Daikin Finding Ways to Invest for Changing Environment as Global Temperatures Rise

Daikin’s operations are on track to benefit from the twin tailwinds of global warming and growing affluence in emerging economies.

Daikin Industries Ltd, one of the world’s largest manufacturers of air conditioners, is ready to tap into its cash pool of 756 billion yen (US$6.6bil or RM28bil) to acquire companies to prepare for a jump in demand as global temperatures rise, while seeking to minimise its carbon impact.

“We need to find ways to invest for the changing environment, finding business opportunities and addressing sustainability concerns, as well as investing in research, people and acquisitions,” chief executive officer Masanori Togawa said in an interview, adding that he prefers targets in new markets to bolster sales and service networks.
He also doesn’t favour buybacks. “You can spend money to buy back shares, but that shouldn’t be the goal.”

Daikin has already set aside a mergers and acquisitions war chest of 600 billion yen (RM21.8bil), but is willing to increase that if necessary, Togawa said. Daikin’s operations are on track to benefit from the twin tailwinds of global warming and growing affluence in emerging economies.
The International Energy Agency predicts that energy demand for air conditioning will triple by 2050.

The Osaka-based firm is the fifth-best performer in the Nikkei 225 over the past decade with a nine-fold jump in its stock.
Daikin’s market value of 6.4 trillion yen exceeds that of Hitachi Ltd or Panasonic Corp.
Daikin has made three billion-dollar acquisitions in the past: Malaysia’s OYL Industries in 2006, United States’ Goodman Global Group in 2012 and Austrian AHT Cooling Systems in 2019.

Togawa said he’d be willing to do so again, adding that he’s now looking at commercial cold supply chains, chilled showcase makers and the shift in Europe away from burning fuels and toward heat pumps.

Asked whether he was interested in buying local rivals such as Fujitsu General Ltd or Toshiba Carrier Corp, Togawa said he saw few benefits because of the lack of cost-saving synergies. One of those is already spoken for: Toshiba Corp is planning to sell a 55 percent stake in its air-conditioning unit to its US partner Carrier Global Corp for about 100 billion yen as part of a broad overhaul.
While Daikin’s profit and sales slipped slightly for the fiscal year ended March 2021, analysts project that the manufacturer will post record profit and sales for the current period ending next month.

Daikin is also among those facing challenges due to the shortage of semiconductors, driven by booming global demand for smart phones, computers and gadgets. Togawa said that while chip supplies will probably remain tight until later this year, Daikin has already secured enough semiconductors for the coming fiscal year through March 2023.

Despite its growth prospects, Daikin will need to make its products far more efficient in order to meet its goals of cutting its carbon footprint by 30 percent in 2025, halving it by 2030 and reaching net-zero greenhouse gas emissions by 2050.

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