Strong Pricing Lifts Japan Tobacco's Profits While New Products Shed Light on Reduced-Risk Growth
Wide-moat Japan Tobacco's first-quarter results came in above our expectations thanks to greater-than-expected pricing variance in the domestic and overseas tobacco businesses, although management considered the results in line with its internal target. Like-for-like adjusted operating profits saw 7% growth. Reported operating profits, up 24%, were lifted by Gilead’s one-off payment of JPY 62 billion for buying back the distribution rights of six HIV drugs. We reiterate our view that brand equit...Japan Tobacco is mainly engaged in the manufacture and sale of tobacco products in the domestic and overseas markets. Along with its affiliates, Co. operates in four principal business segments: Japanese domestic tobacco, international tobacco, pharmaceutical, and processed food. Co. is engaged in the manufacture and sale of cigarettes in Japan and overseas; the research, development, manufacture and sale of ethical pharmaceuticals; and the manufacture and sale of frozen and ambient processed foods, bakery items and seasoning. In addition, Co. is involved in the leasing and management of real estate and the other businesses.
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