Japan Tobacco : 2023 Second Quarter Results

Tokyo, July 31, 2023

2023 Second Quarter Results

2023 Second Quarter Highlights (vs. 2022)

• Revenue increased by 9.9% to JPY 1,392.8 billion.
• Core revenue at constant FX increased by 6.8% to JPY 1,302.4 billion.
• Adjusted operating profit at constant FX increased by 4.7% to JPY 434.3 billion.
• On a reported basis, adjusted operating profit increased by 6.7 % to JPY 442.8 billion.
• Operating profit increased by 8.0% to JPY 413.6 billion.
• Profit increased by 8.7% to JPY 287.0 billion.
• The Company announced to offer an interim dividend per share of JPY 94 as initially planned.

2023 Forecasts (vs. Initial Forecasts)

• Revenue forecast is revised upward by JPY 130.0 billion.
• Core revenue at constant FX is revised by JPY 31.0 billion.
• Adjusted operating profit at constant FX is revised by JPY 2.0 billion.
• On a reported basis, adjusted operating profit is revised by JPY 16.0 billion.
• Forecasts are revised upward for operating profit (JPY 21.0 billion) and profit (JPY 17.0 billion).
• Free cash flow is revised upward by JPY 76.0 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 strong set of results for the first half. In particular, the tobacco business reported solid growth across its indicators, driven by a more resilient industry volume and continued market share gains, as well as robust pricing.

Considering the accelerated investment towards heated tobacco sticks (HTS) in the second half of 2023, we have kept the full year forecast for adjusted operating profit at constant FX unchanged. On a reported basis, recognizing the current positive foreign exchange trend, we have revised upward our forecast, including the adjusted operating profit. Dividend per share guidance for full year remains unchanged taking into account our dividend policy at 188 yen per share. The interim dividend is 94 yen per share.

As announced in February, we are accelerating investment towards HTS to establish the foundation of our future growth. Ploom X is now available in 6 markets, following the launch in the Czech Republic in June, and will be launched in Switzerland in September. Geographical expansion is on track with the expectation to complete launches in 14 markets by the end of 2023 and 28 markets by the end of 2024.

The JT Group will make appropriate management decisions in accordance with the 4S model*, our management philosophy, and will work as one 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 businesses."

• 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 July 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 Q2 2023, the impacts of the hyperinflationary accounting and hyperinflation include those in Ethiopia, Iran, Sudan and Turkey.

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Q2 2023 Quarter Results

Consolidated Results

(billions of JPY)	Q2 2023	Q2 2022	Variance	2023 YTD	2022 YTD	Variance
Revenue	727.5	685.3	+6.2％	1,392.8	1,266.8	+9.9％
Adjusted operating profit	219.5	220.0	-0.2％	442.8	414.9	+6.7％
Operating profit	207.2	204.6	+1.2%	413.6	383.0	+8.0%
Profit	142.3	140.0	+1.7%	287.0	264.1	+8.7％
Core revenue	707.8	659.5	+7.3％	1,302.4	1,219.1	+6.8％
at constant FX
Adjusted operating profit	229.6	220.0	+4.4％	434.3	414.9	+4.7%
at constant FX

Q2 2023

• Revenue
  Revenue increased by 6.2% to JPY 727.5 billion, driven by increases across all businesses. At constant FX, core revenue increased by 7.3 % to JPY 707.8 billion.
• Adjusted operating profit
  At constant FX, adjusted operating profit increased by 4.4% to JPY 229.6 billion, driven by increases across all businesses. On a reported basis, adjusted operating profit decreased by 0.2% to JPY 219.5 billion, due to negative currency movements, mainly from the appreciation of the Japanese yen against several local currencies.

• Operating profit
  Operating profit increased by 1.2% to JPY 207.2 billion, driven by lower trademark amortization in the tobacco business, partially offset by a decrease in adjusted operating profit.
• Profit
  Profit increased by 1.7% to JPY 142.3 billion, mainly driven by an increase in operating profit.

2023 YTD

• Revenue
  Revenue increased by 9.9% to JPY 1,392.8 billion, driven by an increase in the tobacco and pharmaceutical businesses, and positive currency movements from a weaker Japanese yen in the tobacco business. At constant FX, core revenue increased by 6.8% to JPY 1,302.4 billion.
• Adjusted operating profit
  At constant FX, adjusted operating profit increased by 4.7% to JPY 434.3 billion, driven by increases across all businesses. On a reported basis, adjusted operating profit increased by 6.7% to JPY 442.8 billion, driven by positive currency movements from a weaker Japanese yen.

• Operating profit
  Operating profit increased by 8.0% to JPY 413.6 billion, mainly driven by an increase in adjusted

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operating profit.

• Profit
  Profit increased by 8.7% to JPY 287.0 billion, driven by an increase in operating profit and lower corporate tax, partially offset by increased financing costs.

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Results by Business Segment
Tobacco Business
(billions of JPY)	Q2	Q2	Variance	2023	2022	Variance
2023	2022	YTD	YTD
Core revenue	638.1	603.2	+5.8%	1,217.2	1,105.3	+10.1%
(+7.3%)*	(+6.8%)*
Adjusted operating profit	225.0	227.8	-1.2%	450.2	425.1	+5.9%
(+3.2%)*	(+3.9%)*
Reference(billions of units, billions of JPY)
Total volume	139.2	134.2	+3.7%	269.3	262.8	+2.5%
Combustibles volume	137.0	132.2	+3.7%	265.2	258.7	+2.5%
RRP volume	2.1	2.1	+4.7%	4.2	4.0	+3.9%
RRP-related revenue	19.2	20.1	-4.4%	39.5	39.1	+0.8%

*At constant FX

Q2 2023

• Core revenue and adjusted operating profit
  Core revenue increased by 5.8%, and by 7.3% at constant FX, driven by a positive volume variance of JPY 5.6 billion, mainly in the EMA cluster, and a strong price/mix contribution of JPY 38.1 billion from the Western Europe and EMA clusters, offsetting unfavorable currency movements. RRP-related revenue declined by 4.4%, due to unfavorable comparisons impacting the RRP volume performance. Adjusted operating profit decreased by 1.2%, due to unfavorable currency movements. At constant FX, adjusted operating profit increased by 3.2% as the positive price/mix contribution more than offset a negative volume variance and higher costs partly related to the Ploom X geo-expansion.
• Volume and market share1
  Total volume increased by 3.7%, 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 3.7%, fueled by Winston (+11.8%), Camel (+21.3%) and continued market share gains. In the RRP category, volume grew by 4.7%, despite the disruption from one-off items impacting 2023, notably the discontinuation of Ploom S in Russia. Excluding these one-off items, RRP volume grew strongly driven by HTS, with Japan HTS volume increasing 41.8% plus the additional volume generated from new market launches.
  Market share gains continued in the key markets of Japan, the Philippines, Romania, Russia, Spain and Taiwan.

2023 YTD

• Core revenue and adjusted operating profit
  Core revenue increased by 10.1%, and by 6.8% at constant FX, driven by a positive volume variance of JPY 5.1 billion from the Asia and EMA clusters, and a robust price/mix contribution of JPY 70.3 billion from the Western Europe and EMA clusters, as well as favorable currency movements. RRP- related revenue grew by 0.8%, impacted by unfavorable comparisons affecting the RRP volume performance.
  Adjusted operating profit increased by 5.9%, and by 3.9% at constant FX, driven by the solid price/mix contribution and favorable currency movements, more than offsetting the negative volume, as well as

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