FINANCIAL HIGHLIGHTS MANAGEMENT PERSPECTIVE TOPICS REVIEW OF OPERATIONS FINANCIAL SECTION CORPORATE DATA 14 DAIKIN INDUSTRIES, LTD. ANNUAL REPORT 2001 Chemicals In other chemicals, although sales of fluoroalcohol—a CD-R dye solvent—declined due to changes in the CD-R market, we succeeded in substantially expanding our share of the international market for oil- and water-repellant fin- ishes and significantly increased our sales. We commenced local production of these finishes at Daikin America, Inc., in February 2001 and will work to strengthen the supply capabilities of our plants in Japan and the United States. During the term under review, Daikin succeeded in increasing sales for the sixth consecutive year, owing to expansion in the semiconductor markets of Japan and other countries, global business development, and favorable market conditions in the United States and Europe. Fiscal 2001 was the final year of the Fusion 21 strategic management plan, and we succeeded in meeting the plan’s targets for improving business scale and profitability with a global market share of 20%.  In fluoroplastics and fluoroelastomers, Daikin achieved a 20% increase in sales year on year amid growing demand from the semi- conductor industries of Japan and the United States and recovery in the FEP market for LAN cables in the United States. In fluorocarbons, increased demand for alternative refrig- erants led to an increase in net sales for the term. Demand for R-407C and R-410A surged, especially from Japanese air conditioning manufacturers. In response to these market conditions, in January 2001 Daikin com- menced operations at Japan’s first mass production plant for HFC125, the base gas from which these new alternative coolants are derived, and it is now supplying this gas worldwide along with HFC32. Fluorochemicals are used in a wide range of industries, including automotive equipment, IT, and semiconductor manufacturing facilities, and, therefore, long-term market stability is expected. Daikin has instituted a growth strategy for its chemicals business that is aimed at dramatic growth and will be imple- mented in concert with the new Companywide Fusion 05 strategic management plan.  Our growth strategy can be broken up into three major sections. First, we will develop new applications for fluoro- chemicals in the strong growth potential areas of IT and semiconductors in order to create a market for these special- ty chemicals. Second, we will expand those operations related to products that promote global development. Third, we will create new peripheral businesses that leverage the unique properties of our functional chemicals. In June 2000, Daikin established the Daikin Institute of Advanced Chemistry and Technology, Inc., in the United States—the center of leading-edge applications develop- ment—as a research center for the efficient outsourcing of the latest fluorochemical technological development and applications development to external research institutions and venture corporations. In the months and years ahead, we will expand our global technologies network and accel- erate the development of new applications and new prod- ucts and the establishment of new businesses. Outlook Overview 66.2 77.4 79.6 82.0 96.2 Sales (% of net sales, ¥ billion) ’97 ’98 ’99 ’00 ’01 18.1% During fiscal 2001, sales by Daikin’s Chemicals Division rose 17.4%, to ¥96.2 billion. This figure represented 18.1% of consolidated net sales.