Japan Tobacco: FY23 Results

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Tobacco Segment: 87% weight in revenue, 97% weight in adj. operating profit in FY23

Top-line & Bottom-line Results – Tobacco Segment Only1

Excluding Pharmaceuticals and Processed Food Segments; adjusted, at constant currencies

Revenue: +7.4% in Q4 2023 and +6.4% in FY23, driven by positive price/mix variance in the Western Europe & EMA clusters and volume growth in the Asia & EMA clusters, more than offsetting the industry volume contractions in the Philippines (-13%) and the UK (-17%)

Operating profit: -1% in Q4 2023 and +4.4% in FY23. Strong price/mix improvement failed to offset higher investments (partly related to the geographical expansion of Ploom X) and higher supply chain costs in the final quarter of 2023

Total Volume: +3.4% in Q4 and +2.4% in FY23 (combustible volume +3.1% and +2.3%, respectively)

RRP volume: +23.2% in Q4 and +11.8% in FY23

RRP weight – FY23: 1.6% by volume and 3.3% by revenue

RRPs: Ploom X (heated tobacco)

– RRP volume grew by 11.8% in FY23 (- by 20.5% excluding discontinuation of Ploom S). Growth driven by heated tobacco segment share gains in Japan (volume up by +47.8%) and launches in European markets

– Ploom X is now available in 13 markets including Czech Republic, Greece, Hungary, Italy, Japan, Kazakhstan, Lithuania, Poland, Portugal, Romania, Slovenia, Switzerland and the UK

– Japan: RRP is close to 40% of total tobacco industry volume in Japan and Ploom X reaches 11.4% SoS. Diversified portfolio of MEVIUS and Camel SKUs, with flavors and tastes tailored to consumer needs. Roll-out of Ploom X ADVANCED to further attract and retain users. For further details, see “Heated Tobacco Products”

– Geographical expansion plan for 2023 is on track: Encouraging early results in term of SoS gains

– HTP share of segment estimated at 6.7%; on track with ambition to reach mid-teen segment share by 2028 (based on a sample of 9 markets)


– GFB (Global Flagship Brands) volume continued to grow to 72% of total volume. GFB includes four Brands: Winston, Camel, MEVIUS (44Bn) and LD (44.8Bn)

– Winston (#2 after Marlboro) and Camel (#3) volume increased double-digit in 35+ markets. Camel is the fastest growing brand in combustibles

– Total global market share reached record high with +0.5pp year-on-year gain (based on cigarette, fine cut and heated tobacco volume in 70+ markets representing 90+ of the volume)

FY24 Forecast

– Core revenue: +3.9% to ¥2,836Bn (at constant FX; +6.2% on a reported basis)

– Adjusted operating profit: flat at ¥728Bn (at constant FX; -5.5% on a reported basis)

– Tobacco Segment: revenue +4.5%, operating profit +2% (at constant FX)

– Basic EPS: ¥256.3 (-5.7% on a reported basis). Based on the share price at the time of writing (¥4,028), JT now trades at 15.7x 2024EPS (the second best multiple among the industry majors after ITC).

Other Highlights

– Dividend: increased by +3.2% from ¥188 to ¥194 (yield: 4.8%; payout ratio: 71.4% in FY23 and 75.7% in FY24 vs. target ratio of 75%+/-5%)

– Mid-/long-term target: Mid to high single digit CAGR for adj. operating profit (constant FX)

– Combustibles growth expected to outperform the industry in the 2024-26 period: -0.5% to -1.5% volume decline (vs. -2.6% for the Industry) and mid-single digit net revenue growth (vs. +1.8% for the Industry)

– JT RRP revenue to increase by ~2.5 times from 2023 to 2026 (vs. +46% increase for the Industry)

– Ploom X geographical expansion: Aims to cover over ~80% of the total global HTS demand by end of 2025. To be available in over 40 markets by end of 2026

– Established 25 new sustainability targets to further evolve the strategy towards becoming a more sustainable business for society at large. R&D to explore future value-added business opportunities, focusing on the concept of “Fulfilling Moments, Enriching Life”

Our Recollection

Overall, combustible volume growth (+2.4% in FY23) combined with pricing/mix improvements helped deliver mid-single digit revenue & operating profit increase in FY23. Thanks to the geographical expansion of Ploom X and progressive category share gains in Japan, RRP volume growth increased to +17% in Q3 and and +23% in Q4 2023 (from only +3% in Q1 2023). We will continue to closely watch Ploom X’s performance in the expansion markets.

In Feburary 2023, we noted: “In the League of Laggards to the transformation to RRPs (Altria, Imperial, JT), we clearly favor JT due its size/scale, higher emerging market exposure (supporting the combustible volume), very low indebtedness and strong focus on expanding its presence in the heated tobacco category”.

JT shares increased +50% since our call (i.e. correction from an overly undervalued level, further fueled by the general market interest in Japanese equities) and are now trading above the key ¥4,000 level for the first time since June 2017. Although we still favor JT over Altria and Imperial Brands (in terms of business strength & growth), we need to underline the fact that JT’s share price has progressed faster than its business fundamentals and exhaustion of the price momentum could be in the cards in the upcoming months.


  1. https://www.jt.com/investors/results/forecast/index.html ↩︎

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