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Japan Tobacco Inc. (JAPAF) Q4 2022 Earnings Call Transcript

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Japan Tobacco Inc. (OTCPK:JAPAF) Q4 2022 Earnings Conference Call February 15, 2023 4:00 AM ET

Company Participants

Masamichi Terabatake - Chief Executive Officer

Eddy Pirard - Chief Executive Officer of JT International

Nobuya Kato - Chief Financial Officer

Vassilis Vovos - Chief Financial Officer of JT International

Conference Call Participants

Makoto Morita - Daiwa Securities

Nobuyoshi Miura - Citigroup

Hiroshi Saji - Mizuho Securities

Satoshi Fujiwara - Nomura Securities

Naomi Takagi - SMBC Nikko Securities

Haruka Miyake - Morgan Stanley MUFG Securities

Operator

Thank you for participating successful nan gathering for 2022 Full Year Results astatine Japan Tobacco Inc. today. It is time, truthful we would for illustration to start.

In today's meeting, first, Mr. Terabatake, Chief Executive Officer of nan JT Group will present you Business Plan 2023. And Mr. Eddy Pirard, CEO of JT International, will follow, who explains Tobacco Business 2022 results and 2023 outlook. Lastly, Mr. Kato, Chief Financial Officer of nan JT Group, will explicate JT Group 2022 results and 2023 forecast. Then, we move connected to Q&A session, and this gathering is scheduled to extremity astatine 8:00 p.m. JST.

Now, I'd for illustration to present you nan first presenter, Mr. Terabatake, please.

Masamichi Terabatake

I americium Masamichi Terabatake, President and CEO of Japan Tobacco. Thank you for taking nan clip to be today's financial results briefing. I americium grateful for your continuing support and encouragement.

First of all, I would for illustration to widen my heartfelt sympathy to nan victims of nan caller earthquake successful Turkey and their families. The JT Group has begun providing emergency alleviation services specified arsenic hunt and rescue. We sincerely believe for nan information of everyone and for nan earliest imaginable betterment of nan affected areas.

I would besides for illustration to return a infinitesimal to definitive my concerns astir nan business between Russia and Ukraine. I americium profoundly concerned astir nan quality calamity and devastation unfolding successful Ukraine and sincerely dream bid will return soon. The JT Group continues to spot nan highest privilege connected nan information of our labor and their families and it's extending each imaginable support to affected people.

Today, I will statesman an overview of fiscal twelvemonth 2022 followed by our recently articulated JT Group Purpose. Next, I will stock specifications down nan Business Plan 2023. Then, I'll explicate nan strategical roles of each of our businesses and our initiatives towards sustainability earlier discussing our allocation of guidance resources astatine nan end. Eddy Pirard, nan CEO of JTI, will supply cardinal highlights of nan baccy business. And Nobuya Kato, CFO of nan JT Group, will item our consolidated financial results for 2022 arsenic good arsenic nan forecasts for 2023.

First, an overview of 2022. Please spot Slide 5. 2022, successful summation to changes successful societal and user behaviour owed to COVID, was a twelvemonth of precocious uncertainties, including world ostentation and economical stagnation, nan business successful Russia and Ukraine, and FX fluctuations.

Against this backdrop, beardown sheer momentum driving a resilient measurement and pricing effects successful nan baccy business, which is nan halfway of our business, importantly exceeded nan first scheme for 2022 announced successful February past year. Despite nan tight proviso and request of semiconductors, we were capable to much than double our HTS class shares from nan early of 2021, driven by nan publication of Ploom X successful Japan.

As nan first twelvemonth of nan mixed baccy business guidance structure, 2022 was a twelvemonth which has successfully strengthened our business instauration and capabilities done various initiatives. Thanks to nan contributions of nan baccy business, JT Group, arsenic a whole, achieved grounds highs from gross to profit, while changeless rate adjusted operating profit and profit greatly exceeded nan erstwhile years and first plans.

Considering our afloat twelvemonth results and pursuing nan 3rd 4th announcement, we scheme to salary an yearly dividend of [JPY180] (ph) per stock for 2022 successful accordance pinch our shareholder return policy.

Next, I'd for illustration to present nan recently articulated JT Group Purpose. Please spot Slide 7. In nan midst of discontinuous changes successful nan societal and business environment, we person designed nan JT Group Purpose to supply a clear guidance towards being a much sustainable business for nine astatine large.

In articulating this plan, we looked astatine areas wherever nan JT Group tin beryllium expected to lend successful nan early nine and areas wherever nan JT Group tin proceed to lend complete nan long-term. We person wished that JT Group's top worth is to consistently supply nan Fulfilling Moments done our products and services and to create these moments together pinch society.

Fulfilling Moments is simply a halfway worth that JT has provided done its products and services. This intends that nan articulation of nan JT Group Purpose does not embody a caller group of values that disagree from those of nan past. On nan different hand, nan Fulfilling Moments demanded successful nan early whitethorn dishonesty beyond nan products and services of nan coming JT Group. Alternatively, they whitethorn beryllium wholly different. We judge that JT must proceed to germinate truthful that nine tin proceed to entrust nan area of Fulfilling Moments. We must besides flexibly alteration nan intends of providing worth successful statement pinch nan ever-changing values of nine and people.

By clarifying our halfway -- people of evolution, focusing connected Fulfilling Moments and changing nan intends of providing worth arsenic needed, we judge that together pinch our immutable firm philosophy, embedded successful nan 4S model, nan JT Group intent will alteration our firm entities, businesses and individual labor to specify what kinds of products and services to supply and to create these moments together pinch society.

In bid to nexus nan JT Group Purpose to nan activities of each business, we person besides articulated nan intent for each business based connected nan JT Group Purpose. From now on, each conception will attraction connected nan business cognition pinch nan JT Group Purpose successful mind.

The intent for each business is arsenic described connected nan slide. Each business will lend to nan realization of nan JT Group Purpose done nan realization of each business purpose. Going forward, each of our businesses will lend to nan realization of nan JT Group Purpose done nan execution of their ain purpose.

Details of our baccy business intent will beryllium shared astatine nan Tobacco Investor Conference, which is scheduled to beryllium held connected May 8 this year.

In our existing businesses, we will spot apical privilege connected nan execution of nan strategies we person outlined, and connected that basis, we will purpose for further evolution. Importantly, we will germinate each kinds of activities to recognize nan JT Group Purpose.

As an inaugural toward realizing nan JT Group Purpose, we established D-LAB, a firm R&D organization. The domiciled of D-LAB is to behaviour research, research and create nan seeds of early businesses pinch a attraction connected nan conception of Fulfilling Moments. This conception includes a wide scope of activities, specified arsenic those that entreaty to nan 5 senses, for illustration consciousness and nutrient and those that subordinate to wellness, specified arsenic breathing.

D-LAB activities will lend to nan improvement of Fulfilling Moments and purpose to lend to JT Group's net maturation successful nan long-term. D-LAB activities are mostly divided into multifaceted investigation connected nan worth of Fulfilling Moments, seeds exploration and seeds creation for early businesses.

The squad is perpetually moving connected much than respective twelve projects, while repeating proceedings and error. Let maine present immoderate circumstantial initiatives for each area.

In our multifaceted research, we behaviour associated investigation pinch universities arsenic good arsenic activity pinch partner companies to deepen our knowing of nan worth of Fulfilling Moments. One of our investigation results we took and developed into a prototype of a respiratory-guided robotic cushion, we really participated successful nan Las Vegas 2023 CES, 1 of nan astir renowned exertion exhibitions successful nan world and won an Innovation Award.

The seeds exploration for early businesses purpose to research areas which could create Fulfilling Moments, specified arsenic technologies that tin lead to early products and services. For example, we are a sole investor successful a task superior money that invests successful early-stage startups. The money has presently invested successful astir 140 companies, chiefly successful Europe and nan United States that person affinity pinch Fulfilling Moments.

We besides person a statement that explores and researches earthy materials chiefly successful Asia successful collaboration pinch outer parties, specified arsenic universities. With seeds creation for early businesses, we create products and services from zero, behaviour tests and person affiliates that person reached nan shape successful which we really supply Fulfilling Moments to our customers, truthful conscionable done trading aggregate products.

In summary, by exploring opportunities beyond those of nan existent JT Group, we are committed to delivering worth successful nan shape of Fulfilling Moments done a assortment of firm activities successful statement pinch nan changing society, clip and people. And D-LAB is 1 of our astir salient activities.

Next, I'd for illustration to present nan Business Plan 2023, our three-year scheme commencing this year. Please spot Slide 11. Within Business Plan 2023, our mid- to semipermanent target remains unchanged. We will proceed to prosecute sustainable profit maturation complete nan mid- to long-term. To execute this goal, we will trust mostly connected nan baccy business arsenic nan profit maturation motor of nan JT Group.

Within nan halfway baccy business, we will fortify our world organizational strength. At nan aforesaid time, we will amended net successful combustibles, prioritize investing chiefly successful RRP categories, peculiarly HTS, which are nan astir important for early profit maturation and support a competitory costs base. In 2023, arsenic nan twelvemonth to laic nan foundations for achieving early profit growth, we will importantly put successful nan baccy business, including accelerating investments successful nan HTS segment.

In addition, antagonistic effect of nan higher input costs will make nan adjusted operating profit astatine changeless FX broadly unchangeable versus nan erstwhile year. On nan different hand, we expect low-single-digit maturation for adjusted operating profit astatine changeless FX successful nan existent business plan.

However, we stay assured nan unchangeable contributions from combustibles and nan improved HTS profitability to travel will alteration nan JT Group to proceed delivering connected its target to execute mid-to-high single-digit maturation of adjusted operating profit astatine changeless rate successful nan mid- to long-term. As a result, we intend to steadily turn DPS successful statement pinch our shareholders return policy, which targets a dividend payout ratio of 75% done sustainable mid- to semipermanent maturation of profit.

Before moving to our business segments, I would for illustration to adhd immoderate much specifications astir nan strategical priorities successful nan baccy business that I person conscionable presented. The recently mixed baccy building which started successful January 2022 has contributed to heighten nan world organizational capabilities.

We besides made advancement pinch regards to nan world formulation and implementation of unified and accordant strategies and nan utilization of world resources. We are continuing to amended nan velocity of decision-making and to build a much effective and businesslike business structure, arsenic good arsenic to fortify nan worth to consumers done integer and merchandise innovation.

In combustibles, which we judge will stay nan largest baccy class for nan foreseeable future, nan attraction is connected continuing to turn nan gross base. By maintaining a disciplined finance attack towards our brands and markets, we will thrust net successful a sustainable and semipermanent manner.

We scheme to put much than JPY300 cardinal successful RRP during business scheme 2023. We see HTS to beryllium nan class pinch nan highest imaginable for sustained net growth. Investing successful HTS will beryllium our priority. As shown connected nan slide, location are 3 awesome medium- to semipermanent RRP ambitions. We expect RRP gross to much than double by 2025 compared to 2022, HTS marketplace stock successful nan cardinal HTS markets to scope nan mid-teens level by 2028 and to breakeven successful RRP class by 2028.

We person already mentioned respective times immoderate of nan measures we person implemented to summation nan competitiveness successful nan baccy business, whether overseas aliases successful Japan. We person already generated complete JPY40 cardinal successful tally complaint savings complete nan three-year period. Of course, we will proceed arsenic we usually do to research caller improvements, including astir JPY20 cardinal wrong our proviso concatenation successful 2024.

In our mid- to semipermanent strategy, we judge that nan mixed baccy building will lend to nan early maturation of JT Group.

Let's move connected to our policies for nan baccy business. As I said earlier, location is nary alteration to nan domiciled of nan baccy business, which utilized to beryllium nan profit maturation motor of nan JT Group. As nan outlook of nan operating situation for Business Plan 2023, we will intimately show changes specified arsenic nan effect connected nan world system of ostentation and economical stagnation caused by geopolitical risks, arsenic good arsenic accelerated costs increases, taxation increases aimed astatine securing nan financial resources of nan governments of each state and further advancement and complexity of nan regulations.

The outlook for nan early remains uncertain. But moreover nether this environment, we proceed to purpose for profit maturation pinch nan baccy business arsenic nan maturation engine. Downtrading is expected to proceed considering nan existent macroeconomic situation and nan implications connected consumers' disposable income. Our attraction connected combustibles are improving return connected investment.

We will proceed to turn profits done sustained marketplace stock gains, beardown marque portfolio and top-line maturation fueled by pricing opportunities connected apical of nan existent business momentum. These efforts will beryllium supported by improvements wrong nan proviso concatenation efficiencies and disciplined finance attack towards our beardown portfolio of brands.

Next will beryllium our strategy for RRP. As RRP is expected to grow further, peculiarly successful HTS, it is truthful highly important that we put to fortify our beingness successful this important class for nan early maturation of nan JT Group earnings.

From an operating situation perspective, we judge that user request for RRP will proceed to increase, notably for HTS. 2023 scheme springiness america overmuch amended assurance and visibility connected our proviso of devices for nan upcoming years contempt nan semiconductor proviso shortage.

In awesome HTS markets, we besides expect title to intensify. We expect regulatory developments to evolve. As explained earlier, we will prioritize our finance towards HTS successful particular. Through these investment, we will accelerate nan geo description of Ploom X and grow nan HTS conception stock of Ploom.

In addition, we are sharing feedback from consumers successful each marketplace globally and utilizing nan information for R&D, trading and different purposes to continuously amended our products and further fortify our capabilities.

Before moving to our different business segments, fto maine reaffirm our beardown attraction connected nan RRP class during business scheme 2023. As mentioned earlier, we scheme to grow our HTS class shares successful cardinal HTS markets to nan mid-teens level by 2028 and breakeven successful nan RRP category.

In bid to recognize this ambition, we will accelerate geo description starting pinch nan motorboat of Ploom X successful nan U.K. successful October 2022 and successful Italy successful April 2023. Over nan two-year play of 2023 and 2024, we scheme to participate much than 20 markets. In addition, we will aggressively put successful trading successful HTS to support nan geo description .

Next, let's move to nan pharmaceutical and processed nutrient businesses. Starting pinch nan pharmaceutical business. It's our knowing that nan situation astir nan pharmaceutical business will stay challenging arsenic supplier prices proceed to diminution successful some Japanese and overseas markets, reflecting nan optimization of supplier costs connected a world scale. Inside JT, we are besides projecting a gradual alteration successful royalty income related to anti-HIV drugs. At nan aforesaid time, Torii Pharmaceutical has precocious delivered dependable maturation successful nan income of narcotics for allergies and tegument disease.

In 2022, we saw a accordant pipeline development, including receiving support that JW Pharma Company Limited, a licensee for ENAROY tablets received trading authorization successful South Korea. In January 2023, CORECTIM Ointment was approved for nan curen of atopic dermatitis for nan curen of infants.

We will proceed to amended our supplier find capabilities by enhancing investigation teams and innovating nan supplier find process. We will besides activity to heighten our business fundamentals by collaborating pinch Torii Pharmaceutical to maximize merchandise worth and fortify in-licensing activities.

Next is nan processed nutrient business. In nan processed nutrient business, nan processed nutrient class successful which JT Group chiefly operates continues to expand. On nan different hand, we judge it is basal to proceed to intimately show nan effect of fluctuations successful world markets and speech rates connected earthy worldly costs and nan emergence successful unit and logistic costs caused by labour shortages and different factors.

Against this backdrop, successful nan processed nutrient business, we will steadily instrumentality value revisions successful consequence to nan existent surge successful earthy materials prices, chiefly successful nan stiff and ambient foods segment. At nan aforesaid time, we will toggle shape into a highly-profitable business building by strengthening nan allocation of resources to precocious value-added merchandise groups, thereby achieving sustainable profit growth. In addition, we will accelerate our efforts to turn our business from a semipermanent position and beforehand nan creation of customer worth pinch an oculus connected nan early of food.

We will guarantee that some pharmaceutical and processed nutrient businesses will complement nan profit maturation for nan group by pursuing nan basal strategies we've group for them.

Let maine move connected to nan taxable of our initiatives for sustainability. Sustainability initiatives are very important to support nan semipermanent maturation of our business and those are intelligibly successful statement pinch nan 4S model, our guidance principle. To present success, myself, arsenic nan CEO, and nan Board of Directors prosecute successful mounting targets, discussing circumstantial initiatives to execute them and monitoring nan advancement of nan related initiatives, each pinch patient commitment.

Let maine item immoderate of nan advancement made successful 2022. In February past year, I explained our caller greenhouse state emissions simplification targets retired to 2030. The target for Scope 1 and 2 emissions is now validated by nan Science Based Targets inaugural arsenic being successful statement pinch nan latest ambiance subject and 1.5 degrees pathway. Climate alteration is an rumor needing contiguous attraction globally and nan JT Group will fortify initiatives to execute nan validated target and lend to realizing nan decarbonization of society.

Our sustainability initiatives are besides well-recognized and nan JT Group has been included successful nan world recognized Dow Jones Sustainability Asia/Pacific Index for nan ninth consecutive year. We judge that our inclusion successful nan scale is nan consequence of our earnest efforts to reside ESG issues crossed our worth chain. Another illustration of outer nickname is nan action for CDP Climate A List, which has materialized for nan 4th consecutive year.

From 2023 onwards, we will further fortify our sustainability model and initiatives successful statement pinch nan JT Group Purpose. We person initiated activity to update our materiality topics for sustainable maturation and besides revise our value-creation process to nexus nan values nan group will supply successful nan JT Group Purpose.

Some of nan outcomes will beryllium explained successful our adjacent Integrated Report 2022 that is planned to beryllium issued successful June this year. For nan JT Group to proceed delivering semipermanent growth, it is basal that we lend to societal advancement done our business activities. We are taking actions to alteration nan nine and nan JT Group to turn sustainably based connected dialogues pinch our stakeholders and successful statement pinch nan JT Group Purpose.

Next, fto maine outline our policies connected assets allocation and shareholder returns. Our assets allocation argumentation will stay unchanged. We will prioritize finance successful businesses that are conducive to sustainable profit growth, nan baccy business successful particular, based connected our 4S model.

While maintaining our targeted payout ratio of astir 75%, we will activity to amended shareholder returns done continuous profit maturation complete nan mid- to long-term. To that end, we will proceed our efforts to grow adjusted operating profit astatine changeless currency. The dividend for 2023 is projected to beryllium JPY188 per share, successful statement pinch our shareholder returns policy.

In closing, please spot Slide 20. In 2022, nan twelvemonth continued to beryllium a twelvemonth of precocious uncertainty, including changes successful nine and user behaviour owed to COVID-19. Nevertheless, we were capable to recognize grounds precocious profits, acknowledgment to nan beardown momentum, peculiarly successful nan baccy business. Based connected our caller business guidance structure, we proceed to make consumer-centric reasoning and actions, nan starting constituent of each of our work, and we person further promoted nan maximization of group-wide usage of resources and nan accent connected faster and much elastic decision-making.

In 2023, we will proceed to fortify our world organizational capabilities done business finance and purpose for sustainable maturation complete nan mid- to long-term. In summation to ensuring nan elasticity of our business strategy for nan future, we will steadily amended shareholder returns done sustainable maturation of profit complete nan mid- to long-term, successful statement pinch our shareholder return policy, which targets a dividend payout ratio of 75%.

On May 8, we will clasp a Tobacco Investor Conference to explicate our early growth-oriented baccy business, including our efforts to execute our ambitions for HTS done 2028.

Together pinch societal change, we person formulated a JT Group Purpose to supply worth successful nan shape of fulfilling done a assortment of firm activities that are much evolving. To make it happen, we will germinate each kinds of initiatives and activities to recognize JT Group Purpose.

Following done connected nan 4S exemplary arsenic our basal guidance principle, I will strive to support nan JT Group evolving, truthful that it will proceed to connection products and services that transcend user expectations and proceed to beryllium desired by our consumers, shareholders, labor and nine astatine large.

Thank you very overmuch for your attention. Now, I will manus complete to JTI's CEO, Eddy Pirard, for an update of nan baccy business.

Eddy Pirard

Thank you, Terabatake-san, and bully day to you all. It is my pleasance to coming present nan 2022 afloat twelvemonth results of JT Group's baccy business, combining for nan first clip nan erstwhile world and Japan home baccy businesses.

Let maine commencement by saying that I tin only echo Terabatake-san's words connected Turkey and besides connected Ukraine.

I will now reappraisal our 2022 capacity followed by Business Plan 2023 cardinal assumptions. In 2022, nan baccy business afloat delivered connected its domiciled arsenic profit maturation motor for nan JT Group, overcoming nan galore challenges, including nan Russia-Ukraine warfare and nan semiconductor proviso shortage limiting our HTS description plans.

Our full baccy volume, including each combustibles and RRP products, was broadly stable, fueled by sustained marketplace stock gains successful our apical 30 markets. Coupled pinch coagulated pricing, this capacity drove our beardown top-line growth, resulting successful a robust adjusted operating profit increase.

We began nan twelvemonth pinch nan One Tobacco integration, unifying our baccy businesses and building a stronger and much agreed organization. The thrust and power of our labor astir nan world was a awesome occurrence driver. The One Tobacco integration consolidated our expertise and knowledge globally, established greater collaboration, faster decision-making and further enhanced our business fundamentals. Our world baccy strategy is astatine nan bosom of each our initiatives. We thrust net pinch a dedicated attraction connected combustibles ROI, profitable stock gains and increasing revenues successful our combustible business fuels our finance successful HTS.

Let maine return you done our marketplace stock capacity connected nan adjacent slide. Our user focus, beardown execution and fantabulous engagement pinch nan waste and acquisition delivered different twelvemonth of marketplace stock gains successful nan combustibles class globally and successful HTS successful Japan.

In combustibles, we grew stock 0.6 percent points to 35.6% crossed our apical 30 markets, including successful our cardinal markets of Italy, nan Philippines, Spain, Taiwan and Turkey. Two-thirds of our apical 30 markets grew stock pinch advancement successful some cigarettes and fine-cut tobacco.

In cigarettes, we grew our stock successful nan mid-price segment, wherever Winston continued to registry gains and successful nan worth value conception wherever Camel kept its increasing momentum. In fine-cut, we strengthened our starring position, notably pinch Winston, Camel and Sterling successful nan U.K.

Global flagship brands were a cardinal contributor to stock gains successful combustible, reaching a grounds precocious stock of 24.8% crossed our apical 30 markets, expanding 1.3 percent points. Global flagship brands grew stock successful 24 of our apical 30 markets, led by Winston and Camel. Several caller launches for illustration Camel Craft and MEVIUS E bid successful Japan supported nan stock maturation momentum. I will grow connected these caller launches later successful nan presentation.

All successful all, nan continued stock capacity is simply a consequence of semipermanent sustained and focused finance strategy based connected heavy and applicable user insights, starring to a well-laddered portfolio of beardown brands.

Our stock gains bolstered our business pinch full measurement declining by only 0.5 percent point. This capacity was fueled by a constricted combustible measurement diminution of 0.7%, outperforming an estimated manufacture diminution of 1.5% crossed our markets, mixed pinch double-digit RRP measurement growth. More than 60 markets grew measurement and complete 10 markets delivered an yearly measurement maturation of astatine slightest 0.5 cardinal units.

GFB measurement grew by 1.9 percent points, chiefly driven by Winston and Camel, which grew double-digit successful much than 30 markets. Poland, Iran, Italy, Turkey, Tanzania and Brazil were nan largest contributors to Winston growth, while Russia, Indonesia, nan Philippines, Morocco, Spain and Japan drove Camel performance. LD and MEVIUS grew successful much than 10 markets.

Importantly, RRP was our fastest-growing class successful position of volume, albeit from a mini guidelines arsenic we made important inroads into nan HTS conception successful Japan. The investments down HTS are enhancing our full measurement inclination successful statement pinch our world baccy strategy and we expect this inclination to accelerate arsenic of 2023 arsenic we proceed pinch our investments and description plans.

Let's move connected to pricing. Once again, nan resilience of a combustible pricing exemplary was amply demonstrated successful 2022. In a challenging environment, we generated a grounds JPY140 cardinal successful favorable price/mix variance to halfway revenues. This is supra our 2018-2021 mean and compensated for nan unexpected costs increases owed to nan macroeconomic and geopolitical environments.

In position of pricing, each clusters contributed positively to halfway gross growth. In EMA, nan main drivers were Russia, Turkey, Romania and Poland. In Western Europe, nan U.K. and Germany were key. And past but not least, Japan and nan Philippines, which fueled affirmative variances successful Asia. In position of mix, nan unwinding of COVID trends, notably successful nan U.K., and ongoing downtrading partially offset nan pricing contribution. While this was existent for astir markets, we besides witnessed uptrading trends arsenic was nan lawsuit of Turkey and Taiwan.

Let's now reappraisal nan capacity of our caller clusters introduced pinch nan unification of nan 2 baccy businesses. Beyond pricing, which I've conscionable mentioned, each clusters contributed to maturation successful 2022, some successful position of combustible shares and adjusted operating profit. Core gross and profit maturation was wide crossed our footprint, pinch much than 65 markets increasing some financial metrics.

In Asia, we strengthened and broadened nan guidelines of markets contributing to maturation pinch nan support of our GFBs. The Philippines and Taiwan reached caller highs and we besides registered grounds marketplace stock and profit publication successful markets for illustration Cambodia and Malaysia.

In Western Europe, we grew apical and bottommost statement contempt nan unwinding of COVID-19 trends. This affirmative capacity was driven by beardown price/mix and combustible stock gains successful France, Germany, Greece, Ireland, Italy, Luxembourg, nan Netherlands, Spain and Switzerland. Beyond our cardinal markets successful nan cluster, Germany continued to present a coagulated performance, fueled by GFB marketplace stock gains and halfway gross maturation driven by excise tax-led value increases.

EMA, our largest cluster, was nan strongest contributor to halfway gross and AOP growth, some expanding double-digit. This maturation was fueled by beardown measurement capacity pinch much than 50 markets successful nan cluster increasing measurement and world recreation unit progressively recovering, each of this coupled pinch robust price/mix.

Another occurrence communicative extracurricular nan cardinal markets was Poland, wherever we grew marketplace stock by 1.2 percent points, wholly driven by our GFBs. This, coupled pinch an improved manufacture measurement and pricing, led to coagulated halfway gross and profit maturation successful 2022.

Let maine move to our cardinal markets now, starting pinch nan U.K. In 2022, we maintained our undisputed marketplace activity done a balanced attack successful managing stock and profitability. This is nan consequence of complete a decade of investments and awesome execution by our U.K. squad to fortify our starring position, some successful cigarettes and fine-cut.

Benson & Hedges, nan Number One marque successful cigarettes, grew marketplace stock by much than 8 percent points complete nan past 5 years. Amber Leaf and Sterling, respectively first and 2nd brands successful nan fine-cut tobacco, class grew by 3.7 percent points.

In combustibles, we grew stock by almost 5 percent points to 45.1%. Over nan aforesaid period, our halfway gross successful nan U.K. accrued by 19%, driven by robust pricing and nan stock gains conscionable mentioned, which offset nan manufacture measurement decline.

On nan taxable of manufacture measurement contraction, I would for illustration to accent that though nan diminution was important successful 2022 owed to nan unwinding of COVID trends, nan wide inclination has not changed. When looking astatine nan mean combustibles manufacture diminution complete nan past 3 years, this was adjacent to minus 1.1%.

We person besides strengthened our offerings successful nan worth conception to reside incremental user request by launching 2 caller products successful April 2022, Mayfair Silver successful cigarettes and Benson & Hedges Blue successful fine-cut. In heated tobacco, we launched Ploom X successful London astatine nan extremity of October past year, and early user feedback is positive.

Our strengthened portfolio and fantabulous waste and acquisition relationships led to encouraging combustible stock trends complete nan past months. Going forward, you tin remainder assured successful our capacity to turn net successful nan U.K. while maintaining our marketplace stock leadership.

Moving to nan Philippines, wherever backmost successful 2017, we acquired nan assets of Mighty Corporation, instantly boosting our marketplace stock from 7% to 29%. The acquisition besides allowed america to summation activity successful nan worth conception pinch nan section brands Mighty and Marvels and to triple nan number of constituent of income served successful what is simply a analyzable geography.

But it was only nan commencement of our maturation journey. From there, done focused finance and beardown execution, we grew our stock organically by astir 8 percent points to astir 37%. This maturation was driven chiefly by Winston, now nan 3rd largest marque successful nan Philippines, supported by a well-articulated portfolio addressing each value segments.

Importantly, Winston stock gains were delivered while its battalion value much than doubled complete nan period. This capacity drove important halfway gross and profit maturation contempt a fiercely competitory environment. Going forward, we are assured successful our expertise to support our marketplace stock and proceed to thrust a affirmative top- and bottom-line performance.

Turning to Japan, wherever nan combustibles manufacture measurement continued to diminution owed to nan effect of tax-led value increases, though astatine a slower complaint than nan erstwhile year. In addition, station nan excise taxation equalization impacting nan small cigar conception successful October 2021, downtrading did not slow, but shifted from big consumers moving into small cigars to buying worth cigarettes. To reside this caller trend, we strengthened our portfolio successful nan little value conception pinch nan motorboat of Camel Craft.

Camel Craft genuinely correspond nan Camel marque spirit, a unsocial equity astatine nan correct value for consumers. In only six months, Camel not only became nan Number One marque successful value, but exited nan twelvemonth arsenic nan Number Two combustible brands successful nan country. We besides strengthened nan Number One position of MEVIUS pinch nan E bid description successful nan mid-price segment. This caller bid much than doubled its stock versus nan commencement of 2022. More recently, we extended nan E bid to nan debased tar and ace slim conception to broaden its entreaty to a larger big user base. More of specified initiatives are successful nan pipeline.

Looking backmost astatine 2022, we've enhanced our starring positions successful each 3 value segments of nan Japan market. And we've exited nan twelvemonth pinch a marketplace stock of 60.4% successful combustible, 3 percent points supra past twelvemonth successful January, a beardown recovery, which we are assured will proceed successful 2023, and a grounds to our colleagues successful Japan who are committed to take sides and turn our beardown section combustible franchise.

In Japan, not only did we fortify our activity successful combustibles, but nan motorboat of Ploom X provided a measurement alteration successful our capacity successful HTS. Ploom X is our first genuinely world merchandise and almost important motorboat successful respective years. In Japan, our first Ploom S instrumentality was launched successful 2019, followed by nan 2nd procreation successful 2020 and a wholly caller device, Ploom X, launched successful August 2021, an accelerated travel pinch awesome upgrades on nan way, some successful narration to devices and to consumables.

The innovations of Ploom X, including our proprietary aerial travel strategy importantly improved nan user acquisition and translated successful important stock gains successful nan HTS segment, increasing from 3.2% earlier nan rollout to scope 8.2% successful December past year. More importantly, retention rates accrued since launch, highlighting nan competitiveness of our offering. This was enhanced by nan preamble of caller flavored SKUs, promotions successful consequence to fierce offers prevailing successful nan market, best-in-class customer attraction arsenic good arsenic nan betterment of nan Ploom X CLUB.

The Ploom X CLUB is portion of our e-commerce platform, offering a personalized acquisition based connected each big user preferences. A points-based strategy allows consumers to unlock promotions and participate to initiatives accessible only to CLUB members. A subscription exemplary is besides disposable and gaining expanding traction. The Ploom CLUB is conscionable 1 illustration of nan benefits resulting from our enhanced capabilities that now encompasses some nan integer and beingness unit space. More investments are ongoing successful this direction, and we will support you updated connected cardinal achievements.

With its expanding occurrence successful Japan and targeted motorboat successful London supported by awesome retention rates crossed nan board, Ploom X is now fresh to move to nan adjacent shape of its description plan. In 2023, we will accelerate nan Ploom travel pinch nan purpose to go a world powerfulness marque pinch nan planned motorboat of Ploom X successful much than 10 markets

You tin expect our attraction to beryllium connected established HTS markets wherever we tin use from existing precocious levels of class consciousness among big consumers. This focused finance strategy will let america to optimize our investments compared to markets wherever larger resources would beryllium required to pass and person different consumers to nan HTS category.

You tin expect nan rollout to beryllium skewed toward nan 2nd half of 2023 arsenic we build inventories of devices pursuing nan readiness of nan semiconductor supply. We intend to support nan motorboat gait successful 2024 pinch further launches planned successful 10 further markets. This accelerated description scheme builds connected a world baccy strategy, which prioritizes HTS among RRP segments.

The Ploom geographic description is conscionable 1 pillar of our HTS finance strategy. Equal attraction is placed connected enhancing our soul capabilities pinch strategical investments, merchandise innovation, R&D, subject and user acquisition and retention to dramatically standard up our competitiveness successful HTS. We will stock much specifications during our upcoming May Tobacco Investor Conference.

In closing, each successful all, I judge that nan first afloat twelvemonth results of nan unified baccy business were fantabulous crossed nan committee and rather promising. Despite nan challenges and disruptions, we exited nan twelvemonth stronger than erstwhile we started. Stronger pinch a much cohesive world baccy business, stronger pinch much occurrence successful some combustible and successful HTS. These achievements paved nan measurement for further maturation complete our three-year business plan.

Let maine commencement by sharing our 2023 attraction areas. In RRP, our attraction this twelvemonth is connected driving further HTS stock gains successful Japan and rolling retired Ploom X successful much than 10 markets. As shared earlier by Terabatake-san, we are successful an accelerated finance shape to execute our ambition successful RRP. This requires important trading support and soul investments considering nan already aggravated competitory situation successful this category.

In combustibles, which will proceed to supply nan substance for nan HTS investments, our attraction successful 2023 is connected top-line maturation and driving return connected investments done continued profitable stock gains, GFB equity building and optimized pricing opportunities. As a matter of fact, we person already announced aliases secured 60% of our pricing for nan year.

Kato-san will supply much specifications connected nan 2023 guidance successful this presentation, truthful fto maine move to nan mid-term outlook. We expect full measurement to beryllium unchangeable complete nan adjacent 3 years pinch continued marketplace stock gains expected to partially offset manufacture declines successful combustibles. In RRP, maturation successful HTS is forecast to thrust a double-digit measurement increase. Over nan Business Plan period, halfway gross is expected to summation mid-single digit pinch combustible pricing remaining a cardinal driver for growth, supported by accrued RRP gross publication to nan apical line.

Adjusted operating profit is forecast to turn debased single-digit complete nan three-year scheme pinch stronger maturation towards nan extremity of nan period. This reflects higher RRP finance successful nan first years required to compete successful this category. The Business Plan is simply a clear testament of our committedness to accelerate maturation successful HTS and advancement towards our RRP ambitions while remaining focused connected capacity successful combustibles.

Rest assured that we will proceed to turn returns from nan combustibles business, which will not only stay nan largest and astir profitable class for galore years to come, but besides which will money our efforts successful RRP.

Thank you for your attraction and liking successful nan baccy business. I will now manus complete to Kato-san for nan reappraisal of nan JT Group financial results.

Nobuya Kato

Thank you, Eddy. I americium Nobuya Kato, Chief Financial Officer of nan JT Group. I will explicate our consolidated financial results for 2022 and stock specifications regarding nan outlook for 2023.

First, fto maine explicate our consolidated financial results for fiscal twelvemonth 2022. Please spot Slide 4. Our adjusted operating profit astatine changeless currency, our superior capacity indicator, accrued 9% year-on-year, driven by nan baccy business. As Eddy mentioned, nan main driver of nan baccy business' profit maturation was nan beardown pricing contribution, enabling america to flooded nan challenging operating environment, specified arsenic expanding power prices and worldwide inflation. As a result, we achieved grounds precocious revenue, AOP, operating profit for continuing operations and profit for continuing operations.

Revenue connected a reported ground accrued 14.3% year-on-year, fueled by nan beardown top-line maturation successful nan baccy business and nan important depreciation of nan Japanese yen, arsenic good arsenic accrued gross successful nan pharmaceutical and processed nutrient businesses.

AOP was besides positively impacted by nan gross maturation and nan important Japanese yen depreciation, resulting successful a 19.2% year-on-year increase. Operating profit jumped 31% year-on-year, reflecting nan AOP summation and nan favorable comparison to 2021 from nan absence of one-time costs related to initiatives to fortify our competitiveness successful Japan and nan deficiency of compensation payments to retiring Japanese leafage baccy growers.

Profit accrued 30.8% year-on-year arsenic nan summation successful operating profit afloat offset higher financing costs.

Free rate travel decreased by JPY99.1 cardinal compared to nan erstwhile fiscal year, contempt a important summation successful AOP. This diminution was owed to a deterioration successful moving capital, higher firm income taxation and payments related to onetime costs associated pinch initiatives to fortify competitiveness successful Japan.

Next, fto maine move connected to nan results for each business segment, starting pinch nan baccy business. Please mention to Slide 5. Eddy has explained our marketplace stock and measurement capacity successful detail. So, I'll attraction connected nan financial figures connected a reported basis, including FX impacts.

During 2022, beardown pricing contributions from each clusters importantly outweighed nan effect of an unfavorable marketplace operation crossed nan baccy business arsenic good arsenic an unfavorable merchandise operation associated pinch downtrading and higher input costs wrong nan proviso chain. The depreciation of nan Japanese yen further boosted our performance, resulting successful beardown maturation connected a reported basis. As a result, some halfway gross and AOP increased, achieving double-digit percent growth.

Next, I will explicate nan results of our pharmaceutical and processed nutrient businesses. Please spot Slide 6.

Starting pinch nan pharmaceutical business. Revenue accrued year-on-year, driven by income maturation astatine our consolidated subsidiary, Torii Pharmaceutical, from CORECTIM Ointment successful nan area of tegument diseases, CEDARCURE, Japanese cedar pollen sublingual tablets, and MITICURE House Dust Mite Sublingual Tablets successful nan area of allergens, contempt nan little onetime income from nan licensing of patented JT compounds and little overseas royalty income. AOP was broadly unchangeable arsenic nan gross maturation was mostly offset by increases successful R&D expenses astatine Torii Pharmaceutical.

Turning to nan processed nutrient business. Revenue accrued compared to nan erstwhile fiscal twelvemonth owed to value increases successful consequence to rising costs successful nan stiff and ambient foods business, seasonings business and bakery business arsenic good arsenic income maturation successful family products and nan betterment of nutrient services products successful nan stiff and ambient nutrient business. Despite top-line maturation driven by value increases, AOP declined from nan erstwhile fiscal twelvemonth owed to soaring earthy worldly and inferior costs arsenic good arsenic antagonistic overseas speech effects and nan unfavorable comparison of a one-time income point resulting from an security declare recorded past year.

Turning to our business forecast for fiscal twelvemonth 2023. Before explaining nan consolidated financial forecast, I would for illustration to reiterate nan existent authorities of nan Russian market. Please spot Slide 8.

Regarding Russia, while nan operating situation remains very challenging, we proceed to manufacture and administer our products successful compliance pinch applicable regulations and world sanctions. Also, arsenic announced successful March 2022, we person suspended each caller investments and trading activities successful Russia. There person been nary changes successful our stance. We will proceed to return each basal decisions successful consequence to changes successful circumstances and successful accordance pinch our guidance accuracy guided by our 4S model.

In fiscal twelvemonth 2022, nan Russian marketplace accounted for astir 11% of gross and astir 22% of AOP successful our consolidated financial results. In nan consolidated forecast of 2023, which I will explicate successful much item shortly, nan Russian marketplace will relationship for astir 11% of gross and astir 25% of AOP. In 2022, nan Russian business included a impermanent summation successful costs owed to nan effect of sourcing changes and different factors. As a result, we expect 2023 to relationship for a higher proportionality of AOP than 2022 results.

I would for illustration to reason connected Russia by mentioning nan sensitivity guidance for nan Russian ruble. If nan Russian ruble moves by 1% against nan Japanese yen, it will person astir much than JPY2 cardinal effect connected our AOP.

Please spot Slide 9. First, I will explicate nan consolidated financial forecast. In nan baccy business, though we expect pricing benefits to continue, we forecast net maturation will beryllium constricted owed to nan ongoing effect from higher input costs related to world ostentation and our plans to accelerate investments successful RRP, peculiarly successful nan HTS. As a result, AOP astatine changeless FX, our superior capacity indicator, is expected to beryllium level year-on-year.

Despite nan anticipated summation successful gross successful nan pharmaceutical business, gross connected a reported ground is forecast to alteration by 1.1% year-on-year owed to nan antagonistic effect of speech rates connected nan baccy business. Similarly, AOP connected a reported ground is expected to alteration by 8.4% from nan erstwhile fiscal twelvemonth owed to nan antagonistic effect of speech rates connected nan baccy business, much than offsetting nan anticipated summation successful income successful nan pharmaceutical and processed nutrient businesses.

For reference, we estimate nan antagonistic FX effect connected nan AOP will beryllium astir JPY60 cardinal for nan full year. Operating profit is expected to alteration by 6.4% year-on-year owed to nan alteration successful AOP, partially offset by little trademark amortization. Year-on-year profit is expected to beryllium unchangeable astatine JPY440 cardinal arsenic betterment successful financing costs will partially offset nan alteration successful operating income.

Although we expect little AOP and an summation successful superior expenditures, nan favorable comparison to 2022 from nan absence of payments related to initiatives to fortify our competitiveness successful Japan and nan little firm income tax, free rate travel is expected to summation by JPY19.1 cardinal to JPY402 billion.

Please look astatine Slide 10. I will explicate nan forecast of each business. First, we will attraction connected nan measurement outlook of nan baccy business. In fiscal twelvemonth 2023, we expect combustible stock momentum to stay coagulated crossed our footprint. We besides expect maturation successful combustibles measurement successful emerging markets and continued measurement betterment successful world recreation retail. And RRP income measurement is besides expected to increase, peculiarly successful Japan. However, nan diminution successful combustibles manufacture measurement successful our cardinal markets, specified arsenic Japan, nan Philippines, Russia, nan U.K. and different countries will offset these affirmative effects. As a result, full measurement included some combustibles and RRP is expected to alteration betwixt 1.5% to 2.0% year-on-year.

On nan gross side, while combustibles measurement successful cardinal markets is expected to diminution and nan merchandise operation is expected to deteriorate owed to continued downtrading, nan pricing situation will stay robust. As Eddy mentioned, we person already announced aliases implemented 60% of nan planned pricing for this year. In addition, RRP-related gross is expected to grow. As a result, halfway gross astatine changeless FX is expected to summation by 2.2% complete nan erstwhile year.

AOP astatine changeless FX is expected to beryllium broadly unchangeable versus nan erstwhile twelvemonth arsenic nan top-line maturation will beryllium offset by nan effect from higher input costs and accrued investments associated pinch nan geographic description of HTS.

Regarding reported figures, including nan effect of speech rates, some halfway gross and AOP are expected to diminution year-on-year owed to FX assumptions foreseeing an exertion of nan Japanese yen.

On Slide 11, I will explicate nan forecast for nan pharmaceutical and processed nutrient businesses. Revenue successful nan pharmaceutical business is expected to summation owed to a one-time income from nan licensing of patented JT compounds and nan gross maturation astatine Torii Pharmaceutical much than offsetting little overseas royalty income. AOP is expected to summation fueled by nan gross maturation contempt nan anticipated summation successful R&D expenses.

For nan processed nutrient business, contempt top-line maturation owed to value revisions successful nan stiff and ambient foods business and seasonings business successful consequence to higher cost, gross is expected to alteration owed to nan effect of nan absence of income successful nan bakery business, which was transferred connected December 1 of nan erstwhile year. On nan different hand, AOP is expected to summation contempt nan antagonistic effect of nan transportation of nan bakery business arsenic nan value summation benefits implemented successful 2022 and those planned for 2023 outweigh nan antagonistic effect of earthy worldly and inferior costs, which are expected to summation successful 2023.

In closing, please spot Slide 13. In fiscal twelvemonth 2022, contempt a challenging operating environment, we importantly exceeded our first plans, delivering awesome results, driven by nan beardown pricing successful our baccy business and continued gross and combustible shares. We person achieved grounds precocious profits driven by nan business momentum, besides supported by nan depreciation of Japanese yen. In fiscal twelvemonth 2023, we will fortify our investments successful RRP, focusing connected nan HTS conception to found nan foundations for nan JT Group's early net growth.

The operating situation is expected to stay challenging. We expect a coagulated pricing publication from nan baccy business, expanding input costs complete nan play and overseas speech rates headwinds versus 2022. In this environment, we expect to unafraid nan aforesaid level of AOP astatine changeless FX arsenic erstwhile twelvemonth done pricing and costs efficiencies.

Let maine extremity my position pinch shareholder returns. Based connected our shareholder returns policy, we scheme to salary a dividend of JPY188 per stock for 2022, a dividend payout ratio of 75.4%. For 2023, arsenic Mr. Terabatake has explained, we scheme to salary JPY188 per share, a dividend payout ratio of 75.8% successful accordance to nan target ratio of astir 75% based successful our shareholder returns policy.

This concludes my presentation. Thank you each very overmuch for your attention.

Question-and-Answer Session

Unidentified Company Representative

Thank you all. We'd for illustration to now commencement nan Q&A session. Let maine present you to nan speakers who will return your questions, Mr. Masamichi Terabatake, CEO of nan GT Group; Nobuya Kato, CFO of nan JT Group; Eddy Pirard, CEO of JTI; and JTI CFO, Vassilis Vovos.

[Operator Instructions] Due to clip constraints, we would for illustration to inquire each personification to inquire only 1 mobility each. We whitethorn not beryllium capable to return each nan questions. We dream you understand. Thank you for waiting.

Let maine present nan first personification from Daiwa Securities, Mr. Morita, complete to you.

Makoto Morita

This is Morita from Daiwa. Thank you for taking my question. Regarding your RRP strategy, I would for illustration you to stock pinch america your thoughts. Smoke-free future, your competitor has a very focused strategy. And you person besides been saying that you are going to summation your investments successful your presentation. However, combustibles are still expected to support a ample portion of your profits. So, pinch that successful mind, are you going to proceed to beryllium down your competition? Will you beryllium capable to drawback up pinch them? What is nan determination of your management?

And you're going to beryllium investing successful 3 years JPY300 billion, according to your presentation. How did you determine connected nan JPY300 cardinal number? Are you really going to beryllium capable to compete good against your competitor? Are you earnestly going to beryllium capable to drawback up to your title successful nan RRP category?

Unidentified Company Representative

Thank you for your question. Regarding our determination towards RRP arsenic good arsenic nan decision-making process towards nan investment, our President, Mr. Terabatake, will return that question.

Masamichi Terabatake

Thank you for your question. First of all, for combustibles and RRP and really we are going to onslaught a equilibrium betwixt nan 2 and really overmuch of a determination are we going to person astir RRP, it's nan wide image fundamentally you're asking about.

Regarding competitor strategy, we are not successful a position to speak astir it. But for illustration Eddy explained, for combustibles, we judge that successful nan adjacent 10 years, they will still proceed to beryllium a main portion of our profits. I presume that erstwhile you look astatine nan P&L of our competitor from a profit constituent of view, I still judge that combustibles are generating a ample portion of it. That's what we believe. And besides successful nan baccy business, it continues to beryllium nan main pillar. So, of course, if that pillar becomes unsteady, we won't beryllium capable to put into nan RRP business well.

So, for illustration we explained, we proceed to spot bully momentum and we expect our profit maturation to beryllium sustained, and we will besides attraction connected ROI, truthful that we will beryllium businesslike arsenic good arsenic effective successful our business management. We would for illustration to guarantee that we could make costs that we tin usage for investments.

And talking astir RRP and its future, successful nan past respective years, we person been integrating our R&D functionalities. We person besides integrated our baccy business, truthful that we could beryllium competing pinch our competitors for RRP connected a world scale. And we besides developed a world exemplary of Ploom X, and we launched it from August 21 successful Japan. And arsenic you tin see, we person gradually been seeing signs of growth. And erstwhile you perceive to feedback from consumers arsenic good arsenic nan reinforcement of integer capabilities, we person been reinforcing our R&D capabilities to date. And finally, from 2023, we will beryllium rolling retired this business globally, moreover more.

To opportunity a small more, for 2022, it's existent that successful Japan, we person been capable to turn HTS stock of market. But successful 2022, regarding nan investments into HTS, location were immoderate constraints regarding semiconductor procurement. So, we weren't astatine 100%. So, we had to power our investments by a definite degree. But from 2023, we won't person that obstacle immoderate longer. Therefore, we tin beryllium moreover much proactive moreover successful Japan to beforehand income going forward, and we would for illustration to guarantee that we seizure marketplace share.

And we person been learning from Japan for nan product, and we would for illustration to guarantee that our learnings are applied to nan motorboat that is planned for Europe. Last month, I was successful nan U.K., and I want to spot really Ploom X and its motorboat was doing astir and it seemed that nan learnings successful Japan were applied well. So, truthful far, things person been going well. And successful April, we will beryllium launching nan merchandise successful Italy. So, we person gained much visibility into nan world rollout. So, personally, I americium -- I person nan condemnation of being successful.

So, regarding really we built up nan scheme for JPY300 cardinal worthy of investment, nan capabilities we person this twelvemonth aliases we decided connected nan privilege markets and we looked astatine nan procurement of devices and decided connected nan volume, put together a trading scheme and past built our three-year plan. And that added up to an aggregate of astir JPY300 billion. And of course, this will beryllium reviewed connected a rolling basis. So, nan finance is worthy JPY300 cardinal aliases more, for illustration Eddy said.

In nan first half of nan 3 years, meaning this twelvemonth and adjacent year, we would for illustration to usage a bully magnitude for trading purposes. So, whether we are going to beryllium capable to beryllium comparable arsenic competitors aliases not, is that successful each of nan markets we would for illustration to guarantee that we leverage nan investments. So arsenic to first, turn our share, I deliberation it each comes down to that. And nan programme that we are poised to launch, we would for illustration to guarantee that, that will lead to marketplace stock gains, which we judge will happen. And for details, and from nan baccy business, we will springiness you specifications successful May erstwhile we person nan meeting.

But that is nan wide image from my standpoint. So, if Eddy would for illustration to travel up connected my point, please spell ahead.

Eddy Pirard

Thank you, Tera-san, and convey you for nan answer. And Morita-san, convey you for nan question. This is simply a mobility that so we do get from clip to time. And I deliberation it's important capable to effort to accent and thief everyone understand precisely what stands betwixt nan combustible and nan RRP category.

The mobility is very much, is it meaningful to prosecute a strategy successful combustible? Not only arsenic we explained successful nan presentation, is nan domiciled of combustible rather important successful nan wide operation arsenic a measurement to money nan translator into an RRP request by consumers. We are very acold from being exclusively a combustible company, arsenic you tin admit from nan scheme that we person laid retired successful beforehand of you.

And nan JPY300 cardinal that was mentioned and that Terabatake-san explained, so will beryllium very overmuch successful support of nan geo description . The measurement we do build up those numbers are very overmuch bottom-up pinch a consciousness of guidance from nan center, which intends that marketplace by market, we are ensuring that we've sewage nan capable level of resources that is required to compete fixed nan specifics of nan markets successful which we go.

And arsenic Terabatake mentioned, we're very overmuch a strategy that's focused connected privilege markets. We will beryllium focusing connected markets wherever nan awareness, nan beingness of nan class is there, meaning nan ratio of our way to market, leveraging our infrastructure, leveraging our bully brands and infrastructure successful nan marketplace successful general, nan waste and acquisition relationships that we person will thief america beryllium arsenic businesslike arsenic possible. We ever time off nan anticipation for markets to inquire for much if nan results show nan request for much aliases if nan competitory scenery evolves. But arsenic of today, we are assured that nan resources being put complete nan planned play for nan improvement of nan class is going to beryllium rather important.

I deliberation it's useful to besides revisit a small spot nan advancement that we've made successful Japan successful nan area of RRP. We person grown complete nan past twelvemonth our stock of assemblage successful RRP. Do we wish that we turn faster? Yes, we do. Are we contented pinch nan advancement that we make? Very overmuch so. We had an situation which was constrained by nan proviso of nan microchips that we discussed before. But we were very overmuch focused connected user knowing and insights connected learning astir way to marketplace and really to champion run an introduction into a market, blase marketplace and competitory marketplace for illustration Japan. And each this learning will beryllium deployed successful world markets, starting pinch nan U.K. and past twelvemonth and now going into Italy and different markets. The rollout successful astir 20 markets positive complete nan planned period, I deliberation it's rather ambitious, will beryllium targeted and well-funded. I dream that gives you different magnitude connected that strategy. Thank you.

Makoto Morita

Looking guardant to that. Thank you very much.

Unidentified Company Representative

Thank you, Morita-san. We would for illustration to present nan adjacent personification from Citigroup Securities, Mr. Miura, please.

Nobuyoshi Miura

Good evening. This is Miura from Citigroup. Can you perceive us?

Unidentified Company Representative

Yes, we tin perceive you.

Nobuyoshi Miura

Thank you very overmuch for nan opportunity. So conscionable to much of a basal question. In position of baccy manufacture and nan JT's sustainable growth, this is my mobility related to. So, possibly for nan adjacent 10 years aliases truthful nan rate cattle successful combustibles, you tin still make profit from location done nan pricing strategy, and you tin astir apt put successful HTS. So, possibly location is simply a stableness for nan adjacent 10 years. However, nan mobility is HTS whitethorn not beryllium truthful profitable, and if we spot summation successful nan proportionality of HTS wrong nan sales. So possibly astatine 1 constituent profitability of baccy manufacture and besides for JT whitethorn really commencement to travel down. It could beryllium 20 years retired aliases it could beryllium 30 years out, I'm not rather sure. But I do person a mobility astir nan sustainability of nan profitability of HTS into nan future. So, americium I incorrect successful suggesting that? So, I'd for illustration to perceive from Terabatake-san, if you tin springiness america your explanation, your thoughts?

Unidentified Company Representative

Thank you very much. So, nan sustainability of baccy manufacture and nan sustainability of profitability, truthful Terabatake-san would reply that.

Masamichi Terabatake

Thank you very overmuch for that really challenging question. So, wrong our mid- to semipermanent strategy, we person been discussing that connected a rolling basis, 10 years, 20 years, 30 years out, really sustainable tin we turn our business. So, we person been conducting continuous chat connected that. And arsenic Miura-san conscionable mentioned, we would for illustration to prosecute combustibles maturation arsenic acold arsenic we can. By 2028, we are trying to make nan HTS business a break-even.

So, nan gross separator you whitethorn comprehend that arsenic debased successful position of gross separator for HTS. However, we do not spot it that way. Because erstwhile we spell complete nan break-even point, we shall spot much of nan profit fig increase. So, successful summation to combustibles, HTS profitability will beryllium an add-on connected apical of nan combustibles. So, we do judge we tin proceed our growth.

But successful position of nan sustainability, really perpetual could that be? Would that spell up for different 30 years? At this point, of course, I'm not -- I cannot springiness you pinch assurance that we can. But let's conscionable say, 10 years, 15 years, 20 years, I would say, successful position of nan nicotine business and wrong nan baccy business, we should beryllium capable to turn rather steadily. We do person that image for that clip frame. Of course, it really depends connected nan market. For Italy, Poland, for instance, moreover arsenic we speak today, HTS gross separator successful comparison to nan marketplace share, it's still rather -- it is already significant. So, these markets, we would for illustration to strategically reside these privilege markets.

So, successful each nan cigaret trading markets, we do not intend to waste HTS, not astatine nan each markets. But we would for illustration to make it nan 2nd pillar wrong nan baccy business, truthful it tin assistance successful nan maturation aliases thrust nan maturation of nan company. That is our scheme correct now. So that is our mid- to semipermanent plan. So what I tin stock astatine this point, 10, 15, 20 years' timeframe, pinch confidence, we tin opportunity wrong nan baccy business, we would person combustibles successful HTS. It will beryllium nan main pillars to turn nan profit for nan company. So, astatine this peculiar moment, we do person that image up of us.

Nobuyoshi Miura

Thank you very much. That was very educational. Also, conscionable further mobility from my end, Russia. So, you person been disclosing successful a adjacent mode wrong your IR activities astir nan capacity successful your activities. So, astatine what constituent would nan profit from Russia commencement to disappear? Actually, that has been my interest each along. So, what are immoderate of nan conditions that you would officially retreat from nan Russian business? What are immoderate of nan conditions? So, correct now, you're watching each nan regulation. So, nan mobility is whether you tin proceed nan operations successful Russia, I'd conscionable for illustration to corroborate that?

Masamichi Terabatake

May I? So, successful position of Russia, location are a number of factors we request to consider, what will beryllium nan trigger for america to discontinue nan operation. So, it's difficult to show it will beryllium a azygous event. To beryllium honorable pinch you, location is nary azygous trigger that would commencement that. So correct now, from nan position of proviso chain, it is still operating successful position of nan sourcing of nan earthy materials. We've been capable to do that. And also, nan rate settlement, we've been capable to do that also.

So, nan sanctions that we are seeing, of course, there's been an upgrade of different functions, and we person been complying pinch nan sanctions and regulations truthful far. So, astatine this point, no, we do not comprehend that we request to discontinue nan cognition successful Russia. In fact, moreover arsenic we speak today, we are not anticipating immoderate circumstantial events that would discontinue our cognition of Russia. So, did I reply your question?

Nobuyoshi Miura

So is that each factored successful nan plan?

Masamichi Terabatake

So, I do judge that has been factored already into this year's plan. So, I do person immoderate comfortableness successful that.

Nobuyoshi Miura

But what if there's a abrupt event, and that would really bring down your marketplace headdress arsenic well? So, if you person immoderate simulations aliases lawsuit studies aliases immoderate factors that you see that whitethorn perchance hamper nan marketplace cap? If you tin stock those, that will beryllium helpful.

Masamichi Terabatake

Well, alternatively than specifically looking astatine different factors, it's each astir really we proceed our cognition correct now. That's wherever each our contented and ingenuity are going in. So, we are complying each nan sanctions, and we are trying to proceed our operation. And nan workforce, we person established a workforce successful Hong Kong, who would beryllium specifically focusing connected nan cognition successful Russia. And if we request to abstracted nan cognition from JT Group, we person been exploring different scenarios. And really we intend to abstracted nan business, of course, that will airs different effect connected our performance.

So, we are looking into those factors, but we are seeing immoderate changes successful nan sanctions. Also, we whitethorn request immoderate support from nan Russian authority. So, each instance, nan conditions are changing. So, accordingly, we are conducting a consequent information of nan situation. So, correct now, we are not expecting immoderate circumstantial arena that whitethorn perchance extremity our operation. We don't person that astatine this moment.

Nobuyoshi Miura

So, if that's nan case, truthful you're moving difficult and complying pinch nan regulations, but nan changes are rather dramatic. And of course, location are various issues if you were to abstracted nan business from nan JT Group. So, possibly it's challenging to make nan withdrawal then. Am I knowing this correct?

Masamichi Terabatake

Well, immoderate of our competitors person conscionable announced that they're not progressing successful position of nan initiative. So, of course, it is existent that we person been looking into it, but it is not truthful easy. Of course, it is not impossible. That is not nan case.

Nobuyoshi Miura

Well understood. Thank you very overmuch for your answer.

Unidentified Company Representative

Thank you very much, Miura-san. Let maine present nan adjacent person. Mizuho Securities, Mr. Saji, complete to you.

Hiroshi Saji

Thank you very much. It mightiness beryllium deviating from our results, but successful nan U.S. market, I wanted to corroborate your stance and expectations towards nan U.S. market. With nan JV pinch Altria, they haven't been offering immoderate further accusation lately. But erstwhile you deliberation astir your profit pool, I deliberation it is simply a important market. And erstwhile you deliberation astir nan global, your world business, I deliberation location is simply a value to nan JV you person pinch Altria. So, complete nan short-term and medium-term, tin you stock your views connected what benignant of expectations you person towards this market?

Unidentified Company Representative

Thank you very overmuch for your question. It was a mobility astir our stance and expectations towards nan U.S. market. So, Mr. Terabatake arsenic good arsenic Eddy will return your question. First is Mr. Terabatake.

Masamichi Terabatake

So, regarding nan measurement we look astatine our market, I deliberation Eddy should speak astir that. But regarding nan JV pinch Altria, nan backdrop to that was some CEOs talk to 1 and another. And successful nan RRP category, we wanted to beryllium globally Number One together. So that was nan overarching framework. And wrong LOI, upon -- agreeing upon nan wide framework, we were talking astir opportunities for HTS successful nan U.S. So that's really things started. So that's nan measurement to look astatine it.

So, we will beryllium supplying nan Ploom devices and we will beryllium offering nan expertise astir nan manufacturing of it. And Altria, pinch their Marlboro, they will beryllium providing their Marlboro brand. And together, we will beryllium proving nan imaginable of HTS successful nan U.S. So that is nan meaning for nan JV. And alternatively of going into nan U.S. unsocial because nan hurdles are precocious for that market, we wanted to activity together pinch Altria, which is nan starring institution successful trying to rotation retired an HTS business.

So, regarding nan U.S. market, tin Eddy speak astir it? Over to you.

Eddy Pirard

Thank you, Tera-san. Let maine effort to springiness an further small dimension. The nonsubjective for nan U.S. marketplace based connected wherever we are coming and fixed nan complexity of nan marketplace is to proceed to turn our stock momentum chiefly successful nan little extremity of nan market. And it is very difficult arsenic an situation to see immoderate outer maturation opportunities, arsenic you tin imagine. And our attraction has been very overmuch connected processing and strengthening our presence, building capabilities, building infrastructure complete clip and nan marque equity that allows america to compete. Looking astatine nan latest data, successful Q4 '22, our stock of marketplace reached 1.7%. But if you attraction connected nan states wherever we do operate, we are astatine 2.4% successful nan past 4th of past year.

Now arsenic Terabatake-san said, nan tone of nan business is very overmuch to look astatine nan future, to look astatine wherever nan opportunities are and really to champion leverage those. We person a akin position of nan early erstwhile it comes to our partner successful Altria. And it is really nan joining forces of 2 powerhouses, if you will, that person akin ambitions successful nan abstraction that bring to nan statement circumstantial skills, infrastructure. And erstwhile it comes to nan U.S. market, it's very difficult to compete pinch nan marketplace leader successful Altria that covers an situation and a web of 200,000 outlets positive successful nan market, which is wholly retired of region connected our ain and would beryllium wholly disproportionate to nan business that we tin bring in. So, nan thought of joining unit is to seizure that opportunity makes a batch of consciousness for us, starting pinch a attraction connected HTS, which is simply a caller class and what remains nan astir important RRP marketplace successful nan world, wherever we do person dream to proceed providing consumers pinch offers to fulfill their various needs.

So, this is intelligibly embryonic. We conscionable announced this very recently. There's a batch of momentum down this. The first measurement of nan business will be, of course, to taxable nan merchandise for PMTA for premarket authorization. It is very clear to america that this was besides successful a way, a ballot of assurance successful nan merchandise that we would beryllium bringing to nan market, and we're very overmuch looking guardant to joining unit to research much opportunities successful nan abstraction of RRP beryllium successful nan U.S. aliases beyond. But clearly, nan first footstep was to look astatine nan opportunity successful nan U.S. market. Thank you.

Unidentified Company Representative

Saji-san, I dream that answers your question.

Hiroshi Saji

Well, regarding nan JV pinch Altria, you were besides talking astir nan world perspective. But including joining hands successful nan RRP category, what are immoderate opportunities successful nan non-U.S. markets? Have you identified anything?

Unidentified Company Representative

I think, Eddy, JTI CEO, tin return that question, opportunities extracurricular of nan U.S. pinch Altria.

Eddy Pirard

Yes, I deliberation that was a pleasure. We are astatine nan early stages of that business and we are presently engaged very meaningfully successful discussions astir nan various categories and really without putting anyone connected a pedestal, it's each nan categories retired of nan HTS wherever we started that exploration. Altria benefits from its ain intelligence spot development, R&D efforts and initiatives successful nan space, we person our own, and we are comparing notes arsenic to what is astir applicable to fulfill nan evolving user needs.

As you know, Altria has been peculiarly progressive successful nan area of nicotine patch, for example, this is an area wherever we are besides present. We are ever looking astatine opportunities and user insights to spot wherever nan marketplace tin return us. I deliberation it's amended to conscionable time off it for later. We've sewage thing circumstantial to stock pinch you. But astatine this constituent successful time, location is nary limitation into nan exploration effort that is covered by nan memorandum of knowing betwixt our 2 companies.

Hiroshi Saji

Thank you. Well understood.

Unidentified Company Representative

Thank you, Mr. Saji. So, I'd for illustration to present nan adjacent mobility from Nomura Securities, Fujiwara, please.

Satoshi Fujiwara

This is Fujiwara from Nomura Securities. I person a mobility related to RRP. So, by 2028, successful cardinal markets, will beryllium successful nan mid-teens. That is nan marketplace stock that you're looking at. So, wrong Japan, nan PMI is overwhelmingly beardown and nan marketplace shares are somewhat fixed. So, I do judge Ploom X stock is increasing, but possibly nan maturation will beryllium somewhat much gradual. So, I person a mobility extracurricular of Japan. So U.K., Italy and each nan markets that you will beryllium making inroads going forward, nan marketplace is astatine a different shape from Japan. So, what will beryllium nan gait of stock gains? Would it beryllium overmuch much quicker than Japan? I do judge that is possible. So, what are immoderate of nan expectations successful position of nan velocity of stock gains? And also, if you tin stock pinch america nan existent business aft nan motorboat successful London, that would beryllium helpful.

Unidentified Company Representative

So, Eddy from JTI would reply that question.

Eddy Pirard

It is very difficult to disclose nan gait astatine which we're going to seizure consumers successful those various markets. Each marketplace is circumstantial successful each marketplace wherever we person circumstantial challenges. But clearly, we are eager and nan ambition by '28 to person mid-teens successful those privilege markets, I think, is simply a bully reflection arsenic nan gait that is embedded to get to that level. As I said successful nan presentation, conscionable to reframe, successful nan conception of nan gait of development, nan U.K. was very overmuch done successful a trial marketplace of London and to commencement pinch towards nan extremity of past year, mostly earlier -- sorry, of past year, apologies. And we will person Italy coming astir April, and nan markets will beryllium skewed towards nan 2nd half of this year. So, it will springiness you a consciousness arsenic to erstwhile we tin expect to spot immoderate improvement of that category.

The U.K. market, it's still excessively early to get meaningful feedback. What we tin show you is that we person quickly captured astir 60% weighted distribution successful cardinal accounts successful nan London area, which we cover. The feedback from some waste and acquisition and user is rather positive. So we are, I think, gathering our soul milestones, if you will, arsenic to really we deploy it. We are reasonably cautiously bullish astir our prospects. We are very happy to spot nan advancement successful Japan. We person a batch of betterment has been made to boost nan instrumentality arsenic good arsenic to nan combustible nan sticks and nan brand's performance. So, overall, I deliberation that nan ambition that we person by '28 is thing that we are assured we tin present on.

Vassilis Vovos

If I whitethorn adhd conscionable activity points and springiness immoderate much granularity connected nan points that you conscionable mentioned, Eddy. Just to adhd immoderate granularity, I deliberation nan constituent that successful Japan, nan business is very circumstantial is correct, because nan constitution of brands has started earlier, title has been location for a longer clip and nan user habits are stronger and nan equity of nan competitory brands has been building for a longer time. So, having said that, I surely judge that we are not speaking astir stiff marketplace share. So, we person proven past twelvemonth that we tin turn [Technical Difficulty] marketplace stock betwixt nan infinitesimal of nan launched of Ploom X and today, we person moved from 300,000 consumers to 1.2 cardinal consumers that take Ploom X. We spot continuously expanding nan number of [indiscernible] consumers among our franchise and to person momentum, arsenic you saw, which continues besides successful January.

But nan mobility is much what is happening extracurricular of Japan. We person nan nonsubjective to beryllium successful mid-teens, let's say, thing for illustration 15%-plus of our service class by 2028. As mentioned earlier by Eddy, nan markets wherever we are entering person already a very beardown commercialized infrastructure. For JTI, we person very beardown user franchises successful these markets and our wide marketplace stock is overmuch higher than nan 15% that we target successful 5 years. So, overall, I deliberation fixed besides nan truth that nan equity of nan competitory brands is much caller than what we person seen successful Japan, we should expect that we tin build up this marketplace stock successful nan adjacent 5 years.

Unidentified Company Representative

Fujiwara-san, did we reply your question?

Satoshi Fujiwara

Thank you very overmuch for that.

Unidentified Company Representative

Let maine present nan adjacent person. SMBC Nikko Securities, Takagi-san -- Ms. Takagi.

Naomi Takagi

This is Takagi. Can you perceive me? I person a mobility for President Terabatake regarding shareholder return. Last twelvemonth you did a immense dividend hike and that came crossed arsenic a large surprise. And of course, I deliberation that was attributed partially to nan rate complaint impact, and we really don't cognize wherever rate rates are headed. But if they were to unwind, possibly profits whitethorn spell beneath your expectations substantially. But should we beryllium fresh to spot a dividend cut? Or regarding nan rate complaint risk, really are you intending connected managing nan equilibrium betwixt that and dividend? Because you person nett cash, you person a beardown P&L. So, tin you stock your views?

Unidentified Company Representative

Thank you for nan question. Regarding shareholder return and really we deliberation astir nan effect from rate rates, Mr. Terabatake will return your question.

Masamichi Terabatake

Thank you for your question. Last year, it's existent that location was a favorable effect from FX, but we were besides seeing bully momentum from our business arsenic good that led to bully performance. So, dividends reached grounds precocious levels. And I felt happy to beryllium capable to do so. And it seems that astatine this point, we should beryllium capable to support that level for this twelvemonth arsenic well, and we position that arsenic a positive. So, for this year, if rates were to change, whether it beryllium up aliases down, if they were to spell antagonistic and profits were to diminution and what we're going to do successful that circumstance.

Regarding nan dividend policy, nan payout ratio successful principle, we'll look astatine 75% pinch nan lowest being 70% and highest being 80%. We person been communicating that. We would for illustration to negociate our payout ratio successful that range. So well, fundamentally pursuing that policy, and we'll look astatine wherever our capacity yet reaches. However, if profits were to spell down and nan rate effect were to spell negative, and if we -- whether aliases not we are going to salary it retired by 85% to 90%, location whitethorn beryllium a anticipation that we still will salary retired dividends moreover astatine that level. But of course, that's what we would for illustration to avoid. And of course, nan business broadside will make efforts. But of course, it's a matter of wherever rate rates are going to caput towards and we really cannot summation afloat visibility astir that.

Our existent assumptions are adopting aliases adjacent to nan existent rates we see. We person been conducting an estimate, and we would for illustration to good negociate nan impact. But successful conclusion, if FX were to person an utmost adverse impact, and location whitethorn beryllium a anticipation that nan payout complaint whitethorn diminution somewhat. But is it conscionable going to beryllium owed to FX? Or is it going to beryllium because of nan business that are capacity declines? Regarding nan outlook, we'll request to make a broad determination astatine nan extremity of this twelvemonth to determine connected nan magnitude of dividends to beryllium paid, but I conscionable wanted to reiterate our policy. Thank you.

Satoshi Fujiwara

Thank you very much.

Unidentified Company Representative

Thank you very much, Takagi-san. The adjacent mobility comes from Morgan Stanley MUFG Securities, Miyake-san.

Haruka Miyake

This is Miyake from Morgan Stanley MUFG. I besides person a mobility related to RRP. I'd for illustration you to springiness you a spot much color. So, wrong nan Japanese market, it has been challenging. And of course, nan competitors person had longer history, each those we are alert of. But since you launched Ploom X gradually, you are seeing an summation successful nan marketplace share. So, you person immoderate affirmative learning that you've had successful nan Japanese market. Also, nan subscription exemplary is starting to work. Those are immoderate of nan comments that person been shared. So, what are immoderate of nan initiatives that person been reasonably effective? What were nan initiatives that was adjuvant successful increasing nan marketplace share? That is my question. And really would that beryllium translated into U.K. and Italy? How tin we usage those arsenic weapons aliases initiatives from nan learning successful Japan? So that is nan first question.

Also, nan 2nd portion of my question, erstwhile you look astatine nan competitors, you person nan instrumentality and nan refills, nan sticks. There has been a perpetual effort for innovation. So, rather frequently, they person been conducting various remodeling, renewal. And possibly that is important successful bid to supply a taxable and entreaty to nan market. So, I do judge moreover from [indiscernible] modulation for that, it has been somewhat time-consuming aliases has taken time. So, going forward, what is nan benignant of anticipation we should person successful position of nan turnover aliases nan renewal of nan products going forward?

Unidentified Company Representative

Thank you very much. The mobility astir nan learning successful Japan and nan 2nd constituent relates to nan pipeline. So, Eddy, nan CEO from JTI, would answer.

Eddy Pirard

Thank you for nan question. As you tin imagine, nan Japanese marketplace has been astatine nan forefront of our learning of nan building of capabilities and that arsenic such, it's beautiful overmuch each nan touch constituent successful nan benignant of ecosystem astir nan RRP category. Our colleagues successful Japan person done a tremendous occupation successful trying to amended understand what was -- what we telephone impediments to take and symptom points connected a caller class improvement complete nan years wherever we were not capable to afloat compete pinch a proposition that we felt was arsenic bully arsenic Ploom X to compete successful nan early days of nan class improvement for ourselves. This has gone from nan usage of nan instrumentality itself. It's friendliness successful nan hand, is creation features, is simply a request for cleanings and nan likes to much important features possibly for illustration nan expertise for group to return power of their convention erstwhile they decided to vape connected a instrumentality to besides flavors and nan sensations that were developed by nan device. And a batch of R&D efforts person been followed these user insights to support connected improving specifically what has been done and those that person been developed for nan procurement of a world instrumentality that we are now rolling retired successful nan market.

When it comes to nan specifics of immoderate assessments we've done connected trading effectiveness, for example, without going into nan specifications and it's very clear that different activities will subordinate to different marketplace specifics. In Japan, nan competitory environment, arsenic you know, has been rather competitory successful position of value promotions, discounts and nan likes. And we person learned rather a spot successful position of our necessity to observe and lucifer sometimes competitory activities successful nan area. But we've besides seen and analyzed measures that are much effective than others successful merchandising, for example, and successful way to market. So those will beryllium incorporated into nan learning. Even wrong nan deployment of nan improvement of nan world markets, we person put successful spot immoderate integer devices that would let nan markets to leverage 1 another's learnings successful position of champion practices, which will beryllium -- which are and will beryllium ongoing arsenic we deploy into nan markets this twelvemonth and adjacent year. So that's thing that we person benefited a batch from nan early efforts successful Japan.

When it comes to innovation, location are 2 parts to nan question, I believe. One is relating much to instrumentality and nan velocity astatine which we tin expect to spot betterment connected nan devices and caller products coming to market. But nan different one, I believe, which is besides rather important is nan velocity astatine which nan wide holistic connection to consumers will evolve. And that intelligibly goes into nan combustible part, nan stick, nan blend improvement and nan like. Where we guidelines today, we judge that a two- to three-year rhythm for caller merchandise improvement is what will benignant of travel to play. We judge that nan mini modification to devices, mini betterment mightiness hap a spot faster, facelifts, different shapes and nan likes. But successful position of technologies and awesome betterment connected nan devices, it's astir apt nan rhythm of 2 to 3 years approximately.

On nan instrumentality development, this is an ongoing effort. And each clip we person an expertise to supply consumers pinch an betterment to nan sensorial connection that we provide, this is thing that we spot happening connected a faster pace.

I don't know, Vassilis, if you person thing to adhd to this or...

Vassilis Vovos

Thank you, Eddy. Just to supply immoderate granularity connected practices from nan marketplace that we tin really usage arsenic we expand, clearly, we person a batch of learnings from nan Japan marketplace successful position of nan functionality and nan customization of nan merchandise offered. And these are examples that we will beryllium bringing into different markets. We person an fantabulous programme of seamless integer engagement pinch nan consumers. These are things that we will beryllium bringing into nan different markets.

And conscionable to reenforce nan constituent that nan cycles of improvement tin beryllium besides very predominant erstwhile it comes to nan baccy sticks that we are utilizing successful arsenic we are improving nan brands, we are very proud astir nan sensorial acquisition that nan consumers are having today. And erstwhile we do user tests, we people very precocious into these areas. These are each things that we've learned pinch our deployment successful Japan, we will beryllium bringing into nan different markets and proceed to enrich nan learnings connected that.

Masamichi Terabatake

May I? So, successful position of nan improvement of instrumentality and stick, truthful some from Eddy and Vassilis comments person been made. So, until we scope Ploom X, JT and JTI, we person been progressive successful improvement of nan instrumentality separately. So, it took america immoderate time. It was time-consuming to scope that world exemplary for Ploom X. But now we person 1 azygous management, 1 team, tobacco, truthful involving connected an integrated ground for nan improvement of some nan instrumentality and sticks.

So, successful position of nan pipeline, we should beryllium capable to stock much specifications successful May of this year. In position of nan modification of sticks arsenic good arsenic nan caller type of nan device, truthful it would beryllium nan adjacent procreation -- nan pursuing generation, we do person visibility successful position of nan improvement pipeline. And -- but of course, because of competitory reasons, we cannot springiness you each nan specifications astatine this peculiar moment. But we are steadily engaging successful nan development. That's what we tin show you astatine this moment.

Satoshi Fujiwara

Thank you very much. And conscionable to adhd on. So, RRP, arsenic you prosecute this connected a world basis, truthful I do judge nan privilege is -- HTS is nan highest priority. So, you person nary volition to attraction connected e-cigarettes. Am I correct successful knowing that?

Unidentified Company Representative

So, Eddy from JTI, CEO, would reply that.

Eddy Pirard

Yes, that's correct. Our RRP strategy has not changed since past time. We very overmuch spot that nan bulk of nan maturation successful RRP will travel from HTS. This is our halfway focus. This is wherever we will walk nan bulk of our resources and efforts and we are maintaining a position of exploratory for different categories, including E-Vapor category. So, you are wholly correct.

Unidentified Company Representative

Thank you very overmuch for that. And convey you, Miyake-san for that question.

Eddy Pirard

Okay.

Unidentified Company Representative

Thank you, Ms. Miyake. Because clip has come, though we person been receiving galore questions, we would for illustration to reason nan Q&A session. With this, we would for illustration to extremity nan fiscal 2022 results meeting. Thank you very overmuch for participating.

Editor: Naga



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