FUSION25 Offer new value for the environment and air to realize both contributions to a sustainable society and Group growth June 7, 2021 - Daikin
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FUSION25
Offer new value for the environment and air to realize
both contributions to a sustainable society and Group growth
June 7, 2021
Contents I. FUSION 20 Achievements II. Goals and Mid-term Implementation Plan III. Key Group Strategies
I. FUSION 20 Achievements
FUSION 20 Achievements
Through key strategies to expand our business domains, reform our business structure, and
enhance our existing businesses, net sales and operating profit progressed as planned up to
FY 2018.
Although our business has been significantly affected by the COVID-19 pandemic since FY
2019, we have implemented both proactive and defensive measures as well as measures to
strengthen our business structure. In FY 2020, as a result, we largely recovered and
exceeded the original forecast we announced in May 2020 (net sales of 2,330 billion yen
and operating profit of 150 billion yen).
FY 2016 FY 2017 FY 2018 FY 2019 FY 2020
FUSION 20
Result Result Result Result latter-half plan Result
Net sales
(100 million yen)
20,440 22,906 24,811 25,503 29,000 24,934
Operating profit
(100 million yen)
2,308 2,537 2,763 2,655 3,480 2,386
Operating profit
margin (%)
11.3 11.1 11.1 10.4 12.0 9.6
4
FUSION 20 Achievements
Business domain expansion/business structure conversion
1) Expansion of the Air Conditioning (AC) Solutions business
➢ Energy Service Solutions business
Business foundation strengthened through investing in sales and service networks as well as
developing technology for solutions business
Full-scale business development primarily in North America, which is the largest market
➢ Indoor Air Quality (IAQ) and Air Environment (AE) Engineering business
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 own technology through external
collaborative creation such as technology development and demonstration tests
2) 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 financial information and ESG information
including on climate change started
3) 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
acquisition of Zanotti and AHT and other measures 5
FUSION 20 Achievements
Enhancement of existing businesses
4) AC business in North America
Sales and market share expanded by increased sales of unitary, VRV, and Applied equipment
Initiatives promoted for transforming the business structure into the Service Solutions
business in addition to equipment sales
5) AC business in Asia
No. 1 position achieved in the residential and commercial Direct Expansion business in many
countries
Measures implemented to expand the Solutions business and become the No. 1 in the
Applied business
6) Chemicals business
Record-high profit achieved in FY 2018
Investment decisions made for future growth (establishing a 2nd plant in China, augmenting
the U.S. plant, establishing the Innovation Center in Europe)
Business expanded through applications development and polymer alloy/non-fluorine
materials
7) Filter business
Filter Division established and the North America, Europe, and Power & Industrial (P&I)
businesses reformed
New product development started to respond to IAQ needs
6
Reference: Change in Performance
Net sales/operating profit: Approximately a five-fold increase over the past 20 years
Operations in over 160 countries, with more than 80,000 Group employees
A more robust global business foundation than ever
FUSION 05 FUSION 10 FUSION 15 FUSION 20
Be a company that Be the global No. 1 AC Be a truly global and Co-create new value in the
attracts people, capital, company excellent company air and environment fields Operating profit
Net sales with wisdom and passion
(100 million yen) and information (100 million yen)
Global COVID-19 pandemic
30,000 3,000
Net sales
Operating profit
25,000 2,500
Global financial crisis
20,000 Acquisition of Goodman, 2,000
a U.S. residential AC
Acquisition of OYL Group manufacturer
15,000 1,500
10,000 Recorded new highs in 1,000
net sales and operating profit
for 6 consecutive years
5,000 since FY 2013 500
Increased profit for 14
consecutive years since FY 1994 Increased sales for 10 consecutive years since FY 2010
0 0
'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
7 (Fiscal year)
7
II. Goals and Mid-term Implementation Plan
FUSION 25 Overview
Assumptions Offer new value for the environment and air to realize both
contributions to a sustainable society and Group growth
Viewing external environmental changes as a great opportunity, capitalize
Changes in the external
Circumstances
Increased importance of 9 key strategy themes Ideal value
environmental and creation
social contributions 3 growth strategy themes
on our strengths to achieve further growth and development
Consumption shift from goods
to experiences While contributing to the
Increased needs for IAQ and environment and society,
ventilation expand business and Economic
Innovative advances in digital, improve profitability value
AI, 5G, and other technologies
1 theme for focus regions
Our strengths
Energy-saving, environmental,
Obtain investment resources
IAQ technologies for the growth strategy
Globally expanding robust
through accelerated global
sales network development and enhanced
profitability
Local production for local
Environmental
consumption model 5 themes to enhance the
People-Centered management foundation and
Management, diversity
management Reinforce the management social value
foundation to support
Our Group Philosophy business transformation
and growth
9
9 key strategy themes
成長戦略３テーマ
Growth strategy
Challenge to achieve Promotion of Solutions Creating value
1 2 business connected 3
carbon neutrality with air
with customers
Businesses supporting our growth
Air Conditioning Achieve the No. 1 in the AC market in North
Focus region 4 business in America, the largest market with great
North America opportunities
Management foundation enhancement
Strengthening Establishing a Promoting digital Creating market
5 technology
development 6 robust supply 7 transformation 8 value/enhancing
advocacy
capabilities chain for innovation
activities
9 Improving HR capabilities through advanced diversity management
10Ideal value creation
Economic value Environmental and social value
経済価値 Net CO2 emissions reductions
2025 target (from BAU)
FY 2025 Group targets
25年全社目標
（イメージ） (Image) 30%+
売上
Free humankind from heat and cold
3.5兆円～
Sales
営業利益
3.6 trillion yen Directly connect with customers and
4,200億円～ satisfy individual application needs
営業利益率
Operating
profit
12％～ 430 billion yen Offer safe, reliable, comfortable IAQ/AE
Operating profit margin Contribute to reducing food loss
Approx. 12% Participate in international rule-making
Contribute to the growth of
employees and local communities
11Group-wide Quantitative Targets
V-shaped recovery in FY 2021, record high financial results in FY 2022 and FY 2023
➢Net sales: 3 trillion yen or higher
➢Operating profit margin: 11% or higher in FY 2023 while ensuring upfront investments
aimed at further business expansion
FY 2020 FY 2021 FY 2023 Investment plan
result plan plan 3-year
Net sales cumulative
(100 million yen)
24,934 27,500 31,000 (100 million yen) (FY 2021–23)
Capital investments 4,460
Operating profit
(100 million yen)
2,386 2,700 3,250 R&D 2,260
Operating profit Digital investments
1,370
margin (%)
9.6 9.8 10.5 (*)
*Major investment themes
ROE (%) 10.1 10.8 11.0 ・Building a platform to obtain/analyze business data
・Reforming ECM/SCM processes to reduce
development/supply lead time
FCF 3,400 ・Building systems to upgrade the management
(100 million yen)
1,235 ー (3-year cumulative
foundation
for 2021–2023)
・Streamlining indirect operations using digital
USD/JPY ¥106 ¥105 ¥105 technologies
EUR/JPY ¥124 ¥125 ¥125
RMB/JPY ¥15.7 ¥16.0 ¥16.0 12Business Expansion Through Growth Strategy
Net sales increase over 1 trillion yen in the 5 years until FY 2025
➢50% (more than 500 billion yen) from the 3 growth strategy themes
➢Existing businesses to grow centering on AC equipment sales in each global region
(100 million yen)
Approx. 36,000
Value with air Approx. 50% of the total sales
increase earned from the
3 growth strategy themes
Solutions
Carbon neutrality
(Heat Pump Space
and Water Heating
business)
24,934
Existing
businesses
FY 2020 FY 2025 image 13III. Key Group Strategies
1 Challenge to Achieve Carbon Neutrality
Reducing greenhouse gas emissions throughout the product lifecycle to achieve
carbon neutrality in 2050
➢ Targets: With the base year set at 2019, reduce net CO2 emissions* by 30% or more in 2025
and 50% or more in 2030, compared with emissions without measures (business as usual
(BAU))
*Net CO2 emissions = Emissions − Contribution to emissions reductions
➢ Fulfilling our social responsibility while leading the industry by expanding sales of heat
pump space and water heaters and inverter units, proposing energy-saving solutions, and
implementing other environmental initiatives
■Net CO2 emissions reduction target
Emissions increase as business
expands with the BAU scenario
Reduce by
Reduce by 50%+
30%+
Emissions *Contribution to emissions
reductions
Efforts to reduce CO2 emissions that
Net emissions contribute to society, including
(emission－contribution) promotion of Daikin equipment with
lower CO2 emissions (replacing
other companies’ equipment with
Contribution Zero or below
higher CO2 emissions), energy
to emissions creation, and forest conservation
reductions * 2019 2025 2030 2050
(Base year) activities
151 Challenge to Achieve Carbon Neutrality
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 ➡ 98%+ in 2025 Heating units’
➢ Develop elemental technology with high energy efficiency energy source
composition
Source: 2019 BRG
3) Heat Pump Space and Water Heating business Electric
Europe
Positioning Europe and North America as ■Heat Pump Space and Water
Heating business sales
the priority regions to accelerate conversion of (100 million yen)
combustion heaters to heat pump space and 2,500 Combustion
2,040 (Gas/oil)
water heaters 2,000
North
➢ Europe: Aim to achieve No. 1 share in major countries 1,500 1,306 America
➢ North America: Accelerate sales of inverter heat pump 1,000
unitary products Electric
Combustion
500 (Gas/oil)
0
FY 2020 FY 2023 161 Challenge to Achieve Carbon Neutrality
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
- 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
■Smart city project in Singapore
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
Specific 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) 172 Promotion of Solutions Business Connected with Customers
1) AC solutions
Three solutions for service/inspections, value-added proposals during
equipment operation, and retrofits/replacements 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
■AC Solutions business sales
(100 million yen)
6,000 5,600
5,000 4,319
4,000
3,000
2,000
1,000
0
FY 2020 FY 2023
182 Promotion of Solutions Business Connected with Customers
Reinforcing proposal and response capabilities for each vertical market
Providing solutions menu satisfying diverse customer needs
➢ Individually optimized air conditioning by managing and analyzing customer information
and equipment operational data
➢ Safeguarded spaces where air quality is visible and ventilation, disinfection, and other
IAQ technologies are combined
➢ Total facility energy management through external collaborative innovation etc.
Offices Schools Hospitals Hotels Factories
Comfort from Facility management Prevent entry and Individual Nonstop, highly
airflow, even and technical spread of temperature control reliable
temperature support where there viruses/bacteria, and advanced operations/energy
distribution, is no dedicated reduce the risk of operability, i.e., savings toward
ventilation, sound facility caretaker cluster infection multilingual support achieving net zero
insulation carbon
192 Promotion of Solutions Business Connected with Customers
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
➢ One-stop solutions offering refrigeration, AC, and store design as well as
installation, service, and maintenance
➢ Business supporting store operations with enhanced solutions menu
- Introduction of remote monitoring systems for food retailers, etc.
➢ Total proposals starting from retail stores to cover distribution warehouses and land
transportation
(2) Store Solutions business in Asia/Oceania markets with growth potential
(3) Entire Cold Chain business (from production to consumption)
➢ Contribute to resolving social issues including reducing food loss and ensuring food
safety and security by utilizing data
■Refrigeration Solutions business sales
■Value offered through Daikin’s business entry (100 million yen)
Initiatives towards CO2 emissions reductions, food loss control/reduction 2,000
throughout the entire supply chain 1,600
Contributing to 1,500
食生活に貢献
food life
1,000
500
0
Production sites Transportation Transit points Consumption sites Consumers
FY 2020 FY 2023 203 Creating Value with Air
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 purifiers, and sell 1 million units per year in each region
➢ Proposal optimal ventilation systems for each vertical market to expand sales of Heat
Reclaim Ventilation (HRV)
➢ Launch a global base model for air purifiers, and comply with standards and regulations in
each region
➢ Position China as the IAQ mother base, create new products and services, and deploy them
to other global regions
- Develop technologies through collaborative innovation with Tsinghua University, etc.
➢ Develop IAQ diagnosis tools ■Product portfolio for establishing a large-scale IAQ/Ventilation business
■IAQ/Ventilation business sales
(100 million yen)
3,000 2,900
2,500
1,977
2,000
1,500
1,000
500
0
FY 2020 FY 2023 213 Creating Value with Air
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
- Offer air environment for hypoxic training
- 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
- PoC verification for commercialization
➢ Pursue new value with air
- Examine a social integration course on creating value with air with the University of
Tokyo
- Promote industry-academia collaboration with Kyoto University, Osaka University, and
Tottori University
224 Air Conditioning Business in North America
Increasing sales to 1 trillion yen and achieving the No. 1 in the AC market
in North America in FY 2025
(1) Residential and Light Commercial markets (Goodman)
➢ Expand business in the residential volume-zone market by enhancing our sales network
➢ Expand sales of our premium residential products to expand business and promote
inverter units
➢ Further reinforce the VRV and Rooftop businesses in the light commercial market
(2) Applied Solutions business (Daikin Applied Americas)
➢ Establish a specialist team for each priority vertical market to fully develop the Solutions
business
➢ Enhance the product lineup of large-sized centrifugal chillers and small-sized magnetic
bearing centrifugal chillers
➢ Expand the Air-side business including air handling units and fan coils ■ North America AC business sales
(3) Market transformation through intra-Group collaborative (100 million yen)
8,000
innovation 8,000
5,985
➢ Using opportunities presented by environmental and 6,000
energy-efficiency regulations, promote market shifts to
inverter products, heat pump units, and low-GWP refrigerants 4,000
➢ Develop integrated controls for VRV and Applied products to meet 2,000
needs in each vertical market
0
➢ Conduct joint marketing to increase our brand recognition FY 2020 FY 2023
235 Strengthening Technology Development Capabilities
Prioritized resource allocation to 4 key domains (3 growth strategy domains + 1 domain
with future themes) linked with FUSION 25
➢ Technology and product development through internal and external collaborative innovation
projects centering on the Technology and Innovation Center (TIC), the technology control tower
of Dakin Group, to accelerate generating results
245 Strengthening Technology Development Capabilities
➢ Enhanced overseas R&D bases as well as recruitment and development of human resources to
promote innovation to accelerate business contributions as the global Group
Japan
USA
Europe
Applied Solutions
Heat pump space China
and water heaters
TIC
Control tower
✓ Technology strategy formulation
IAQ ✓ Core product development
India ✓ AI/IoT technologies
Cooling-only inverter
For high-ambient- Asia
temperature zone
Major industry–academia collaborations
University of Tokyo Osaka University
Together with faculty from the University Partner with information science
of Tokyo and university-originated departments at Osaka University to
create safe and reliable IAQ/AE and
startups, create and deploy in society realize next-generation smart buildings
future technologies and business models using the new campus (at Minoh,
that realize “value with air” Japan) 256 Establishing a Robust Supply Chain
Further solidifying our supply system while uncertainties such as global supply chain
disruptions and increasing decoupling on a global scale are rapidly growing
➢ Shift to region-based procurement to achieve local production for local consumption
➢ Establish concurrent production and backup systems to avoid risks
➢ Centralize supply chain information utilizing digital tools to realize optimized SCM
Europe
North America
China Japan
India
Latin America
Data data
Asia
267 Promoting Digital Transformation for Innovation
Creation of new products, services, and business models and fundamental
operational process innovations with significantly enlarged digital investments
Development of 1,500 human resources in digital fields through the Daikin
Information and Communications Technology College and other initiatives
(1) Business innovation
➢ Build a platform for linking and analyzing data to expand the Solutions business
- Build a system to manage customer information and utilize it to offer value throughout
the AC equipment lifecycle, etc.
➢ Increase connected equipment to obtain equipment data
In addition, obtain data on people, buildings, and others that lead to future business
development through external collaboration
(2) Process innovation
➢ Reform processes for ECM and SCM
➢ Reform development processes
- Develop products and materials by applying materials informatics, etc. in Chemical
business
➢ Construct systems for upgrading the management foundation (human resources,
accounting, legal affairs, CSR, and others)
➢ Increase the efficiency of indirect operations using
robotic process automation and AI
27Appendix
Other Focus Regions in AC Business
Japan
Establish new sales models by utilizing digital technologies that capture changes in market
conditions to accelerate growth.
Enhance IAQ/Ventilation products and solutions proposals responding to customer needs to
achieve the No. 1 share in all areas and markets.
Europe
Launch and expand sales of differentiated products by capturing demand presented by growing
interest in the environment and continuous investment in dwelling environments.
While substantially expanding the Heat Pump Space and Water Heating business leveraging the
European Green Deal, also enhance the one-stop store Solutions business including air
conditioning and ventilation in the refrigeration domain. Aim to become a solutions provider
capable of flexibly responding to the customers’ IAQ and energy needs for all HVAC&R markets.
China
Responding to the information-oriented society, shift to a new business model combining
offline and online sales. With residential multi-split AC and VRV at the core, enhance
proposals to create value with air and expand business in all markets. As the only global AC
brand in China, create markets to achieve continuous growth.
Asia/Oceania
Enhance sales networks and product lineup in Asia anticipating its further market growth
potential. In addition to sales expansion, enhance cost competitiveness to improve
profitability. In India, aiming to make it the next major base for our business, achieve the
No. 1 share in RA to further solidify our No. 1 position in total sales share. 29Other Businesses
Chemicals
Stay close to customers with a focus on the 4 key markets (semiconductors,
automotive, information communications, information devices).
Expand business by enhancing sales of existing products, developing new products,
and obtaining non-fluorine materials.
Lead the industry by creating markets through applications development and
resolving environmental and social issues.
Filter
Reform business structures mainly in North America, Europe, and the P&I business
to secure stable profit.
While expanding the IAQ business by enhancing collaboration with the AC business
aiming to become the global No. 1 share, offer air with value in people’s daily lives
and society to promote resolving social issues.
30AC Business Sales Targets by Region
(100 million yen)
9,000
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
0
Middle East/
Japan Europe China Americas Asia/Oceania
Africa
FY 2015 4,169 2,513 3,136 4,963 2,847 652
FY 2020 4,960 3,945 3,277 6,748 3,273 535
FY 2023 plan 5,600 5,100 3,700 8,600 4,500 650
31Notes on forecast This data is compiled for informational proposes and is not to be construed as a solicitation of any action. This data (includes management plan) was compiled by Daikin Industries., Ltd. (the Company) based on reliable information available at the time of compilation. It may include some risks and uncertainties. The Company is not responsible for its accuracy or completeness. The Company asks for your own discretion in using this data. The Company accepts no liability for any loss or damage of any kind arising out of judgment for investment made solely relying on the business forecast or target figures described in the data.
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