Japan Tobacco Inc. · TSE:2914
Japan Tobacco — H1 FY2002 Earnings Presentation
28 slides from Japan Tobacco's earnings presentation, Nov 16, 2001
Slide 1: FY 2002 Interim Results
Slide 1 FY 2002 Interim Results (Half Year ending September 30, 2001) November 16, 2001 Japan Tobacco Inc.
Slide 2: Forward-Looking and Cautionary Statements
Slide 2 Forward-Looking and Cautionary Statements This document contains "forward-looking statements," as such term is defined in the Private Securities Litigation Reform Act of 1995. These statements are based on our management's assumptions and beliefs in light of the information currently availab
Slide 3: Today's Schedule
Slide 3 Today's Schedule ■ 4:30 - 5:00 p.m. – Summary of FY 2002 Interim Results – FY 2002 Outlook Hideo Katsuura Senior Vice President Chief Communications Officer ■ 5:00 - 6:00 p.m. – Questions and Answers
Slide 4: Summary of FY 2002 Interim Results
Slide 4 Summary of FY 2002 Interim Results
Slide 5: Strengthened Organization (1)
Slide 5 FY2002 First Half Strengthened Organization (1) ■ Optimization of board members – Reduced from 24 to 11 ■ Introduction of Executive Officer System – Separated and clarified functions of board members and executive officers ■ Establishment of advisory committee – Held first meeting in Septemb
Slide 6: Strengthened Organization (2)
Slide 6 FY2002 First Half Strengthened Organization (2) ■ Rationalization for increased productivity over mid to long term Billion cigarettes workers − Closed down 9 domestic tobacco 350 35,000 33,000 manufacturing plants after privatization. 300 Domestic Sales Volume 31,000 − Voluntary early retire
Slide 7: Key Developments (1)
Slide 7 FY2002 First Half Key Developments (1) ■ Domestic Tobacco – Cigarette sales volume down moderately: 121.4 billion (- 3.2 billion YoY)* *Does not include duty-free sales in Japan. – Market share down slightly: 74.5% (-0.5 point YoY) – New products introduced ■ "Marlboro Medium" from April 2 n
Slide 8: Key Developments (2)
Slide 8 FY2002 First Half Key Developments (2) ■ Pharmaceuticals – JTT-811 (drug for diabetes complications) enters to Phase II – Dissolved Lifix on August 1 (will clear within FY2002) ■ Impact on earnings expected to be small ■ Foods – Sales of JT-brand beverage increased by 1% YoY – Lineup of comm
Slide 9: Business Highlights - Net Sales and EBITDA
Slide 9 Business Highlights - Net Sales and EBITDA ■ Net Sales: up by JPY 7.5 billion to JPY 2,278.3 billion – Main reasons for increase ■ Favorable impact of weak yen and expanded international sales volume (up JPY 38.0 billion) ■ Increase in foods revenue (up JPY 5.8 billion) – Main reason for dec
Slide 10: Business Highlights - EBITDA by Business Segment (1)
Slide 10 Business Highlights - EBITDA by Business Segment (1) ■ Tobacco: up by JPY 0.9 billion to 165.9 billion – Main reasons for increase ■ Termination of JT Mutual Assist. Assoc. and voluntary retirement of factory workers ■ Foreign exchange gain since consolidation of JT International – From JPY
Slide 11: Business Highlights - EBITDA by Business Segment (2)
Slide 11 Business Highlights - EBITDA by Business Segment (2) ■ Foods: up by JPY 3.4 billion to JPY 1.3 billion – Main reasons for increase ■ Revenue increase effect ■ Strategic use of sales promotion expenses since second half of FY2001 ■ Thorough control of profit and losses for each brand ■ Other
Slide 12: Business Highlights - Operating and Net income
Slide 12 Business Highlights - Operating and Net income ■ Operating income up JPY 4.2 billion – Depreciation and amortization cost: up JPY0.5 billion ■ Investments in consolidated raw materials processing equipment and introduced high- speed cigarette rolling and packaging machines ■ Net income up J
Slide 13: Business Highlights - Balance Sheet
Slide 13 Business Highlights - Balance Sheet ■ Total assets: up JPY 34.8 billion – Increase in fund for national tobacco excise taxes payable (up approx. JPY30 billion) and down payments for leaf tobacco purchase (up approx. JPY 26 billion). Decrease in raw materials and semi-finished products inven
Slide 14: FY2002 Outlook
Slide 14 FY2002 Outlook
Slide 15: Weak Market Trend Continues
Slide 15 Domestic Tobacco Weak Market Trend Continues ■ First-half actual – Volume: 121.4 billion cigarettes (down 3.2 billion YoY) – Market share: 74.5% (down 0.5 percentage point YoY) ■ Forecast for FY 2002 – 237 billion cigarettes (down 6.1 billion YoY) First half actual Forecast for year FY2001
Slide 16: Additional Cost Reduction
Slide 16 Domestic Tobacco Additional Cost Reduction ■ Costs are being cut by an additional JPY 7 billion – Approx. JPY 3 billion in cost of sales ■ lower manufacturing costs – Approx. JPY 4 billion in SG&A costs ■ lower costs of general and administrative ■ allocating sales expenditure more flexibly
Slide 17: Sales Volume up 6% in Jan. to Sept.
Slide 17 International Tobacco Sales Volume up 6% in Jan. to Sept. ■ Total sales volume up 6% – Europe ■ Up 5%, due to growth in Spain and Italy – Americas ■ No change, despite declining total demand in Canada – Asia ■ Up 10%, due to growth in Taiwan and Korea – CIS and others ■ Up 5%, due to growth
Slide 18: FY2001 Forecast
Slide 18 International Tobacco FY2001 Forecast ■ Excluding negative FX impact*, EBITDA will exceed its target in five-year plan. *Estimated at about US$ 80 million Original vs. Current Forecast (billion cigarettes, USD million, %) 2000 2001 2001 Actual (a) Forecast (b) (b) / (a) 5 year plan (c) (b)
Slide 19: Business Environment Issues
Slide 19 International Tobacco Business Environment Issues ■ JT challenges EU’s ban on use of the word “mild” – JT and JTI seek protection of “MILD SEVEN” brand in Court of First Instance. – EU’s ban infringes on JT’s intellectual property established in the “MILD SEVEN” trademark. – Directive excee
Slide 20: Royalty Revenue from Viracept
Slide 20 Pharmaceuticals Royalty Revenue from Viracept ■ 1st half Revenue decreased to US$56 million (Down US$12 million) ■ FY 2002 growth expected to be sluggish $146 million $123 million $126 million $56 million $48 million FY1998 FY1999 FY2000 FY2001 FY2002 first-half
Slide 21: Development Pipeline
Slide 21 Pharmaceuticals Development Pipeline ■ JTT-811 (for diabetic complications) enters Phase II ■ JTV-803 (anticoagulant) pill enters Phase I ■ R&D expenditure forecast to be JPY35 billion – Two-year average forecast at JPY30 billion. ■ JPY26 billion last year (non-consolidated), excl. one-time
Slide 22: JT-Brand Sales Volume
Slide 22 Foods JT-Brand Sales Volume ■ Revised sales volume target is 32 million cases for FY2002 ■ Product lineup being enhanced 35 32.0 30.2 30 24.5 Introduced Nov. 5 2001 23.4 25 Roots Rcafé Café latte 20 million cases 15 8.0 10 6.0 5 Introduced Nov. 5 2001 0 Lychee Flavored 1996 1997 1998 1999 2
Slide 23: Frozen Foods for Consumers
Slide 23 Foods Frozen Foods for Consumers ■ Enhanced lineup of retail frozen foods – Introduced large packages for "Yamucharo" Chinese foods (5 items) – Introduced "Daininki!" series of side dishes (9 items) and "Green Giant" vegetables in mini-pack series (6 items)
Slide 24: Balancing EBITDA
Slide 24 Foods Balancing EBITDA ■ Working toward balanced EBITDA – Beverages ■ Better control of SG&A since second half of last year ■ Better control of profit and loss by each brand – Processed foods ■ Enhanced cost control under intensified market conditions EBITDA (actual) EBITDA (target) in FY 2
Slide 25: FY2002 Outlook
Slide 25 FY2002 Outlook (excl. extraordinary loss on voluntary early retirements) ■ Sales will decline, due to decreased volume for domestic tobacco ■ Operating income remain unchanged – Increased loss from pharmaceuticals will offset increased earnings from tobacco and smaller loss from foods (JPYb
Slide 26: EBITDA Breakdown (vs. YoY actual)
Slide 26 FY 2002 Outlook EBITDA Breakdown (vs. YoY actual) ■ Tobacco: EBITDA to increase – Decline in sales volume to be offset by cost-cutting and termination of charge for JT Mutual Assistance Association – Expanded business in international tobacco. ■ Pharmaceuticals: EBITDA to deteriorate – Decl
Slide 27: Factors Behind Revisions
Slide 27 FY 2002 Outlook Factors Behind Revisions ■ EBITDA revised down to JPY15 billion – Domestic tobacco (decrease) ■ sales volume: down 4 billion cigarettes, from 241 billion to 237 billion ■ JPY2.5 billion decrease in leaf tobacco reappraisal profit ■ others: down approx. JPY3.0 billion (optimi
Slide 28: Japan Tobacco Inc.
Slide 28 Japan Tobacco Inc.