Japan Tobacco : 2023 Third Quarter Results

Tokyo, October 31, 2023

2023 Third Quarter Results

2023 Third Quarter Highlights (vs. 2022)

• Revenue increased by 7.4% to JPY 2,157.0 billion
• Core revenue at constant FX increased by 5.9% to JPY 2,049.2 billion
• Adjusted operating profit at constant FX increased by 5.9% to JPY 675.5 billion
• On a reported basis, adjusted operating profit increased by 4.2% to JPY 664.4 billion
• Operating profit increased by 9.1% to JPY 631.8 billion
• Profit increased by 9.5% to JPY 442.0 billion

2023 Forecasts (vs. Previous Forecasts)

• Revenue forecast is revised upward by JPY 85.0 billion
• Core revenue at constant FX is revised upward by JPY 63.0 billion
• Adjusted operating profit at constant FX is revised upward by JPY 34.0 billion
• On a reported basis, adjusted operating profit is revised upward by JPY 38.0 billion
• Forecasts are revised upward for operating profit (+ JPY 45.0 billion) and profit (+ JPY 7.0 billion)
• Free cash flow is revised upward by JPY 25.0 billion
• As announced in the initial forecast, 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:

"The JT Group posted another set of strong results for the third quarter. In particular, the tobacco business reported solid growth across its indicators, driven by continued market share gains and robust pricing.

As announced in February, we are accelerating investments in HTS to establish the foundation of our future growth, and these investments are progressing as planned. The market share of Ploom X in the HTS segment in Japan is steadily increasing with share exceeding 10% in the periods of July to September 2023, despite a competitive business environment. In addition, since July 2023, we have launched Ploom X in Switzerland, Poland, Hungary, Romania, and Greece and plan to roll it out in Kazakhstan in early November. We expect to continue the geographical expansion of Ploom X, to reach 28 markets by year end 2024.

We have revised upward the full year forecast for adjusted operating profit at constant FX to account for the stronger year-to-datetop-line growth of the tobacco business. Similarly, on a reported basis, in anticipation of the continuous depreciation trend of the yen, we have revised upward our forecast, including adjusted operating profit. In line with our dividend policy, dividend per share guidance for the full year remains unchanged at 188 yen per share.

The JT Group will continue to take appropriate management decisions in accordance with the 4S model*, our management principle, and work as one team to achieve our revised full-year forecasts. We will also make continuous efforts to bring to life our JT Group Purpose** and the purposes of each business."

• 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
• The JT Group Purpose "Fulfilling Moments, Enriching Life" is designed to clarify the direction to being a sustainable entity. The area of "human enrichment" undergoes changes in various ways with the times and the people, and the JT Group strives to evolve constantly so that we can continue to be entrusted within this area by society and make valuable contributions in the future.

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Investors' Meeting

A conference call with members of the investor community will be held on October 31, 2023 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/).

Note on Hyperinflationary Adjustments

The results for fiscal year 2022 and fiscal year 2023 as well as the forecasts for fiscal year 2023 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. The results and forecast on a constant FX basis have been calculated to exclude amounts of revenue and profit that have increased due to hyperinflation in certain markets. As of Q3 2023, the impacts of the hyperinflationary accounting and hyperinflation include those in Ethiopia, Iran, Sudan and Turkey.

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Q3 2023 Financial Results

Consolidated Results

(billions of JPY)	Q3 2023	Q3 2022	Variance	2023 YTD	2022 YTD	Variance
Revenue	764.2	741.7	+3.0％	2,157.0	2,008.5	+7.4％
Adjusted operating profit	221.5	223.0	-0.6％	664.4	637.8	+4.2％
Operating profit	218.3	196.4	+11.2%	631.8	579.3	+9.1%
Profit	155.0	139.7	+10.9%	442.0	403.8	+9.5％
Core revenue	746.8	715.6	+4.4％	2,049.2	1,934.7	+5.9％
at constant FX
Adjusted operating profit	241.2	223.0	+8.2％	675.5	637.8	+5.9%
at constant FX

Q3 2023

• Revenue
  Revenue increased by 3.0% to JPY 764.2 billion, driven by an increase in the tobacco and pharmaceutical businesses. At constant FX, core revenue increased by 4.4 % to JPY 746.8 billion.
• Adjusted operating profit
  On a reported basis, adjusted operating profit decreased by 0.6% to JPY 221.5 billion, due to unfavorable currency movements, mainly from the appreciation of the Japanese yen against several local currencies, partially offset by growth across all businesses. At constant FX, adjusted operating profit increased by 8.2% to JPY 241.2 billion.

• Operating profit
  Operating profit increased by 11.2% to JPY 218.3 billion, mainly driven by an increase in sales of real estate and reduced trademark amortization in the tobacco business, partially offset by a decrease in adjusted operating profit.
• Profit
  Profit increased by 10.9% to JPY 155.0 billion, driven by an increase in operating profit.

2023 YTD

• Revenue
  Revenue increased by 7.4% to JPY 2,157.0 billion, driven by an increase in the tobacco and pharmaceutical businesses. At constant FX, core revenue increased by 5.9% to JPY 2,049.2 billion.
• Adjusted operating profit
  On a reported basis, adjusted operating profit increased by 4.2% to JPY 664.4 billion, driven by growth across all businesses, partially offset by unfavorable currency movements, from the appreciation of the Japanese yen against several local currencies. At constant FX, adjusted operating profit increased by 5.9% to JPY 675.5 billion.

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• Operating profit
  Operating profit increased by 9.1% to JPY 631.8 billion, driven by an increase in adjusted operating profit, as well as by an increase in sales of real estate and reduced trademark amortization in the tobacco business.
• Profit
  Profit increased by 9.5% to JPY 442.0 billion, driven by an increase in operating profit.

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Results by Business Segment
Tobacco Business
(billions of JPY)	Q3	Q3	Variance	2023	2022	Variance
2023	2022	YTD	YTD
Core revenue	674.1	655.4	+2.8%	1,891.3	1,760.7	+7.4%
(+4.7%)*	(+6.0%)*
Adjusted operating profit	226.7	228.3	-0.7%	676.8	653.4	+3.6%
(+7.9%)*	(+5.3%)*
Reference(billions of units, billions of JPY)
Total volume	141.3	139.2	+1.5%	410.6	402.0	+2.1%
Combustibles volume	139.0	137.3	+1.2%	404.2	396.0	+2.1%
RRP volume	2.3	2.0	+17.1%	6.5	6.0	+8.2%
RRP-related revenue	22.7	19.7	+15.0%	62.1	58.9	+5.6%
					*At constant FX

Q3 2023

• Core revenue and adjusted operating profit
  Core revenue increased by 2.8%, and by 4.7% at constant FX, driven by a solid strong price/mix variance of JPY 38.4 billion from the Western Europe and EMA clusters, offsetting a negative volume contribution of JPY 7.8 billion in the Asia and Western Europe clusters, and unfavorable currency movements. RRP-related revenue grew by 15.0%, driven by the double-digit RRP volume increase fueled by Ploom X.
  Adjusted operating profit decreased by 0.7%, due to unfavorable currency movements. At constant FX, adjusted operating profit increased by 7.9% as the strong price/mix variance more than offset higher investments, partly related to the Ploom X geo-expansion, and the impact of inflation on costs.
• Volume and market share1
  Total volume increased by 1.5%, driven by solid growth in the EMA cluster, partially offset by impacts from lower industry volume in Asia and Western Europe. Volume in the combustibles category grew by 1.2%, fueled by continued market share gains and the performance of Winston (+9.1%) and Camel (+18.1%). In the RRP category, volume grew by 17.1%, driven by the continued share gains in Japan and the geo-expansion of Ploom X.
  Market share increased in the key markets of Italy, Japan, the Philippines, Romania, Russia and Taiwan.

2023 YTD

• Core revenue and adjusted operating profit
  Core revenue increased by 7.4%, and by 6.0% at constant FX, driven by a robust price/mix variance of JPY 108.7 billion from the Western Europe and EMA clusters as well as favorable currency movements, which more than offset a negative volume contribution of JPY 2.7 billion in the Western Europe cluster. RRP-related revenue grew by 5.6%, fueled by the RRP volume acceleration.
  Adjusted operating profit increased by 3.6%, and by 5.3% at constant FX, driven by the solid price/mix variance, more than offsetting the impact of inflation and increased investment in the geo-expansion of Ploom X, and unfavorable currency movements.

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• Volume and market share1
  Total volume increased by 2.1%, driven by growth in the Asia and EMA clusters, following continued market share gains, and favorable industry volume trends in selected markets. This more than offset a decline in Western Europe, due to lower industry volumes, notably in the UK. Combustibles volume increased by 2.1%, fueled by Winston (+8.1%) and Camel (+18.2%). RRP volume grew by 8.2%, and by 18.8% when excluding one-off unfavorable comparisons. This volume growth was fueled by HTS volume increasing by 46.5% in Japan and HTS volume contribution from European market launches. Ploom X is now available in Czech Republic, Greece, Hungary, Italy, Japan, Lithuania, Poland, Portugal, Romania, Switzerland and the UK.
  Market share increased in the key markets of Italy, Japan, the Philippines, Romania, Russia and Taiwan.

Tobacco Business

Performance Review by Cluster

Asia

(billions of JPY)	2023	2022	Variance
YTD	YTD
Core revenue	599.1	609.3	-1.7%
(-2.6%)*
Adjusted operating profit	212.8	230.8	-7.8%
(-7.2%)*
Reference(billions of units)
Total volume	96.0	95.8	+0.2%

*At constant FX

• Core revenue and adjusted operating profit
  Core revenue decreased by 1.7%, as the positive volume contribution, mainly in Japan, and favorable currency movements, could not offset a negative price/mix variance, primarily in Japan. At constant FX, core revenue decreased by 2.6%.
  Adjusted operating profit decreased by 7.8%, and by 7.2% at constant FX, due to the negative contribution from both volume and price/mix, partially offset by a favorable variance in costs.
• Volume and market share1
  Total and GFB volumes increased by 0.2% and 6.7%, respectively, mainly driven by the strong Camel growth in Bangladesh, Indonesia and Japan. Market share increased in Bangladesh, Cambodia, Japan, Malaysia, the Philippines, Singapore, South Korea and Taiwan.
• By market1, 2
  In Japan, total volume was up by 2.3%, driven by share gains in both combustibles and RRP which outperformed the industry volume and was mainly fueled by the increase of the RRP category (+11.7%). Total market share increased by 0.6ppt to 42.9%.
  In combustibles, volume increased by 0.3%, driven by category share gains (+3.1ppt to 60.8%), fueled by Camel Craft, which more than offset the category volume contraction estimated at 4.8%.In RRP, a category estimated at 37.4% (shipment basis) of the total tobacco industry size, volume increased by 21.3% with RRP category share increasing 1.0ppt to 13.0%. Within the HTS segment, Ploom X grew volume by 46.5% and continued to gain share, reaching an HTS segment share of 9.8%, up by 2.2ppt. Core revenue decreased due to the negative price/mix variance, more than offsetting the favorable volume contribution.

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In the Philippines, total volume declined by 5.1%, due to industry volume contraction following excise tax-led price increases. GFB volume increased by a strong 35.8%, fueled by Camel. Total market share grew an estimated 3.7ppt to 42.1%, also driven by Camel.

Core revenue at constant FX increased, driven by a favorable price/mix contribution offsetting the negative volume variance.

In Taiwan, total and GFB volumes decreased by 3.7% and 4.4%, respectively, due to industry volume contraction, resulting from the gradual unwinding of COVID trends. Total market share increased 1.4ppt to 50.2%, driven by Winston and LD.

Core revenue at constant FX decreased due to unfavorable volume and price/mix variances.

Western Europe

(billions of JPY)	2023	2022	Variance
YTD	YTD
Core revenue	467.6	413.4	+13.1%
(+4.0%)*
Adjusted operating profit	210.0	193.2	+8.7%
(+3.2%)*
Reference(billions of units)
Total volume	80.5	84.0	-4.2%

*At constant FX

• Core revenue and adjusted operating profit
  Core revenue increased by 13.1%, driven by a positive price/mix contribution, mainly in France, Germany, Ireland, Spain, Sweden and the UK, and by favorable currency movements. These drivers more than offset the negative volume variance, primarily in the UK, despite gains in Italy and Portugal. At constant FX, core revenue increased by 4.0%.
  Adjusted operating profit increased by 8.7%, as the revenue growth and favorable currency movements more than offset investments related to Ploom X geo-expansions. At constant FX, adjusted operating profit grew by 3.2%.
• Volume and market share1
  Total and GFB volumes decreased by 4.2% and 0.3%, respectively, due to industry volume contraction across the cluster, most notably in the UK, despite continued market share gains in several markets. Market share increased in Belgium, France, Germany, Italy, Luxembourg, the Netherlands, Portugal and Switzerland.
• By market1, 2
  In Italy, total volume increased by 1.5%, and 1.3% when excluding inventory movements, driven by market share gains and the volume contribution from Ploom X. GFB volume grew by 0.6%, fueled by Winston. Total market share increased by 0.2ppt to 23.2%.
  Core revenue at constant FX decreased as the favorable volume variance could not offset a negative price/mix contribution.
  In Spain, total volume decreased by 2.2%, and 2.9% when excluding inventory movements, mainly due to industry contraction resulting from the stabilization of post-COVID trends. GFB volume decreased by 2.0%, and total market share was stable at 27.9%.
  Core revenue at constant FX increased, driven by a favorable price/mix variance, more than offsetting a negative volume contribution.

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In the UK, total volume declined by 19.2%, due to the large industry volume contraction, resulting mainly from excise tax-led price increases and the full unwinding of COVID trends in the first half. Total market share declined by 0.9ppt to 43.8%, despite Benson & Hedges gaining 0.9ppt of share.

Core revenue at constant FX increased, as the negative volume variance was more than offset by a solid price/mix contribution.

EMA

(billions of JPY)	2023	2022	Variance
YTD	YTD
Core revenue	824.6	737.9	+11.7%
(+14.3%)*
Adjusted operating profit	254.0	229.4	+10.7%
(+19.6%)*
Reference(billions of units)
Total volume	234.1	222.2	+5.4%

*At constant FX

• Core revenue and adjusted operating profit
  Core revenue increased by 11.7%, and by 14.3% at constant FX, driven by a positive volume variance, mainly in Egypt, Global Travel Retail, Iran and Turkey, and a robust price/mix contribution, including in Canada, Poland, Russia and Turkey. These drivers more than offset unfavorable currency movements.
  Adjusted operating profit grew by 10.7%, as the revenue growth more than offset a higher costs variance and unfavorable currency movements. At constant FX, adjusted operating profit increased by 19.6%.
• Volume and market share1
  Total and GFB volumes increased by 5.4% and 10.6%, respectively, mainly driven by Azerbaijan, Brazil, Egypt, Iran, Turkey and the ongoing recovery in Global Travel Retail. Market share increased in Azerbaijan, Brazil, Canada, the Czech Republic, Iran, Jordan, Mexico, Romania, Russia, Saudi Arabia, South Africa and the USA.
• By market1, 2
  In Romania, total and GFB volumes increased by 4.0% and 19.8%, respectively, outperforming the industry volume growth. As part of the HTS geo-expansion plan, Ploom X was launched on October 2nd. Camel grew solid share in combustibles, driving total market share to 27.7%, up by 0.2ppt.
  Core revenue at constant FX increased, driven by the positive volume and price/mix contributions.
  In Russia, total volume declined by 2.1%, and by 0.7% when excluding inventory movements, due to an industry volume3 contraction estimated at 2.4% and the discontinuation of Ploom S. GFB volume grew by 3.3%, fueled by total market share gains of 0.4ppt to 37.2%, led by Winston, Camel and Sobranie.
  Core revenue at constant FX increased, driven by the positive price/mix contribution, more than offsetting the negative volume variance.
  In Turkey, total volume grew by 15.6%, driven by a higher industry volume resulting from a favorable comparison to the prior year, an improved consumption and reduced illicit trade volume. GFB volume increased 16.3%, fueled by Winston, Camel and LD. Total market share decreased 0.8ppt to 27.1%,

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despite gains from Winston.

Core revenue at constant FX grew, driven by favorable volume and price/mix contributions.

1. Source: the figures for total tobacco market share are based on JT Group estimates on year-to-date average, unless otherwise specified, based on total tobacco figures (i.e. combustibles and heated tobacco products) at the end of September 2023. Year-to- date share of market growth for 2023 is calculated against year-to-date total tobacco shares of market at the end of the respective period in 2022. Brazil, Cambodia, Canada, France, Germany, Italy, Malaysia, Portugal, Romania, Russia, Saudi Arabia, Singapore, South Africa, South Korea, Spain, Switzerland and Turkey are on a year-to-date average at the end of August 2023.
2. From the first quarter of 2023 onward, the market share is computed based on combustibles and heated tobacco products (HTP) industry size for all key markets where the data is available. Prior to this disclosure, only the Japan and Russia markets were using this scope for market share. All other markets report combustibles market share.
3. Source: JT Group estimates based on a year-to-date average at the end of September 2023 for total tobacco data versus the same period last year.

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Pharmaceutical Business
(billions of JPY)	Q3 2023	Q3 2022	Variance	2023	2022	Variance
YTD	YTD
Revenue	22.1	20.4	+1.8	69.8	59.7	+10.1
Adjusted operating profit	3.1	2.4	+0.7	13.1	7.3	+5.9

Q3 2023

• Revenue and adjusted operating profit
  Revenue increased driven by top-line growth at our consolidated subsidiary, Torii Pharmaceutical, and the upside of overseas royalty income due to the Japanese yen depreciation.
  Adjusted operating profit grew driven by an increase in revenue, which more than offset higher R&D expenditures.

2023 YTD

• Revenue and adjusted operating profit
  Revenue increased due to one-time compensation gains from licensed compounds and top-line growth at our consolidated subsidiary, Torii Pharmaceutical.
  Adjusted operating profit increased for the same reasons given for the third quarter.

Processed Food Business

(billions of JPY)	Q3 2023	Q3 2022	Variance	2023	2022	Variance
YTD	YTD
Revenue	38.1	39.3	-1.3	111.5	112.8	-1.3
Adjusted operating profit	1.7	0.4	+1.3	4.6	1.9	+2.8

Q3 2023

• Revenue and adjusted operating profit
  Revenue decreased mainly due to the impact of revenue losses caused by the transfer of the bakery business, partially offset by a positive contribution from price revisions in the frozen and ambient foods business implemented in the previous and current fiscal years, as well as an increase of food-service products due to a recovery of eating out demand.
  Adjusted operating profit increased driven by a positive contribution from price revisions implemented in the previous and current fiscal years and an increase in food-service products, offsetting the impact of further significant increases in raw material and other costs compared to the previous fiscal year.

2023 YTD

• Revenue and adjusted operating profit
  Revenue was broadly stable year-on-year for the same reasons given for the third quarter. Adjusted operating profit increased for the same reasons given for the third quarter.

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