DAIKIN INDUSTRIES,LTD.

Business Details

Daikin Industries' flagship business, engaged in the manufacture, sale, and installation of residential, commercial, and Applied Air Conditioning Equipment, refrigeration units, filters, marine equipment, and related products. The business operates globally through domestic and overseas consolidated subsidiaries across Japan, the Americas, Europe, Asia, China, and the Middle East/Africa. Centered on energy-saving, low-global-warming-potential refrigerants, and carbon-neutral compatible products, the segment is driving expansion of Applied Air Conditioning for data centers and the Service & Solutions Business.

Recent Overview

Both net sales and operating profit increased year on year, but China and Asia struggled; impairment recorded at AHT.

In FY2026 (ending March 2026), the Air Conditioning & Refrigeration Business segment recorded net sales of ¥4,621,131 million (up 5.4% year on year) and operating profit of ¥376,991 million (up 7.4% year on year). While the Americas, Europe, Middle East/Africa, and Japan drove growth, China saw a decline in sales due to the real estate downturn, and Asia/Oceania also saw a decline due to unfavorable weather and other factors. An impairment loss of ¥11,849 million was recorded on customer-related assets and trademark rights of consolidated subsidiary AHT Cooling Systems. Under the new strategic management plan 'FUSION 30,' the policy is to expand the solutions business and grow operations in the North America and IMEA growth regions.

Key Products

Growth Drivers

• Expansion of the market for Applied Air Conditioning Equipment for data centers (Americas, Europe, Middle East, Asia)
• Sales expansion of Commercial Air Conditioning Equipment in Europe (increased demand for products using the low-global-warming-potential refrigerant R32)
• Sales expansion of residential and commercial air conditioning in India, Middle East, and Africa (IMEA)
• Increased domestic commercial air conditioning replacement demand and inbound demand, and residential demand driven by extreme heat
• Promotion of monetization of the global Service & Solutions Business (shift toward a circular solutions business)
• Improved profit margins through promotion of sales pricing policy and cost reductions (e.g., material substitution from copper to aluminum)
• Business expansion in the North America and IMEA growth regions under the new strategic management plan 'FUSION 30'

Risks

• Sluggish demand for residential air conditioning in the US (elevated distribution inventory following refrigerant regulation changes, persistently high mortgage rates)
• Demand slowdown due to the prolonged real estate downturn in China
• Sluggish demand for residential heat pump water heating equipment in Europe (uncertainty over subsidy programs, delays in combustion heating regulations)
• Risk of inflation and supply chain disruption stemming from US tariff policy
• Sluggish demand in Asia/Oceania due to unfavorable weather and uncertain economic outlook
• Foreign exchange risk (impact on yen-translated sales when the yen appreciates)
• Risk of additional impairment due to failure of consolidated subsidiaries (including AHT Cooling Systems) to meet business plans
• Geopolitical risk (rising transportation costs and business disruption due to deteriorating conditions in the Middle East)

Business Details

The Chemicals Business manufactures and sells Fluorocarbon Gas (Refrigerant), fluoropolymers (fluoroelastomers, fluoropaints, etc.), and Chemical Products (Semiconductor Etching Agents, Water/Oil Repellents, Water/Oil Repellents, surfactants, etc.). Major customers are in the semiconductor, automotive, construction, and data center fields. The business operates globally through a network of domestic and overseas consolidated subsidiaries, accounting for approximately 5.6% of the Daikin Group's total net sales. While possessing proprietary fluorochemical technology, its performance is structurally susceptible to trends in semiconductor demand.

Recent Overview

Net sales rose 7.0% year on year, but operating profit fell sharply by 28.3% year on year due to the semiconductor demand slowdown.

In FY2026 (ending March 2026), the Chemicals Business achieved net sales of ¥281,469 million (up 7.0% year on year), but operating profit fell sharply to ¥33,089 million (down 28.3% year on year), directly impacted by the prolonged distribution inventory adjustment in the semiconductor field and delayed demand recovery in key markets. While fluoroelastomers and Chemical Products (etching agents) achieved sales growth, fluoropolymers remained flat year on year. Segment assets expanded to ¥625,121 million, partly due to the addition of newly consolidated sites.

Key Products

Growth Drivers

• Capturing robust demand for fluoropolymers and Chemical Products for data centers (development of new applications)
• Increased sales driven by expansion of fluoroelastomer sales for the automotive markets in China, Europe, and the US
• Sales contribution from the addition of new consolidated sites in the field of etching agents for semiconductor processes
• Promotion of sales expansion of Fluorocarbon Gas in the US, Asia, and Europe
• Medium- to long-term growth orientation for the high-performance and environmental materials business under the new strategic management plan 'FUSION 30'

Risks

• Downward pressure on sales and profit from sluggish semiconductor market demand and prolonged distribution inventory adjustment
• Delayed recovery in fluoropolymer demand due to the downturn in the US and China construction markets
• Intensifying price competition in China (demand stagnation and heightened competition amid the prolonged real estate downturn)
• Demand volatility risk in the automotive field (sensitivity of fluoroelastomers' major customer base, the automotive market, to economic conditions)
• Foreign exchange risk (yen-translated sales and profit decrease when the yen appreciates)

Business Details

This segment comprises three businesses: the Hydraulics business (Hydraulic Equipment & Devices for Industrial Machinery, Hydraulic Equipment for Construction Machinery & Vehicles), the Special Machinery business (healthcare equipment such as Medical Oxygen Concentrators & Hypoxic Systems), and the Electronic Systems business (IT solutions such as Facility Design CAD/BIM System, Smart Innovator, and database systems). It targets customers in the domestic and overseas industrial machinery, construction machinery, medical, and IT fields, serving as a diversification platform for the Daikin Group.

Recent Overview

Driven by Special Machinery and industrial machinery hydraulics, both net sales and operating profit increased year on year.

For the full year of FY2026 (ending March 2026), net sales were ¥112,435 million (up 7.3% year on year) and operating profit was ¥4,925 million (up 8.4% year on year). The Special Machinery business benefited from increased orders for Medical Oxygen Concentrators and Hypoxic Systems. In the Hydraulics business, Hydraulic Equipment & Devices for Industrial Machinery increased for domestic and US markets, while Hydraulic Equipment for Construction Machinery & Vehicles decreased for major domestic customers. The Electronic Systems business saw a decline in data science software sales, but secured results flat year on year through sales expansion of Smart Innovator and increased sales of facility CAD systems.

Key Products

Growth Drivers

• Increased orders for Medical Oxygen Concentrators & Hypoxic Systems (capturing healthcare and sports demand)
• Increased sales of Hydraulic Equipment & Devices for Industrial Machinery in the US market
• Securing stable earnings in the Electronic Systems business through sales expansion of facility CAD systems and Smart Innovator
• Steady trend in demand for industrial machinery, supported by domestic inbound demand and recovery in capital expenditure

Risks

• Risk of decreased sales of Hydraulic Equipment for Construction Machinery & Vehicles to major domestic customers in the Hydraulics business
• Risk of earnings volatility due to sluggish data science software sales and irregularity of large-scale projects in the Electronic Systems business
• Extremely low operating profit margin for the segment overall (approx. 4.4% in FY2026, ending March 2026), indicating a fragile earnings base
• High sensitivity to the business cycle of the industrial machinery market, posing risk of a sharp decline in sales and profit during economic downturns
• Risk of limited resource allocation within the Group due to lower strategic priority