Specialist
Former executive at Goodman Global Holdings
Agenda
- Daikin’s (TYO: 6367) US sales performance and factors influencing near-term sales expectations
- Daikin’s in-house distribution strategy and impact from distribution market consolidation
- Trends impacting profitability outlook, including technology changes and increasing efficiency requirements
Questions
1.
What’s your overview of Daikin Industries’ sales performance in the US market, given the company reported its FY22 results in early May 2023? How have sales trends evolved over the past few years and what have been the key drivers of those trends?
2.
Do you believe any macro- or industry-specific factors will have a significant impact on sales performance in the near term, such as new housing starts? Is there a close connection between new job creation and light commercial HVAC [heating, ventilation and air conditioning] sales?
3.
Daikin’s presentation indicates an expectation for the wider US HVAC market to grow at about 4% through 2025. Do you expect the company’s growth in the US to be above the market average or more or less aligned with it?
4.
How are Daikin and its brands differentiated from the main competitors in the US market, especially in terms of products and the customer service offering?
5.
Are there any key areas of focus or investment that Daikin is making to maintain or expand its market share in the US?
6.
What do you anticipate for Daikin’s sales performance in the next few years, maybe beyond the US market? What specific growth drivers or risk factors might have a significant impact on sales performance in the near-to-longer term?
7.
How does Daikin mitigate risks related to currency fluctuations with its US business? We’ve seen quite a bit of yen depreciation over the last 24 months – maybe even longer – as we’ve seen rates rise in the US and stay very low or negative in Japan. What percentage of the components employed in US units come from Japan, if any?
8.
Is the near- or onshoring trend related to the wider tariff environment that’s been in place in the US from recent years? Was Daikin motivated to move as much of its production into or closer to the US because of economic drivers and the supply chain disruption more generally in the last few years?
9.
What’s your view of Daikin’s distribution strategy, which is predominantly in-house? You mentioned the company wanted to have as much control as possible over its US distribution channels, and had acquired its top-tier distributors and was moving in to try and acquire the second-tier distributors. What’s the motivation for wanting that much control over distribution channels? What advantages does this offer? How does this strategy compare to what other players are doing in the industry?
10.
Would Daikin’s third-party distributors only be distributing Daikin family products, including Goodman, or would they also be distributing for competitors?
11.
Particularly in the US market, there’s been a trend of wider distribution market consolidation where PE money has been coming in and acquiring some of the third-party distributors, consolidating them and making them run more efficiently. How has that trend impacted Daikin’s business performance? What’s your opinion on the continuation of that trend?
12.
In terms of new technology, how is the increasing popularity and mainstreaming of heat pumps impacting Daikin’s profitability outlook in the US market?
13.
Where is Daikin positioned compared to competitors when it comes to technology improvements around inverters?
14.
How is refrigerant control potentially impacting Daikin and its US positioning?
15.
How do you expect efficiency requirements to progress in the medium term or until 2030? How might it impact Daikin’s market share? You mentioned that in the near term, the energy efficiency regulations, the steps or efficiency improvements are fairly achievable, at least at a federal level.
16.
How do you anticipate technology progression trends and regulation changes to impact Daikin and its fortunes in the US market?
17.
California has a much higher energy price environment vs the rest of the US. Has Daikin seen far better sales in California due to energy being a lot more expensive there, or potentially the regulation being a bit tighter?
18.
It seems that Daikin and its family of brands has a significant advantage on the technology and efficiency side vs players such as Carrier. How sustainable is that competitive advantage? Is the inverter technology still under patent? When might that run off? How easy would it be to copy certain solutions and technologies?