Supplementary Document
Tokyo, February 6, 2017
Japan Tobacco Inc.
Japan Tobacco International (JTI)
Results for the 12-month period ended December 31, 2016

Robust pricing delivers double-digit profit growth2016

2015

Changevs. prioryear

1

94.5

98.4

-3.9%

398.7

393.9

1.2%

167.4

68.2

-1.1%

283.7

273.6

3.7%

2

2,429

2,516

-3.5%

10,49010,338

1.5%Core revenue at constant FX

2,539

2,516

0.9%

11,215

10,3388.5%

Adjusted operating profit

468543-13.7%

3,095

3,257

-5.0%

Adjusted operating profit at constant FX

559543

3.0%

3,693

3,257

13.4%

(billions of units, millions of US$)

Total shipment volume
GFB shipment volume
Core revenue

Oct-Dec

2016

2015

Changevs. prioryear

Jan-Dec

Highlights
Full year 2016 (January-December)•Core revenue and adjusted operating profit at constant currency grew 8.5% and 13.4%,
respectively, driven primarily by robust price/mix.

•On a reported basis, core revenue grew 1.5% while adjusted operating profit declined 5.0%,
due to unfavorable currency movements.

•Total and GFB shipment volumes increased by 1.2% and 3.7%, respectively, fueled bycontinued market share gains, growth in seeding markets, acquisitions and favorable tradeinventory adjustments mainly in the first quarter. In fine cut, total and GFB shipment volumes
increased 8.1% and 17.7%, respectively.

•Year-on-year market share 3 increased in key markets including France, Italy, Spain andTaiwan. In Russia and the UK, GFB market share continued to grow.

3 months quarter-to-date 2016 (October-December)•Core revenue and adjusted operating profit at constant currency increased 0.9% and 3.0%,respectively, driven by pricing gains.

•Reported core revenue and adjusted operating profit declined 3.5% and 13.7%, respectively,
due to unfavorable currency movements.

•Total and GFB shipment volumes declined 3.9% and 1.1%, respectively, mainly due to lower
performance in CIS+. GFB fine cut shipment volume grew 5.9% resulting in total fine cut
shipment volume growth of 1.2%.

1

Performance review
Core revenue and adjusted operating profit
Full year 2016 (January-December)Core revenue at constant currency grew 8.5% or US$877 million to US$11,215 million, driven by
US$721 million in price/mix contribution and volume growth.
Adjusted operating profit at constant currency increased 13.4% or US$435 million to US$3,693
million, driven by positive price/mix of US$690 million and after investing in seeding markets andemerging products for future sustainable growth.
On a reported basis, core revenue was up 1.5% as positive price/mix and total shipment volume
growth offset currency downsides, while adjusted operating profit declined 5.0% due to unfavorable
currency movements.

3 months quarter-to-date 2016 (October-December)Core revenue at constant currency increased 0.9% or US$24 million to US$2,539 million, driven by
US$110 million in price/mix contribution.
Adjusted operating profit at constant currency grew 3.0% or US$16 million to US$559 million,
combining positive price/mix of US$94 million and ongoing investments.
On a reported basis, core revenue and adjusted operating profit declined 3.5% and 13.7% due tocurrency downsides.

Total shipment volume(billions of units)

Oct-DecCluster20162015Changevs. prioryear

South & West Europe
North & Central Europe
CIS+
Rest-of-the-World

14.0
12.9
33.3
34.4
94.5

14.4
12.9
37.6
33.4
98.4

-3.3%
-0.6%
-11.6%
3.1%-3.9%

Total JTI

Jan-Dec2016

2015

Changevs. prior
year

65.2
54.2
141.4
137.9
398.7

63.2
53.0
152.5
125.2
393.9

3.2%
2.3%
-7.3%
10.1%
1.2%

Full year 2016 (January-December)
Total shipment volume grew 1.2% to 398.7 billion cigarette equivalent units. This positive volume
performance driven by Brazil, Egypt, France, Germany, Iran, Italy, Kazakhstan, South Korea,Myanmar, the Philippines, Spain, Taiwan and Turkey was supported by acquisitions and favorable
trade inventory adjustments mainly in the first quarter. Fine cut shipment volume increased 8.1%,
led by France, Germany, Hungary, Italy, Spain, Switzerland and the UK.

3 months quarter-to-date 2016 (October-December)
Total shipment volume decreased 3.9% to 94.5 billion cigarette equivalent units due to lower
performance in Russia and Ukraine. In fine cut, shipment volume increased 1.2%, mainly in North& Central Europe.

2GFB shipment volume(billions of units)

Oct-Dec

Cluster

2016

2015

Changevs. prioryear

South & West Europe
North & Central Europe
CIS+
Rest-of-the-World
Total JTI

12.5
7.9
25.4
21.7
67.4

12.8
7.6
28.4
19.5
68.2

-2.1%
3.5%
-10.6%
11.5%-1.1%

Jan-Dec
2016

2015

Changevs. prioryear

58.6
33.6
107.1
84.4
283.7

55.8
30.5
113.3
74.0
273.6

5.0%
10.4%
-5.4%
14.0%
3.7%

Full year 2016 (January-December)
GFB shipment volume increased 3.7% to 283.7 billion cigarette equivalent units, including theaddition of two billion cigarette equivalent units from Natural American Spirit. Growth came fromCanada, France, Germany, Iran, Italy, Kazakhstan, Romania, Spain, Taiwan and the UK, as well
as from seeding markets such as Brazil, Egypt, South Korea, Myanmar and the Philippines. GFB
fine cut shipment volume increased 17.7%, primarily led by the Benelux, France, Germany,Hungary, Italy, Spain, Switzerland, the UK and the addition of Natural American Spirit.
GFBs represented 71.2% of total shipment volume, up 1.7ppt from last year.
Winston: Shipment volume grew 5.5% to 139.3 billion cigarette equivalent units, primarily driven
by Brazil, Egypt, France, Germany, Iran, Italy, North Africa markets, the Philippines, Taiwan andTurkey. Fine cut shipment volume increased 11.2%, led by the Benelux, France, Germany,Hungary and Italy. Winston achieved record high market shares in 20 markets.
Camel: Shipment volume grew 2.5% to a historical level of 52.2 billion cigarette equivalent units,increasing notably in the Benelux, Brazil, the Caucasus markets, France, Iran, Italy, the Philippines,
South Africa and Spain. Fine cut shipment volume increased 8.2%, led by the Benelux, Czech
Republic, France, Italy and Poland.
Mevius: Shipment volume increased 4.7% to 17.9 billion cigarette equivalent units driven bypositive performance in South Korea, Myanmar and South East Asia markets.
LD: Despite continued growth in Canada, Kazakhstan, Romania and Turkey, shipment volume
declined 3.9% to 47.6 billion cigarette equivalent units, primarily due to industry volume decline in
Russia and lower performance in the Caucasus markets and Ukraine. Fine cut shipment volume
grew 2.1%, mainly led by Hungary. LD achieved record market share levels in 12 markets,including Canada, Kazakhstan, Romania, Russia, and Taiwan.

3 months quarter-to-date 2016 (October-December)
GFB shipment volume declined 1.1% to 67.4 billion cigarette equivalent units, due to lower
performance in Russia and Ukraine. In fine cut, GFB shipment volume increased 5.9%, driven byboth European clusters.

3Cluster review
Full year 2016 (January-December)South and West Europe(billions of units, millions of US$)Jan-Dec2016
2015

Total shipment volume
GFB shipment volume
Core revenue at constant FX

65.2
58.6
1,982

63.2
55.8
1,870Changevs. prior year
3.2%
5.0%
6.0%

Core revenue at constant currency increased 6.0%, driven by volume contribution of US$68 million
and positive price/mix of US$45 million.
Total and GFB shipment volumes grew 3.2% and 5.0%, respectively, driven by positive shareperformance across most markets and the addition of Natural American Spirit in the Benelux,France, Greece, Italy, Spain and Switzerland. Market share increased in the Benelux, France,Greece, Italy, Spain and Switzerland.
In France, total and GFB shipment volumes outperformed the industry and grew 2.4% and 3.5%,respectively, driven by Winston and Camel. Fine cut shipment volume increased 6.9%, led byWinston, Camel and Fleur du Pays. Market share grew 0.6ppt to 22.0%, driven by Winston, Cameland Fleur du Pays.
In Italy, Winston, Camel and Benson & Hedges led an increase in total and GFB shipment volumesof 7.6% and 7.9%, respectively. Fine cut shipment volume increased 34.3% driven by Winston,Camel and Natural American Spirit. Market share increased 1.6ppt to 22.7%.
In Spain, total and GFB shipment volumes grew 2.2% and 2.5%, respectively, mainly driven by
Camel and Benson & Hedges. Fine cut shipment volume increased 4.3% driven by Camel,
Natural American Spirit and Amber Leaf. Market share grew 0.5ppt to 22.8%, primarily driven by
Camel and Benson & Hedges.

North and Central Europe(billions of units, millions of US$)Jan-Dec
2016
2015

Total shipment volume
GFB shipment volume
Core revenue at constant FX

54.2
33.6
2,427

53.0
30.5
2,306

Changevs. prior year
2.3%
10.4%
5.3%

Core revenue at constant currency grew 5.3%, led by US$77 million in price/mix contribution andvolume growth.
Total and GFB shipment volumes increased 2.3% and 10.4%, respectively, mainly driven byGermany and the addition of Natural American Spirit in Austria, Germany, Ireland and the UK.
Market share grew in Austria, Czech Republic, Germany, Hungary, Ireland and Sweden.

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In Austria, GFB shipment volume grew 9.2%, mainly driven by Winston, Camel and Benson &Hedges. Total shipment volume declined 0.4% due to industry contraction. Market share
increased 0.2ppt to 31.4%, led by Winston, Camel and Benson & Hedges.
In Poland, total and GFB shipment volumes declined 3.3% and 2.7%, respectively, due to market
share decline. Market share decreased 0.4ppt to 16.0%, as the positive performance of Winston
and Camel was offset by intense competition impacting LD.
In the UK, GFB shipment volume grew 24.3%, driven by Benson & Hedges and the addition of
Natural American Spirit. Total shipment volume declined 2.7%, mainly due to industry contraction.
Fine cut shipment volume increased 3.9%, led by Sterling, Amber Leaf and Natural American Spirit.
Market share declined 0.2ppt to 41.7% despite continued growth from Benson & Hedges andAmber Leaf, the number one tobacco brand in the market.

CIS+(billions of units, millions of US$)Jan-Dec2016
2015

Total shipment volume
GFB shipment volume
Core revenue at constant FX

141.4
107.1
2,882

152.5
113.3
2,799

Changevs. prior year
-7.3%
-5.4%
3.0%

Core revenue at constant currency grew 3.0%, led by price/mix gains of US$289 million partly
offset by negative volume contribution.
Total and GFB shipment volumes declined 7.3% and 5.4%, respectively, mainly due to lowerindustry volume in Russia and lower market share in Russia and Ukraine. GFB market share
increased in Kazakhstan, Romania and Russia.
In Romania, total and GFB shipment volumes grew 2.7% and 13.8%, respectively, primarily driven
by Winston, LD and Sobranie. Market share increased 0.5ppt to 26.1%, led by Winston, Sobranieand LD, the latter benefiting from the successful migration from More.
In Russia, total and GFB shipment volumes declined 8.6% and 3.2%, respectively. This wasmainly due to industry contraction 4 estimated at 5.1%, as well as competitive pressure at the lowend of the market impacting market share. Share of market and share of value declined 1.0ppt to32.8% and 0.6ppt to 34.2%, respectively. GFB market share grew 0.5ppt to 24.7%, driven by
Winston, the leading tobacco brand, and LD.

Rest-of-the-World(billions of units, millions of US$)Jan-Dec
2016
2015

Total shipment volume
GFB shipment volume
Core revenue at constant FX

137.9
84.4
3,924

125.2
74.0
3,363

Changevs. prior year
10.1%
14.0%
16.7%

Core revenue at constant currency grew 16.7%, led by strong volume, acquisitions and price/mix
contribution of US$310 million.
5Total and GFB shipment volumes increased 10.1% and 14.0%, respectively, primarily driven byIran (including the acquisition of Arian Tobacco Industry), North Africa markets, Taiwan and Turkey,
as well as positive contribution from seeding initiatives in Brazil, Egypt, South Korea, Myanmar andthe Philippines. Market share grew in several markets, including Brazil, Canada, Malaysia, thePhilippines and Taiwan.
In Taiwan, total and GFB shipment volumes grew 1.3% and 11.0%, respectively, led by Winston,which was supported by the migration of More, and LD. Share of market and share of value
increased 0.7ppt to 39.9% and 0.9ppt to 46.2%, respectively, driven by Winston and LD.
In Turkey, total and GFB shipment volumes increased 1.1% and 0.6%, respectively, driven by
improved industry trends benefiting Winston and LD. Market share declined 0.9ppt to 29.4%, as
the positive performance of Winston and LD was more than offset by Camel.

###Notes:
1

Including fine cut, cigars, pipe tobacco and snus, but excluding contract manufactured products, waterpipe tobacco andemerging products.
2Revenue including waterpipe tobacco and emerging products, but excluding revenue from distribution, contract
manufacturing and other peripheral businesses.
3
Source: IRI, Logista, Nielsen and JTI estimates on a 12-month rolling average, unless otherwise specified, forcigarettes and fine cut at the end of December 2016. Brazil, Germany, Kazakhstan, the Philippines and Singapore areon a 12-month rolling average at the end of November 2016. 12-month share of market growth for November 2016
markets is calculated against a 12-month share of market at the end of December 2015.
4Source: JTI estimates based on January-December 2016 data versus the same period last year.

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

Contacts:

Masahito Shirasu, General Manager
Tomohiro Funahashi, Associate General 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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