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• Revenue: Increased both at constant FX and on a reported basis.

• Adjusted Operating Profit (AOP): Increased 2.6% year on year at constant FX.

• Operating Profit: Increased 0.8% year on year.

• Free Cash Flow: Decreased by JPY159.8 billion to JPY260.5 billion.

• Tobacco Business Volume: Total volume grew by 2.2% year on year.

• Combustibles Volume: Increased by 1.8% year on year.

• RRP Volume: Increased by 22.8% year on year.

• Ploom Volume: Increased by 40% year on year to 5.9 billion units.

• RRP-Related Revenue: Increased by approximately 22% year on year.

• Vector Acquisition: Total value approximately USD2.4 billion, increasing US market share from 2.4% to 8.2%.

• Pharmaceutical Business Revenue: Decreased by JPY2.8 billion.

• Processed Food Business Revenue: Increased by JPY2 billion.

• Dividend Payout Ratio: Approximately 74%, with annual dividend per share forecast at JPY194.

• Warning! GuruFocus has detected 4 Warning Sign with BLX.

Release Date: October 31, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive 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.

Negative Points

• 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.