It's now my pleasure to introduce our CFO, Mr. Furukawa, please.
Good afternoon. I am Hiromasa Furukawa, CFO of the JT Group. Thank you for joining us today for the JT Group's first quarter 2024 earnings briefing. First, let me review the three-month consolidated financial results. As shown on the slide, revenue and adjusted operating profit increased, both on a constant FX and on a reported basis. AOP, at a constant FX, our primary performance indicator, increased by 3.4% year-on-year, driven by the solid contribution from our core tobacco business. The growth in the tobacco business was fueled by pricing in combustibles, which outweighed increased investment towards HTS and higher costs, including in supply chain costs. The increased profit in the processed food business also complemented the overall growth. On a reported basis, AOP declined due to the negative foreign exchange impact from the depreciation of some emerging market currencies and the appreciation of cost-related currencies.
Operating profit increased by 4.6% year-on-year, mainly driven by the AOP increase, as well as adjustment benefits driven by a decrease in amortization of trademark rights and increase in gain on sales of real estate. Profit increased by 8.7% year-on-year, mainly fueled by the operating profit growth and lower financing costs. Moving on to the results of each business segment, starting with the tobacco business. First, please see slide 4 for the tobacco volume performance. Total volume, including combustibles and RRP, increased by 2.1% year-on-year. Excluding favorable inventory movements, total volume grew by 1.3% year-on-year. In the first quarter, we continued to see solid market share momentum and GFB volume growth in several markets.
In the combustibles category, volume growth was driven by the EMA cluster, fueled by strong market share and volume momentum in emerging countries, positive industry volume in the key markets of Russia and Turkey, and ongoing recovery in global travel retail, mainly in Asia. These factors, plus the favorable inventory movements, resulted in a 1.7% year-over-year increase in combustibles volume. This despite the lower combustibles industry volume in Japan, the Philippines, Taiwan, and the UK, as well as the negative impact from the business model change in Sudan. RRP volume increased significantly by 25.2% year-over-year, driven by an increase in HTS volume, our investment priority. In addition to the growth of market share in the HTS segment in Japan, volume growth was supported by Ploom X launches in several markets, particularly in Europe. Overall, total volume in the first quarter exceeded our initial expectations.
We will continue to monitor trends in industry volume and operating environment in each market. Moving on to the financial performance of the tobacco business on slide 5. In the first quarter, we continued to deliver strong top-line growth driven by pricing contributions in multiple markets, including the Philippines, Russia, and the UK. Although total volume grew on a unit basis year on year, the volume contribution to AOP was negative. This was due to a lower market mix, resulting from a reduced volume composition from high-margin markets such as the UK. Top-line growth was partially offset by increased investments towards the accelerated geoexpansion of Ploom X, higher supply chain costs due to leaf tobacco costs, and other factors such as labor costs.
Foreign exchange impact on AOP was unfavorable, mainly due to the depreciation of some emerging market currencies such as the Russian ruble and the appreciation of cost-related currencies such as the US dollar and Swiss franc. AOP in the first quarter exceeded our initial expectations, mainly due to higher-than-expected total volume and the related pricing contribution, as well as a more moderate increase in supply chain costs compared to the initial forecast, and the phasing of various sales promotions and costs. Slide six reviews the performance of the three tobacco clusters of the tobacco business. The graphs on this slide show year-on-year changes in total volume, core revenue, and AOP on a constant FX for each cluster. Let me start with Asia. This cluster includes the key markets of Japan, the Philippines, and Taiwan.
Total volume in this cluster decreased by 4.5% year-on-year, mainly due to lower combustibles industry volume in Japan and the Philippines, partially offset by market share gains in the Philippines and Taiwan, and higher Ploom X volume in Japan. Despite a positive pricing contribution from the Philippines, mainly resulting from a carryover effect from last year, financial results showed a decrease in core revenue and AOP at Constant FX. These results were due to a negative volume variance, a deterioration in the product mix from downtrading trends in Japan and the Philippines, and investments towards growing our RRP share in Japan. Turning to Western Europe, which includes the key markets of Italy, Spain, and the UK, total volume was flat year-on-year, as GFB fueled market share gains in most markets, and Ploom X volume growth offset declines from lower industry volume, mainly in France and the UK.
Excluding the favorable inventory movements in France, Italy, and Spain, total volume decreased 3.5% year-on-year. Core revenue and AOP grew as the pricing contributions, mainly in Spain and the UK, offset the negative volume variance, mainly in the UK, increased investment towards Ploom X, and higher costs, including in the supply chain. Moving on to EMA. This cluster includes the key markets of Romania, Russia, and Turkey. Total volume increased 5.7% year-on-year, driven by market share gains in several markets, continued recovery of global travel retail, mainly in Asia, and favorable industry volume in Russia and Turkey. These factors more than offset the negative impact from business model changes in Sudan.
The cluster reported an increase in both revenue and AOP at constant FX, driven by the robust volume and pricing contributions, mainly in Romania and Russia, which more than offset the investment towards Ploom X and higher costs, including in the supply chain. Turning to RRP on slide seven. RRP sales volume increased by 25.2% year-on-year to 2.5 billion units. This performance was mainly driven by the growth of Ploom X in Japan. RRP volume is also increasing steadily in markets outside of Japan and is expected to grow further as we expand the number of markets in which Ploom X is deployed. Since the beginning of 2024, Ploom X was launched in four additional markets, namely the Canary Islands, Germany, Slovakia, and Spain. Ploom X is now available in 17 markets.
We are planning four additional launches by the end of June, including Serbia, Ukraine by the end of May, and Latvia and Montenegro in June. These efforts put us on a track towards achieving the 2028 ambition in terms of meeting HTS share at segments in HTS key markets and RRP break-even. Slide 8 provides an update on the progress at Ploom X in several markets.
As shown in the graph, Ploom X market share in Japan and overseas is growing steadily, including in newly launched markets. In Japan, the largest HTS market globally, Ploom X continued its positive trend amid increasing competition in the HTS segment. In the quarter, Ploom X share at segment grew to 11% and reached 11.3% in March. In Italy, we have strengthened our distribution and expanded nationwide since last November. Post our nationwide expansion, our segment share has been growing steadily, reaching 1.5% as of March 2024.
In the Czech Republic and Switzerland, where we launched in June and September last year, respectively, our segment share has been constantly increasing since last launch. As we recall from our tobacco investor conference last year, our launch strategy in HTS focuses initially on large urban cities. This means that our segment share performance tends to be higher in these cities. For instance, in Geneva, our segment share reached 4.1% in March. We continue to aim to reach nationwide expansion in each launch market at an early stage. In other markets, our segment share continued to improve gradually since launch, and we have received positive feedback from both our customers and business partners, confirming we are off to a good start. Next, I'll explain the results of the pharmaceutical and processed food businesses, starting with the pharmaceutical business.
Although sales in the area of skin disease and allergen grew at our subsidiary, Torii Pharmaceutical, revenue declined by JPY 1.6 billion year-on-year due to the absence of one-time income from licensing of patented JT compounds received in FY 2023. AOP decreased year-on-year due to the higher R&D expenses, in addition to the lower revenue. Moving to the processed food business. Revenue was broadly stable year-on-year, mainly driven by the positive impacts from price revisions, offsetting the impact of discontinuation of some products as a result of the product portfolio review. AOP increased driven by the positive pricing contribution from the revisions implemented in the previous fiscal year, offsetting the increase in raw material costs and unfavorable currency movements. In closing, please see slide 11. To summarize the first quarter results, we delivered solid profit growth with tobacco pricing as a main driver.
The stronger-than-expected tobacco volume performance also contributed to the business performance, rather complemented by the profit growth in the processed food. This robust start of the year gives us confidence in achieving our full-year forecast announced in February. On the other hand, foreign exchange rates have remained volatile. In addition, the business environment remains uncertain due to the macroeconomic factors such as geopolitical risks, including the situation in the Middle East. The total industry volume evolutions trend to supply chain costs, just to name a few. We continue to closely monitor the situation and will update our earnings forecast if and when necessary. Regarding RRP, our investment priority, the geoexpansion of Ploom X is on track with our plan, and we confirm that the announced 2028 RRP ambition remains unchanged. We continue to collect and utilize customers' feedback to further improve our product and marketing strategy. This concludes my presentation.
Thank you very much for your attention.
Thank you very much, Mr. Furukawa. Now, we would like to start the Q&A session. Let me introduce you to the speakers who will answer your questions today. Hiromasa Furukawa, CFO of the JT Group, and Nobuya Kato, JTI deputy CEO. Next, I will inform you how to ask questions. We are afraid we don't accept questions in this English line. If you have a question, please send an email to jt.ir@jt.com. We will introduce your question accordingly. Thank you for your understanding. Thank you for waiting. The first question comes from Mizuho Securities, Mr. Saji. I have one question, which is about page six, EMA in the tobacco business. For Russia, Turkey, and Iran that comprise this segment or cluster, you've done quite a lot of pricing in Russia in 2023, and total volume has been increasing even after pricing.
So, can you talk about its sustainability? And also for Turkey, I think. Total volume has been growing by approximately 20%. So I'm sure there's inflation, but when it comes to affordability, it seems that trends continue to be brisk. But I was wondering about its sustainability. So Russia and Turkey in the EMA cluster and its performance trends and its sustainability is my question. Thank you for your question. The question was about the EMA cluster and Russia, Turkey, Iran, and the increase in industry volume, as well as how long it can be sustained. Mr. Kato, we'll take your question. Mr. Saji, thank you for your question.
This is Kato speaking. For total volume in Turkey, Iran, and Russia, it has been firm. In each of the markets, volume continues to be firm, and the reasons vary by market.
For example, in the case of Russia, total volume has been firm, not just for the first quarter this year, but even after tax increases and pricing last year. It has been relatively firm, and it has remained that way for Q1 this year as well. So it's really hard to pinpoint one single reason because there's various reasons. But one major reason is because of illicit products. Illicit products have been growing, but its growth rate compared to several years ago has been decelerating over the course of the past two years. So that has led to relatively firm industry volume. That is our view. So for Turkey and affordability that you were asking about in your question, [Foreign language]well, that's one of the reasons why total volume continues to be firm.
For other consumer goods, prices have been increasing, and tobacco products have been seeing their prices increase as well. In the past year or two, compared to other consumer goods, for tobacco prices, relatively, it's more affordable on a comparative basis. Relatively, affordability has been favorable, leading to firm volume. For Iran, it's similar to the trends in Russia, where the inflow of illicit goods compared to before has been falling, leading to firm volume. Regarding the sustainability of this firmness, because we're still in Q1, we need to continue to closely watch the trends. Earlier, I talked about affordability in Turkey.
But it's not just limited to Turkey, but the economic circumstances in each of the countries and how they are likely to change is something we should watch out for because we need to look at how it's going to have an impact on consumer behavior. And for each of the markets, tax increases as well as price increases, the timing as well as the degree of the increases are likely to affect the purchasing volume by consumers. But in any case, during the middle of the fiscal year, we would like to continuously watch the trends closely. That's it for me. Thank you. Thank you. Just one thing. For the prime driver for EMA, I guess you're not really seeing any signs of negativity in the trends. For total volume, it's a matter of closely watching the trends going forward. However, share gains continue to be brisk.
So at this point in time, we are not anticipating any major negative factors. For the brisk share gains and its momentum throughout the course of the fiscal year, we do expect that this will be ongoing. We are getting good response. Thank you.
Thank you, Mr. Saji. Now, I'd like to take the next question. Mr. Morita of Daiwa Securities, please. This is Morita of Daiwa Securities. Do you hear me? Yes. Thank you. I have one question. I'd like to ask about the dividend. After the beginning of the year, it has been covered by the media for the 55% of the dividend, and also the return from the foreign company has been covered as well. And there have been raised some questions. And I do believe that that should be sustainable. But this dividend policy of 75%, is it sustainable or not? That is my first question.
Also today, up to this 75% of the dividend should be sustained. It was a comment provided. So going forward, do you continue to stick to this 75% of the payout ratio? Or if the environment changes, is it possible to change that number? So for the mid to long term, I'd like to know your thought about the dividend. Thank you very much. The question is about the dividend. It's regarding the 75% of the payout ratio. Is that sustainable? And after 2026 and onward, is that sustainable going forward? And that is covered by Mr. Furukawa.
Thank you very much for your question. This is Furukawa. Our thought for the dividend policy remains unchanged. This is the first answer. And also, as you have mentioned, our payout ratio of 75% ±5% is a range we have provided. And we continue to achieve that payout ratio.
We have been saying that, and that remains unchanged going forward. There was the Nikkei report. It is rather hard to communicate precisely, but we have not specified the timeframe. In the future, the business mix, and also there might be some exceptional changes that might happen, and we will be open to that changes. But the basic policy, we continue to remain unchanged. For the second part, I assume that you are talking about the capital reserve reversal, and that has been covered by the media article. Because of the Japanese Companies Act, the distributable amount is constrained. There is one assumption. Talking about the consolidated JT Group, then we need to think about the gap between these, a consolidated one and also Japan one.
Of course, there is one option for us to think about the reversal coming from the international. So there are several options available for us. So there might be some constraint coming from the regulations or the constraint. And we are not specifying any changes that may happen to us. That's all from us. Thank you. That's very clear to me. Thank you. And additional question. 2026 and December and onward, 2027 and 2028, I understand that you cannot comment specifically for those futures. And unless there is any major change in the environment, then don't you have to have any needs to change that commitment of the 75% of a payout ratio? Or do you review that payout ratio 2027 and onward? What will be the background assumption? That might be one of the factors we need to consider.
But at this point of time, we can say that we don't have any plan to change. And also going forward in the future, of course, we are not sure what may happen. And basically, we are going to aim at the competitive payout ratio. So at this point of time, there is no factor for us to be communicating to you. That's very clear to me. Thank you very much. Thank you, Mr. Morita. The next person is from Morgan Stanley MUFG Securities, Ms. Miyake.
Hello. This is Miyake from Morgan Stanley. For Q1 and your results, I would like you to sort out the drivers. Compared to your expectations, I think you said that you're off to a good start, especially volume was firm, was the way I understood it. So from a pricing point of view, did you exceed your expectations?
Can you sort that out for me? And for the positive inventory correction, even when you exclude that impact, did you also mean that you were off to a good start? Thank you very much for the question. Against expectation, volume was firm, but were you able to breathe with pricing? And even if you exclude the inventory adjustment impact, did you still exceed expectations? So Mr. Kato will take that question. Ms. Miyake, thank you very much for your question. So for Q1, I think your understanding is right for volume. There are some markets where industry volume was firm, but we also had market share gain momentum as well in some markets. So overall, sales volume was pretty good.
And also, regarding even without the inventory adjustments and your question around whether we were able to see good results, even if we didn't have the one-off volume impact from inventory adjustments, we were able to see positive volume. And for pricing and your question around whether we exceeded expectations, mainly in Europe, UK, France, and Spain, whether it be timing or by amount, we were able to see pricing that exceeded expectations. So volume and pricing or top-line momentum was positive. And for pricing, if I may add a few more comments, at the beginning of the year, we had a pricing plan, and approximately 70% of the plan has been secured as of Q1 this year. Also, you didn't ask about this, but regarding costs, if I may refer to costs a little, Mr.
Furukawa talked about this in his comments, but supply chain cost-wise increased year-over-year. However, compared to our initial expectations, it was a little bit moderate. For material prices, negotiations turned out to be favorable. So we made self-efforts to improve our cost base. So costs were also moderate compared to our initial expectations. So that also contributed to our positive profits. Thank you very much. I did want to ask about costs too, so that really helped. Thank you. Thank you, Ms. Miyake. Now, I will take the next question. Mr. Fujiwara of Nomura Securities, please. Hello. This is Fujiwara of Nomura Securities. I have one question about RRP, HTS, and the share. I'm referring to Slide eight. Your start-off was very good.
Compared with the other peers, your Ploom X, I'd like to know more about the feedback of your Ploom X compared with other peers and also in other countries. What is the share dynamics? Of course, at the time of the launch, of course, that might have affected you. But after that, I think there is some difference in the shares' increased momentum. So in some countries where the share momentum has been very rapid, and in some others, it has been more moderate. So we'd like to know the background of that difference, please. Thank you. The question was about the HTS share. Compared with the other peers, what is the feedback of your product? And also, what is the background of the momentum of each market? And Mr. Kato, we will take your question. Mr. Fujiwara, thank you very much for your question.
For the Ploom X, the customer feedback vis-à-vis the competitor's product has been collected in various markets. I'd like to share with you the result. Also, of course, there have been some variants by the market, so I'd like to comment specifically. With regard to the consumer's feedback for the Ploom X, generally speaking, it has been very good vis-à-vis the competitor's product. To be more specific, the vapor volume was sufficient. Also, heating time and heating speed was relatively good. Also, the most favored factor was that the usable time per unit is that five minutes without any disruption, and you can have a number of puffs during that time. And that point was highly appreciated by consumers. Also price-wise, of course, the price varies by market, but it is generally regarded as the affordable price.
With that regard, we have received good feedback as well. In each market, the launch time varies. In Japan, we have launched earlier than the others, and we have been increasing the shares steadily. Among the feedback from the consumers, there are the good appealing points. We have been looking at the consumer's preference, and we were trying to respond to those needs by the consumers. By market, there are some different colors, as you have mentioned. After the launch, the time varies, and also the competitive environment varies by the market. I think that had been linked to the difference in results as well. As shown by the slide, in Czech and Portugal, it was more than 4%. We had a very good result in this market.
As a background, as I have mentioned before, the product appreciation itself is very good. Also after the consumer tried our product, we need to encourage the consumers to try our product. Also the recognition level needs to be enhanced as well. And I think that is one of the keys to increase our sales. In Portugal and Czech, as I mentioned, the improvement of the recognition happened due to the approach on a one-on-one basis with consumers. So that, for example, we have set up the pop-up shop or the shopping shop to increase more opportunities for the consumers to try our products and also increase the recognition level. And I think that was successful. In the very high level of the share, Lithuania, let me make a comment about that.
In Lithuania, the people tend to be tech-savvy, and they love to have the innovative product. So they are more acceptable for the new product. That is a part of their national feature, and that is well reflected in the growth of the Ploom X product share. On the other hand, in Italy, the share seems to be a bit slow. Let me comment on that as well. For Italy, the tobacco stick sales are only possible at the traditional tobaccnist store. So that is not the key account, but so-called tobaccnist sales are possible. So in order to appeal to consumers and also in order to build a strong brand, we need to take time. That is a part of the reason why the growth has been rather slow.
That said, in Italy, first, we have limited the area for sales, but from the second half of the last year, we have expanded it to the nationwide sales. After that, the product recognition has been up, and also the share gain has been continuing as well. I'd like to emphasize one point. Generally speaking, we said that we had a good start-off. As shown by the graph, month by month, in every market, and some markets are not covered, but SOS within the category has been steadily increasing. The speed or the share level, of course, varies by the market. But we have been achieving the steady growth, and that is a very encouraging sign for us. Also, that is one of the reasons why we are confident that we have been making a very good start. That's all from me. Thank you.
Thank you very much for your very in-depth explanation and shares. A strong momentum, you seem to have a very good confidence. So from the trial to the switching, you are having the smooth switchover from the trial to the purchase and then the retention. That is the usual flow of the consumers. After the trial, the purchase ratio and after the purchase, the retention ratio itself has been very good so far. First, we are putting a focus on the recognition and the trial. We are making more effort on that part. Although that might take some time, but we'd like to improve that, and that will lead to the increase of the purchase. Thank you very much.
Thank you, Mr. Fujiwara.