Thank you very much for participating in the investor meeting for Q1 2026 results at Japan Tobacco Inc. today.

Before we start the meeting, I'd like to ask you to make sure that your display name is accurate. Thank you for your cooperation.

It's now a pleasure to introduce our CFO, Mr. Furukawa, please.

Good afternoon. I am Hiromasa Furukawa, CFO of the JT Group.

Thank you very much for joining us today for JT Group's first quarter 2026 earnings briefing. I will begin by explaining the consolidated results for the first quarter, marking a strong start to the year.

As shown on the slide, both revenue and AOP recorded significant increases on both constant FX and reported basis, mainly driven by a robust quarter in the tobacco business. AOP at constant FX, our key profit management indicator, increased by 20.5% year on year, resulting in strong operating profit and profit growth.

The FX impact was positive, mainly driven by the appreciation of several currencies, including the Russian ruble, against the Japanese yen. Operating profit increased by 24.7% year on year, driven by the increase in AOP as well as a reduction in amortization costs of intangible assets arising from past acquisitions, included in the adjustment items.

Profit increased by 27.3% year on year, driven by operating profit growth. In addition, financial income and expenses improved in the first quarter.

Due to the recent rapid deteriorating situation in the Middle East and Iran, we have reclassified certain balance sheet items related to Iran in our consolidated financial statements in accordance with IFRS. As a result, we expect impacts from foreign exchange gains and losses arising from Iran-related balance sheet items to be mitigated.

Next, I will move on to the performance of each business segment, starting with the volume performance of the tobacco business. Please turn to slide 4.

Total volume, combining with combustibles and RRP, increased by 0.9% year on year, representing a solid performance considering the global industry volume contraction. In combustibles, strong share momentum continued across many markets.

Although combustibles industry volume declined in several markets, including Japan, Russia, and the UK, our combustibles volume remained in line with the previous year. RRP volume increased by a significant 44.2% year on year, driven by accelerated growth in Ploom volume and sustained market share gains, and boosted by the temporary demand ahead of the RRP tax hike in Japan.

Moving on to the financial performance of the tobacco business on slide 5. In the first quarter, pricing contributions materialized across many markets, driving double-digit growth in both revenue and AOP, together with favorable phasing impact of promotional activities.

Let me explain the AOP drivers by factor. Volume contribution was negative, as the total volume increase was offset by a deterioration in market mix from large volume declines in higher price markets such as the UK.

Price mix contribution continued to be strong, driven by robust pricing across many markets, including the key markets of Japan, Russia, Turkey, and the US. These top-line growth factors fully offset increased investments towards Ploom, as well as inflation-driven increases in raw material costs and SG&A expenses such as labor, resulting in a 19.2% year-on-year increase in AOP at constant FX.

As mentioned earlier, the FX impact was favorable. On slide 6, I will explain the performance of the three clusters in the tobacco business.

The graphs on this slide show year-on-year variances in total volume, core revenue, and AOP at constant FX for each cluster. Let me start with Asia, a cluster which includes the key markets of Japan, the Philippines, and Taiwan.

Total volume in this cluster increased by 7.3% year on year, driven by higher Ploom volume across markets as well as combustibles market share gains in the Philippines and Bangladesh. Regarding financial results, revenue and profit increased significantly, mainly driven by positive pricing and volume contributions in Japan and the Philippines.

Next is Western Europe, which includes Italy, Spain, and the UK. Total volume in this cluster declined by 3.2% year on year.

While we achieved market share gains in several markets, including Italy, as well as in heated products driven by Ploom, these positive factors were offset by declining combustibles industry volume, notably in the UK market. Core revenue and AOP grew as the pricing contribution, mainly in Spain and the UK, offset the negative volume variance, namely in the UK.

Moving on to EMA, which includes Romania, Russia, Turkey, and the US. Total volume in this cluster remained in line with the previous year.

The ongoing increase in industry volume in Turkey, combined with market share gains in Turkey and the US, as well as higher Ploom volume across markets, were offset by declining combustibles industry volume, including in the key markets of Russia and the US. The cluster reported an increase in both revenue and AOP, driven by a pricing contribution, namely in Russia, Turkey, and the US, partially offset by negative volume effects, namely in Russia.

While investments in Ploom and inflation-driven increases in raw material costs and SG&A expenses continued across clusters, these were offset by top-line growth. On slide 7, I want to highlight the top-line performance of RRP.

As shown in the graphs on that slide, growth in RRP volume and RRP-related revenue have accelerated. Although the acceleration includes a temporary higher demand in Japan, we remain confident in our ability to continue capturing additional volume and category share, building on the momentum of Ploom AURA, which was launched in 2025.

As of May 2026, Ploom has been launched in 29 markets, and AURA has already been introduced in 25 markets. As a result, Ploom category share in our key selected heated products markets reached 10.1% as of February 2026.

Slide 8 updates the trend of Ploom in several markets. Through the strengthening of our investment in RRP, as mentioned previously, we are expanding our global coverage and enhancing our portfolio through the transition to AURA and EVOL.

In addition, we are investing to increase awareness by strengthening communication with consumers across both digital and in-person touchpoints. Stronger engagement throughout the consumer journey is a key to enhance our retention.

Following the learnings from the launch market, we are focusing not only on driving trials through collaborations with various events and promotional activities at pop-up stores, but also on strengthening post-purchase engagement to enhance retention. These initiatives are steadily translating into tangible results.

As shown in the graphs, Ploom's share within the heated products category continued to grow across markets. In Japan, our average category share reached 15.8% in the first quarter, and driven by the contribution of Ploom AURA, launched in May last year, the pace of share growth is accelerating.

In Taiwan, following the launch of Ploom in October last year, we have confirmed strong initial momentum, with first quarter heated product share reaching almost 25%. From this standpoint, Taiwan represents the best launch performance of Ploom so far.

To strengthen our consumable offering for Ploom, we have recently launched LEAF, a new brand of heated nicotine sticks that do not contain tobacco leaves, in Poland and in Italy. LEAF offers an innovative proposition using a herbal substance and to consumers interested in flavored heated products.

Next, I will explain the results of the processed food business. Revenue increased by 1.4 billion yen year on year, driven by price revisions of frozen udon noodles in the frozen and ambient foods business.

AOP increased by 0.9 billion yen year on year, and revenue growth offset higher raw material costs due to rising rice prices. Finally, please see slide 11.

In the first quarter, consolidated AOP at constant FX increased by 20.5% year on year, delivering a robust performance. In the tobacco business, the favorable pricing variance and a stronger contribution from RRP was supported by continued combustibles share gains.

Meanwhile, amid the recent escalation of tensions in the Middle East, uncertainty remains, including potential impacts on operations in the region, as well as performance impacts from rising crude oil prices. Continued close monitoring is required, including impacts on national economies, FX movements, and our supply chain cost.

At this stage, the direct impact to our business is not material, and the strong momentum in the tobacco business continued. As our first quarter delivered a strong start to the year, we remain focused on delivering our full-year initial forecast.

This concludes my presentation. Thank you very much for your attention.

Thank you, Mr. Furukawa.

Now we'd like to move to Q&A session. Let me introduce you to the speakers who will answer your questions today: Hiromasa Furukawa, CFO of the JT Group; and Nobuya Kato, JTI Deputy CEO.

Next, I will show you how to ask questions. We are afraid we don't accept questions in this English line.

If you have any question, please send an email to [email protected]. We will introduce your question accordingly.

Thank you for your understanding. Thank you for waiting.

The first question comes from Mr. Saji, Mizuho Securities.

Thank you very much for the opportunity. I have one question related to Russia.

The market industry demand for the March quarter, I believe it was positive. Looking at the materials, -4.3%, it appears as if the negative amount is large in comparison to the industry volume.

Of course there was a tax hike in January, perhaps the consumers' mindset were negatively hit, and also perhaps downtrading have occurred. It could be that affordability has declined.

My question is, this volume decline, how do you perceive this? The fact that your market share is declining, what are your thoughts?

Also for the heated tobacco products, in terms of the share, the area that you are not involved in, the competitors are perhaps reaching 10% if not 20%. I believe you are not involved in this particular category.

Going forward, so as JT is not involved the heated tobacco products, how do you perceive the fact that the heated tobacco products share is increasing within Russia?

The question related to the Russian market, Kato will answer the question.

Saji-san, thank you very much for that question. As for Russia, for the first quarter, as you rightly mentioned, the volume have declined for JT, and likewise the market share has declined.

As some of the factors behind that, let me explain. Let's just say the items you've mentioned, they are correct, as you have understood.

In addition to that, in terms of the industry volume as a whole, year on year there was a positive. However, in terms of combustibles, there was a significant decline.

Some of the factors behind that, as you rightly mentioned in terms of the reasons, the heated products growth is somewhat more strongly in comparison to the combustibles. It is just as you have explained.

Of course there was the tax hike. The degree of the tax hike was larger than the previous years, hence that had led to deterioration of the affordability, especially for the combustibles.

That has led to the volume decline for both the industry volume for the combustibles. Now, for combustibles industry volume decline, and in addition to that, JT's market share is coming down, and that has led to the sales volume decline.

This is not just for combustibles, but for the market as a whole, we are seeing deterioration of the affordability, therefore there's been a downtrading in process. As downtrading progress in terms of the value price, in comparison to the overall market share, our market share in the value price is somewhat weaker.

We are stronger in the mid to more of a premium price. Therefore, if the market as a whole moves towards downtrading, that will pose a negative impact on our performance.

Going forward with heated products, how should we perceive them, and especially for the second quarter onwards, what would be the possible trend? That was the nature of a question.

Now, for the heated products growth, of course because of the combustibles, there was a price hike and also with the tax hike, we continue to see price increase. Whereas for the heated products, the competitors are also offering at somewhat more of a more affordable price.

Heated products of course continues to be higher in price in comparison to combustibles, but let's just say the price gap against the combustibles is narrowing. All in all, the affordability deterioration and also downtrading progressing, that is how the consumers are behaving at this moment.

As we see the deterioration in the affordability, what are some of the initiatives that we could conduct? Now, how long this would continue, and to what extent would it continue, depending on that, we need to consider different measures.

For instance, pricing, we may need to look at more of a value price, and we may need to strengthen more of our initiatives in those particular price range. We are not just complacent with how the market is behaving, we like to mitigate, if not try to get back to where it was before.

Those are some of our thoughts.

Thank you for that. Just one point to confirm then: so in terms of heated tobaccos, of course you are not conducting new investment here, but the market as a whole, the competitors, I think they're growing by 15% or so.

Basically your ideas don't change then? No new investments then?

As of this moment, we are monitoring the market closely as to what we can do and what we would do. We are making a cautious approach.

Understood. Thank you very much for that.

Mr. Saji, thank you very much.

Now we'd like to take the next question. From Nomura Securities, Mr.

Morita, please.

I'm Morita of Nomura Securities. I'd like to ask about the impact on the Iran and also Middle East.

That the Iran and Middle East related operation, you said that the direct impact is minor. What is the current status?

Also, would you comment on the FX impact? Also, are there some change after the IFRS?

For the full year based, what will be the level of the impact in the Middle East situation, and also what point we need to be mindful?

The impact by the Middle East situation, Furukawa will take that question.

Thank you very much, Mr. Morita.

Iranian situation and the Middle East situation, of course we do have the deep concern, and we hope to see the peaceful solution. Also we do have the operation there, and we are having the business bases there.

Our top priority to ensure the safety of the employees. Also we will continue to comply with the laws, including the local regulations.

Talking about Iran itself, first let me comment on this point. Initially, there was a temporary shutdown of the factory.

However, we didn't have any damage to the facility, and currently we do have the operation with close security control. Also for the distribution and safe sales activities, we do have some alternative routes, and sometimes we are taking the remote activities.

Also the raw materials necessary for the production, we have already secured the appropriate rules. Both for the completed products and also the materials, we do have a certain level of the inventory.

Another one for the financial expense, on the BS side, we had some reclassification. The trigger was when we look at the Iranian situation and also based on the IFRS requirement, we have revisited and had some reclassifications.

Also we had the agreement with the accountant as well. Any additional comment?

For the Middle East situation, well, let me comment on the financial impact slightly. Far, as Furukawa mentioned, operation itself, suspension of the operation didn't happen.

However, if there is a further deterioration and if the operation stopped, naturally we would have the negative impact, and we wouldn't rule out that possibility. Far we were able to continue our operation.

Whether that probability of the risk is high or not, actually we are closely monitoring that, and we don't think that is high. Also other materialized one that is related to the rising crude oil cost, the cost impact on us, and of course along with the increase of the oil cost, the energy cost and the raw material cost and the transportation cost are up, and sometimes the lead times are extending.

The distribution and the cost, yes, we are seeing that some pressures are there. We have seen some limited cost increase so far.

Majority of that exposure, we are having the very close monitoring. Also our cost that is directly affected by the crude oil price, the proportion that is a very small compared with the total cost.

I would say the impact is a limited one. Also how long that soaring oil price will continue, we would see that what would be the ultimate negative impact on us.

Given that we do have a very strong momentum of the tobacco business, as presented in the presentation by Furukawa, that profit growth for the full year, at this point of time, unless there is any big surprise, we're confident we'll be able to achieve that.

Thank you. A follow-up question: so on the operational side, it is currently functioning.

It is not clear risk, and also cost increase is a limited one. Is that what you mentioned?

Yes, your observation is correct.

Would you give us any quantitative comment on that?

Are you talking about the cost increase?

FX adjustment, or the cost environment, would you give us any quantitative comment?

As I commented in the presentation, on the balance sheet we have the reclassification. That is the under the OP line.

Iranian business itself, the adjusted OP, FX will continue to be with us, as usual. However, the latest Iranian rate, actually there is no prominent gap.

Of course the basic stance is we continue to have the close watch. For the impact for the entire company, currently that is a limited one.

Understood. Thank you.

Thank you very much, Mr. Morita.

The next question comes from Mr. Fujiwara, J.P.

Morgan Securities.

Hello, this is Fujiwara from J.P. Morgan.

Thank you for the opportunity. Can you hear me?

Yes.

One question: so the first quarter results has been very robust. Adjusted operating profit, vis-a-vis the full year basis, I think it's close to 70% or so on a constant currency basis.

Of course depending on the Middle East situation, of course we need to be mindful of that. As of this moment, perhaps there's not much of a big risk at this moment.

Perhaps Q1, was it better, too good to be, or should we perceive more risk in the second quarter onwards? Pretty sure the full-year guidance is well within the realm of achieving, but what are some of the potential concerns that we should have going forward?

For the first quarter results, how we evaluate those, and also how we perceive the rest of the year, Mr. Furukawa would provide you with an answer.

Thank you very much for that question. As you rightly mentioned in terms of the Middle East situation, the first quarter, as of today, the impact has been limited as of today, that is.

Depending on how it may change, of course we need to closely monitor that. Of course some of the supply chain related costs and the crude oil, the price deriving from the Middle East situation, of course we need to pay close attention to, and those could be considered as risks.

Again, Q1 has just been completed. In terms of the industry demand for the major markets and the FX for the major markets, we'd like to make sure we keep a close watch on those.

As far as Q1 is concerned, as mentioned already, we are steadily progressing towards the full-year guidance achievement. Accordingly, we'd like to give an update if the situation changes.

Just to add on, then: so the first quarter, it was a very good start. In terms of the temporary demand in Japan, I believe it's several hundred millions of sticks.

Is this the right way to look at that? Also in terms of the other profit, the RRP-related investments, I think there was a comment on some of the timing difference.

If you could also give us more of a quantitative number in terms of the impact.

The question was related to the Japanese market about the last-minute demand impact and also some of the difference in booking of the cost. Mr.

Kato would talk about that.

In terms of the impact of the last-minute demand in Japan, it's hard to assess the exact number, but the end product is it was larger than we initially anticipated in terms of the pre-tax hike last-minute demand. This is our estimate, but as you mentioned, several hundred million sticks, that is also our understanding in terms of the magnitude.

Also another point, the investment, and also the timing difference, and Mr. Furukawa mentioned about the full-year outlook, and this is related to that.

For the heated products related investment, there has been some timing difference and has been pushed out. Of course sales promotion accounts for a large part of that.

Depending on the competitive climate of the respective market, we would conduct those sales promotion at the most effective timing. As far as Q1 is concerned, there were some changes in terms of the timing.

Q2 onwards, on a full-year basis, we should be able to execute those. Actually, inherently Q2 onwards we were planning to conduct these sales promotions, it was skewed more towards Q2 onwards.

Q1, in terms of the proportion of the investment, it was initially limited. As our plan, it is skewed more towards the second quarter onwards.

The business as a whole has been quite favorable for Q1. In terms of Q2, we will see more investment.

Also as Mr. Furukawa mentioned, we shall see more of the volume.

In fact, we need to closely watch the situation of Russia. Also what has been positive in Q1, for instance the Philippines, also Turkey, Bangladesh, those markets were positive in Q1.

In fact, last year in Q1, it has been very strong on a year-on-year. However, the second quarter onwards, last year's the volume of Q2 onwards, perhaps a positive year-on-year impact may not be continued for the second quarter.

Actually that was already baked into our guidance. What we initially anticipated -1% to flat, that was the guidance at the beginning of the year.

As of now, after Q1, a plus 0.9%. The full-year guidance hasn't changed dramatically.

All in all, Q2 onwards, we may see some deceleration in terms of the top line as well as the volume. Actually that has already been baked into our guidance.

That is just a comparison year on year, and also the execution timing of the cost, but in terms of the general momentum continues to be strong, then? Yes, the share momentum last year was very strong, and that momentum has been able to successfully continue, and we've been able to confirm that in Q1.

Q2 onwards, we have high conviction that we can carry this.

Understood. Thank you.

Thank you, Mr. Fujiwara.

Now we'd like to take the next question. From Goldman Sachs, Mr.

Miyazaki, over to you.

This is Miyazaki of Goldman Sachs. Thank you for your presentation.

I have one question. I'd like to ask about the profit change in the first quarter.

I'm looking at the page 5, and in this others cost, there might be some phasing. In the second quarter and onward, it to be increasing.

However, still in the last 1 year, the average of others was around 40 billion yen or so for pushdown. This seems to be a bit smaller with that 12 billion.

Initially you said that others cost is going to be more than 164 billion in the last years. If that remains unchanged in the Q2 and onward, does the cost increase be much larger?

Is my observation correct? Also talking about the price mix, this is positive 8.2, and this seems to be a bit big one.

Also you're going to have the offset by that to offset the cost increase. Then the price mix benefit should be bigger than this in the Q2 onward.

You have the pricing in January and onward, and also price mix impact will be bigger in the Q2 and onward. Would you comment on the price mix and others?

For the tobacco business, AOP's change factor, others and price mix and the results, and also the forecast, Kato will make some comment.

Talking about the others, as explained earlier, well, you seem to have a different impression. In the Q2 onward, especially for the Ploom AURA in each market, since the launch in the previous year, it has been progressing in terms of the awareness, and also trial having increasing, and that has led to the better retention.

We are going to spend more in our investment to that regard. That means we're going to have a certain level of the cost or investment.

Cost-wise, well, there will be some impact by the inflation, and it to be increasing with that. Talking about the pricing, in Q1, compared with initial forecast, 80% of the pricing is already done.

Going forward, we continue to have the solid pricing as scheduled. In Q1, our level of achievement is very high.

In addition to that, we are happy to add on, and which is already put into the plan, and we continue to make further progress.

Understood. Thank you very much.

Mr. Miyazaki, thank you very much.

The next question comes from Mr. Furuta, SMBC Nikko Securities.

Thank you very much. This is Furuta from SMBC Nikko Securities.

I also have one question. The first quarter, as there has been discussion, it has been strong.

What has been the biggest factor that you're seeing a stronger results in comparison to the plan? Of course you had pricing and so forth, what do you believe that was the biggest factor that you performed better?

The questions related to the fact that the actual was better than the plan for the first quarter, Mr. Kato will reply.

Already mentioned the pricing and the Q1, we've been able to execute 80%, we've been able to secure the 80% of the pricing. As I mentioned, and that was actually better than our initial anticipation.

For instance, in the Philippines, we've been able to execute the pricing strategy, and that has been very instrumental in achieving this results.

Thank you very much. Also for going forward then, you've talked about the timing difference in investment, and also there are some concerns related to the industry volume in Russia.

In terms of the increase in the EPS and then also the guidance for the full year, would you perceive that you could still achieve those?

Of course, I think the strength that we've seen in quarter 1, that may actually expect us to see an upward revision. Actually Q1 has been very strong.

As mentioned already, the business fundamentals continue to be very strong, and we believe this could be carried on. We have high confidence in doing that.

However, this is again at the time of the first quarter. The second quarter onwards, just to repeat myself, we expect to see more investment, and we need to pay a close attention to the volume outlook as well.

Second quarter onwards, accordingly we'd like to provide an update. Again, just to repeat myself, as of today, we have been able to make a very strong start.

We have confidence as of this moment that we can achieve the guidance number.

Thank you very much. That is all.

Thank you, Mr. Furuta.

Now I'll take the next question. From Daiwa Securities, Mr.

Igarashi, please.

Thank you for taking my question. I'm Igarashi of Daiwa Securities.

Which is not covered, the category share of the Ploom in Japanese market. Slide 8 shows 15.8% and up by 3.1 percentage point year-on-year basis.

Looking closely, in the Q4 it was 15.7%, quarter on quarter it is almost flattish. How do you see this number?

Do you see that you are gaining shares? Would you have your comment on a quarter-on-quarter basis, please?

The Ploom's category share in Japan and also the quarter-on-quarter basis, Mr. Kato will comment.

Thank you, Mr. Igarashi, for your question.

As you see, the Q4 in the previous year, the Ploom's category share was 15.7%, and this time it is 15.8%. It seems that the growth seems to be rather slowing down.

Yes, I do agree your observation. Ploom AURA, growth in Japanese market is not decelerating, actually, and momentum is solidly sustained.

However, at the end of the day, the share gain is now slowing down, partly because there was some impact by the temporary demand prior to the tax increase in April. To be more specific, in March there was a temporary demand.

For JT, yes, we did have the impact. Looking at the competitors, at the March number, the increase out of the temporary demand was larger compared with ours.

That has made some impact, and that was reflected in the share movement. Then when the temporary demand impact is normalized in a few months, like in May and June, actually we need to take a few more months to see how the situation will evolve for the normalization.

We'll continue to have the close monitoring. Ploom AURA, underlying momentum itself, rather than having the concern, we are confident and we'll continue to grow.

Thank you very much. As mentioned earlier, the marketing investment for the Ploom in the Q2 onward, are you going to enhance that, is that correct?

Yes, including Japan, and globally. Are we going to have more investment in Q2 onward?

We'll have the skew.

Thank you. That's all.

Thank you very much.

Mr. Igarashi, thank you very much.

We still have time. It appears as if there are no more questions.

Now we would like to conclude the Q&A session. We will now conclude the meeting.

Thank you so much for your participation.