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Daikin set to breeze past forecast on Chinese and Indian growth

Global air conditioner leader makes way into wealthy Asian homes

A worker assembles air conditioners at a Daikin factory in India, one of the company's fastest-growing markets.   © Reuters

TOKYO -- Japan's Daikin Industries, the world's biggest air conditioner maker by sales, is expected to surpass its earnings forecast for the year ended in March, driven by growth in Asian emerging markets.

The Osaka-based company looks likely to report a 10% rise in group operating profit to about 253 billion yen ($2.3 billion), topping its estimate of an 8% increase to 250 billion yen and marking a fifth straight record high.

Sales likely rose 12% to about 2.29 trillion yen thanks to a strong performance by the mainstay air conditioning business in all of its major markets. Results are due out on May 9.

Sales in China, which accounts for over 30% of total operating profit, climbed about 10% on a local currency basis. Daikin expanded specialist retailers in provincial cities and boosted sales of high-performance products to large, affluent households.

In the Asia-Oceania region, sales grew around 20% in both India and Australia. Daikin expanded the number of retailers in India to capture both residential and commercial demand.

In Japan, Daikin's air conditioning business likely hit an operating profit record as offices and stores invested in new air conditioning equipment. Redevelopment projects in Tokyo ahead of the 2020 Olympics provided a tailwind as well. Households also replaced older models with newer, more energy-efficient ones. 

Business was brisk in the chemical segment thanks to products used in silicon wafer cleaning, chip manufacturing equipment and automotive fuel hoses. Orders for chip-related products were so strong that the company's plants continued to run at full capacity.

The company did face some headwinds. The profitability of Daikin's exports from Thailand, a key manufacturing base, to elsewhere in Asia dropped as the baht strengthened against the dollar. Rising prices for copper, used in piping, also pushed up costs. But Daikin was able to pass on the higher costs to customers and switched materials for some parts from copper to cheaper aluminum.

Growth in emerging nations like China and India is expected to continue in the year ending March 2019. Daikin has projected sales of 2.5 trillion yen and operating profit of 270 billion yen for the current fiscal year.

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