Japan Tobacco Inc. · TSE:2914

Japan Tobacco — Investor Presentation (September 2010)

45 slides from Japan Tobacco's investor presentation, Sep 28, 2010

  1. Slide 1: JT International Investor Field Trip CIS+ Region

    JT International Investor Field Trip CIS+ Region St. Petersburg September 28, 2010

  2. Slide 2: Forward-looking and cautionary statements

    Forward-looking and cautionary statements This presentation contains forward-looking statements about our industry, business, plans and objectives, financial conditions and results of operations based on current expectations, assumptions, estimates and projections. These statements discuss future ex

  3. Slide 3: Martin Braddock, CIS+ Regional President

    Martin Braddock CIS+ Regional President 3

  4. Slide 4: Agenda

    Agenda  Introduction  Macro Environment  Tobacco Market  JTI Strategy & Performance  Ukraine, Kazakhstan, Romania  Conclusions  Appendix 4

  5. Slide 5: Introduction

    - Introduction - 5

  6. Slide 6: Contribution to JTI, FY 2009

    CIS+ Contribution to JTI, FY 2009 CIS+ Rest of JTI Total Volume GFB Volume EBITA 27% 43% 51% 49% 57% 73%  CIS+ is a major contributor to JTI volume, both in GFB and non-GFB, as well as to profit, providing a strong base for JTI growth worldwide 6

  7. Slide 7: CIS+ Footprint

    CIS+ Footprint Russia Ukraine  22 markets Kazakhstan  9 factories (7 cigarettes, 1 RTS, 1 CRES) Kyrgyzstan  332 million population Mongolia  600 billion cigarettes Romania  10,000 employees (incl. factories) Belarus Moldova Cres Neva, Russia (CRES(1) factory) Georgia St Petersburg, Russia Azerb

  8. Slide 8: Volume: key markets contribution

    CIS+ Volume: key markets contribution Key Markets‟ Contribution to JTI CIS+ Volume Jan-Aug 2010, Percent Serbia 1% Romania2% Others 5% Belarus 3% Kazakhstan 6% Ukraine 13% Russia 70%  Russia is the largest contributor by far to JTI volumes in the CIS+ region Russia Ukraine Kazakhstan Belarus Romani

  9. Slide 9: JTI is the leader in share of market in CIS+

    JTI is the leader in share of market in CIS+ 42% JTI Share of Market July(1) 2010 37% 31% 31% 28% 28% 25% 25% 24% 24% 18% 13% 12% 11% 7% 6% 3% 2% 0.1% Russia Belarus Kyrgyzst. Ukraine Moldova Kazakh. Albania Georgia SOM # 1 SOM # 2 SOM # 2 SOM # 2 SOM # 2 SOM # 2 SOM # 2 SOM # 2 SOV # 1 SOV # 1 SOV

  10. Slide 10: Share of market and share of value evolution

    CIS+ Share of market and share of value evolution Market SOM % SOV(1) % Markets Size July July 10(2) vs. July 10(2) July 10(2) vs. FY 09 10(2) July09 July09 Russia 390 36.9 0.6 34.5 1.2 Ukraine 88 28.0 -1.3 27.7 -0.3 Ukraine w/o Ronson & St. 27.5 1.0 27.3 1.1 George Kazakhstan 29 41.8 1.9 40.2 1.5

  11. Slide 11: Management team

    CIS+ Management team BRADDOCK, MARTIN REGIONAL PRESIDENT TOMLINSON, KEVIN YASA, IDIL ANDREEVA, GUERGANA GENERAL MANAGER CONSUMER &TRADE HR RUSSIA Headcount: 2,304 MARKETING ERNST, ANTOINE GENERAL MANAGER WOODS, CHRIS SOUTHERBY-SMITH, HARTLEY UKRAINE Headcount: 568 CFO R&D REGIONAL SERVICES SITSAS, T

  12. Slide 12: Macro Environment

    - Macro Environment - 12

  13. Slide 13: Economic crisis impact on GDP and unemployment

    Economic crisis impact on GDP and unemployment Real GDP growth, % Unemployment rate, % Markets 2009 2010f 2011f 2009 2010f 2011f Russia -7.9% 4.2% 4.3% 8.2% 7.2% 6.5% Ukraine -15.1% 4.4% 5.8% 8.8% 8.4% 7.6% Kazakhstan 1.2% 4.8% 4.9% 6.6% 5.8% 5.0% Romania -7.1% -0.5% 3.7% 6.0% 7.8% 6.7% Belarus -4.2

  14. Slide 14: Economic crisis impact on FX rates

    Economic crisis impact on FX rates Russia (RUB) Ukraine (UAH) Average, maximum and minimum FX rates Average, maximum and minimum FX rates 40 10 8.1 8.0 35 31.7 UAH / USD RUB / USD 5.0 5.3 30 30.2 5 25.6 25 24.9 20 0 FY 2007 FY 2008 FY 2009 Jan-Aug 2010 FY 2007 FY 2008 FY 2009 Jan-Aug 2010 Kazakhstan

  15. Slide 15: Tobacco Market

    - Tobacco Market - 15

  16. Slide 16: Total industry volume evolution

    CIS+ Total industry volume evolution Index (Jan-2007 = 100) 100 98.7 98 92.6 87.5 50  Significant industry contraction started in the summer 2009  Initial signs of recovery observed, with the return of the historic trend of higher consumption during the summer Note: analysis includes Russia, Ukrai

  17. Slide 17: Pricing segments evolution: first signs of recovery

    CIS+ Pricing segments evolution: first signs of recovery Price Segments Evolution Share of Market, % Q1 10 vs Q1 09 Value/Base Mid-Price Sub-Premium Premium Prestige Q2 10 vs Q2 09 100 8.8 9.4 9.4 9.5 9.6 9.7 9.9 9.8 0.3 9.5 Prestige 0.5 9.8 9.6 9.7 9.5 9.1 9.1 9.0 21.6 22.3 22.2 21.9 22.6 22.7 -0.7

  18. Slide 18: Taxation structure

    CIS+ Taxation structure  Tax incidence in the region remains relatively low and is expected to grow  Key markets are introducing long-term planning cycles for excise, providing predictability (Russia, Kazakhstan, Serbia)  Tax systems in Bulgaria, Romania, Croatia are defined by EU Total tax incid

  19. Slide 19: Regulatory environment

    CIS+ Regulatory environment  Regulatory environment is defined by the requirements of the WHO Framework Convention on Tobacco Control  EU regulations set the model for Member States in the region (Romania, Bulgaria) and beyond  Most countries in the region have introduced comprehensive tobacco co

  20. Slide 20: JTI Strategy & Performance

    - JTI Strategy & Performance - 20

  21. Slide 21: Performance

    CIS+ Performance Volume and Net Sales 2010 Net change vs. same period in 2009 (%) 18.3% 11.4% 6.5% Q1 10 4.1% Q2 10 0.6% Jul/Aug 10 -5.3% -5.3% -7.3% -9.7% Volume GFB Volume Reported Net Sales  During July/August, total volume in CIS+ grew slightly, mainly driven by slowing market contraction in Ru

  22. Slide 22: Strategy overview

    CIS+ Strategy overview JTI Mission Continue role as the profit growth engine of the JT Group CIS+ Vision Retain #1 SOM Attain #1 SOV CIS+ Mission Volume, earnings & talent engine for JTI STRATEGIC PILLARS Leverage our Focus on GFB, Further build on Recruit, Proactively engage scale to improve drivin

  23. Slide 23: Strong portfolio in CIS+: leading in all segments below premium

    Strong Portfolio in CIS+: Leading in all segments below premium & increasing focus on premium and above THIS SLIDE HAS BEEN DEVELOPED TO EXPLAIN JTI’S PERFORMANCE TO OUR INVESTORS. IT IS NOT INTENDED TO PROMOTE THE PURCHASE OF OUR PRODUCTS. Segments JTI SOS(1) GFB Non-GFB Opportunities Prestige 6% P

  24. Slide 24: Constant focus on driving GFB

    CIS+ Constant focus on driving GFB THIS SLIDE HAS BEEN DEVELOPED TO EXPLAIN JTI’S PERFORMANCE TO OUR INVESTORS. IT IS NOT INTENDED TO PROMOTE THE PURCHASE OF OUR PRODUCTS. Recent innovations & launches Winston further strengthens its equity through consumer- relevant extensions and Winston innovativ

  25. Slide 25: Volume evolution: GFB/non-GFB split

    CIS+ Volume evolution: GFB/non-GFB split 100% 53.8% 51.0% 51.2% 51.0% 49.2% 59.7% 56.5% Non-GFB volume 46.2% 49.0% 48.8% 49.0% 50.8% 40.3% 43.5% GFB volume 0% H1 H2 H1 H2 H1 H2 Jan-Aug 2007 2008 2009 2010  Our consistent investment behind GFB delivers continued mix improvement and premiumization of

  26. Slide 26: Share of value development

    CIS+ Share of value development JTI CIS+ Share of Value 26.6% 25.5% 25.6% 25.6% 25.0% 25% 15% H1 2008 H2 2008 H1 2009 H2 2009 Jan-Jul 10  JTI holds the #2 SOV(1) position, and is steadily gaining share (1) SOV: Share of Value (as percentage of retail sales) 26 Source: A.C. Nielsen, Business Analyti

  27. Slide 27: Reported net sales per '000 evolution

    CIS+ Reported net sales per „000 evolution US$ Per ‘000 15.4 15 14.4 13.9 13 12.1 11 2007 2008 2009 Jan-Aug 2010  Pricing and GFB mix improvement drive reported net sales per ‘000 increase  In 2009, pricing mostly offset the adverse FX impact 27 Note: 2007 figures include pro-forma Gallaher

  28. Slide 28: Talent development

    CIS+ Talent development  The CIS+ region is the biggest employer in JTI: 40% of the total 25,000 JTI employees work in the CIS+ region  We are a highly competitive employer in CIS+ markets:  JTI is among the top 25% best-paying companies in the FMCG sector  Our employees expressed 21% higher sat

  29. Slide 29: Ukraine

    - Ukraine - 29

  30. Slide 30: Ukraine market: situation analysis

    Ukraine market: situation analysis  Ukraine was the market in the region that was affected strongest by the economic crisis, with a GDP decrease of 15% in 2009  Political volatility, struggling public finances have caused frequent and sudden changes of excise tax since 2008  Market contraction of

  31. Slide 31: Ukraine: key indicators

    Ukraine: key indicators Index Price Segments evolution (Jan-2008 = 100) Industry Sales volume indexed Prestige Premium Sub-Premium Mid-Price 2008: 103 BNU 2009: 88 BNU Popular/Base/Non Filter Key JTI brands 100% 7.0% 8.2% 8.5% Sobranie 8.5% 8.8% 9.1% Camel 100 100 100 96 22.5% 23.5% 23.8% Winston, 8

  32. Slide 32: Kazakhstan

    - Kazakhstan - 32

  33. Slide 33: Kazakhstan market: situation analysis

    Kazakhstan market: situation analysis THIS SLIDE HAS BEEN DEVELOPED TO EXPLAIN JTI’S PERFORMANCE TO OUR INVESTORS. IT IS NOT INTENDED TO PROMOTE THE PURCHASE OF OUR PRODUCTS.  Early onset of crisis, and since 2009 the country is on the way to recovery  Market contraction started to stabilize durin

  34. Slide 34: Kazakhstan: key indicators

    Kazakhstan: key indicators Index Price Segments evolution (Jan-2008 = 100) Industry Sales volume indexed Prestige Premium 2008: 31 BNU 2009: 29 BNU Mid-Price Value/Base/Non Filter Key JTI brands 100% 5.2% 6.9% 8.3% Russian Style 119 23.5% 21.8% 19.6% Sobranie 100 21.8% Sovereign, 22.3% 21.0% Winston

  35. Slide 35: Romania

    - Romania - 35

  36. Slide 36: Romania market: situation analysis

    Romania market: situation analysis  Frequent and sudden excise tax changes due to the crisis led to price increases, with the market being compressed from the bottom  SOM under pressure due to our brand portfolio being relatively skewed towards Value segment Excise burden driving illicit trade in

  37. Slide 37: Romania: key indicators

    Romania: key indicators Price Segments evolution Index (Jan-2008 = 100) Industry Sales volume indexed Prestige Premium Mid-Price Value/Base Key JTI brands 2008: 30 BNU 2009: 29 BNU 100% 107 6.8% 8.7% 9.8% Sobranie 100 100 36.6% 39.1% Camel, Glamour 41.3% 80 74 35.7% 35.0% 33.0% Winston 20.9% Winches

  38. Slide 38: Conclusions

    - Conclusions - 38

  39. Slide 39: Passion for Growth

    CIS+ “Passion for Growth”  Gradual economic recovery is expected, with improved prospects for stabilization of market contraction and resumption of up-trading  We have a strong leadership position in the region, being #1 in SOM and growing SOV closing the gap to #1  Highly competitive portfolio w

  40. Slide 40: Appendix

    - Appendix - 40

  41. Slide 41: Winston: Engine for CIS+, #1 brand in the region

    Winston: Engine for CIS+, #1 brand in the region THIS SLIDE HAS BEEN DEVELOPED TO EXPLAIN JTI’S PERFORMANCE TO OUR INVESTORS. IT IS NOT INTENDED TO PROMOTE THE PURCHASE OF OUR PRODUCTS. Winston CIS+ Share of Market , % 9.0 9 8.6 8.6 8.3 7.8 6 3 0 H1 2008 H2 2008 H1 2009 H2 2009 Jan-Jul 10  Winston

  42. Slide 42: Building share in the Premium+ segment

    Sobranie, Camel, Mild Seven: Building share in the Premium+ segment THIS SLIDE HAS BEEN DEVELOPED TO EXPLAIN JTI’S PERFORMANCE TO OUR INVESTORS. IT IS NOT INTENDED TO PROMOTE THE PURCHASE OF OUR PRODUCTS. Sobranie Moscow Share of Segment, % Camel CIS+ Share of Market, % M7 SOM, % M7 Prestige SOS, %

  43. Slide 43: Glamour: #1 brand in Super Slims segment in CIS+

    Glamour: #1 brand in Super Slims segment in CIS+ THIS SLIDE HAS BEEN DEVELOPED TO EXPLAIN JTI’S PERFORMANCE TO OUR INVESTORS. IT IS NOT INTENDED Glamour CIS+ ShareTO PROMOTE of Market, % THE PURCHASE OF OUR PRODUCTS. 2.0 1.9 2.0 1.9 2 1.7 1 0 H1 2008 H2 2008 H1 2009 H2 2009 Jan-Jul 10  Stable and s

  44. Slide 44: LD: Key international brand in Mid price and below

    LD: Key international brand in Mid price and below THIS SLIDE HAS BEEN DEVELOPED TO EXPLAIN JTI’S PERFORMANCE TO OUR INVESTORS. IT IS NOT INTENDED TO PROMOTE THE PURCHASE OF OUR PRODUCTS. LD CIS+ Share of Market, % 4.1 4.0 4 3.7 3.5 3.3 2 0 H1 2008 H2 2008 H1 2009 H2 2009 Jan-Jul 10  #3 brand in Ru

  45. Slide 45: Continuous quest for leadership in Trade Marketing

    Continuous quest for leadership in Trade Marketing THIS SLIDE HAS BEEN DEVELOPED TO EXPLAIN JTI’S PERFORMANCE TO OUR INVESTORS. IT IS NOT INTENDED TO PROMOTE THE PURCHASE OF OUR PRODUCTS. Point of Sales Visibility & Innovation Video back walls Packs diode lighting New Communication Channels Sobranie

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