Integrated report

Business Plan 2024

contents

Every year, the JT Group publishes a three-year rolling business plan reflecting the changing operating environment, including economic trends, geopolitical risks and the competitive landscape. Business Plan 2024 covers the three years from 2024 to 2026.

Given the increasing uncertainty and complexity in our business environment, we will build a business foundation for sustainable future profit growth through optimal leveraging of our resources on a global scale and aggressive business investment.

Operating environment outlook 2024-2026

Tobacco business
  • We are projecting a difficult business environment ahead, with erosion of total industry volume, continued down-trading, prominent geopolitical risk, a tougher operational environment for RRP (Reduced-Risk Products) due to tightening regulations, higher taxes and stronger competition on top of exchange risk. Higher supply chain, due to rising raw material and logistics costs, and indirect costs, as well as increased illicit trade as travel restrictions ease, are also concerns.
Pharmaceutical business
  • We project drug price reductions both in Japan and abroad, following a global trend toward rationalization of drug costs.
Processed food business
  • Japan’s domestic market is expanding in line with lifestyle changes and rising demand for convenience, including easier cooking that takes less time. Outside Japan, we project expanding business opportunities due to population growth, rising income standards and the worldwide popularity of Japanese cuisine.
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Group profit targets

Mid- to long-term targets

Mid- to high-single-digit annual average adjusted operating profit (AOP) growth rate (consolidated basis) at constant currency

Prospects during the business plan period

Consolidated AOP at constant currency is expected to remain at the same level as the previous year for 2024 due to enhanced investment in RRP, but will likely return to a growth path from 2025 onward, resulting in expectations of a compound annual growth rate in the mid-single digits for the entire three-year period of the business plan
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Roles and targets for each business

Tobacco business
Core driver of the Group’s profit growth
  • While continued strong top-line growth is expected, we foresee a mid-single-digit compound annual AOP growth rate over the three-year period starting in 2024 due to continued investment in RRP, primarily HTS (heated tobacco sticks). However, we expect the growth rate to increase in the later part of the business plan period due to top-line growth contribution from RRP

Tobacco business
operating policy
  • Prioritize investment in HTS, which is expected to be the fastest growing RRP segment
    • Ploom X will be available in over 40 markets by the end of 2026
    • At the end of 2026, RRP-related revenue is expected to increase by approximately 2.5 times compared to 2023, driven by increased sales volume
    • Our shares of the HTS key markets segment in key markets will expand to the mid-teens by 2028
    • Our RRP business will breakeven by 2028*
  • Pursue top-line growth and continuing ROI improvement in the combustibles business
  • Selective investment in RRP category products other than HTS, based on future market potential
  • Continue strengthening Company-wide strategic capabilities

*

Breakeven at brand contribution level representing gross profit less commercial expenditure and before allocation of overheads

Pharmaceutical business/
Processed food business
Complement the Group’s profit growth
  • Pharmaceutical business:

Focus on R&D investment for next-generation strategic products, and maximizing the value of each product
Expect to maintain a stable profit level during the business plan period

  • Processed food business:

Realize profitable top-line growth
Targeting mid-single-digit profit growth over the business plan period

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Resource allocation policy

Resource allocation policy
based on the 4S model
and the JT Group Purpose
  • Prioritize business investments*1 for sustainable profit growth over the medium and long term
  • Strike a balance between profit growth through business investments and shareholder returns

Shareholder return policy
  • While maintaining a strong financial base, aim to improve shareholder returns by achieving medium- and long-term profit growth*2
  • Target a dividend payout ratio of about 75%*3, a competitive level*4 in capital markets
  • Consider implementing a share buyback program, mainly taking into account the Group’s financial outlook for the respective year and projected capital needs

*1

Growth of AOP for constant currency through high-quality top-line growth

*2

The Group will maintain a strong financial base that secures stability in case of changes in the business environment such as economic crises and flexibility enabling expeditious responses to business investment opportunities

*3

To be in the range of approximately ±5%

*4

Monitor the shareholder return trends of Fast-Moving Consumer Goods companies which have a stakeholder model similar to our 4S model and have realized strong business growth
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Integrated Report 2023

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