Q3 2024 Japan Tobacco Inc Earnings Call Transcript
Key Points
- Japan Tobacco Inc (JAPAF) reported an increase in revenue and adjusted operating profit (AOP) both at constant FX and on a reported basis, driven primarily by the tobacco business.
- The company's tobacco business saw a 2.2% year-on-year increase in total volume, with significant growth in the Reduced-Risk Products (RRP) segment, particularly Ploom, which increased by 22.8%.
- The acquisition of Vector Group is expected to significantly increase Japan Tobacco Inc (JAPAF)'s market share in the US from 2.4% to 8.2%, enhancing its competitiveness in the US market.
- The processed food business contributed positively to the company's performance, with revenue and profit increasing year on year due to price revisions and steady sales growth.
- Japan Tobacco Inc (JAPAF) revised its full-year forecast upward for consolidated revenue and AOP, reflecting strong business momentum and the contribution from the Vector acquisition.
- The financial contribution of volume to AOP was negative due to a higher volume contribution from lower-margin markets, impacting overall profitability.
- Free cash flow decreased by JPY159.8 billion to JPY260.5 billion due to a temporary deterioration in working capital, including the impact of tobacco tax payment schedules.
- The impact of foreign exchange was unfavorable to AOP, with the depreciation of emerging market currencies and appreciation of cost-related currencies offsetting the positive impact of a weaker yen.
- The pharmaceutical business saw a decrease in revenue and AOP due to the absence of one-time compensation gains and lower overseas royalty income.
- The Canadian litigation poses a potential financial risk, with the possibility of a CAD32.5 billion settlement impacting future dividend payouts.
I am Hiromasa Furukawa, Chief Financial Officer of the JT Group. I would like to go through our consolidated financial results for the third quarter of 2024. We would like to share with you the third-quarter 2024 briefings. First, let me clarify that since the closing of the Vector acquisition took place in October, the contribution from this acquisition is only included in the revised forecast for the full year, not in the cumulative third-quarter results.
Please see slide 4. As shown on the slide, revenue and AOP increased both at constant FX and on a reported basis. AOP at constant FX, our primary performance indicator, increased 2.6% year on year. This solid performance was mainly driven by the tobacco business, where the robust pricing contributions outweighed the impact of increased investment towards Ploom as well as higher costs in our supply chain and in indirect expenses such as labor cost.
I would also like to mention the contribution of the processed food business to this performance, where
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