Daikin continued growth in FY 2005
Daikin Europe N.V. (09/06/2006)
In a difficult year with respect to weather conditions and general economic growth, Daikin closed its financial year with continued growth.
In a difficult year with respect to weather conditions and general economic growth, Daikin Europe N.V. closed its 2005 financial year (FY) with a consolidated turnover of 1,222 million euro, an increase of 88 million euro or almost 8% compared to FY2004.
Although this growth was less than in previous years due to lower than expected sales in the residential market segment, the consolidated profit targets were reached. High market stock levels carried over from 2004 and a strong decrease in demand in Italy, Europe’s largest air conditioning market and engine of Daikin Europe’s growth in the past years, contributed to lower than anticipated residential sales.
Daikin Spain shows strong growth
Leading the way among the top performers of the group was Daikin Spain, with 40% growth compared to 2004. Performance in Spain was carried by strong economic growth, an ongoing construction boom and high consumer confidence. This result was obtained despite a major fire in Daikin’s warehouse in Madrid during the peak season. Daikin Spain is now the largest single sales entity in the group.
Greece and Russia proving good investments
Efforts made by Daikin Europe to strengthen its presence in Greece and Russia are bearing fruit. Sales by the Daikin Europe Hellas Office increased by over 25%, reaching the highest turnover ever in Greece. The Greek office will be a Daikin Europe affiliate from 2006 onwards.
Russia also posted sales growth of over 20%. The Daikin Europe Moscow representation office was established in May 2005, improving the support to Daikin’s three Russian distributors with advertising, sales promotion, consulting sales seminars and general distributor support.
Newcomer South Africa contributes to 2005 result
Moreover, another portion of the consolidated sales growth can be attributed to the addition of South Africa to Daikin Europe’s sales territory. Daikin South Africa posted 13 million euro additional turnover. From 2006, Daikin South Africa will be part of the Daikin Europe Group as a full affiliate.
Residential market suffers
The optimistic sales expectations for the residential market for 2005 did not materialize during the year, and as a result, stock levels in the market accumulated. This situation was aggravated by the absence of extended periods of hot weather in most parts of Europe. These factors led to difficult sales conditions in most affiliates compared to the high growth rates posted in previous years.
This was especially true for the Italian market, where demand collapsed due to the high stock levels in the market, combined with a stagnant economy and very weak consumer confidence in the run-up to presidential elections. The Italian market shrunk by some 40%, resulting in a 15% decrease in sales by Daikin Italy compared to 2004.
Sales of splits weak, commercial products strong
Looking at the different product groups of Daikin Europe, the split segment was the weakest. Overall sales of splits were 15% lower than in 2004. Sales in Daikin Europe’s commercial range, however, continued to show strong growth. Sky Air sales were up by 13% and VRV by 24%. Chiller sales also demonstrated strong growth (9%), particularly in the large chiller segment. The latter clearly benefited from the extended product range offered in the Daikin portfolio.
New factories fully operational in 2005
Financial year 2005 also saw the full deployment of the Daikin factory in Plzen, Czech Republic. The presence of a split factory in Europe allowed Daikin to significantly reduce lead times and stock levels. In the coming years, the output of the Plzen plant will be further increased, as new production lines come on stream.
Beginning 2006, the new factory in Brno, Czech Republic, also became operational. The factory supplies compressors to Daikin Europe and to the Plzen plant, and will also allow further reduction of lead times and inventory levels of production parts.
Challenges for 2006: accelerate growth and create new business
The central challenge facing Daikin Europe for the coming year is putting all its affiliates back on the road to growth, with the development of commercial systems playing a key role. In addition, as Daikin Europe’s sales territory expands to the African continent, Turkey and the Middle East, the challenge is to facilitate the further development of these markets and enable them to make a substantial contribution to the group results.
A major task lies in finding new, but related fields of business expansion. This so-called new business will be a major driver for growth, already in 2006, but even much more so in the future. The launch of the Altherma heating system in 2006 marks Daikin’s decisive step into the heating market, and should be the foundation for a major future source of revenue.
