Overview of Consolidated Financial Results for 1H FY 3/2010 and Full-term Forecasts for FY 3/2010

Transcription

1 Overview of Consolidated Financial Results for 1H FY 3/2010 and Full-term Forecasts for FY 3/2010 *Please be reminded that the figures shown on these slides may be different from those shown in the financial statements as they are intended to facilitate understanding of individual businesses. *For details, please refer to the footnotes on the slides. Financial Results for 1H FY 3/2010 1

2 Consolidated Financial Results for 1H FY 3/2010: Executive Summary Consolidated net sales and profits declined due to volume decline of the domestic tobacco business and adverse currency fluctuation against international tobacco business Results of the domestic tobacco business were in line with the initial forecast At constant rates of exchange, the international tobacco business posted EBITDA growth of 11.7% driven by pricing 3 Consolidated Financial Results for 1H FY 3/2010 (JPY Bn) H H Change Net Sales* 1, % EBITDA Operating Income % -20.0% Reference <Before goodwill amortization> H H Operating Income** Change -17.3% Recurring Profit % Recurring Profit** % Net Income % Net Income** % Net sales and EBITDA dropped 13.5% and 19.1% respectively, due to volume decline of the domestic tobacco business and adverse currency fluctuation against international tobacco business Recurring profit and Net income also declined, but not as steep as operating income due to the improvements of non-operating results and extraordinary profits and losses *Net sales excluding tax does not account for revenue from the imported tobacco, domestic duty free, the China Division and other miscellaneous in the domestic tobacco business, in addition to the distribution, private label, 4 contract manufacturing and other peripheral businesses in the international tobacco business **Before good will amortization 2

3 Domestic Tobacco Business: Executive Summary Net sales and profits declined mainly due to volume decline Market share of JT products was up 0.1ppt from the first half of FY 3/2009 to 65.0% Market shares of key brands* grew steadily The sales volume in the first half declined 5.2%, roughly in line with our forecast The impact of the inventory buildup before the FY 3/ taspo introduction for FY 3/2009 is decreasing *Mild Seven, Seven Stars, Pianissimo 5 Domestic Tobacco Business: 1H FY 3/2010 (BNU,JPY Bn) H H Change Sales Volume % Net Sales excl. Tax* % EBITDA % Operating Income % Although net sales and profits declined due to volume decline and a rise in raw materials costs, the results were roughly in line with our forecast * Net sales excluding tax does not account for revenue from the imported tobacco, domestic duty free, the China Division, and other miscellaneous. 6 3

4 Domestic Tobacco Business: Market Share Trend * Market Shares of Major JT brands and All JT Products Mild Seven Seven Stars Pianissimo JT share ** ** ** ** ** FY/05 FY/06 FY/07 FY/08 Q2/09 Market share of JT products came to 65.0%, down 0.1ppt compared with the previous FY 3/2009 but up 0.1ppt compared with 1H of FY 3/2009 Market share of key brands rose 0.1ppt compared with the previous FY 3/2009 thanks to effective sales promotion through retail stores and the launch of new products * New basis=jt original brands + JTI brands sold in Japan (Camel, Winston, Salem, etc.) **Total for major JT brands Domestic Tobacco Business: Taspo Impact Change in the Sales Volume in FY 3/2010 Year on year rate of increase Apr-Jun Apr-Sep -7.2% -5.2% FY 3/2010 Forecast -4.6% Impact of a rise in inventory before the FY 3/09 taspo introduction(1) Approx.-2.3% Approx.-0.3% - Impact of taspo-related loss of Approx. -0.7% Approx. -0.5% Approx. -0.3% purchase opportunities(2) Downward trend in overall cigarette demand Approx. -4.2% Approx. -4.4% Approx. -4.3% (1) As this factor is temporary, its impact will disappear on a full-year basis. (2) The impact of this factor will decrease on a full-year basis. The impact of the inventory buildup in 1Q FY03/2009 is set to disappear 8 4

5 International Tobacco Business: Executive Summary-1H FY 3/2010 Net sales and EBITDA declined due to adverse currency fluctuation Despite 1.8% growth of GFBs, total volume was down 0.9% At constant rates of exchange, net sales excluding tax and EBITDA grew 9.1% and 11.9%, respectively driven by pricing 9 International Tobacco Business: 1H FY 3/2010 (BNU,MM$) H H Change Total Volume* % GFB Volume % Net Sales** 5,096 4, % Net Sales per thousand***(us$) % EBITDA**** 1,860 1, % at constant rates of exchange Net Sales** 5,096 5, % Net Sales per thousand***(us$) % EBITDA**** 1,860 2, % Total volume declined, but net sales and EBITDA grew at constant rates of exchange driven by pricing Volume growth momentum continued in the UK, Turkey and our key markets in Western Europe. However, declines in the Philippines, Iran, Ukraine, Romania and Kazakhstan offset the growth and resulted in a 0.9% decrease Net sales and EBITDA declined due to adverse currency fluctuation *Total volume includes cigars, pipe tobacco and snus, but does not include private label and contract manufactured products **Net sales excluding tax does not account for revenue from the distribution, private label, contract manufacturing and other peripheral businesses 10 ***Net sales per thousand cigarettes based on total volume, including cigars, pipe tobacco, and snus, but excluding private label and contract manufactured products, and joint ventures whose revenues are not accounted for ****Before royalty payment to JT 5

6 International Tobacco Business: Currency fluctuation impact in 1H FY 3/ H Average a H Average b Change b vs a RUB/USD % GBP/USD % EUR/USD % JPY/USD % EBITDA*(MM$) H 1, H Change 1, % EBITDA**(JPY Bn) % EBITDA in USD declined by 19.1% because of adverse currency fluctuation between USD and currencies other than JPY In addition to the above, JPY/USD fluctuation had a negative impact. As a result, EBITDA in JPY dropped 29.6% *Before royalty payment to JT **After royalty payment to JT 11 Pharmaceutical Business: 1H FY 3/2010 (JPY Bn) H H Change Clinical development (as of October 29, 2009) Net Sales Code Key Indication Stage JTT-705(oral) Dyslipidemia Phase 2 (Japan) EBITDA -5.1 JTT-130(oral) JTK-303(oral) Dyslipidemia HIV infection Phase 2 (Japan) Phase 2 (Overseas) Phase 1 (Japan) Operating Income JTT-302(oral) Dyslipidemia Phase 2 (Overseas) JTT-305(oral) Osteoporosis Phase 2 (Japan) Advanced to Phase 2 abroad JTS-653(oral) JTT-654(oral) JTK-656(oral) JTT-751(oral) Pain Overactive bladder Type 2 diabetes mellitus HIV infection Phase 1 (Japan) Phase 1 (Japan) Phase 2 (Overseas) Phase 1 (Overseas) Phase 2 (Japan) Hyperphosphatemia Despite growth in net sales and profits at Torii Pharmaceutical, net sales and profits for the pharmaceutical business declined in the absence of the milestone revenue that boosted the results of the same period of FY 3/2009 JTT-654 advanced to Phase 2 abroad 12 6

7 Foods Business: 1H FY 3/2010 (JPY Bn) H H Change Net Sales EBITDA* Operating Income *EBITDA after adjusting the impact of a change in the lease accounting standard 1H FY 3/2009: JPY 8.3 billion 1H FY 3/2010:JPY 8.4 billion (unchanged) Net sales declined due to the withdrawal from the chilled processed foods business and the exclusion of some subsidiaries from the consolidated results. EBITDA grew due to a change in the lease accounting standard but remained flat if that impact is adjusted 13 (This slide intentionally left blank) 7

8 International Tobacco Business Jan-Sept FY 3/2010 (preliminary) International Tobacco Business: Executive Summary-Results for Jan-Sep FY 3/2010 (preliminary) Total volume fell 3.7% due mainly to Iran, Ukraine, the Philippines, Spain and Taiwan and GFB volume declined 1.7% Total volume in Jul-Sep dropped 8.8% due to sharp decline in Iran, while a marginal decline (-1.1%) in Russia because of accelerated market contraction At constant rates of exchange, net sales grew 5.7% driven by pricing Share of market increased year-on-year in most of our key markets 16 8

9 International Tobacco Business: Results for Jan-Sep FY 3/2010 (preliminary) Total Volume* GFB Volume (BNU,MM$) <Jan-Sep (preliminary)> Jul-Sep Jan-Sep Jul-Sep Jan-Sep (-8.8%) (-3.7%) (-8.0%) (-1.7%) at constant rates of exchange Net Sales** Net Sales per thousand***(us$) 2, , ,939 8,500 (-0.3%) (+5.7%) (+7.9%) (+8.0%) Total volume in Jan-Sep declined due to market contraction, caused by tax increases and economic recession, and extraordinary factors in Iran, Ukraine and the Philippines GFB volume in Jan-Sep also declined, but not as steep as total volume Volume growth continued in Turkey, the UK, Italy and France At constant rates of exchange, net sales grew 5.7% *Total volume includes cigars, pipe tobacco and snus, but does not include private label and contract manufactured products **Net sales excluding tax does not account for revenue from the distribution, private label, contract manufacturing and other peripheral businesses 17 ***Net sales per thousand cigarettes based on total volume, including cigars, pipe tobacco, and snus, but excluding private label and contract manufactured products, and joint ventures whose revenues are not accounted for International Tobacco Business: Share of Key Markets 2008 Sep* 2009 Sep* Italy 16.8% 18.1% France 14.0% 14.6% Spain 20.4% 20.5% UK 39.2% 40.2% Russia 35.5% 36.5% Turkey 16.5% 18.4% Taiwan 38.0% 38.7% Source:AC Nielsen, Core EPOS and JTI internal data <Jan-Sep (preliminary)> Share of market increased year-on-year in most of our key markets *12-month rolling average 18 9

10 South & West Europe: Market contraction in Spain, but growth momentum in Italy and France (BNU) 2008 Jan-Sep 2009 Jan-Sep Change Total Volume* % <Jan-Sep (preliminary)> GFB Volume % Italy: Total market & JTI volume growth % (year-on-year) France: Total market & JTI volume growth % (year-on-year) 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% 12.0% Total market 10.0% JTI 8.0% 6.0% 4.0% 2.0% 0.0% Jan-Mar Jan-Jun Jan-Sep Source:AC Nielsen and JTI internal data Total market JTI Jan-Mar Jan-Jun Jan-Sep Total volume declined due mainly to weak performance in Spain because of price increase following the tax hike in June and accelerated market contraction. However, GFB volume remained flat Growth momentum continues in Italy and France *Total volume includes cigars, pipe tobacco and snus, but does not include private label and contract manufactured products 19 North & Central Europe: Growth momentum led by the UK (BNU) Total Volume* 2008 Jan-Sep Jan-Sep Change % <Jan-Sep (preliminary)> GFB Volume % JTI volume growth %:year-on-year North & Central Europe Jan-Mar Jan-Jun Jan-Sep +3.0% +6.5% +6.4% UK +1.7% +7.0% +8.6% Volume growth in the cluster continued for the three consecutive quarters The UK, where unit prices remain high, contributed to the good performance driven by market size increase due to less tourists from the country *Total volume includes cigars, pipe tobacco and snus, but does not include private label and contract manufactured products 20 10

11 CIS+: Robust share performance in Russia (BNU) Total Volume* 2008 Jan-Sep Jan-Sep Change % <Jan-Sep (preliminary)> GFB Volume % Russia JTI share** Russia Total market & JTI volume growth % (year-on-year) 3.0% 2.0% 1.0% 37.0% 36.5% 36.0% 0.0% -1.0% -2.0% -3.0% -4.0% Total market JTI Jan-Mar Jan-Jun Jan-Sep Source:AC Nielsen 35.5% 35.0% Jan-Mar Apr-Jun Jul-Sept Oct-Dec Jan-Mar Apr-Jun Jul-Sept FY 2008 Total volume in Jan-Sep declined 3.5% due to continued enforcement of our sales policy in Ukraine, market contraction in Ukraine and Romania due to price increases following tax hikes and economic recession, as well as Kazakhstan due to economic recession Total volume in Jul-Sep declined 6.5%. In addition to the above factors, Russia turned to negative growth in the same period, though marginal (-1.1%) While down-trading in Russia continued, our share of market has been growing benefiting from well-balanced our brand portfolio In Kazakhstan, first signs of market turnaround were observed *Total volume includes cigars, pipe tobacco and snus, but does not include private label and contract manufactured products **Quarter average 21 FY 2009 Source:AC Nielsen Rest of the World: Unstable operating environment continued (BNU) 2008 Jan-Sep 2009 Jan-Sep Total Volume* % GFB Volume % in Iran, while Taiwan showed recovery Change <Jan-Sep (preliminary)> Development in Iran Impact of pictorial health warning PHW introduction Social uncertainty after the presidential election Impact of change in VAT collecting system While Turkey enjoyed strong momentum, downside in Iran, the Philippines and Taiwan led to total volume decline Iran has been facing deteriorating and unstable operating environment Taiwan volume declined due to market contraction accelerated by price increase following the tax hike in June. Further, temporary price disadvantage against competitors led to share of market decline. However, our share of market showed signs of recovery as disadvantage depilates (Sep vs Aug share of market**: +0.7ppt) *Total volume includes cigars, pipe tobacco and snus, but does not include private label and contract manufactured products **Monthly 22 11

12 Favorable pricing (MM$) 9,000 8,500 Net Sales excl. tax* Roadmap: 08 to % <Jan-Sep (preliminary)> excise tax change price increase 8, ,472 Italy - Feb France - - 7,500 7,000 8,043 8,500 7,028 Spain Jun Jan, Jun UK Feb Feb, Apr Russia Jan Jan, Mar 6,500 Jan-Sep 08 Volume Change Price/Mix 09 Jan-Sep at constant rates of exchange FX impact Jan-Sep 09 Turkey Mar Mar, Jul Taiwan Jun Jun Net sales grew 5.7% at constant rates of exchange as a result of price increases *Net sales excluding tax does not account for revenue from the distribution, private label, contract manufacturing and other peripheral businesses 23 Full-Term Forecasts for FY 03/

13 Forecasts: Executive Summary EBITDA forecast is revised upward due mainly to change in the exchange rate assumptions for the international tobacco business EBITDA forecast at constant rates of exchange for the international tobacco business exhibits a double-digit growth of 13.0% Sales volume, net sales and EBITDA for the domestic tobacco business remain unchanged Net sales and EBITDA for the pharmaceutical business have been revised upward due to the strong performance of Torii Pharmaceutical Net sales and EBITDA for the food business have been revised downward 25 Forecasts for FY 3/2010 ( JPY Bn) FY 2008 Actual a Initial Forecast b FY 2009 Revised Forecast c Change from FY 2008 (c-a)/a Difference from Initial Forecast (c-b) Net Sales excl. tax* 2, , , % EBITDA % Operating Income % Recurring Profit % +8.0 Net Income % +8.0 (Before goodwill amortization ) Net Income** % +8.0 The forecasts of profits have been revised upward due mainly to a change in the exchange rate assumptions for the international tobacco business *Net sales excluding tax does not account for revenue from the imported tobacco, domestic duty free, the China Division and other miscellaneous in the domestic tobacco business, in addition to the distribution, private label, 26 contract manufacturing and other peripheral businesses in the international tobacco business **Before good will amortization 13

14 Domestic Tobacco Business: Forecasts for FY 3/2010 (BNU, JPY BN) FY 2008 Actual a Initial Forecast b FY 2009 Revised Forecast c Change from FY 2008 (c-a)/a Difference from Initiall Forecast (c-b) Sales Volume % 0 Net Sales excl. tax % 0 EBITDA % 0 Operating Income % +2.0 The initial forecasts of the sales volume, net sales and EBITDA remain unchanged as the impact of the taspo-related factors was in line with expectations. * Net sales excluding tax does not account for revenue from the imported tobacco, domestic duty free, the China Division, and other miscellaneous. 27 International Tobacco Business: Forecasts for FY 3/2010 ( BNU,JPY Bn) FY 2008 Actual a Initial Forecast b FY 2009 Revised Forecast c Change from FY 2008 (c-a)/a Difference from Initial Forecast (c-b) Total Volume* % GFB Volume % Net Sales excl. tax** 1, % -8.0 EBITDA*** % ( MM$ ) Net Sales excl. tax** 10,445 9,370 9, % +110 Net Sales excl. tax** at constant rates of exchange 10,445 11,920 11, % -830 EBITDA**** 3,452 2,500 2, % +380 EBITDA**** at constant rates of exchange 3,452 4,100 3, % -200 At constant rates of exchange, net sales and EBITDA are forecasted to grow by 6.2% and 13.0%, respectively Total volume is projected to drop 3.1% compared with FY 2008 Actual *Total volume includes cigars, pipe tobacco and snus, but does not include private label and contract manufactured products **Net sales excluding tax does not account for revenue from the distribution, private label, contract manufacturing and other peripheral businesses 28 ***After royalty payment to JT ****Before royalty payment to JT 14

15 International Tobacco Business: EBITDA roadmap <FY 2008 Actual vs FY 2009 Revised forecasts> Revised Forecast Initial Forecast FY 3/2009 3,452 FY 3/2009 3,452 Costs -300 Less Cost increase+50 Costs -350 Integration synergy Business momentum (inclu. Additional initiatives) Business momentum-250 Integration synergy Business momentum (incl.additional initiatives) FY 3/2010 Revised forecast (excl. FX impact) 3,900 FY 3/2010 Initital forecast (excl. FX impact)) 4,100 FX impact -1,020 Less negative FX impact+580 FX impact -1,600 FY 3/2010 Revised forecast 2,880 2,000 2,500 3,000 3,500 4,000 (MMUS$) FY 3/2010 Initial forecast 2,500 2,000 2,500 3,000 3,500 4,000 4,500 (MMUS$) EBITDA forecast at constant rates of exchange is revised downward by US$200MM mainly because of lower volume projection. However, double digit growth of 13.0% is expected Change in the exchange rate assumptions has a positive impact of US$580 million compared with the initial forecast Consequently, the forecast of EBITDA in FY 3/2010 has been raised by US$380 million to US$2,880 million International Tobacco Business: Exchange rate assumptions 09 Initial Assumption a 09 Revised Assumption b Jan-Sep 09 Average c Oct-Dec 09 Average d Change from Initial Assumption b vs a RUB/USD % GBP/USD % EUR/USD % JPY/USD % Exchange rate assumptions changed in accordance with recent developments 30 15

16 Pharmaceutical Business: Forecasts for FY 3/2010 ( JPY Bn ) FY 2008 Actual a Initial Forecast b FY 2009 Revised Forecast c Difference from FY 2008 (c-a) Difference from Initial Forecast (c-b) Net Sales EBITDA Operating Income The forecasts of net sales and EBITDA have been revised upward due to the strong performance of Torii Pharmaceutical. 31 Foods Business: Forecasts for FY 3/2010 ( JPY Bn) FY 2008 Actual a Initial Forecast b FY 2009 Revised Forecast c Difference from FY 2008 (c-a) Difference from Initial Forecast (c-b) Net Sales EBITDA Operating income *The company name change is scheduled for January The forecast of net sales has been lowered due to a slump in consumption due to the recession and intensified competition The forecast of EBITDA has been revised downward due to a sharp fall in prices of some products, although we still aim to attain the initial forecast through cost reduction and sales promotion. The company name of Katokichi is scheduled to be changed to Table Mark in January

17 33 <Back up data> All detailed figures come to <Back up data> 34 17

18 Caution concerning forward-looking statements Forward-Looking and Cautionary Statements This presentation contains forward-looking statements about our industry, business, plans and objectives, financial conditions and results of operations based on current expectations, assumptions, estimates and projections. These statements reflect future expectations, identify strategies, discuss market trends, contain projections of operational results and financial conditions, and state other forward-looking information. These forward-looking statements are subject to various known and unknown risks, s, uncertainties and other factors that could cause our actual results to differ from those suggested by any forward-looking statement. We assume no duty or obligation to update any forward-looking statement or to advise of any change in the assumptions and factors on which they are based. Risks, uncertainties or other factors that could cause actual results to differ materially from m those expressed in any forward-looking statement include, without limitation: (1) health concerns related to the use of tobacco products; (2) legal or regulatory developments and changes; including, without t limitation, tax increases and restrictions on sales, marketing and use of tobacco products, governmental investigations and privately imposed smoking restrictions; (3) litigation in Japan and elsewhere; (4) our ability to further diversify our business beyond the tobacco o industry; (5) our ability to successfully expand internationally and make investments outside Japan; (6) competition and changing consumer preferences; (7) the impact of any acquisitions or similar transactions; (8) local and global economic conditions; and (9) fluctuations in foreign exchange rates and the costs of raw materials. 35 <Back Up Data No1> International Tobacco Business Results for 1H FY 3/2010 (JPY basis) <JPY basis / Disclosure basis> ( JPY Bn) 1H FY 3/2009 1H FY 3/2010 Change Net Sales including tax (-20.4%) Net Sales excluding tax* (-18.6%) EBITDA** (-29.6%) Operating Income (-40.2%) JPY/USD (+9.7%) *Net sales excluding tax does not account for revenue from the imported tobacco, domestic duty free, the China Division and other miscellaneous in the domestic tobacco business, in addition to the distribution, private label, 36 contract manufacturing and other peripheral businesses in the international tobacco business **After royalty payment to JT 18

19 <Back up data No2 > GFB Volume <Jan-Sep (preliminary)> ( BNU ) 2008 Jan-Sep GFB volume Jan-Sep Change -1.7% Winston % Camel % Mild Seven % B&H % Silk Cut % LD % Sobranie % Glamour % 37 <Back up data No3 > Jan-Sep FY 3/2010 Composition Ratio by Region <Jan-Sep (preliminary)> Volume* Net Sales excluding tax** Rest of the World, 25% North & Central Europe, 11% Rest of the World, 26% North & Central Europe, 27% South & West Europe, 15% CIS+, 49% South & West Europe, 20% CIS+, 26% *Total volume includes cigars, pipe tobacco and snus, but does not include private label and contract manufactured products **Net sales excluding tax does not account for revenue from the distribution, 38 private label, contract manufacturing and other peripheral businesses 19

20 [Reference Material] Analysis of Consolidated Financial Results for 1H FY 3/2010 and Full-term Forecast for FY 3/2010 Caution concerning forward-looking statements Forward-Looking and Cautionary Statements This presentation contains forward-looking statements about our industry, business, plans and objectives, financial conditions and results of operations based on current expectations, assumptions, estimates and projections. These statements discuss future expectations, identify strategies, discuss market trends, contain projections of operational results and financial condition and state other forward-looking information. These forward-looking statements are subject to various known and unknown risks, s, uncertainties and other factors that could cause our actual results to differ from those suggested by any forward-looking statement. We assume no duty or obligation to update any forward-looking statement or to advise of any change in the assumptions and factors on which they are based. Risks, uncertainties or other factors that could cause actual results to differ materially from m those expressed in any forward-looking statement include, without limitation: (1) health concerns relating to the use of tobacco products; (2) legal or regulatory developments and changes; including, without t limitation, tax increases and restrictions on the sale, marketing and usage of tobacco products, governmental investigations and privately imposed smoking restrictions; (3) litigation in Japan and elsewhere; (4) our ability to further diversify our business beyond the tobacco o industry; (5) our ability to successfully expand internationally and make investments outside of Japan; (6) competition and changing consumer preferences; (7) the impact of any acquisitions or similar transactions; (8) local and global economic conditions; and (9) fluctuations in foreign exchange rates and the costs of raw materials

21 1H Results for FY 3/2010 Domestic Tobacco Business - Net sales excluding tax* -38 1H FY3/ Volume effect Unit price effect -0 1H FY3/ * Net sales excluding tax does not account for revenue from the imported tobacco, domestic duty free, the China Division, and other miscellaneous (JPY Bn) 1H Results for FY 3/2010 Domestic Tobacco Business - EBITDA 1H FY 3/ Volume effect Unit price effect -0 Cost increase -5.0 Leaf tobacco reappraisal gain/loss 0 Sales promotion and others H FY 3/ (JPY Bn) 21

22 1H Results for FY 3/2010 International Tobacco Business - Net sales excluding tax* 1H FY3/2009 5,096 Volume effect +46 Price and product mix effect +419 Forex impact** -1,009 1H FY3/2010 4,552 4,300 4,500 4,700 4,900 5,100 5,300 5,500 5,700 (USD million) * Net sales excluding tax does not account for revenue from the distribution, private label, contract manufacturing and other peripheral businesses ** Forex impact is the fluctuation between USD and other currencies 1H Results for FY 3/2010 International Tobacco Business - EBITDA before royalty payment to JT 1H FY 3/2009 1,860 Volume effect +28 Price and product mix effect +461 Others -271 Forex impact* H FY 3/2010 1,505 1,300 1,400 1,500 1,600 1,700 1,800 1,900 2,000 2,100 2,200 2,300 2,400 2,500 (USD million) * Forex impact is the fluctuation between USD and other currencies 22

23 1H Results for FY 3/2010 Pharmaceutical Business - Net sales 1H FY3/ Torii Pharmaceutical Co.Ltd. (non-consolidated) +2.7 Royalty income, etc H FY 3/ (JPY Bn) 1H Results for FY 3/2010 Pharmaceutical Business - EBITDA 1H FY 3/ R&D expenses (non-conslidated) +0.9 Operating income of Torii Pharmaceutical Co.Ltd. (non-conslidated) +0.9 Royalty income, etc H FY 3/ (JPY Bn) 23

24 1H Results for FY 3/2010 Foods Business - Net sales 1H FY 3/ Beverages -1.8 Processed foods etc Chilled foods (Withdrawal in Nov, 2008) H FY 3/ (JPY Bn) 1H Results for FY 3/2010 Foods Business - EBITDA 1H FY 3/ Beverages +5.2 Processed foods etc. Overhead costs H FY 3/ (JPY Bn) 24

25 1H Results for FY 3/2010 Recurring profit Net income 1H FY 3/ H FY 3/ Operating income Recurring profit Non-operating income/loss Extraordinary profit/loss, income tax, etc H FY 3/ H FY 3/ (JPY Bn) Positive factors: -Decrease in loss on foreign exchange (19.4Bn) -Decrease in interest payment (9.8Bn) Negative factors: -Decrease in interest income(1.8bn) -Decrease in dividend income(0.2bn) etc (JPY Bn) Positive factors: -Decrease in impairment loss(10.1bn) -Decrease in introduction costs for vending machines with adult identification functions (11.0Bn) -Decrease in loss on disposition of property, plant and equipment (4.5Bn) Negative factors: -Decrease in profit on sale of property, plant and equipment (10.8Bn) etc. [This slide intentionally left blank] 25

26 Summary of Consolidated B/S as of Sep. 30, 2009 Assets (JPY Bn) 4, , , , , , , , ,224.7 Compared to B/S as of Mar. 31, 2009 Current Assets : up JPY Bn Increase in Inventories : up JPY 65.1 Bn Increase in Trade notes and Accounts receivable : up JPY 40.9 Bn 2, , , , ,823.9 as of Mar. 31, 2009 as of Sep. 30, 2009 Current Assets Fixed Assets Fixed Assets : up JPY 39.7 Bn Increase in Goodwill : up JPY 26.3 Bn Increase in Trademarks : up JPY 36.3 Bn Summary of Consolidated B/S as of Sep. 30, 2009 Liabilities & Net Assets (JPY Bn) 4, , , , , , , , , , , , ,744.6 as of Mar. 31, 2009 as of Sep. 30, 2009 Total Liabilities Total Net Assets Compared to B/S as of Mar. 31, 2009 Total Liabilities : up JPY 48.4 Bn Tobacco excise taxes payable : up JPY 42.3 Bn Total Net Assets : up JPY Bn Foreign Currency Translation Adjustments: up JPY 78.4 Bn Ratio of Equity Capital: From 40.0% to 41.3% 26

27 Forecast for FY 3/2010 compared to results of the previous fiscal year Domestic Tobacco Business Net Sales excluding tax * (JPY Bn) [Negative factors] -Decrease in JT sales volume bn units bn units (down 7.4 bn units) FY 3/2009 FY 3/2010 Forecast * Net sales excluding tax does not account for imported tobacco, domestic duty-free, the China division and others. Forecast for FY 3/2010 compared to results of the previous fiscal year Domestic Tobacco Business - EBITDA (JPY Bn) [Negative factors] -Decrease in JT sales volume (down 7.4 bn cigarettes, approx. JPY 23.0 bn) -Increase in costs and others (approx. JPY 3.0bn) FY 3/2009 FY 3/2010 Forecast 27

28 Forecast for FY 3/2010 compared to results of the previous fiscal year International Tobacco Business Net Sales excluding tax * (USD million) 12,000 11,000 10,445 [Negative factors] -Decrease in adverse currency fluctuation, but partially offset by the continuing top-line growth driven by pricing 10,000 9,480 9,000 8,000 JPY/US$ foreign exchange rate: From US$1=JPY to US$1=JPY (up JPY 10.48) 7,000 6,000 5,000 FY 3/2009 FY 3/2010 Forecast * Net sales excluding tax do not account for revenue from the distribution, private label, contract manufacturing and other peripheral businesses. Forecast for FY 3/2010 compared to results of the previous fiscal year International Tobacco Business - EBITDA before royalty payment to JT (USD million) 4,000 3,500 3,452 [Negative factors] 3,000 2,500 2,880 -Decrease in adverse currency fluctuation, but partially offset by the continuing top-line growth driven by pricing 2,000 1,500 1, (Reference) Industry segment information basis EBITDA after royalty payment to JT: From JPY bn to JPY bn (down JPY 97.9 bn) JPY/US$ foreign exchange rate: From US$1=JPY to US$1=JPY (up JPY 10.48) 0 FY 3/2009 FY 3/2010 Forecast 28

29 Forecast for FY 3/2010 compared to results of the previous fiscal year Pharmaceutical Business Net Sales (JPY Bn) 56.7 [Positive factors] -Increase in sales of Torii Pharmaceutical Co. Ltd.: [JPY 37.3b to JPY 42.9bn (up JPY 5.6bn)] [Negative factors] -Mainly to the absence of the one time milestone revenue which we received in FY3/ FY 3/2009 FY 3/2010 Forecast Forecast for FY 3/2010 compared to results of the previous fiscal year Pharmaceutical Business - EBITDA (JPY Bn) [Positive factors] -Increase in operating income of Torii Pharmaceutical Co. Ltd [Negative factors] -Mainly to the absence of the one time milestone revenue which we received in FY3/ FY 3/2009 FY 3/2010 Forecast 29

30 Forecast for FY 3/2010 compared to results of the previous fiscal year Foods Business Net Sales (JPY Bn) [Positive factors] -Strengthening of the Roots flagship coffee brand [Negative factors] 200 -Withdraw from the chilled processed foods business -Exclusion of some subsidiaries from consolidated accounts FY 3/2009 FY 3/2010 Forecast Forecast for FY 3/2010 compared to results of the previous fiscal year Foods Business - EBITDA (JPY Bn) [Negative factors] -Taking into account a sharp decline in the market prices of some products An increase in allowance for doubtful accounts due to delays in the collection of some debts Excluding these factors, EBITDA is slightly increasing FY 3/2009 FY 3/2010 Forecast 30

31 Forecast for FY 3/2010 compared to results of the previous fiscal year Recurring Profit Net Income FY 3/ FY 3/ Operating income Recurring profit Non-operating income Extraordinary profit/loss, income tax, etc FY 3/2010 Forecast FY 3/2010 Forecast (JPY Bn) Positive factors: -Decrease in interest payment accompanied by the repayment of Interest bearing debt etc (JPY Bn) Positive factors: -Decrease in introduction costs for vending machines with adult identification functions etc. Negative factors: -Decrease in profit on sale of property, plant and equipment etc. 31

32 Data sheets for 6 months ended Sep Summary of Business Performance (unit: JPY billion) 6. Amortization relating to major acquisitions (unit: JPY billion) JT Operationg Income Trademark rights * mainly 20 Recurring Profit Goodwill Net Income * Termination of trademark rights amortization: Former RJRI Apr-19, Former Gallaher Mar-27 7.Capital expenditure (unit: JPY billion) 6 months 6 months ended ended Change Sep Sep Capital expenditures Net sales including excise tax *1 3, , Domestic tobacco Domestic tobacco 1, , International tobacco * International tobacco *1 1, , Pharmaceutical Net sales excluding excise tax *1 *2 *3 1, Foods Domestic tobacco * Others International tobacco *1 * * International tobacco business: 6 months ended June,2009 Pharmaceutical Cash and cash equivalents * (unit: JPY billion) Foods Beverages Processed foods Cash and cash equivalents Others * *1 International tobacco business: 6 months ended June, months ended Sep months ended Sep Change *3 Excluding revenue from the distribution, private label, contract manufacturing and other peripheral businesses. Others * Personnel expense is the sum of compensation, salaries, allowances, provision for retirement benefit, legal welfare, employee bonuses and accrual of employee bonuses. Interest-bearing debt , <International tobacco business> Total sales volume* (billion cigarettes) <Foods business - Beverage business> Number of beverage vending machines * 254, ,000 1, EBITDA by business segment *1 (unit: JPY billion) JT-owned 32,000 32, months 6 months Combined 76,500 81,000 4,500 ended ended Change Beverage vending machines include vending machines for cans and packs, etc. and for cups owned by other Sep Sep * companies and operated by our subsidiary. "JT-owned" vending machines are owned by JT. "Combined" Consolidated EBITDA vending machines are owned by our subsidiaries or affiliates,and focus on selling JT brand beverages but also sell non-jt brand beverages. Operating income Depreciation and amortization * Domestic tobacco EBITDA Operating income Depreciation and amortization * International tobacco EBITDA * Operating income Depreciation and amortization * Pharmaceutical EBITDA Operating income Depreciation and amortization * Foods EBITDA Operating income Depreciation and amortization * Others EBITDA Operating income Depreciation and amortization * (Reference) (unit: USD million) International tobacco EBITDA 1,860 1, (Before royalty payment) *1 EBITDA=operating income + depreciation and amortization *2 *2 Depreciation and amortization = depreciation of tangible fixed assets + amortization of intangible fixed assets + amortization of long-term prepaid expenses + amortization of goodwill 6 months ended Sep Cash and cash equivalents = cash and deposits + marketable securities + securities purchased under repurchase agreements As of end of Mar As of end of Sep (Reference) (unit: USD million) * Interest-bearing debt = short-term bank loans +commercial paper+ bonds + long-term borrowings+ lease obligation International tobacco 10. Business data 6 months 6 months 5,096 4, ended ended Change Net sales excluding tax *1 3 <Domestic tobacco business> Sep Sep JT sales volume* (billion cigarettes) Leaf tobacco reappraisal profit / loss * (unit: JPY billion) Total demand (billion cigarettes) months 6 months ended ended Change JT market share 64.9% 65.0% 0.1%pt Sep Sep JT net sales before tax per 1,000 cigarettes (JPY) 12,696 12,691-5 Leaf tobacco reappraisal profit / loss JT net sales after tax per 1,000 cigarettes (JPY) 4,055 4,055 0 * Profit when denoted negative * Sales volume of domestic duty-free and China division is excluded, which was 1.9 billion for FY ended Sep and 1.8billion for FY ended Sep. 2009, respectively. Year ended Jun As of end of Mar months ended Sep Sales including excise tax 3, , Former RJRI Sales excluding excise tax * 1, Trademark rights Apr-09 EBITDA Katokichi Operating Income Goodwill Dec-12 Recurring Profit * Katokichi Goodwill amortization in FY2009 includes one-time goodwill amortization of Katokichi's subsidiary Net Income (unit: USD million) * Excluding revenue from imported tobacco, domestic duty free, the China Division and other JT International Year Year Years to miscellaneous in the domestic tobacco business, the distribution, private label, contract ended ended manufacturing and other peripheral businesses in the international tobacco business amortize Jun Jun (Reference:Figures for major profit items before goodwill amortization) Former RJRI and Gallaher 2. Breakdown of net sales (unit: JPY billion) 6 months 6 months ended ended Change Sep Sep As of end of Mar As of end of Sep Year ended Jun As of end of Sep Years to amortize *2 Excluding revenue from the imported tobacco, domestic duty free, the China Division, and other 9. Interest-bearing debt * (unit: JPY billion) miscellaneous. 4. Breakdown of SG&A expenses (unit: JPY billion) 6 months 6 months ended ended Change Sep Sep SG&A GFB sales volume (billion cigarettes) Personnel * JPY/USD rate for consolidation (JPY) Advertising and general publicity * Including cigars, pipe tobacco and snus, excluding private label and contract manufacturing products Sales promotion months 6 months ended ended Change R&D <Pharmaceutical business> Sep Sep Depreciation and amortization R&D expenses (parent company) (JPY billion) Change Change Change Change Termination *3 International tobacco business: 6 months ended June,

33 Data sheets for 6 months ended Sep Consolidated financial outlook for fiscal year ending March 31, 2010 compared 2. Consolidated financial outlook for fiscal year ending March 31, 2010 compared to the forecast as of April 2009 to the results of previous fiscal year (JPY billion) (JPY billion) Previous forecast Revised forecast Change FY 03/2009 Revised forecast Change Net sales including excise tax 6, , Net sales including excise tax 6, , EBITDA EBITDA Operating income Operating income Recurring profit Recurring profit Net income Net income Return on equity 6.2% 6.8% 0.6%pt Return on equity 6.8% 6.8% 0.0%pt Free cash flow* Free cash flow* (Reference: Net income before goodwill amortization) (Reference: Net income before goodwill amortization) Net income Net income (JPY billion) (JPY billion) Previous forecast Revised forecast Change FY 03/2009 Revised forecast Change Capital expenditures Capital expenditures Domestic tobacco Domestic tobacco International tobacco International tobacco Pharmaceutical Pharmaceutical Foods Foods Other businesses Other businesses Consolidated financial outlook by business segment (JPY billion) Consolidated financial outlook by business segment (JPY billion) Previous forecast Revised forecast Change FY 03/2009 Revised forecast Change Net sales including excise tax *1 6, , Net sales including excise tax *1 6, , Domestic tobacco 3, , Domestic tobacco 3, , International tobacco *1 2, , International tobacco *1 3, , Net sales excluding excise tax *1*2*3 1, , Net sales excluding excise tax *1*2*3 2, , Domestic tobacco * Domestic tobacco * International tobacco *1* International tobacco *1*3 1, Pharmaceutical Pharmaceutical Foods Foods EBITDA EBITDA Domestic tobacco Domestic tobacco International tobacco International tobacco Pharmaceutical Pharmaceutical Foods Foods Operating income Operating income Domestic tobacco Domestic tobacco International tobacco International tobacco Pharmaceutical Pharmaceutical Foods Foods Depreciation and amortization Depreciation and amortization Domestic tobacco Domestic tobacco International tobacco International tobacco Pharmaceutical Pharmaceutical Foods Foods (Reference) (unit: USD million) (Reference) (unit: USD million) International tobacco 9,370 9, International tobacco 10,445 9, Net sales excluding tax *1 3 Net sales excluding tax *1 3 International tobacco EBITDA *1 International tobacco EBITDA 2,500 2, *1 (Before royalty payment) (Before royalty payment) 3,452 2, *1 International tobacco business: Year ended Dec.2009 *1 International tobacco business: Year ended Dec.2009 *2 Excluding revenue from the imported tobacco, domestic duty free, the China Division, and other *2 Excluding revenue from the imported tobacco, domestic duty free, the China Division, and other miscellaneous. miscellaneous. *3 Excluding revenue from the distribution, private label, contract manufacturing and other peripheral *3 Excluding revenue from the distribution, private label, contract manufacturing and other peripheral businesses businesses Major assumptions Major assumptions (1)Domestic tobacco business (billions of cigarettes) (1)Domestic tobacco business (billions of cigarettes) Previous forecast Revised forecast Change FY 03/2009 Revised forecast Change Sales volume Sales volume Excluding sales of domestic duty-free and China division Excluding sales of domestic duty-free and China division (2) International tobacco business (billions of cigarettes, JPY) (2) International tobacco business (billions of cigarettes, JPY) Previous forecast Revised forecast Change FY 03/2008 Revised forecast Change Total sales volume Total sales volume GFB sales volume* GFB sales volume* JPY/USD rate JPY/USD rate Goodwill amortization relating to major acquisitions Trademark rights amortization relating to major acquisitions International tobacco business (unit: USD million) JT (unit: JPY billion) Year ended Dec.2008 Year ending Dec.2009 Years to amortize Former RJRI and Gallaher Former RJRI * Termination of goodwill amortization: Former RJRI Apr-19, Former Gallaher Mar-27 * Termination of trademark rights amortization: Former RJRI Apr-09 Foods Business (unit: JPY billion) JT International (unit: USD million) FY ended Mar FY ending Mar. 2010** Years to amortize FY ended Mar Year ended FY ending Mar Year ending Years to amortize Years to amortize Dec.2008 Dec.2009 Katokichi Former RJRI and Gallaher mainly 20 * Termination of goodwill amortization: Dec-12 * Termination of trademark rights amortization: Former RJRI Apr-19, Former ** Including one-time goodwill amortization of Katokichi's subsidiary (1billion yen) Gallaher Mar-27 33

34 Data of JT products in Japanese market * Excludes sales from the China, Hong Kong, and Macau markets and domestic duty-free sales. Domestic Tobacco Business Results Market Share in Growing Segments 1. Quarterly Sales Volume (billions of cigarettes) 1. 1mg Tar Apr-Jun Jul-Sep Oct-Dec Jan-Mar Total (1) JT 1mg Tar Product Share (%) FY 03/ Apr-Jun Jul-Sep Oct-Dec Jan-Mar Total FY 03/ FY 03/ FY 03/ FY 03/ FY 03/ (2) 1mg Market Share (%) Apr-Jun Jul-Sep Oct-Dec Jan-Mar Total FY 03/ Quarterly Retail Price Sales (billions of JPY) FY 03/ Apr-Jun Jul-Sep Oct-Dec Jan-Mar Total FY 03/ FY 03/ ,499.8 (3) JT Share in 1mg Tar Segment (%) FY 03/ ,382.8 Apr-Jun Jul-Sep Oct-Dec Jan-Mar Total FY 03/ FY 03/ * Retail price sales = sales volume * fixed retail price. FY 03/ FY 03/ Menthol (1) JT Menthol Product Share (%) 3. Quarterly Net Sales Per Thousand Cigarettes (JPY) Apr-Jun Jul-Sep Oct-Dec Jan-Mar Total Apr-Jun Jul-Sep Oct-Dec Jan-Mar Total FY 03/ FY 03/ ,698 12,694 12,704 12,702 12,699 FY 03/ FY 03/ ,699 12,693 12,699 12,699 12,698 FY 03/ FY 03/ ,693 12,689 (2) Menthol Market Share (%) * Net sales per thousand cigarettes Apr-Jun Jul-Sep Oct-Dec Jan-Mar Total = (retail price sales - retailer margins - consumption tax) / sales volume * 1,000 FY 03/ FY 03/ FY 03/ (3) JT Share in Menthol Segment (%) Apr-Jun Jul-Sep Oct-Dec Jan-Mar Total 4. Quarterly Net Sales Excluding Excise Tax FY 03/ Per Thousand Cigarettes (JPY) FY 03/ Apr-Jun Jul-Sep Oct-Dec Jan-Mar Total FY 03/ FY 03/2008 4,056 4,053 4,063 4,057 4,057 FY 03/2009 4,056 4,054 4,060 4,058 4, JPY 320 or above* FY 03/2010 4,056 4,055 (1) JT JPY 320 or above Product Share (%) * Net sales excluding excise tax per thousand cigarettes Apr-Jun Jul-Sep Oct-Dec Jan-Mar Total = (retail price sales - retailer margins - consumption tax - excise taxes) / sales volume * 1,000 FY 03/ FY 03/ FY 03/ Quarterly JT Market Share (%) (2) JPY 320 or above Product Market Share320 (%) Apr-Jun Jul-Sep Oct-Dec Jan-Mar Total Apr-Jun Jul-Sep Oct-Dec Jan-Mar Total FY 03/ FY 03/ FY 03/ FY 03/ FY 03/ FY 03/ (3) JT Share in JPY 320 or above Segment (%) Apr-Jun Jul-Sep Oct-Dec Jan-Mar Total FY 03/ FY 03/ FY 03/ * JPY 300 or above until Apr-Jun Quarterly D-spec Product Share (%) Apr-Jun Jul-Sep Oct-Dec Jan-Mar Total FY 03/ FY 03/ FY 03/ * Pianissimo and Premier have been sold as D-spec products since March Bevel Flair have been sold as D-spec products since December