Overview of Consolidated Financial Results for FY 3/2010 and Full-term Forecasts for FY 3/2011

Transcription

1 Overview of Consolidated Financial Results for FY 3/2010 and Full-term Forecasts 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. Activities for FY3/2011-To Achieve JT-11 President and CEO and Representative Director Hiroshi Kimura 1

2 Consolidated Financial Results FY3/2010: Executive Summary Japanese Domestic Tobacco Business: EBITDA surpassed initial forecast despite weaker industry volumes than assumed International Tobacco Business: EBITDA at constant rates of exchange grew 14.9% driven by favorable pricing and market share gains On a reported basis, adjusted net sales excluding tax and EBITDA declined due to currency movements, not offset by business momentum Pharmaceutical Business: Net sales and profit declined due to the absence of a one-time milestone revenue received in the previous year Food Business: EBITDA slightly increased in our key business1). Total Food Business EBITDA declined due to the slump in fishery product prices, which is a one-time factor JTG performance exceeded initial forecast; good start for the first year of JT-11 Adjusted Net Sales excluding tax2) FY 3/2009 2, , % FY 2009 Initital Forecast 1,985.0 EBITDA % Net Income % < Reference : Before goodwill amortization > Net Income % )Key business are: Beverages, Processed food and Seasoning 2)Adjusted net sales excluding tax do not account for revenue from the imported tobacco, 3 domestic duty free, the China Division and other miscellaneous in the Japanese domestic tobacco business, in addition to the distribution, private label, contract manufacturing and other peripheral businesses in the international tobacco business Activities for FY 3/2011: Executive Summary Adjusted net sales excluding tax and EBITDA are forecasted to decline mainly due to a steep tax hike in the Japanese Domestic Tobacco Business Japanese Domestic Tobacco Business: Applied to amend retail prices and ensure the quality and services commensurate with the retail price International Tobacco Business: Gain market share and grow profit through favorable pricing Pharmaceutical Business: Aim to develop world-class innovative drugs Food Business: Focus on key business and further strengthen the business foundations for future growth JTG will strive to realize our long-term vision and achieve the targets under JT-11 by exploring opportunities for future growth and further strengthening our business foundations in this difficult business environment. Adjusted Net Sales excluding tax1) EBITDA Net Income Actual FY 3/2011 Forecast 1, , % % % <Reference:Before goodwill amortization> Net Income % 1)Adjusted net sales excluding tax do not account for revenue from the imported tobacco, domestic duty free, the China Division and other miscellaneous in the Japanese domestic tobacco business, in addition to the distribution, private label, contract manufacturing and other 4 peripheral businesses in the international tobacco business 2

3 Japanese Domestic Tobacco Business: FY 3/2011 Amendment of retail prices Background Planned tax hike of JPY 70 per pack is unprecedented While we are projecting a sharp industry volume decline by more than 25% on an annual basis, 1) Continue providing the quality and services which will satisfy our customers 2) Secure smoking spaces so as to serve the needs of both smokers and non-smokers 3) Correspond to increases in raw material costs Increases in the retailers margin and the consumption tax must be also taken into consideration Applied for an amendment of retail prices which exceed the excise tax hike Meet the higher consumer expectations through improving quality and services 5 Japanese Domestic Tobacco Business:Retail prices of representative cigarette brands Applied basis ~Sep Oct. 2010~ (JPY per pack ) (JPY per pack ) 350 Cabin Prestige 470 Cabin Prestige Peace Infinity Peace Infinity Pianissimo Camel Salem Mild Seven Cabin Seven Stars Peace Hope Winston Caster Hi-Lite Pianissimo Camel Salem Seven Stars Peace Hope Mild Seven Cabin Caster Hi-Lite Winston Retail price increases will vary among different brands and products, in order to ensure the quality of each brand and product will be maintained, consumer expectations will be met and their support will be secured Ensure the quality and services commensurate with the retail price 6 3

4 Japanese Domestic Tobacco Business: FY 3/2011 Amendment of retail prices - Future earnings EBITDA 1) Roadmap: FY 3/2011 Volume effect Adoption of management approach EBITDA JPY BN JPY BN Cost increase and others Leaf tobacco reappraisal gain/loss -4.1 Unit price effect FY 3/2011 Forecast )Before royalty payments from JTI, A part of overhead cost allocation was canceled after accounting standard change 7 Expecting EBITDA to decline by 12.8% to JPY billion in FY 3/2011 due to a sharp volume decline, a temporary increase in demand, increases in expenses related to strengthening of retail store sales and R&D intended to ensure quality and services commensurate with the retail price and one-time cost of retail price revision Target under JT-11 unchanged; Keeping FY 3/2012 EBITDA at level International Tobacco Business: Gain market share and grow profit through favorable pricing US$ based EBITDA 1) Roadmap: FY 3/2011 2,965 Business momentum +335 Leaf/NTM Costs increase -150 FY 3/2011 Forecast (excl. FX impact) 3,150 FX impact2) +180 FY 3/2011 Forecast 3,330 2,700 2,800 2,900 3,000 3,100 3,200 3,300 3,400 (MM$) Business momentum supported by pricing and market share gains to drive EBITDA growth during 2010 Continuous investment in brand-building to ensure quality top-line growth Expecting 12.3% EBITDA growth through a combination of business momentum and currency benefits At constant rates of exchange, EBITDA to grow 6.2% 1)Before royalty payments to JT 2) FX impact is the fluctuation between US$ and other currencies 8 4

5 International Tobacco Business: EBITDA growth after FY 3/2011 Economic Assumptions: Unemployment to lag behind GDP growth and to decrease gradually Timing of business environment upturn to vary market-by-market and expected to start from 2H of 2010 or 1H of 2011 at the earliest Business momentum from 2H of 2010: Industry volume decline to slow down Market hare s ains g Favorable pricing Profit growth through quality top-line growth Target under JT-11 unchanged; Continue to achieve EBITDA CAGR of at least 10% at constant rates of exchange 9 Pharmaceutical Business: A certain amount of development in the 1st year of JT-11, continue to aim creation of World-Class Drugs Clinical development (as of April 28, 2010) Code Key Indication Stage Rights JTT-705(oral) Dyslipidemia Phase 2 (Japan) Out licensing to Roche (Phase 3) JTT-130(oral) Dyslipidemia JTK-303(oral) HIV infection JTT-302(oral) JTT-305(oral) Dyslipidemia Osteoporosis JTS-653(oral) Pain Overactive bladder JTT-654(oral) Type 2 diabetes mellitus JTK-656(oral) HIV infection Phase 2 (Japan) Phase 2(Overseas) Phase 1 (Japan) Phase 2(Overseas) Phase 2 (Japan) Phase 1 (Japan) Phase 1 (Japan) Phase 2(Overseas) Phase 1(Overseas) Out licensing to Gilead Sciences (Phase 3) Out licensing to Merck (U.S.) Advances in JTT-654: Advanced to phase2 abroad JTK-853: Clinical trial started abroad MEK inhibitors: Advanced to phase2 by the partner JTT-751(oral) Hyperphosphatemia Phase 2 (Japan) In licensing from Keryx Biopharmaceuticals JTK-853(oral) Hepatitis C Phase 1(Overseas) Updates since the previous announcement on February 9, 2010: none To enhance clinical development capabilities, particularly for compounds in latestage clinical trial, and strengthen drug discovery research Enhancing clinical development capabilities so as to adapt to the need for more advanced development Improving drug discovery research so as to strengthen the R&D pipeline To further develop Torii Pharmaceutical s capabilities in its areas of strength 10 5

6 Food Business:Strengthening business foundation for future growth Business environment through Weak consumption due to recession Increased downward pressure on prices amid a deflationary environment Activities in FY 3/2011 and beyond Beverages Strengthen the flagship Roots brand in its 10-year anniversary Increase vending machines steadily Continue cost reduction effort Processed foods and seasonings Shift to a high value added business model focusing on staple food products 1) and seasonings (e.g. yeast extract) Continue to promote optimum business operations Promotion of top-level food safety Actions for reducing risks, Improving consumer response and Creating stronger organization and operating base 1)Staple food products are: frozen noodles, frozen and packed cooked rice, frozen bread 11 Striving to increase dividends in steady and sustainable manner s in dividend payout ratio excluding the impact of goodwill amortization and dividend per share (JPY per share) (%) 6,000 Year-end dividend per share Half-year dividend per share Payout ratio , , ,800 3, ,600 3,000 2, , ,000 1,800 2,200 2,600 2, FY 3/2007 FY 3/2008 FY 3/ Year-end dividend is increased to JPY 3,000 per share, made up of JPY 2,800 common dividend and JPY 200 commemorative dividend Annual dividend is JPY 5,800, including half-year dividend of JPY 2,800 per share Dividend payout ratio for excluding the impact of goodwill amortization will come to 23.6%, with the dividend level steadily rising 12 6

7 Consolidated Financial Results for CFO and Senior Vice President Hideki Miyazaki Consolidated Financial Results for : Executive Summary JTG performance exceeded the initial forecast; good start for the first year of JT-11 Japanese Domestic Tobacco Business EBITDA surpassed the initial forecast, despite weaker industry volumes than assumed International Tobacco Business EBITDA grew 14.9% at constant rates of exchange driven by favorable pricing and market share gains On a reported basis, dollar-based EBITDA decreased 14.1% due to adverse currency movements 14 7

8 Consolidated Financial Results : FY3/2010 FY 3/2009 Adjusted Net Sales excluding tax1) 2, , % EBITDA % <Reference: Before goodwill amortization> FY 3/2009 Operating Income % Operating Income2) % Recurring Profit % Recurring Profit2) % Net Income % Net Income2) % Adjusted net sales excluding tax and EBITDA declined by 11.7% and 18.5%, respectively, mainly due to the weak volumes of the Japanese Domestic Tobacco Business and adverse currency movements in the International Tobacco Business Recurring profit decreased less steeply, as non-operating income/loss improved Net income grew 12.2% due to the reversal of liability on fine levied under UK competition law etc. 1)Adjusted net sales excluding tax do not account for revenue from the imported tobacco, domestic duty free, the China Division and other miscellaneous items in the Japanese domestic tobacco business, in addition to the distribution, private label, contract manufacturing and other peripheral businesses in the international tobacco business 15 2)Before goodwill amortization Japanese Domestic Tobacco Business : (%) 66.5 JT Share (BNU,JPY BN) FY 3/ % Total Volume % 64.5 Adjusted Net Sales excluding tax1) EBITDA Operating Income % % % Total Share of key brands2) 45.1% 43.5 FY 3/2007 FY 3/2008 FY 3/2009 FY 3/2010 Adjusted net sales excluding tax and profits declined as volume decline accelerated marginally Overall JT share remained almost flat at 64.9% Share of key brands rose to 45.1% due to strong performance of Seven Stars and Pianissimo brands 1)Adjusted net sales excluding tax does not account for revenue from the imported tobacco, domestic duty free, the China Division, and other miscellaneous. 2)Mild Seven, Seven Stars, Pianissimo (The market share figure for key brands is 16 inclusive and retrospective of market share figures for icene and Lucia, which were integrated into Pianissimo family on January 2010) 8

9 International Tobacco Business : FY3/2010 (BNU,MM$) Total Volume1) GFB Volume Adjusted Net Sales excluding tax2) Adjusted Net Sales excl. tax per thousand3)(us$) EBITDA4) EBITDA5) at constant rates of exchange Adjusted Net Sales excluding tax2) Adjusted Net Sales excluding tax per thousand3)(us$) EBITDA4) FY 3/ % % 10,445 9, % % 3,452 2, % % 10,445 11, % % 3,452 3, % Share of Key Markets (12-month rolling average) Italy 17.1% 18.5% France 14.2% 14.8% Spain 20.5% 20.6% UK 39.1% 40.4% Russia 35.7% 36.8% Turkey 17.0% 18.8% Taiwan 38.7% 38.0% Source:AC Nielsen, Core EPOS and JTI internal data Volume increased in Turkey, the UK, Russia and key markets in Western Europe. However, total volume decreased 2.5% mainly due to declines in Iran, Ukraine, the Philippines, Taiwan, Romania and Spain Market share increased year-on-year in most of our key markets At constant rates of exchange, adjusted net sales excluding tax and EBITDA grew as a result of favorable pricing and volume gains in Europe Adjusted net sales excluding tax and EBITDA declined on a reported basis due to adverse currency fluctuations 1) Total volume includes cigars, pipe tobacco and snus, but does not include private label and contract manufactured products 2) Adjusted net sales excluding tax do not account for revenue from the distribution, private label, contract manufacturing and other peripheral businesses 3) Adjusted net sales excluding tax per thousand cigarettes are based on total volume, 17 including cigars, pipe tobacco, and snus, but excluding private label and contract manufactured products, and joint ventures (the revenues of which are not included for these purposes) 4) Before royalty payments to JT 5)After royalty payments to JT Pharmaceutical and Food Businesses: Pharmaceutical Business Food Business FY 3/2009 FY 3/2009 Net Sales Net Sales EBITDA EBITDA Operating Income Operating Income Pharmaceutical Business:Sales and profit growth for Torii was offset by the absence of the one-time revenues that had boosted the previous year s results. As a result net sales and profit decreased Food Business:Sales decreased due to withdrawal from the chilled processed food business and exclusion of some subsidiaries from the consolidated results. Despite marginal EBITDA growth in the key business segments due to lower raw materials prices and cost reduction, EBITDA for the overall food business decreased due to one-time losses in the fishery product business 18 9

10 International Tobacco Business Jan-Mar FY 3/2011 (preliminary) International Tobacco Business : Executive Summary-Results for Jan-Mar FY 3/2011(preliminary) Adjusted net sales excluding tax grew 10.4% due to favorable pricing and currency impact Adjusted net sales excluding tax at constant rates of exchange grew 1.8% Share of market increased year-on-year in most of our key markets Total volume and GFB volume fell 6.8% and 4.4% respectively, due to the contraction of industry volumes in many markets, as well as instability in the operating environment of Iran 20 10

11 International Tobacco Business: Results for Jan-Mar FY 3/2011(preliminary) <Jan-Mar (preliminary)> (BNU,MM$) Total Volume1) GFB Volume Adjusted Net Sales excl. tax2) Adjusted Net Sales excl. tax per thousand3)(us$) at constant rates of exchange Adjusted Net Sales excl. tax2) Adjusted Net Sales excl. tax per thousand3)(us$) 2009 Jan-Mar 2010 Jan-Mar % % 2,148 2, % % 2,148 2, % % Adjusted net sales excluding tax on a reported basis and at constant rates of exchange grew 10.4% and 1.8%, respectively Total volume and GFB volume decreased 6.8% and 4.4% respectively, due to: Contraction of industry volumes in many markets resulting from higher unemployment and steep excise increases Unstable operating environment in Iran since mid ) Total volume includes cigars, pipe tobacco and snus, but does not include private label and contract manufactured products 2) Adjusted net sales excluding tax do not account for revenue from the distribution, 21 private label, contract manufacturing and other peripheral businesses 3) Adjusted net sales excluding tax per thousand cigarettes are based on total volume, including cigars, pipe tobacco, and snus, but excluding private label and contract manufactured products, and joint ventures (the revenues of which are not included for these purposes) International Tobacco Business : Share of Key Markets Mar 1) Mar 1) Italy 17.4% 18.7% France 14.3% 15.1% Spain 20.6% 20.5% UK 39.3% 40.4% Russia 36.1% 36.8% Turkey 17.5% 19.5% Taiwan 39.2% 37.4% Source:AC Nielsen, Core EPOS and JTI internal data <Jan-Mar (preliminary)> Share of market increased year-on-year in most of our key markets In Taiwan, as market leader, JTI took strong pricing action following the excise tax increase, with a short-term negative impact on market share 1) 12-month rolling average 22 11

12 International Tobacco Business : Performance by cluster Total Volume for 2010 Jan-Mar ( from 2009 Jan-Mar Total Volume 1) GFB Volume Total -6.8% -4.4% <Jan-Mar (preliminary)> South & West Europe -9.2% -8.9% North & Central Europe +6.9% +16.2% CIS+ -9.7% -5.3% Rest of the World -5.9% -4.5% S&WE: Adverse inventory adjustments and market contractions in Spain and Italy led to volume decline. Excluding these two markets, total volume increased, driven by strong GFB performance in France N&CE: Strong performance in the UK (Sterling) and Poland (LD) drove volume growth CIS+: Significant industry volume declines in Russia, Romania and Ukraine due to economic downturn and/or excise-led price increases RoW: Growth in Canada and the Philippines did not offset the volume decrease in Iran caused by the operating environment instability 1)Total volume includes cigars, pipe tobacco and snus, but does not include private label and contract manufactured products 23 Favorable pricing (MM$) 2,400 2,100 1,800 Adjusted Net Sales excl. tax 1) Roadmap: 2009 Jan-Mar to 2010 Jan-Mar ,148 2, ,372 <Jan-Mar (preliminary)> excise tax change price increase Italy - - France - - Spain - Jan UK Jan 2),Mar Jan,Mar Russia Jan Jan 1, Jan-Mar Volume Price/Mix Jan-Mar 10 at constant rates of exchange FX impact 2010 Jan-Mar Turkey - 3) Jan Taiwan - - 2)Increase in VAT 3)Excise tobacco tax increase in Dec 09 Adjusted net sales excluding tax grew 10.4% due to favorable pricing and currency impact At constant rates of exchange, adjusted net sales excluding tax grew 1.8% 1)Adjusted net sales excluding tax do not account for revenue from the distribution, private label, contract manufacturing and other peripheral businesses 24 12

13 Full-Term Forecasts for FY 3/2011 Forecasts for FY 3/2011 : Executive Summary EBITDA is forecasted to decrease due to weaker performance in the Japanese Domestic Tobacco Business, but partially offset by growth in the International Tobacco Business Japanese Domestic Tobacco Business: EBITDA is forecasted to decrease 12.8% to JPY billion due to significant volume decline International Tobacco Business: Dollar based adjusted net sales excluding tax and EBITDA are projected to grow 8.2% and 12.3%, respectively, through favorable pricing, market share gains and currency benefits Pharmaceutical Business: Incremental R&D investment including Torii Pharmaceutical is expected to result in lower profit Food Business: Profit is forecasted to grow due to enhancement of the flagship Roots brand and increased focus on staple food products and seasonings (e.g. yeast extract) Adoption of management approach(reference:back up data No.1) Japanese Domestic Tobacco Business: Before-royalty-receipt-basis International Tobacco Business: Before-royalty-payment-basis The allocation of expenses common throughout the company and capital expenditures was partially revised 26 13

14 Full-Term Forecasts for FY 3/2011 Actual FY 3/2011 Forecast Adjusted Net Sales excl. tax1) 1, , % EBITDA % Operating Income % Recurring Profit % Net Income % ROE(%) ppt FCF % < Reference: Before goodwill amortization > Net Income2) % EPS(yen)2) 24, , % Dividend per share(yen) 5,800 5, Payout Ratio(%)2) 23.6% 23.7% +0.1ppt EBITDA is forecasted to decrease due to weaker performances in the Japanese Domestic Tobacco Business, partially offset by growth in the International Tobacco Business Net income is projected to decrease as an improvement in non-operating income/loss is expected to be offset by deterioration in extraordinary income/loss due to an agreement payment to the Canadian authorities 1)Adjusted net sales excluding tax does not account for revenue from the imported tobacco, domestic duty free, the China Division and other miscellaneous in the Japanese domestic tobacco business, in addition to the distribution, private label, 27 contract manufacturing and other peripheral businesses in the international tobacco business 2)Before good will amortization Japanese Domestic Tobacco Business : Forecasts for FY 3/2011 (BNU,JPY BN) Actual FY 3/2011 Forecast Total Volume % Adjusted Net Sales excluding tax1) % EBITDA % Operating Income % Initial forecast for FY3/2010 EBITDA under new disclosure method: JPY billion Total volume is projected to decline by 16% to billion cigarettes due to the steep tax hike on October 1, 2010 EBITDA is forecasted to decrease 12.8% to JPY billion due to a temporary increase in demand as well as significant volume decline 1)Adjusted net sales excluding tax does not account for revenue from the imported tobacco, domestic duty free, the China Division, and other miscellaneous. 2) Before royalty payments from JTI, 28 A part of overhead cost allocation was canceled after accounting standard change 14

15 International Tobacco Business : Forecasts for FY 3/2011 ( BNU, JPY BN ) Actual FY 3/2011 Forecast Total Volume1) % GFB Volume % Adjusted Net Sales excl. tax2) % EBITDA3) % Exchange rate assumptions JPY/$ % ( MM$ ) Jan-Dec 09 Average a Jan-Dec 10 Assumption b Jan-Mar 10 Average c from 09 actual b vs a Adjusted Net Sales excl. tax2) 9,682 10, % Adjusted Net Sales excl. tax2) at constant rates of exchange 9,682 10, % EBITDA3) 2,965 3, % EBITDA3) at constant rates of exchange 2,965 3, % 1) Total volume includes cigars, pipe tobacco and snus, but does not include private label and contract manufactured products 2) Adjusted net sales excluding tax do not account for revenue from the distribution, 29 private label, contract manufacturing and other peripheral businesses 3) Before royalty payments to JT RUB/$ % GBP/$ % EUR/$ % Adjusted net sales growth of 8.2% and EBITDA growth of 12.3% are expected due to favorable pricing, market share gains and favorable currency assumptions At constant rates of exchange, adjusted net sales excluding tax and EBITDA are projected to grow 3.9% and 6.2%, respectively EBITDA in JPY is forecasted to be JPY billion based on projected appreciation of the JPY Pharmaceutical and Food Businesses: Forecasts for FY 3/2011 Pharmaceutical Business (JPY BN ) Actual FY 3/2011 Forecast Net Sales Food Business (JPY BN ) Actual FY 3/2011 Forecast Net Sales EBITDA Operating Income EBITDA Operating Income Pharmaceutical Business : Sales are projected to remain stable but profits are forecasted to decline due to increased R&D costs, including those at Torii Pharmaceutical Food Business : EBITDA is forecasted to grow due to enhancement of the flagship Roots brand in its 10-year anniversary, increased focus on staple food products and seasonings (e.g. yeast extract) and cost reduction 30 15

16 31 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, 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 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 changes; i ncluding, without limi tation, tax increases and restrictions on sales, ma rketing 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 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

17 <Back up data> All the detailed figures comes to <Back up data> 33 <Back up data No.1 > Forecasts for FY 3/2011:Application of New Standard for information disclosure by industry segment New standard Disclosure of segment-by-segment information used by the management for making management decisions (management approach) Starting date of application Application will start with the forecasts for FY 3/2011 to be issued at the same time as the announcement of the results for (to enable year-on-year comparison, the unaudited results for based on the new standard will be disclosed as reference data). Disclosure of segment-by-segment results for Q1 of FY 3/2011 and later will be based on the new standard. Benefits and effects of the new standard The disclosure of figures used by the management for making management decisions will be useful for investors, too. The application of the new standard will not affect the consolidated results. Segment-by-segment information items to be affected Royalty payment by the International Tobacco Business to the Japanese Domestic Tobacco Business The allocation of expenses common throughout the company and capital expenditures will be partially revised. Results for for the Japanese Domestic and International Tobacco Businesses based on the former and new standards (EBITDA Road Map) Japanese Domestic Tobacco Business International Tobacco Business Former standard1 JPY257.6 billion JPY249.8 billion Royalty receipt/payment 1) 2 JPY28.3 billion JPY-27.8 billion Common expenses3 JPY21.9 billion - New standard4 JPY251.2 billion JPY277.6 billion 4= No impact on the pharmaceutical and food businesses 1)Amounts are different due to the accounting period 34 17

18 <Back up data No.2 > International Tobacco: (JPY basis) <Jan-Mar (preliminary)> <JPY basis Disclosure basis> ( JPY BN ) FY 3/ Net Sales incl. tax 3, ,633.6 (-15.5%) Adjusted Net Sales excl. tax 1) EBITDA 2) Operating Income 1, (-16.1%) (-26.1%) (-37.6%) JPY/USD (+10.5%) 1)Adjusted net sales excluding tax does not account for revenue from the distribution, private label, contract manufacturing and other peripheral businesses 35 2)After royalty payment to JT <Back up data No.3 > Performance by cluster <Jan-Mar (preliminary)> (BNU) South & West Europe Total Volume 1) GFB Volume North & Central Europe Total Volume 1) GFB Volume CIS+ Total Volume 1) GFB Volume Rest of the World Total Volume 1) GFB Volume 2009 Jan-Mar 2010 Jan-Mar % % % +16.2% -9.7% -5.3% % % 1) Total volume includes cigars, pipe tobacco and snus, but does not include private label and contract manufactured products 36 18

19 <Back up data No.4 > GFB Volume <Jan-Mar (preliminary)> (BNU) 2009 Jan-Mar 2010 Jan-Mar Winston % Camel % Mild Seven % B&H % Silk Cut % LD % Sobranie % Glamour % 37 <Back up data No.5> Composition Ratio by Region <Jan-Mar (preliminary)> Total Volume 1) Adjusted Net Sales excluding tax 2) Rest of the World, 29% North & Central Europe, 12% CIS+, 44% Rest of the World, 30% North & Central Europe, 27% South & West Europe, 16% South & West Europe, 19% CIS+, 23% HQ Net sales included in RoW 1)Total volume includes cigars, pipe tobacco and snus, but does not include private label and contract manufactured products 2) Adjusted net sales excluding tax does not account for revenue from the distribution, private label, contract manufacturing and other peripheral businesses 38 19

20 [Reference Material] Analysis of Consolidated Financial Results for and Full-term Forecast for FY 3/2011 Caution concerning forward-looking statements Forward-Looking and Cautionary Statements This p resentation contai ns forward-looking stateme nts about our ind ustry, business, plans and ob jectives, fi nancial conditions and results of operat ions b ased on curre nt expectations, assumptions, estimates and p rojections. These statements discuss future expectations, identify strateg ies, discuss market tre nds, contai 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 risk s, uncertainties and ot her factors that could cause our actual resu lts to differ from those suggested by any forward-looking s tatement. We as sume no du ty o r ob ligation to update any forward -looking statement or to advise of any change in the ass umptions and factors on w hich 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 ch anges; including, withou t li mitation, tax increases and restrictions on t he sale, market ing an d usage of tobacco products, govern mental 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 20

21 Results for Japanese Domestic Tobacco Business Adjusted Net sales excluding tax* FY3/ Volume effect Price and product mix effect -0.1 FY3/ * Net sales excluding tax does not account for revenue from the imported tobacco, domestic duty free, the China Division, and other miscellaneous 3 Results for Japanese Domestic Tobacco Business EBITDA* FY 3/ Volume effect Price and product mix effect -0.1 Cost increase -7.0 Leaf tobacco reappraisal gain/loss 0 Sales promotion and others *After royalty payments from JTI, before HQ cost allocation change 4 21

22 Results for International Tobacco Business Adjusted Net sales excluding tax* FY3/ ,445 Volume effect -68 Price and product mix effect +815 FY3/2010 at constant rates of exchange Forex impact** 11,192-1,510 FY3/2010 9,682 (MM$) 9,400 9,600 9,800 10,000 10,200 10,400 10,600 10,800 11,000 11,200 * Net sales excluding tax does not account for revenue from the distribution, private label, contract manufacturing and other peripheral businesses **Forex impact is the fluctuation between USD and other currencies 5 (MM$) Results for International Tobacco Business - EBITDA EBITDA before royalty payments to JT FY3/2009 3,452 Volume effect +19 Price and product mix effect +913 Others -416 FY3/2010 at constant rates of exchange 3,967 Forex impact* -1,002 FY3/2010 2,965 2,700 2,800 2,900 3,000 3,100 3,200 3,300 3,400 3,500 3,600 3,700 3,800 3,900 4,000 4,100 4,200 4,300 4,400 4,500 (MM$) *Forex impact is the fluctuation between USD and other currencies 6 22

23 Results for Pharmaceutical Business - Net sales FY3/ Torii Pharmaceutical Co.Ltd. (non-consolidated) +5.0 Royalty income, etc Results for Pharmaceutical Business - EBITDA FY 3/ R&D expenses (non-conslidated) Operating income of Torii Pharmaceutical Co.Ltd. (non-conslidated) Royalty income, etc

24 Results for Food Business - Net sales FY 3/ Beverages -1.2 Processed foods etc Chilled foods (Withdrawal in Nov, 2008) Results for Food Business - EBITDA FY 3/ Beverages -0.4 Processed foods etc Overhead costs

25 Results for Recurring profit Net income FY 3/ FY 3/ Operating income Recurring profit Non-operating income/loss Extraordinary profit/loss, income tax, etc Positive factors: -Decrease in interest payment (25.2BN) -Decrease in loss on foreign exchange (1.5BN) Negative factors: -Decrease in interest income(5.6bn) etc Positive factors: -Increase from reversal of liability on fine levied under UK competition law(16.7bn) -Decrease in business restructuring cost(14.4bn) -Decrease in introduction costs for vending machines with adult identification functions (13.4BN) -Decrease in impairment loss(10.3bn) Negative factors: -Account for expense for disposal of PCB-containing wastes(4.0bn) -Decrease in profit on sale of property, plant and equipment (14.1BN) etc. 11 [This slide intentionally left blank] 12 25

26 Summary of Consolidated B/S as of Mar. 31, 2010 Assets Compared to B/S as of Mar. 31, 2009 Current Assets: up JPY BN Increase in Inventories up JPY 90.9 BN Mar. 31, 2009 Cash and deposits/ Short-term investment securities 3, Raw materials and supplies: up JPY 73.5 BN Increase in purchase, increase in inventory unit price Merchandise and finished goods: up JPY 28.0 BN Increase in International tobacco business Inventories Notes and accounts receivable-trade Trademarks Fixed Assets: down JPY BN Decrease in Goodwill down JPY 66.5 BN Amortization and strong JPY impact(jti goodwill held in US$ base) Goodwill Other assets Decrease in Deferred tax assets down JPY 43.4 BN Release in International Tobacco Business and subsidiary of Food business Mar. 31, , , , , , , Summary of Consolidated B/S as of Mar. 31, 2010 Liabilities & Net Assets Compared to B/S as of Mar. 31, 2009 Mar. 31, 2009 Loans payable Commercial papers Bonds National tobacco tax payable Other liabilities Retained earnings Foreign currency translation adjustment Other Net assets Mar. 31, , ,872.5 Liabilities : down JPY BN Decrease in Loans payable down JPY 157.3BN Repayment Increase in Commercial papers up JPY BN Decrease in Bonds down JPY 80.7 BN Redemption of domestic bonds down JPY BN (JPY Financing for RJRI acquisition) Redemption of f-glh bonds approx. down JPY 40.0 BN(300MM GBP) New issuance of domestic bonds up JPY BN (issued in May) Increase in National tobacco excise tax payable up JPY 38.7 BN International Tobacco Business ( increase in UK etc.) Net Assets : up JPY 98.9 BN Increase in Retained earnings up JPY 85.6 BN Increase in Foreign currency translation adjustment up JPY 14.4 BN 3, , , , , , ,

27 Forecast for FY 3/2011 compared to results of the previous fiscal year Japanese Domestic Tobacco Business Adjusted Net Sales excluding tax*/ebitda** Adjusted Net Sales excluding tax* EBITDA FY 3/2011 Forecast Negative factors Decrease in JT sales volume: 151.8BN units BN units (down 24.3 BN units) Negative factors Decrease in JT sales volume (down 24.3 BN units): approx. JPY 74.0 BN Completion of Leaf tobacco reappraisal: 4.1BN Increase in costs and others: approx. JPY 13.0 BN Positive factors Price effect: approx. JPY 59.0 BN *Net sales excluding tax does not account for imported tobacco, domestic duty-free, the China division and others. **Before royalty payments from JTI, part of overhead cost allocation canceled after accounting standard change 15 Forecast for FY 3/2011 compared to results of the previous fiscal year International Tobacco Business Net Sales excluding tax*/ebitda** Net Sales excluding tax* EBITDA** 9,682 2,965 FY 3/2011 Forecast 10,060 10,480 At constant rates of exchange 3,330 3,150 At constant rates of exchange 7,000 8,000 9,000 10,000 11,000 (MM$) Positive factors Top-line growth driven by pricing in key markets (Reference) Adjusted Net Sales excluding tax*: From JPY906.7 BN to JPY BN ( up JPY 37.2 BN) JPY/US$ foreign exchange rate: From US$1=JPY93.65 to JPY 90.00(up 3.65) 1,500 2,000 2,500 3,000 3,500 (MM$) Positive factors Top-line growth driven by pricing in key markets (Reference) EBITDA**: From JPY BN to JPY BN (up JPY 22.3 BN) JPY/US$ foreign exchange rate: From US$1=JPY93.65 to JPY 90.00(up JPY 3.65) * Net sales excluding tax does not account for revenue from the distribution, private label, contract manufacturing and other peripheral businesses ** Before royalty payments to JT 16 27

28 Forecast for FY 3/2011 compared to results of the previous fiscal year Pharmaceutical Business Net Sales/EBITDA** Net Sales EBITDA FY 3/2011 Forecast Positive factors Increase in sales of Torii Pharmaceutical Co. Ltd.: JPY 42.4 BN to JPY 43.8 BN (up JPY 1.3 BN) Negative factors Decrease of royalty income and absence of the one time revenue etc. which we received in FY3/ Negative factors Decrease in operating income of Torii Pharmaceutical Co., Ltd.: JPY 6.1 BN to JPY 4.0 BN (down JPY 2.1 BN) Increase in R&D expenses including Torii based on progress made in development Absence of royalty and one time revenue etc. which we received in FY3/ Forecast for FY 3/2011 compared to results of the previous fiscal year Food Business Net Sales/EBITDA Net Sales EBITDA FY 3/2011 Forecast Positive factors Growth in key business Negative factors Choice and concentration of the operation in Table Mark group Positive factors Strengthen our flagship canned coffee product Roots which celebrates 10-year anniversary in 2010 Strategically focused on staple food products as well as seasonings (eg. Yeast extract) and cost reduction 18 28

29 Forecast for FY 3/2011 compared to results of the previous fiscal year Recurring profit Net income Operating income -1.5 Recurring profit Non-operating income/loss Extraordinary profit/loss, income tax, etc FY 3/2011 Forecast FY 3/2011 Forecast Positive factors: -Decrease in loss on foreign exchange etc 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:13.8bn -Decrease in profit on sale of property, plant and equipment etc. 19 [This slide intentionally left blank] 20 29

30 Data sheets for FY ended Mar Summary of Business Performance (unit: JPY billion) 6. Amortization relating to major acquisitions FY ended Mar FY ended Mar Net sales including excise tax 6, , Goodwill amortization relating to major acquisitions JT International (unit: USD million) Adjusted net sales excl. excise tax * 2, , Former RJRI and Gallaher EBITDA * Goodwill includes Former RJRI, Former Gallaher and others. Operating Income (unit: JPY billion) Recurring Profit Foods business Net Income (Reference:Before goodwill amortization) Trademark amortization relating to major acquisitions (unit: JPY billion) Operationg Income Japanese domestic tobacco business Recurring Profit Net Income Former RJRI Apr Breakdown of net sales (unit: JPY billion) JT International FY ended Mar FY ended Mar (unit: USD million) Former RJRI and Gallaher mainly 20 Net sales including excise tax *1 6, , * Termination of trademark rights amortization: Former RJRI Apr-19, Former Gallaher Mar-27 Japanese domestic tobacco 3, , International tobacco *1 3, , Capital expenditure (unit: JPY billion) Adjusted net sales excl. excise tax *1 *2 *3 2, , Japanese domestic tobacco * Year ended Dec FY ended Mar FY ended Mar Year ended Dec FY ended Mar FY ended Mar Year ended Dec FY ended Mar * Excluding revenue from imported tobacco, domestic duty free, the China Division and other TableMark(FormerKatokichi) Dec-12 miscellaneous in the Japanese domestic tobacco business, the distribution, private label, contract manufacturing and other peripheral businesses in the international tobacco business * TableMark(FormerKatokichi) Goodwill amortization in FY ended Mar.2010 includes one-time goodwill amortization of TableMark(FormerKatokichi)'s subsidiary FY ended Mar Year ended Dec FY ended Mar International tobacco *1 *3 1, Capital expenditures Pharmaceutical Japanese domestic tobacco Foods International tobacco * Beverages Pharmaceutical Processed foods Foods Others Others *1 International tobacco business: Year ended Dec,2008 and Year ended Dec,2009 * International tobacco business: Year ended Dec,2008 and Year ended Dec,2009 *2 Excluding revenue from the imported tobacco, domestic duty free, the China Division, and 8. Cash and cash equivalents * (unit: JPY billion) other miscellaneous. As of end of As of end of *3 Mar Mar Excluding revenue from the distribution, private label, contract manufacturing and other peripheral businesses. Cash and cash equivalents (Reference) (unit: USD million) * Cash and cash equivalents = cash and deposits + marketable securities + securities purchased under repurchase agreements International tobacco 10,445 9, Adjusted net sales excl.excise tax *1 *3 9. Interest-bearing debt * (unit: JPY billion) As of end of As of end of 3. Leaf tobacco reappraisal profit / loss * (unit: JPY billion) Mar Mar FY ended FY ended Interest-bearing debt Mar Mar * Interest-bearing debt = short-term bank loans +commercial paper+ bonds + long-term borrowings+ lease obligation Leaf tobacco reappraisal profit / loss Business data FY ended FY ended * Profit when denoted negative <Japanese domestic tobacco business> Mar Mar JT sales volume* (billion cigarettes) Breakdown of SG&A expenses (unit: JPY billion) Total demand (billion cigarettes) FY ended FY ended JT market share 65.1% 64.9% - 0.2%pt Mar Mar JT net sales before tax per 1,000 cigarettes (JPY) 12,698 12,692-6 SG&A JT net sales after tax per 1,000 cigarettes (JPY) 4,057 4,056-1 Personnel * * Sales volume of domestic duty-free and China division is excluded, which was 3.6 billion for FY ended Advertising and general publicity Mar and 3.6billion for FY ended Mar. 2010, respectively. Sales promotion Year ended Year ended R&D <International tobacco business> Dec Dec Depreciation and amortization Total sales volume* (billion cigarettes) Others GFB sales volume (billion cigarettes) * Personnel expense is the sum of compensation, salaries, allowances, provision for JPY/USD rate for consolidation (JPY) retirement benefit, legal welfare, employee bonuses and accrual of employee bonuses. * Including cigars, pipe tobacco and snus, excluding private label and contract manufacturing products FY ended Mar Years to amortize Years to amortize Years to amortize Years to amortize 5. EBITDA by business segment *1 (unit: JPY billion) <Pharmaceutical business> FY ended FY ended R&D expenses (parent company) (JPY billion) Mar Mar Termination Termination Consolidated EBITDA As of end of As of end of Operating income <Foods business - Beverage business> Mar Mar Depreciation and amortization * Number of beverage vending machines * 254, ,000 3,000 Japanese domestic tobacco EBITDA JT-owned 32,000 33,000 1,000 Operating income Combined 76,500 82,000 5,500 Depreciation and amortization * * 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. International tobacco EBITDA * "Combined" vending machines are owned by our subsidiaries or affiliates,and focus on selling JT brand Operating income beverages but also sell non-jt brand beverages. Depreciation and amortization * Pharmaceutical EBITDA Number of employees* Operating income As of end of As of end of Depreciation and amortization * Mar Mar Foods EBITDA Number of employees (consolidated basis) 47,977 49,665 1,688 Operating income Japanese domestic tobacco 11,281 11,282 1 Depreciation and amortization * International tobacco 23,227 24,751 1,524 Others EBITDA Pharmaceutical 1,616 1, Operating income Foods 10,975 11, Depreciation and amortization * Other businesses (Reference) (unit: USD million) Corporate International tobacco EBITDA Number of employees (parent company) 8,908 8, ,452 2, (Before royalty payment) Number of employees based on enrollment (parent company) 9,973 9, *1 EBITDA=operating income + depreciation and amortization *2 * Number of employees is counted at working base, unless otherwise indicated. *2 Depreciation and amortization = depreciation of tangible fixed assets + amortization of intangible fixed assets + amortization of long-term prepaid expenses + amortization of goodwill *3 International tobacco business: Year ended Dec,2008 and Year ended Dec,

31 Data sheets for FY ended Mar Consolidated financial outlook for the fiscal year ending Mar. 31, 2011 compared to the results of previous fiscal year Consolidated financial outlook by business segment *4 (JPY billion) (JPY billion) from FY FY ended Mar.2010 FY ended Mar.2010 FY ending Mar.2011 Mar.2010 to FY FY ended Mar. FY ending Mar. (former standard) (New standard) (New standard) Mar (Actual) 2011(Forecast) Net sales including excise tax *1 6, , , Net sales including excise tax 6, , Japanese domestic tobacco 3, , , EBITDA International tobacco *1 2, , , Operating income Adjusted net sales excl. excise tax *1*2*3 1, , , Recurring profit Japanese domestic tobacco * Net income International tobacco *1* Return on Equity 8.6% 8.0% -0.6%pt Pharmaceutical Free cash flow* Foods (Reference: Before goodwill amortization) Other businesses/elimination (JPY billion) and corporate Net income EBITDA *1* EPS(JPY) 24, , , Japanese domestic tobacco Cash dividends per share(jpy) 5,800 5, International tobacco * Payout Ratio 23.6% 23.7% 0.1% Pharmaceutical (JPY billion) Foods Operating income *1* Capital expenditures Japanese domestic tobacco Japanese domestic tobacco International tobacco * International tobacco * Pharmaceutical Pharmaceutical Foods Foods Other businesses/elimination and corporate Other businesses/elimination and corporate Depriciation and amortization *1* Japanese domestic tobacco (Reference) (unit: USD million) International tobacco * International tobacco Pharmaceutical ,682 10, Adjusted net sales excl. excise tax *1 *3 Foods International tobacco EBITDA *1 Other businesses/elimination 2,965 3, and corporate (Before royalty payment) FY ended Mar.2010 (New standard) *4 FY ending Mar.2011 (New standard) *4 Other businesses/elimination and corporate *1 International tobacco business: Year ended Dec.2009 and Year ending Dec.2010 *4 With the change of accounting standard for disclosures about Segments of an Enterprise and related information, we *2 Excluding revenue from the imported tobacco, domestic duty free, the China Division, and other changed the definition of the index according to the business segment. EBITDA and OP of Japanese domestic business is miscellaneous. 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. *3 Excluding revenue from the distribution, private label, contract manufacturing and other peripheral businesses *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 Major assumptions Goodwill amortization relating to major acquisitions (1)Japanese domestic tobacco business (billions of cigarettes) International tobacco business (unit: USD million) FY ended Mar.2010 FY ending Mar.2011 Year ended Year ending Years to Dec.2009 Dec.2010 amortize Sales volume Former RJRI and Gallaher *Excluding sales of domestic duty-free and China division * Termination of goodwill amortization: Former RJRI Apr-19, Former Gallaher Mar-27 Goodwill includes Former RJRI, Former Gallaher and others. (2) International tobacco business (billions of cigarettes,jpy,rub,gbp,eur) Foods Business (unit: JPY billion) FY ended Mar.2010 FY ending Mar.2011 Total sales volume* BNU TableMark(FormerKatokichi) GFB sales volume BNU * Termination of goodwill amortization: Dec-12 JPY/USD rate JPY ** Including one-time goodwill amortization of TableMark's subsidiary RUB/USD rate RUB GBP/USD rate GBP Trademark rights amortization relating to major acquisitions EUR/USD rate EUR *Total volume includes cigars, pipe tobacco and snus, but does not include private label and contract manufactured products Japanese domestic tobacco FY ended Mar. 2010** FY ended Mar FY ending Mar FY ending Mar Years to amortize (unit: JPY billion) Years to amortize Former RJRI * Termination of trademark rights amortization: Former RJRI Apr-09 International tobacco (unit: USD million) Year ended Year ending Years to Dec.2009 Dec.2010 amortize Former RJRI and Gallaher mainly 20 * Termination of trademark rights amortization: Former RJRI Apr-19, Former Gallaher Mar-27 31