Overview of Consolidated Financial Results for Q3 FY 3/2011 and Full-term Forecasts for FY 3/2011

Transcription

1 Overview of Consolidated Financial Results for Q3 FY 3/2011 and Full-term s for FY 3/2011 *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. 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 op erations based on current expectations, assumptions, estimates and projections. These statements reflect future expectations, identify strategies, discuss ma rket trends, contain project ions of opera tional t results and financial conditions, and state other forward-looking information. These forward-looking statements are subject to various known and unknown risk s, uncertainties and other factors t hat could cause our actual results to differ from those suggested by any forwa rd-looking statement. We assume no duty or obligation to upd ate any forward-looking statement or to advise of any change in the assumptions and factors on which they are based. Risks, uncertaint ies or other factors that could cause actual results to di ffer materially from those expressed in any forward-looking statement include, without limitation: (1) health concerns related to the use of tobacco products; (2) legal or regulatory d evelopments and c hanges; including, without t limitation, tax increases and restrictions on sa les, marketing and use of tobacco o 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. 2 1

2 Financial Results for Q3 FY 3/2011 Consolidated Financial Results for Q3 FY 3/2011 : Executive Summary Adjusted net sales excluding tax and EBITDA remained basically flat. Operating income, recurring profit and net income increased. In the Japanese domestic tobacco business, net sales and profits decreased, as they were affected by volume declines caused by the tax hike. In the international tobacco business, US Dollar based corec net sales and EBITDA increased 8.0% and 12.4%, respectively. Pricing and favorable currency exchange movements more than offset the impact of the total shipment volume decline caused by industry contraction. Share in our key markets continued to grow. 4 2

3 Consolidated Financial Results : Q3 FY 3/ Apr-Dec Adjusted Net Sales excluding tax 1) 1, Apr-Dec 1,487.6 Change -0.6% EBITDA Operating Income % +4.8% < Reference : Before goodwill amortization > Operating Income 2) 2009 Apr-Dec Apr-Dec Change % Recurring Profit % Recurring Profit 2) % Net Income % Net Income 2) % Adjusted net sales excluding tax and EBITDA remained basically flat, as pricing and favorable currency exchange movements in the international tobacco business offset sales volume decline in the Japanese domestic tobacco business caused by market contraction following the tax hike. Operating income, recurring profit and net income increased. 1) Adjusted net sales excluding tax do not include revenue from the imported tobacco, domestic duty free, the China Division and other peripheral businesses in the Japanese domestic tobacco business, as well as distribution, leaf tobacco, 5 private label, contract manufacturing and other peripheral businesses in the international tobacco business. 2) Before good will amortization Japanese Domestic Tobacco Business : Q3 FY 3/2011 (BNU,JPY BN) 2009 Apr-Dec 2010 Apr-Dec Change Total Sales Volume Adjusted Net Sales excluding tax 1) % % EBITDA 2) % Operating Income % Due to a volume decline following the tax hike, total sales volume decreased 9.0%. Adjusted net sales excluding tax, EBITDA and operating income decreased, although volume decline impact was partially offset by pricing. 1) Adjusted net sales excluding tax do not include revenue from the imported tobacco, domestic duty free, the China Division, and other peripheral businesses. 2) Before royalty payments from JTI, a part of overhead cost allocation was canceled after accounting standard change. 6 3

4 Japanese Domestic Tobacco Business : Q3 FY 3/2011 Volume Roadmap:2009 Q3 to 2010 Q3 Q3 FY3/ BNU 1H Trend decline, Impact of excise-led price increase announcement and others 1H heightened demand ahead of the excise-led price increase Trade de-loading in Oct-Dec A volume drop due to the tax hike and a trend decline in Oct-Dec Q3 FY3/ BNU -5.5BNU +13.5BNU -10.8BNU -7.7BNU -9.0% year-on-year Despite sales volume increase due to the heightened demand ahead of the excise-led price increase in 1H, total sales volume declined following the tax hike in October from the impact of the price increase and trade de-loading. 7 Japanese Domestic Tobacco Business : Q3 FY 3/ JT Share % Total share of key brands 1) % FY % Apr-Jun 64.5% Jul-Sep 65.1% Apr-Sep YTD 64.9% Apr-Dec YTD 64.4% FY % Apr-Jun 45.1% Jul-Sep 46.1% Apr-Sep YTD 45.7% Apr-Dec YTD 44.9% 61.0 Oct-Dec 62.7% 42.0 Oct-Dec 41.9% FY06 FY07 FY08 FY09 FY10 Apr-Jun FY10 Jul-Aug FY10 Oct-Dec 38.0 FY06 FY07 FY08 FY09 FY10 Apr-Jun FY10 Jul-Aug FY10 Oct-Dec Market share of JT brands and the key brands declined slightly in Apr-Dec. Market share decline in Oct-Dec was mainly caused by trade de-loading and does not reflect the actual situation. Striving to stay competitive by strengthening brand equity through various measures while continuing to monitor market trends. 1) Mild Seven, Seven Stars, Pianissimo (The market share figure for key brands is inclusive and retrospective of market share figures for icene and Lucia, which were integrated into Pianissimo family on January 2010). 8 4

5 Japanese Domestic Tobacco Business : Q3 FY 3/2011 5,500 Increases in the unit price, changes in the ratio by price segment Net sales excl. taxes per 1,000 cigarettes of JT products 1) (JPY) 5, % 90% 80% 70% Component ratio of price segment in JT sales volume 8% 7% 28% Previous tax hike Recent tax hike 60% 50% 79% 80% 4,500 3,500 4,050 3,852 Q1 Q2 Q3 4,052 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 FY2006 FY2007 FY2008 FY2009 FY2010 1)Sales excl.taxes per 1,000 cigarettes of JT products= (retail price sales-retailer marginsconsumption tax-excise taxes)/sales volume 1, % 30% 20% 10% 0% 13% 13% 65% 8% 4-6/ / /2010 JPY 440 or above (JPY320 or above until Sep. 2010) JPY 410 (JPY 300 until Sep. 2010) JPY 400 or below (JPY 290 or below until Sep. 2010) Net sales excluding tax per thousand cigarettes increased as planned, due to the price increase. As products in the premium segment increased, product mix improved significantly. Japanese Domestic Tobacco Business : Q3 FY 3/2011 Adjusted Net Sales excluding tax 1) EBITDA 2) 2) Q3 FY3/2010 1H Trend decline, Impact of excise-led price increase announcement and others 1H heightened demand ahead of the excise-led price increase Total volume effect JPY BN Q3 FY3/2010 1H Trend decline, Impact of excise-led price increase announcement and others 1H heightened demand ahead of the excise-led price increase Total volume effect JPY BN Trade de-loading in Oct-Dec A volume drop due to the tax hike and a trend decline in Oct-Dec Trade de-loading in Oct-Dec A volume drop due to the tax hike and a trend decline in Oct-Dec Price and product mix effect Price and product mix effect Leaf tobacco reappraisal gain/loss +3.1 Others +0.7 Cost increase/ Sales promotion and others -8.4 Q3 FY3/ % year-on-year Q3 FY3/ % year-on-year JPY BN Net sales and profits declined as pricing effect could not offset the volume decline following the tax increase. JPY BN 1) Adjusted net sales excluding tax do not include revenue from the imported tobacco, domestic duty free, the China Division, and other peripheral businesses. 2) Before royalty payments from JTI, a part of overhead cost allocation was canceled after accounting standard change. 10 5

6 International Tobacco Business : Q3 FY 3/2011 (BNU,MM$) Total Shipment Volume 1) GFB Shipment Volume Core Net Sales excl. tax 2) Core Net Sales excl. tax per thousand 3) (US$) EBITDA 4) EBITDA 4) 2009 Jan-Sep 2010 Jan-Sep Change % % 7,028 7, % % 2,354 2, % % at constant rates of exchange Core Net Sales excl. tax 2) Core Net Sales excl. tax per thousand 3) (US$) EBITDA 4) 7,028 7, % % 2,354 2, % Core net sales and EBITDA increased as pricing and favorable currency exchange movements more than offset the impact of the total shipment volume decline caused by industry contraction. Core net sales excluding tax and EBITDA grew 8.0% and 12.4%, respectively. At constant rates of exchange, core net sales excluding tax and EBITDA grew 5.6% and 7.8%, respectively. Yen based EBITDA grew 5.9% despite the impact of a strong Yen. 1) Total shipment volume (which was previously designated sales volume ) includes cigars, pipe tobacco and snus, but does not include private label and contract manufacturing. 2) Core net sales excluding tax do not include revenue from distribution, leaf tobacco, private label, contract manufacturing and other peripheral businesses. 11 3) Core net sales per thousand cigarettes are the quotient of core net sales excluding tax as defined in footnote 2, and total shipment volume as defined in footnote 1, less joint venture volumes. 4) Before royalty payments to JT Pharmaceutical Business : Q3 FY 3/2011 Clinical development (as of Feb 7, 2011) Code Key Indication Stage JTT-705(oral) Dyslipidemia Phase 2 (Japan) 2009 Apr-Dec 2010 Apr-Dec Change JTT-130(oral) JTK-303(oral) Dyslipidemia HIV infection Phase 2 (Japan) Phase 2 (Overseas) Phase 1 (Japan) Net Sales JTT-302(oral) JTT-305(oral) Dyslipidemia Osteoporosis Phase 2 (Overseas) Phase 2 (Japan) EBITDA JTS-653(oral) Pain Overactive bladder Phase 2 (Japan) Operating Income JTK-656(oral) JTT-751(oral) HIV infection Hyperphosphate mia Phase 1 (Overseas) Phase 2 (Japan) JTK-853(oral) Hepatitis C Phase 1 (Overseas) JTT-851(oral) Type 2 diabetes mellitus Phase 1 (Japan) Net sales grew due to the strong performance of Torii Pharmaceutical and from milestone revenue of out-licensed compounds. EBITDA remained basically flat due to, cost increase among others. 12 6

7 Food Business : Q3 FY 3/ Apr-Dec 2010 Apr-Dec Change Net Sales Beverages Processed foods EBITDA Operating Income Net sales for the beverage business grew due to the summer heat waves and steady sales growth of the Roots brand. Net sales for the food business declined due to the closure of rice wholesale business, exclusion of some subsidiaries from the consolidated results as well as a decline in sales of products to restaurants. Profits increased as good results from the beverage business more than offset the decrease in sales of the food business caused by decline in sales of products to restaurants. 13 Full-Term s for FY 3/2011 7

8 s: : Executive Summary The forecasts for consolidated net sales and profits were both revised upward. The forecasts for net sales and EBITDA for the Japanese domestic tobacco business were revised upward as a result of the upward revision of the total sales volume forecast. US Dollar based EBITDA for the international tobacco business was 10.6% growth, or 7.7% at constant rates of exchange. 15 s for FY 3/2011 Actual a Previous b FY 3/2011 Revised c Difference from Previous (c-b) Change from (c-a)/a Adjusted Net Sales excl. tax1) 1, , , % EBITDA % Operating Income % Recurring Profit % Net Income % ROE(%) ppt -0.5ppt FCF % < Reference: Before goodwill amortization > Net Income2) % EPS(yen)2) 24, , , % Dividend per share(yen) 5,800 5,600 5, % Payout Ratio(%)2) 23.6% 26.2% 23.6% -2.6%ppt - The forecasts for adjusted net sales excluding tax and EBITDA were revised upward. The forecasts for the Japanese domestic tobacco business were revised upward as a result of the upward revision of the total sales volume forecast. EBITDA for the international tobacco business was revised upward. 1) Adjusted net sales excluding tax do not include revenue from the imported tobacco, domestic duty free, the China Division and other peripheral businesses in the Japanese domestic tobacco business, as well as distribution, leaf tobacco, private label, contract manufacturing and other peripheral businesses in the international tobacco business. 2) Before good will amortization 16 8

9 Japanese Domestic Tobacco Business: s for FY 3/2011 (BNU,JPY BN) Actual a Previous b FY 3/2011 Revised c Difference from Previous (c-b) Change from (c-a)/a Total Sales Volume % Adjusted Net Sales excl. tax1) % EBITDA 2) % Operating Income % The volume forecast was revised upward by 8 billion cigarettes, after reviewing the impact of demand decline following the tax hike and trade de-loading. Net sales and EBITDA forecasts were revised upward as a result of the revision of the volume forecast. 1)Adjusted net sales excluding tax do not include revenue from the imported tobacco, domestic duty free, the China Division, and other peripheral businesses. 2)Before royalty payments from JTI, a part of overhead cost allocation was canceled after accounting standard change 17 Japanese Domestic Tobacco Business: s for FY 3/2011 Revised volume forecast for FY 3/2011 Revised volume forecast for 2H FY 3/ Change due to revision of the price elasticity 2 Price elasticity: revised down from 0.7 to 0.5 Previous In excess of -25% 2H FY3/ around -20% Change due to revision of the estimated drop caused by trade de-loading Some consumers who reduced or quit smoking are assumed to have stocked up on cigarettes ahead of the tax hike. Estimated decline is due to trade deloading: Revised down from 13.5 bn to 11.5 bn cigarettes 3Revised up by 8 bn. cigarettes Impact of trade de-loading in Oct- Dec Impact of volume drop due to the tax hike and trend decline in Oct-Dec Impact of trade de-loading in Jan- Mar Impact of volume drop due to the tax hike and trend decline in Jan-Mar Impact of trade de-loading: bn. cigarettes Price elasticity at approx. 0.5: Around -20%, bn. cigarettes Revised (BNU) 2H FY3/ (BNU) Regarding the demand decline caused by the tax hike, the assumed price elasticity was revised to approx. 0.5 from 0.7: upward revision of approximately 6 billion cigarettes. 2 The impact of trade de-loading was revised to a volume decline of 11.5 billion cigarettes from a decline of 13.5 billion cigarettes: upward revision of approximately 2 billion cigarettes. 3In light of the above revisions, the volume forecast was revised upward by 8 billion cigarettes. Monitoring of sales trends will continue on the assumption that trade de-loading effect has not ended in Q

10 Japanese Domestic Tobacco Business: s for FY 3/2011 EBITDA forecast Previous Revised FY3/ FY3/ Volume effect Volume effect Price and product mix effect Price and product mix effect Leaf tobacco reappraisal gain/loss -4.1 Leaf tobacco reappraisal gain/loss -4.1 Cost increase/sales promotion and others FY3/2011 Previous forecast Revised up by 26 BN JPY Cost increase/sales promotion and others FY3/2011 Revised forecast Volume effect as well as price and product mix effect were both revised, FY following 3/2006 the upward revision FY 3/2007 of the sales volume of 8 billion cigarettes. Cost increase, sales promotion and others is forecasted to increase by JPY 9 billion. The EBITDA forecast was revised upward by JPY 26 billion. 19 Japanese Domestic Tobacco Business: s for FY 3/2011 Seven Stars Renewal (Product improvement) Mild Seven New package with round corners (Product improvement) Mild Seven Shop (Enhancement of promotional activities at sales outlets) Pianissimo Super Slims Menthol One: Launched in November 2010 (Product innovation/brand extension) Mild Seven D-Spec One 100 s Box: Launched in January 2011 Blue Windy Lounge (Smoking Place) Strengthening and enhancing product innovation (R&D), brand extension and product improvement for packaging and design. Strengthening point of sale at retail outlets for easier view and purchase. Securing smoking places for smokers while giving consideration to non-smokers. Facility investment to provide products that meet the diversifying needs of our customers. THIS SLIDE HAS BEEN DEVELOPED TO EXPLAIN JT s PERFORMANCE TO OUR INVESTORS. THIS SLIDE IS NOT INTENDED TO PROMOTE THE PURCHASE OF OUR PRODUCTS OR TO INDUCE SMOKING

11 International Tobacco Business: Results for FY 3/2011 (BNU, JPY BN) Actual a Previous b FY 3/2011 Actual c Difference from Previous (c-b) Change from (c-a)/a Total Shipment Volume 1) % GFB Shipment Volume % Core Net Sales excl. tax 2) % EBITDA 3) % (BNU, MM$) Core Net Sales excl. tax 2) 9,682 10,240 10, % Core Net Sales excl. tax 2) at constant rates of exchange 9,682 10,110 10, % EBITDA 3) 2,965 3,260 3, % EBITDA 3) at constant rates of exchange 2,965 3,150 3, % US Dollar based core net sales excluding tax and EBITDA were 5.6% growth and 10.6% growth, respectively. US Dollar EBITDA was 7.7% growth at constant rates of exchange. 1) Total shipment volume (which was previously designated sales volume ) includes cigars, pipe tobacco and snus, but does not include private label and contract manufacturing. 2) Core net sales excluding tax do not include revenue from distribution, leaf tobacco, private label, contract manufacturing and other peripheral businesses. 21 3)Before royalty payments to JT Pharmaceutical Business: s for FY 3/2011 (BNU,JPY BN) Actual a Previous b FY 3/2011 Revised c Difference from Previous (c-b) Change from (c-a)/a Net Sales EBITDA Operating Income Net sales forecast was revised upward to reflect increase in milestone revenue from outlicensed compounds. EBTIDA was revised down due to an upfront payment by Torii Pharmaceutical in respect of a license agreement to develop and commercialize allergy immunotherapy products

12 Food Business: s for FY 3/2011 (BNU,JPY BN) Actual a Previous b FY 3/2011 Revised c Difference from Previous (c-b) Change from (c-a)/a Net Sales EBITDA Operating Income Uonuma Mizunosato factory of TableMark Co., Ltd. Net sales and EBITDA were revised upwards due to the favorable results of the beverage business in Q3. 23 s for FY 3/2011 EBITDA Roadmap:FY3/2010 to FY3/2011 FY3/ JPY BN Japanese Domestic Tobacco -6.2 JPY BN International tobacco at constant rate of exchange International tobacco Forex inpact at Local currency vs. USD International tobacco Forex inpact at JPY vs. USD Pharmaceutical +227MM$(19.9 JPY BN) +88MM$(7.7 JPY BN) JPY BN -5.3 JPY BN Food +1.5 JPY BN Other/ Elimination and Corporate -3.4 JPY BN FY3/ JPY BN (JPY JPY BN) In the Japanese domestic tobacco business, EBITDA is forecast to decline due to the impact of excise-led price increase. EBITDA for the international tobacco business is forecast to increase at constant rates of exchange, although this is partially offset by strong yen. Consolidated EBITDA is forecast to decline due to a strong yen. Excluding this impact, it is forecast to increase

13 Closing Remarks Share Buyback JT decided to start repurchasing its own shares up to 65,000 shares, or up to JPY 20 billion, as a means of return to shareholders, from February 9, 2011 to March 23, [This slide intentionally left blank] 26 13

14 <Back up data> All the Detailed figures comes to <Back up data> 27 Japanese Domestic Tobacco Business: s for FY 3/2011 of sales volume Heightened demand ahead of the excise-led price increase 1H volume decrease by trend decline and others: Around -7% Previous H FY3/2009 Volume: 73.2BN -25% or more Impact of volume decline from trade de-loading 13.5BN 39.0 Price elasticity: Approx. 0.7: -25% or more Some consumers who reduced or quit smoking are assumed to have stocked up on cigarettes ahead of the tax hike Revised H FY3/2009 Volume 73.2BN (around -20%) Price elasticity is assumed at approx. 0.5: around -20% 2 Impact of volume decline from trade de-loading 11.5BN 3Revised up by 8 bn. cigarettes 1H sales volume 2H sales volume forecast 1H sales volume 2H sales volume forecast 86.5bn.cigarettes 39.0bn.cigarettes (-47%) 86.5bn.cigarettes 47bn.cigarettes (-36%) (+10% ) (+10%) 1 Regarding the demand decline due to the tax hike, the assumed price elasticity was revised to approximately 0.5 from 0.7, resulting in the upward revision of approximately 6 billion cigarettes. 2 The impact of trade de-loading was revised to a volume decline of 11.5 billion cigarettes es from a decline of 13.5 billion cigarettes, resulting in the upward revision of approximately 2 billion cigarettes. 3 In light of the above revisions, the volume forecast was revised upward by 8 billion cigarettes

15 [Reference Material] Analysis of Consolidated Financial Results for Q3 FY 3/2011 and Full-term for FY 3/2011 Caution concerning forward-looking statements Forward-Looking and Cautionary Statements This presentation contains forward-looking statements about our ind ustry, business, plans and ob jectives, financial conditions and results of operat ions based on curre nt expectations, assumptions, estimates and projections. p These statements discuss future expectations, identify strategies, discuss market tre nds, contain n projections of operational results and financial condition and state other forward ard-looking information. These forward-looking statements are subject to various know n and unknow n risks, s, uncertainties and ot her factors that could cause our actual resu lts to differ from those suggested by any forward-looking statement. We as sume no duty or obligation to update any forward -looking statement or to advise of any change in the ass umptions and factors on which they are base d. Risks, unce rtainties or oth er factors that coul d cause actual results to differ mate rially from those expressed in any forwa rd-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, market ing 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. 2 15

16 Q3 Results for FY 3/2011 Japanese Domestic Tobacco Business Adjusted Net sales excluding tax 1) Q3 FY3/ Volume decrease following tax increase and volume decrease following heightened demand Volume effect Price and product mix effect Others Price Amendment +0.7 Q3 FY3/ ) Adjusted net sales excluding tax do not account for revenue from the imported tobacco, domestic duty free, the China Division, and other peripheral businesses. 3 Q3 Results for FY 3/2011 Japanese Domestic Tobacco Business EBITDA 1) Q Volume decrease following tax increase and volume decrease following heightened demand Volume effect Price and product mix Cost increase Leaf tobacco reappraisal gain/loss Price amendment Sales promotion and others -9.9 Q3 FY 3/ ) Before royalty payments from JTI, a part of overhead cost allocation canceled after accounting standard change. 4 16

17 Q3 Results for FY 3/2011 International Tobacco Business Core Net sales excluding tax 1) Q3 FY3/2010 7,028 Volume effect -48 Price and product mix effect +444 Q3 FY3/2011 at constant rates of exchange 7,423 Forex impact2) +168 Q3 FY3/2011 7, (MM US$) 1) Core net sales excluding tax do not include revenue from distribution, leaf tobacco, private label, contract manufacturing and other peripheral businesses. 2) Forex impact is the fluctuation between USD and other currencies 5 Q3 Results for FY 3/2011 International Tobacco Business - EBITDA EBITDA before royalty payments to JT 1) Q3 FY3/2010 2,354 Volume effect -19 Price and product mix effect +391 Others Q3 FY3/2011 at constant rates of exchange Forex impact2) 2, Including Leaf/NTM Costs increase 150MM$ Q3 FY3/2011 2,646 2,250 2,350 2,450 2,550 2,650 2,750 (MM US$) 1) Before royalty payment to JT in USD 2)Forex impact is the fluctuation between USD and other currencies6 17

18 Q3 Results for FY 3/2011 Pharmaceutical Business - Net sales Q3 FY3/ Torii Pharmaceutical Co., Ltd. (non-consolidated) +1.4 Royalty income, etc Q3 FY 3/ Q3 Results for FY 3/2011 Pharmaceutical Business - EBITDA Q3-6.2 R&D expenses (non-consolidated) Operating income of Torii Pharmaceutical Co.,Ltd. (non-consolidated) Royalty income, etc Q3 FY 3/

19 Q3 Results for FY 3/2011 Food Business - Net sales Q Beverages +6.5 Processed foods etc Q3 FY 3/ Q3 Results for FY 3/2011 Food Business - EBITDA Q Beverages +1.5 Processed foods etc Overhead costs +0 Q3 FY 3/

20 Q3 Results for FY 3/2011 Recurring profit Net income Q Q Opearing Income Recurring profit Non-operating income/loss Extraordinary profit.loss, income tax etc Q3 FY 3/ Q3 FY 3/ Positive Factors: -Improvement in foreign exchange loss/profits (17.5 BN) - Decrease in interest payment (7.5 BN) Negative Factors: -Decrease in interest income and dividend income, among others (2.6 BN) Positive Factors: -Decrease in business restructuring cost (3.4 BN) -Decrease in loss on disposition of property (2.9 BN) -Decrease in income tax, among others (5.8 BN) Negative factors: -Account for payment of a fine to the Canadian authorities (13.0BN) -Decrease in profit on sale of property, plant and equipment among others (18.8BN) 11 [This slide intentionally left blank] 12 20

21 Summary of Consolidated B/S as of Dec. 31, 2010 Assets Compared to B/S as of Mar. 31, 2010 Mar. 31, 2010 Cash and deposits/ short-term investment securities Inventories Notes and accounts receivable-trade Trademarks Goodwill Other assets Dec, , , , , ,900.0 Current Assets: up JPY 74.6BN Decrease in cash and deposits/short- term investment securities down JPY 33.2 BN Repayment of interest-bearing debts Decrease in inventories down JPY 28.3 BN Decrease in semi-finished & finished products for the Japanese Domestic Tobacco Business Increase in notes and accounts receivabletrade up JPY 27.7 BN Top line growth in the Japanese Domestic Tobacco Business. Increase in other current assets up JPY BN Increase of securities purchased under repurchase agreements Fixed Assets: down JPY BN Decrease in Trademarks down JPY 48.7 BN Depreciation of local currencies against US$, strong yen and amortization in International Tobacco Business Decrease in Goodwill down JPY BN Amortization in International Tobacco Business and strong yen Decrease Property Plant and Equipment down JPY 5.7 BN Effect of strong yen in the International Tobacco Business. 13 Summary of Consolidated B/S as of Dec. 31, 2010 Liabilities & Net Assets Commercial Papers National tobacco tax payable Retained Earnings Foreign currency nslation adjustments Other net assets Compared to B/S as of Mar. 31, 2010 Mar. 31, 2010 Loans payable Bonds Lease liabilities Other liabilities Dec. 31, , , , , , ,900.0 Liabilities : down JPY BN Decrease in Loans payable down JPY 32.9BN Decrease in Commercial papers down JPY BN Decrease in Bonds down JPY 2.8 BN Increase in National tobacco excise tax payable up JPY BN - Increase due to year end effect of Japanese domestic tobacco business Net Assets : down JPY 85.0 BN Increase in Retained earnings up JPY 64.0 BN Decrease in Foreign currency translation adjustment down JPY BN - Appreciation of JPY against US$ (From US$1= JPY to US$1= 83.82) 14 21

22 Revised for FY 3/2011 compared to results of the previous fiscal year Japanese Domestic Tobacco Business Adjusted Net Sales excluding tax 1) /EBITDA 2) Core net sales excluding tax 1) EBITDA 2) FY 3/2011 Revised Negative factors Decrease in JT sales volume: 151.8BN units BN units (down 18.3 BN units) Negative factors Decrease in JT sales volume (down 18.3 BN units): approx. JPY 56.0 BN Completion of Leaf tobacco reappraisal: 4.1BN Increase in costs and others: approx. JPY 16 BN Positive factors Price effect: approx. JPY 70.0 BN 1)Net sales excluding tax does not account for imported tobacco, domestic duty-free, the China division and others. 2)Before royalty payments from JTI, part of overhead cost allocation 15 canceled after accounting standard change Revised for FY 3/2011 compared to results of the previous fiscal year International Tobacco Business Core Net Sales excluding tax 1) /EBITDA 2) Core Net Sales excluding tax 1) EBITDA 2) 9,682 2,965 FY 3/2011 Revised 10,223 10,144 At constant rates of exchange 3,281 3,192 At constant rates of exchange 7,500 8,500 9,500 10,500 Positive factors Pricing effect off-sets volume decrease effect (Reference) Core Net Sales excluding tax 1) : From JPY906.7 BN to JPY BN ( down JPY 9.2 BN) 1,500 2,000 2,500 3,000 3,500 (MM US$) (MM US$) Positive factors Pricing effect off-sets volume decrease effect (Reference) EBITDA 2) : From JPY BN to JPY BN (up JPY 10.3 BN) JPY/US$ foreign exchange rate: From US$1=JPY93.65 to JPY (up 5.86) JPY/US$ foreign exchange rate: From US$1=JPY93.65 to JPY 87.79(up JPY 5.86) 1) Core Net sales excluding tax does not include revenue from the distribution, leaf Tobacco, private label, contract manufacturing and other peripheral businesses 2)Before royalty payments to JT 16 22

23 Revised for FY 3/2011 compared to results of the previous fiscal year Pharmaceutical Business- Net Sales/EBITDA Net Sales EBITDA FY 3/2011 Revised Positive factors Increase in sales of Torii Pharmaceutical Co. Ltd.: JPY 42.4 BN to JPY 44.2 BN (up JPY 1.7 BN) Negative factors Decrease in operating profit due to increase in R&D expenses of Torii Pharmaceutical Co., LTD., JPY 6.1BN to JPY 1.2BN (down JPY 4.9 BN) 17 Revised for FY 3/2011 compared to results of the previous fiscal year Food Business Net Sales/EBITDA Net Sales EBITDA FY 3/2011 Revised Positive factors Positive factors Growth in beverage business due to summer heat Strong focus on Roots, the flagship brand, and wave and good performance driven by Roots, the strategic focus on staple food products as well flag-ship coffee brand as seasonings (eg. Yeast extract) and cost Negative factors reduction Choice and concentration of the operation in Table Mark group Decrease in sales of out-of-home products 18 23

24 Revised for FY 3/2011 compared to results of the previous fiscal year Recurring profit Net income Operating income Recurring Profit Non-operating income Extraordinary profit/loss income tax etc FY 3/2011 Revised [Positive Factors] -Improvement in foreign exchange profit/loss -Improvement in financial income/payments FY 3/2011 Revised [Positive Factors] Decrease in business restructuring cost Decrease in impairment loss [Negative Factors] -Decrease from previous years reversal of liability on fine levied under UK competition law(16.7bn) -Expense for agreement with Canadian authorities: around 13BN -Decrease in profit on sale of property, plant and equipment among others 19 [This slide intentionally left blank] 20 24

25 Data sheets for 9 months ended Dec 2010 Data Sheet(1) 1. Summary of Business Performance (unit: JPY billion) 6. Amortization relating to major acquisitions 9 months ended Dec months ended Dec Net Sales including excise tax 4, , Goodwill Amortization relating to major acquisitions International tobacco business (unit: USD million) Net Sales excluding excise tax * 1, , Former RJRI and Gallaher EBITDA * Including former RJRI, Gallaher and others Operating Income * Termination of goodwill amortization: Former RJRI Apr-19, Former Gallaher Mar-27 (Reference: Figures for major profit items before goodwill amortization) Change * Including one-time goodwill amortization of TableMark's subsidiary Operating Income * Termination of goodwill amortization: Dec-12 Recurring Profit Japanese domestic tobacco * * Termination of trademark rights amortization: Former RJRI Apr-19, Former Gallaher Mar-27 International tobacco *1 * Pharmaceutical Capital expenditure (unit: JPY billion) Food Beverages Processed foods Others *1 International tobacco business: 9 months ended Sep Capital expenditures *2 Excluding revenue from the imported tobacco, domestic duty free, the China Division and other Japanese domestic tobacco peripheral businesses International tobacco * *3 Excluding revenue from the distribution, leaf tobacco,private label, contract manufacturing and Pharmaceutical other peripheral businesses Food (Reference) (unit: USD million) Other/Elimination and corporate International tobacco * International tobacco business: 9 months ended Sep 7,028 7, Core net sales excl. excise tax *1 *3 8. Cash and cash equivalents * (unit: JPY billion) 3. Leaf tobacco reappraisal profit / loss * (unit: JPY billion) 9 months 9 months ended ended Change Dec Dec Leaf tobacco reappraisal profit / loss Cash and cash equivalents * Cash and cash equivalents = cash and deposits + marketable securities + securities purchased under repurchase agreements * Profit when denoted negative 9. Interest-bearing debt * (unit: JPY billion) International tobacco EBITDA * Operating income <Pharmaceutical business> Depreciation and amortization *2 Pharmaceutical EBITDA Operating income Depreciation and amortization * <Food business - Beverage business> 9 months ended Dec months ended Dec (Former standard) As of end of Mar months ended Dec Recurring Profit (unit: JPY billion) Net Income Food business 9 months 9 months Years to ended ended * Excluding revenues from the imported tobacco, domestic duty free, the China Division and other peripheral amortize Dec. 2009* Dec businesses in the Japanese domestic tobacco business, as well as distribution, leaf tobacco, private label, contract manufacturing and other peripheral businesses in the international tobacco business TableMark (Former Katokichi) Net Income Trademark amortization relating to major acquisitions (unit: JPY billion) Japanese domestic tobacco business 9 months 9 months Years to ended ended 2. Breakdown of net sales (unit: JPY billion) amortize Dec Dec months 9 months Former RJRI ended ended Change Dec Dec * Terminated in Apr-09 Net sales including excise tax *1 4, , (unit: USD million) Japanese domestic tobacco 2, , International Tobacco Business 9 months 9 months Years to ended ended International tobacco *1 1, , amortize Sep Sep Adjusted net sales excluding excise tax *1 *2 *3 1, , Former RJRI and Gallaher mainly20 9 months ended Dec (New standard) As of end of Dec As of end of As of end of 4. Breakdown of SG&A expenses (unit: JPY billion) Mar Dec Change 9 months 9 months ended ended Change Interest-bearing debt Dec Dec * Interest-bearing debt = short-term bank loans + CP + bonds + long-term borrowings+ lease obligation SG&A Personnel * Business data Advertising and general publicity months 9 months ended ended Change Sales promotion <Japanese domestic tobacco business> Dec Dec R&D JT sales volume* (billion cigarettes) Depreciation and amortization Total demand (billion cigarettes) Others JT market share 65.0% 64.4% - 0.6%pt * Personnel expense is the sum of compensation, salaries, allowances, provision for JT net sales before tax per 1,000 cigarettes (JPY) 12,691 13, retirement benefit, legal welfare, employee bonuses and accrual of employee bonuses. JT net sales after tax per 1,000 cigarettes (JPY) 4,056 4, * Sales volume of domestic duty-free and China division is excluded, which was 2.8 billion for 9 months ended Dec and 2.7billion for 9 months ended Dec. 2010, respectively. 5. EBITDA by business segment *1 (unit: JPY billion) 9 months 9 months 9 months 9 months 9 months ended ended ended Change ended ended Change <International tobacco business> Dec Dec Dec (New Sep Sep (Former (New (New standard) Total shipment volume* (billion cigarettes) standard) standard) standard) GFB shipment volume (billion cigarettes) Consolidated EBITDA JPY/USD rate for consolidation (JPY) % Operating income RUB/USD rate for consolidation (RUB) % Depreciation and amortization * GBP/USD rate for consolidation (GBP) % Japanese domestic tobacco EBITDA EUR/USD rate for consolidation (EUR) % Operating income * Total shipment (which was previously designated sales volume ) includes cigars, pipe tobacco and Depreciation and amortization * snus, but does not include private label and contract manufacturing. As of end of As of end of Mar Dec Food EBITDA Number of beverage vending machines * 257, ,000 10,000 Operating income JT-owned 33,000 33,000 0 Depreciation and amortization * Combined 82,000 86,000 4,000 Other/Elimination and corporate EBITDA * Beverage vending machines include vending machines for cans and packs, etc. and for cups owned by other companies and operated by our subsidiary. "JT-owned" vending machines are owned by JT. "Combined" Operating income vending machines are owned by our subsidiaries or affiliates,and focus on selling JT brand beverages but Depreciation and amortization * also sell non-jt brand beverages. (Reference) (unit: USD million) 9 months 9 months ended ended Change Sep Sep International tobacco EBITDA 2,354 2, (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 Years to amortize 9 months ended Dec (New standard) 9 months 9 months ended ended Change Dec Dec R&D expenses (parent company) (JPY billion) Change Change Change (New standard) *3 International tobacco business: 9 months ended Sep 25

26 Data sheets for 9 months ended Dec Data Sheet (2) 1. Consolidated financial outlook for the fiscal year ending Mar. 31, 2011 compared to the forecast as of Oct 2010 Major assumptions (JPY billion) Previous forecast Revised forecast Change (1)Japanese domestic tobacco business (billions of cigarettes) Net sales including excise tax 5, , Previous forecast Revised forecast Change EBITDA Sales volume Operating income *Excluding sales of domestic duty-free and China division Recurring profit Net income (2) International tobacco business (billions of cigarettes, JPY, RUB, GBP, EUR) Return on Equity 6.9% 8.1% 1.2%pt Previous forecast Revised forecast Change Free cash flow* Total shipment volume* BNU (Reference: Before goodwill amortization) (JPY billion) GFB shipment volume BNU Net income JPY/USD rate % JPY EPS (JPY) 21, , , RUB/USD rate % RUB Cash dividends per share (JPY) 5,600 5,600 - GBP/USD rate % GBP Payout Ratio 26.2% 23.6% -2.6% EUR/USD rate EUR Consolidated financial outlook by business segment *4 (JPY billion) Previous forecast Revised forecast Change *Total shipment (which was previously designated sales volume ) includes cigars, pipe tobacco and snus, but does not include private label and contract manufacturing. Net sales including excise tax *1 5, , Goodwill amortization relating to major acquisitions Japanese domestic tobacco 2, , International tobacco *1 2, , International tobacco business (unit: USD million) Adjusted net sales excl. excise tax *1*2*3 1, , Previous Revised Years to Japanese domestic tobacco * forecast forecast amortize International tobacco *1* Former RJRI and Gallaher Pharmaceutical * Termination of goodwill amortization: Former RJRI Apr-19, Former Gallaher Food Mar-27 Others Food Business (unit: JPY billion) EBITDA *1* Previous Revised Years to Japanese domestic tobacco forecast forecast amortize International tobacco * TableMark (Former Katokichi) Pharmaceutical * Termination of goodwill amortization: Dec-12 Food ** Including one-time goodwill amortization of TableMark's subsidiary Others/Elimination and corporate Operating income * Trademark rights amortization relating to major acquisitions Japanese domestic tobacco International tobacco * Japanese domestic tobacco (unit: JPY billion) Pharmaceutical Previous Revised Years to Food forecast forecast amortize Others/Elimination and corporate Former RJRI Depreciation and amortization *1* * Termination of trademark rights amortization: Former RJRI Apr-09 Japanese domestic tobacco International tobacco * International tobacco business (unit: USD million) Pharmaceutical Previous Revised Years to Food forecast forecast amortize Others/Elimination and corporate Former RJRI and Gallaher mainly 20 (JPY billion) * Termination of trademark rights amortization: Former RJRI Apr-19, Former Capital expenditures Gallaher Mar-27 Japanese domestic tobacco International tobacco * Pharmaceutical Food Others/Elimination and corporate (Reference) International tobacco *1 *3 Core net sales excl. excise tax International tobacco EBITDA *1 (Before royalty payment) (unit: USD million) Previous forecast Revised forecast Change 10,240 3,260 10, , *1 International tobacco business: Year ended Dec.2009 and Year ending Dec.2010 *2 Excluding revenue from the imported tobacco, domestic duty free, the China Division and other peripheral businesses *3 Excluding revenue from the distribution, leaf tobacco,private label, contract manufacturing and other peripheral businesses *4 With the change of accounting standard for disclosures about Segments of an Enterprise and related information, we changed the definition of the index according to the business segment. EBITDA and OP of Japanese domestic business is before royalty acceptance.ebitda and OP of international business is before royalty payment. In addition we have changed the allocation method of the overhead expenses and CAPEX. *5 EBITDA=operating income + depreciation and amortization *6 *6 Depreciation and amortization = depreciation of tangible fixed assets + amortization of intangible fixed assets + amortization of long-term prepaid expenses + amortization of goodwill 26

27 2. Data sheets for 9 months ended Dec Data Sheet (3) Consolidated financial outlook for the fiscal year ending Mar. 31, 2011 compared to the results of previous fiscal year Major assumptions (JPY billion) FY 03/2010 Revised forecast Change (1)Japanese domestic tobacco business (billions of cigarettes) Net sales including excise tax 6, , FY 03/2010 Revised forecast Change EBITDA Sales volume Operating income *Excluding sales of domestic duty-free and China division Recurring profit Net income (2) International tobacco business (billions of cigarettes, JPY, RUB, GBP, EUR) Return on Equity 8.6% 8.1% -0.5%pt FY 03/2010 Revised forecast Change Free cash flow* Total shipment volume* BNU (Reference: Before goodwill amortization) (JPY billion) GFB shipment volume BNU Net income JPY/USD rate % JPY EPS (JPY) 24, , RUB/USD rate % RUB Cash dividends per share (JPY) 5,800 5, GBP/USD rate % GBP Payout Ratio 23.6% 23.6% - EUR/USD rate % EUR Consolidated financial outlook by business segment *4 (JPY billion) *Total shipment (which was previously designated sales volume ) includes cigars, pipe tobacco and Change from FY snus, but does not include private label and contract manufacturing. FY ended 03/2010 FY ended 03/2010 FY ending 03/ /2010 to FY (Former standard) (New standard) (New standard) 03/2011 (New standard) Net sales including excise tax *1 6, , , Goodwill amortization relating to major acquisitions Japanese domestic tobacco 3, , , International tobacco *1 2, , , International tobacco business (unit: USD million) Adjusted net sales excl. excise tax *1*2*3 1, , , Year ended Year ending Years to Japanese domestic tobacco * Dec.2009 Dec.2010 amortize International tobacco *1* Former RJRI and Gallaher Pharmaceutical * Termination of goodwill amortization: Former RJRI Apr-19, Former Gallaher Food Mar-27 Others Food Business (unit: JPY billion) EBITDA *1* Japanese domestic tobacco International tobacco * TableMark (Former Katokichi) Pharmaceutical * Termination of goodwill amortization: Dec-12 Food ** Including one-time goodwill amortization of TableMark's subsidiary Others/Elimination and corporate Operating income * Trademark rights amortization relating to major acquisitions Japanese domestic tobacco International tobacco * Japanese domestic tobacco (unit: JPY billion) Pharmaceutical FY ended FY ending Years to Food Mar Mar amortize Others/Elimination and corporate Former RJRI Depreciation and amortization *1* * Termination of trademark rights amortization: Former RJRI Apr-09 Japanese domestic tobacco International tobacco * International tobacco business (unit: USD million) Pharmaceutical Year ended Year ending Years to Food Dec.2009 Dec.2010 amortize Others/Elimination and corporate Former RJRI and Gallaher (JPY billion) * Capital expenditures Japanese domestic tobacco International tobacco * Pharmaceutical Food FY ended Mar. 2010** FY ending Mar Years to amortize Termination of trademark rights amortization: Former RJRI Apr-19, Former Gallaher Mar-27 Others/Elimination and corporate (Reference) International tobacco *1 *3 Core net sales excl. excise tax International tobacco EBITDA *1 (Before royalty payment) (unit: USD million) FY 03/2010 Revised forecast Change 9,682 10, ,965 3, *1 International tobacco business: Year ended Dec.2009 and Year ending Dec.2010 *2 Excluding revenue from the imported tobacco, domestic duty free, the China Division and other peripheral businesses *3 Excluding revenue from the distribution, leaf tobacco,private label, contract manufacturing and other peripheral businesses *4 With the change of accounting standard for disclosures about Segments of an Enterprise and related information, we changed the definition of the index according to the business segment. EBITDA and OP of Japanese domestic business is before royalty acceptance.ebitda and OP of international business is before royalty payment. In addition we have changed the allocation method of the overhead expenses and CAPEX. *5 EBITDA=operating income + depreciation and amortization *6 *6 Depreciation and amortization = depreciation of tangible fixed assets + amortization of intangible fixed assets + amortization of long-term prepaid expenses + amortization of goodwill 27