FOR IMMEDIATE RELEASETokyo, August 1, 2016

JT’s Consolidated Financial Results for FY2016 Second Quarter

First Half results demonstrated solid business performance
Results for FY2016 Second Quarter : (January 1, 2016 – June 30, 2016)
All businesses in the group delivered steady top line growth in the initial six-month period,
leading to solid adjusted operating profit growth excluding currency effects.
Revenue and adjusted operating profit declined 1.7% and 3.2% respectively due to unfavorable
currency movements in the international tobacco business. Operating profit grew 15.5% as aresult of gains from the sale of real estate assets in the first quarter. Profit attributable toowners of the parent increased 16.8%.

Adjusted operating profit at constant currency grew 14.3% mainly led by strong results in theinternational tobacco business.

International Tobacco Business: Total and GFB shipment volumes increased 4.4% and 6.7%
respectively, driven by continued market share momentum and acquisitions. In US Dollars,
adjusted operating profit at constant currency grew 17.7% driven by volume growth and robust
pricing while investments were accelerated. On a reported basis, adjusted operating profit
declined 2.3% due to adverse currency movements against the US Dollar. Adjusted operating
profit in Japanese Yen declined 9.3% due to the appreciation of the currency against the USDollar.

Japanese Domestic Tobacco Business: Adjusted operating profit grew 3.0% mainly driven by
the retail price amendment of certain products including Mevius and the contribution of NaturalAmerican Spirit. The profit growth was also supported by the effects of the measures tostrengthen the competitiveness of the Japanese domestic tobacco business.

Forecast for FY2016
At constant currency, the forecast for adjusted operating profit is revised upwards by ¥7.0 billion
reflecting strong first half performance in the international tobacco business. The profit is now
forecast to grow 8.5% from the previous fiscal year.
The revenue forecast is revised downwards by ¥80.0 billion due to a stronger than anticipatedappreciation of the Japanese Yen against the US Dollar. The forecast for adjusted operating
profit is increased by ¥7.0 billion, as the revision of exchange rate assumptions of local
currencies against the US Dollar offsets the negative impact of Japanese Yen.

The forecast for profit attributable to owners of the parent is revised upwards by ¥10.0 billion
mainly due to the upward revision of adjusted operating profit and lower corporate income tax.

Mitsuomi Koizumi, President and Chief Executive Officer of JT, commented:
Our international tobacco business continues to deliver strong volume growth led by GFBs andmarket share gains. This solid business performance combined with robust pricing allows us torevise our profit forecast upwards by targeting another year of double digit profit growth at constantcurrency. We also continue to increase the level of investments in our business, notably in seeding
markets and emerging products. Domestically, we delivered steady profit growth driven by theinclusion of Natural American Spirit and the retail price amendment of Mevius. Despite theincreasingly uncertain operating environment, the strong first half performance provides a soundground to make upward revisions to the overall group forecasts for this fiscal year.
1Consolidated Financial Results for January 1 – June 30, 2016(billions of Yen)

January – June2015
2016Revenue

1,095.2

Adjusted operating profit

Difference

Net Change

1,076.9

-18.3

-1.7%

328.9

318.3

-10.5

-3.2%

Operating profit

298.8

345.0

46.2

15.5%

Profit attributable to ownersof the parent 1

211.6

247.1

35.5

16.8%

328.9

375.8

46.9

14.3%

At constant FX:
Adjusted operating profit

Revenue
Revenue declined 1.7% due to unfavorable currency movements in the international tobacco
business despite steady top line growth across all businesses.

Adjusted Operating Profit
Adjusted operating profit at constant currency increased 14.3% mainly driven by strong
business momentum in the international tobacco business. On a reported basis, adjusted
operating profit declined 3.2% due to unfavorable local currency movements against the USDollar as well as the appreciation of the Japanese Yen against the US Dollar.

Operating Profit
Operating profit grew 15.5% as a result of gains from the sale of real estate assets in the firstquarter.

Profit Attributable to Owners of the Parent
Profit attributable to owners of the parent grew 16.8% due to higher operating profit.

Dividend
As stated in the “Business Plan 2016”, the Company announces a first half-year dividend of ¥64
per share and forecasts a second half-year dividend of ¥64 per share, resulting in an annual
forecast dividend of ¥128 per share this fiscal year.

2Results by Business Segment

International Tobacco Business
January - June(billions of units, billions of Yen)

Net Change2015

2016

Total shipment volume2

191.2

199.7

4.4%

GFB shipment volume

131.9

140.7

6.7%

Core revenue3

609.2

584.1

-4.1%

Adjusted operating profit

212.9

193.1

-9.3%

Total shipment volume increased 4.4% driven by solid performance in the Caucasus markets,France, Germany, Iran, Italy, Kazakhstan, Korea, the Philippines, Romania, South East Asianmarkets and Turkey, as well as contributions from acquisitions, and favorable comparisons in thefirst quarter due to trade inventory adjustments. GFB shipment volume grew 6.7% led by continued
brand building initiatives, market share momentum and the inclusion of Natural American Spirit.
Market share4 continued to grow in most key markets, including France, Italy, Spain, Taiwan and theUK.
In US Dollars, core revenue and adjusted operating profit at constant currency grew 12.6% and17.7%, respectively, driven by a robust price/mix and volume growth. Investments also increased,particularly in seeding markets and emerging products. On a reported basis, core revenue
increased 3.5% driven by strong business momentum offsetting currency fluctuations. Reported
adjusted operating profit declined 2.3% due to currency fluctuations. In Japanese Yen, core
revenue and adjusted operating profit decreased 4.1% and 9.3% respectively, due to theappreciation of the Japanese Yen against the US Dollar.
Japanese Domestic Tobacco Business
January – June(billions of units, billions of Yen)

Net Change2015

2016

Total sales volume5

53.1

52.7

-0.7%

Core revenue6

312.2

318.6

2.1%

Adjusted operating profit

125.8

129.6

3.0%

Total sales volume slightly decreased mainly due to lower industry volume and the negative impactof the retail price amendment of certain products including Mevius, although this was partly offset by
the acquisition of Natural American Spirit. Core revenue grew 2.1% driven by the retail priceamendment of certain products including Mevius and the positive impact of the acquisition of NaturalAmerican Spirit. Adjusted operating profit grew 3.0% due to higher core revenue and the effects ofthe measures to strengthen the competitiveness of the Japanese domestic tobacco business. The
profit growth was partly offset by the enhancement of sales promotions.

3Pharmaceutical Business
January - June(billions of Yen)

Difference

2015

2016

Revenue

34.8

40.3

5.5

Adjusted operating profit

-2.1

2.8

4.9

Revenue increased ¥5.5 billion to ¥40.3 billion driven by royalty revenue growth and a one-off
milestone revenue contribution in the first quarter related to the progress of an original JT compoundthat has been out-licensed. This revenue growth drove an adjusted operating profit improvement of¥4.9 billion to ¥2.8 billion.

Processed Food Business
January – June(billions of Yen)

Difference

2015

2016

Revenue

79.5

79.9

0.4

Adjusted operating profit

1.1

3.1

2.0

The processed food business continued to mainly focus on staple food such as frozen noodles,frozen rice, packed cooked rice and frozen baked bread. Revenue increased ¥0.4 billion to ¥79.9billion. Adjusted operating profit increased ¥2.0 billion as a result of higher revenue and lower raw
material costs due to the appreciation of the Japanese Yen.

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Consolidated Forecast for FY2016(billions of Yen)FY2015
Actual

FY2016 Initial
Forecast

FY2016
Revised
Forecast

Change from
FY2016 Initial
Forecast

Revenue

2,252.9

2,200.0

2,120.0-80.0

Adjusted operating profit

626.7

562.0

569.0

7.0

Operating profit

565.2

566.0

572.0

6.0

6.8
(1.2%)

Profit attributable to ownersof the parent

398.5

399.0

409.0

10.0

10.5
(2.6%)

626.7

673.0

680.0

7.053.3(8.5%)

Change from
FY2015
Actual-132.9(-5.9%)-57.7(-9.2%)

At constant FX:
Adjusted operating profit

At constant currency, the forecast for adjusted operating profit is revised upwards by ¥7.0 billion,
8.5% growth from the previous fiscal year, mainly reflecting the strong first half performance in
the international tobacco business.

The revenue forecast is revised downwards by ¥80.0 billion due to the appreciation of theJapanese Yen against the US Dollar. The forecast for adjusted operating profit is revised
upwards by ¥7.0 billion reflecting the strong first half performance in the international tobacco
business, as the revision of exchange rate assumptions of local currencies, mainly the RussianRuble, against the US Dollar offsets the negative impact of Japanese Yen.

The forecast for operating profit is revised upwards by ¥6.0 billion. The revision is mainly due tostronger adjusted operating profit growth.

The forecast for profit attributable to owners of the parent is revised upwards by ¥10.0 billion
due to higher operating profit and lower effective tax rate.

Forecasts by Business Segment
International Tobacco Business 7 : The forecasts for total and GFB shipment volumes arerevised upwards by 8.0 billion and 6.0 billion cigarette equivalent units respectively, reflectingstrong performance in the first half. In US Dollars, the forecast for adjusted operating profit atconstant currency is revised upwards by US$80.0 million due to strong volume growth andprice/mix effect, an increase of 11.4% from the previous year, while investments continue toaccelerate. The reported adjusted operating profit forecast is also revised upwards by US$380
million mainly as a result of favorably revised exchange rate assumption of the Russian Ruble.
In Japanese Yen, the forecast for adjusted operating profit is revised upwards by ¥9.0 billion
despite stronger than expected Japanese Yen against the US Dollar.

Japanese Domestic Tobacco Business: The industry volume is forecast to decline more thaninitially expected, resulting in downward revision of total sales volume by 1.0 billion. Core
revenue forecast is also revised downwards by ¥4.0 billion. Nevertheless, adjusted operating
profit forecast remains unchanged reflecting lower raw material costs caused by theappreciation of the Japanese Yen.

5Pharmaceutical Business: The forecasts for revenue and adjusted operating profit are revised
downwards by ¥3.0 billion respectively, due to lower royalty revenue affected by theappreciation of Japanese Yen. Nevertheless, royalty revenue from Stribild among others has
shown steady performance in line with our assumptions. There is no change in ourexpectations for the business to turn profitable this year.

Processed Food Business: The revenue forecast is revised downwards by ¥3.0 billion due tothe readjustment of the sales plan. The forecast for adjusted operating profit is revised upwardsby ¥1.5 billion primarily supported by the appreciation of the Japanese Yen leading to lower
material costs.

###Japan Tobacco Inc. is a leading international tobacco company. Its products are sold in over 120 countries and its globally
recognized brands include Winston, Camel, Mevius, LD and Natural American Spirit. With diversified operations, JT is also
actively present in pharmaceuticals and processed foods. The company’s revenue was ¥2.253 trillion (US$18,679million(*)) in the fiscal year ended December 31, 2015.
*Translated at the rate of ¥120.61 per $1, as of December 31, 2015

Notes:
1Profit in 2015 is from continuing operations.
Including fine cut, cigars, pipe tobacco and snus, but excluding contract manufactured products, waterpipe tobacco andemerging products.
3Revenue including waterpipe tobacco and emerging products, but excluding revenue from distribution, contract
manufacturing and other peripheral businesses.
4Source: IRI, Logista, Nielsen and JTI estimates on a 12-month rolling average, unless otherwise specified, for cigarettes
and fine cut at the end of June 2016. Russia, Spain and Turkey on a 12-month rolling average at the end of May 2016.
12-month share of market growth for May 2016 markets is calculated against a 12-month share of market at the end ofMay 2015.
5
Total sales volume excluding domestic duty free, the China business and emerging products.
6Core revenue including domestic duty free, the China business and emerging products.
7
The exchange rate assumptions for US $1.00 are: Ruble 67.50, UK Sterling 0.72, Euro 0.90, Swiss Franc 0.98, Taiwan
Dollar 32.50, Turkish Lira 2.90 and ¥105.8. Appreciation of the Japanese Yen and the Swiss Franc against the US Dollar
negatively affects the consolidated financial result numbers. Conversely, appreciation of the other currencies against theUS Dollar has a positive effect.
2

Additional definitions are provided at https://www.jt.com/media/definitions/index.html.

Contacts:

Ryohei Sugata, General Manager
Sayako Takahashi, Manager
Media and Investor Relations Division
Japan Tobacco Inc. Tokyo: +81-3-5572-4292
E-mail: jt.media.relations@jt.com

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