By Timothy S. Donahue

Top Takeaways:

• Higher Forecast: JT raised its full-year profit outlook following strong nine-month results.
• Ploom Growth: Reduced-risk product volume increased 31.1%, led by heated tobacco expansion.
• Pricing Power: Tobacco revenue rose 8.7%, excluding currency fluctuations, despite declining cigarette volumes.

Japan Tobacco is selling fewer cigarettes but making considerably more money from them, while Ploom’s expanding heated-tobacco business gives the company another engine for growth.

The Tokyo-based tobacco company raised its full-year earnings forecast on Oct. 29 after reporting a 16.9% increase in adjusted operating profit at constant currency for the first nine months of 2026, driven by strong cigarette pricing and continued growth in reduced-risk products (RRP).

Operating profit increased by 24.2%, while net profit rose by 21%. Favorable foreign exchange movements, including the Russian ruble’s appreciation against the yen, contributed to the reported results.

Tobacco core revenue increased 8.7% at constant currency, with pricing and product mix contributing 9.6 percentage points. The gains offset declines in combustible volumes, increased Ploom investment, and higher manufacturing and operating costs.

“Robust pricing [continues] to be the primary growth driver across many markets,” CFO Hiromasa Furukawa said during the company’s third-quarter earnings briefing.

Total tobacco volume declined by just 0.3% over the nine-month period, while combustible volume fell 1%. Reduced-risk product volume, however, increased 31.1%, supported by Ploom AURA’s expansion in Japan and contributions from LYO, JT’s tobacco-free heated nicotine sticks in Europe.

Ploom’s share of the heated tobacco category across JT’s initial 13 markets reached 11.6% in August, reflecting ongoing marketing investment and product expansion.

Japan remained a particularly important market, although tobacco tax increases in April and October complicated quarterly shipment patterns.

Furukawa said tax-related price increases prompted consumers and retailers to purchase products ahead of implementation, producing temporary volume spikes in March and September, followed by normalization.

During the subsequent analyst discussion, Deputy CEO Nobuya Kato estimated that September’s temporary demand increase contributed about 400 million units to Ploom shipments, compared with 270 million in March.

Competitors benefited more from the September buying surge, temporarily reducing Ploom’s reported category share. “Based on the real demand basis in October — we are seeing the recovery very close to the September level before the temporary demand,” Kato said.

He cautioned that another month or two would be needed to fully assess the impact of October’s price increases, which were larger for Ploom than for competing products.

JT also recently introduced Ploom CUBE, a smaller device designed to complement Ploom AURA. According to Kato, both devices use the same consumables and offer equivalent functionality. “The main product is AURA,” he said, adding that the company expects the expanded device portfolio to support further Ploom growth.

Across JT’s geographic operations, Asia recorded 3.4% total volume growth and a 32.1% increase in RRP volume. Western Europe saw a 3.9% decline in total volume, while RRP volume increased 13.4%. In the Eastern Europe, Middle East, Africa, and Americas cluster, RRP volume climbed 43.9% despite a 0.6% decline in total volume.

Strong cigarette pricing in the Philippines, Russia, Turkey, the United Kingdom, and the United States helped offset volume pressures and increased investment.

However, executives acknowledged that sustained price increases could eventually face resistance as inflation, taxation and declining consumer purchasing power affect demand. “We cannot be overoptimistic,” Kato said when asked whether the unusually strong pricing environment could continue.

He nevertheless expects pricing conditions to remain broadly favorable through 2027, though the company will monitor consumer affordability and tobacco tax developments.

In Russia, where consumers are increasingly shifting to lower-priced cigarettes, JT plans to introduce another value-segment product to strengthen its competitive position. Kato also acknowledged that Russia’s heated tobacco category is expanding, even though JT currently does not participate in that segment. The company is monitoring developments but announced no specific plans to enter.

Reflecting its stronger performance, JT raised its full-year consolidated core revenue forecast at constant currency by ¥44 billion and its adjusted operating profit forecast by ¥40 billion at constant currency.

The revised outlook calls for full-year adjusted operating profit growth of 16.1% at constant currency and reported operating profit growth of 21.9%. Net profit is expected to increase by 32.6%.

JT kept its annual dividend forecast unchanged at ¥272 per share.

The company expects fourth-quarter growth to moderate as cigarette volumes soften and marketing expenses rise, particularly for Ploom.

Looking ahead, JT said its strategy remains focused on strengthening profitability through combustible tobacco pricing and on developing heated products as a second growth engine. “Pricing is going to be the first driver, the single greatest driver,” Kato said of the company’s longer-term earnings prospects.

For JT, the immediate challenge is to maintain pricing strength without accelerating cigarette volume declines while turning Ploom’s growing sales into a larger, more profitable share of the global heated tobacco market.