Air-Conditioning Committee of the
Company
June
June
June
2008 Executive Offi cer of the Company
2010 Senior Executive Offi cer of the Company
2011 Director and Senior Executive Offi cer (Current
position), Representative of air conditioning in
Europe, the Middle East and Africa of the
Company
June
2018 Representative of Air Conditioning in Europe,
the Middle East and Africa (excluding East Africa)
of the Company
(China) Co., Ltd.
June
2021 Chairman of the Board of Daikin (China)
Investment Co., Ltd. (Current position)
Number of the Company shares owned 5,300
Responsibilities and Assigned Items
Responsible for Air Conditioning Business in Japan,
Representative of China Business, Chairman of the Board and
President of Daikin (China) Investment Co., Ltd.,
June
2021 Representative of Europe, the Middle East and
Africa of the Company (Current position),
Chairman of the Board of Daikin Europe N.V.
(Current position)
Number of the Company shares owned 10,100
Responsibilities and Assigned Items
Representative of Europe, the Middle East and Africa of the
Company
Chairman of the Board of Daikin Europe N.V.
Yuko Arai
Member of the Board (External)
Ken Tayano
Representative Director, Senior
Executive Offi cer
Masatsugu Minaka
Member of the Board, Senior
Executive Offi cer
Integrated Report 2021
47
Corporate Officers
Takashi Matsuzaki
Member of the Board, Senior
Executive Offi cer
Yoshihiro Mineno
Member of the Board,
Senior Executive Offi cer
Date of Birth December 23, 1958
June
April
June
June
June
June
1982 Entered the Company
2004 Executive Offi cer of the Company
2008 Director and Senior Executive Offi cer of the
Company
2010 Senior Executive Offi cer of the Company
2012 Director and Senior Executive Offi cer of the
Company
June
2015 In charge of R&D in North America (including
June
applied solutions, commercial & industrial
refrigeration, fi lter and dust collection) of the
Company
2017 In charge of R&D in North America of the
Company (Current position), in charge of
Applied R&D Center of the Company (Current
position), General Manager of Silicon Valley
Technology Offi ce of the Company
2018 Senior Executive Offi cer 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)
June
June
2019 Senior Executive Offi cer of the Company
2020 Director and Senior Executive Offi cer of the
Company (Current position)
Number of the Company shares owned 8,000
Responsibilities and Assigned Items
Responsible for Applied Solution Business, R&D in North
America, Applied R&D Center, Daikin Open Innovation Lab
Silicon Valley
Date of Birth May 14, 1953
Number of the Company shares owned 6,500
Responsibilities and Assigned Items
Responsible for Global Operations Division, fi lter business,
training,
Director of Goodman Global Group, Inc. (non-resident),
Director of Daikin Holdings (Houston), Inc. (non-resident)
September 1978 Entered the Company
May
2010 General Manager of Global Operations Division
of the Company
June
June
2012 Executive Offi cer of the Company
2016 Senior Executive Offi cer of the Company,
Director of Goodman Global Group, Inc.
(Current position), Director of Daikin Holdings
(Houston), Inc. (Current position)
June
2019 Senior Executive Offi cer of the Company, in
charge of fi lter business of the Company
(Current position), in charge of training of the
Company (Current position)
June
2021 Director and Senior Executive Offi cer (Current
position), in charge of Global Operations Division
of the Company (Current position)
Date of Birth November 10, 1959
1997 Regional Director (Asia Pacifi c) of Carrier Aircon
Limited
June
2019 Member of the Board and Senior Associate
Offi cer of the Company (Current position)
2001 Regional Vice President (North&East) of Voltas
Number of the Company shares owned —
Limited
2005 Senior Vice President of the above company
2006 Managing Director of Unifl air India Pvt. Ltd.
2010 Deputy Managing Director & COO of Daikin
May
Airconditioning India Pvt. Ltd.
September 2010 Managing Director & COO of the above company
2017 Managing Director & CEO of the above company
July
(Current position)
June
2018 Member of the Board and Associate Offi cer of
the Company, Regional General Manager of Air-
Conditioning Business in India/East Africa of
Global Operations Division of the Company
(Current position)
Kanwal Jeet Jawa
Member of the Board and
Senior Associate Offi cer
Responsibilities and Assigned Items
Regional General Manager of Air-Conditioning Business in India/
East Africa of Global Operations Division of the Company,
Managing Director & CEO of Daikin Airconditioning India Pvt. Ltd.
48
Audit & Supervisory Board Members
Date of Birth April 21, 1940
June
2020 Chief Advisor of the above company (Current
1963 Entered Sumitomo Forestry Co., Ltd.
April
December 1988 Director of the above company
June
June
1992 Managing Director of the above company
1995 Representative Director and Senior Managing
Director of the above company
April
1999 Representative Director and President of the
above company
June
2002 Representative Director and Executive Offi cer 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)
position)
Number of the Company shares owned —
Signifi cant Concurrent Posts
Chief Advisor of Sumitomo Forestry Co., Ltd.
Date of Birth
January 2, 1943
Number of the Company shares owned —
Signifi cant Concurrent Posts
Honorary Advisor of Teijin Limited
1965 Entered Teijin Limited
2000 Director of the above company
2001 Managing Director of the above company
April
June
June
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
Number of the Company shares owned 8,000
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 Offi cer, 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 Offi cer of the Company,
General Manager of New York Offi ce 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
June
2015 Audit & Supervisory Board member of the
Company (Current position)
Date of Birth
July 31, 1960
Number of the Company shares owned 1,000
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 Offi cer of the Company
2019 Audit & Supervisory Board member of the
Company (Current position)
Toru Nagashima
Audit & Supervisory Board
Member (External)
Kosei Uematsu
Audit & Supervisory Board
member (Standing)
Hisao Tamori
Audit & Supervisory Board
member (Standing)
Integrated Report 2021
49
Corporate Officers
Executive Offi cers
Position
Name
Responsibilities and Assigned Items
Senior Executive Offi cer Koichi Takahashi
Responsible for Finance, Accounting/Budget Operations, Promoting Operational Effi -
ciency, General Manager of Finance and Accounting Division
Senior Executive Offi cer Masayuki Moriyama
Responsible for Applied Solution Business in China Region, Refrigeration Business,
Director of Daikin (China) Investment, COO of McQuay China
Senior Executive Offi cer
Satoshi Funada
Responsible for Service Operations, General Manager of Air Conditioning Sales Division
Senior Executive Offi cer
Naofumi Takenaka
Responsible for Human Resources, General Affairs
Senior Executive Offi cer
Yoshikazu Tayama
Department Manager of Budget and Administration Group in Finance and Account-
ing Division
Senior Executive Offi cer
Katsuyuki Sawai
Responsible for CSR, Global Environment Affairs, Public Relations, General Manager
of Tokyo Offi ce, Manager of Public Relations Department in Tokyo Offi ce, Chairman
of CSR Committee
Senior Executive Offi cer
Tsutomu Morimoto
Responsible for Goodman Group Business, Executive Secretarial Department, Coop-
eration within North America
Senior Executive Offi cer
Yuji Yoneda
Responsible for Air-Conditioning Product Development (including Applied Solution
and Refrigeration), General Manager of Technology and Innovation Center
Senior Executive Offi cer Masaki Saji
General Manager of Human Resources Division, Department Manager of Diversity
Promotion Group in Human Resources Division
Senior Executive Offi cer
Toshio Ashida
Responsible for Corporate Planning, Electronics Business, Technology Innovation
Strategy Offi ce in Technology and Innovation Center
Senior Executive Offi cer
Yasushi Yamada
Responsible for Safety
Executive Offi cer
Hitoshi Jinno
General Manager of Filter Division
Executive Offi cer
Kota Miyazumi
Responsible for Marketing, Corporate Communication, General Manager of Mar-
keting Research Division, Department Manager of Planning Group in Marketing
Research Division, Chairman of Information Disclosure Committee
Executive Offi cer
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
50
Position
Name
Responsibilities and Assigned Items
Executive Offi cer
Akira Murai
Responsible for Defense Systems Business, SCM, Logistics, Co-Creation Projects mem-
ber of Technology and Innovation Center, General Manager of Yodogawa Plant
Executive Offi cer
Makio Takeuchi
Responsible for Global Procurement
Executive Offi cer
Yoshiyuki Hiraga
Responsible for Chemicals Business, Chemical Environment/Safety
Executive Offi cer
Hideki Maruoka
Responsible for Oil Hydraulics Business
Executive Offi cer
Shigeki Morita
Responsible for PL/Quality (Air Conditioning/Applied/Refrigeration), Alliance Promo-
tion with Gree Electric Appliances Inc., PD Affi liation Alliance Promotion, Concur-
rent Development Promotion, General Manager of Air-Conditioning Manufacturing
Division, General Manager of Sakai Plant
Executive Offi cer
Katsumi Kawahara
Deputy General Manager of Technology and Innovation Center (Responsible for
Promoting Industry, Government and Academia Collaboration)
Executive Offi cer
Shoji Uehara
General Manager of Global Operations Division
Executive Offi cer
Hiroaki Ueda
Responsible for DX Strategy Promotion, General Manager of Corporate Planning
Department
Executive Offi cer
Katsuya Miura
General Manager of Chemicals Division, Manager of Planning Department in
Chemicals Division
Executive Offi cer
Kenji Matsuba
Deputy General Manager of Air-Conditioning Manufacturing Division (Responsible
for Business Strategy), Manager of Planning Department in Air-Conditioning
Manufacturing Division
Executive Offi cer
Kimikazu Hatou
Deputy General Manager of Air-Conditioning Manufacturing Division (Responsible
for Product Development), Manager Responsible for Product Development in Refrig-
eration Division, General Manager of Shiga Plant
Executive Offi cer
Tomohiro Mizuguchi
Responsible for IT Promotion, Manager of General Affairs Department, Manager of
General Affairs Group in General Affairs Department
Executive Offi cer
Keiko Mori
Responsible for Human Resource Development and Maximizing the Talents of Women,
Department Manager Responsible for Executive Secretarial in Executive Secretarial
Department
Integrated Report 2021
51
Compliance/Risk Management
Taking an Integrated Approach to Promoting
Compliance and Risk Management
Identifi cation of Important Risks and Planning and
Implementation of Countermeasures
At Daikin, the Internal Control Committee, chaired by the
President, checks and confi rms that internal controls,
including risk management, are functioning properly
throughout the Group. On top of this, the Corporate Ethics
and Risk Management Committee promotes the manage-
ment of operational risk and thorough compliance.
Chaired by the offi cer in charge of corporate ethics and
compliance, the Corporate Ethics and Risk Management
Committee is comprised of each department head and the
presidents of major Group companies in Japan. In principle,
the Committee meets twice a year to identify issues that
need to be strengthened and promote their resolution, and
to report on the status of initiatives at overseas Group
companies.
Steps are also taken to formulate and develop compre-
hensive common rules to tackle compliance and risk man-
agement for overseas Group companies.
The Daikin Group established its Group Conduct
Guidelines that clearly outline required conduct for individ-
ual officers and employees and appointed a Compliance
and Risk Management Leader (CRL) for each division and
each of the main Group companies in Japan and overseas
to ensure thorough compliance. By regularly checking the
status of compliance and risk management, sharing infor-
mation, and disseminating these Guidelines, every effort is
being made to foster “culture free of compliance viola-
tions” and to elevate “mechanisms to ensure that there are
no compliance violations.”
In fi scal 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.
Self Assessment System to Check the Status of
Conduct Guidelines Compliance
Once a year, Daikin uses its unique self assessment system
to ensure that the Group is in thorough compliance with
the Group Conduct Guidelines. Using self assessments,
employees check their own actions based on the Group
Conduct Guidelines. Drawing on the results, employees
identify issues for the organization and put in place
countermeasures. The issues identifi ed and countermea-
sures are reported to and shared with the Corporate Ethics
and Risk Management Committee.
With the rapid expansion of the Group’s business, the
Daikin Group has introduced risk management across the
Group to gain an overall picture of risks from a global per-
spective in an accurate and prompt manner and to reduce
risks. Every year, each division and main Group companies
overseas and in Japan identify critical risks through risk
assessments. Based on the fi ndings, each Group company
puts forward and implements countermeasures and works
diligently to reduce these risks. The status of each compa-
ny’s risk reduction measures is shared with and reported to
the Corporate Ethics and Risk Management Committee. For
example, in fi scal 2020, Daikin Industries made efforts
toward key themes such as “Information management
risk,” “Economic security risk,” “Quality risk,” “Natural
disaster risk,” “Strengthening overseas crisis management
functions,” and “Harassment prevention.”
Corporate Ethics and Risk Management
Board of Directors
Corporate Ethics and
Risk Management Committee
Organization body for
promoting corporate ethics and
risk management activities for
the entire Group
Officer in Charge of Compliance
and Corporate Ethics
Persons in charge of promoting
corporate ethics and risk
management activities for the
entire Group
Officer in Charge
Divisions and
Group Companies
Legal Affairs, Compliance
and Intellectual
Property Center
Staff division of the director in
charge of corporate ethics and
compliance
P
r
o
m
o
t
i
o
n
E
x
e
c
u
t
i
o
n
Persons in Charge of
Corporate Ethics and
Risk Management
Persons responsible for
taking action on corporate
ethics and risk management
Compliance and
Risk Management
Leaders Meeting
Compliance and
Risk Management Leaders
Persons in charge of
promoting corporate ethics
and risk management
52
Response to TCFD
For Daikin, climate change represents one important issue affecting its business continuity.
Daikin endorses the recommendation of the Task Force on Climate-Related Financial Disclosures
(TCFD)* intended to mitigate the risk of instability in fi nancial markets attributed to climate
change. We are now working to analyze and refl ect the risks and opportunities of climate
change as they as related to our business operations into our management strategies and risk
management. We will disclose the progress of such appropriately as we aim for further growth
while contributing to a decarbonized society.
* TCFD was established in 2015 by the Financial Stability Board. It recommends that companies disclose information about the fi nancial impacts of climate change
after evaluating related business risks and opportunities.
Daikin’s Response to TCFD’s Recommended Disclosures
Governance
The organization’s governance
around climate-related risks and
opportunities
• Establish climate-related issues as important CSR issues of Daikin and manage them at the executive man-
agement level through the CSR Committee, chaired by the offi cer in charge of CSR
• The CSR Committee discusses Daikin’s initiatives, targets, risks and opportunities concerning climate change,
follows up on results, and reports to the Board of Directors
Strategy
The actual and potential impacts of
climate-related risks and opportuni-
ties on the organization’s business,
strategy and fi nancial planning
Risk Management
Process for identifying, assessing
and managing climate-related risks
• Analyze the climate scenarios based on The Future of Cooling by the International Energy Agency (IEA)
• Demand for air conditioning is expected to more than triple current levels by 2050. While there is the risk of
stricter energy regulations for air conditioning and tighter regulations on refrigerants with a high global
warming potential, this will also be an opportunity for Daikin to expand its strengths of highly environmen-
tally conscious products and services
• Environmental Vision 2050 calls for net zero greenhouse gas emissions by 2050; and we have incorporated
greenhouse gas reduction targets and main measures into the FUSION 25 Strategic Management Plan
• Gather information on climate risks from business bases around the world based on scenario analysis, evalu-
ate priorities, and specify climate risks that should be refl ected in strategy
• Recognize climate risks as risks that signifi cantly impact Daikin’s business strategy, and integrate them into
the company-wide risk management process
• Check the status of company-wide risk management by the Internal Control Committee chaired by the
President and CEO, and report to the Board of Directors
Metrics and Targets
The metrics and targets used to
assess and manage relevant climate-
related risks and opportunities
• Under Environmental Vision 2050, aim to reduce greenhouse gas emissions to net zero by 2050
• Under the FUSION 25 Strategic Management Plan, set targets to reduce greenhouse gas emissions from our
own business operations (30% or more by 2025 and 50% or more by 2030 compared to BAU with 2019 as
the base year)
Climate Related Risks and Opportunities and Potential Impacts
Category
Impact on Daikin’s business
Transition
Risks
Stricter regulations on refrigerants
If regulations on refrigerants become too strict, there is a possibility that
existing air conditioners no longer compliant with these regulations will
become obsolete.
Tight supply and demand for electricity
There is a possibility that the spread of air conditioners in emerging countries
will increase electricity usage and make it diffi cult to increase sales of air con-
ditioners due to electricity shortages.
Probability
of
occurrence
Potential
fi nancial
impacts
High
Large
High
Large
Physical
Damage to production bases
There is a possibility that fl ooding caused by typhoons could cause our plants
to shut down or stop the supply of parts due to the shutdown of suppliers.
Medium
Medium
Opportunities
Transition
Stricter regulations on refrigerants
Companies without technologies compliant with regulations on refrigerants
will be weeded out, resulting in increased sales of air conditioners using
refrigerants with lower global warming potential, which is our strength.
Stricter regulations on energy effi ciency
Companies without technologies compliant with stricter regulations on ener-
gy effi ciency will be weeded out, resulting in increased sales of air condition-
ers with high energy effi ciency, which is our strength.
Stricter regulations on the use of fossil fuels
Regulations on the use of fossil fuels continue to become stricter, and since
combustion heaters will be subject to them, there will be an increase in sales
on growing demand for heat pump heaters, which is our strength.
High
Large
High
Large
High
Large
Integrated Report 2021
53
Enhancing the Management Foundation
As part of “FUSION 25,” Daikin raised fi ve themes to enhance the management foundation:
“Strengthening Technology Development Capabilities,” “Establishing a Robust Supply Chain,”
“Promoting Digital Transformation for Innovation,” “Creating Market Value/Enhancing Advocacy
Activities,” and “Improving HR Capabilities Through Advanced Diversity Management.”
Strengthening Technology Development Capabilities
We believe that technological development capability is the
lifeline of a manufacturer. Amid rapidly changing external con-
ditions, we will accelerate the development of distinctive tech-
nologies and products, and their contribution to business
expansion, by promoting both internal and external co-creation
that includes collaboration among industry and academia. We
will focus on allocating resources with the establishment of
four key domains (three growth strategy domains + one
domain with future themes).
● Key domains and themes
Target business contributions in FUSION 25
(3 growth strategy domains)
Future themes
(1) Challenge to achieve
carbon neutrality
Enhanced heat pumps
Next-generation refrigerants
New environment-
related business
Energy
creation
Chemicals’ environmental
technology
(2) Promotion of
Solutions business
AC Solutions
Refrigeration Solutions
(3) Creating value with air
Safe and reliable IAQ/AE
Data utilization
(4) Development and
research on advanced
technologies for the
future
Effective use of
resources/energy
Alternative
technologies for
vapor compression
Technologies for
sustainable business
growth while
resolving social issues
P
r
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o
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c
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l
a
b
o
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a
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i
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a
t
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p
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t
s
● Core/fundamental technology themes in existing businesses
AC core
Chemicals core
Analysis/evaluation
Design
Digital technology utilization for enhanced technology development capabilities
54
R&D Bases
Enhanced overseas R&D bases as well as recruitment and development
of human resources to promote innovation to accelerate business
contributions globally
Europe
Heat pump space and
Heat pump space and
water heaters
water heaters
USA
Applied Solutions
Applied Solutions
Japan
TIC
Control tower
Control tower
•• Technology strategy formulation
Technology strategy formulation
•• Core product development
Core product development
•• AI/IoT technologies
AI/IoT technologies
China
IAQIAQ
India
Cooling only inverter
Cooling only inverter
For high ambient
For high ambient
temperature zone
temperature zone
Asia
We will pursue technology development through internal and
external collaborative innovation projects centering on the
Technology and Innovation Center —the technology control
tower of Daikin Group—to accelerate the creation of results. In
order to promote key domains and strategic themes globally,
we will strengthen development capabilities and collaboration
among our overseas development sites while working to recruit
and train personnel.
Aiming to Implement New Technologies in Society by Promoting Industry-Academia
Collaboration
In partnership with professors from the University of Tokyo and related venture com-
panies, we are working on creating and deploying in society future technologies and
business models in pursuit of “new value with air.” In February 2021, we invested in
Fairy Devices Inc., a University of Tokyo-based start-up. We will expand the supply
system in Japan and overseas for THINKLET®—a smart wearable device we are jointly
developing that constitutes a remote work support solution for training air-condi-
tioning service engineers—and accelerate the strengthening of our global service
business and the transmission of expertise. With Kyoto University, we reviewed joint
R&D themes in terms of healthcare, the environment, energy, and air-conditioning
culture in Asia and Africa, with a view to a new normal era. We have established fi ve
co-creation programs and will pursue them based on an integrated approach to the
arts and sciences. In addition, we will partner with the information science depart-
ments at Osaka University to create safe and reliable IAQ/AE and realize next-gener-
ation smart buildings using the new campus (at Minoh, Japan).
Service engineers wearing THINKLET® are support-
ed by skilled personnel from remote locations
Integrated Report 2021
55
Enhancing the Management Foundation
Establishing a Robust Supply Chain
We are working to further solidifying our supply system while
uncertainties such as global supply chain disruptions and
increasing decoupling on a global scale are rapidly growing.
To that end, we are taking steps to shift to region-based pro-
curement to achieve local production for local consumption
and establish concurrent production and backup systems to
avoid risks. In addition, we aim to centralize supply chain infor-
mation utilizing digital tools to realize optimized SCM. The
introduction and use of simulation tools will enable us to
respond to demand fl uctuations, make more sophisticated
decisions in the event of abnormalities, and achieve overall
optimal planning.
Making practical use of solutions that support the planning and execution of optimal
production and sales plans that respond immediately to changes in demand
As part of IoT-based collaboration with Hitachi, Ltd., Daikin has applied Hitachi Group’s SCM
optimization simulation technology*1 in the Company’s Chemicals business to put into prac-
tical use solutions that support the planning and implementation of optimal production and
sales plans that respond immediately to demand fl uctuations. Until now, manufacturing and
sales measures—such as which products to produce, how much and at which locations, and
where to sell them—had to be formulated manually by those in charge, making the process
very time-consuming. Based on the supply-demand balance of multiple manufacturing and
sales bases, this solution can automatically present manufacturing/sales measures and pro-
duction plans that are optimized to maximize key performance indicators (KPIs) including for
sales and profi ts. We have confi rmed that it is possible to create about 60 times as many
patterns in a short period of time as conventional methods, and that the time required for
decision making can be reduced by about 95% since consensus can be formed quickly
based on quantitative simulation results*2. Going forward, we will continue to use digital
technology to enhance the sophistication of ECM and SCM.
Substitutable manufacturing,
bottleneck elimination
Supporting the planning and execution of produc-
tion and sales plans by connecting global manu-
facturing and sales bases
Spare capacity utilization,
increased production of
highly profi table products
*1 Technology that simulates optimal production bases, production volume, sales volume, and total costs, etc., using mathematical optimization methods
developed by Hitachi Solutions, Ltd.
*2 Survey examples during the Daikin and Hitachi demonstration. The number of patterns created per unit of time, and the time to determine whether pro-
duction is possible after demand is known.
Promoting Digital Transformation for Innovation
We will work to create new products, services, and business
models and fundamental business process innovations with
signifi cantly enlarged digital investments.
We will build a platform for linking and analyzing data to
expand the Solutions business as well as a system to manage
customer information and utilize it to offer value throughout
the AC equipment lifecycle. In addition, we will increase con-
nected equipment to obtain equipment data as well as obtain
data on people, buildings, and others that lead to future busi-
ness development through external collaboration. Furthermore,
we will reform processes for ECM, SCM, and development,
construct systems for upgrading the management foundation,
and increase the effi ciency of indirect operations using robotic
process automation and AI.
To promote such digital transformation, we will pursue the
development of 1,500 human resources in digital fi elds
through the Daikin Information and Communications
Technology College and other initiatives.
Selected for “DX Stocks 2020”
The Company was selected as one of the “Digital Transformation Stocks (DX Stocks)
2020” by the Ministry of Economy, Trade and Industry and the Tokyo Stock Exchange.
The “DX Stocks” category selects companies that are actively engaged in “DX” activi-
ties, such as using data and digital technologies to transform their products, services
and business models, as well as radically reforming their business processes.
We are actively pursuing the use of AI/IoT technology to provide high-value-added
air-conditioning to society. For example, we launched the spatial data co-creation plat-
form “CRESNECT” with partner companies. As its fi rst project, we opened the co-work-
ing space “point 0 Marunouchi” in 2019. Combining the Company’s cutting-edge
technology, data, and expertise, we are conducting fi eld tests aimed at creating “offi ce
spaces of the future” that will improve productivity and maintain health. Looking ahead,
we will continue to create innovations that help solve social issues by steadily advancing
DX through collaborative creation both internally and externally.
Lecture at the Daikin Information and Communi-
cations Technology College
56
Creating Market Value/Enhancing Advocacy Activities
As a driving force in the industry, we will participate in the cre-
ation of common global rules and the formation of interna-
tional public opinion. We will continue to increase our market
value by gaining the understanding of a wide range of stake-
holders regarding our technologies and products that lead to
the resolution of social issues, such as realizing carbon neutrali-
ty and helping to improve air quality.
To mitigate global warming, we will work to expand the use
of R32, inverter units, and heat pump space and water heaters,
while promoting the recovery and recycling of refrigerants.
To create new value for air, we will engage with universities,
research institutes, and industry in an effort to create new safe-
ty and security standards.
Selected among “Clarivate Top 100 Global Innovators 2021”
Daikin was selected among “Clarivate Top 100 Global Innovators 2021,” a list of the
world’s most innovative companies and institutions based on analysis of patent data by
global information services company Clarivate Plc. This year marks the eighth time over-
all and the seventh consecutive year that Daikin has been selected.
As an air-conditioning manufacturer with global business operations, Daikin allows
the use of some of its patents by other companies in order to contribute to the reduc-
tion of greenhouse gases for the industry overall. For example, Daikin granted free
access worldwide to 93 patents related to air-conditioning equipment utilizing R32, a
refrigerant with low global warming potential (GWP). Since 2019, Daikin has expanded
the scope of patents and pledged the non-assertion of those patents to support conver-
sion to refrigerants with high energy savings and low GWP. In recognition of these
efforts, Daikin was awarded the “Minister of Economy, Trade and Industry Award” at
the Intellectual Property Achievement Awards for fi scal 2020 conducted by the Ministry
of Economy, Trade and Industry and the Japan Patent Offi ce.
Daikin will continue to work on R&D activities for creating innovation that provides new
value to society as it further strengthens the intellectual property activities that support them.
Improving HR Capabilities through Advanced Diversity Management
Responding to the changing times, we will further refi ne our
corporate culture and organizational DNA based on “peo-
ple-centered management”—which is the foundation of our
growth and development—and will work to ensure that such
initiatives are thoroughly implemented and take hold
Groupwide. We will develop human resource measures that
enable all employees around the world to maximize their
diverse individuality and unlimited potential for growth. As the
impact of COVID-19 changes the way we work and live, we
will fl exibly respond to the “new normal” in order to create
new value and achieve further growth and development.
Granted “Nadeshiko Brand” Designation in Fiscal 2020 for the Eighth Time over Seven
Consecutive Years
The Ministry of Economy, Trade and Industry and the Tokyo Stock Exchange (TSE) jointly selects
and publicizes TSE-listed enterprises that are outstanding in terms of maximizing the talents of
women in the workplace under the “Nadeshiko Brand.” Daikin was granted the Nadeshiko
Brand designation in fi scal 2020, marking the eighth time over seven consecutive years.
Daikin considers diversity management to be a pillar of its management approach. In partic-
ular, we have been working on maximizing the talents of women under a project directly con-
trolled by top management that was launched in 2011. In fi scal 2020, the number of female
managers and the ratio of female employees increased, as did the number of candidates for
management positions. We have been steadily expanding the scope of our activities through a
series of concrete measures. The proactive nature of these efforts was evaluated highly, and we
believe that this led to the Company being granted the “Nadeshiko Brand” designation.
We have also formulated an action plan for maximizing the talents of women toward
the end of fi scal 2025, setting quantitative goals such as increasing the number of
female executives appointed internally to at least one position and the number of
female managers to 120, as well as maintaining a parental leave utilization rate of at
least 90% for both men and women.
Going forward, we will accelerate our efforts to promote diversity management with the
aim of creating an environment where every employee can demonstrate their full potential.
Integrated Report 2021
57
Eleven-Year Financial Highlights
Daikin Industries, Ltd. and Consolidated Subsidiaries
Years Ended March 31
2011
2011
2012
2012
2013
2013
2014
2014
2015
2016
2017
2018
2019
2020
2021
Operating Results (for the year):
Net sales
Gross profi t
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 fl ow (Note 3)
Net cash provided by (used in) fi nancing 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 fl ow
Cash dividends
Ratios (%):
Gross profi t margin
Operating income margin
EBITDA margin
Return on shareholders’ equity (ROE)
Shareholders’ equity ratio
¥1,160,331
¥1,218,701
¥1,290,903
¥1,787,679
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
¥179,713
(80,835)
98,878
(38,249)
¥1,132,507
¥1,160,564
¥1,735,836
¥2,011,870
372,481
487,876
389,891
502,309
705,871
618,118
693,944
801,854
¥ 68.14
¥ 141.37
¥ 149.73
¥ 318.33
1,672.74
1,725.64
2,123.10
2,748.08
189
36.00
(62)
36.00
(396)
36.00
339
50.00
31.17%
30.52%
30.06%
31.79%
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
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 fl ow = 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 fi nancial statements for the fi scal year ended March 31, 2014 and subsequent years have been revised.
5. Effective from April 1, 2018, the consolidated fi nancial statements for the fi scal 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
(¥ billion)
300
250
200
150
100
50
0
11
12
13
14
15
16
17
18
19
20
21
11
12
13
14
15
16
17
18
19
20
21
58
Net Income Attributable to
Owners of the Parent
(¥ billion)
200
150
100
50
0
11
12
13
14
15
16
17
18
19
20
21
2011
2012
2013
2014
2015
2015
2016
2016
2017
2017
2018
2018
2019
2019
2020
2020
Millions of Yen
2021
2021
¥1,915,014
¥2,043,691
¥2,043,969
¥2,290,561
¥2,481,109
¥2,550,305
¥2,493,387
649,902
459,314
42,892
190,588
268,354
119,675
711,576
493,704
46,138
217,872
302,075
136,987
730,935
500,166
53,870
230,769
315,798
153,939
798,829
545,089
62,051
253,740
348,574
189,052
868,923
592,668
65,216
276,255
375,570
189,049
884,898
619,385
67,968
265,513
393,999
170,731
¥160,423
¥226,186
¥267,663
¥223,740
¥250,009
¥302,167
(77,331)
83,092
(83,073)
(105,493)
(128,823)
(127,459)
(165,773)
(156,187)
120,693
(85,422)
138,840
(73,544)
96,281
(93,955)
84,236
(68,721)
145,980
(169,934)
864,136
625,513
71,738
238,623
372,217
156,250
¥374,691
(159,667)
215,024
98,942
¥2,263,990
¥2,191,105
¥2,356,149
¥2,475,708
¥2,700,891
¥2,667,513
¥3,239,663
662,413
608,981
609,430
554,371
585,642
553,807
1,024,725
1,014,409
1,111,636
1,296,553
1,416,075
1,434,968
¥ 410.19
¥ 469.23
¥ 526.81
¥ 646.53
¥ 646.39
¥ 583.61
3,511.34
3,473.54
3,802.10
4,433.62
4,841.15
4,904.46
285
100.00
413
120.00
475
130.00
329
140.00
288
160.00
499
160.00
751,213
1,665,689
¥ 533.97
5,691.85
735
160.00
33.94%
34.82%
35.76%
34.87%
35.02%
34.70%
34.66%
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
9.57
14.93
10.08
51.42
Research and Development Expenses
Shareholders’ Equity
Total Assets
(¥ billion)
75
60
45
30
15
0
11
12
13
14
15
16
17
18
19
20
21
(¥ billion)
1,800
1,500
1,200
900
600
300
0
11
12
13
14
15
16
17
18
19
20
21
(¥ billion)
3,500
2,800
2,100
1,400
700
0
11
12
13
14
15
16
17
18
19
20
21
Integrated Report 2021
59
Financial Review
Summary of the Period
During the fi scal year ended March 31, 2021, the overall world
economy slowed signifi cantly as economic activity stagnated
due to the global spread of the coronavirus (COVID-19). While
some countries saw a recovery, there were also regions where
the infection spread again, prolonging the impact of the dis-
ease. Although the U.S. economy slowed due to a decline in
personal consumption in the fi rst half of the period, there were
signs of a recovery from the second half as government eco-
nomic measures and strong online sales laid the groundwork
for increased consumption. The European economy was sup-
ported by a recovery in exports, despite the continued slow-
down in personal consumption attributable to prolonged
restrictions on activities. In the economies of Asia and emerg-
ing countries, domestic demand was sluggish due to restric-
tions on activities, but there were signs of economic recovery,
helped by gains in exports and government spending. The
Chinese economy continued a recovery trend buoyed by the
quick resumption of economic activities and increases in
exports and government infrastructure investment in the infor-
mation and telecommunication as well as energy sectors.
Despite export gains to China and a recovery in production
activities, sluggish personal consumption placed downward
pressure on the Japanese economy.
Amid this environment, the Daikin Group launched cross-di-
visional projects, and focused on dealing with the COVID-19
pandemic in terms of business operations, including produc-
tion, procurement, and sales. In particular, the Group worked
to develop and launch new products related to air quality, such
as air purifi ers and ventilation products, by capitalizing on the
growing awareness for the safety and assurance of indoor air
quality and air environments. In addition, while procurement
from sales networks, production sites, and suppliers was affect-
ed in each country, the Group worked to maintain its product
supply system. Although market environments vary according
to country and region, sales are returning to a recovery trend,
particularly in residential air-conditioning equipment.
In addition, the Daikin Group set “Accelerating Our 3
Structures of Collaborative Innovation, Let Us Win in this Era of
Change” (3 Structures of Collaborative Innovation:
Collaborative Innovation with Customers, Collaborative
Innovation with External Bodies, and Collaborative Innovation
within the Group) as the slogan for its Annual Group Policy for
2020. The Group made efforts to strengthen sales and market-
ing capabilities; foster new product development; build fl exible
production and procurement systems; improve quality;
enhance human resources capabilities; and reduce both fi xed
and variable costs in each region around the world.
In the fi scal year under review, the Daikin Group’s net sales
fell to ¥2,493.4 billion (a year-on-year decrease of 2.2%). As
for profi ts, consolidated operating income dropped to ¥238.6
billion (a decline of 10.1% from the previous fi scal year). Net
income attributable to owners of the parent decreased 8.5%,
to ¥156.3 billion.
Performance by Business Segment
Air-Conditioning and Refrigeration Equipment
Total sales of the Air-Conditioning and Refrigeration Equipment
segment decreased 1.5% from the previous fi scal year, to
¥2,273.8 billion. Operating income declined 5.5% year on
year, to ¥223.1 billion.
• Japan
In the Japanese commercial air-conditioning equipment mar-
ket, industry demand declined, particularly in the market for
stores, due to the spread of COVID-19. As air quality needs
rose for ventilation and disinfection, the Daikin Group expand-
ed its proposals for air environments using systems that com-
bine air-conditioning equipment and ventilation equipment.
This includes the launch of new products in the “Heat Reclaim
Ventilator” lineup, high-performance ventilation equipment
that can ventilate a room without affecting the room’s tem-
perature. The Group strengthened its efforts to convey its value
to the market in order to meet expectations as an air-condi-
tioner manufacturer, such as by developing “untact” sales uti-
lizing online activities, stimulating demand through advertising
focused on ventilation and disinfection, and opening an “Air
Consultation Service” to directly answer customer concerns.
However, net sales of commercial air-conditioning systems
were lower year on year due to factors including reduced
demand.
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
2017
2018
2019
2020
2021
(¥ billion)
280
(%)
12
(¥ billion)
200
210
140
70
0
2017
2018
2019
2020
2021
2021
9
6
3
0
150
100
50
0
2017
2018
2019
2020
2021
Domestic
Overseas sales
Operating income
Operating income margin
60
In the Japanese residential air-conditioning equipment mar-
ket, industry demand for both room air conditioners and air
purifi ers exceeded the previous fi scal year because of demand
for additional purchases of air-conditioning equipment due to
changes in residential applications including remote work, as
well as growth in demand for home appliances due to people
spending more time at home. The Group responded to market
needs by launching a series of high value-added products uti-
lizing proprietary technologies, such as the Streamer disinfec-
tion unit, waterless humidifi cation, and room air conditioner air
supply ventilation, including the room air conditioners “Urusara
X” and “Ururu Sarara Air Purifi er.” Additionally, despite disrup-
tions to its supply chain caused by COVID-19, the Group
worked to maintain a stable supply system and increased sales.
Through these efforts, the Group’s net sales of residential
air-conditioning systems increased year on year.
• Americas Region
In the Americas, net sales decreased year on year as a whole
due to the impact of COVID-19. Residential air-conditioning
system demand was positively affected by people spending
more time at home, increased adoption of remote work, and
favorable weather conditions. However, net sales declined year
on year as the pandemic took hold throughout the United
States, which contributed to tight supply as a result of the tem-
porary closure of factories. Net sales of commercial air-condi-
tioning systems also declined year on year due to the review
and suspension of projects in the retail and restaurant as well
as certain other industries. In the market for large buildings
(Applied Systems), the Group worked to strengthen its sales
network and expand sales of ventilation products, particularly
of rooftop units and air-handling units (large commercial
air-conditioning systems that meet a wide variety of air-condi-
tioning needs depending on the type of business and room
application). Despite these endeavors, net sales fell below the
level of the previous fi scal year due to a slowdown in the mar-
ket caused by the spread of infection.
• China
In China, the Group strengthened its lineup of air and ventila-
tion products to meet the changes in the market and expand-
ed online sales. In April and May, there was some impact from
sales activities restrictions, but sales recovered from July
onwards, and annual net sales exceeded the previous fi scal
year. The Group maintained a high level of profi ts by reducing
fi xed costs and promoting cost reductions. Recovery was rapid
for residential air-conditioning systems, and the Group expand-
ed sales by developing sales that combined the Internet with its
“PROSHOP” specialty shops, and simultaneously strengthening
online sales in order to capture new customers and demand for
replacements. In the commercial retail market where recovery
in demand was slow for stores and offi ces, the Group expand-
ed customer contact points by leveraging ventilation and clean-
ing and captured replacement as well as additional demand. In
the large-scale projects market, the Group promoted collabora-
tion with major developers in order to secure net sales. In the
Applied Systems air-conditioning equipment market, the Group
strengthened sales in growth fi elds, such as infrastructure, data
centers and other information-related businesses, as well as in
repair and maintenance.
• Asia/Oceania Region
In Asia and Oceania, sales dropped signifi cantly due to the sus-
pension of business activities in many countries in April
because of governmental decrees in response to the spread of
COVID-19. However, the Group exploited growing demand
from the relaxation of restrictions by strengthening sales from
May onwards, and sales for the fourth quarter (January to
March) recovered to nearly the same level year on year. As
restrictions were eased in residential air-conditioning systems,
the Group captured demand, despite the remaining restrictions
in place on business activities, as people spent more time at
home and from a rebound in the decline in demand when
business activities were suspended. In addition, the Group pro-
moted sales through its own dealer channels as shopping malls
leasing space to home electronics retailers were closed in many
countries due to restrictions on business activities. In commer-
cial air-conditioning systems, a diffi cult situation continued as
the spread of infection caused delays in construction starts and
construction schedules across the market due to a shortage of
workers and mandatory COVID-19 testing at construction sites.
For the full fi scal year, net sales decreased year on year as a
whole due to the signifi cant impact of the spread of infection
in the fi rst quarter (April to June), which is the peak season for
air-conditioning use in Asia.
Selling, General
and Administrative Expenses
(¥ billion)
640
480
320
160
0
2017
2018
2019
2020
2021
Sales by Segment
Segment Profi t
(¥ billion)
2,500
2,000
1,500
1,000
500
0
2017
2018
2019
2020
2021
(¥ billion)
300
200
100
0
2017
2018
2019
2020
20212021
Air conditioning
Chemicals
Other
Air conditioning
Chemicals
Other
Integrated Report 2021
61
Financial Review
• Europe/The Middle and Near East/Africa
In Europe, the impact of strict lockdowns in response to the
spread of COVID-19 in various countries forced the Group to
start in a harsh business environment. However, the Group
established a stable intra-regional production and supply sys-
tem even while having to perform sales and promotional activi-
ties online and ensure social distancing. In addition, the Group
improved business performance by capturing new needs that
arose due to the COVID-19 pandemic, such as demand from
remote work and staying at home, and increased awareness of
air quality such as ventilation and disinfection. As a result,
overall net sales were higher year over year. Demand for resi-
dential air-conditioning systems rapidly increased due to
intense heat waves in France, Spain, and other countries, as
well as demand from staying at home. The Group capitalized
on this demand by taking full advantage of its nearest factories
in the Czech Republic and Turkey to provide supply. In addition,
the Group strengthened its sales network by developing new
dealers and expanded sales of residential heat pump hot water
heating systems, aided by new and greater subsidies under the
European Green Deal, an economic stimulus measure for
European nations aimed at achieving greenhouse gas reduction
targets for 2030. In particular, sales increased signifi cantly in
Germany and Italy thanks to the effects of introducing new
models and strengthening marketing capabilities. As a result of
these factors, overall net sales of residential air-conditioning
systems increased year over year. As for commercial air-condi-
tioning systems, demand from offi ces, hotels, restaurants, and
stores, which are major applications, declined due to the
repeatedly imposed lockdowns in various countries. Even at
food retailers with strong performance, new store construction
and renovation projects were cancelled or postponed.
Although sales were maximized through the use of propos-
al-based sales effectively leveraging online tools amid this diffi -
cult market environment and the restrictions placed on sales
activities such as visits to customers and worksites, net sales of
commercial air-conditioning systems decreased year over year.
In the Middle and Near East/Africa, sales of residential
air-conditioning systems increased year over year. However,
overall net sales decreased year over year because sales of
commercial air-conditioning systems were sluggish due to a
decrease in the number of projects caused by low crude oil
prices. In Turkey, net sales in the local currency increased year
over year, driven by sales of residential air-conditioning systems
and heating systems, but yen-equivalent net sales remained at
the same level year over year due to the impact of the sharp
depreciation of the Turkish lira.
In the fi lter business, while the global commercial market
declined due to the spread of COVID-19, the Group expanded
sales of high value-added products that contribute to higher air
quality and launched infection control products ahead of com-
petitors. Sales of high-performance fi lters mainly for residential
use were strong in the United States, and sales of negative
pressure units and air purifi ers grew in Japan thanks to subsi-
dies. In Europe, however, there was a severe impact from lock-
downs because sales mainly consist of end users for
commercial applications, and there was also customer restraint
on investments in commercial dust collection systems for gas
turbines, large plants, and similar facilities. As a result, overall
net sales in the fi lter business remained at the same level year
over year.
In the marine vessels business, net sales increased year over
year due to an increase in unit sales of marine container refrig-
eration units.
Chemicals
Overall sales of the Chemicals segment decreased by 8.7%
year over year to ¥164.2 billion. Operating income decreased
by 52.2% to ¥11.4 billion.
The general condition regarding overall sales of fl uorochemi-
cal products was harsh due to a decline in demand affected by
the spread of COVID-19 in a wide range of fi elds, including
semiconductors and automobiles, and a decline in demand in
the European gas market.
Net sales of fl uoropolymers decreased year over year due to
the major drop during the fi rst half of the period, as well as a
decline in demand for construction and aircraft in the United
States, despite the recovery trend of global demand for semi-
conductor and automotive-related applications especially in the
Chinese market. Net sales of fl uoroelastomers also decreased
year over year, despite a recovery in demand in the automotive
fi eld centering on the Chinese market.
Among specialty chemicals, net sales of anti-fouling surface
coating agents increased year over year as a result of strong
sales in China. In addition, net sales of semiconductor etching
agents increased year over year due to sales expansion to meet
Cash Dividends per Share
Total Assets
Working Capital and Current Ratio
(¥ billion)
3,200
2,400
1,600
800
0
2017
2018
2019
2020
2021
2021
(¥ billion)
1,000
750
500
250
0
2017
2018
2019
2020
2021
(%)
280
210
140
70
0
Working capital
Current ratio
2017
2018
2019
2020
2021
(¥)
200
150
100
50
0
62
recovering demand. However, due in part to the general
decline in demand from the impact of COVID-19, overall net
sales of specialty chemicals remained at the same level year
over year.
As for fl uorocarbon gas, the impact of the decline in global
sales was signifi cant, and as a result, overall sales of gas
decreased substantially year over year.
Other Operations
Overall sales of the “Others” segment decreased by 9.6% year
over year to ¥55.4 billion. Operating income decreased by
25.5% to ¥4.1 billion.
In oil hydraulic equipment, net sales of oil hydraulic equip-
ment for industrial machinery declined year over year as a
result of a decline in capital investment in Japan and declining
demand in Asian, European, and U.S. markets triggered by the
spread of COVID-19. In addition, net sales of oil hydraulic
equipment for construction machinery and vehicles declined
year over year due to the impact of decreased demand in the
Japanese, European, and U.S. markets resulting from the
spread of infection.
In defense systems-related products, net sales decreased year
over year as a result of a reduction in sales of ammunition to
the Ministry of Defense, despite an increase of sales of home
oxygen equipment due to robust sales of oxygen concentrators
as well as the capture of demand for pulse oximeters (medical
devices that can easily measure blood oxygen saturation with-
out blood collection) in response to the spread of COVID-19.
In the electronics business, net sales decreased year over year
due to a decline in sales of “SpaceFinder,” a database system
for design and development sectors that is sold mainly to man-
ufacturers, which suffered from a decline in investment associ-
ated with the spread of COVID-19.
Current Exchange Rates
In foreign currency markets, the yen’s average annual exchange
rate was ¥3 stronger against the U.S. dollar and ¥3 weaker
against the euro compared to the previous fi scal year. The aver-
age rates for the fi scal year under review were US$1=¥106 and
€1=¥124. Fluctuations in currency exchange rates resulted in a
decrease of ¥22.5 billion in sales and ¥5.0 billion in operating
income below what they would have been in the absence of
fl uctuations.
Yen-U.S. dollar rate
Yen-euro rate
2020
¥109
¥121
2021
¥106
¥124
SG&A Expenses and Operating Income
SG&A expenses rose 1.0% over the previous fi scal year, to
¥625.5 billion mainly as a result of increases in personnel costs.
Consolidated operating income declined 10.1% year on
year, to ¥238.6 billion, while the operating income margin
came in at 9.6%.
Assets, Liabilities, and Total Equity
Assets
Total assets increased by ¥572.2 billion from the end of the
previous fi scal year to ¥3,239.7 billion.
Current assets increased by ¥428.9 billion from the end of
the previous fi scal year to ¥1,733.4 billion, mainly due to an
increase in cash and deposits.
Non-current assets increased by ¥143.2 billion from the end
of the previous fi scal year to ¥1,506.3 billion, primarily due to
an increase in investment securities resulting from market value
fl uctuation.
Liabilities and Net Assets
Liabilities increased by ¥336.2 billion from the end of the previ-
ous fi scal year to ¥1,541.2 billion, mainly due to an increase in
long-term borrowings.
Net assets increased by ¥235.9 billion from the end of the
previous fi scal year to ¥1,698.5 billion, primarily due to an
increase caused by posting of net income attributable to own-
ers of parent.
As a result of the aforementioned, the shareholders’ equity
ratio declined from 53.8% as of the end of the previous fi scal
year, to 51.4%. Net assets per share improved to ¥5,691.85
Total Share holders’ Equity and
Shareholders’ Equity Ratio
Free Cash Flow
Capital Investment
and Depreciation and Amortization
(¥ billion)
1,800
1,200
600
0
(%)
60
(¥ billion)
210
(¥ billion)
150
40
140
20
70
0
0
0
2017
2018
2019
2020
2021
2017
2018
2019
2020
2021
100
50
0
2017
2018
2019
2020
2021
Shareholders’ equity
Shareholders’ equity ratio
Capital investment
Depreciation and amortization (excluding amortization of goodwill)
Integrated Report 2021
63
Financial Review
from ¥4,904.46 for the previous fi scal year.
Total interest-bearing liabilities stood at ¥751.2 billion as of
March 31, 2021, up ¥197.5 billion compared to the end of the
previous fi scal year. This mainly refl ected the increase in long-
term borrowings and other factors. The interest-bearing liability
ratio (interest bearing liabilities / total assets) increased from
20.8% to 23.2%.
Cash Flows
During the fi scal year under review, net cash provided by oper-
ating activities was ¥374.7 billion, an increase of ¥72.5 billion
from the previous fi scal year, principally due to an increase in
trade payables. Net cash used in investing activities was ¥159.7
billion, an increase of ¥3.5 billion from the previous fi scal year,
primarily due to a decrease in proceeds from sales of invest-
ment securities. Net cash provided by fi nancing activities was
¥98.9 billion, an increase of ¥268.9 billion from the previous
fi scal year, mainly due to an increase in proceeds from long-
term borrowings. After including the effect of foreign
exchange rate change to these results, net increase in cash and
cash equivalents for the fi scal year under review, amounted to
¥341.2 billion, an increase of ¥387.2 billion from the previous
fi scal year.
Capital Investment
Considering investment as the foundation of growth, the
Daikin Group will strive to expand its business through invest-
ment, as well as to strengthen its fi nancial position, further
increase its corporate value, and improve shareholder returns.
Specifi cally, in addition to capital investments for new products
and investments to improve productivity and expand produc-
tion capacity, the Group will implement each strategic invest-
ment to expand its business globally and strengthen its
competitiveness. The funds required for these investments will
be procured by borrowing mainly from fi nancial institutions
and bonds as necessary, in addition to the Group’s own funds
based on the accumulation of internal reserves. During the fi s-
cal year under review, net cash provided by operating activities
was ¥374.7 billion, exceeding net cash used in investment
activities of ¥159.7 billion.
R&D Expenses
In view of the rising concern about global warming on a world-
wide scale and issues related to energy, the Daikin Group
working mainly through its Technology and Innovation Center
(TIC) engages in leading-edge technology research and devel-
opment programs designed to proactively contribute to the
resolution of global environmental issues, while also expanding
the Group’s business operations.
In addition to upgrading of its core proprietary technologies,
the Daikin Group is taking steps to acquire technology in coop-
eration with outside parties.
In fi scal 2019, Daikin established the Technology and
Innovation Center CVC Offi ce to play a role in all corporate
venture capital activities related to investment in and support
for start-up companies around the world.
In fi scal 2020, the Group entered into a comprehensive col-
laborative cooperation with Doshisha University in Kyoto.
Based on this, both parties worked on the practical application
of CO2 capture, decomposition, and reuse technologies, and
further increasing the effi ciency of air conditioners in order to
reduce greenhouse gas emissions. In addition, in response to
the increasing global demand for air quality, we have devel-
oped a “moisture-permeable membrane total heat exchanger
element” for ventilation equipment and “low-pressure loss air
fi lter material” for large air conditioners in cooperation with
Daicel Corporation.
We will work to innovate through collaborative creation,
solve environmental and social issues, and expand our business
by promoting industry-government-academia collaboration,
including with the University of Tokyo, China’s Tsinghua
University, and start-up companies, with which we already
formed partnerships.
Through these efforts utilizing our global R&D infrastructure,
we will work to greatly improve the effi ciency and speed of
R&D to create differentiated products in each region of the
world.
In fi scal 2020, R&D expenses included in the Groupwide
Research and
Development Expenses
(¥ billion)
80
60
40
20
00
0
64
2017
2018
2019
2020
2021
ROE
(%)
16
12
8
4
0
2017
2018
2019
2020
2021
ROA
(%)
8
6
4
2
0
2017
2018
2019
2020
2021
SG&A and manufacturing costs totaled ¥71.7 billion, and the
main initiatives, results, and R&D expenses by business seg-
ment for the fi scal year under review are as follows.
Air-Conditioning and Refrigeration Equipment
R&D expenses for air-conditioning and refrigeration operations
totaled ¥63.1 billion.
In the domestic air-conditioning business, people’s aware-
ness of air quality is increasing due to COVID-19, while in the
residential market we have applied our proprietary “waterless
humidifying” technology to the “Urusara X,” a room air condi-
tioner that can ventilate while cooling and heating that was
launched in November 2019. Subsequently, we expanded our
lineup of “air conditioners with ventilation” in order to support
“ventilation,” which has become the norm in homes, sequen-
tially launching the “Urusara X,” “Urusara mini,” “V Series,”
“Ururu Sarara Ceiling Mounted Cassette-Shape Single Flow
Type,” and “Ururu Sarara Floor Mounted Type” from
November 2020.
In facilities used by an unspecifi ed large number of people—
such as restaurants, stores, and offi ces—“ventilation” and
“virus suppression” are urgently needed. Accordingly, in May
2020 we released “titanium apatite fi lters” that absorb bacte-
ria and viruses for use in commercial air conditioners.
Moreover, in September 2020 we launched “Venti-air,” an
exposed installation total heat exchanger unit that can be ret-
rofi tted. The “Venti-air” system not only eliminates the need to
replace ceilings when installing additional equipment in exist-
ing buildings, but also can be installed in a variety of ways,
including on the ceiling, interior walls, and under the eaves,
making it easier to install ventilation equipment. We have also
developed three new products that are set to be released
sometime from May 2021: the industry’s fi rst “outdoor installa-
tion type” that can be installed outside; a “ceiling-suspension
type” suitable for retrofi tting in schools and other facilities
where there is no ceiling space; and an “exposed installation
type (150 m3/h type)” that can be used in small spaces.
Furthermore, we plan to release from April 2021 the “UV
Streamer Air Purifi er,” which quickly and effectively suppress-
ing viruses in spaces that are diffi cult to ventilate, such as small
windowless spaces and conference rooms that are constant
use. Developed in cooperation with Asahi Kasei Corporation,
this air purifi er is the industry’s fi rst to use UVC LEDs, which
emit deep UV rays with a wavelength of 265nm that are highly
effective in inhibiting viruses and bacteria.
The “UV Streamer Air Purifi er” irradiates viruses and bacteria
captured by the “Antibacterial HEPA Filter—a dust collection
fi lter with an antibacterial agent attached to conventional elec-
trostatic HEPA fi lters—using our unique powerful decomposing
“streamer” and 265nm deep UV rays, which are highly effec-
tive in inhibiting viruses and bacteria. This product suppresses
viruses by more than 99% in 30 minutes and bacteria by about
10 times faster than conventional streamer air purifi ers. We will
establish a supply system based on domestic production in
order to respond to fl uctuations in demand and rapidly supply
this product.
We will continue to develop devices useful for “ventilation”
and “virus control” by utilizing air purifi cation technology that
combines “streamer technology” and “UVC LED,” as well as
expand our product lineups in order to help further improve air
quality.
In the residential market, there is a growing demand for new
air conditioners to be installed in rooms not equipped with air
conditioners in light of more time being spent at home work-
ing or studying. In order to meet this demand, we launched a
new series of products in March 2021: “risora” a wall-mount-
ed type room air conditioner that features a design that blends
in with the room based on its thinness and texture; and the
“Cocotas,” a small space multi-cassette type for small private
rooms, corridors, washrooms and other non-residential rooms.
The “risora” has a new look, featuring two types of front
panels for indoor units. The “natural wood” panel, with its soft
color and wood texture, blends into the room with a relaxing
look amid people spending more time at home. The other new
panel, “aluminum silver” is designed to appear different
depending on the viewing angle and lighting.
“Cocotas” was previously designed as a multi-type air condi-
tioner in which two or more indoor units were connected to
one outdoor unit. In order to meet the increasing demand for
air conditioning in small spaces, however, we have developed a
pair-type air conditioner that connect one indoor unit to one
outdoor unit, making installation easier.
In the commercial market, we launched the waterless
humidifi cation unit “Ururu Unit” in June 2020 for store users
who require humidifi cation such as clinics, cram schools and
nursery schools. Applying waterless humidifi cation technology
cultivated in room air conditioners enables humidifi cation
along with ventilation, resulting in improved room air quality.
In February 2021, we released an outdoor installation-compati-
ble version of our “beltless type” air conditioner for facilities.
Indoor facility space can be effectively utilized by installing the
indoor unit outdoors. In addition, during installation, mainte-
nance and servicing, work can be done without entering the
room, thus reducing the impact on factory operating hours.
The “outdoor air control mode” is used to increase the amount
of ventilation in order to meet growing ventilation needs with-
out creating new installation space in rooms.
In Applied Systems, we released a new dedicated outside air
treatment system (DOAS) model in July 2020 in North America,
featuring improved operating effi ciency that reduces energy
consumption for outdoor air intake. We also released the
industry’s smallest indoor air handling unit in October 2020.
This new unit uses a compact design featuring signifi cant
installation freedom, while also realizing the same functionality
and performance as larger models. In addition, it uses
high-performance air fi lters and an anti-contamination design
to provide better indoor air quality.
In Europe, we launched in September 2020 a water-cooled
screw heat pump chiller that uses the low-GWP refrigerant
R1234ze. In combination with our air-cooled heat pump chiller
already on the market, this product can be used not only for air
conditioning but also for supplying hot water.
In China, we launched a modular magnetic bearing turbo
chiller in April 2020, featuring a never-seen-before compact
and lightweight design, and it can be transported by forklift or
passenger elevator. In addition, units can be connected (cool-
ing capacity expansion) through simple on-site installation to
meet the demand for partial upgrades, expansion and split
investment of existing properties. In March 2021, we released
a modular scroll chiller equipped with a free-cooling function
that can signifi cantly improve server cooling effi ciency for small
and medium-sized data centers.
Integrated Report 2021
65
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 fl uorine products and fl uo-
rochemical technology. In the fl uoropolymer resin and fl uoro-
elastomer fi elds, fl uorochemicals exhibit good heat resistance,
low drug reactivity, and dielectric properties. Using these prop-
erties, Daikin is developing new differentiated products for
automotive, semiconductor, wire and cable (IT fi eld), and other
applications. Daikin also develops coatings based on the
non-adhesive and chemical resistant properties of fl uo-
ride-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 fl uoride-related R&D, including the development of
telecommunication and information terminal materials based
on the functionality of fl uorine containing compounds and the
provision of contracted synthesis research for pharmaceutical
intermediates.
In addition to these developments, as part of R&D in periph-
eral areas aimed at developing new techniques and applica-
tions, Daikin is working on the development of fi lm process
products and multilayered materials and conducts advanced
materials research related to the medical, optical, environmen-
tal, electric power battery, and energy areas. Through these ini-
tiatives, Daikin is endeavoring to further secure the global No.
1 position and become the sole provider of fl uorochemical
solutions. Especially, in the automotive battery fi eld, Daikin is
making concerted efforts to grow its ties globally and further
expand its markets. In addition, we are pursuing the develop-
ment of various environmentally friendly products from an
SDGs perspective.
By furthering and accelerating its R&D, the TIC, which has
the mission of new product development in Daikin’s Chemicals
business, is seeking to develop technologies that will lead on
next-generation themes.
Other Operations
R&D expenses for the Other operations totaled ¥2.0 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 medium- 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-vol-
ume applications.
In the industrial press and other industrial machinery applica-
tions, 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 system
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 fea-
tures, Daikin will promote the adoption of this system for
presses and other machines and move forward with sales
66
expansion globally.
Also, Daikin is proceeding with the development of an ener-
gy 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 fi nd applications
globally.
In defense systems, Daikin mainly conducts R&D related to
artillery shell and guided missiles components, for Japan’s
Ministry of Defense, as well as equipment used in home oxy-
gen therapy.
Dividend Policy and Dividends
Applicable to the Fiscal Year
The Company will continue to focus on expanding its business-
es while investing its assets strategically and improving its
fi nancial structure by such means as proceeding with the
reduction of overall costs and enhancing its fi nancial 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 profi t returns to
our shareholders.
Specifi cally, 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 divi-
dend payout ratio, we will introduce initiatives to further
increase returns to our shareholders with the core goal of sta-
ble and continuous dividends.
In addition, internal reserves will be applied to strategic
investments to expand business and increase competitiveness
such as reinforcing the structure of management, promoting
global businesses, and accelerating eco-conscious product
development.
For the fi scal year ended March 31, 2021, the Company has
proposed an annual cash dividend of ¥160 (¥80 for the interim
dividend and ¥80 for the year-end dividend). For the fi scal year
ending March 31, 2022, the Company plans an annual cash
dividend of ¥180 (¥90 for the interim dividend and ¥90 for the
year-end dividend).
Outlook for Fiscal 2021
Going forward, the global economy is expected to start
expanding due to the widespread use of COVID-19 vaccines
and economic measures taken by various countries. China and
the U.S. continue to engage in major fi scal spending and thus
are expected to lead the economic expansion, while Europe
and Japan are also expected to see a gradual economic recov-
ery, albeit later on. Against this backdrop, we adhere to under
the Group’s slogan for its Annual Group Policy for 2021,
“Taking ‘Overwhelming Changes’ as Opportunity, Let’s
Challenge New Initiatives.” Accordingly, we will take the fol-
lowing initiatives. We will strengthen our Solutions business,
which is not limited to the sale of single units; further increase
sales of heat-pump heaters and hot-water units; build a
low-temperature business that links the cold chain from pro-
duction sites to consumption areas; provide products and ser-
vices that address growing needs for air and ventilation, and
solutions to global environmental and climate change issues;
strengthen our sales and marketing capabilities by utilizing dig-
ital technologies; engage in fl exible production and procure-
ment; improve quality; enhance human resources; and reduce
fi xed and variable costs. As for technological development, we
will also strive to acquire differentiated technologies by collab-
orating with venture companies and academic institutions.
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 coun-
tries. While this represents a huge opportunity for the Daikin
Group with its main business in air conditioning, there is the
worldwide issue of climate change. Amidst growing demand
for decarbonization, there are issues such as curbing energy
consumption associated with air conditioning, lowering the use
of fossil fuels, and preventing leaks of refrigerants that cause
greenhouse effects. Unless we make a concerted effort to con-
trol greenhouse gas emissions, these could become a risk for
the Group. The Daikin Group aims to respond to these risks by
reducing its environmental impact by, for example, developing
and spreading the use of refrigerants with lower global warm-
ing potential, developing and spreading the use of high-effi -
ciency air conditioners, and creating solutions for buildings that
utilize energy effi ciently throughout the entire facility. In 2018,
the Daikin Group formulated its “Environmental Vision 2050”
to aim for zero greenhouse gas emissions in 2050, while offer-
ing 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 business continuity, and as such, Daikin analyzes the
risks and opportunities it will have on business, and together
with refl ecting that to management strategy, the Group con-
tributes to solutions to climate change and other social prob-
lems while also aiming for further growth.
For the fi scal year ending March 31, 2022, Daikin forecasts a
10.3% increase in consolidated net sales, to ¥2,750.0 billion,
with operating income expected to rise 13.1% year on year, to
¥270.0 billion, and net income attributable to owners of the
parent expanding 13.3%, to ¥177.0 billion. The estimated
exchange rates for the fi scal year are ¥105 to the US dollar and
¥125 to the euro.
Principal Risks Associated with the
Daikin Group’s Operations
Management recognizes the following principal risks that may
infl uence decisions made by investors given their signifi cant
impact on business conditions as stated in the securities report,
and among matters pertaining to accounting status, consoli-
dated companies’ fi nancial status and business performance,
as well as cash fl ows.
The following have been determined as of the end of the
consolidated fi scal year under review.
(1) Risks related to the market environment
(cid:2) Risks related to changes in the market environment
The Group develops, procures, manufactures, and sells goods
and services in each of its business domains, chiefl y air condi-
tioning, as it grows its business globally. The Group strives to
raise market share by strengthening its sales network, offering
competitive products and services, and cutting fi xed costs in
order to expand its business and enhance profi tability.
Nonetheless, in the event that market conditions deteriorate
in countries and regions in which the Group has operations,
due to, for example, rising instability in the political and diplo-
matic situation, trade friction, economic contraction, extreme
weather, and outbreak of a pandemic, such as COVID-19,
there is a possibility that business expansion and increases in
profi tability will not progress as planned. As a result, there is a
possibility of an impact on the Group’s fi nancial situation and
management performance.
(cid:3) Risks related to fl uctuations in currency exchange rates
and funds procurement environment
Overseas sales accounted for a high ratio of the Daikin Group’s
consolidated net sales in fi scal 2020. The acceleration of global
business development going forward is expected to further ele-
vate this overseas sales ratio. Consolidated fi nancial statements
are prepared 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 fi gures. In
addition, because the Group engages in foreign currency-de-
nominated transactions in raw materials and parts procure-
ment and in the sale of goods and services, there is a possibility
that fl uctuations in currency exchange rates could impact man-
ufacturing costs and sales performance. To avoid such currency
exchange rate-related risks, the Group undertakes short-term
risk hedging via forward exchange contracts and similar instru-
ments. Daikin also undertakes medium- to long-term measures
to continuously adjust procurement and manufacturing opera-
tions 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 fl uctuations in currency
exchange rates.
In addition, the Daikin Group procures funds necessary for
its business activities through loans from fi nancial institutions,
or by using commercial paper or bonds. When the economic
environment fl uctuates, the lending posture of fi nancial institu-
tions 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 fi x 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 fi nancial
situation and management performance.
(cid:4) Risk related to fl uctuation in market value of securities
The Daikin Group takes a strategic approach to holding corpo-
rate 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 fi nan-
cial situation and management performance.
Integrated Report 2021
67
Financial Review
(2) Risks related to business activities
(cid:2) 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
satisfaction. However, the emergence of new technology, prod-
ucts or services that differ from those anticipated by the
Group, or abrupt changes to the market such as rapidly esca-
lating competition, including from new market entrants, may
lead to the necessity to amend or transform technology or
product strategy.
In that event, delays in bringing about new products or ser-
vices, or launching new businesses, will cause the Group to
lose its advantageous position against competitors or new mar-
ket entrants. As a result, this may impact the Group’s fi nancial
situation and management performance.
(cid:3) Risks related to acquisitions and alliances with other
companies
The Daikin Group has in the past utilized corporate acquisi-
tions, in addition to organic growth leveraging existing man-
agement resources in order to grow its business globally and to
strengthen its product lineup and sales structure. Going for-
ward, to expand its business domains and accelerate the trans-
formation 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 execution,
will strive to ensure that business integration occurs smoothly.
Nonetheless, after a project is executed, there is a possibility
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 fi nancial situation and management
performance.
(cid:4) Product and service quality and responsibility
The Daikin Group operates in over 160 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 fi rst
consideration to the safety of the customer. To prevent reoc-
currence or expansion of the accident, the Group will repair or
exchange, and will through newspapers or other means notify
and disclose information to sales vendors and other relevant
third parties, fulfi lling 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 result of a deteriorated brand image, there is a
possibility of an adverse impact on the Group’s fi nancial situa-
tion and management performance.
(cid:5) Risks related to procurement
In the event management conditions at suppliers deteriorates,
68
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 rea-
sonable prices. This can be achieved by diversifying its suppliers
and transitioning to domestic and local procurement, as well as
by creating parts commonalities and standardization, among
other efforts. However, in the short term, it may be diffi cult to
take the measures described above, and in the event of an
unforeseen situation, such as the spread of a global pandemic
or large-scale disaster, 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 addition, the Daikin Group and its suppliers set prices of
raw 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 chang-
es in the supply and demand environment or fl uctuations 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 fi nancial situation and management
performance.
(cid:6) Legal regulations
The Daikin Group, which operates in over 160 countries world-
wide, is subject to laws and regulations covering competition,
the prevention of bribery, human rights, 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 limita-
tions 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 con-
fi rm whether or not daily business is being performed in adher-
ence to laws and regulations. Together with raising a
consciousness of compliance, the Group conducts audits and
confi rms 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
fi nancial situation and management performance.
(cid:7) Information security
In the course of carrying out its business, the Daikin Group
obtains confi dential information from third parties and person-
al information from customers, in addition, the Group also
handles its own proprietary confi dential 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 pro-
duction lines at each location or logistics systems, and exert a
serious impact on business.
To prevent any of these situations from arising, the Group is
putting into place countermeasures that include strengthening
information security systems, thoroughly controlling confi den-
tial notifi cations, restricting external access, maintaining inter-
nal regulations, and conducting education and training.
However, in the event such situations were to occur, there may
service bases around the world. In recent years, Japan has
experienced earthquakes, tsunamis, typhoons, torrential rain,
and other natural disasters. In preparation for such natural
disasters, the Company takes measures to reinforce each busi-
ness site against earthquakes, and also acts to put in place
countermeasures against tsunamis, signifi cant rainfall, fl ood-
ing, and other disasters. In addition, it also formulates disaster
prevention regulations pertaining to natural disasters, and peri-
odically conducts disaster prevention training in efforts to mini-
mize the impact of natural disasters. Nonetheless, there is a
possibility that a major natural disaster will signifi cantly 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 natu-
ral disasters, terrorism, riots, wars, and other incidents could
conceivably 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, the spread of contagious diseases has become
a risk for the Daikin Group’s business. In response to the spread
of COVID-19, the Group has made securing the health and
safety of its employees the top priority in exerting every effort
to prevent the spread of infection. The Group has also
engaged in addressing important management issues, such as
strengthening procurement, manufacturing, inventory, and
logistics globally; promoting online sales that address declines
in demand and changes in consumer purchasing behavior;
expanding sales of ventilation products that seize upon the
greater awareness of air quality and ventilation; and develop-
ing products that stand out. At the same time, vaccination is
also progressing in countries around the world. However, given
that it is diffi cult to foresee when the COVID-19 pandemic will
come to an end due to factors such as the spread of variants,
there is a possibility of an impact on the Group’s fi nancial situa-
tion or management performance.
be requirements to pay large-scale damages or fi nes. Moreover,
the payment of enormous countermeasure costs has the
potential to impact the Group’s fi nancial situation and man-
agement performance.
(3) Risks related to climate change and other
environmental issues
Climate change is one of the social problems that the Group
must tackle on a global basis. Based on the Group Philosophy
to “Be a Company that Leads in Applying Environmentally
Friendly Practices,” the Daikin Group therefore develops and
spreads energy-conserving, high-effi ciency air conditioners and
refrigerants with lower global warming potential, and gener-
ates solutions for the effi cient use of energy throughout entire
buildings. In this way it is taking aggressive action to curb
greenhouse gas (CO2, fl uorocarbons) emissions, and to miti-
gate climate change. However, in the event that regulations
covering use and emissions of greenhouse effect-causing
refrigerant gas, and regulations pertaining to energy conserva-
tion become more stringent as the shift to a low-carbon soci-
ety progresses, there is a possibility of increased costs necessary
to adhere to such regulations. In addition, in the event that
taking a suffi cient response to these regulations is diffi cult and
delays occur, product sales may be hindered, and there may be
an impact on smooth business operations. One of the physical
risks here is damage to the Group’s employees, manufacturing
facilities, systems, and supply chains in the event of a large-
scale disaster associated with abnormal weather, which pres-
ents the potential for signifi cant impact on business activities.
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
establishment 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 neces-
sary to respond by undertaking purifi cation 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 fi nancial situation and management perfor-
mance.
(4) Others
(cid:2) 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 an indication of impairment is
identifi ed, steps are taken to estimate the total amount of
future cash fl ows to determine the existence of loss. The future
cash fl ows 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 fl uctuations in business performance or other factors,
the fi nancial position and results of operations of the Group
may be affected. Meanwhile, the Group monitors its perfor-
mance on an ongoing basis and strives to take action before it
becomes diffi cult to recover investments.
(cid:3) Natural disasters, etc.
The Daikin Group possesses R&D, manufacturing, sales, and
Integrated Report 2021
69
Consolidated Balance Sheet
Daikin Industries, Ltd. and Consolidated Subsidiaries
Consolidated Balance Sheet
March 31, 2021
ASSETS
CURRENT ASSETS:
Cash and cash equivalents
Short-term investments
Trade receivables :
Notes
Accounts
Allowance for doubtful receivables
Inventories
Prepaid expenses and other current assets
Millions of Yen
2021
2020
¥
662,267
73,831
¥
321,152
49,641
59,954
408,377
(13,074 )
469,398
72,608
48,613
392,142
(10,562 )
433,783
69,658
Total current assets
1,733,361
1,304,427
PROPERTY, PLANT AND EQUIPMENT:
Land
Buildings and structures
Machinery and equipment
Furniture and fixtures
Lease assets
Construction in progress
Total
Accumulated depreciation
61,429
493,194
691,285
214,586
3,955
68,857
1,533,306
(885,895 )
56,891
444,781
631,138
193,840
3,614
46,120
1,376,384
(796,403 )
Net property, plant and equipment
647,411
579,981
INVESTMENTS AND OTHER ASSETS:
Investment securities
Investments in and advances to unconsolidated subsidiaries and associated
206,377
157,329
companies
Goodwill
Customer relationships
Other intangible assets
Deferred tax assets
Assets for retirement benefits
Other assets
24,277
268,684
177,968
96,110
31,692
19,960
33,823
17,439
281,969
169,766
90,921
26,794
12,885
26,002
Total investments and other assets
858,891
783,105
TOTAL
¥ 3,239,663
¥ 2,667,513
70
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Short-term borrowings
Current portion of long-term debt
Current portion of long-term lease obligations
Trade payables :
Notes
Accounts
Income taxes payable
Provision for product warranties
Accrued expenses
Other current liabilities
Millions of Yen
2021
2020
¥
40,755
76,279
20,639
11,914
217,832
20,757
62,255
154,214
161,340
¥
48,938
105,900
17,301
10,007
179,837
19,894
52,850
142,069
117,162
Total current liabilities
765,985
693,958
LONG-TERM LIABILITIES:
Long-term debt
Long-term lease obligations
Liabilities for retirement benefits
Deferred tax liabilities
Other long-term liabilities
548,803
64,737
14,540
118,606
28,497
323,185
58,483
13,219
90,087
25,990
Total long-term liabilities
775,183
510,964
COMMITMENTS AND CONTINGENT LIABILITIES
EQUITY :
Common stock - authorized 500,000,000 shares; issued 293,113,973 shares
Capital surplus
Stock acquisition rights
Retained earnings
Treasury stock, at cost: 469,595 shares in 2021 and 529,837 shares in 2020
Accumulated other comprehensive income (loss):
Unrealized gains on available-for-sale securities
Deferred gain (loss) on derivatives under hedge accounting
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Subtotal
Noncontrolling interests
Total equity
85,032
84,215
2,019
1,363,505
(2,013 )
68,700
1,293
69,470
(4,513 )
1,667,708
30,787
1,698,495
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
TOTAL
¥ 3,239,663
¥ 2,667,513
Integrated Report 2021
71
Consolidated Statement of Income
Daikin Industries, Ltd. and Consolidated Subsidiaries
Consolidated Statement of Income
Year Ended March 31, 2021
NET SALES
COST OF SALES
Gross profit
Millions of Yen
2021
2020
¥ 2,493,387
¥ 2,550,305
1,629,251
1,665,407
864,136
884,898
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
625,513
619,385
Operating income
238,623
265,513
OTHER (EXPENSES) INCOME:
Interest and dividend income
Interest expense
Equity in earnings of associated companies
Exchange gains
Subsidy income
Gain 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
Gains on sales of investment securities
Impairment losses on investment securities
Gains on reversal of stock acquisition rights
Gain on insurance claims
Gain on liquidation of a subsidiary
Loss on liquidation of an unconsolidated subsidiary
Other – net
Other expenses – net
10,696
(8,791 )
7
547
1,393
(1,208 )
(115 )
(225 )
313
(472 )
8
1
(5)
(2,228 )
(79)
13,114
(11,008 )
166
461
3,239
658
(454 )
(23,555 )
10,810
(579 )
25
255
(2,465 )
(9,333 )
INCOME BEFORE INCOME TAXES
238,544
256,180(cid:3)
INCOME TAXES :
Current
Deferred
Total income taxes
NET INCOME
NET INCOME ATTRIBUTABLE TO NONCONTROLLING
INTERESTS
72,055
3,743
75,798
81,132
(2,150 )
78,982
162,746
177,198
(6,496 )
(6,467 )
NET INCOME ATTRIBUTABLE TO OWNERS OF THE PARENT
¥
156,250
¥
170,731
AMOUNTS PER COMMON SHARE :
Basic net income
Diluted net income
Cash dividends applicable to the year
Yen
¥533.97
533.66
160.00
¥583.61
583.22
160.00
72
Consolidated Statement of Comprehensive Income
Daikin Industries, Ltd. and Consolidated Subsidiaries
Consolidated Statement of Comprehensive Income
Year Ended March 31, 2021
NET INCOME
OTHER COMPREHENSIVE INCOME (LOSS) :
Millions of Yen
2021
2020
¥ 162,746
¥ 177,198
Unrealized gain (loss) on available-for-sale securities
Deferred gain (loss) on derivatives under hedge accounting
Foreign currency translation adjustments
Remeasurements of defined benefit plans
Share of other comprehensive income (loss) in affiliates accounted for
using the equity method
Total other comprehensive income (loss)
38,934
4,090
75,637
3,184
(27,921 )
(3,416 )
(69,587 )
(2,457 )
260
122,105
(495 )
(103,876 )
COMPREHENSIVE INCOME
¥ 284,851
¥ 73,322
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of the parent
Noncontrolling interests
¥276,969
7,882
¥68,079
5,243
Integrated Report 2021
73
Consolidated Statement of Changes in Equity
Daikin Industries, Ltd. and Consolidated Subsidiaries
Consolidated Statement of Changes in Equity
Year Ended March 31, 2021
Outstanding
Number of
Common
Shares Issued
Common
Stock
Capital
Surplus
Stock
Acquisition
Rights
Retained
Earnings
Treasury
Stock
BALANCE, APRIL 1, 2019
292,508,233
¥ 85,032
¥ 83,650
¥ 1,721
¥ 1,133,101
¥ (2,589 )
Net income
Cash dividends, ¥160 per share
Effect of change of the fiscal year-end
of a certain consolidated subsidiary
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
(97 )
76,000
170,731
(49,731 )
(28 )
(2 )
326
287
(38 )
166
BALANCE, MARCH 31, 2020
292,584,136
85,032
83,899
1,887
1,254,073
(2,265 )
Net income
Cash dividends, ¥160 per share
Effect of change of the fiscal year-end
of a certain consolidated subsidiary
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
156,250
(46,818 )
(458 )
60,700
316
(9 )
261
132
BALANCE, MARCH 31, 2021
292,644,378
¥ 85,032
¥ 84,215
¥ 2,019
¥ 1,363,505
¥ (2,013 )
74
Millions of Yen
Accumulated Other Comprehensive Income (Loss)
Unrealized
Gains on
Available-for-
Sale Securities
Deferred Gain
(Loss) on
Derivatives
under Hedge
Accounting
Foreign
Currency
Translation
Adjustments
Remeasurements
of Defined Benefit
Plans
Total
Noncontrolling
Interests
Total Equity
¥ 57,686
¥ 619
¥ 63,808
¥ (5,232 )
¥ 1,417,796
¥ 29,054
¥ 1,446,850
170,731
(49,731 )
(28 )
(2 )
613
170,731
(49,731 )
(28 )
(2 )
613
(27,921 )
(3,416 )
(68,860 )
(2,455 )
(38 )
(102,486 )
(3,318 )
(38 )
(105,804 )
29,765
(2,797 )
(5,052 )
(7,687 )
1,436,855
25,736
1,462,591
156,250
(46,818 )
(9 )
577
156,250
(46,818 )
(9 )
577
38,935
4,090
74,522
3,174
120,853
5,051
125,904
¥ 68,700
¥ 1,293
¥ 69,470
¥ (4,513 )
¥ 1,667,708
¥ 30,787
¥ 1,698,495
Integrated Report 2021
75
Consolidated Statement of Cash Flows
Consolidated Statement of Cash Flows
Year Ended March 31, 2021
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:
Millions of Yen
2021
2020
¥ 238,544
¥ 256,180
(67,588 )
133,594
225
(313 )
472
1,208
(7 )
511
(7,748 )
(4,026 )
(7,064 )
25,037
5,702
43,375
469
12,300
136,147
374,691
(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
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
Decrease (increase) in investments in and advances to an unconsolidated subsidiary
and associated companies
Payment for transfer of business
Payments for acquisition of investment securities
Proceeds from sales of investment securities
Net increase in time deposits
Other – net
(104,971 )
4,724
(98,095 )
3,963
(28,571 )
(13,190 )
55
(346 )
(1,829 )
607
(17,957 )
(11,379 )
(99 )
(1,595 )
22,585
(52,908 )
(16,848 )
Net cash used in investing activities
(159,667 )
(156,187 )
FINANCING ACTIVITIES:
Net decrease in short-term borrowings
Proceeds from long-term debt
Repayments of long-term debt
Cash dividends paid to owners of the parent
Cash dividends paid to noncontrolling interests
Repayments of lease obligations
Other – net
Net cash provided by (used in) financing activities
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
NET INCREASE (DECREASE) 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
(9,253 )
293,218
(105,904 )
(46,721 )
(4,357 )
(28,085 )
44
98,942
27,207
(93,943 )
102,562
(98,196 )
(49,731 )
(9,859 )
(20,919 )
152
(169,934 )
(22,029 )
341,173
(45,983 )
321,152
367,189
(47 )
(7)
EFFECT OF CHANGE OF THE FISCAL YEAR-END OF CONSOLIDATED SUBSIDIARIES
(58)
CASH AND CASH EQUIVALENTS, END OF YEAR
¥ 662,267
¥ 321,152
76
Corporate Data
(As of March 31, 2021)
Company Name
Daikin Industries, Ltd.
Head Offi ce
Tokyo Offi ce
Umeda Center Bldg., 2-4-12, Nakazaki-Nishi, Kita-ku, Osaka 530-8323, Japan
Phone: 81-6-6373-4312 URL: https://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
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
25,559
Major Shareholders
• The Master Trust Bank of Japan, Ltd. (Trust Account)
• Custody Bank of Japan, Ltd. (Trust Account)
• Sumitomo Mitsui Banking Corporation
• Custody Bank of Japan, Ltd. (Trust Account 7)
• Custody Bank of Japan, Ltd. Retirement Benefi t Trust Account for The Norinchukin Bank
• MUFG Bank, Ltd.
• Custody Bank of Japan, Ltd. (Trust Account 4)
• Government of Norway
• SSBTC CLIENT OMNIBUS ACCOUNT
• Custody Bank of Japan, Ltd. (Trust Account 5)
Number of Subsidiaries
and Affi liated Companies
Subsidiaries: 315 Affi liates: 18
Number of Employees
84,870 (Consolidated)
Stock Exchange Listing
Tokyo
Advertising Method
The Company uses the electronic advertising method, posting advertisements on its website (https://www.
daikin.co.jp/e-koukoku/). However, when electronic advertising is not possible due to technical problems or
other circumstances, the Company will post advertisements in the Nikkei Shimbun.
Shareholder Register
Administrator
Mitsubishi UFJ Trust and Banking Corporation
3-6-3, Fushimicho, Chuo-ku, Osaka 541-8502, Japan
Ordinary General Meeting
of Shareholders
June
Auditor
Deloitte Touche Tohmatsu LLC
Integrated Report 2021
77
https://www.daikin.com