Japan Tobacco

Good afternoon. I am Hiromasa Furukawa, CFO of the JT Group. Thank you very much for joining us today for JT Group's second quarter 2026 earnings briefing. Before we begin, we would like to express our deepest sympathies to all those affected by the 2026 Kumamoto earthquake in Japan. We sincerely hope that those in the affected communities remain safe and that the region recovers as quickly as possible. I will begin by explaining our six months consolidated results for the fiscal year 2026. Revenue in ALP increased significantly, reflecting the strong business momentum in both the tobacco and processed food businesses. AOP at constant FX, our key performance indicator, increased by 19.4% year-on-year, contributing to growth all the way to net income. The FX impact was positive, driven by the appreciation of several currencies, including the Russian ruble, against the Japanese yen. Operating profit increased by 29% year-on-year driven by the increase in AOP as well as a reduction in amortizing costs of intangible assets arising from past acquisitions included in the adjustment items. Profit increased by 28.9% year-on-year driven by operating profit growth and lower financial costs. Next, I will detail the performance of each business segment, starting with the tobacco business and its volume performance. Please turn to slide 5. Total volume, combining both combustibles and RRP, increased by 1% year-on-year. Excluding favorable inventory movements, total volume increased by 0.4% year-on-year. and combustibles. Although industry volume declined across several markets, including Japan, Russia and the UK, solid share and GFB volume momentum continued across our global footprint. As a result, our combustibles volume remained in line with the previous year. RRP volume increased by a significant 33.8% year-on-year, driven by plume, continuing to grow volume substantially, up by 43.5% year-on-year, and to gain share in heated products. Moving on to the financial performance of the tobacco business on slide 6. At a constant FX, core revenue increased by 10.6%. Price mix contributed 10.2%, with pricing continuing to be the primary growth driver across many markets. Let me explain the AOP drivers by factor. Volume contribution was negative as the total volume increase was offset by a deterioration in market mix from large volume declines in higher priced markets such as the UK. The price mix contribution I mentioned was driven by robust pricing including the key markets of the Philippines, Russia, Turkey and the USA. These top-line growth factors fully offset increased investments towards plume, as well as inflation-driven increases in raw materials costs and SG&A expenses such as labor, resulting in AOP at constant FX increasing by 18.8% year-on-year. As mentioned earlier, the FX impact was favorable. In summary, throughout the first half, I am happy to report that these outstanding results exceeded our initial forecasts, fueled by solid pricing contributions and positive FX impacts. On slide 7, I will explain the performance of the three clusters in the tobacco business. The graphs on this slide show year-on-year variances and total volume, core revenue, and AOP at constant FX for each cluster. Let me start with Asia cluster, which includes the key markets of Japan, the Philippines, and Taiwan. Total volume in this cluster increased by 4.2% year-on-year, driven by resilient combustibles industry volume and market share growth, led by Bangladesh, as well as higher plume volume, mainly in Japan and Taiwan. Revenue and profit increase, mainly driven by positive pricing in Japan and the Philippines, as well as plume volume contributions in Japan and Taiwan. Next is Western Europe, which includes Italy, Spain and the UK. Total market share gains in several markets, continued category share gains in heated products by plume and favorable inventory movements, mainly in Italy and Spain, could not offset the lower combustibles industry volume, mainly in the UK. As a result, total volume in this cluster declined by 2.4% year-on-year. Core revenue in AOP grew as pricing contributions across several markets, including the UK, offset negative volume effects, primarily in the UK. Moving on to EMA, which includes Romania, Russia, Turkey, and the USA. Total volume in this cluster increased by 0.7% year-on-year. The increase in market share gains in Turkey and the USA, combined with higher plume volume across markets and increasing industry volume in Turkey, were partially offset by declining industry volume, mainly in Russia. The cluster reported an increase in both revenue and AOP driven by pricing contributions, mainly in Russia, Turkey, and the USA. While investments in plume and inflation-driven increases in raw material costs and SG&A expenses continued across clusters, these were offset by top-line growths. On slide 8, we highlight our ROP performance. Let me share some details. As shown in the charts at the top, gross and post-ROP volume and ROP-related revenue has accelerated following the launch of Plume Aura in 2025. The stop-line growth has been driven by the continued expansion of the category, as well as the steady growth in Plume's heated product share through strategic marketing investments. In Japan, while there were some short-term fluctuations due to the timing of marketing initiatives and temporarily demand increase ahead of the RRP tax-led price revisions in the first quarter, I am pleased to report that the share momentum remains solid. Monthly share for June, when the adverse impact from the temporary demand had largely subsided, reached 18.3%, indicating steady progress in line with the growth trajectory since the launch of Plume Aura. In other markets, heated products share also continue to grow, supported by the contribution from LEO, our tobacco-free heated nicotine stick in Europe. As a result, Plume's category share across our 13 initial heated products markets reached 11.5% as of May 2026. In addition, Plume's geographic footprint has expanded to 30 markets as of July, with the rollout of ORA completed in 29 markets.

Next, I will explain the results of the processed food business. Revenue increased by 2.5 billion yen year-on-year, mainly driven by price revisions of packed cooked rice in the frozen and ambient foods business. AOP increased by 1.5 billion yen year-on-year as revenue growth offset higher raw material costs due to rising brown rice prices. From the next slide, I will guide you through our revised forecast for fiscal year 2026. First, I will explain our full-year consolidated revised forecast. Core revenue at constant effects has been revised upward by 80 billion yen from the initial forecast, reflecting the strong momentum in the tobacco business. As a result, core revenue is expected to increase by 6% year-on-year. AOP at constant FX has also been revised upward by 24 billion yen from the initial forecast, reflecting the upward revision of core revenue at constant FX. Consequently, AOP is expected to increase by 11.6% year-on-year. The FX impact on AOP is expected to improve versus the initial forecast. As a result, AOP on a reported basis has been revised upward by 80 billion yen from the initial forecast. Operating profit has been revised upward by 87 billion yen, reflecting the upward revision of AOP. Profit has been revised upward by 74 billion yen, driven by the increase in operating profit and lower financial costs. Free cash flow has been revised upward by 121 billion yen, mainly driven by the upward revision of AOP. Compared to the previous year, we expect an increase of 378.3 billion yen, notably driven by the absence of the First, let's look at the tobacco business, starting with volume expectations. Total volume, including combustibles and RRP, is forecast to be in a range between 1% year-on-year decline and in line with the prior year. This is unchanged versus our initial forecast. Indeed, first half volume performance was broadly in line with our initial forecast. This initial forecast also incorporated lower total volume for a second half, reflecting tax-driven price increases across markets and year-on-year comparison effects. Turning to the financials and starting with the constant FX indicators. As just mentioned, in the second half, we expect total tobacco volume to decline year on year, accompanied by an unfavorable market mix. In addition, supply chain costs and investments in RRP are expected to increase versus first half. As a result, growth in core revenue and AOP is expected to moderate versus first half. However, acknowledging the strong pricing contributions, we have revised core revenue upward by 80 billion yen. This will translate into 6% growth year on year. The upward revision of the top line will enable us to make additional investments in RRP, resulting in AOP being revised upward by 25 billion yen, or an 11.2% increase year on year. The FX impact on AOP is expected to improve versus our initial forecast, reflecting a stronger Russian ruble and a weaker Japanese yen than initially assumed, as well as higher hyperinflation adjustments due to pricing effects in Iran to offset inflation and local currency depreciation. Regarding the situation in the Middle East, we have incorporated the impact into our revised full-year forecasts based on certain assumptions. As stated at the first quarter results announcement, the impact is currently expected to be limited. Slide 13 explains the revised forecasts for the processed food business. Revenue is expected to increase by 10.5 billion yen year-on-year, with no change from the initial forecast. AOP is expected to remain broadly in line with the prior year and Unchanged from the initial forecast, reflecting solid business performance despite higher raw material costs and other cost increases associated with the situation in the Middle East. Finally, please see slide 15. As discussed today, the tobacco business was the primary driver of our first-half performance, delivering outstanding results that exceeded our initial expectations. In combustibles, pricing continued to contribute strongly to performance while maintaining share gains across many markets. In RRP, the expanding presence of plume steadily contributed to top-line growth. This performance is clear evidence that our strategic goals and investments to support sustainable profit growth are delivering solid results. Building on our strong confidence in the underlying strength of the business, the significant first-half results and our ability to execute, we have substantially upgraded our full-year guidance. Based on the revised forecast and our shareholder return policy, we also plan to revise the annual dividend guidance upward by 30 yen from 242 yen to 272 yen. We expect the dividend payout ratio based on the profit after the Canada adjustment to be 75.2%. This concludes my presentation. Thank you very much for your attention. Thank you, Mr. Furukawa. Now we would like to move to the Q&A session. Let me introduce the speakers who will take your questions today. Hiromasa Furukawa, CFO of the JT Group, and Nobuya Kato, JTI Deputy CEO. Next, I will explain how to ask questions. We are afraid we don't accept questions in this English line. If you do have any questions, please send an email to jt.ir at jt.com We will introduce your questions accordingly. Thank you for your understanding.

Thank you very much. We would like to introduce the first question. Mr. Saji from Mizuho Securities. Thank you very much. I have a question, one question. This relates to the overseas pricing situation, especially IMA cluster in the second quarter, 64.9 billion yen of impact you had in terms of the pricing. So perhaps in the first half, combustibles, We have just short of 2% that is declined in the Russian market. But within that, Russia seems to be contributing in terms of pricing. So in light of that, how sustainable is this pricing strategy in Russia? And also, the FX impact, which has contributed to the dividend hike. So 56 billion yen of FX impact was a positive factor that you have included. So Iran perhaps contributed. So what is the pricing situation in Iran? Appears as if it has been quite steady if you look at the adjustment and the revised guidance. So I'd like to ask about the sustainability of the pricing strategy in Russia and Iran. So that is my question. So this is a question related to Russia and Iran and the pricing and the strategy. So JTI Deputy CEO Kato would answer. So this is Kato. Mr. Saji, thank you very much for the question. So as for Russia, how sustainable is the pricing? So this year, and also going forward, the pricing environment is not expected to dramatically change. Russia, in recent months, perhaps there's an deterioration of the affordability, and the economic environment is not necessarily positive, and down trading is ongoing. We have been sharing those information. On the other hand, On a relative basis, in Russia, we do have a robust leadership position. So in the mid-price and also the higher, the premium segment, we do have a fairly strong market share. Now for down trading and the value segment, We have not been able to own strong products. So that may be the reason why the overall volume and the market share is somewhat declined. But in the mid-price or higher price segment, it has been relatively resilient. So we believe we can continue to execute a solid pricing strategy. But all in all, down trading is underway. And in the value segment, we intend to take initiatives wherever possible. So pricing as a whole in Russia, it is not likely that the situation will worsen, that we cannot actually continue with the pricing strategy. However, we are seeing some softness within the volume, and of course we have the down trading. So in terms of the level of pricing, we need to strike the right balance, taking all those information into consideration. So that's the total picture. Now, as we have shared already after the Q1 results, Russia, the tax hike has been higher than initially anticipated. Next year and the following year, the liberal tax hike has been disclosed by the government. But whether that level, whether that would come through or not, perhaps just as we have seen, perhaps the tax hike may be higher than initially anticipated. If that is the case, that may pose an impact on the affordability of the market. So we need to take those into consideration as we execute the pricing strategy. So that's the general direction. Going forward, having more challenges in executing the pricing strategy in Russia, that is not the kind of expectations we have. Now moving on to Iran, the pricing in Iran. As mentioned, hyperinflation has been adopted in the market. So the inflation level is extremely high. So the way we approach the pricing So inflation and the equivalent level of inflation, we will offset that through pricing strategy. That is our basic thought process. And that is why we have been executing the pricing strategy. So regardless of tobacco products, so in the consumables in general and around, it is facing a continuous inflation. So in that level, pricing has been executed in the past, and we have been able to do that. We believe we can continue to do so in the future. So as inflation continues, so this is not just for the tobacco products, the pricing will be impacted by the inflation. And accordingly, we will conduct the pricing. Thank you very much. So in terms of AOP, so I think the FX adjustment was quite large, about 56 billion. So Iran, how big was the portion within this? So this is Furukawa. So in terms of FX impact, 56 billion was the FX impact. So almost entirely this amount I already mentioned was in my explanation. So Iran is a hyperinflationary market. So the price related to inflation, so we try to ensure that. So the AOP from the constant FX basis, those have been excluded from that number. So that particular portion, we conducted ad-back because we have a much more clear picture of Iran. So now we have factored those into the plan. So in the adjusted plan for the FX plan, so I cannot give you the detailed number, quite a large portion of that has been taken into account through the Iran situation. Understood. Thank you very much.

Thank you. Mr. Sadiq, next person is Qasim. Morita-san from Nomura Securities. This is Morita from Nomura Securities. Thank you for taking my question. Can you hear me? Yes, we can. Please go ahead. In the presentation, you were talking about current performance, which is a result of your investments that you've been making. So what kind of initiatives have Boring fruit in what areas of your business? Can you share with us more detail? And as a result of that, regarding the growth rate of the profits over the medium to long term, I think it's high single digit at this moment that you were assuming. But when you look at the growth rates, do you think it can be revised upwards? Is there a possibility of that happening? I would appreciate your comments on this as well. Thank you. The question was about the results of past investments as well as what we view future profit levels are going to be. So Mr. Kato will take that question. Morita-san, thank you very much for your question. So the investments that we've been making in the past as well as the results we've been seeing and what has been working well, Leading to robust results and performance was the gist of your question. But from my point of view, personally speaking, combustibles and RRP, or in particular, heated products as part of RRP, our company has been focused and have been investing in both areas. and have strove to improve performance. And for combustibles, we have been... For combustibles, we've been looking at better ROI and improving margins. And for the profits that are generated as a result, we have been reinvesting into RRP to ensure its further growth. So I think the strategy of focusing on both parts of the business has turned out to be successful. So for the combustibles business, we are striving to improve profitability. And in order to do so, we are making necessary investments so that top line and earnings in the bottom line can grow. and effectively and efficiently we are striving to improve the businesses profitability and so far we have been able to generate good results by using the profit pool mainly around plume we are striving to grow the RRP business and like I always communicate over three years Well, from several years ago, 500 billion or 600 billion or recently 800 billion over three years are the numbers we've been communicating. On a yen basis, the numbers have been increasing somewhat, but in this regard, we would like to ensure that we well invest into the RRP business to ensure a good return in the future. So currently, as we explained in the presentation, In Japan, now, the share of segment is 18%. And when you look at other markets, although the level is different, we are seeing steady growth. The 13 markets that we view as heated products markets, our share has been increasing, reaching 11.5%. So for combustibles and RRPA in particular, heated products or plume, the investments into these businesses have generated steady results, whether it be top line or volume and profit growth. So everything has come together. So our growth, our investments have been generating these results. As for growth rates and the future, as you rightly said, when it comes to next fiscal year and beyond, it might be too early to speak about it at this moment. However, in February this year and the next three years or the next two years, when you think about profit growth, High single digit growth is what we are striving to achieve. So that is what we've already been communicating. And when you look at where we are right now, we have revised up our guidance for this fiscal year. And when you look at the guidance for the tobacco business, we do believe we can reach that level and also for next fiscal year and beyond. At the beginning of the year, we have set forth a midterm plan Thank you very much. Well, changing the angle of the question, you are feeling more confidence in achieving high single digit growth. I understand that. But what about double digit growth? In order to achieve double digit growth, what kind of conditions are required? Can you give me a comment on that? Thank you. Well, that's a pretty short question, which is also a difficult question. Well, last year and this year and beyond, when you think about the business environment and our performance, it's a matter of how far we can grow our business. And when you think about that right now, We are currently confident about delivering high single-digit growth. However, when it comes to double-digit growth, like I've been saying earlier, improving the ROI of the combustibles business needs to go up a level. We need to be able to accelerate how much it goes up. And also, for plume and RRP, I guess I'm talking about profits here, but when it comes to profitability, if we can grow even further and start to gain visibility around it, and talking about visibility or expectations amongst ourselves, there's one part that is internal, and then there's the market environment that you need to look at, respectively, as a set. So from that point of view, We have just ended our first half. Therefore, we'll have to see how things go in the second half of the year so that we could think about what we can communicate next fiscal year at the beginning with respect to our three-year midterm plan. Yes, I look forward to it. Thank you very much.

Thank you very much, Mr. Morita. So we'd like to move on to the next question. Mr. Fujiwara, JP Morgan Securities, please. Good evening. This is Fujiwara from JP Morgan Securities. So I have a question related to slide 12 about the revised forecast. So the changes from the initial expectation, I'd like to pose a question. So again, I know you explained a little bit, but I'd like to pose an additional question. So on a constant FX basis, it's increased by 80 billion yen. However, in terms of the profit, it's $25 billion in terms of constant effects. So when you look at the high level of marginal profit for the tobacco business, I think it might have much more contribution to the profit. So do you expect to have increased investment into RRP? Has that been factored into these numbers? So the question was related to tobacco business, the revised forecast about the constant effects of the core revenue and AOP constant effects, the variance between those. So Kato would like to answer. So Mr. Fujiwara, thank you very much for that question. So the plumes investment. Whether we are increasing the investment towards plume more so than initially expected, yes, partially, yes, we are conducting some additional investment. However, that in itself is whether it is posing a large impact. I think the more fair way to look at that, it's the first half and the second half. The assumption, if you look at the whole, you would come out with the full year number. So in comparison to the core revenue growth, the AOP growth appears to be somewhat lower, especially if you were to compare the second half number. So there's some of the factors behind that. So, of course, the plume-related investment. We are conducting additional investment in the second half in comparison to the initial anticipation. But, of course, right from the start, the absolute amount of the investment was expected to be larger for the second half as opposed to the first half. In addition to that, when you look at the top line, The volume in the second half is expected to be weaker in comparison to the first half. Specifically, where it has been quite solid was in Turkey or Bangladesh, which has been quite brisk in the first half. But in terms of the growth rate and also the total demand from the industry, we expect to see a slowdown in the second half. So, for instance, Japan as well. And in October, they will be at the tax hike for the heated products. So the volume is expected to weaken in the second half in Japan as well. Also Russia, Russia and also Poland and Romania. So in the first half, at the beginning of the year, there was a significant tax increase and the volume is expected to soften into the second half. Also the Philippines. Last year, the middle of last year that is, there was the interim election. So it was an unusual, the large volume that we have seen. So in comparison, of course it would be weaker for this year. So that is why we expect to see a deceleration in the second half. So all in all, the volume, we expect to see softening in the second half. So if the volume softens, So the sales, the revenue would also decelerate, and also the profit that comes out would also weaken as well in the second half. However, if you look at the cost, the second half, the plumes investment is larger for the second half related to the cost. So Mr. Furukawa mentioned that impact is not so large, but also Middle East situation, the energy price and the crude oil price, The impact on the cost, we shall see more of that realized in the second half. The cost is the second half heavy, whereas the top line is weaker in the second half. So the first half, the top line was quite positive, and the cost was somewhat lighter in comparison to the second half. So if you take all those into consideration, perhaps you would see that picture that you just outlined on the full year basis. Understood. So in talking about the tax hike in Japan, I'd like to pose an additional question. So plume and the stick, so it's a price revision. 40 yen is the revision for plume. So if you look at the competitive situation in April and October, maybe the price gap was somewhat shrinking. So with the pricing strategy, what sort of impact would it show on the market share? But I think even with the increased price, the brand equity is getting stronger. So do you expect to see the positive share momentum to continue? Thank you for that question. So the price differential in comparison to the competitors, October onwards, perhaps it would become narrower. But of course, how it would pan out, we just need to watch and monitor the situation. So back in April, with the price revision and the pricing back then, So actually the price differential had actually widened against the competitors. So 18.3%, that is the share of segment, that is the recent number. So the growth could be explained somewhat by this price differential. So it could be explained partially by that. But as we have seen from last year, the plumes, the share growth momentum Thank you very much. So how the consumers would perceive and how they would react to these. We need to observe those. So this is a learning experience for us, and we need to continuously watch the market. So the consumers, how they have behaved April onwards, we have conducted some analysis and we continue to do so. So for the heated products by different price segment, we have been observing the segment share. When you observe those, we haven't observed a significant down trading. Also more in details. So within our own portfolio, within the JT Group's portfolio, So we have the premium segment and also we have Mebius in the mid-range and also the Camel as well in the value segment. So we haven't seen any significant changes in the structure of those brands, especially the Epo. The price sensitivity within the heated products If we were to analyze that, perhaps it's too early to draw a conclusion just by looking at the April experience. But as of this particular moment, maybe the impact is not so large. So once the April impact has taken its round, We believe that we can continue to exert the strong, the gross momentum for Plume. Well understood. Thank you very much for that.

Fujiwara-san, thank you very much for the question. Let me introduce the next person. From Morgan Stanley MUFG Securities, Miyake-san, please. Thank you very much for taking my question. This is Miyake from Morgan Stanley. Regarding the current Plume in Japan, I would like to know about more details about Plume in Japan. For the three brands, what is the volume mix of the three right now? That's one question and also with The low temperature segment compared to the first quarter, I think volume increased since the second quarter. But what kind of demand have you captured? And I think you are going to establish a position to cut prices for this product going forward. I think your main part is going to be heated. High-temperature products, but regarding that positioning as well as how the low-temperature products are going to compare, can you please walk me through the strategy? So that was a question about brand mix in Japan as well as the strategy around infused. So JTIW CEO Kato will take that question. Miyake-san, thank you for the question. Regarding Plume, talking about the internal three brands, Evo, Mebius, and Camel, and the mix, I think that was your question, but we would like to withhold from giving you the exact numbers when it comes to breakdown. But I could round things off and give you a ballpark. And when you look at the trends every month, there are some subtle changes in mix. But roughly speaking, Evo is about 10% to 15%. Mebius is about 45% to 50%, Mebius. and Kamel is about 35 to 40%. So that's the rough breakdown. Going forward, the three price segments. We would like to continue to have these three price segments so that we can ensure that we are able to cater to customer needs. There will be a price increase due to the tax increase But we would like to ensure that we are able to maintain the brand equity of each product. And in accordance with the quality of the products, we would like to ensure that the customers are satisfied in their purchase when they purchase our products. So whether it be the product or the brand or the price point, we would like to ensure we manage a good brand portfolio for Plume. We do believe that we have been able to do so. So the three price segments and the portfolio will be leveraged so that the plume business overall can continue to grow. And regarding width and the pricing or the prices for next year onwards, Regarding our price strategy for certain products, because of competitive reasons, I would like to refrain from directly addressing that question. But one thing I can share with you is our strategy or way of thinking. So with a low temperature product, So you could enjoy it in a different way, and we do have some core users who prefer this product because it's different. So for width, it doesn't really smell at all, and you don't have to wait for the heating time either. But when it comes to kick, compared to heated products or plume, It is slightly weak. Therefore, it's a matter of what consumers want from with and the difference with plume. But based off that, we would like to consider how much we price the product at. We would like to ensure that the consumers who buy the product are satisfied with the product itself as well as the price we offer it at. When we consider setting the prices. So I'm not able to give you guidance on how much we're going to price it at, but basically we want to ensure that we address the customer preferences and also look at profitability when we set the price of the product. Thank you. Thank you. For page 8, I'm on page 8 right now. Before April, your share went down because of temporary demand. And there was some fluctuation. There was a pickup since June once again. So what are the factors you see? And Aura, since its launch, has ran its course. So what kind of potential do you see in the products going forward? So the question was about before and after the price revisions in Japan, and Mr. Kalton will take that question. Miyako-san, thank you for your follow-up question. The graph and the way you interpreted the graph is correct, and we saw temporary demand, a reactionary fall, and then after, Around May-June timeframe, we saw the price revision, temporary demand-related fluctuations settle down, and we were able to see our share grow once again, which gave us confidence. So like I've been saying from earlier, Plume is comprised of three brands, and it's not only price point, but we do have a variety of flavors available. And we do boast that we have a strong brand portfolio. And also for Aura, the device, I do believe the satisfaction level of customers also have been having an impact supporting the growth of Bloom overall. On the other hand, the question about are there no more challenges and how are you going to grow the business in the future even more? Through trials, awareness, recognition of the brand has went up and because more and more people are trying the product out and are making a purchase when it comes to bloom overall or aura as well. So we have been able to drive the business more than before. On the other hand, but when it comes to retention, we still feel that there is more opportunity to make further improvements. So in the future, Retention is another area we would like to engage in so that we could enhance retention. And if we're able, we do believe that's critical for the further growth of plume. So that would be our area of focus. Thank you, IC.

Ms. Miyake, thank you very much. We'd like to move on to the next question. Mr. Miyazaki from Goldman Sachs, Japan. So this is Miyazaki from Goldman Sachs, Japan. So I have a question related to cost. So in slide six, the others. So if you look at Q1 and Q2, the Q2 was 32 billion. That was the negative impact in others. So that's how it appears. So if you look at Q4 of last year, so each quarter was $38 billion or $44 billion or so. So this particular quarter, it was less in terms of the cost increase. So what is the background here? Is it going to be shifted just to the second half? Would that be the case? So in the second half, So we have the Q2, about 32 billion. So in the second half, do you expect to see a larger cost increase on a quarterly basis? What are your expectations? The question was related to tobacco business, the Q2, the cost, and based on that, what are the assumptions for the second half? So Mr. Kato would answer. Mr. Miyazaki, thank you very much for the question. So in terms of cost, so of course, the question was whether it's just been pushed out to the second half or not. Actually, yes, there has been some timing difference, and we are seeing that. Therefore, in the second half, we have seen some cost pushed out. So that is expected to happen. And that has been reflected on the four-year guidance. Also, as part of a separate question, you posed about the second half, especially the plume-related investment. So the cost tends to be heavier in the second half. We have just explained to you. So within that, it shows some of the timing difference of the cost. and that has been included in the guidance. Thank you very much. I just related to that then. So there's a new plan that you have. So in comparison to the initial plan, are you seeing less profit for the second half? Because your adjustment, normally your revision, normally, You basically reflect what has been upside for the June half. And normally you don't really change the expectations in the second half. But this time around, the second half plan, it seems to be you have revised those down in comparison to the plan announced back in February. So is that the case, or have you not really touched upon those? Have you not really changed those? So can you explain on these? So the question was related to tobacco business as they revised the guidance, whether there has been some changes in the second half assumption. So roughly speaking, since the beginning of the year, we haven't significantly changed it. and especially when it relates to cost, for instance. So just to reiterate, there is expected to be additional investment, inclusive of plume. So that is in comparison to the initial plan. Also, because of the Middle East situation, the cost increase, crude oil and so forth, that has been added as well. But all in all, In terms of the profit for the second half, we are not actually lowering that in comparison to our initial assumption. So that is not the case. So in other words, the top line we've been able to deliver as expected. But the second half in terms of profit appears to be decelerating. in comparison to the first half. So you might actually have that impression because it seems to be some deceleration. But again, in terms of the profit assumption, we haven't significantly reduced those in the second half. Thank you very much.

Thank you, Miyazaki-san. We are drawing close to the close. Therefore, the next person will be the final person to ask a question. Furuta-san from SMBC Nikko Securities, please. Thank you for taking my question. This is Furuta from SMBC Nikko. Please go ahead. I have one question related to Miyazaki-san's question. Regarding your view on the second half expectations, Profits are going to be flattish according to your plan, but when you think about volume, I don't think it's going to settle down that low. So can you once again tell us your view on that? And you might be wary about how volume is going to be in the second half, but when you look at and so forth. You continue to have good in Turkey. Your performance continues to be robust. So can you share your views about expectations for the second half? The question was about the tobacco business and the view on second half performance. Mr. Kato will take that question. Mr. Furuta, thank you very much for your question. Well, like you rightly said, we I explained too much about the cost side of things earlier, but like you said, for the second half, when it comes to top line or volume, compared to the current expectations we have, we do believe there's plenty of Thank you very much. There is also a chance that that may persist in the second half of the year as well. So if that were to materialize, obviously volume should be stronger than expected. And if that's the case, obviously profits, it will affect profits as well, and profits should turn out to be higher than our expectations. Other than that, we are assuming weaker volume in markets like Japan and Russia. This includes the first half where these markets were performing relatively weak, but For the second half expectations, the weakness we're currently assuming may not be the level that we are expecting right now. It might be positive or negative. It may go both ways. So depending on how the actual trends turn out to be will affect our results. So for top line in the second half, or volume, We will need to continue to monitor the trends. And of course, I think there is a possibility that it might be trending upwards. And if that's the case, our earnings or profits should be higher than expected. So up until the third quarter, well, every year we say this, but during the summer period, the summer period is a volume zone season. So we need to go past this season and enter Q3 Then we should start to gain more visibility into how we should end the year. I see. Thank you very much.

Mr. Furuta, thank you very much. That was that. We would like to conclude the Q&A. Now we'd like to conclude the meeting. Thank you so much for your participation.