Good afternoon. I am Hiromasa Furukawa, CFO of the JT Group. Thank you very much for coming to the investor meeting. I will begin by explaining our six months consolidated results for FY2025. Please see slide four. As shown on the slide, revenue and AOP increased strongly, both on a constant FX and on a reported basis. AOP at constant FX, our primary performance indicator, increased by an impressive 24.7% YoY, driven by a strong organic performance that was boosted by the contribution of the Vector Group in the US, which we acquired last year. The foreign exchange impact on AOP remains negative due to the appreciation of the Japanese yen from Q2 onward. This has led to the depreciation of major currencies and of several emerging market currencies against the Japanese yen. Operating profit increased by 10.9% YoY, driven by the increase in AOP. The increase was partially offset by impairment losses related to the transfer of the pharmaceutical business and higher amortization costs of intangible assets related to the Vector acquisition, both of which were included in the adjusted items. Profit increased by 4.8% YoY, driven by the increase in operating profit, which exceeded higher financial costs and higher corporate income tax expenses. Moving on to the results of each business segment, starting with the tobacco business. Please see slide five for the volume performance of the tobacco business. Total volume, combining both combustibles and RRP increased by 0.7% YoY. When excluding the unfavorable impact of inventory adjustments, mainly in Russia and Western Europe, total volume actually grew by 1.9% YoY. This solid volume performance in the context of a global decline in combustibles industry volume was driven by organic growth and the inclusion of the volume from the Vector Group, which we acquired last year. Let me now explain the breakdown by product category. Combustibles volume increased by 0.3% YoY. The main driver of growth was the EMA cluster, where continued market share gains and an improved combustibles industry volume and the Vector Group inclusion delivered solid volume growth. In our other clusters, we also continued to gain market share, including in Taiwan and the UK, mostly offset by lower industry sizes. This was mainly the case in the key markets of Japan and the UK. RRP volume grew by a significant YoY increase of 20.2%. This was driven by continued growth in both volume and market share within the HTS category and markets where available. This RRP performance embeds the sales performance of Ploom AURA and EVO in Japan, which I will explain more in detail later. Moving on to the financial performance of the tobacco business on slide six. In Q2, we achieved double-digit growth in both revenue and AOP driven by strong pricing contributions across multiple markets. Focusing on the AOP growth drivers, the volume contribution was positive, mainly fueled by the inclusion of the Vector Group, which also improved the market mix through higher margins. Regarding the Vector Group contribution, I can confirm that it has been in line with our initial expectation. The price/mix contribution to AOP was very strong. Pricing contributions in many markets, including the Philippines, Russia, and the UK outweighed the lower product mix, mainly due to down trading in Japan and the Philippines. These positive factors far exceeded the incremental investments toward Ploom and the inflation-led cost increases within the supply chain, including tobacco leaf and labor. As a result, AOP at constant FX increased by 23.1% YoY. As I mentioned earlier, the FX impact on AOP was unfavorable. Nonetheless, AOP in H1 came in strongly, fueled by solid pricing contributions applied to a favorable organic volume momentum. Slide seven reviews the performance of the three clusters in the tobacco business. The graphs on this slide show YoY variances in 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. Despite growth in Q2, total volume in H1 decreased by 0.4% YoY, mainly due to lower combustibles industry volume in Japan and Taiwan. The decrease was partially offset by market share gains in several markets, including Bangladesh and Taiwan and higher Ploom volumes in Japan. Regarding financial results, a strong pricing contribution in the Philippines outweighed the negative volume impact and lower product mix, mainly due to downtrading in Japan and also the Philippines. These factors resulted in higher revenue in AOP at constant FX. Turning to Western Europe, which includes the key markets of Italy, Spain, and the UK. Total volume decreased by 5.8% YoY due to lower combustibles industry volume in several markets, notably the UK, as well as unfavorable inventory movements in Italy and Spain. These factors exceeded the positive share momentum in several markets, including Germany and the UK, combined with continued Ploom share gains in the HTS segment. Core revenue and AOP grew as the pricing contributions, mainly in Italy and the UK, offset the negative volume variance, mainly in the UK. Moving on to EMA. This cluster includes the key markets of Romania, Russia, Turkey, and the US. Total volume increased by 3.2% YoY, mainly driven by the inclusion of the Vector Group and market share gains in several markets as well as an improved industry volume in Russia and Turkey. The cluster reported an increase in both revenue and AOP at constant FX driven by the increase of total volume and an improved market mix from the inclusion of the Vector Group. Pricing contributions were also strong, mainly in Russia and Turkey. The robust top line growth across the board enabled each cluster to offset the incremental investment towards Ploom and inflation-led cost increases, including in the supply chain. Slide eight provides an update on the HTS share trends of Ploom in selected markets. As shown on the graph, Ploom's share within the HTS segment is continuing to grow across the footprint. In Japan, HTS share of segment reached a 13.6% average in Q2. Our share gains are solid despite new product launches and intense promotional activities by competitors. Speaking of new product launches, on May 27, we launched our new device, Ploom AURA, along with the premium stick EVO and limited channels. I will provide further details on Ploom AURA and performance in Japan on the next slide. Outside of Japan, even though competition in each market was intense, our HTS share of segment has continued to grow steadily. This is driven by the adjustment of our go-to-market approach, including the expansion of distribution networks, promotional activities such as collaboration with various events and use of pop-up stores as well as marketing efforts leveraging digital media and online platforms. Slide nine explains the performance of Ploom AURA in Japan. In Japan, after the prelaunch at the end of May, we expanded the availability of AURA nationwide on July 1. We are very encouraged by the strong start of AURA and EVO sticks. As you can see from the graph on the left, cumulative device sales of Ploom AURA have exceeded those of the previous model, Ploom X, by approximately 3x in the first three weeks of nationwide expansion under the same conditions. This significantly surpassed our past sales records for HTS devices. Importantly, after the launch, cumulative device sales have continued to grow steadily. Customer feedback includes comments such as the product offers a stronger kick with a rich and satisfying taste and design has become slimmer and more comfortable to hold, indicating high evaluations by consumers for the major renewal points of taste and design. Regarding the premium stick EVO, we have also received very positive feedback such as—as expected from a premium brand—the flavor is rich and delicious, and it's worth purchasing even at JPY550. As a result, as shown in the graph on the right, HTS share of segment growth in Japan has accelerated since the launch of Ploom AURA and EVO. Going forward, we plan to expand the stick lineup and gradually roll out AURA in overseas markets, starting with Switzerland in September. These developments give us confidence in our ability to continue expanding our market share, both in Japan and overseas and keep us on track to deliver on our 2028 RRP ambitions. Next, I will explain the results of the processed food and pharmaceutical businesses, starting with the processed food business. Revenue increased by JPY2.9 billion YoY, driven by the positive impact from price revisions this year and higher sales of packaged cooked rice in the frozen and ambient food business. However, this revenue increase could not offset higher raw material costs such as rice, resulting in an AOP decrease. Moving to the pharmaceutical business. Revenue increased by JPY4.3 billion YoY, driven by the sales increase in the area of skin disease and allergen at our subsidiary, Torii Pharmaceutical and increased overseas royalty income. AOP was broadly stable as the revenue increase offset higher SG&A expenses. From the next slide, I will guide you through our revised forecast for FY2025. First, I'll explain our full-year consolidated revised forecast. Core revenue at constant FX has been revised upward by JPY54 billion from the initial forecast, reflecting the strong H1 momentum in the tobacco business as well as an upward revision of the revenue in the processed food business. While revenue in the pharmaceutical business has been revised downward due to the transfer of the pharmaceutical business, this impact is more than offset by the factors I just mentioned. As a result, we expect an 8.4% YoY increase in core revenue at constant FX. AOP at constant FX has also been revised upward by JPY47 billion from the initial forecast, reflecting the upward revision of core revenue at constant FX. Consequently, AOP is expected to increase by 14.6% YoY. The negative FX impact on AOP is expected to ease versus the initial forecast due to a favorable revision of assumed foreign exchange rates. As a result, AOP on a reported basis has been revised upward by JPY89 billion from the initial forecast. Operating profit has been revised upward by JPY68 billion, reflecting the upward revision of AOP, partially offset by the adjustment tied to impairment losses related to the transfer of the pharmaceutical business. Profit has been revised upward by JPY44 billion, driven by the increase in operating profit, partially offset by higher financial costs. Free cash flow has been revised downward by JPY112 billion despite cash inflows related to the transfer of the pharmaceutical business and the upward revision of AOP. This is due to the expected initial payment related to the comprehensive settlement of the Canadian litigations, which was not incorporated in the initial forecast and higher working capital. Compared to the previous year, we expect an increase of JPY65.5 billion due to the payment made last year for the acquisition of Vector Group. Next, this slide explains the revised forecast of each business. First, let's look at the volume forecast for the tobacco business. Total volume combining combustibles and RRP has been revised upward, reflecting the share growth in combustibles and the improved industry volume in several markets. In H2, we expect total volume to decline YoY, mainly due to the lapping of the Vector Group acquisition in October. As a result, we're expecting total volume to decline by approximately 1% YoY. Turning to the financials. Core revenue at constant FX has been revised upward by JPY80 billion, reflecting the strong pricing delivered in H1. This will translate to a 9.8% YoY increase, including the lapping of the Vector Group acquisition. The robust top line performance will enable us to make additional investments in Ploom, resulting in AOP at constant FX being revised upward by JPY42 billion. Consequently, AOP at constant FX is expected to increase by 13.4% YoY. In H2, growth in core revenue and AOP is expected to moderate, reflecting a volume decline in H2 YoY and a higher cost base versus H1. Although FX rates are expected to continue to have a negative impact, the revision of assumed exchange rates is expected to reduce the extent of this negative impact compared to the initial forecast. Slide 14 explains the revised forecast for the processed food and pharmaceutical businesses. The forecast for revenue in the processed food business has been revised upward by JPY2 billion from the initial forecast, incorporating higher sales of packaged cooked rice in the frozen and ambient food business. Forecast for AOP remains unchanged from the initial forecast as the upward revision of revenue is to be offset by higher raw material costs such as rice. Moving on to the pharmaceutical business, our revenue forecast has been revised downward by JPY28 billion from the initial forecast mainly due to the deconsolidation of Torii Pharmaceutical from July this year following the sale of shares in Torii. Higher overseas royalty income is expected to partially offset this negative impact. AOP has been revised upward by JPY6 billion from the initial forecast despite the downward revision of revenue, mainly driven by the exclusion of R&D expenses concentrated in H2 due to the deconsolidation. The pharmaceutical business is planned to be classified as a discontinued operation starting from Q3 of this fiscal year. Please refer to slide 18 for details regarding the corresponding disclosure changes. Finally, please see slide 16. The H1 results were very strong. The pricing contribution in the tobacco business was a significant driver of this performance alongside the inclusion of the Vector Group, which contributed in line with our initial expectation. As a result, AOP at constant FX increased by 24.7% YoY, marking substantial growth. In HTS, our focus area, Ploom market share has been steadily expanding. We are also seeing strong momentum for Ploom AURA and EVO in Japan since July. As for the full-year forecast, we have revised upward all indicators from top to bottom line. This reflects the strong momentum in the tobacco business during H1 and the anticipated reduction in negative FX impact due to a revision of the FX rate assumptions. Finally, shareholder returns. This is the first time we are making this announcement in conjunction with the Q2 earnings release. Based on the revised forecast and our shareholder return policy, we plan to revise the annual dividend guidance upward by JPY14 from JPY194 to JPY208. As I mentioned in the Q1 results announcement, we determined the dividend for the current period based on the payout ratio calculated on the continuing operations basis. The payout ratio will be 74.9% based on the figure, which is shown on slide 18. This concludes my presentation. Thank you very much for your attention.

Thank you very much. We'd like to move on to the Q&A session. Let me introduce to you the speakers who will answer your questions today. Hiromasa Furukawa, CFO of the JT Group and Nobuya Kato, JTI Deputy CEO. Now, we would like to show you how to ask questions. Please click the “raise hand” button in the Zoom window. If you’re selected, please unmute your microphone and ask your question. For participants joining by phone, please dial *9 to raise your hand. If selected, dial *6 to unmute and ask your question. Due to time constraints, each person may ask only one question. Please note that we may not be able to answer all your questions. Thank you for your understanding. Thank you very much for waiting. I would like to introduce the first questioner from Mizuho Securities, Saji-san, please.

Thank you very much for the opportunity. So it has been a very favorable result. I'm very happy. My question relates to the domestic RRP business. So in three years, JPY650 billion is the investment plan. So a large portion of that, so Ploom AURA, the launch is using a lot of- within that investment. So my question is three years, JPY650 billion. This year, how much would you spend? And what would be your investment? So also adjusted OP, that is the way you've been communicating to us. So what is the potential expense increase that is related to AOP? Also, on a mid-term basis, you're planning to turn the business into black as KPI. So by 2028, for RRP as a whole, you're planning to turn this business into black. So this year, inclusive of the deficit, what is the degree of the deficit you may have, inclusive of all these expenses? Thank you very much.

That question relates to RRP category, JPY650 billion investment and breakdown by each year. And also its usage and also impact on adjusted OP. Also towards the 2028 ambitions, some of the outlook on a mid-term basis. So JTI Deputy CEO, Mr. Kato would answer.

Mr. Saji, thank you very much for the question. This is Kato. So you mentioned domestic. So that was part of your question. But as you know, JPY650 billion in three years. This is not just for domestic, but also on the global basis. That is the amount that we expect to invest. So breakdown by each year, unfortunately, we do not disclose. But as a general trend, shall we say, gradually, it shall be on the rise because, of course, there will be more markets deployed with the RRP. And also for this year, next year, and the year after, so at the end of this year into H1 of next year, in the existing markets, we will conduct the replacement to AURA. So on a relative basis, this year and next year, perhaps somewhat investment is heavy on a relative basis. Also, as part of your question, you mentioned about the breakdown of the investment. So you're talking not just by the year, but by which products, which I think that was also part of your question as well. So I would also like to explain on that part. Needless to say, new products development, and also, we may have R&D with the base, the insights, all those are inclusive in there. And of course, we talked about replacement to AURA and various marketing and promotional activities are only inclusive in here. Now in terms of turning the business into black or profitable, as Mr. Saji mentioned, so the year 2028 has been set as a potential milestone to bring the RRP business as a whole profitable. So that is the mid-term outlook. So we would like to achieve those. And for the time being, again, we're just aiming for breakeven and also making the business profitable on a mid-term basis. That is our first, the target. So of course, in order to achieve that, we need to have some sort of base to start from. Therefore, at the same time, HTS, especially, of course, HTS will be the primary, the category. So mid-teens is the segment share we are aiming for. So we shall have certain amount, or the base size. Once we achieve the breakeven, we need to accelerate the contribution into the earnings. So in terms of the time frame, you may wonder when can we actually have a recoup of the investment that has been made? So basically, on a mid-term basis, first of all, the breakeven and making the business profitable, and of course, we need to have certain size as well. All these need to be taken into perspective. And beyond that, we would also need to accelerate the contribution into earnings development. So on the long-term basis, perhaps a bit more on the longer [inaudible], we would like to recoup the investment that we have made. So that is all in terms of my answer.

Just one additional point. In terms of adjusted OP, what is the potential expense or cost that would hit the AOP? Because the investment amount is quite large, I believe some are concerned about the potential cost and expenses. So the expenses that would hit the AOP, how much would that be for this fiscal term roughly?

So for this fiscal term, I think that was the question. In terms of adjusted OP, what would be the amount that would hit the AOP maybe we cannot disclose the exact amount. But perhaps on a qualitative basis, I can give you some color. So we don't have a number specifically for RRP. We cannot disclose that number specifically for RRP. So for this fiscal term, on a full-year basis, in terms of AOP on a current constant FX basis, 13.4% growth YoY is expected. So there are some positive drivers, and there are some negative factors, which would be the cost. So within that, versus others, that is negative. And also, it will be realized as cost. So perhaps we can give you the breakdown within the others. So within the others, so we have the cost, the COGS accounts for about half of that within the others. And the marketing cost, just short of 30% and OpEx around 25%. So that is the breakdown. So the marketing expenses account for quite a large portion within the investment. So within the cost, it's just short of 30% in terms of marketing. But of course, the marketing, this relates not just to RRP, but also in markets where RRP is not deployed, that is for combustibles. We are also spending the market expenses as well. So again, just as a reminder, this is not just for RRP. So this is not a direct answer to your question, but hopefully, that would answer your question.

Thank you very much.

Saji-san, thank you very much. So I'll introduce the next person. From Nomura Securities, Morita-san. Over to you.

This is Morita from Nomura Securities. Regarding shareholder return, I would like to receive additional comments from you. 75% was the shareholder payout ratio. And you were commenting that you're comparing against other FMCGs. But when you look at food companies and other companies of Japan, they are moving it up a step further when it comes to share buybacks and so forth. I think they're going up a level lately. And when you look at your balance sheet, when it comes to shareholder return, I think there is a little bit of more opportunity to do additional returns. So when you think about total shareholder return, what are your views in changing it and making it higher? And how do you view what others are doing? And how do you view yourself?

The question was about our policy on shareholder returns. Our Group CFO, Mr. Furukawa, will take the question.

Morita-san, thank you for your question. This is Furukawa, Group CFO. As you rightly said in your question, regarding shareholder return, the main part of our policy is dividend per share. Regarding the payout ratio, 75% plus/minus 5% is what we have guided as a policy. So first, regarding the payout ratio of 75%, we look at various peers and global FMCG companies, and we have confirmed where they are through monitoring. And we look at and benchmark against our peers, and we do believe our payout ratio is comparable to what they offer. But regarding allocation of cash, we do believe it's important to offer shareholder return, but it's also important to invest it into our business. We would like to strike a good balance between the two, and that is how we have derived the payout ratio that we currently offer. Regarding your question on share buybacks and its opportunity, up until now, we have been answering to that kind of question as well. But regarding share buybacks, it depends on our financials for that given fiscal year. On top of that, the business environment we're in, as well as where we are free cash flow-wise, as well as where our balance sheet stands, as well as our medium-term outlook, we will also look at our profit levels as well as how much we're going to invest into our business. We look at a variety of factors to decide what we are going to do. So just to confirm, we look at the benchmark of dividend payout ratios. However, over the medium and long term, we want to sustainably grow our profits so that we can steadily increase shareholder return.

I just have a follow-up question to that. Against your peers, what about total shareholder return? I think that's more relevant. When you look at total shareholder return of peers, the 75% dividend payout ratio, do you still feel that it's comparable to competition?

Of course, we do engage in monitoring. And when you look at numbers of targeted companies, we are inferior when it comes to total shareholder return. But as we do comparisons against the companies we monitor, we will constantly confirm where we stand position- wise. And at the same time, we will continue to obviously need to invest in our business as well. So we would like to strike a good balance by looking at both. However, also consider shareholder return policies that are competitive. And of course, these are moving parts. And other companies will also change their policies as well. So we would like to continue to monitor where they stand.

Thank you very much.

Thank you very much, Morita-san. So I'd like to introduce the next question. JPMorgan Securities, Fujiwara-san, please.

Hello. This is Fujiwara from JPMorgan Securities. Thank you very much. I have one question related to the tobacco business on a constant FX basis, how should we look at the AOP going forward? So you talked about H2, it is not expected to grow that much. Maybe just a slight decline in terms of the profit. You've explained that within the presentation, but I'd like to hear more details related to that. Also for the business plan 2025, the business plan, so high single-digit growth is expected. So this term, 13% growth has already been planned. So next year onwards, high single-digit growth, could you realize this? Because it appears as if the base has been lifted. So next fiscal term onwards, if you can share with us your outlook. So that is my question.

So the question was related to this year's remaining period, what is the AOP for tobacco business? Also next year onwards, what are the outlook and the thoughts related to the earnings growth? So Kato-san will give you the answer.

Fujiwara-san, thank you very much for that question. H2, we may see some deceleration. So I'd like to again explain to you the factors. The largest factor, as you may be aware, Vector Group's acquisition impact. Q4 of last year, that has been consolidated. So basically, it has been lifted and it will be absent in Q4 onwards for this year. So that is definitely one of the largest factors. So of course, that would have an impact on the volume. And of course, beyond the volume all the way to profit, it shall definitely pose an impact. In terms of pricing, the pricing effect, so in H2, we do expect to see a pricing effect as well. In terms of the pricing environment as a whole, we are not expecting major changes. So we believe we can steadily implement the pricing strategy. Now in terms of volume, H1 is expected to be stronger. So as a result, the pricing effect, H1 tends to be stronger in comparison to H2. So on a relative basis, H2 may appear to be weaker. This is just on a relative basis. Also, we've been talking about AURA. So in the existing markets, we will continuously deploy AURA. Now the replacement will be accelerated more in H2 of this year. And in relation to that, investment should grow in H2. So these are some of the factors we are expecting in H2. Also for next year, I think your question relates to the outlook for next year. So 13.4% is this year's growth expectation. And one of the major factors, as repeatedly mentioned, is the acquisition of Vector Group. Needless to say, this year, we shall see the full-year impact. And next year, we shall see an acquisition, the effect. So of course, the simple sort of a positive effect from the acquisition will be absent next year onwards. So that is perhaps why Fujiwara-san is posing the question. What do we think of next year onwards? So we're still in the midst of this year. So we cannot really comment on next year at this particular moment. But perhaps I can give you some explanation on a qualitative basis. So 13.4% of full-year growth expectation, this number. Certainly, the Vector acquisition impact is inclusive in there in large portion. But at the same time, organic contribution, organic growth has been very robust as well. And that is the reason why we have set the guidance for 13.4%. So the strong momentum is there. And we are hoping that this will be continued next year onwards. So that is we can share with you at this moment.

Understood. Thank you very much.

Thank you, Fujiwara-san. I'll introduce the next person. Morgan Stanley MUFG, Miyake-san, over to you.

Thank you. This is Miyake from Morgan Stanley. I have a question about Ploom and its market share increase in Japan. I would like more color. And on its backdrop, this time, the premium price range of EVO was also launched, and you are also going to raise the prices of Mevius as well. Up until now, downtrading manifested in the RRP market, I recall. So after the launch of EVO in the RRP brands, how has the mix started to change? And do you think that momentum is sustainable? That's my question.

The question was about HTS category share increases in Japan and the reasons why. And regarding the launch of EVO as well as other brands and its mix change, how has it developed? Kato-san will take the question.

Thank you very much for your question, Miyake-san. Regarding the launch of AURA, from the end of May, there was an initial limited distribution on a channel basis. And then after the Q2 launch, segment SOS became 13.6%. It increased. And because it was channel limited, the contribution for EVO is not that high. That's the way you can look at it. However, having said that, QoQ, we have been growing the business. So prior to AURA, which was Ploom Advanced, we have been able to satisfy our customer base, Ploom X Advanced. And also for the sticks, we do believe customers will continue to enjoy and be satisfied with the sticks. For Mevius and Camel, there has been a switchover from the beginning of this year. So we've been making improvements of our sticks, whether it be the flavor or the kick. And those are the reasons why we have been able to steadily increase our share. And then from July, we launched AURA on a nationwide basis. And as Furukawa-san explained in the presentation, when you look at July, segment share has been growing by approximately two percentage points. And looking at the two percentage point increase, our view is that because of the new AURA device, whether it be EVO or Mevius or Camel sticks, the flavor as well as the kick has become better due to the new device. And I believe that has served as a positive. And the new brand EVO, there has been a high level of interest from the customer base, which has led to the growth, we presume. In terms of mix, we are not able to go into detail, unfortunately. But as of the month of July only, for Mevius as well as for Camel, our view is that there has not been a significant amount of cannibalization with EVO and its launch. And regarding EVO, because it was a new brand, marketing-wise, we are running various promotions and campaigns to promote trials of the user base, and that has had an impact on EVO sales in the first month. We have been receiving high levels of interest. So hereafter, whether it be for EVO or for AURA, by having our customers use AURA and how much that's going to contribute to share growth, we only have completed the first month. So we need to continue to monitor the trends. But as a first month of the launch, our view is that we are off to a very good start. And when you hear our customer feedback, there's a lot of positive, extremely positive feedback so far. So we are feeling a good response from this launch, and we have high expectations towards the future. We are deepening our confidence. Also, I think you also mentioned this in your question, but going forward for Mevius with the price increases that we are going to do for Camel, Mevius and EVO, there will be three price ranges available. So it's like to talk a little bit about the way we look at our portfolio. So broadly speaking, price range-wise, we would like to have different brands be allocated in a balanced way so that we can enhance our profitability. And we would also like to respond to a diverse range of customer demand. So that's the sort of portfolio we would like to build by having these brands in place. To go into further detail for Mevius, including RMC, many customers support Mevius. It's popular. And also up until now, it has continued to be loved by customers because of its flavor and quality. We would like to continue to succeed with those properties as we extend the lineup of products. And amongst the three brands, it will be in the middle in order to cater to extensive preferences of the customer base. For EVO, this is a dedicated brand for HTS. It has been first time ever for JT to do this. And also for AURA, you are able to have a very rich and “flavorable” experience. We have adopted extremely high-end quality tobacco leaf. So it's HTS AURA dedicated as a brand. And we are able to deliver high quality through this brand, reflected in its price point. And for Camel, it's in the value price range category. So the prices are affordable. But on the other hand, we don't compromise when it comes to flavor and quality. In this regard, we have three brands under three price categories. And by having this kind of different positionings, we are able to communicate different types of features and characteristics so that the customers can enjoy based on their preference. So that's the kind of optimal portfolio we would like to build. And by doing so, we would like to enhance our share.

Thank you very much. I just have a follow-up question to that. By rolling out AURA and launching EVO, what kind of users are you anticipating? Are they coming from competition? Are they coming from combustibles? And are they converting as well?

Well, according to our data, as you rightly said, competitor HTS users have been captured and also combustibles users, including competitor combustibles users have been coming as well. And whether it be for the AURA device, the segment share has been increasing, although it's just the first month, which we believe is proof that we have been able to capture share from competitor HTSs. So it's very encouraging because the data matches with our internal data. So we have been deepening our confidence.

Thank you.

Thank you very much, Miyake-san. We'd like to move on to the next question from Goldman Sachs Securities. Miyazaki-san, please.

So this is Miyazaki from Goldman Sachs Securities. Thank you very much for that explanation. My question relates to the bottom line and the free cash flows. So I'd like to ask about the line items closer there. So in comparison to Q1, the adjusted OP or the operating profit related to that, the earning power for net income, I think there has been an improvement in comparison to Q1. So were there any changes in terms of the line items, the financial cost or tax, so forth? Has there been an improvement that has played a positive impact on the bottom line? And would this continue into H2 of the year? So it's a confirmation on those line items. Also on the full- year basis, free cash flow has actually risen in- no, sorry, free cash flow itself, actually, you've revised it down on a full-year basis. But I think you mentioned about the increase in the working capital. So what exactly caused the rise or what is expected to raise the working capital? So that is an additional question to you.

So the question relates to the H1 results. So the line items below operating profit, the details related to that and also free cash flow, the full-year guidance, especially related to the working capital. So Furukawa-san would respond to your question.

Thank you very much for the question. So I think there are two questions inclusive in there. First is the items below operating profit. So in comparison to Q1, you mentioned about the comparison, there's improvement in comparison to Q1. So in terms of the tax burden, in comparison to Q1, the burden is less in Q2. So Q1, I think it was close to 30% in terms of the tax rate. So I think I mentioned that as we progress through the quarter, this burden shall come down. So that is definitely one impact that we have seen in Q2. Also, in comparison to last year, of course, there is some interest, the cost related to Vector acquisition. But perhaps if you were to compare with Q1 that you may have that impression. Also, as to the cash flows, free cash flow that is, so within the revised forecast, because of the settlement in the Canadian litigation, so there was some initial payment related to the litigation. We expect to make that payment within this year, and that is why we are expecting the free cash flow and we have revised it down. And so in terms of the increase in the working capital, that is related to the non-tobacco materials, the NTMs. We have a lot of inventory. And of course, this relates to our sales strategy. So that has led to increase in the working capital. So that is all for me.

Thank you very much for that.

Thank you, Miyaki-san. We are drawing close to the close. So the next person will be the last question. From SMBC Nikko Securities, Furuta-san, please.

This is Furuta from SMBC. Thank you for taking my question. I have a question about your revised forecast as well as about the dividend increase. You were saying that H2 is going to be moderate. But after the end of Q1, you were saying that the profit growth rate is going to moderate and costs will be incurred. But Q2 on a constant currency basis, we saw profit still increase with momentum. So I kind of feel that your H2 expectations are a little bit conservative. And I do understand about the lapping of Vector as well as investment costs, but are you being wary of something else? And also about dividend increases, for the first time, you increased dividends as of Q2, that's what you said. But is there a change in policy? Why did you make these announcements at this time?

The current question was about the tobacco business and the H2 expectations, first, Kato-san will give his view.

For H2 of the year and the moderation or the deceleration that we explained earlier about, you were asking whether we are accounting for any other risks on top of what we explained. I think that's what you're trying to get at. When it comes to specific risk factors and accounting for them that we didn't explain, no, that is not the case. But regarding some areas that we didn't cover extensively is about volume. And we were just talking about Vector. But in H1 of the year, for some markets like Turkey or Russia, total industry volume was extremely brisk. We explained that in Q1 as well. But in H2, we've been doing pricing and there has been some tax increases as well. So for H2 of the year, we expect industry volume compared to the past to be a little bit slower, and it's likely to decelerate. That's our assumption. Furthermore, for markets like Bangladesh, as of last year, in H2, latter half, we launched some new products. And that impact has come through substantially in H1 of this year. But for H2 of the year, on a YoY basis, we're going to be coming against the higher half. So it's going to be slower. So regarding volume, it's not just the Vector effect. We're expecting various factors, and that is why we anticipate a deceleration. And you also said our outlook may be conservative. But in other words, that would also mean that the trends of industry volume for H2, if it becomes stronger, of course, we're not ruling out that possibility, but we haven't accounted for that in our assumptions. But there may be a chance that industry volume continues to be brisk for H2 of the year. So if that materializes for sales volume, it should become stronger than what we expect. And in turn, H2 will come out to be stronger, which will be reflected on to our bottom line. And regarding risk factors that we haven't accounted for, if I were to mention some, one would be tariffs in the US for they are having negotiations with countries around the world, and we are starting to gain visibility, whether it be for Japan as well as for the EU. However, the talks are not over yet. And also for import tariffs into the US, although that has been decided, what is going to happen to exports out of the US going to regions and countries around the world? That is also uncertain at this moment. So there's a lot of uncertainty still out there, which may be a risk on the cost side of things and there may be some negative items that may come through. However, we are also conducting various types of simulations on our side as well. And regarding things that are related to US tariffs, we have accounted for that kind of impact by a certain degree in our forecast this year. And as we run various simulations, unless our forecast is really off, we should be able to achieve our projections. So that's it regarding the outlook for H2 of the year. Next, regarding our view on the revised dividend forecast, Mr. Furukawa will take that question.

Thank you. This is Furukawa. As you rightly said, for us, as of the Q2 results announcement, announcing a dividend increase is probably the first time ever. As of Q2 earnings announcement and revising up our dividend forecast, well, one thing that I mentioned in the presentation was that we saw strong performance of the tobacco business that we accounted for, for H1. Also, we revised the FX assumptions, and we expect the negative impact from FX to become smaller than before. So that is why based on net income, we decided to revise up the dividends. And the payout ratio is 75%, plus/minus 5%. So because the revised forecast, when applying the payout ratio, the dividend goes below the 75% target. And also, we looked at current business conditions as well as the strength of momentum, and we deem that achieving the target is high. Therefore, we decided to revise up the dividend payout forecast as of Q2. And we talked about revising up the net profit outlook, and this is on the back of strong business performance. Of course, it's still in the middle of a fiscal year. So going forward, there might be a substantial change, which we cannot rule out. In that case, like I mentioned earlier, the 75% plus minus 5% will be what we will refer to when we decide on our dividend payout. And the outlook we set forth today is what we would like to achieve by making efforts throughout the remainder of the year.

Thank you very much. I have a follow-up regarding the business. You mentioned tariffs as a risk factor. Is there anything that has impacted consumption behavior? Even indirect impact would be fine. But what have you acknowledged so far?

This is Kato speaking. So far, indirectly, because tariffs have increased, prices have also been increasing. When it comes to affordability or consumer sentiment and negative impacts and so forth, that's what we would call as indirect impact. But at this point in time, we have not seen that kind of impact materialize in a big way. However, when it comes to consumer sentiment and the economy, you need to look at the trends over a longer period. When the sentiment starts to become negative, consumers will start downtrading or they may hold back from making purchases. So we need to continue to closely watch the trends. But as of right now, we have not confirmed any big movements so far.

Thank you.

Thank you very much, Furuta-san. With that, we would like to conclude the Q&A session. So, now, we would like to conclude the FY2025 Q2 investor meeting. Thank you very much for your participation. [END]