Japan Tobacco : 2023 First Quarter Results (CFO Presentation)

JT Group

2023 First-Quarter Results

Nobuya Kato

JT Group Chief Financial Officer

*Please be reminded that the figures shown on these slides may differ from those shown in the financial statements as they are intended to facilitate the reader's understanding of individual businesses.

*For details of each term, please refer to annotations on slide 11.

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FORWARD-LOOKING STATEMENTS

This presentation contains forward-looking statements. These statements appear in a number of places in this document and include statements regarding the intent, belief, or current and future expectations of our management with respect to our business, financial condition and results of operations. In some cases, you can identify forward-looking statements by terms such as "may", "will", "should", "would", "expect", "intend", "project", "plan", "aim", "seek", "target", "anticipate", "believe", "estimate", "predict", "potential" or the negative of these terms or other similar terminology. These statements are not guarantees of future performance and are subject to various risks and uncertainties. Actual results, performance or achievements, or those of the industries in which we operate, may differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements. In addition, these forward-looking statements are necessarily dependent upon assumptions, estimates and data that may be incorrect or imprecise and involve known and unknown risks and uncertainties. Forward-looking statements regarding operating results are particularly subject to a variety of assumptions, some or all of which may not be realized.

Risks, uncertainties or other factors that could cause actual results to differ materially from those expressed in any forward-looking statement include, without limitation:

1. increase in awareness of health concerns related to smoking;
2. regulatory developments; including, without limitation, tax increases and restrictions on sales, marketing, packaging, labeling and use of tobacco products, privately imposed restrictions and governmental investigations;
3. litigation around the world alleging adverse health and financial effects resulting from, or relating to, tobacco products;
4. our ability to further diversify our business beyond the traditional tobacco industry;
5. our ability to successfully expand internationally and make investments outside Japan;
6. competition, changing consumer preferences and behavior;
7. our ability to manage impacts derived from business diversification or business expansion;
8. economic, regulatory and political changes, such as nationalization, terrorism, wars and civil unrest, in countries in which we operate;
9. fluctuations in foreign exchange rates and the costs of raw materials; and
10. catastrophes, including natural disasters.

© Copyright JT 2023

2

2023 First-Quarter Consolidated Results

(JPY BN)	2023	vs. 2022
Jan-Mar
Reported
Revenue	665.3	+14.4%
AOP	223.4	+14.6%
Operating profit	206.4	+15.7%
Profit	144.7	+16.6%

Note: The results for fiscal year 2022 and fiscal year 2023 on a reported basis have been adjusted to include the impact of hyperinflationary accounting in accordance with the requirements stipulated in IAS 29. The results for fiscal year 2022 and fiscal year 2023 on a constant FX basis have been calculated to exclude amounts of revenue and profit that have increased due to hyperinflation in certain markets.

Core revenue at constant FX: +6.2%

Adjusted operating profit (AOP) at constant FX: +5.1%

• Positive pricing contributions in the tobacco business

Revenue on a reported basis

• Increase driven by top-line growth in the tobacco and pharmaceutical businesses
• Favorable FX impact due to weak JPY in the tobacco business

AOP on a reported basis and Operating profit

• Growth fueled by all businesses
• Favorable FX impact due to weak JPY in the tobacco business

Profit

• Increase fueled by operating profit growth and lower corporate income tax offsetting higher financing costs

© Copyright JT 2023

3

Tobacco Business: Volume Performance

(BnU)	2023	vs. 2022
Jan-Mar
Total volume	130.2	+1.3%
Combustibles volume	128.2	+1.2%
RRP volume	2.0	+3.0%

Total volume

1. Continued combustibles favorable momentum in EMA

1. On-goingRRP volume growth

(-) Industry volume decline in several key markets

Combustibles

1. Segment share gains in Japan

1. Higher industry volume in Turkey

1. Recovery in Global Travel Retail and strong momentum in emerging markets

(-) Industry volume contraction in the U.K.

RRP

(+) HTS* segment share gains in Japan

*heated tobacco sticks

© Copyright JT 2023

4

Tobacco Business: Financial Results & Drivers

(JPY BN)	2023	vs. 2022
Jan-Mar
Core revenue	579.1	+15.3％
at constant FX	533.6	+6.3%
AOP	225.1	+14.1%
at constant FX	206.5	+4.6%

Note: The results for fiscal year 2022 and fiscal year 2023 on a reported basis have been adjusted to include the impact of hyperinflationary accounting in accordance with the requirements stipulated in IAS

29. The results for fiscal year 2022 and fiscal year 2023 on a constant FX basis have been calculated to exclude amounts of revenue and profit that have increased due to hyperinflation in certain markets.

© Copyright JT 2023

Core revenue

1. Pricing benefits in multiple markets, including Russia and the U.K. (-) Negative volume contribution due to lower market mix
   (-) Continued downtrading in several markets including Japan

AOP

(+) Top-line growth

(-) Higher input costs within the supply chain

FX impacts

(+) Positive FX impact due to weaker JPY

Roadmap of AOP variance (JPY BN)

						225.1
		32.4	-20.3	206.5	18.6
197.3
-3.0
2022	Volume	Price/Mix	Others	2023	FX	2023
Jan-Mar				Jan-Mar		Jan-Mar
				At constant
				FX		5