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Message to Shareholders and Investors

Image:Masanori Togawa

Masanori Togawa
President and CEO
Daikin Industries, Ltd.

In fiscal year 2017, we implemented aggressive investments to boost production capacity in the United States and Asia, expand sales and after sales service networks, which included acquisitions in each country, improve the global product development system, and acquire new technology, such as AI and IoT, to establish a solid foundation for sustainable growth. Not only were we able to fortify capabilities in sales, after sales service, technology, and product development, we were even able to raise profitability by promoting total cost reductions.

As a result, sales expanded for the Air Conditioning business, beginning with the important strategic regions of North America and Asia, and included the main regions of Japan, China, and Europe. We also expanded sales in the Chemicals business to the semiconductor and automotive markets. In terms of profit, the surge in prices for raw materials greatly exceeded initial projections; however, we quickly adopted measures in response to changes and overcame adverse conditions by expanding sales, launching high value-added products, and initiating total cost reductions. Consequently, we increased both revenue and profits for the eighth consecutive term and achieved a record high in results for the fifth consecutive term.

While the global economy is projected to continue its expansionary phase into the future, uncertainty is mounting in light of issues such as trade friction between the United States and China and the ever-worsening situation in the Middle East. Moreover, risks also include a further upsurge in market prices for raw materials, sharp movements in foreign exchange, and an economic slowdown brought about by U.S. government policies prioritizing national interests.

In this type of environment, it is necessary to understand conditions in even greater detail than before regarding economic trends, fluctuations in exchange rates and markets, and tendencies of competing companies while maintaining a flexible stance that implements measures in a timely manner. Together with providing substance to challenging measures that lead to a stronger management structure, further sales expansion, and higher profits, we will establish and fully utilize all measures at our disposal, both proactive and reactive, should the management environment suddenly deteriorate.

Fiscal year 2018 is in the mid-term of Fusion 20, our strategic management plan targeting fiscal year 2020. At the time of formulating the management plan, we committed ourselves to tackling sales of 2 trillion 500 billion yen and operating income of 270 billion yen as quantitative targets for fiscal year 2018.

For this two-year period of 2016 and 2017, we were able to do what was needed to achieve targets. For fiscal year 2018, we predict a harsh environment such as the impact of fluctuations in foreign exchange and higher prices for raw materials. Nevertheless, we will continue to implement growth investments and plan action in 2018 that further improves profitability and strengthens the management structure.

Because of favorable results, we propose an annual dividend for fiscal year 2017 of 140 yen, which represents a 10-yen increase from the publicly announced (interim 65 yen and term-end 75 yen). For fiscal year 2018, we plan an annual dividend of 140 yen (interim 70 yen, term-end 70 yen).

Daikin will expand business while executing strategic investments toward further growth and development and accelerate the building of a robust corporate constitution through improved results and structural reforms. By doing this, we will increase market capitalization to improve corporate value while striving to further increase dividends to shareholders.

For now and in the future, I respectively ask for your continued understanding and support of Daikin.

Masanori Togawa

Masanori Togawa
President and CEO
Daikin Industries, Ltd.

May 2018

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