Japan Tobacco : 2024 First Quarter Results

May 09, 2024 at 02:12 am EDT

Tokyo, May 9, 2024

2024 First Quarter Results

2024 First Quarter Highlights (vs. 2023)

Revenue increased by 11.3% to JPY 740.3 billion.
Core revenue at constant FX increased by 5.7% to JPY 676.7 billion.
Adjusted operating profit at constant FX increased by 3.4% to JPY 231.0 billion.
On a reported basis, adjusted operating profit increased by 1.5 % to JPY 226.7 billion.
Operating profit increased by 4.6% to JPY 215.8 billion.
Profit increased by 8.7% to JPY 157.3 billion.

Please refer to 'Data Sheets' on page 9 for more financial figures.

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

"The JT Group delivered robust results in the first quarter. GFB volume growth and solid pricing, as well as RRP-related revenue increasing by double-digits in the tobacco business, continued to drive the strong performance of the Group.

RRP volume increased by 25.2% year on year, mainly driven by the HTS segment, which is our investment priority. Geo-expansion of Ploom X is on track; we have completed launches in four additional markets, year- to-date. With plans to launch in four more markets by June, we are making good progress to deliver our ambitions set for 2028.

Amid increasing uncertainty and complexity in the operating environment, 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 business plan. We will also make continuous efforts to bring to life our JT Group Purpose** and the Purpose 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 with this area by society and make valuable contributions in the future.

Investors' Meeting

A conference call with members of the investor community will be held on May 9, 2024 at 5:30pm 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 2023 and fiscal year 2024 as well as the forecasts for fiscal year 2024 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 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 Q1 2024, the markets impacted by hyperinflationary accounting and hyperinflation include those in Ethiopia, Iran, Sudan and Turkey.

Q1 2024 Financial Results

Consolidated Results

(billions of JPY)	Q1 2024	Q1 2023	Variance

Revenue	740.3	665.3	+11.3%
Adjusted operating profit	226.7	223.4	+1.5%
Operating profit	215.8	206.4	+4.6%
Profit	157.3	144.7	+8.7%

Core revenue at constant FX	676.7	640.0	+5.7%
Adjusted operating profit at constant FX	231.0	223.4	+3.4%

Q1 2024

Revenue
Revenue increased by 11.3%, driven by an increase in the tobacco business, as well as positive currency movements due to a weaker Japanese yen. At constant FX, core revenue increased by 5.7%.
Adjusted operating profit
Adjusted operating profit increased by 1.5 %, driven by an increase in the tobacco and processed food businesses, partially offset by negative currency movements. At constant FX, adjusted operating profit increased by 3.4%.

Operating profit
Operating profit increased by 4.6 %, driven by the increase in adjusted operating profit, as well as reduced amortization of trademark rights and gains on sales of real estate in the adjusted items.
Profit
Profit increased by 8.7 %, mainly driven by the increase in operating profit and lower financing costs.

Results by Business Segment
Tobacco Business
(billions of JPY)	Q1 2024	Q1 2023	Variance

Core revenue	653.3	579.1	+12.8%
(+6.6%)*

Adjusted operating profit	231.9	225.1	+3.0%
(+4.9%)*

Reference(billions of units, billions of JPY)
Total volume	132.9	130.2	+2.1%
Combustibles volume	130.3	128.2	+1.7%
RRP volume	2.5	2.0	+25.2%
RRP-related revenue	23.9	20.3	+17.7%

*At constant FX

Q1 2024

Quarterly results were robust with positive volume and share gains, as well as solid pricing contributions which drove the increase in core revenue and adjusted operating profit, supported by double-digitRRP-related revenue growth.
Core revenue and adjusted operating profit
Core revenue grew by 12.8%, and by 6.6% at constant FX, driven by a positive price/mix contribution of JPY 43.1 billion from all clusters, as well as favorable currency movements, due to the weak Japanese yen. RRP-related revenue grew by 17.7%, mainly fueled by Ploom X in Japan. These positive drivers offset a slightly negative volume variance of JPY 4.8 billion, due to the Asia and Western Europe clusters.
Adjusted operating profit increased by 3.0%, and by 4.9% at constant FX, driven by core revenue growth, partially offset by higher investments towards HTS and increased costs, including in the supply chain, heightened by the weak Japanese yen.
Volume and market share
Continued market share gains in combustibles and accelerated RRP volume growth resulted in total volume increasing 2.1%, or 1.3% excluding inventory adjustments. Combustibles volume was up by 1.7%, driven by Global Flagship Brands (GFB) as well as strong growth in the EMA cluster. GFB volume grew by 6.3%, fueled by Winston (+9.8%) and Camel (+10.5%). RRP volume grew by 25.2%, driven by continued HTS growth in Japan and increasing contributions from other markets.
Total tobacco market share grew in many markets, including the key markets of Italy, the Philippines, Russia and Taiwan.

Tobacco Business

Performance Review by Cluster

Asia

(billions of JPY)	Q1 2024	Q1 2023	Variance

Core revenue	199.5	196.2	+1.7%
(-1.7%)*

Adjusted operating profit	73.6	75.8	-3.0%
(-1.8%)*

Reference(billions of units)
Total volume	30.7	32.1	-4.5%

*At constant FX

Core revenue and adjusted operating profit
Core revenue increased by 1.7%, driven by a positive price/mix contribution, notably in the Philippines and Taiwan, and favorable currency movements, partially offset by a negative volume variance, mainly in Japan, the Philippines and Taiwan. At constant FX, core revenue decreased by 1.7%.
Adjusted operating profit declined by 3.0%, as the positive price/mix contribution was offset by the negative volume variance, RRP investments to expand market share in Japan, and increased costs, including in the supply chain, as well as unfavorable currency movements. At constant FX, adjusted operating profit decreased by 1.8%.
Volume and market share
Total and GFB volumes decreased by 4.5% and 0.2%, respectively, mainly due to lower combustibles industry volume in Japan and the Philippines, partially offset by market share gains in several markets and RRP volume growth in Japan. Total tobacco market share increased in Bangladesh, Cambodia, Indonesia, Malaysia, the Philippines, South Korea, and Taiwan.
By market
In Japan, share of segment increased in both combustibles and RRP, but total volume declined by 2.5%, due to a decline in combustibles industry volume and lower total market share (-1.5ppt).
In combustibles, despite continued growth from Camel, volume decreased by 5.5%, due to an industry volume contraction estimated at 6.8%.
In RRP, a category estimated at 42.2% (shipment basis) of the total tobacco industry size, volume increased by 20.8% and category share grew by 0.8ppt to reach 13.5%. Within HTS, Ploom volume grew by 34.7% and continued to gain share, reaching an HTS segment share of 11.0%, up by 1.6ppt year-to-date.
Core revenue decreased, due to the negative variance from both volume and price/mix.
In the Philippines, total volume declined by 16.4% due to significant industry volume contraction, partially offset by market share gains. GFB volume increased by 12.9%, fueled by Camel. Year-to- date total market share grew by an estimated 2.9ppt to 43.5%.
Core revenue at constant FX increased, driven by a positive price/mix contribution exceeding the negative volume variance.
In Taiwan, total and GFB volumes decreased by 2.0% and 1.6%, respectively, due to the industry volume decline partially offset by market share gains. Year-to-date market share increased by 0.9ppt to 50.9%, driven by gains from Winston and MEVIUS.

Core revenue at constant FX was stable, as the positive price/mix contribution offset the negative volume variance.

Western Europe

(billions of JPY)	Q1 2024	Q1 2023	Variance

Core revenue	172.6	140.5	+22.9%
(+7.1%)*

Adjusted operating profit	78.8	64.7	+21.8%
(+6.9%)*

Reference(billions of units)
Total volume	26.1	26.1	+0.2%

*At constant FX

Core revenue and adjusted operating profit
Core revenue increased by 22.9%, and by 7.1% at constant FX, driven by a positive price/mix contribution, mainly in France, Germany, Spain and the U.K., and by favorable currency movements, more than offsetting a negative volume variance, mainly in France, Germany, Ireland and the U.K.
Adjusted operating profit grew by 21.8%, and by 6.9% at constant FX, driven by the core revenue increase, more than offsetting the higher investments towards HTS and increased costs, including in the supply chain, as well as favorable currency movements.
Volume and market share
Continued market share gains and RRP volume growth resulted in total volume increasing by 0.2%, offsetting industry volume contraction across most of the cluster, notably in the U.K. GFB volume grew by 4.0%, fueled by solid growth by Winston (+5.1%), Camel (+2.2%) and LD (+6.1%). Total tobacco market share grew in France, Ireland, Italy, Latvia, Lithuania, Luxembourg, the Netherlands, Sweden and Switzerland.
By market
In Italy, total volume grew by 12.5%, and by 6.5% when excluding inventory movements, supported by market share gains and the growing HTS volume contribution. GFB volume increased by 13.0%, driven by Winston and Camel. Year-to-date total tobacco market share grew by 0.9ppt to 24.0%.
Core revenue at constant FX increased as the positive volume contribution more than offset the negative price/mix variance.
In Spain, total and GFB volumes increased by 7.1% and 9.6%, respectively, fueled by favorable inventory movements. Excluding these, total volume declined by 4.0%, due to industry volume contraction and market share losses. Year-to-date total tobacco market share reached 27.4%, down by 0.5ppt.
Core revenue at constant FX increased, driven by the positive contribution from both volume and price/mix.
In the U.K., total volume declined by 16.1%, due to industry volume contraction resulting from excise- tax led price increases, and market share losses. Year-to-date total tobacco market share declined by 1.5ppt to 43.2%, despite continued share gains by Benson & Hedges.
Core revenue at constant FX increased as the positive price/mix contribution more than offset the negative volume variance.

EMA

(billions of JPY)	Q1 2024	Q1 2023	Variance

Core revenue	281.2	242.4	+16.0%
(+13.0%)*

Adjusted operating profit	79.5	84.6	-6.0%
(+9.4%)*

Reference(billions of units)
Total volume	76.1	72.0	+5.7%

*At constant FX

Core revenue and adjusted operating profit
Core revenue increased by 16.0%, and by 13.0% at constant FX, driven by a favorable volume variance, mainly in Egypt, Global Travel Retail, Iran, Russia and Turkey, and by a strong positive price/mix contribution, notably in Canada, Jordan, Kazakhstan, Russia and Turkey, as well as by favorable currency movements.
Adjusted operating profit declined by 6.0%, due to unfavorable currency movements. At constant FX, adjusted operating profit grew by 9.4%, driven by the solid core revenue increase which offset higher investments towards HTS and increased costs, including in the supply chain.
Volume and market share
Total and GFB volumes increased by 5.7% and 9.6%, respectively, mainly driven by Brazil, Egypt, Global Travel Retail, Iran, Russia, Saudi Arabia and Turkey. Total tobacco market share increased across the cluster, including in Algeria, Azerbaijan, Brazil, Bulgaria, Canada, Iran, Jordan, Lebanon, Mexico, Poland, Russia, Saudi Arabia, Slovak Rep, South Africa and the USA.
By market
In Romania, total volume decreased by 2.6%, despite GFB volume increasing by 1.7%, fueled by growth from Camel. Subsequent Camel share gains could not prevent year-to-date total tobacco market share to decrease by 1.6ppt to 25.7%.
Core revenue at constant FX increased, driven by a positive price/mix contribution.
In Russia, total volume increased by 5.3%, driven by market share gains and an industry volume growing by an estimated 1.7%. GFB volume increased by 9.4%, with all four brands gaining volume. Year-to-date total tobacco market share was up by 0.6ppt to 37.1%, driven by Winston, Camel and Sobranie.
Core revenue at constant FX grew, driven by a positive variance in both volume and price/mix, following excise-tax led price increases.
In Turkey, total and GFB volumes increased by 23.1% and 20.7%, respectively, supported by a higher industry volume resulting from improved consumption. Year-to-date total tobacco market share decreased by 0.4ppt to 26.9%, mainly due to Camel.
Core revenue at constant FX increased, driven by the positive contribution of both volume and price/mix.

Source: the figures for market share are based on JT Group estimates on year-to-date average. Year-to-date share of market growth for 2024 is calculated against year-to-date shares of market at the end of the respective period in 2023.

The Philippines, Saudi Arabia, and Sweden are on a year-to-date average at the end of February 2024. The figures for industry volume are based on JT Group estimates on sum of year-to-date period. Year-to-date industry volume variance for 2024 is calculated against year-to-date industry volume at the end of the respective period in 2023. The Philippines is on sum of year-to-date period at the end of February 2024.

Pharmaceutical Business
(billions of JPY)	Q1 2024	Q1 2023	Variance

Revenue	23.3	24.9	-1.6
Adjusted operating profit	3.8	6.9	-3.1

Q1 2024

Revenue and adjusted operating profit
Revenue decreased due to the absence of one-time compensation gains from licensed compounds received in 2023, despite sales growth in the area of skin diseases and allergens at our consolidated subsidiary, Torii Pharmaceutical.
Adjusted operating profit decreased due to the revenue decline as well as an increase in R&D expenditures.

Processed Food Business
(billions of JPY)	Q1 2024	Q1 2023	Variance
Revenue	35.7	35.6	+0.1
Adjusted operating profit	2.0	1.4	+0.6

Q1 2024

Revenue and adjusted operating profit
Revenue was broadly stable year on year, mainly driven by a positive contribution from price revisions implemented in the previous fiscal year in the frozen and ambient foods as well as the seasonings businesses, despite discontinuation of some products due to a portfolio optimization.
Adjusted operating profit increased driven by the positive contribution from price revisions implemented in the previous fiscal year, offsetting the increase in raw material costs and unfavorable currency movements.

Data Sheets

Results for 2024 First Quarter

1. Summary of consolidated results				(JPY BN)
				Q1	Q1	Variance (abs)	Variance (%)
				2024	2023


	Revenue	740.3	665.3	+75.1	+11.3%

	Operating profit	215.8	206.4	+9.4	+4.6%

	Adjusted operating profit	226.7	223.4	+3.3	+1.5%

	Profit before income taxes	201.3	183.1	+18.1	+9.9%

	Profit	157.3	144.7	+12.6	+8.7%

	Basic EPS*(JPY)	88.58	81.52	+7.07	+8.7%
	*Based on profit
	[Reference]				(JPY BN)

				Q1	Q1	Variance (abs)	Variance (%)
				2024	2023


	Core revenue at constant FX	676.7	640.0	+36.7	+5.7%

	Adjusted operating profit at constant FX	231.0	223.4	+7.6	+3.4%

2. Results by business segment				(JPY BN)
				Q1	Q1	Variance (abs)	Variance (%)
				2024	2023


	Consolidated revenue	740.3	665.3	+75.1	+11.3%

		Tobacco	681.0	604.3	+76.6	+12.7%

			Core revenue	653.3	579.1	+74.2	+12.8%

		Pharmaceutical	23.3	24.9	-1.6	-6.4%

		Processed food	35.7	35.6	+0.1	+0.3%

		Others	0.3	0.4	-0.1	-27.4%

	Consolidated operating profit	215.8	206.4	+9.4	+4.6%

		Tobacco	219.2	208.8	+10.5	+5.0%

		Pharmaceutical	3.8	6.9	-3.1	-44.5%

		Processed food	2.0	1.3	+0.7	+52.2%

		Others/Elimination	-9.3	-10.6	+1.3	-

	Adjustments, total	-10.9	-17.0	+6.1
		Tobacco	-12.7	-16.4	+3.7
		Pharmaceutical	-	-	-
		Processed food	-0.0	-0.1	+0.1
		Others/Elimination	1.8	-0.5	+2.3
	Consolidated adjusted operating profit	226.7	223.4	+3.3	+1.5%

		Tobacco	231.9	225.1	+6.7	+3.0%

		Pharmaceutical	3.8	6.9	-3.1	-44.5%

		Processed food	2.0	1.4	+0.6	+43.5%

		Others/Elimination	-11.1	-10.1	-0.9	-

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Japan Tobacco Inc. published this content on 09 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 09 May 2024 06:11:25 UTC.

Market Closed - Japan Exchange Other stock markets 02:00:00 2024-05-23 am EDT			5-day change	1st Jan Change
4,446 ^JPY	+0.36%		+1.00%	+21.98%

May. 14	Jefferies Adjusts Japan Tobacco’s Price Target to 3,741 Yen From 3,353 Yen, Keeps at Hold	MT
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	1st Jan change	Capi.
JAPAN TOBACCO, INC.	+21.98%	50.26B
ITC LIMITED	-4.49%	65.96B
KT&G CORPORATION	+1.27%	7.27B
PT HANJAYA MANDALA SAMPOERNA TBK	-13.97%	5.58B
RLX TECHNOLOGY INC.	-1.00%	2.52B
PT GUDANG GARAM TBK	-6.03%	2.29B
BRITISH AMERICAN TOBACCO BANGLADESH COMPANY LIMITED	-35.67%	1.54B
SCANDINAVIAN TOBACCO GROUP A/S	-16.37%	1.17B
EASTERN COMPANY S.A.E	-16.48%	1.13B
KARELIA TOBACCO COMPANY INC.	-3.51%	1.01B

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