Daikin reports ‘sluggish’ residential demand in Q2

Daikin saw North American sales volumes drop eight percent year-over-year during the second quarter, along with soft residential demand, a company spokesman said on its earnings call Tuesday.

Why it matters: The results reflect findings from Lennox, which reported a similar nine percent year-over-year decrease in residential unit volumes during its same-quarter earnings call on July 23, partly due to softness in the housing market. 

What’s happening: Daikin — in North America — is facing “a difficult business environment with sluggish residential industry demand due to prolonged inflation and high mortgage interest rates,” said senior executive Koichi Takahashi. 

• “Sales of ducted unitary air conditioners for houses were significantly affected by the rush demand reaction due to changes in GWP regulations for refrigerants,” he added. 
• Daikin North America’s ductless sales, though, grew during the quarter. 

Zoom out: Despite its emphasis on R-32, the company acknowledged the industry tightness around R-454B cylinder availability; however, “In the financial results explanations of rival manufacturers, it was reported that the problem of supply shortages has largely been resolved,” Takahashi noted. 

On tariffs: While President Trump recently imposed a 50 percent tariff on additional copper products, Daikin North America secures much of its volume in the U.S., so the company expects a muted impact. 

• Still, it’s looking to compensate. “[W]e are talking with our local representatives about making additional price changes,” Takahashi explained.
• “However, we would like to decide what percentage we will raise while keeping an eye on demand and the price revisions of our rivals,” he added. 

What else they’re saying: “We do not have statistics… but as far as we are currently aware, U.S. distribution inventories of residential products remain high,” said Takahashi.

• “However, there are no new R-410A units being supplied at all anymore,” he added. “As a result, actual sales will decrease, and we estimate that the inventory of R-410A units will approach almost zero at the end of September or later.”