Japan Tobacco (2914) investor relations material

Executive summary

• Revenue for H1 2026 rose 17.7% year-on-year to JPY 1,986.1 billion, with operating profit up 29% and net profit up 28.9%, driven by strong tobacco and processed food businesses.

• Results exceeded initial forecasts, supported by robust pricing, favorable FX, and strong performance in key markets.

• The pharmaceutical business was classified as discontinued operations following its transfer and sale in 2025; all figures reflect continuing operations.

• Upward revision to full-year guidance and dividend, reflecting strong H1 performance and confidence in business fundamentals.

Financial highlights

• Adjusted operating profit (AOP) for H1 2026 was JPY 661.7 billion, up 26.2% year-on-year; at constant FX, AOP grew 19.4%.

• Core revenue at constant FX in the tobacco business increased by 10.6% year-on-year, with price mix contributing 10.2%.

• RRP volume surged 33.8% year-on-year, with RRP-related revenue up 40.7%.

• Free cash flow forecast revised upward by JPY 121 billion, mainly due to higher AOP.

• Gross profit increased to JPY 1,170.0 billion from JPY 971.3 billion year-over-year, with a gross margin improvement.

Outlook and guidance

• Full-year 2026 revenue forecast revised upward to JPY 3,885.0 billion (+12.0% year-on-year), with AOP at constant FX forecast at JPY 988.0 billion (+11.6%).

• Net profit forecast increased to JPY 644.0 billion (+29.0% vs. 2025).

• Dividend guidance raised by JPY 30 to JPY 272 per share, with a payout ratio of 75.2% after Canada Adjustment.

• H2 expected to see softer volume and profit growth due to tax-driven price increases and higher costs, but potential for upside remains if robust market trends persist.

• Free cash flow forecast up to JPY 651.0 billion.