Japan Tobacco Inc. · TSE:2914
Japan Tobacco — Q4 2023 Earnings Presentation
34 slides from Japan Tobacco's earnings presentation, Feb 14, 2024
Slide 1: Business Plan 2024
JT Group Business Plan 2024 Masamichi Terabatake JT Group Chief Executive 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.
Slide 2: Forward-Looking Statements
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
Slide 3: Agenda
Agenda • FY2023 Overview • Business Plan 2024 • Sustainability • JT Group Purpose / D-LAB • Tobacco Business FY2023 Results and FY2024 Outlook • JT Group FY2023 Financials and FY2024 Forecast • Closing Remarks © Copyright JT 2024 3
Slide 4: FY 2023 Overview: Record high levels across all indicators
FY 2023 Overview | Record high levels across all indicators*) • All business segments delivered strongly, exceeding initial forecasts and prior year results • Tobacco • Combustibles | Continued share gains, fueled by GFBs, and pricing across clusters • RRP | Volume expansion driven by share gains in
Slide 5: 4S Model and JT Group Purpose guide our resource allocation
Business Plan 2024 4S Model and JT Group Purpose guide our resource allocation 4S Model JT Group Purpose Share holders Consumers Employees Society • Prioritize business investments for sustainable profit growth in the mid to long term • Strike a balance between profit growth, through business invest
Slide 6: Pursue sustainable profit growth over mid to long term
Business Plan 2024 Pursue sustainable profit growth over mid to long term Mid to Long Term Growth Algorithm Grow AOP*) at mid to high single digit rate Outlook for 2024-2026: AOP expected to grow mid single digit, considering a flat AOP growth in FY24 to account for incremental investments towards R
Slide 7: Tobacco: Combustibles growth expected to outperform industry estimates
Business Plan 2024 | FY2024-2026 Tobacco | Combustibles growth expected to outperform industry estimates 2024-2026 Combustibles assumptions Volume Net revenue Industry -2.6% +1.8% Continued market share Optimize gains pricing & opportunities GFB momentum -1.5 ~ -0.5% Mid single digit growth © Copyri
Slide 8: Tobacco: Accelerate revenue growth in HTS
Business Plan 2024 | FY2024-2026 Tobacco | Accelerate revenue growth in HTS HTS industry net revenues, $Bn 45 29 +13.5% 19 12 13 2022 2023 CAGR 2026 2030 2035 • Strategy to prioritize and grow HTS is supported by RRP industry assumptions highlighting HTS as the largest and fastest growing RRP segmen
Slide 9: Making steady progress towards 2028 RRP ambitions
Business Plan 2024 | FY2024-2026 Tobacco | Making steady progress towards 2028 RRP ambitions # of Ploom X markets 2028 RRP ambitions Global HTS volume market coverage 80% Reach mid-teen HTS segment share 58% >40 >40 Achieve break-even*) in the RRP category 13 2023 2026 • Continue to invest in HTS to
Slide 10: JT Group Sustainability Targets formulated
Sustainability 25 JT Group Sustainability Targets formulated JT Group Purpose As nature, society, and people's lives are intertwined, sustaining our ways of living, and the activities of corporate entities, will depend on the sustainability of the environment and society in which we exist. In realiz
Slide 11: JT Group Sustainability Targets formulated
Sustainability 25 JT Group Sustainability Targets formulated Biodiversity impact assessment Emissions reduction Renewable energy Protecting water Enhancing biodiversity – No Waste reduction deforestation, no conversion Designing for circularity – Reduced-Risk Products Packaging, product and device S
Slide 12: Update on corporate initiatives
Update on corporate initiatives JT Group Purpose • New company purpose very well received by all stakeholders, notably employees • Management team conducted dialogue with employees to promote the permeation and practice of the Purpose throughout the year D-LAB • A Corporate R&D organization that sup
Slide 13: 2023 Results & 2024 Outlook
JT Group - Tobacco Business 2023 Results & 2024 Outlook Eddy Pirard JTI President & CEO
Slide 14: Outstanding volume performance driven by GFB and RRP
Outstanding volume performance driven by GFB and RRP Volume variance (2023 vs. PY) • Total volume grew despite industry volume 1) declining at c. 1.4% +11.8% • Increased volume in 50+ markets • GFB volume continued to grow to 72% of total volume: +7.6% • Winston and Camel volume increased double-dig
Slide 15: Winston and Camel growth fueled the GFB volume expansion
Winston and Camel growth fueled the GFB volume expansion BnU BnU +17.6 +23.9 200.3 100.7 182.7 185.4 85.7 76.8 2) 2) Rank #2 #2 Rank #6 #3 2021 2022 2023 2021 2022 2023 • Continued volume growth across the footprint • Fastest growing brand in combustibles • Volume increased 8.1% versus 2022 • Volume
Slide 16: Market share gains continued across clusters
Market share gains continued across clusters Market share (2023 vs. PY) • Excellence in execution and brand building fueled another year of total share gains +0.8pp • Total share reached record high • Gains recorded in 50+ markets +0.6pp +0.5pp • Key drivers by cluster were: • Western Europe | Franc
Slide 17: Robust performance in key markets
Robust performance in key markets Selected key markets share (2023 vs. PY) 1) • In Italy, both combustibles and RRP grew share Italy Japan • In Japan, share gains drove a positive volume variance, notably with continued 23.2% 42.8% share increase by Ploom (+0.2pp) (+0.3pp) • The Philippines grew an
Slide 18: Another record year for price/mix
Another record year for price/mix 1) Price/mix variance, ¥Bn • Sustainable combustibles pricing more than compensated inflationary pressure • Key contributors per cluster included: • Asia | Indonesia & Philippines +140.0 +144.3 • EMA | Canada, Romania, Russia & Turkey +116.5 • Western Europe | Germa
Slide 19: Underlying RRP volume increased double-digit
Underlying RRP volume increased double-digit 1) Underlying RRP volume , BnU • Strong underlying RRP volume increase, driven by the success of Ploom X in Japan +20.5% 8.8 • Ploom X now available in 13 markets 1.4 7.3 • Outside of Japan, second half weighted Outside 1.3 Ploom X market launches contrib
Slide 20: Ploom X continued to gain share in Japan
Ploom X continued to gain share in Japan • Uninterrupted share gains in an increasingly competitive HTS segment, reaching an exit share of 11.4% • Diversified portfolio of SKUs around MEVIUS and Camel, with flavors and tastes tailored to consumer needs • Roll-out of Ploom X ADVANCED in November furt
Slide 21: Encouraging early results from Ploom X outside Japan
Encouraging early results from Ploom X outside Japan Ploom SoS in HTS (Launch Area), % Czech Republic Lithuania Portugal 3.4% 2.7% 2.4% M1 M2 M3 M4 M5 M6 M7 M1 M2 M3 M4 M5 M6 M7 M1 M2 M3 M4 M5 M6 M7 UK 1.9% Italy 0.8% Switzerland 1.3% M1 M2 M3 M4 M5 M6 M7 M1 M2 M3 M4 M5 M6 M7 M1 M2 M3 M4 M5 M6 M7 Mo
Slide 22: Outlook for the Tobacco business
Outlook for the Tobacco business Accelerate RRP investments in HTS • Drive continuous share gains in Japan and existing footprint to support total volume • Ploom X geo-expansion in additional markets to reach an HTS industry volume coverage of 80% Continue to focus on growth and returns in combustib
Slide 23: 2023 Results & 2024 Forecasts
JT Group 2023 Results & 2024 Forecasts Hiromasa Furukawa JT Group Chief Financial Officer
Slide 24: 2023 Consolidated Results: Record highs across all indicators
2023 Consolidated Results: Achieved record highs across all indicators from revenue to profit1) (JPY BN） FY2023 vs.2022 (%) Revenue and AOP2) At constant FX • In the tobacco business, solid pricing contribution more than offset the impact of higher input costs and enhanced investments towards HTS3)
Slide 25: Tobacco Business Financial Results & Drivers
Tobacco Business Financial Results & Drivers: Solid profit growth at constant FX driven by strong pricing contribution vs.2022 Volume (JPY BN) FY2023 (%) Core revenue 2,478.6 +7.1% • Total volume growth was more than offset by an unfavorable market mix at constant FX 2,462.4 +6.4% Price/Mix AOP 749.
Slide 26: Pharmaceutical and Processed Food Businesses: Positive profit contribution
Pharmaceutical and Processed Food Businesses: Positive profit contribution Pharmaceutical Business vs.2022 Revenue (JPY BN) FY2023 (abs) • Increased driven by one-time income from the licensing of patented JT compounds as well as sales growth at Torii Pharmaceutical, in the area Revenue 94.9 +12.0 o
Slide 27: 2024 Consolidated Financial Forecasts
2024 Consolidated Financial Forecasts vs. 2023 vs. 2023 (JPY BN) FY2024 Revenue and AOP AOP at constant FX expected in line with 2023 (abs) (%) At constant FX • Revenue expected to grow at both constant FX and reported, driven by pricing contributions in the tobacco business Core revenue 2,836.0 +10
Slide 28: Tobacco Business: Volume Outlook and Financial Forecasts
Tobacco Business: Volume Outlook and Financial Forecasts Volume Volume FY2024 assumption (+) Market share gains in Combustibles A decrease of -1.0% to -0.5% (+) Volume growth in Global Travel Retail Total volume vs. 2023 (+) RRP volume growth, fueled by Ploom X (-) Combustibles industry volume contr
Slide 29: Pharmaceutical and Processed Food Businesses: Financial Forecasts
Pharmaceutical and Processed Food Businesses: Financial Forecasts Pharmaceutical Business (JPY BN) FY2024 vs. 2023 Revenue -6.4 JPY BN vs. 2023 (abs) • Decrease due to an unfavorable comparison to 2023 from the absence of one-time income from the licensing of patented JT compounds and Revenue 88.5 -
Slide 30: Shareholder Returns
Shareholder Returns Shareholder return policy • Enhance shareholder returns by delivering mid to long term profit growth while maintaining a strong financial base1) • Target a dividend payout ratio of about 75% 2) ,a competitive level3) in the capital markets • Consider implementing a share buy-back
Slide 31: Closing Remarks
Closing Remarks Masamichi Terabatake JT Group Chief Executive Officer
Slide 32: Closing Remarks
Closing Remarks • Delivered another strong set of results • Solid pricing and market share growth in Combustibles • HTS volume and share increases • Pharmaceutical and Processed Food business complemented the Group’s profit growth Share • Unchanged resource allocation policy, guided by the 4S holder
Slide 33: Definitions
＜Definitions＞ Operating profit + amortization cost of acquired intangibles arising from business acquisitions + adjusted items (income and costs)* Adjusted operating profit(AOP)： * Adjusted items (income and costs) = impairment losses on goodwill ± restructuring income and costs ± others Constant FX
Slide 34: Definitions
＜Definitions＞ Total volume： The volume of tobacco-based products which excludes contract-manufactured products, waterpipe, RRP devices and related accessories. The shipment volume of combustibles which excludes contract-manufactured products, snus, waterpipe, heated tobacco products and Combustibles