Review of Operations high-value-added products that easily appeal to our cus- tomers. Such products include the SUPER INVERTER SERIES, which contributed greatly to market share expansion in the previous term. In fiscal 2001, we further enhanced the ener- gy efficiency of the series and expanded our lineup into the high-capacity zone with the SUPER INVERTER 70, the FACILITIES INVERTER, which is intended for use in manu- facturing plants, and multi-air conditioners for office build- ings, which feature independent control of individual units and are designed to meet the demand for building renova- tion in metropolitan areas. In the residential-use air conditioner market, the URURU & SARARA air conditioner—now in its second year on the market—proved extremely popular with consumers and contributed to increased sales. Sales through mass merchandisers of home appliances also grew substantially, boosted by increased demand stemming from the hot summer. The slowdown in the U.S. economy and declining private sector capital investment—the primary driver of market industry demand—owing to deflationary pressures, are cause for concern in the Japanese air conditioning market. Over the months and years ahead, meeting customer needs with comprehensive solutions will become para- mount as the huge stock of package air conditioners installed during the bubble economy era approach replace- ment age and the majority of commercial-use air condition- ers will be converted to HFC coolant in autumn 2001. As such, we are firmly aware that a major factor in marketing strategies in fiscal 2002 will be ensuring the competence and efficacy of the products, services, and sales operations that enable the Company to provide solutions to the prob- lems this situation presents. In the commercial-use air conditioning market, we succeeded in sub- stantially increasing our market share through sales expansion initiatives focused on DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2001 12 FINANCIAL HIGHLIGHTS MANAGEMENT PERSPECTIVE TOPICS REVIEW OF OPERATIONS FINANCIAL SECTION CORPORATE DATA •Commercial-Use Air Conditioners Against this backdrop, increases in Daikin’s unit sales of package air conditioners and room air conditioners substan- tially exceeded the average growth rate for the industry, proving the effectiveness of Daikin’s efforts to expand its retail focused sales network and its powerful product lineup featuring products unique to Daikin that have proved well suited to the rising demand for air conditioner replacements. Demand in Japan’s air conditioning market underwent a dramatic recovery during fiscal 2001. In the first half, private sector capital investment rebounded and seasonal demand was strong due to hot weather during the summer season, which offset the relative decline in public works spending. In the second half, as well, private sector capital investment remained strong and demand from the housing market was bolstered by the impending enforcement of the Recycling Law. Sales (% of net sales, ¥ billion) 353.9 336.7 345.8 344.2 401.2 ’97 ’98 ’99 ’00 ’01 75.4% Air Conditioning The Japanese Market Overview Outlook In fiscal 2001, sales by Daikin’s Air Conditioning and Refrigeration Equipment Division rose 16.6%, to ¥401.2 billion. The division’s sales accounted for 75.4% of con- solidated net sales.  • Residential-Use Air Conditioners