Tokyo, May 10, 2017
Japan Tobacco Inc.
Japan Tobacco International (JTI)
2017 First Quarter Results

Pricing and cost optimization maintain profit growth

191.7

94.4

Changevs. prioryear
-2.9%

166.0

66.4

-0.5%

2

2,429

2,468-1.6%

Core revenue at constant FX

2,469

2,468

0.0%

Adjusted operating profit

810

863

-6.1%

Adjusted operating profit at constant FX

875863

1.5%

Jan-Mar2017
2016(billions of units, millions of US$)

Total shipment volume
GFB shipment volume
Core revenueHighlights
2017 first quarter results (January-March)•Core revenue at constant currency was stable as price/mix gains in several key markets offset
the volume decline impact.

•Adjusted operating profit at constant currency grew 1.5% driven by price/mix gains and cost
optimization, while investments in emerging markets and emerging products continued.

•

On a reported basis, core revenue and adjusted operating profit declined 1.6% and 6.1%,
respectively, due to currency fluctuations.

•Total shipment volume declined 2.9% primarily due to industry volume contraction in three outof four clusters, market share loss due to competitor driven price discounting in CIS+ andunfavorable trade inventory adjustments versus the same period last year.

•GFB shipment volume was stable but grew excluding inventory adjustments, driven by astrong performance momentum from Winston and Mevius. GFB mix in total shipment volumegrew 1.7ppt to 72.0%.

•Year-on-year market share 3 increased in the key markets of France, Italy, Spain and Taiwan.
GFB market share grew in most key markets, including Russia and the UK.

1Performance review
Core revenue and adjusted operating profit

2017 first quarter results (January-March)Core revenue at constant currency was stable at US$2,469 million, supported by a positive
price/mix contribution of US$58 million offsetting the volume decline impact.
Adjusted operating profit at constant currency increased 1.5% or US$13 million to US$875 million
driven by a positive price/mix of US$50 million and cost optimization, while investments inemerging markets and emerging products continued.
On a reported basis, core revenue and adjusted operating profit declined 1.6% and 6.1%,
respectively, due to currency fluctuations.

Total shipment volume(billions of units)

Jan-MarCluster

2017

2016

Changevs. prioryear

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

15.9
12.5
29.0
34.3
91.7

17.0
13.2
31.1
33.2
94.4

-6.4%
-5.0%
-6.7%
3.4%
-2.9%

Total JTI

2017 first quarter results (January-March)
Total shipment volume decreased 2.9% to 91.7 billion cigarette equivalent units. The positive
volume momentum in the Rest-of-the-World cluster was insufficient to offset the industry volume
contraction in other clusters, notably in the key markets of Italy, Russia, Spain and the UK, andtrade inventory adjustments versus the same period last year. Fine cut shipment volume declined
5.1%, due to industry volume contraction in Benelux, Spain and the UK. Market share grew,
notably in the key markets of France, Italy, Spain and Taiwan.

GFB shipment volume(billions of units)

Jan-MarCluster

2017

2016

Changevs. prioryear

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

14.3
7.7
22.3
21.8
66.0

15.2
8.0
23.7
19.4
66.4

-5.9%
-4.0%
-6.2%
12.1%
-0.5%

Total JTI

2017 first quarter results (January-March)
Rest-of-the-World grew GFB shipment volume 12.1%, driven by Iran, Korea and Taiwan. Despite
this growth, GFB shipment volume declined 0.5% to 66.0 billion cigarette equivalent units due toindustry volume contraction in a number of key markets, notably Italy, Russia, Spain and the UK.
Excluding trade inventory adjustments, GFB shipment volume increased. Winston, Mevius and2

Natural American Spirit delivered solid volume and share performance across several markets.
GFB fine cut shipment volume declined 4.9%, primarily due to industry volume contraction inBenelux and Spain. GFBs represented 72.0% of total shipment volume, up 1.7ppt from last year.
Winston: Shipment volume grew 4.7% to 33.1 billion cigarette equivalent units, primarily driven by
Brazil, Egypt, Iran, Kazakhstan, Russia, Taiwan and Ukraine.
Camel: Shipment volume declined 1.5% to 12.6 billion cigarette equivalent units, mainly due toindustry volume contraction and unfavorable inventory movements in Italy offsetting growth inBrazil, Iran and the Philippines.
Mevius: Shipment volume increased 4.8% to 4.5 billion cigarette equivalent units driven by growthin Korea, Malaysia, Myanmar, Russia, South East Asia markets and Taiwan.
LD: Shipment volume decreased 11.9% to 9.9 billion cigarette equivalent units, primarily due toindustry volume contraction and intense price competition in Russia and Ukraine offsetting growthin Kazakhstan, Poland and Taiwan.

Cluster review
2017 first quarter results (January-March)
South and West Europe(billions of units, millions of US$)Jan-Mar2017
2016

Total shipment volume
GFB shipment volume
Core revenue at constant FX

15.9
14.3
476

17.0
15.2
506

Changevs. prior year
-6.4%-5.9%-5.9%

Core revenue at constant currency decreased 5.9% to US$476 million, due to volume decline anda negative US$2 million price/mix contribution.
Total and GFB shipment volumes declined 6.4% and 5.9%, respectively, primarily due to industry
volume contraction in Italy and Spain as well as unfavorable inventory movements in key markets
following the implementation of the revised European Tobacco Products Directive. Market share
increased in Benelux, France, Italy, Greece, Spain and Switzerland.
In France, total and GFB shipment volumes were down 5.1% and 6.9%, respectively, mainly due tounfavorable inventory movements versus the same period last year. Market share grew 0.5ppt to22.0%, driven by Winston, Camel and Fleur du Pays.
In Italy, industry volume contraction and unfavorable inventory movements led to a decline of totaland GFB shipment volumes of 7.6% and 7.4%, respectively. Market share momentum continued,reaching 23.4% up 1.7ppt, driven by Camel, Winston and Benson & Hedges.
In Spain, industry volume contraction following the excise tax increase in December 2016 andunfavorable inventory movements drove total and GFB shipment volumes down 10.1% and 10.7%,
respectively. Market share gains continued, reaching 23.0% up 0.6ppt, primarily led by Camel.

3North and Central Europe(billions of units, millions of US$)Jan-Mar2017
2016

Total shipment volume
GFB shipment volume
Core revenue at constant currency

12.5
7.751913.2
8.0570Changevs. prior year
-5.0%
-4.0%
-8.9%

Core revenue at constant currency declined 8.9% to US$519 million, due to volume decline and anegative US$13 million price/mix contribution.
Total and GFB shipment volumes declined 5.0% and 4.0%, respectively, mainly due to industry
volume contraction in Germany, Ireland and the UK. Market share grew in Germany, Hungary andSweden.
In Austria, total and GFB shipment volumes grew 2.2% and 6.3%, respectively, driven by Benson& Hedges, Winston and Camel. Market share declined 0.2ppt to 31.3% despite gains from Winston,Camel and Benson & Hedges.
In Germany, Winston and Natural American Spirit volume momentum was unable to offset industry
volume contraction, leading total and GFB shipment volumes to decline 2.2% and 1.3%,respectively. Market share continued to grow reaching 8.3%, an increase of 1.4ppt driven byWinston and Camel.
In the UK, industry volume contraction drove total and GFB shipment volumes down 7.2% and13.6%, respectively. Market share declined 0.6ppt to 41.4% while quarterly market share 4 wasstable at 41.0% versus the fourth quarter 2016.

CIS+(billions of units, millions of US$)Jan-Mar2017
2016

Total shipment volumeGFB shipment volumeCore revenue at constant currency

29.0
22.3
480

31.1
23.7
511

Changevs. prior year
-6.7%-6.2%-6.2%

Core revenue at constant currency declined 6.2% to US$480 million despite a positive US$5
million price/mix contribution.
Total and GFB shipment volumes declined 6.7% and 6.2%, respectively, due to industry volume
contraction in Russia and Ukraine. Market share grew in Kazakhstan and Romania.
In Romania, total and GFB shipment volumes declined 7.0% and 3.6%, respectively, due toindustry volume contraction. Market share increased 0.4ppt to 26.3% driven by Winston, LD andSobranie.
In Russia, total and GFB shipment volumes declined 6.5% and 5.8%, respectively, versus anindustry volume contraction estimated at 5.5% 5 for the quarter. Share of market and share ofvalue declined 1.2ppt to 32.5% and 0.7ppt to 33.9%, respectively, while GFB market share grew
0.3ppt to 24.6%, led by Winston. Versus the fourth quarter 2016, quarterly market share increased
0.3ppt to 32.0% driven by recent product initiatives.
4Rest-of-the-World(billions of units, millions of US$)Jan-Mar2017
2016

Total shipment volume
GFB shipment volumeCore revenue at constant currency

34.3
21.899433.2
19.4881

Changevs. prior year
3.4%
12.1%
12.9%

Core revenue at constant currency increased 12.9% to US$994 million, driven by volume and apositive price/mix contribution of US$68 million.
Total and GFB shipment volumes increased 3.4% and 12.1%, respectively, mainly driven by Brazil,Egypt, Iran, Korea, Myanmar, the Philippines and Taiwan. Market share grew in several markets
including Canada, Malaysia and Taiwan.
In Iran, total and GFB shipment volumes grew significantly by 23.1% and 49.2%, respectively,driven by the strong momentum of Winston and the launch of Camel.
In Taiwan, total and GFB shipment volumes grew 8.6% and 25.1%, respectively, driven by thestrong performance of Winston and supported by growth from Mevius, LD and Camel as well as
favorable inventory movements. Share of market and share of value increased 1.1ppt to 40.4%
and 1.1ppt to 46.6%, respectively, driven by Winston, LD and Camel.
In Turkey, industry volume contracted in the quarter following the December ’16 excise tax driven
price increase. Despite the resilient performance from Winston and LD, total and GFB shipment
volumes declined 1.3% and 0.2%, respectively. Market share declined 0.7ppt to 29.3% whilequarterly market share increased 0.5ppt to 29.4% versus the fourth quarter 2016, driven by
Winston and Camel.
###Notes:
1

Including fine cut, cigars, pipe tobacco and snus, but excluding contract manufactured products, waterpipe tobacco andemerging products.
2
Including revenues from waterpipe tobacco and emerging products, but excluding revenue from distribution, contract
manufacturing and other peripheral businesses.
3Source: IRI, Logista, Nielsen and JTI estimates on a 12-month rolling average, unless otherwise specified, forcigarettes and fine cut at the end of March 2017. Canada, Germany, Hungary, Kazakhstan, Spain and Switzerland areon a 12-month rolling average at the end of February 2017. 12-month share of market growth for February 2017
markets is calculated against a 12-month share of market at the end of March 2016.
4
Source: JTI estimates on a 3-month rolling average for cigarettes at the end of March 2017.
5
Source: JTI estimates based on Jan-Mar 2017 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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