Japan Tobacco : Consolidated Financial Results for the Fiscal Year Ended December 31, 2021

[This is an English translation prepared for reference purpose only. Should there be any inconsistency between the translation and the original Japanese text, the latter shall prevail.]

February 14, 2022

Consolidated Financial Results

for the Fiscal Year Ended December 31, 2021

Name of the Listed Company:	JAPAN TOBACCO INC. (Stock Code: 2914)
Listed Stock Exchange:	Tokyo Stock Exchange
URL:	https://www.jti.co.jp/
Representative:	Masamichi Terabatake, Representative Director and President,
	Chief Executive Officer
Contact:	Hiroyuki Fukuda, Senior Vice President, Corporate Communications
Telephone:	[phone]

Scheduled date of Annual General Meeting of Shareholders: March 23, 2022

Scheduled date to file Securities Report: March 23, 2022

Scheduled starting date of the dividend payments: March 24, 2022

Drawing up supplementary documents on financial results: Yes

Holding investors' meeting: Yes (for analysts and institutional investors)

(Yen amounts are rounded to the nearest million, unless otherwise noted.)

1. Consolidated Financial Results for the Fiscal Year Ended December 31, 2021 (from

January 1, 2021 to December 31, 2021)

(1) Consolidated Operating Results				(Percentages indicate year-on-year changes.)
	Revenue			Operating profit	Profit before income taxes	Profit for the year
Year ended	Millions of yen	%		Millions of yen	%	Millions of yen	%	Millions of yen	%
December 31, 2021	2,324,838	11.1	499,021	6.4	472,390	12.5	340,181	9.0
December 31, 2020	2,092,561	(3.8)	469,054	(6.6)	420,063	(9.7)	312,029	(13.7)
	Profit attributable to		Comprehensive income
	owners of the parent		Basic earnings per share	Diluted earnings per share
		for the year
	company
Year ended	Millions of yen	%		Millions of yen	%		Yen		Yen
December 31, 2021	338,490	9.1	540,258	306.6		190.76		190.68
December 31, 2020	310,253	(10.9)	132,883	(63.7)		174.88		174.80
	Ratio of profit to equity		Ratio of profit before	Ratio of operating profit
	attributable to owners of		income taxes to total
		to revenue
	the parent company		assets
Year ended		%			%		%
December 31, 2021		12.7			8.5		21.5
December 31, 2020		12.0			7.7		22.4
Reference: Share of profit (loss) in investments accounted for using the equity method:
Fiscal year ended December 31, 2021:	¥3,997 million;	Fiscal year ended December 31, 2020: ¥4,042 million

(2) Consolidated Financial Position

			Equity attributable to	Ratio of equity	Equity attributable to
			attributable to owners
	Total assets	Total equity	owners of the parent	owners of the parent
	of the parent company
			company	company per share
			to total assets
As of	Millions of yen	Millions of yen	Millions of yen	%	Yen
December 31, 2021	5,774,209	2,886,081	2,809,258	48.7	1,583.10
December 31, 2020	5,381,382	2,599,495	2,522,834	46.9	1,421.92

(3) Consolidated Cash Flows

	Net cash flows	Net cash flows	Net cash flows	Cash and cash
	from (used in)	from (used in)	from (used in)	equivalents at the end of
	operating activities	investing activities	financing activities	the year
Year ended	Millions of yen	Millions of yen	Millions of yen	Millions of yen
December 31, 2021	598,909	(97,499)	(353,138)	721,731
December 31, 2020	519,833	5,354	(297,404)	538,844

2. Cash Dividends

		Annual dividends per share				Ratio of dividends
					to equity
	First		Third			Total amount of	Payout ratio	attributable to
	Second	Fiscal year-		dividends (total)	(consolidated)	owners of the
	quarter-	quarter-	Total
	quarter-end	end			parent company
	end		end					(consolidated)
	Yen	Yen	Yen	Yen	Yen	Millions of yen	%	%
Year ended
December	-	77.00	-	77.00	154.00	273,234	88.1	10.5
31, 2020
Year ended
December	-	65.00	-	75.00	140.00	248,433	73.4	9.3
31, 2021
Year ending
December	-	75.00	-	75.00	150.00		74.8
31, 2022
(Forecast)

3. Consolidated Earnings Forecasts for the Fiscal Year Ending December 31, 2022 (January 1, 2022 to December 31, 2022)

					(Percentages indicate year-on-year changes.)
					Profit attributable to	Basic earnings
	Revenue		Operating profit		owners of the parent
			per share
					company
	Millions of yen	%	Millions of yen	%	Millions of yen	%	Yen
Year ending	2,315,000	(0.4)	534,000	7.0	356,000	5.2	200.62
December 31, 2022

[Additional Information] Growth rate in adjusted operating profit at constant rates of exchange:

The Group has set its group-wide target for annual average growth rate in adjusted operating profit at constant rates of exchange, at mid to high single-digit over the mid- to long-term, and will continue to pursue this goal.

(Percentages indicate year-on-year changes.)

	Adjusted operating profit at constant rates of exchange
	Millions of yen		%
Year ended	598,414		22.9
December 31, 2021
Year ending	635,000		4.0
December 31, 2022 (Forecast)

The Group also discloses certain non-GAAP financial measures that are not required or defined under IFRS, which is the accounting standard the Company applies. These non-GAAP financial measures are used internally to manage each of the business operations to understand their underlying performance, in view of the Group's target for mid- to long-term sustainable growth, and the Group believes that these financial measures are useful information for users of the financial statements to assess the Group's performance. For details of these financial measures, please refer to "1. Business Results" in attached materials.

For detailed information on the consolidated financial results, please refer to the materials for investors' meeting that were released on the Company's website (https://www.jt.com/investors/) on February 14, 2022.

Notes

1. Changes in significant subsidiaries during the period (changes in specified subsidiaries resulting in change in scope of consolidation): None
2. Changes in accounting policies and changes in accounting estimates
3. 1. Changes in accounting policies due to revisions in accounting standards under IFRS: Yes
   2. Changes in accounting policies due to other reasons: None
   3. Changes in accounting estimates: None

For details, please refer to "3. Consolidated Financial Statements and Major Notes (IFRS), (6) Notes to consolidated financial statements (Changes in accounting policies)."

1. Number of shares issued (ordinary shares)
   a. Total number of shares issued at the end of the period (including treasury shares)

As of December 31, 2021	2,000,000,000	shares
As of December 31, 2020	2,000,000,000	shares

1. Number of treasury shares at the end of the period

As of December 31, 2021	225,475,301	shares
As of December 31, 2020	225,754,671	shares

1. Average number of shares during the period

Fiscal year ended December 31, 2021	1,774,419,289	shares
Fiscal year ended December 31, 2020	1,774,128,185	shares

• Financial results reports are exempt from audit conducted by certified public accountants or an audit corporation.
• Proper use of earnings forecasts, and other special matters
  The forward-looking statements, including earnings forecasts, contained in these materials are based on information currently available to the Company and on certain assumptions and suppositions deemed to be reasonable by the Company. Actual business and other results may differ substantially due to various factors. These forward-looking statements are not intended to be construed as our assurance for it to materialize in the future. Please refer to "FORWARD-LOOKING STATEMENTS" for the suppositions that form the assumptions for earnings forecasts and cautions concerning the use of earnings forecasts.

	Attached Materials
	Index
1. Business Results .....................................................................................................................................	2
(1)	Consolidated Business Results ............................................................................................................	2
(2)	Consolidated Financial Position ..........................................................................................................	4
(3)	Outlook for the Next Fiscal Year .........................................................................................................	5
(4)	Basic policy on Profit Distribution and Dividends for Fiscal Years 2021 and 2022...............................	6
2. Basic Principle on the Choice of Accounting Standards...........................................................................	7
3. Consolidated Financial Statements and Major Notes (IFRS)....................................................................	9
(1)	Consolidated Statement of Financial Position ......................................................................................	9
(2)	Consolidated Statement of Income and Consolidated Statement of Comprehensive Income ...............	11
(3)	Consolidated Statement of Changes in Equity ...................................................................................	13
(4)	Consolidated Statement of Cash Flows..............................................................................................	15
(5)	Notes on Premise of Going Concern..................................................................................................	17
(6)	Notes to Consolidated Financial Statements ......................................................................................	17
(Changes in accounting policies)..........................................................................................................	17
(Additional information) ......................................................................................................................	17
(Segment information) .........................................................................................................................	18
(Per share information) ........................................................................................................................	23
(Significant subsequent events) ............................................................................................................	24
4. Non-consolidated Financial Statements and Major Notes (Japanese GAAP) ..........................................	25
(1)	Non-consolidated Balance Sheet .......................................................................................................	25
(2)	Non-consolidated Statement of Income .............................................................................................	28
(3)	Non-consolidated Statement of Changes in Net Assets ......................................................................	29
(4)	Notes on Premise of Going Concern..................................................................................................	31

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1. Business Results

(Non-GAAP Financial Measures)

The Group also discloses certain non-GAAP financial measures that are not required or defined under IFRS, which is the accounting standard the Company applies. These non-GAAP financial measures are used internally to manage each of the business operations to understand their underlying performance, in view of the Group's target for mid- to long-term sustainable growth, and the Group believes that these financial measures are useful information for users of the financial statements to assess the Group's performance.

Adjusted operating profit

Adjusted operating profit presented is operating profit (loss) less amortization cost of acquired intangibles arising from business acquisitions and adjustment items (income and costs). Adjustment items (income and costs) are impairment losses on goodwill, restructuring income and costs, and other items.

Furthermore, adjusted operating profit at constant rates of exchange is also presented as additional information. This is a financial measurement that excludes foreign exchange effects by translating and calculating adjusted operating profit for the current fiscal year in the International Tobacco Business using the foreign exchange rates of the previous fiscal year. The Group has set its group-wide target for annual average growth rate in adjusted operating profit at constant FX, at mid to high single digit over the mid- to long-term, and will continue to pursue this goal.

The Group makes accounting adjustments to the financial statements of subsidiaries that operate in hyperinflationary economies according to the requirements stipulated in IAS 29 "Financial Reporting in Hyperinflationary Economies" (hereinafter referred to as "IAS 29"). However, the impact of IAS 29 is not included in adjusted operating profit at constant FX.

(1) Consolidated Business Results a. General summary

			(Billions of yen)
	Fiscal year ended	Fiscal year ended	Change
	December 31, 2020	December 31, 2021
Revenue	2,092.6	2,324.8	11.1%
Adjusted operating profit	487.0	610.4	25.4%
Operating profit	469.1	499.0	6.4%
Profit attributable to owners of the parent	310.3	338.5	9.1%
company
Adjusted operating profit at constant rates of	487.0	598.4	22.9%
exchange

Revenue

Revenue increased by 11.1% from the previous year to ¥2,324.8 billion, with declines in the Processed Food Business being offset by increases in the International Tobacco Business, the Domestic Tobacco Business and the Pharmaceutical Business.

Adjusted operating profit

Adjusted operating profit at constant rates of exchange increased by 22.9% from the previous year driven by growth in the International Tobacco Business, the Domestic Tobacco Business and the Processed Food Business, partially offset by a decrease in the Pharmaceutical Business. Adjusted operating profit including foreign exchange effects increased by 25.4% from the previous fiscal year to ¥610.4 billion, mainly due to the favorable foreign exchange effects in the International Tobacco Business.

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