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Daikin Industries Ramps Up U.S. Air Conditioning Market Presence

Expanding American Operations, Daikin Targets Top Sales Spot by Fiscal 2025 Amid Global Challenges
Japan
d 6367.TSE Blue Chip 150
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Daikin Industries is intensifying its efforts to dominate the U.S. air conditioning market, leveraging its proficiency in energy-efficient technology. This strategic push includes the recent inauguration of a chiller production facility in San Luis Potosi, Mexico, catering to the American preference for large-scale air conditioning systems.

Historically, U.S. giants like Trane Technologies and Johnson Controls have led this sector. However, Daikin’s persistent expansion through acquisitions since the mid-2000s, coupled with recent contracts in energy-intensive data centers, demonstrates its growing influence in the market.

Yoshinao Ibara of Morgan Stanley MUFG Securities acknowledges the U.S. market as particularly challenging. Despite Daikin’s global leadership in air conditioner sales, it still trails behind Trane in the U.S. The company’s ambitious goal is to clinch the top sales position in the U.S. by fiscal 2025, as stated by Daikin Chairman Noriyuki Inoue.

A key challenge for Daikin in the U.S. is enhancing profitability. With its American air conditioning business generating significant revenue, the focus is now on improving the operating profit margin, which lags behind the global average due to the lower margins in applied air conditioning systems.

The Mexico plant is a strategic move to increase profitability in this segment. Daikin also aims to grow its residential air conditioning division, targeting a 10% profit margin in the Americas. This expansion includes constructing a new wing at the Mexico facility for residential units, complementing its Texas production hub. Daikin’s edge in energy-saving technology, like inverters, has already boosted its U.S. residential air conditioner profit margin to about 9%.

This U.S. growth offsets economic challenges in China and Europe, contributing to Daikin’s overall earnings. While the company does not disclose regional profits for its air conditioning business, its U.S. operations are nearing the profitability levels of its China operations, a significant shift from previous years.

Despite market concerns about slower growth in Daikin’s heat pump business and a dip in its stock price from a 2023 peak, the company’s focus on the U.S. market remains a crucial part of its global strategy. This focus is essential as Daikin navigates ongoing challenges in China and Europe and plans for sustained growth in fiscal 2024 and beyond.

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