Japan Tobacco : 2022 Third Quarter Results

Tokyo, October 31, 2022

2022 Third Quarter Results

Year-to-Date Highlights (vs. 2021)

• Revenue increased by 13.7% to JPY 2,008.5 billion.
• Core revenue at constant FX increased by 4.1% to JPY 1,765.8 billion.
• Adjusted operating profit at constant FX increased by 6.5% to JPY 578.4 billion. On a reported basis, adjusted operating profit increased by 17.5% to JPY 637.8 billion.
• Operating profit increased by 20.5% to JPY 579.3 billion.
• Profit increased by 19.2% to JPY 403.8 billion.

FY2022 Forecasts (vs. Previous Forecasts)

• Revenue forecast is revised upward by JPY 182.0 billion.
• Core revenue at constant FX is revised upward by JPY 57.0 billion.
• Adjusted operating profit at constant FX is revised upward by JPY 56.0 billion. On a reported basis, adjusted operating profit is revised upward by JPY 103.0 billion.
• Forecasts are revised upward for operating profit (JPY 100.0 billion) and profit (JPY 83.0 billion).
• Free cash flow is revised upward by JPY 77.0 billion.
• The Company plans to offer an annual dividend per share of JPY 188.

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

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

"In the nine-month results, the JT Group delivered a strong performance, mainly driven by robust pricing in the tobacco business. We are also encouraged by the Ploom X volume and share performance in Japan. We have launched Ploom X in the U.K. starting in London. We will accelerate Ploom X launches internationally from 2023.

"Also, we have entered into a joint venture with Altria Group to market and commercialize HTS (heated tobacco sticks) products in the U.S. and signed a long-term,non-binding global memorandum of understanding to explore commercial opportunities for a wide range of potentially reduced-risk products. I strongly believe that this cooperation will increase the global harm reduction possibilities for adult consumers, and drive incremental value for JT and Altria.

"We have revised our 2022 full year guidance upwards, driven by business momentum as well as favorable currency movements against the Japanese yen. Following the upward revisions of our guidance, we are pleased to share our plan to increase our annual dividend guidance by JPY 38 to JPY 188.

"Regarding Russia, while we continue to manufacture and distribute our products, the operating environment remains very challenging. Under these circumstances, the JT Group continues to take necessary decisions to address the changing situation in accordance with the Group's management principle, which is to pursue the 4S model*, as well as in compliance with applicable regulations and international sanctions."

• 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 October 31, 2022 at 5:00pm 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 Q3 2022, the impacts of the hyperinflationary accounting and hyperinflation include those in Ethiopia, Iran, Sudan, and Turkey.

The impacts on the key financial indicators are as follows:

Consolidated/tobacco business results

Revenue:	JPY +29.1 billion
Adjusted operating profit:	JPY -9.6 billion
Profit:	JPY -19.8 billion

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Q3 2022 Financial Results

Consolidated Results

(billions of JPY)	Q3 2022	Q3 2021	Variance	2022 YTD	2021 YTD	Variance
Revenue	741.7	621.5	+19.3％	2,008.5	1,766.1	+13.7％
Adjusted operating profit	223.0	184.7	+20.7％	637.8	542.9	+17.5％
Operating profit	196.4	158.6	+23.8%	579.3	480.7	+20.5%
Profit	139.7	113.6	+23.0％	403.8	338.8	+19.2％
Core revenue	623.8	596.0	+4.7％	1,765.8	1,697.0	+4.1％
at constant FX
Adjusted operating profit	191.7	184.7	+3.8％	578.4	542.9	+6.5％
at constant FX

Q3 2022

• Revenue
  Revenue increased by 19.3% to JPY 741.7 billion, driven by increases across all businesses. At constant FX, core revenue increased by 4.7% to JPY 623.8 billion.
• Adjusted operating profit
  At constant FX, adjusted operating profit increased by 3.8% to JPY 191.7 billion, driven by an increase in the tobacco business, partially offset by decreases in the pharmaceutical and processed food businesses. On a reported basis, adjusted operating profit increased by 20.7% to JPY 223.0 billion, driven by positive currency movements from a weaker Japanese yen.

• Operating profit
  Operating profit increased by 23.8% to JPY 196.4 billion, driven by an increase in adjusted operating profit.
• Profit
  Profit increased by 23.0% to JPY 139.7 billion, driven by an increase in operating profit, partially offset by increasing financing costs.

2022 YTD

• Revenue
  Revenue increased by 13.7% to JPY 2,008.5 billion, driven by increases across all businesses. At constant FX, core revenue increased by 4.1% to JPY 1,765.8 billion.
• Adjusted operating profit
  At constant FX, adjusted operating profit increased by 6.5% to JPY 578.4 billion, driven by increases in the tobacco and pharmaceutical businesses. On a reported basis, adjusted operating profit increased by 17.5% to JPY 637.8 billion, driven by positive currency movements from a weaker Japanese yen.

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• Operating profit
  Operating profit increased by 20.5% to JPY 579.3 billion, driven by an increase in adjusted operating profit.
• Profit
  Profit increased by 19.2% to JPY 403.8 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)	Q3	Q3	Variance	2022	2021	Variance
2022	2021	YTD	YTD
Core revenue	655.4	539.5	+21.5%	1,760.7	1,532.1	+14.9%
(+4.5%)*	(+3.9%)*
Adjusted operating profit	228.3	190.2	+20.1%	653.4	562.9	+16.1%
(+3.6%)*	(+5.5%)*
Reference (billions of units, billions of JPY)
Total volume	139.2	140.1	-0.6%	402.0	403.9	-0.5%
Combustibles volume	137.3	138.2	-0.7%	396.0	398.5	-0.6%
RRP volume	2.0	1.9	+3.5%	6.0	5.4	+10.7%
RRP-related revenue	19.7	19.7	+0.2%	58.9	58.3	+1.0%
					*At constant FX

Q3 2022

• Core revenue and adjusted operating profit
  Core revenue and adjusted operating profit increased, driven by robust pricing contributions from all clusters, a resilient industry volume combined with market share gains, and favorable currency movements. Core revenue grew by 21.5%, and by 4.5% at constant FX, driven by a positive price/mix contribution of JPY 43.2 billion, more than offsetting a negative volume variance of JPY 19.1 billion. RRP-related revenue grew by 0.2%. Adjusted operating profit increased by 20.1%, and by 3.6% at constant FX, driven by the core revenue growth.
• Volume and market share1
  Total volume was resilient, down only by 0.6%, with market share gains and continued growth in the EMA cluster, mainly in Global Travel Retail, Iran, Poland and Russia. These increases almost offset declines in the Asia and Western Europe clusters. In the RRP category, volume grew by 3.5% driven by the on-going HTS segment increase and Ploom X share gains in Japan, while combustibles volume slightly declined by 0.7%, mainly due to industry volume contraction in the key markets of Italy, Japan, the Philippines, and the U.K.
  Market share gains continued in the key markets of Italy, the Philippines, Russia, Spain, Taiwan and Turkey.

2022 YTD

• Core revenue and adjusted operating profit
  Core revenue and adjusted operating profit increased, driven by strong pricing from all three clusters, including the key markets of Japan, the Philippines, Romania, Russia, Spain, Taiwan, Turkey and the U.K. Other drivers included continued market share gains within a resilient industry volume and favorable currency movements. Core revenue grew by 14.9%, and by 3.9% at constant FX, driven by a solid price/mix contribution of JPY 104.4 billion, more than offsetting a negative volume variance of JPY 44.8 billion. RRP-related revenue increased by 1.0%. Adjusted operating profit increased by 16.1%, and by 5.5% at constant FX, driven by core revenue growth, which more than offset higher input costs within the supply chain.

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