Japan Tobacco : 2022 Results & 2023 Forecast (Presentation)

JT Group

2022 Results & 2023 Forecasts

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 14.

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

2022 Full-year Results

2022 Consolidated Results:

Achieved record highs across all indicators from revenue to profit*

(JPY BN)	FY2022	vs. 2021
Reported
Revenue	2,657.8	+14.3%
AOP	727.8	+19.2%
Operating profit	653.6	+31.0%
Profit	442.7	+30.8%
FCF	382.9	-99.1

Note: The results for fiscal year 2021 and fiscal year 2022 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 2021 and fiscal year 2022 on a constant FX basis have been calculated to exclude amounts of revenue and profit that have increased due to hyperinflation in certain markets.

*Revenue, AOP, Operating Profit on values for continuing operations and Profit attributable to owners of the parent company on values for continuing operations

Core revenue at constant FX: +4.8% vs. 2021

Adjusted operating profit (AOP) at constant FX: +9.0% vs. 2021

• Driven by pricing contributions in the tobacco business

Revenue and AOP on a reported basis

• Increased fueled by strong business momentum in the tobacco business and favorable FX impact due to historically weak JPY

Operating profit

• Increased due to AOP growth and favorable comparison of the expenses vs. the one recorded last year

Profit

• Increased as operating profit growth outweighed higher financing costs

FCF

• Decreased due to increased working capital, higher corporate income tax and payments of one-time costs associated with initiatives to strengthen competitiveness in Japan, despite AOP growth

© Copyright JT 2023

4

Tobacco Business: Volume Performance and Financial Results

Volume

		(BnU)	FY2022	vs. 2021
		Total volume	527.3	-0.5%
		Combustibles volume	519.4	-0.7%
		RRP volume	7.9	+10.3%
Financials
		(JPY BN)	FY2022	vs. 2021
		Core revenue	2,315.2	+15.6％
		at constant FX	2,098.1	+4.8%
		AOP	754.0	+18.0%
		at constant FX	691.9	+8.2%

Note: The results for fiscal year 2021 and fiscal year 2022 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 2021 and fiscal year 2022 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 and AOP

• Core revenue increased due to strong pricing benefits
• AOP increased driven by pricing benefits, partially offset by higher input costs within the supply chain associated with inflation

FX impacts

• Positive FX impact fueled by weaker JPY

Roadmap of AOP variance (JPY BN)

						754.0
639.2		140.1	-48.4	691.9	62.1
-39.0
2021	Volume	Price/Mix	Others	2022	FX	2022
				At constant
				FX
						5