Strengthening the Business Base Through Geographic Expansion into Emerging Markets

「Total shipment volume increased 2.2% year on year, driven by continued growth in Combustibles’ market share, the effects of the acquisition of U.S.-based Vector Group Ltd., and significant growth in RRP shipment volume.」

「The purpose of this acquisition was to expand the Group’s presence in the profitable U.S. market, the world’s second-largest market by sales value.」

「On 29 November 2018, our group acquired the tobacco business of Akij Group (Akij), which operated a tobacco business in Bangladesh. Akij has strong brands, including Navy and Sheikh, in the low-priced segment, which accounts for most of the Bangladeshi tobacco market. The acquisition was intended to expand our presence in the country's large market, which is expected to continue growing.」

「Since the acquisition date, revenue arising from this business combination has been ¥6,746 million and operating profit has been ¥1,018 million.」

「On 16 March 2018, our group entered into an agreement to acquire all issued shares and other interests (Note 1) in JSC Donskoy Tabak (DT), which operated a tobacco business in Russia. The acquisition was intended to expand the low-priced brand portfolio and strengthen the distribution and sales network in the Russian market, which is a foundation for our group's profit growth. Under the agreement, our group completed the acquisition of all issued shares and other interests in DT on 31 July 2018. The acquisition cost of the shares (Note 2) was approximately RUB 92.2 billion, or approximately ¥165.0 billion.」

「On 21 December 2017, the Group acquired from the Ethiopian government 30.95% of the issued shares of National Tobacco Enterprise Share Company, which operates a tobacco business in Ethiopia. Following this additional acquisition, the Group came to hold 70.95% of NTE’s shares and made the company a consolidated subsidiary.」

「The purpose of this acquisition was to expand the Group’s presence in Indonesia’s kretek tobacco market by acquiring KDM’s supply chain, including procurement and manufacturing, as well as the nationwide distribution and sales network of the SMN Group. Under the agreement, the Group completed the acquisition of shares in KDM and the SMN Group on 31 October 2017.」

「Going forward, to further strengthen and expand our global business platform, we will invest in a balanced manner in markets where we already have a strong foundation and markets with high growth potential, with the aim of achieving autonomous growth. At the same time, we consider exploring and executing growth opportunities through the acquisition of additional external resources to be an important strategic option.」

「On 15 July 2016, the Group entered into an agreement with the Ethiopian government to acquire 40% of the issued shares of National Tobacco Enterprise Ethiopia S.C., which operates a tobacco business in Ethiopia, for US$510 million (approximately ¥53.9 billion) (Note), and completed the acquisition. The purpose of the transaction was to strengthen the business platform through geographic expansion aimed at future growth in emerging markets.」