Japan Tobacco (2914) Q3 2024 earnings summary

Executive summary

• Revenue for the first nine months of 2024 rose 11.0% year-on-year to ¥2,393.3 billion, driven by strong tobacco pricing and processed food growth, offsetting declines in pharmaceuticals.

• Adjusted operating profit (AOP) at constant FX increased 2.6% year-on-year, supported by tobacco and processed food segments.

• The Vector Group acquisition in the US for $2.4 billion expanded US market share from 2.4% to 8.2%, making the group the fourth largest tobacco company in the US.

• Full-year forecasts for revenue and AOP were revised upward, reflecting strong business momentum and the inclusion of Vector, while profit guidance was tempered by higher costs, taxes, and Canadian litigation risks.

• Proposed annual dividend per share remains unchanged at JPY 194.

Financial highlights

• 2024 Jan–Sep reported revenue: JPY 2,393.3bn (+11.0% YoY); core revenue at constant FX: JPY 2,214.0bn (+6.8% YoY).

• AOP at constant FX: JPY 681.7bn (+2.6% YoY); reported AOP: JPY 672.5bn (+1.2% YoY).

• Operating profit: JPY 636.6bn (+0.8% YoY); profit: JPY 442.4bn (+0.1% YoY).

• Free cash flow declined by JPY 159.8bn to JPY 260.5bn due to temporary working capital deterioration and tobacco tax payment timing.

• Basic earnings per share for the period was ¥249.18, nearly unchanged from the prior year.

Outlook and guidance

• Full-year 2024 revenue forecast revised up to JPY 3,163.5bn (+11.3% YoY); core revenue at constant FX: JPY 2,953.5bn (+8.2% YoY).

• AOP forecast at constant FX: JPY 774.0bn (+6.3% YoY); operating profit: JPY 688.0bn (+2.3% YoY).

• Profit forecast revised down to JPY 467.0bn (-3.2% YoY) due to higher financial costs, taxes, and Vector-related costs.

• Free cash flow forecast revised down to JPY 156.0bn, reflecting Vector acquisition payments.

• Annual dividend forecast is JPY 194.00 per share, unchanged from the previous forecast.