Top-line & Bottom-line Results – Tobacco Segment Only1
(Excluding Pharmaceuticals and Processed Food Segments. Tobacco Segment has a 90% weight in revenue and 100+% weight in adjusted operating companies income in Q2 2025. Adjusted figures, at constant currencies)
Revenue: +15.6% in Q2 2025, driven by strong pricing/mix, the inclusion of Vector Group and RRP-related revenue growth (+8.8%)
Operating profit: +25.3% in Q2 2025, driven by core revenue growth and partially offset by higher investments towards heated tobacco and higher supply chain costs
Total Volume: +2.6% (up +3.4% when adjusted for inventory movements); Combustible volume: +2.3%; RRP volume: +21.4% (heated tobacco volume: +31.2%)
RRP weight – Q2 2025: 2.2% by volume and 3.6% by revenue
Dividend: Increased ¥14 (+7.2%) from ¥194 to ¥208 (paid in two equal parts)
RRPs: Ploom (heated tobacco)
– Japan: Category reached 45.9% of the total tobacco industry size (on shipment basis). JT’s RRP volume (including hybrid products) increased by +22% and category share grew by +1.6ppt to reach 15.2% in H1 2025. JT’s heated tobacco volume grew by +29.2% and category share grew by +2.0ppt to reach 13.1% in H1 2025 (category share in Q2 2025: 13.6%)
– Ploom’s category share in Italy (largest heated tobacco market in the EU) is flat at 1.5%. In other EU markets, Ploom attained 3.1% to 6.6% category share in 15-26 months after launch.
– Ploom AURA: Strong start for Ploom AURA and premium stick EVO since the launch in Japan (May 27) and nationwide expansion (July 1). AURA device sales far exceeded our previous heated tobacco devices. Positive consumer feedback on taste (e.g. “Product offers a stronger kick with a rich and satisfying taste”) and design (e.g. “Design has become slimmer and more comfortable to hold”). AURA and EVO contributed to accelerate category share growth (+2pp since AURA launch)
– Steady progress towards achieving 2028 ambitions (i.e. mid-teens category share) to be further supported by the planned AURA geo-expansion
Regional Overview: Volume, Core Revenue (CR), Adjusted Operating Profit (AOP)
– Asia: Lower combustibles industry volume in Japan and Taiwan. Combustible market share gains mainly in Taiwan. Pricing contribution, mainly in the Philippines
– Western Europe: Lower combustibles industry volume, including in the UK, and unfavorable inventory movements in Italy and Spain. Market share gains, mainly in the UK. Pricing contribution, in several markets such as Italy and the UK
– EMA: Inclusion of Vector Group. Resilient industry volume and pricing contribution, mainly in Russia & Turkey
– US Market (including Vector): Continued growth of LD (+28.5%), capturing consumers in the growing value segment. Combustibles market share up to 8.4%, driven by LD and the continued momentum of Montego
FY25 Guidance
– Core revenue and operating profit guidance increased by +2.7% and +4.9%, respectively, at constant FX
– Upward revision driven by strong momentum in combustibles share gains, improved industry volume in several markets and strong pricing contributions more than offsetting additional investments towards Ploom
– H2 2025 revenue and operating profit growth to slow vs. H1 2025 due to lower volume and higher expenditures
Our Recollection
Overall, strong combustible pricing/mix and contribution from Vector Group helped JT deliver double-digit revenue and operating profit growth in Q2 2025. As noted before, FY25 is set to be an another year of strong growth. JT’s traditional business (combustibles) is in good shape.
On the RRP side, thanks to the geographical expansion of Ploom X and progressive category share gains in Japan, year-on-year volume growth in heated tobacco accelerated to +31.2%. Nevertheless, it is yet to be seen whether the progress achieved in heated tobacco is in proportion to the outsized $4.5Bn investment (over the three-year period from 2024 to 2026, mostly in commercial initiatives). No progression in category share in Italy, Europe’s largest and most competitive heated tobacco market, is concerning. With only 3.6% of its revenue coming from RRPs (compared to more than 40% for PMI), JT still has a lot to do in terms of portfolio transformation. We will continue to closely watch Ploom AURA’s performance in Japan and elsewhere (i.e. whether the segment share is progressively increasing towards the mid-teens).
The more JT can demonstrate that its outsized RRP investment is resulting in more sizable RRP franchise that complements its strength in the cigarette category (i.e. a more balanced & sustainable business mix), the higher is the chance of a re-rating (trading at 15.5x FY25 EPS forecast of ¥278.25).
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