FOR IMMEDIATE RELEASETokyo, August 2, 2017

JT’s Consolidated Financial Results for 2017 Second Quarter(January 1 – June 30, 2017)

First Half results confirm steady business performance
Highlights
Consolidated Financial Results•

Adjusted operating profit at constant currency increased 3.6% driven by the international
tobacco and pharmaceutical businesses.
On a reported basis, adjusted operating profit declined 1.2% due to unfavorable currency
movements in the international tobacco business.

•Operating profit and profit attributable to owners of the parent declined 9.2% and 8.7%respectively mainly due to a decrease in gains from the sale of real estate assets.

Results by Business Segment•

International Tobacco Business: Adjusted operating profit grew 9.1% in US Dollars atconstant currency mainly led by cost optimization. On a reported basis, adjusted operating
profit grew 0.5% due to currency fluctuations. In Japanese Yen, adjusted operating profit
increased 1.0% due to the appreciation of the US Dollar.

•Japanese Domestic Tobacco Business: Adjusted operating profit declined 7.4%, primarily
due to the impact of JT cigarette sales volume decline, partially offset by the benefits of theretail price amendment of MEVIUS last year and cost decreases.

•Pharmaceutical Business: Adjusted operating profit increased 224.5% mainly driven byhigher royalty revenues.

•Processed Food Business: Adjusted operating profit decreased 30.9% due to revenue
decrease.

Consolidated Forecast for 2017•

Adjusted operating profit at constant currency is forecast to grow from the previous fiscal year
but is revised downwards by ¥10.0 billion from the initial forecast due to lower profits in theJapanese domestic tobacco business partially offset by higher profit in the pharmaceuticalbusiness.
On a reported basis, the profit forecast is revised upwards by ¥2.0 billion due to higher profit in
the international tobacco business as a result of favorably revised exchange rate assumptions.

•While the forecast for operating profit is revised upwards by ¥5.0 billion mainly due to adjusted
operating profit growth, the forecast for profit attributable to owners of the parent remains
unchanged mainly due to an increase in net interest expense.

1Forecasts by Business Segment•International Tobacco Business: The forecast for adjusted operating profit in US Dollars atconstant currency remains unchanged at 9.1% growth from the previous fiscal year. On areported basis, the adjusted operating profit forecast increased by US$80 million in US Dollars
or ¥12.0 billion in Japanese Yen as a result of favorably revised exchange rate assumptions.

•Japanese Domestic Tobacco Business: The forecast for adjusted operating profit is revised
downwards by ¥14.0 billion due to the impact of JT cigarette sales volume decline.

•Pharmaceutical Business: The forecast for adjusted operating profit is revised upwards by¥4.0 billion mainly driven by higher royalty revenues.

•Processed Food Business: The forecast for adjusted operating profit remains unchanged.

Dividend• As stated in the “Business Plan 2017”, the Company announced an interim dividend of ¥70 pershare and a forecast for the year-end dividend of ¥70 per share, resulting in an annual
forecast dividend of ¥140 per share this year.
Mitsuomi Koizumi, President and Chief Executive Officer of JT, commented:“In the first half, we achieved continued growth in the Group’s adjusted operating profit at constantcurrency driven by the international tobacco and pharmaceutical businesses, despite anincreasingly uncertain and challenging operating environment.
“We’ve seen high earnings growth in the international tobacco business, for which our well-plannedand executed cost optimization initiative is bearing fruit, as well as higher royalty revenues in thepharmaceutical business which also contributed to the Group’s profit increase.
“In the Japanese tobacco business, cigarette industry volume decline puts further pressure on us,
resulting in adjustments to our business performance. In the meantime, our promising tobacco
vapor product, Ploom TECH, continues to receive strong interest from consumers in Tokyo, where
we launched at the end of June. Given the unique features of Ploom TECH as well as ourcommitment and resources, we are confident to win in the increasingly competitive Japanese
tobacco vapor category in the mid-term.
“As announced, 2017 has proved to be a particularly difficult year for us, however, we remaincommitted to investing for future sustainable profit growth and will continue to do so during the restof this year.”2Consolidated Financial Results(billions of Yen)

January – June2016
2017

Revenue

1,076.9

Adjusted operating profit

Difference

Change1,045.3

-31.5

-2.9%

318.3

314.7

-3.7

-1.2%

Operating profit

345.0

313.3

-31.7

-9.2%

Profit attributable to ownersof the parent

247.1

225.6

-21.5

-8.7%

318.3

329.7

11.4

3.6%

At constant currency:
Adjusted operating profit•Revenue
Revenue decreased 2.9% as growth in the pharmaceutical business was unable to offset thedecline of the Japanese domestic tobacco business and unfavorable currency movements inthe international tobacco business.

•Adjusted Operating Profit
Adjusted operating profit at constant currency increased 3.6% driven by the international
tobacco and pharmaceutical businesses.
On a reported basis, adjusted operating profit declined 1.2% due to unfavorable currency
movements in the international tobacco business.

•Operating Profit
Operating profit declined 9.2% mainly due to a decrease in gains from the sale of real estate
assets.

•Profit Attributable to Owners of the Parent
Profit attributable to owners of the parent declined 8.7% primarily due to lower operating profit.

3Results by Business Segment
International Tobacco Business(billions of units, billions of Yen)

January - June

Difference

Change

193.2

-6.5

-3.3%

140.7

140.8

0.1

0.0%

616.0

606.7

-9.3

-1.5%

584.1

577.2

-6.8

-1.2%

193.1

195.1

2.0

1.0%

2016

2017

199.7

GFB shipment volume
Revenue

Total shipment volume

Core revenue

12

Adjusted operating profit

At constant currency in US Dollars (millions of US Dollars)Core revenue

5,239

5,224

-15.0

-0.3%

Adjusted operating profit

1,729

1,886

157.0

9.1%

Strong performance primarily in Iran and Taiwan was unable to offset the impact of industry
volume contraction in several markets and the unfavorable inventory comparisons in the firstquarter, resulting in total shipment volume declining 3.3%. GFB shipment volume remained stable,
mainly driven by market share gains in several key markets.
In US Dollars, core revenue decreased 0.3% at constant currency due to volume decline and 1.9%
on a reported basis due to currency fluctuations. Adjusted operating profit grew 9.1% at constantcurrency led by cost optimization and positive price/mix while we continued to invest in emerging
markets and emerging products. On a reported basis, adjusted operating profit grew 0.5%, due tocurrency fluctuations.
In Japanese Yen, core revenue decreased 1.2% and adjusted operating profit increased 1.0% dueto the appreciation of the US Dollar.
Japanese Domestic Tobacco Business(billions of units, billions of Yen)

January – June2016
2017

Cigarette industry volume

86.2

3

JT cigarette sales volume
RevenueCore revenue

4

Adjusted operating profit

Difference

Change76.8-9.5-11.0%

52.7

46.8

-5.9

-11.2%

335.9

310.4

-25.6

-7.6%

318.6

294.4

-24.2

-7.6%

129.6

120.0

-9.6

-7.4%

JT cigarette sales volume decreased 11.2%. This is mainly due to cigarette industry volume
contraction caused by the expansion of the tobacco vapor category and a continued diminishingmarket trend. JT’s market share was 61.0%, at parity level to last year.

4Core revenue declined 7.6%, impacted by sales volume decline, partially offset by the benefit of
the retail price amendment of MEVIUS last year. Adjusted operating profit declined 7.4% due tolower core revenue, despite benefits from cost decreases.
Pharmaceutical Business(billions of Yen)

January - June2016
2017

Revenue

40.3

Adjusted operating profit

2.8

Difference

Change

47.2

6.9

17.1%

9.0

6.2

224.5%

Revenue increased 17.1% mainly driven by higher royalty revenues from increased sales oforiginal JT compounds. Adjusted operating profit grew 224.5% as a result of the revenue increase.

Processed Food Business(billions of Yen)

January – June2016
2017

Revenue

79.9

Adjusted operating profit

3.1

Difference

Change77.5-2.5-3.1%2.2-1.0-30.9%The processed food business continued to focus mainly on its staple foods and seasonings
category, as well as striving for cost reduction initiatives, in order to strengthen the earning
capacity in the business.
Although sales of seasonings increased, revenue decreased 3.1% due to lower sales of otherproducts. Adjusted operating profit decreased 30.9% as a result of the revenue decline.

5Consolidated Forecast for 20172017 Revised
Forecast

Difference from2017 Initial
Forecast

Difference from2016 Actual

Change from2016 ActualRevenue

2,125.0

15.0-18.3-0.9%

Adjusted operating profit

589.0

2.0

2.2

0.4%

Operating profit

565.0

5.0

-28.3

-4.8%

Profit attributable to ownersof the parent

402.0--19.7

-4.7%

597.0

-10.0

10.2

1.7%

(billions of Yen)

At constant currency:
Adjusted operating profit•Revenue
The revenue forecast is revised upwards by ¥15.0 billion as a result of favorably revised
exchange rate assumptions in the international tobacco business and higher revenue in thepharmaceutical business despite lower revenue in the Japanese domestic tobacco business.

•Adjusted Operating ProfitThe forecast for adjusted operating profit at constant currency grows from the previous fiscal
year but is revised downwards by ¥10.0 billion from the initial forecast due to lower profit in theJapanese domestic tobacco business, partially offsetting higher profit in the pharmaceuticalbusiness.
On a reported basis, adjusted operating profit forecast is revised upwards by ¥2.0 billion due
to higher profit in the international tobacco business as a result of favorably revised exchange
rate assumptions.

•Operating Profit
The forecast for operating profit is revised upwards by ¥5.0 billion mainly due to adjusted
operating profit growth.

•Profit Attributable to Owners of the Parent
The forecast for profit attributable to owners of the parent remains unchanged as an increasein financial costs offset the operating profit growth.

6Forecasts by Business Segment
International Tobacco Business2017 Revised
Forecast

Difference from2017 Initial
Forecast

Difference from2016 Actual

Change from2016 Actual

Total shipment volume

391.0

-4.0

-7.7

-1.9%

GFB shipment volume288.0-4.3

1.5%

Revenue

1,210.0

32.0

10.8

0.9%

Core revenue

1,152.0

34.0

13.21.2%

Adjusted operating profit

359.0

12.0

22.8

6.8%

(billions of units, billions of Yen)

At constant currency in US Dollars (millions of US Dollars)Core revenue

10,440--50-0.5%

Adjusted operating profit

3,375-

280

9.1%

While the forecast for total shipment volume is revised downwards by 4.0 billion units reflecting
recent operating environment changes in several Middle East and African markets, the forecast for
GFB shipment volume is maintained.
In US Dollars, the forecast for adjusted operating profit at constant currency remains unchanged at
9.1% growth from the previous fiscal year, mainly led by continuous cost optimization. On areported basis, the profit forecast is increased by US$80 million as a result of favorably revised
exchange rate assumptions.
In Japanese Yen, the forecast for adjusted operating profit is revised upwards by ¥12.0 billion
primarily as a result of revised exchange rate assumptions reflecting the recent trend of US Dollar
appreciation.
(Reference) Exchange rate assumptions for US$1.00
2017 Revised
Forecast
Russian Ruble
UK SterlingEuroJapanese Yen

60.00
0.80
0.90
111.16

7Effects to the adjusted
operating profit
forecast
Positive
Positive
PositiveJapanese Domestic Tobacco Business(billions of units, billions of Yen)

2017 Revised
Forecast

Difference from2017 Initial
Forecast

Difference from2016 Actual

Change from2016 Actual

JT cigarette sales volume

93.0

-3.0

-13.2

-12.4%

Revenue

642.0

-13.0

-42.2

-6.2%

Core revenue

602.0

-18.0

-47.7

-7.3%

Adjusted operating profit

230.0

-14.0

-30.2

-11.6%

The forecast of JT cigarette sales volume is revised downwards by 3.0 billion units. This reflects
cigarette industry contraction including effects of the expansion of the tobacco vapor category andthe continued diminishing market trend.
As a result of the revised sales volume, the forecasts for core revenue and adjusted operating
profit are revised downwards by ¥18.0 billion and ¥14.0 billion, respectively.
Pharmaceutical Business2017 Revised
Forecast

Difference from2017 Initial
Forecast

Difference from2016 Actual

Change from2016 Actual

Revenue

102.0

4.0

14.8

17.0%

Adjusted operating profit

23.0

4.0

13.3

136.7%(billions of Yen)

The forecasts for revenue and adjusted operating profit are both revised upwards by ¥4.0 billion,
driven by higher royalty revenues from the increased sales of original JT compounds.
Processed Food Business2017 Revised
Forecast

Difference from2017 Initial
Forecast

Difference from2016 Actual

Change from2016 Actual

Revenue

165.0

-

0.9

0.6%

Adjusted operating profit

6.0-

1.0

20.1%

(billions of Yen)

Forecasts for revenue and adjusted operating profit remain unchanged mainly supported byincreased sales of staple foods.

8###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 ¥2.143 trillion(US$19,703 million(*)) in the fiscal year ended December 31, 2016.
*Translated at the rate of ¥108.78 per $1Notes
1Including fine cut, cigars, pipe tobacco and snus, but excluding contract manufactured products, waterpipe tobacco andemerging products.
2Including revenues from waterpipe tobacco and emerging products, but excluding revenues from distribution, contract
manufacturing and other peripheral businesses.
3Excluding sales volume of domestic duty free, the China business and emerging products.
4
Excluding revenue from distribution of imported tobacco in the Japanese domestic tobacco business, among others,
including revenues from domestic duty free, the China business and emerging products such as Ploom TECH devices
and capsules.
Additional definitions are provided at https://www.jt.com/media/definitions/index.html.

FORWARD-LOOKING STATEMENTS
This document contains forward-looking statements. These statements appear in a number of places in this document
and include statements regarding the intent, belief, or current and future expectations of our management with respect toour business, financial condition and results of operations. In some cases, you can identify forward-looking statements byterms such as “may”, “will”, “should”, “would”, “expect”, “intend”, “project”, “plan”, “aim”, “seek”, “target”, “anticipate”,“believe”, “estimate”, “predict”, “potential” or the negative of these terms or other similar terminology. These statements
are not guarantees of future performance and are subject to various risks and uncertainties. Actual results, performance orachievements, or those of the industries in which we operate, may differ materially from any future results, performance orachievements expressed or implied by these forward-looking statements. In addition, these forward-looking statements
are necessarily dependent upon assumptions, estimates and data that may be incorrect or imprecise and involve known
and unknown risks and uncertainties. Forward-looking statements regarding operating results are particularly subject to avariety of assumptions, some or all of which may not be realized.
Risks, uncertainties or other factors that could cause actual results to differ materially from those expressed in any
forward-looking statement include, without limitation:(1) decrease in demand for tobacco products in key markets;(2) restrictions on promoting, marketing, packaging, labeling and usage of tobacco products in markets in which weoperate;(3) increases in excise, consumption or other taxes on tobacco products in markets in which we operate;(4) litigation around the world alleging adverse health and financial effects resulting from, or relating to, tobacco
products ;(5) our ability to realize anticipated results of our acquisition or other similar investments;(6) competition in markets in which we operate or into which we seek to expand;(7) deterioration in economic conditions in areas that matter to us;(8) economic, regulatory and political changes, such as nationalization, terrorism, wars and civil unrest, in countries inwhich we operate;(9) fluctuations in foreign exchange rates and the costs of raw materials; and(10) catastrophes, including natural disasters.

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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