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Operator: Thank you for participating in the Investor Meeting for 2025 Full Year Results at Japan Tobacco Inc. today, despite your busy schedules. Since it is a scheduled time, let us get started. Before we start the meeting, I'd like to ask you to make sure that your display name on the Zoom is accurate. Thank you for your cooperation. In today's meeting, first, our newly appointed JT Group CEO, Takehiko Tsutsui, who assumed the role in January 2026, will introduce the Business Plan 2026. And Eddy Pirard, CEO of JT International, will follow and explain the tobacco business focus on FY 2025 performance. Lastly, Hiromasa Furukawa, Chief Financial Officer of the JT Group will explain JT Group 2025 results and 2026 forecast. Then we move on to the Q&A session, and this meeting is scheduled to end at 8:00 p.m. Japan Standard Time. Now I would like to introduce the first presenter, Mr. Tsutsui, please begin.
Takehiko Tsutsui: I am Takehiko Tsutsui, CEO of the JT Group. Thank you very much for attending our conference call today. And I would like to express my appreciation for your continued support and understanding of our commitment to growth. Please look at today's agenda. First, I will give an overview of our performance in fiscal year 2025. Then I will expand on the cornerstones of the JT Group before diving into the profit growth guidance and business strategies for the business plan 2026. Eddy Pirard, CEO of JTI will provide details of the Tobacco business performance in 2025. Later, and Hiromasa Furukawa, CFO of the JT Group will cover the fiscal year 2025 group financial results and fiscal year 2026 targets. Before starting the presentation, allow me to share some very early thoughts in my new role as CEO of the JT Group. The JT Group has a history of continuously looking ahead to the future and moving forward. And I myself have participated in many of its revolutions and growth along the way. I believe my mission is to build on the growth strategies and strengthened foundations, driven by my predecessor, Masamichi Terabatake, and to steer the company to even greater heights. We will continue to enhance our corporate value by practicing management based on the JT Group purpose, fulfilling moments enriching life, and our management principle, the 4S model, consistently exceeding customer expectations and achieving sustainable profit growth over the medium to long term. To achieve this, I will take the lead in strengthening our existing capabilities, further developing RRP into future core strengths and simultaneously envisioning our long-term future through D-LAB. Across the short-, medium- and long-term time horizons, we will continue to invest for future growth without hesitation, while also firmly committed to delivering short- and medium-term performance. In addition, in a rapidly changing business environment, I believe it is essential for us to proactively embrace change with a strong sense of urgency. To that end, I will devote my efforts to further strengthening the organizational foundation of the JT Group. Starting today, I would like to deepen our dialogue with capital markets and strive to meet our expectations. Now let me begin with an overview of fiscal year 2025. Please look at Slide 5. In 2025, despite an unstable global geopolitical and economic environment, including soaring prices, we delivered outstanding growth across all indicators from revenue to profit, each reaching record highs. I believe this achievement was supported by the outcomes of our continued strategic investments we have made to drive sustainable growth. I will also briefly review the performance of each business segment, in the tobacco business, our largest contributor. Solid organic momentum continued, as Eddy will detail in his presentation. The key drivers were pricing contribution, combined with ongoing market share gains in Combustibles. 2025 also marked the steady progress of the Vector Group integration, the U.S. Tobacco Company, we acquired in 2024, and its performance boosted the organic growth, I have just mentioned. In RRP, we launched our new heated products device, Ploom AURA, across a total of 17 markets in 2025, and it has recently expanded to 19 markets. Both Ploom AURA and its consumable EVO sticks have been very well received by customers, particularly the taste and design. These products are already contributing to share gains in multiple markets, notably in Japan, and these results further reinforce our confidence in the strategic investment we have made. Accordingly, we believe that 2025 was a year in which we made steady progress in strengthening the business foundation that will support the group's mid- to long-term growth in both Combustibles and RRP. The processed food business achieved profit growth through steady price revisions and improved productivity, as to our pharmaceutical business. And in line with our May 2025 announcement, we successfully completed its transfer to Shionogi in December. As we indicated at the third quarter earnings announcement, the annual dividend per share for 2025 is planned to be JPY 234 per share. Please look at Slide 6. The graph on this slide illustrates the trends in our performance and shareholder returns over the past 5 years. Guided by the JT Group purpose, and our management principle, the 4S model, we have consistently prioritized business investments that contribute to profit growth over the mid- to long term. We have delivered sustainable profit growth by strong top line expansion, which in turn has enabled us to enhance shareholder returns. We believe this demonstrates the growing resilience of our business and navigating a rapidly changing operating environment. As I take on the role of CEO, I will further strengthen and accelerate this growth cycle, and I am committed to formulating and executing our business strategies to ensure our sustainable growth in the years ahead. Allow me to briefly remind you of the philosophy behind the JT Group purpose and our 4S model. Please turn to Slide 7. The JT Group purpose plainly expresses our reason for existence and our aspiration. Importantly, in pursuing The JT Group purpose, we have defined specific purposes for each of our business segments to ensure full alignment. The 4S model. Our management principle is the customer at its center, guides us throughout the decision-making process. As we work to realize our purpose, I am committed to making high-quality decisions grounded in the 4S model and to continually exceed customer expectations. I am convinced that this is the best approach for achieving sustainable medium- to long-term profit growth and continuously enhance our corporate value, ultimately enabling us to share benefits with all stakeholders identifying the 4S model. As part of efforts to go beyond the boundaries of existing businesses for realizing our purpose, we will continue our initiatives within D-LAB of corporate R&D organization. Let me give you a brief overview of D-LAB. At D-LAB, under the concept of unknown fulfilling moments, we engage in advanced research by exploring and creating seeds for future businesses. We aim to foster the value of fulfillment moments and society over the long term, while also aiming to contribute to the JT Group's profit growth. As part of our efforts to create new businesses, several affiliated companies are conducting commercialization trials of products and services from scratch. And some of these initiatives have already progressed to the stage of delivering the value of fulfilling moments to consumers. In addition, in exploring businesses, we have also invested in more than 200 companies aligned with the concept of fulfilling moments, primarily through operating funds that invest in start-ups. And including our research activities, we are currently running over 100 projects at any given time. Although progress will be gradual, the outcomes of these activities are beginning to materialize. Turning to Slide 8, and our capital allocation and shareholder return policies. To further strengthen and accelerate the growth cycle I mentioned earlier, we will continue to prioritize business investments that will deliver sustainable profit growth over the mid to long term. Our main investment focus will remain the Tobacco business, particularly towards Combustibles and heated products. In strengthening our business foundation, we will also consider the acquisition of external resources, such as through M&A as one of our options. Through these business investments, we will drive growth in adjusted operating profit at constant currency, our primary performance indicator. This, in turn, will enable medium- to long-term growth in net profit and support competitive shareholder returns in the capital markets. Regarding the shareholder returns, we remain committed to maintaining a dividend payout ratio of around 75%. We'll continue to focus on delivering robust shareholders' returns with dividends at the forefront. On Slide 9, I'll highlight the overall framework of our sustainability strategy. We have identified the JT Group materiality. Our priority material issues based on our belief that people's lives and corporate activities can be sustainable if the natural environment and society are sustainable. Additionally, we have also established the JT Group sustainability targets as specific goals and initiatives, and we are steadily progressing toward achieving them. Detailed results are available in our integrated report and on our website. We remain strongly committed to ensuring the sustainable growth of our society, and our businesses and to driving forward our initiatives for a sustainable future. Turning to our business plan, 2026. Our profit growth outlook for the 3 years from fiscal year 2026 to fiscal year 2028 as well as business strategies that support it. Like all business plans shared so far, the current business plan is developed with our growth algorithm in mind. As you know, our aim is to pursue sustainable profit growth over the medium to long term, targeting mid- to high single-digit growth in consolidated AOP at constant currency. In fiscal year 2025, while we achieved record-high strong growth, the operating environment surrounding our group remains highly uncertain. We must continue to monitor the impact of geopolitical instabilities on the global economy, foreign exchange volatility, interest rate trends, hyperinflation in certain markets and broader macroeconomic developments across countries. Within this environment, our Tobacco business, our core driver of profit growth is expected to lead our performance. We aim to grow the consolidated AOP at constant currency at a high single-digit CAGR, which is the upper end of our medium- to long-term growth algorithm. Over the business plan period, we do not expect significant relief in the operating environment nor in terms of regulations. In Combustibles, industry volume contraction and down-trading are expected to continue. While in RRP, we forecast intensified competition, especially in heated products. Irrespective of these conditions, our strategic direction remains unchanged. In Combustibles, we will further improve profitability. And in RRP, we will concentrate our business resources toward heated products to establish it as the second engine for profit growth alongside Combustibles. As a result, we aim to grow AOP at high single-digit CAGR over the planned period. In the processed food business, we expect the operating environment to remain challenging, particularly in Japan, with continued increases in labor and logistic costs, as well as fluctuations in raw material prices. In addition, price increases driven by these factors are likely to affect demand. In this context, the processed food business will continue to play its role in complementing the JT Group's profit growth. To ensure top line-driven profit growth we will reliably implement price revisions, expand our business volume both domestically and internationally and further enhance productivity. In the next couple of slides, I'd like to detail some of the fundamental strategies in the Tobacco business. Starting with Combustibles, we'll continue to pursue quality top line growth by taking advantage of pricing opportunities across our footprint and by driving further market share expansion. While industry volume is expected to continue declining, we anticipate to outperform the industry trend through further gains in market share. In addition, we aim to continue improving profitability through focused investments aligned with our market archetypes and various initiatives to reduce costs across our supply chain. Through these efforts, we will generate incremental returns, which in turn will enable higher investments in RRP. In RRP, our view remains unchanged that the category of heated products is expected to grow the most and the fastest within RRP in the future. We will, therefore, continue to prioritize investments in heated products within RRP, accelerating our growth momentum through large-scale strategic investments. In other RRP categories, such as Modern Oral, E-Vapor and Infused, we will keep exploring business opportunities and we'll make selective investments based on the strategies tailored to each category. Specifically, we'll consider new market entries based on market size and growth potential while taking into account the different regulatory environments and consumer preferences across markets. In parallel, we will continue to advance initiatives to strengthen our pipeline of next-generation propositions that may not necessarily fall within the existing RRP category definitions, with the aim of creating products that have the potential to become future growth drivers for RRP. Turning to Slide 12 to explain more concretely our planned initiatives in RRP with a particular focus on heated products. We expect the global RRP market to continue expanding, and we will strengthen our business foundation, as we work towards the milestones laid out in our 2028 RRP ambitions. As the chart indicates, during the business plan period, we aim to accelerate growth in RRP-related revenue driven by top line expansion in heated products. As I mentioned earlier, we're increasingly confident that our investment in RRP has been steadily delivering results. While we will flexibly adjust our plans as circumstances evolve, we currently plan to invest a total of around JPY 800 billion from 2026 to 2028, an amount exceeding past levels, with annual investments expected to gradually increase towards the latter half of the period. The primary use of this investment will be to support commercial initiatives, prioritizing heated products. Through various promotional activities, we will further enhance the equity of Ploom and drive both new consumer acquisition and improved retention. To this effect, we will complete the transition of Ploom AURA in most key markets during 2026, as Ploom AURA is very well received by consumers. In addition, as we prioritize the rollout of Ploom AURA and had temporarily moderate the pace of geographic expansion, we will now gradually resume expanding our global coverage going forward. Furthermore, we will pursue innovation in both devices and sticks, aiming to continue improving our Ploom ecosystem through next-generation products with greater speed. Even as we step up investment, we expect volume growth as well as gross margin improvement in heated products, along with profit contribution from other RRP categories to drive overall profitability improvement in the RRP business. I'll now turn it over to Eddy Pirard, the CEO of JTI, for an overview of the 2025 performance of the Tobacco business. Eddy, the floor is yours.
Eddy Pirard: Thank you to Tsutsui-san, and good afternoon to all participants on the call. It is my pleasure to present today the 2025 performance of JT Group's Tobacco business. A performance which you will see is nothing short of remarkable, thanks to incredible contribution and dedication of our 46,000-plus employees worldwide and that of our commercial partners. My presentation will focus on the main achievements of 2025 as well as the outlook for business plan 2026, while the key financial information will be covered by Furukawa-san in his presentation. 2025 marked another year of incredible performance for the JT Group's Tobacco business. All indicators were up year-on-year, demonstrating once again the significant value of our strategic framework. As a reminder, this strategic framework is anchored on 2 pillars of growth: a Combustibles pillar, where our focus is to improve return on investments through quality top line growth and efficient operations. And a RRP pillar in which we prioritize investments behind heated products, and our brand Ploom, while adopting a more selective approach in other segments like E-Vapor and Modern Oral. In terms of deliverables for the third consecutive year, we have grown total volume, clearly outperforming industry volume trends. GFBs were the main drivers of our 2025 Combustibles volume performance, as we will see later, further supported by the successful integration of the Vector Group, which we acquired in 2024. In RRP, the launch of Ploom AURA has accelerated our volume and share performance in heated products, resulting in JT delivering the fastest growth in this segment, a very promising start for our newest introduction to the Ploom family. This solid volume performance, combined with exceptional pricing in Combustibles, drove a double-digit increase in both core revenue, up almost 15% and adjusted operating profit growing over 23%. Let me elaborate on the key drivers of our 2025 performance, starting with reduced risk products. Growth in both RRP volume and revenue accelerated versus the prior year, increasing by 28% and 24%, respectively. Heated products were instrumental to the volume growth, expanding by 3.2 billion units and representing a 38.6% year-on-year increase, with gains mainly in Japan and across all clusters. On the revenue side, heated products grew by almost 50% at constant FX. The launch of Ploom AURA in May 2025 played a significant role in this expansion as well as the accelerated investment to establish Ploom as a global power brand. Beyond heated products, we continued to explore other RRP segments through a selective and flexible investment approach in line with our strategic framework. And in parallel, we pursued improving our knowledge on multi-category consumers and the capabilities required to win in this environment. Speaking to Modern Oral, as shown by Tsutsui-san, we have expanded Nordic Spirit's presence to 10 markets. Our approach to nicotine pouches remains cautious and targeted as similar to E-Vapor, the regulatory environment remains very fluid and the barriers to entry are lower compared to Heated Products. In E-Vapor, in addition to a logic presence, we profitably explore growth opportunities, including through strategic investments. In 2025, we took a majority stake in a leading and profitable independent U.K. E-Vapor company, Flavor Warehouse. The intent is to strengthen all learnings in this dynamic segment. Since the beginning of my presentation, I have mentioned Ploom extensively. Let me share some more details on its performance. In 2025, supported by innovation and successful consumer acquisition, Ploom was once again the fastest-growing brand in Heated Products. The introduction of Ploom AURA in certain markets and the expansion of our heated tobacco sticks portfolio, fueled share gains in all 28 markets were available. As of November 2025, Ploom had reached a share of segment of 9.7% across the 13 initial markets. Turning to Japan, the largest Heated Products market globally. Since the introduction of Ploom X, we have increased our share of the Heated Products segment almost fivefold, reaching 15.7% in the fourth quarter of 2025. AURA, which we launched mid-2025, clearly contributed to the acceleration of Ploom share gains, as you can see from the slide. And in December, Ploom reached 16.5%, making it the #2 Heated Products offering in Japan across 39 prefectures, including Tokyo. Moving on to other markets. Efforts to strengthen brand equity and drive consumer adoption through adjustments to our commercial execution delivered share gains across our footprint. As would be expected, the share of segment progression differs between markets as it is clearly related to consumer awareness of Heated Products, the diversity of products available and the competitive environment. Across the 9 markets presented on the slide, Ploom's share of segment grew by an average of 1.6x year-on-year with the most significant increases in Poland, in Serbia and Switzerland, all more than doubling their share. Lastly, we launched Ploom in Taiwan at the end of 2025. And although it's still very early, we are encouraged by the performance so far, which has exceeded our expectations. Before moving to a Combustible performance, I'm proud to share how Ploom AURA has improved the consumer experience since its introduction. Starting in Japan, where AURA has been available since the end of May 2025. While we are still early in the journey of AURA, as you can see from the data on the slide, this next-generation device has outperformed the previous X Advanced. It generated a higher Net Promoter Score or NPS compared to Ploom X Advanced, which itself outperformed Ploom X, if you remember, our slide from February last year. Importantly, the number of Ploom users has increased by 34% year-on-year and doubled since 2023. These positive results strengthen our confidence in the quality of our Ploom device, especially as consumers speak very highly of the improved design, functionalities and taste. Also worth mentioning that 58% of Ploom AURA users are new to the franchise. The superior taste satisfaction of Ploom is also owing to the next-generation heated tobacco sticks and the launch of a premium offering in Japan under the EVO brand, an offer, which was very well received by consumers, reaching a share of segment of 3% in December 2025, complementing the existing MEVIUS and Camel propositions with limited cannibalization. We now have a very compelling and competitive portfolio to drive further growth. Leveraging the early success in Japan we are progressively rolling out Ploom AURA across our footprint. As of today, AURA is already available in 19 markets and will be in almost all Ploom remarkets by the end of 2026. In addition, we are gradually migrating our sticks to EVO, our global brand for Heated Tobacco sticks. In summary, we are making good progress in line with our strategic drive to build Heated Products as a second pillar of profit growth in the future. In 2025, our performance in Combustibles was unrivaled. Our volume grew by 1.7% year-on-year, far outpacing industry volume contraction in the measured footprint. Our organic volume grew in over 50 markets year-on-year, further boosted by the successful integration of the Vector Group. While in certain markets like Russia and Turkey, the volume growth was compounded by an exceptionally resilient industry volume. Our volume growth was mainly driven by continued market share gains. Our Combustible share increased in approximately 60 markets, including 9 of our 10 key markets. GFBs were once again instrumental to the volume performance, growing by 2.8%, their 7th consecutive year of growth. At the end of 2025, GFBs represented 74% of our Combustibles volume. Winston, our largest brand and the world's second largest grew volume by 4.9%. Its volume increased in approximately 50 markets, including our key markets of Italy, Romania, Russia and Turkey. Winston also grew market share across many markets, including the 4 key just mentioned, plus Spain and Taiwan. In our measured footprint, Winston was the fastest-growing Combustible brand in 2025. Camel, the third largest global brand grew volume by 4.3%. Volume was up in almost 50 markets, including Italy, the Philippines, Russia, Taiwan and Turkey, fueled by market share gains including in 6 of our 10 key markets. Driven by these brands, our Combustibles market share grew by 1.3% across our measured footprint, making us the fastest-growing company in the category. Although volume contributed to a core revenue increase of 15% in 2025, the main driver remained Combustibles pricing demonstrating yet again its resilience. Last year, the price/mix contribution to core revenue reached an exceptional 10.8%, significantly above its past 3-year average due to several factors. The first accelerator is the positive volume performance, which enabled us to maximize pricing benefits across our footprint. The second and most important factor is the level of price increases across our footprint. All clusters delivered price/mix increases year-on-year. EMA was the strongest performance with all 4 key markets contributing positively. Western Europe, led by Italy and the U.K. also delivered strong growth, even within a down-trading environment. In the Asia cluster, the positive drive came mainly from Bangladesh, Japan and the Philippines. The last factor was related to the impact from down trading. Although the trend continued in 2025, its impact was more limited than we've seen in recent history. As a result of the solid pricing, the Combustibles profit margin grew by an outstanding 3.4 percentage points year-on-year. This increase demonstrated our strategic drive to improve return on investments in Combustibles. We have grown market share through equity-building initiatives towards our GFBs combined with an optimization of pricing opportunities when they arose. In addition, our focused approach using market archetypes, earnings only, share only or earnings and share continued to maximize the expected returns from investments and to ensure profitable top line growth. These top line drivers are enhanced through disciplined cost management initiatives without sacrificing product quality, growth opportunities, and a sustainable business base. These include, but are not limited to the deployment of an end-to-end integrated supply chain, the simplification of our products, both SKUs and brands, and of our IT infrastructure, as well as the further leverage of our global business services. We also continued to invest effectively and efficiently across all functions, including procurement, manufacturing, and in our route to market, while embracing the concept of Kaizen or continuous improvement to maximize the bottom line and drive stronger cash performance and delivery. Finally, the successful integration of the Vector Group further enhance our efforts to improve the Combustibles operating profit margin. Overall, the Tobacco business delivered an incredible performance in 2025, growing all indicators year-on-year, fueled by both Combustible and RRP. The goal for the business plan 2026 period is clear. Capitalizing on our strategy, we reconfirm our intention to grow adjusted operating profit at a high single-digit rate, despite continued down-trading, intensified competition across categories and macroeconomic factors. In RRP, we will further accelerate consumer acquisition by strengthening our commercial engine and leveraging consumer insights from the 28 markets where Ploom is available. As highlighted by Tsutsui-san in his remarks, we will continue to invest towards RRP during this business plan period. These investments will focus on increasing the top line contribution of Heated Products through the sale expansion of Ploom AURA and EVO sticks. We will also strengthen our understanding and profitable participation in other RRP categories. And we will take advantage of our innovation pipeline and improved capabilities to consistently exceed consumer expectations. In Combustibles, we remain committed to improving return on investments. This encompasses continued market share expansion, notably by our GFBs and optimized pricing opportunities to drive both revenue and margin improvements as well as initiatives to manage ongoing inflationary pressure. Thank you very much for your attention and interest in the tobacco business. I will now hand over to Furukawa-san, for the review of the JT Group financial results and forecast.
Hiromasa Furukawa: Thank you, Eddy. I am Hiromasa Furukawa, CFO of the JT Group. I will detail the consolidated financial results for 2025, and our forecast for 2026, both at the group level and by business segment. First, let me take you through our consolidated financial results for 2025. As Tsutsui-san mentioned earlier, thanks to the strong performance of the tobacco business, revenue, AOP, operating profit and profit for the period all reached record highs in 2025. AOP on a constant currency basis, which is our primary performance indicator, increased by 24.9% year-on-year driven by organic growth in the Tobacco business, further boosted by the contribution of the Vector Group acquisition in the U.S.A. Regarding foreign exchange impacts on AOP. While there was a positive impact from the depreciation of the Russian ruble, this was more than offset by the depreciation of emerging market currencies against the Japanese yen, such as the Iranian rial and the Turkish lira, resulting in an overall negative impact. Operating profit increased year-on-year, mainly driven by the absence of the provision for loss on litigation related to the settlement in Canada, which was recorded in 2024. Profit from continuing operation increased year-on-year as the increase in operating profit more than offset higher financial expenses, mainly due to foreign exchange losses arising from a rapid deterioration in the exchange rate in Iran, as well as higher corporate income tax expenses. In addition, profit from continuing operations came in below JPY 555 billion forecast announced with third quarter results. This was due to the impact of a rapid deterioration in the exchange rate in Iran, as just mentioned. Free cash flow increased by JPY 102.2 billion year-on-year to JPY 272.7 billion, as the nonrecurrence of the Vector Group acquisition payment, recorded in 2024. And the increase in AOP more than offset the upfront payment related to the settlement of the litigation in Canada, which was recorded in 2025. Moving on to the financial performance of the Tobacco business. Eddy has already explained the details of the Tobacco business performance. So I will only focus on the financial performance. The volume contribution was positive, mainly fueled by the inclusion of the Vector Group. Regarding the Vector Group contribution to volume, I can confirm that it has been in line with our initial expectation. As shared by Eddy, the price mix contribution to AOP was above its historical average. Strong pricing contributions in many markets, including Japan, the Philippines, Russia, Turkey and the U.K. outweighed the lower product mix, mainly due to down trading in the Philippines and Taiwan. These positive factors far exceeded the incremental investment towards Ploom and the inflation-led cost increases, particularly across the supply chain regarding tobacco leaf and labor. As a result, AOP at constant FX increased by 23.5% year-on-year. As I mentioned earlier, the FX impact on AOP was unfavorable. Next, I will explain the results of the processed food business. Revenue increased by JPY 2.3 billion year-on-year, driven by the positive impact from price revisions of package cooked rice in the Frozen and Ambient Foods business. AOP increased by JPY 0.5 billion year-on-year, mainly driven by the revenue increase, which fully offset higher raw material costs such as rice. Let me move to our business forecast for fiscal year 2026. Before that, I would like to inform you that we have adjusted certain financial figures. One of these adjustments is related to Canada, which I would like to explain now. As you know, a settlement was reached in March last year regarding all the smoking and health litigations in Canada, in which our local subsidiary, JTI McDonald was included as a defendant. Consequently, we will make annual payments from 2026 onward. As a result of these payments, we expect this will create a gap between JT Group's recognized profit and loss as well as its cash flow. Therefore, in order to appropriately reflect the actual cash flow in our profit and loss, under certain assumptions, we have made adjustments to deduct from each indicator, the amounts of revenue and profit corresponding to each annual payment as well as to exclude the impact our noncash profit and loss. For details, please refer to the reference slide titled Canada Adjustment. This being cleared, allows me to explain the consolidated financials. Core revenue at constant FX is expected to increase by 3.6% year-on-year in 2026, driven by a solid pricing contribution in the tobacco business, higher RRP-related revenue and the top line growth in the processed food business. AOP at constant FX, our primary performance indicator is expected to increase by 8.9% year-on-year. The FX impact on AOP is forecast to be negative due to the depreciation of emerging market currencies and depreciation of cost-related currencies such as the U.S. dollar, both against the Japanese yen. Operating profit is expected to increase by 6.2% year-on-year, driven by the increase in AOP and lower amortization costs of trademark rights related to past acquisitions. These positive factors more than offset the absence of profit from the remeasurement related to the settlement liability for the Canada litigation recorded in 2025, as well as a decrease in profit from property sales. Profit is expected to increase by 14.2% year-on-year, driven by the increase in operating profit and lower financial costs due to the absence of the foreign exchange losses recorded in 2025. Free cash flow is expected to increase significantly, driven by the increase in AOP and the absence of the upfront payment related to the settlement of the litigation in Canada, which we recorded in 2025. In the following section, I will explain the forecast by business segment. First, let me explain the volume assumptions for the Tobacco business. The continued share growth of Combustibles across several markets and an increase in RRP volumes are expected to partially offset the global decline in Combustibles industry volume, notably in Japan, the Philippines and the U.K. As a result, total volume is expected to be between flat and down 1% year-on-year. Next, I will explain the financial forecast. Core revenue at constant FX is expected to increase by 3.4% year-on-year, driven by continued strong pricing contribution, mainly in key markets and higher RRP-related revenue. AOP at constant FX is expected to increase by 8.5% year-on-year, driven by top line growth that more than offsets continued RRP investments behind Ploom and inflation-led cost increases, including across our supply chain. As I mentioned earlier, the FX impact on AOP is expected to be unfavorable. Next, I will explain the forecast for the processed food business. Revenue is forecast to increase, mainly driven by price revisions in the Frozen and Ambient Foods business. AOP is expected to decrease, mainly due to higher raw material costs despite the expected increase in revenue. Finally, I would like to explain shareholder returns. As Tsutsui-san explained earlier, there is no change to our shareholder return policy. With respect to the dividend per share for fiscal year 2025, as indicated at the third quarter earnings announcement, is planned to be JPY 234 per share. Regarding the dividend forecast for fiscal year 2026, based on the Canada adjusted profit, we project a dividend of JPY 242 per share, which corresponds to a payout ratio of 75.2%. Profit for fiscal year 2025 came in below the level presented at the third quarter announcement due to the sharp deterioration in the exchange rate in Iran. On the other hand, our business momentum remains strong and adjusted operating profit at constant currency is growing. Under the current medium-term plan as well, we expect to achieve steady profit growth. For fiscal year 2025, the payout ratio will temporarily exceed the 75% plus or minus 5% range, defined in our shareholder return policy. However, given that the full year results are now finalized and we have gained visibility into our medium-term growth outlook, we have decided not to revise the dividend per share forecast that we presented at the third quarter announcement. Please look at the graph on the slide. We consider dividends to be the core of our shareholder return policy. To date, we have achieved sustainable profit growth. And through this profit growth, we have steadily enhanced shareholder returns. Over the past 5 years, our TSR has outperformed the topics. Going forward, we will continue to target a payout ratio of 75%, which we consider to be at a competitive level in the global capital markets and aim to enhance shareholder returns through the realization of sustainable profit growth over the mid to the long term. This concludes my presentation. Thank you for your attention.
Takehiko Tsutsui: Thank you very much Furukawa-san. In closing, I'd like to reflect on the materials we have shared with you today. Throughout its history, the JT Group has consistently invested in its businesses with a long-term perspective, always looking to the future. As a result, our business foundations have strengthened steadily and we have delivered record-high results in 2025, with a further increase expected in 2026. To ensure that this growth remains sustainable, under the Business Plan 2026, which we presented today, we intend to pursue our current resource allocation and shareholder return policies based on the JT Group purpose and the 4S model. We will continue making large-scale strategic investments, particularly in Heated Products. We are convinced that our strong brand equity cultivated through consistent investment, our well-balanced portfolio, supporting our pricing strategy, market share growth as well as the profitability improvement in RRP driven by expected top line growth will deliver high single-digit growth in consolidated AOP at constant currency. We will also continue to enhance shareholder returns in line with growth in net profit, underpinned by our underlying business growth. This concludes our presentation today. Thank you for your attention.
Operator: [Operator Instructions] Let me introduce the speakers who will answer your question as follows: Mr. Takehiko Tsutsui, CEO of the JT Group. Mr. Hiromasa Furukawa, CFO of the JT Group; Mr. Eddy Pirard, CEO of JTI, Mr. Vassilis Vovos, CFO of JTI and Mr. Stefan Fitz, CCO of JTI. [Operator Instructions] The first question comes from Mizuho Securities. Mr. Saji.
Hiroshi Saji: Mr. Tsutsui, congratulations on being assigned as CEO. So I would hope for more enhanced market communication going forward. So my question is towards Mr. Tsutsui. I would like you to really share with us what are the strengths and also the weakness of JT Group, especially vis-a-vis the global competitors. So we have the portfolio within the convertibles. And of course, within RRP, the Heated Products and Modern Oral. So there are difference in the portfolio. So how -- what are your thoughts on your current portfolio? And also in terms of the R&D and the governance system. So what are the strengths and also the weaknesses? And where exactly do you expect to exert your leadership and make some improvements? So that is a question to you.
Unknown Executive: So related to the strengths and weaknesses of JT Group, Mr. Tsutsui would answer your question.
Takehiko Tsutsui: Thank you very much for that question. So let me first talk about the strengths of JT Group. As you have seen with the results and the actual was in Combustibles. We continue to make growth investment. And because of that, we continue to exert the growth capability, and we continue to cherish that going forward. In addition to that, strategically, we have been investing in a different strategy, and that is true for RRP as well. So steadily, we have been making progress. So the fact that we have a clear strategy, that is another strength that we have for JT Group. Now in terms of somewhat of a weakness as you posed, if you look at the RRP, it may be easier for you to understand. So whenever we would need to launch the new businesses. Of course, prior to my current position, 6 years, I was working within JTI, and I have been in the leadership position. So given my experience, I believe we are still at the starting point in launching these new businesses. However, as we have already shown with you with the actual results, little by little, steadily, we have been launching the business. So Ploom AURA, that we have launched back in May last year, if you look at the actual, we do have the innovation capability built in. So since I became the President, what is the kind of leadership I would like to exert? That was another question you posed. So of course, we'd like to cherish the strengths that we've always had. And we would look into RRP and D-LAB as well. So we'd like to continuously challenge for new businesses in the long run. And we'd like to make sure that, that is connected to the growth engine. So we need to make sure that actual really reflects the growth engine that we have. So that is exactly what we'd like to focus on going forward. So there will be an upfront investment. Therefore, it is essential that we engage in close communication with you. And we would like to continuously execute the initiatives. We ask for your continued support. We do ask for your implementation and execution. So thank you.
Operator: The next person is from Nomura Securities. Mr. Morita, over to you.
Makoto Morita: Can you hear me?
Unknown Executive: Yes, we can.
Makoto Morita: This is Morita from Nomura Securities. Regarding growth investments, and some numbers around RRP, up until 2028, you are investing JPY 800 billion as advanced investments. That was the outlook you set forth. Up until now, turning the business profitable by 2028, we're in the markets you enter, raising the market share for RRP to about mid-teens is what you've been communicating. So can you take this opportunity to talk about the profitability of RRP as well as the target share you may have in mind if you have any updates associated with this?
Unknown Executive: Regarding the question about RRP and business strategies, Mr. Tsutsui will take that question.
Takehiko Tsutsui: Thank you for your question. For our ambitions, what's important here is that, this will be a passing point. Therefore, we would like to ensure we build a strong foundation. And as we communicated in today's presentation, after Combustibles, we would like to turn it into the second growth engine. Regarding forecasting of the RRP business. There is uncertainty associated with innovation. Therefore, there may be times when the timing is different from what we expect, more or less. However, on the other hand, likely been setting forth from the past regarding our ambitions, I would say we are broadly in line. As for investments, last year, we set forth JPY 650 billion. When you look at this annually, the latter half of the year, the pace of investments are increased. That was the case for last year. And for this fiscal year, we have set forth the number of JPY 800 billion. We would like to step up the pace of investments going forward. On the other hand, when it comes to this fiscal year and the investments we made, it wasn't really that much off of our expectations from last year. And when it comes to the investments we make. First, for RRP. It's still a new market that was established 10 years ago. So in this type of new market, innovation is extremely effective that is focused on the customer. Therefore, as we continue to make investments, we would like to ensure that we develop good products, and effectively deliver the innovation to the customers by making investments into marketing. So that will be approximately 80% of the JPY 800 billion. So, the reason why it costs so much money for marketing investments is because Combustibles is a mature market. However, in order to effectively reach customers, the way we do things need to be different. So customer acquisition as well as retaining customers are the areas where we are making advanced investments. For Japan, when it comes to innovation, RRP relevant marketing are in sync with each other right now. That is leading to the good performance. So Japan is a good example. And for this momentum, we're not just talking about 2028 in our ambitions, but we would like to accelerate our efforts looking out beyond 2028. That is our intention. And once we are able to make this growth definitive, we would like to also ensure that investments become more efficient, but at this point in time, the plan is one where investments will come in advance. So as we make these advanced investments, as explained in the presentation, high single-digit AOP at constant currency is what we believe we can achieve.
Makoto Morita: [Interpreted] May I confirm one thing? So for RRP and the midterm ambitions, you were saying you were probably in line, but it's not that off. But up until 2020, you were saying that you would like to turn the business profitable. Do you mean that, that target is still in place? Or do you think -- are you trying to say that it's going to be beyond 2028?
Takehiko Tsutsui: [Interpreted] Regarding the communication of becoming profitable in 2028, its marketing spend is deducted from gross margins. That's how we have been communicating. At this point in time, what I would like to stress is, directionally, we are moving towards that direction.
Makoto Morita: [Interpreted] But is that going to be 2028 or 2029 or even 2027?
Takehiko Tsutsui: [Interpreted] Due to the nature of innovation, there may be a chance that the time line may move. However, we are broadly in line towards that direction is what I -- what we have been able to confirm. So it's more of a directional comment.
Makoto Morita: [Interpreted] I see. I guess, the goal is to turn the RRP business into your next growth driver. So you don't really have to collect on your investments that early. But I look forward to your future business.
Operator: [Interpreted] The next question comes from JPMorgan Securities -- excuse me, Morgan Stanley MUFG Securities. Mr. Miyake, please.
Haruka Miyake: [Interpreted] So this is Miyake for Morgan Stanley MUFG. So Ploom has been launched in various markets. You have already made the presentation. So as you switch to Ploom AURA then in other markets, do you expect to see acceleration of the market share? So could we actually confirm that? So there are some markets that have good response, maybe not as much. You mentioned that it is related to the competitive climate. But if you can also highlight on some of the different features of the different markets. That is the first question. Also, the potential for EVO. So it's grown about 20% in Japan. And in terms of overseas market, it is also a premium product. So would it potentially drive the profitability in the overseas as well. So those are the 2 questions.
Operator: [Interpreted] So the question relates to Ploom AURA and also EVO, the Ploom performance. Mr. Tsutsui would answer.
Takehiko Tsutsui: [Interpreted] I would like to answer your question. JTI participants may add on some information later. So first of all, about Ploom AURA. So as we launch outside of Japan, I'd like to share with you the current state. Last year, inclusive of Japan. We have launched it in 17 markets. That is last year. As of today, the number has increased to 19 markets. Now the feedback from the customers, the direction wise, it is quite similar. When you compare the feedback in Japan and also outside of Japan, in terms of the taste and also for the device design, those have been highly evaluated by the customers and consumers. Another point in the overseas market, the timing of launching the Ploom AURA. So in the past, we had Camel and Winston, the brands that were used for combustibles. And we have been launching sticks according to these brands. But this -- we took this opportunity to switch to EVO. And the switch has been successful without reducing the number of customers and even after switching to EVO. The customers have been quite forward-looking. They have been quite positive about AURA and EVO. That was the feedback that we received. Of course, in the respective markets, the impact of AURA and EVO, we are bound to see difference in the different markets. But the general direction is quite similar. When you compare the feedback that we've received in Japan as opposed to the international market. So any additions from the JTI participants?
Operator: [Interpreted] JTI, would like to respond to that question?
Hiromasa Furukawa: Yes. Ploom AURA has been launched in several markets, starting in quarter 4, 2025. And depending on the launch timing, we have different time lines to see the success. But as you have seen in Eddy's presentation, we have, in some of our markets like Poland, tripled our market share of certain share of segment versus the year before. Ploom AURA has been very well received by the consumers in the markets outside of Japan. The consumers like the functionality, the consumers like the taste. But of course, it is also important to state that we need to continuously work on our commercial engine to drive awareness, acquisition and retention. And Ploom AURA, which is newly launched in these markets, will help us to do this in 2026.
Haruka Miyake: [Interpreted] This is related to the first part of the question. So as you intend to improve the profitability of RRP, so the awareness and retention would actually drive the efficiency of the marketing. And of course, you would have more volume increase. At the same time, portfolio, the mix within the stick, you would have more premiumization. Those are some of the impacts you expect to see. So when you look the next 3 to 5 years, what do you see as the biggest driver?
Operator: [Interpreted] So this is a driver of RRP profitability question. Mr. Tsutsui would continue with this response.
Takehiko Tsutsui: [Interpreted] In terms of the driver for the profitability, first thing first, we need to expand the number of consumers, customers, so basically increase the volume of the sticks, the sales of the sticks. We do believe this is the biggest driver. Also in terms of making the operation more efficient, those consumers who tried the Ploom, we need to make sure we need -- we can convert them, and so increases the percentage of conversion so they would enjoy Ploom on a regular basis. Those would be the second -- that will be the second driver. And 2 drivers would really drive the profitability going forward.
Operator: [Interpreted] The next person is from Goldman Sachs, Japan. Mr. Miyazaki.
Takashi Miyazaki: [Interpreted] This is Miyazaki from Goldman Sachs. For the Tobacco business, I would like to learn about the factors that will drive profit increases in 2026. In 2025, on Page 24, you show the factors of adjusted operating profit, compared to this, for 2026, can you walk us through what you are anticipating? I am sure that you will continue to do pricing, but compared to 2025, is the potential going to go down. And for others, that includes supply chain cost, how much of a negative impact should we account for? And for volume, I think you're assuming a slight decline. But is that fair to say, are you actually assuming a decline? So please confirm.
Operator: [Interpreted] Regarding fiscal '26 factors in the Tobacco business, Mr. Furukawa will explain.
Hiromasa Furukawa: [Interpreted] This is Furukawa. I would like to take that question. As you said in your question, when you look back at 2025, it was an extraordinary year. Based off that, regarding what we are assuming for fiscal '26, which I think you're trying to get at. Well, 2025 was a good year, but we believe AOP growth should be about 8.5% on a company-wide basis. That's what we are assuming for '26. From 2025, we saw fair momentum around the world in various markets, and we are confident about that to be ongoing. However, we also had the impact from acquiring Vector, which is going to become absent in 2026. But year-over-year investments in RRP is going to increase and expand. Regarding our volume assumptions that you were asking about, it's true that in 2025, Turkey, Philippines as well as in Russia, we saw some temporary factors, and therefore, industry volume was relatively strong. But we have been taking pricing strategies and taxes have been up. So, we will continue to focus on demand from customers so that we could take action appropriately. Whatever the case may be for the driver of sustainable JT Group growth will be looking at short-term delivery, but we will ensure that we grow the business over the medium to long term and expand profits. That is the basis of which we have formulated our management plan for 2026. JTI will also comment.
Vassilis Vovos: Thank you. Let me add a few color a little bit of color on already the key point of the answer of Furukawa-san. And you very correctly mentioned that for next year, we expect pricing to continue to be a driver of our revenue growth. And as mentioned already in the presentation, 60% of our plant pricing for 2026 is already done. We have already taken pricing in significant markets like the U.S.A., the U.K., the Philippines, Turkey and a number of other markets. So we see pricing continuing to be a big feeder of our profit revenue growth and eventually profit growth, certainly. In addition to that, we see that, by the way as a sustainable driver of revenues, not only for '26, but also as we move into the other years, we think our brands as mentioned in the presentation of Eddy are very strong, are the top-growing brands in combustibles. They have a lot of equity, loyalty pricing power. So we expect to be able to continue taking pricing in the other years as well. That is one driver, of course, of our revenue growth algorithm. You correctly mentioned, we have an anticipation of a slight volume decline next year. So we don't expect in our key markets to see the same behavior of the industry size in '25, we had very strong industry size performance in markets like Russia, Turkey and others. But of course, the decline of our volume, which overall is mentioned between 1% and flat, is much lower than the overall industry decline because we are gaining market share. We gained market share in more than 60 markets this year. We expect this to continue as we go in '26. So the momentum will mitigate our market volumes slight decline. And then the profit generation comes from efficiencies, continuous focus on improving the profit margin. You saw a very impressive increase of the combustible profit margin in 2025, which was up 3.4 points. We will continue in this direction as we move into the future. We are focusing around fewer brands. Our GFBs are now 75% of our volume. That means we reduce proliferation of SKUs, and we harmonize a lot of input materials, we are having a focus on our end-to-end services, both in manufacturing and our shared services. And we also give very clear guidance to our markets in terms of mission. So we have market classification that is clearly allowing for markets to know what's the focus. Markets could be focused on earnings or earnings in shared market. That drives efficiencies also into the investments we are doing. All these elements will help us improve our profit margin even further as we go. And together with the increase of revenue driven by the resilience of volumes and the quality of pricing, this is the driver of the growth. And to that, of course, the significant increase of the volumes of heated tobacco products, a significant increase of the revenues that will come in the coming years. And the reduction of costs because of scale will further fuel the algorithm of growth in the outer years.
Eddy Pirard: Can I add something? I would like to add a little comment on Furukawa-san's and Vassilis' comment. A lot has been talked about in terms of responsiveness on things that we do control. There's also another element, which has been highlighted before, sometimes markets develop in a certain way, the unpredictable and the uncontrollable. And what I think is a feature of our organization, of our business is that we have an embedded increasingly agile organization that can respond to surprises in a very speedy and efficient manner. And that will help in relative terms ensure that we do keep the momentum and that we position ourselves competitively in the best possible way. I think this is something that we don't often talk about, but we've been doing a lot of work over the years on trying to bring that agility by removing obstacles for speedy decision-making and agility in everything that we do. And I thought it was worthy to mention that as well.
Operator: [Interpreted] We would like to move on to the next question. SMBC Nikko Securities. Mr. Furuta, please.
Tsukasa Furuta: [Interpreted] This is Furuta from SMBC Nikko Securities. So I have a question to Mr. Tsutsui, the new President. So we have been involved in large-scale M&A inclusive of Gallaher. And also, you have alluded to M&A during your presentation. So what would be your target going forward? So I'd like to hear your thoughts. Would it be similar to something like Vector or would it be any -- something that would accelerate the growth of RRP?
Operator: [Interpreted] This is a question related to M&A. Mr. Tsutsui would respond.
Takehiko Tsutsui: [Interpreted] Thank you very much for that question. As I have mentioned within the presentation, M&A is a very effective initiative. So as we consider M&A, some of the important elements, M&A is definitely a means to grow. So to what direction and what we are going to grow, so depending on that, the attractiveness of the different deals may differ. So according to our objective, if there are opportunities, we would like to consider and explore the opportunity. So what are the different types of M&A you may ask? So in terms of combustibles. As Eddy mentioned in his presentation, as we consider and focus on ROI. We would look whether it would be instrumental in improving the ROI. And back in 2024, Vector Group was exactly it and meeting that objective. It was a very high-quality deal as we recall. So if there are more opportunities, we would definitely like to explore the possibility. Now in terms of RRP, because it is quite new in terms of characteristic, perhaps it is not so much of a large-sized M&A, but we'll be looking into more of an intellectual property or perhaps a new business model. So for instance, Flavour Warehouse in the U.K. We have forged a partnership with them or acquire them rather. So this sort of a new business model that could be another objective as well. Also, if there are some capabilities that are not fully operational within the group, we may also opt to acquire those as well. So those are some of the directions in terms of M&A. So depending on the objective, we will look around the world. And if there are opportunities, we would definitely like to look into those and look into possibilities. So JTI would also like to respond to that as well.
Eddy Pirard: Thank you very much for the question Furuta-san. I can only support what Tsutsui-san has said. We are hungry for growth, but that comes with discipline, and a more complex environment that we have experienced maybe 10, 15 years ago because of the changing consumer desires and expectations. So it is a twin approach in a way, the combustible area where we've got a lot of confidence in the capabilities that we have to run these businesses. We never forget that M&A is not easy. Integration is hard work. But we understand profoundly what it takes to succeed in the combustible area. And in RRP, it's still relatively new, all things being considered. And so looking at innovative propositions for consumers, looking at intellectual property that can give us a bit of an edge in certain parts of the business is always something that we will keenly look at with the financial discipline that, of course, you would expect from us.
Tsukasa Furuta: [Interpreted] Also, interest of the shareholders' return, I would like to ask about that. So as you continuously make gross investment, Also, if you can also -- the 75% of a dividend payout ratio, maybe it is somewhat lagging behind vis-a-vis the global peers. So how do you intend to strike the balance between gross investment as opposed to shareholders' return?
Operator: [Interpreted] So this is the balance between investment and return? Mr. Tsutsui would like to respond.
Takehiko Tsutsui: [Interpreted] Thank you very much for that question. 75% dividend payout ratio related to this point. So we are fully aware, but there are various benchmarks available in the world. But as far as we're concerned, we believe this is globally competitive. That is our understanding. And as you highlighted, in terms of gross investment, we put the top priority in the gross investment. So within that balance, 75% dividend payout ratio, we believe this is the optimal in terms of the balance. Of course, there are companies out there who are making far larger shareholders' return. And also the global peers, they have been looking into various return level and also different methods of return as well. We are fully aware of those. So just to reiterate, what would you like to stress here, is indeed gross investment really brought our group to the current state. That was the biggest driver that brought us to this very day. So back in 1999, Reynolds acquisition, in 2007, Gallaher acquisition. So these business investment have continued, and that is exactly why we have the performance as of today. And also, we have strong brand equity. The reason it is there because we have made investment in the past. And also, we've been able to capture the pricing opportunity precisely because of the strong brand equity. So I'd like to seek your understanding this gross investment will continue to be proactive, and that would continue to be high in our priority. And that will be continued going forward. And within that, of course, we would also intend to explore the competitive level of shareholders' return. And definitely, we'd like to keep that balance.
Operator: [Interpreted] We are running out of time. So the next question will be the last question. From Daiwa Securities, Mr. Igarashi, over to you.
Shun Igarashi: [Interpreted] I am Igarashi from Daiwa Securities. I'd like to ask a question about innovation in the RRP business. For Ploom AURA, since the launch, the device and the new sticks, it is penetrating the market in a very good way. In the future, I'm sure that new products will appear in the market and innovative products will probably increase. So for your company, I'm sure that highly functional devices will probably be an area that you're going to invest into for more innovation. Is that the case or no?
Operator: [Interpreted] That was a question about RRP innovation. Mr. Tsutsui will take that question.
Takehiko Tsutsui: [Interpreted] Thank you for your question. Regarding RRP innovation, last year in May, we launched Ploom AURA. And it's been a product that was well received from the customer base. So I am very pleased to see that. When we are developing such products, from the moment we are developing the product, we already are talking about making it better. In order to respond to customer expectations, we are creating a wish list in the innovation cycle and are generating a variety of ideas. So -- and even better product, we believe can be delivered to the customer in the future, Therefore, we would like to -- we do have a pipeline in place. Unfortunately, I am not able to share with you today. However, from the pipeline, we would like to ensure that highly positive impactful products for the customer and services can be developed, and we hope you look forward to it.
Operator: [Interpreted] This concludes the results meeting for fiscal '25. Thank you very much for participating today. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]