Japan Tobacco : 2022 Second Quarter Results

Tokyo, July 29, 2022

2022 Second Quarter Results

Year-to-Date Highlights (vs. 2021)

• Revenue increased by 10.7% to JPY 1,266.8 billion.
• Core revenue at constant FX increased by 3.7% to JPY 1,142.0 billion.
• Adjusted operating profit at constant FX increased by 8.0% to JPY 386.7 billion.
• On a reported basis, adjusted operating profit increased by 15.8% to JPY 414.9 billion.
• Operating profit increased by 18.9% to JPY 383.0 billion.
• Profit increased by 17.3% to JPY 264.1 billion.
• The Company announced to offer an interim dividend of JPY 75 as initially planned.

FY2022 Forecasts (vs. Initial Forecasts)

• Revenue forecast is revised upward by JPY 171.0 billion.
• Adjusted operating profit at constant FX is revised downward by JPY 31.0 billion.
• On a reported basis, adjusted operating profit is revised upward by JPY 14.0 billion.
• Forecasts are revised upward for operating profit (JPY 15.0 billion) and profit (JPY 6.0 billion).
• Free cash flow is revised upward by JPY 46.0 billion.
• As announced in the initial forecast, the Company plans to offer an annual dividend per share of JPY 150.

Please refer to 'Data Sheets' on page 14 for more financial figures.

Comments from Masamichi Terabatake, President and CEO of the JT Group:

"I would like to start by reiterating that the safety of our employees and their families remains our top priority. We are extending all possible support to affected people in Ukraine.

"In the first half, the JT Group delivered a robust performance, mainly driven by strong pricing. We are also encouraged by the Ploom X volume and share performance in Japan. In the second half of the year, we will be leveraging learnings from Japan for international Ploom X launches.

"We have revised our 2022 full year reported adjusted operating profit and profit guidance upwards, driven by favorable currency movements against the Japanese yen. However, the adjusted operating profit at constant FX is revised downwards considering higher input costs impacting our supply chain operations. Dividend per share guidance for full year remains unchanged at 150 yen per share. The interim dividend is 75 yen per share.

"Regarding Russia, while we continue to manufacture and distribute our products in full compliance with national and international sanctions, the operating environment is becoming increasingly complex. Under these circumstances, the JT Group continues to evaluate various options for its Russia business, including potentially transferring its ownership, and taking necessary decisions to address the changing situation in accordance with the Group's management principle, which is to pursue the 4S model*."

• Under the 4S model, we strive to fulfill our responsibilities to our valued consumers, shareholders, employees and the wider society, carefully considering the respective interests of these four key stakeholder groups and exceeding their expectations wherever we can. For more details, please visithttps://www.jt.com/about/management_principles/index.html

Investors' Meeting

An investors' meeting with members of the investor community will be held on July 29, 2022 at 6:00pm Tokyo time. An on-demand audio recording of this conference will be available on our website (https://www.jt.com/investors/results/presentation_financial). For detailed information on the consolidated financial results, please visit the Company's website (https://www.jt.com/investors/).

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Note on Hyperinflationary Adjustments

The results for fiscal year 2021 and fiscal year 2022 as well as the forecasts for fiscal year 2022 on a reported basis have been adjusted to include the impact of hyperinflationary accounting, which has been applied since Q3 2020, in accordance with the requirements stipulated in IAS 29. Starting from Q1 2021, the results on a constant FX basis have been calculated to exclude amounts of revenue and profit that have increased due to hyperinflation in certain markets. Starting from Q2 2022, the impacts of the hyperinflationary accounting and hyperinflation include those of in Turkey in addition to Iran and Sudan.

The impacts on the key financial indicators are as follows:

Consolidated/tobacco business results

Revenue:	JPY +17.8 billion
Adjusted operating profit:	JPY -4.0 billion
Profit:	JPY -11.4 billion

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Q2 2022 Financial Results

Consolidated Results

(billions of JPY)	Q2 2022	Q2 2021	Variance	2022 YTD	2021 YTD	Variance
Revenue	685.3	597.2	+14.8％	1,266.8	1,144.5	+10.7％
Adjusted operating profit	220.0	180.1	+22.1％	414.9	358.2	+15.8％
Operating profit	204.6	162.0	+26.3%	383.0	322.1	+18.9%
Profit	140.0	111.4	+25.6％	264.1	225.2	+17.3％
Core revenue	595.0	574.1	+3.6％	1,142.0	1,101.0	+3.7％
at constant FX
Adjusted operating profit	200.6	180.1	+11.4％	386.7	358.2	+8.0％
at constant FX

Q2 2022

• Revenue
  Revenue increased by 14.8% to JPY 685.3 billion driven by increases across all businesses. At constant FX, core revenue increased by 3.6% to JPY 595.0 billion.
• Adjusted operating profit
  At constant FX, adjusted operating profit increased by 11.4% to JPY 200.6 billion driven by increases in the tobacco and pharmaceutical businesses. On a reported basis, adjusted operating profit increased by 22.1% to JPY 220.0 billion driven by positive currency movements from a weaker Japanese yen.

• Operating profit
  Operating profit increased by 26.3% to JPY 204.6 billion driven by an increase in adjusted operating profit.
• Profit
  Profit increased by 25.6% to JPY 140.0 billion driven by an increase in operating profit, partially offset by increasing financing costs.

2022 YTD

• Revenue
  Revenue increased by 10.7% to JPY 1,266.8 billion driven by increases across all businesses. At constant FX, core revenue increased by 3.7% to JPY 1,142.0 billion.
• Adjusted operating profit
  At constant FX, adjusted operating profit increased by 8.0% to JPY 386.7 billion driven by increases in the tobacco and pharmaceutical businesses. On a reported basis, adjusted operating profit increased by 15.8% to JPY 414.9 billion driven by positive currency movements from a weaker Japanese yen.

3

• Operating profit
  Operating profit increased by 18.9% to JPY 383.0 billion driven by an increase in adjusted operating profit.
• Profit
  Profit increased by 17.3% to JPY 264.1 billion driven by an increase in operating profit, partially offset by increasing financing costs.

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Results by Business Segment
Tobacco Business
(billions of JPY)	Q2	Q2	Variance	2022	2021	Variance
2022	2021	YTD	YTD
Core revenue	603.2	519.5	+16.1%	1,105.3	992.6	+11.3%
(+3.7%)*	(+3.6%)*
Adjusted operating profit	227.8	190.4	+19.6%	425.1	372.7	+14.1%
(+9.5%)*	(+6.5%)*
Reference(billions of units, billions of JPY)
Total volume	134.2	136.7	-1.8%	262.8	263.7	-0.4%
Combustibles volume	132.2	134.9	-2.0%	258.7	260.2	-0.6%
RRP volume	2.1	1.8	+13.6%	4.0	3.5	+14.5%
RRP-related revenue	20.1	20.0	+0.6%	39.1	38.6	+1.4%

*At constant FX

Q2 2022

• Core revenue and adjusted operating profit
  Core revenue and adjusted operating profit increased, driven by a solid pricing contribution from all clusters, continued market share gains and favorable currency movements. Core revenue grew by 16.1%, and 3.7% at constant FX, driven by a positive price/mix variance of JPY 35.6 billion, more than offsetting a negative volume contribution of JPY 16.4 billion. RRP-related revenue increased by JPY 0.1 billion. Adjusted operating profit increased by 19.6%, and 9.5% at constant FX, driven by core revenue growth.
• Volume and market share1
  Total volume decreased by 1.8%, due to declines in the Asia and Western Europe clusters, partially offset by continued growth in the EMA cluster, mainly in Global Travel Retail, Iran, Poland and Turkey. Combustibles volume declined by 2.0%, mainly due to industry volume contraction in the key markets of Italy, Japan, the Philippines, Russia and the UK. Market share gains continued in the key markets of Italy, the Philippines, Spain, Taiwan and Turkey. In the RRP category, volume grew by 13.6% driven by the on-going Ploom X HTS (heated tobacco sticks) share gains in Japan, in an increasing segment.

2022 YTD

• Core revenue and adjusted operating profit
  Core revenue and adjusted operating profit increased, driven by solid pricing generated across all three clusters, continued market share gains and favorable currency movements. Core revenue grew by 11.3%, and 3.6% at constant FX, fueled by a positive price/mix contribution of JPY 61.2 billion, which more than offsets a negative volume variance of JPY 25.7 billion. RRP-related revenue increased by JPY 0.6 billion, up 1.4%. Adjusted operating profit was up 14.1%, and 6.5% at constant FX, driven by core revenue growth, despite continued investments in HTS.
• Volume and market share1
  Total volume decreased by 0.4%, due to declines in the Asia and Western Europe clusters, where industry volume contraction in several key markets could not be offset by the combination of growth in the EMA cluster, continued market share gains and RRP volume growth (+14.5%). Combustibles

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