JAPAN TOBACCO INC.

Business Details

The flagship segment of JT Group, engaged in the manufacture and sale of tobacco products both domestically and internationally. Centered on JT International S.A., the segment sells products in more than 130 countries and regions, ranking among the top three in the global industry (excluding China National Tobacco Corporation). The business is built around Global Flagship Brands (Winston, Camel, MEVIUS, LD), and is strengthening investment in the RRP (Reduced-Risk Products) category, particularly heated tobacco products, centered on the Ploom brand, in addition to Combustibles. In Q1 FY2026 (ending December 2026), revenue from own tobacco products was ¥848,519 million, and adjusted operating profit was ¥325,414 million.

Recent Overview

Revenue and profit increased across all clusters; Q1 adjusted operating profit up 21.4% year on year

In Q1 FY2026 (ending December 2026), Tobacco Business external revenue reached ¥885,554 million (up 15.8% year on year), and adjusted operating profit reached ¥325,414 million (up 21.4% year on year), achieving significant increases in both revenue and profit. Revenue from own tobacco products was ¥848,519 million (up 16.2% year on year). By cluster, all three clusters—Asia, Western Europe, and EMA—achieved increases in both revenue and profit. Adjusted operating profit growth on a constant currency basis was 20.5% (consolidated basis). Note that from this first quarter, the definition of adjusted operating profit has been revised to add an adjustment excluding profit corresponding to the installment payments of the Canada litigation settlement (Canada adjustment).

Key Products

Growth Drivers

• Increase in revenue from own tobacco products driven by positive price/mix effects across all clusters (Asia, Western Europe, EMA) (up 16.2% year on year in Q1)
• Strong growth in the EMA cluster (Q1 adjusted operating profit of ¥140,378 million, up 17.9% year on year) and share gains across a broad range of markets
• High growth in adjusted operating profit in the Asia cluster, up 30.7% year on year (¥88,694 million)
• Adjusted operating profit in the Western Europe cluster up 18.9% year on year (¥96,342 million)
• Continued growth in RRP sales volume, centered on the Ploom brand, particularly driven by the Japanese market
• Under the 'JT Group Management Plan 2026' (FY2026 to FY2028, ending December 2026 to December 2028), an average annual high single digit growth in adjusted operating profit on a constant currency basis is assumed

Risks

• Negative foreign exchange impact mainly due to appreciation of cost currencies and depreciation of certain emerging market currencies (against a constant-currency-basis adjusted operating profit growth rate of 20.5%, foreign exchange impact affects actual results)
• Geopolitical risk in the Russian market: as the situation becomes prolonged and complex, options including separation from the Group's management are under consideration. Dependence on the major customer Megapolis Group reaches 14.3% of revenue
• Declining trend in total demand for Combustibles in mature markets and risk of stronger regulation and tax increases
• Weather risk in leaf tobacco procurement and risk of rising procurement costs due to soaring prices of energy resources and other crops
• Intensifying competition in the RRP market and risk of regulatory and tax changes in various countries (particularly a trend toward stricter regulation of tobacco-leaf-free products such as E-Vapor and Modern Oral)
• Financial burden associated with installment payments of settlement amounts related to smoking and health litigation in Canada, including cases naming JTI-Macdonald Corp. as defendant (the Canada adjustment is now excluded from the definition of adjusted operating profit for management purposes)
• Risk of soaring crude oil prices, inflation, and instability in global supply chains due to worsening conditions in the Middle East