TOMRA Systems — Earnings Release 2018

Jul 19, 2018

2 ND QUARTER 2018 RESULTS ANNOUNCEMENT

TOMRA SYSTEMS ASA 2 nd Quarter Results 19.07.2018

HIGHLIGHTS FROM THE QUARTER

Revenues	• Revenues of 2,128 MNOK (1,972 MNOK in second quarter 2017) – up 8% Adjusted for currency and acquisitions, revenues were: - Up 7% for TOMRA Group - Up 10% in TOMRA Collection Solutions - Up 4% in TOMRA Sorting Solutions
Gross margin	• Gross margin 43%, up from 42% in second quarter 2017 - Stable margins in TOMRA Collection Solutions - Improved margins in TOMRA Sorting Solutions
Operating expenses	• Operating expenses of 609 MNOK (528 MNOK in second quarter 2017) - Higher activity - BBC and New South Wales
EBITA	• EBITA of 307 MNOK (306 MNOK in second quarter 2017)
Cashflow	• Cash flow from operations of 127 MNOK (170 MNOK in second quarter 2017)
TOMRA Collection Solutions	• Stable activity in Europe, improved in North America • Ramp-up in New South Wales continues
TOMRA Sorting Solutions	• Order intake of 1,144 MNOK, up from 951 MNOK same period last year (up 20%) • Order backlog of 1,585 MNOK, up from 1,093 MNOK at the end of second quarter 2017

A NUMBER OF GLOBAL INITIATIVES DRIVE PUBLIC AWARENESS AND SEARCH FOR SOLUTIONS

Increased focus on plastic pollution globally and in Europe…

• December 2017, UN called for their member nations to prevent and significantly reduce marine pollution of all kinds by 2025
• − Container Deposit Schemes (CDS) was explicitly mentioned as a preventive solution for marine littering
• May 2018, EU proposed a draft regulation as a part of their plastic strategy that targets 10 single use plastic products
• − The use of plastic food containers and drinks cups will have to be reduced and a return rate of 90% on single-use plastic drink bottles by 2025
• European Federation of Water Bottle Producers pledged commitment to increased use of recycled PET (rPET) in their bottle production in support of the shift towards a more circular European economy
• Minimum of 25% rPET into the production of new bottles

… and at the same time China upholds stringent thresholds on waste import

• July 2017, China announced a policy called National Sword, which limits the import of contaminated recyclable commodities and increases inspections of recyclable commodity imports
• − This has created a short term demand for recycling solutions locally in the exporting countries (US, Europe etc)

A large increase in number of influential public figures supporting industrial transition to a Greener Economy suggesting preventive solutions like Container Deposit Schemes

CURRENCY

Revenues and expenses per currency; NOTE: Rounded figures

	EUR*	USD	NOK	NZD	OTHER	TOTAL
Revenues	45 %	45 %	0 %	0 %	10 %	100 %
Expenses	40 %	30 %	5 %	5 %	20 %	100 %
EBITA	50 %	100 %	- 20 %	- 20 %	-10 %	100 %

* EUR includes DKK

FINANCIAL HIGHLIGHTS P&L STATEMENT

	2nd Quarter			1st Half
Amounts in NOK million	2018	2017	17 Adj*	2018	2017	17 Adj*
Revenues	2,128	1,972	1,938	3,882	3,536	3,508
• Collection Solutions	1,055	975	964	1,989	1,852	1,853
• Sorting Solutions	1,073	997	974	1,893	1,684	1,655
Gross contribution	916	834	813	1,638	1,467	1,439
in %	43%	42%	42%	42%	41%	41%
Operating expenses	609	528	530	1,189	1,003	1,018
EBITA	307	306	283	449	464	421
in %	14%	16%	15%	12%	13%	12%
One time costs included in operating expenses	-	4	4	4	8	8

*2017 actual restated at 2018 exchange rates, estimated

FINANCIAL HIGHLIGHTS BALANCE SHEET, CASH FLOW AND CAPITAL STRUCTURE

Amounts in NOK million	30 June 2018	30 June 2017	31 Dec 2017
ASSETS	8,849	8,260	8,437
• Intangible non-current assets	3,662	3,364	3,412
• Tangible non-current assets	1,066	839	998
• Financial non-current assets	352	362	349
• Inventory	1,290	1,220	1,197
• Receivables	2,140	1,976	1,887
• Cash and cash equivalents	339	499	594
LIABILITIES AND EQUITY	8,849	8,260	8,437
• Equity	4,363	4,275	4,594
• Minority interest	162	197	143
• Interest bearing liabilities	1,845	1,480	1,280
• Non-interest bearing liabilities	2,479	2,308	2,420

Ordinary cashflow from operations

• 127 MNOK (170 MNOK in 2Q 2017)

Solidity

• 49% equity
• NIBD/EBITDA = 1.2x (Rolling 12 months)
• Dividend of NOK 2.35 (NOK 2.10 last year) paid out 8 May 2018

TOMRA COLLECTION SOLUTIONS

HIGHLIGHTS COLLECTION SOLUTIONS

	• Revenues of 1,055 MNOK, up from 975 MNOK in second quarter 2017 - Revenues up 10% in local currencies, mainly driven by New South Wales' volumes
	• Gross margin was 42% in the period - Unchanged from second quarter 2017
Overall	• Operating expenses of 259 MNOK, up from 220 MNOK in second quarter 2017 - New South Wales - Higher activity
	• EBITA decreased from 191 MNOK to 182 MNOK - A result of increased operating expenses
Europe	• Currency adjusted, revenues were stable in Europe TOMRA machines installed in the German market - Replacement in Germany continues, in line with 2017
North America	• Currency adjusted, revenues were up 7% in North America - Both machine sales and throughput volumes improved from last year
Australia	• Deposit introduced 1st December 2018 in New South Wales - Ramp-up continued during second quarter 2018

POTENTIAL NEW DEPOSIT MARKETS

Scotland

Queensland Western Australia

• Queensland government has conditionally appointed CoEx to develop and run a CDS scheme
• CoEx consists of representatives from the beverage industry, where Coca-Cola and Lion have come together as founding members
• Consumers will be able to get a 10 cent refund on most containers between 150 ml and 3 liters
• Focus of the scheme is on away-from-home drink containers which are the most commonly littered

Confirmed commencement: 1/11/2018

• Consumers will be able to get a 10 cent refund on most beverage containers between 150 ml and 3 liters

• The scheme is intended to operate with kerbside recycling and other existing waste services

• The refund will encourage people to collect and recycle drink containers consumed away from home

• September 2017, First Minister Nicola Sturgeon announced a deposit return scheme for drink containers under the 2017-2018 government programme

• Ongoing consultation round is seeking views on which options will deliver the best results for Scotland with
• Consultation deadline 25th of September 2018A &

England

• March 2018, UK Environment Secretary Michael Gove announced plans for a deposit return scheme
• Ongoing consultation round will take into account views from producers, suppliers and consumers to ensure that any system introduced works across the country
• No known consultation round deadline

Estimated Startup: 2020

Estimated Startup: 1/7/2020

Estimated Startup: 1/1/2021

Sources: https://www.qld.gov.au/environment/pollution/management/waste/container-refund https://www.der.wa.gov.au/our-work/programs/111-wa-container-deposit-scheme https://news.gov.scot/news/tackling-plastic-pollution https://www.gov.uk/government/news/deposit-return-scheme-in-fight-against-plastic ⁹

COLLECTION SOLUTIONS FINANCIALS

	2nd Quarter			1st Half
Amounts in NOK million	2018	2017	17 Adj*	2018	2017	17 Adj*
Revenues	1,055	975	964	1,989	1,852	1,853
• Northern Europe	162	149		310	288
• Europe (ex Northern)	403	411		812	794
• North America	413	404		735	746
• Rest of the world	77	11		132	24
Gross contribution	441	411	407	815	762	766
in %	42%	42%	42%	41%	41%	41%
Operating expenses	259	220	220	512	427	432
EBITA	182	191	187	303	335	334
in %	17%	20%	19%	15%	18%	18%

*2017 actual restated at 2018 exchange rates, estimated

TOMRA SORTING SOLUTIONS

HIGHLIGHTS SORTING SOLUTIONS

Revenues	• Revenues equaled 1,073 MNOK in second quarter 2018, up from 997 MNOK in second quarter 2017
	– Adjusted for currency and acquisitions, revenues were up 4%
	– Includes BBC revenues of 63 MNOK in second quarter 2018
	• Gross margin 44%
Gross margin	Up from 42% last year —
	Improved margins in all business streams —
EBITA	• EBITA of 145 MNOK (131 MNOK in second quarter 2017)
	• Order intake of 1,144 MNOK, up from 951 MNOK same period last year (+20%)
Orders	• Order backlog of 1,585 MNOK, up from 1,039 MNOK at the end of second quarter 2017

BUSINESS STREAM UPDATE

FOOD

• Stable revenues in 2Q18 compared to 2Q17
• Strong order intake, leading to all time high order backlog
• BBC consolidated from 1 March 2018, ending second quarter with a backlog of 100 MNOK, up from 86 MNOK at the end of first quarter 2018

RECYCLING

• Revenues in 2Q18 up from 2Q17,
• Very strong order intake, significantly up quarter over quarter
• All time high order backlog

MINING

• Both revenues and order intake improved in Mining, but from a lower level

SORTING SOLUTIONS FINANCIALS

	2nd Quarter			1st Half
Amounts in NOK million	2018	2017	17 Adj*	2018	2017	17 Adj*
Revenues	1,073	997	974	1,893	1,684	1,655
• Europe	428	329		684	536
• North America	406	434		688	686
• South America	39	33		68	58
• Asia	88	92		203	200
• Oceania	71	82		157	139
• Africa	41	27		93	65
Gross contribution	475	423	406	823	705	673
in %	44%	42%	42%	43%	42%	41%
Operating expenses	330	292	293	637	544	552
EBITA	145	131	113	186	161	121
in %	14%	13%	13%	10%	10%	7%

*2017 actual restated at 2018 exchange rates, estimated

BACKLOG DEVELOPMENT AND MOMENTUM

REVENUES

ORDER INTAKE ORDER BACKLOG

• TOMRA Sorting Solutions (TSS):
• Revenues of 1,073 MNOK, up from 997 MNOK last year
• Order intake of 1,144 MNOK in the quarter, compared to 951 MNOK last year
• Despite all time high revenues in the quarter, a strong order intake led to an all time high order backlog of 1,585 MNOK by the end of second quarter
• Estimated backlog conversion ratio in 3Q18: 70%*

OUTLOOK

OUTLOOK

Collection Solutions

• The replacement demand in Germany is assumed to continue in 2018
• Ramp-up in New South Wales will finish during 3rd quarter 2018
• Increased operating expenses due to preparation for new markets

Sorting Solutions • Currently good momentum in all business streams

Currency

• Reporting in NOK and with some NOK cost base, TOMRA will in general benefit from a weak NOK, particularly measured against EUR.
• With significant revenues in USD and costs in EUR and NZD, TOMRA Sorting is exposed to USD/EUR and USD/NZD.

Q&A

DISCLAIMER

Copyright

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Disclaimer

This Document (which may be a presentation, video, brochure or other material), hereafter called Document, may include and be based on, inter alia, forward-looking information and statements that are subject to risks and uncertainties that could cause actual results to differ. The content of this Document may be based on current expectations, estimates and projections about global economic conditions, including the economic conditions of the regions and industries that are major markets for TOMRA Systems ASA and its subsidiaries and affiliates. These expectations, estimates and projections are generally identifiable by statements containing words such as "expects", "believes", "estimates" or similar expressions, if not part of what could be clearly characterized as a demonstration case. Important factors that could cause actual results to differ materially from those expectations include, among others, changes in economic and market conditions in the geographic areas and industries that are or will be major markets for TOMRA Systems ASA. Although TOMRA Systems ASA believes that its expectations and the Document are based upon reasonable assumptions, it can give no assurance that those expectations will be achieved or that the actual results will be as set out in the Document. TOMRA Systems ASA does not guarantee the accuracy, reliability or completeness of the Document, and TOMRA Systems ASA (including its directors, officers and employees) accepts no liability whatsoever for any direct or consequential loss arising from the use of this Document or its contents. TOMRA Systems ASA consists of many legally independent entities, constituting their own separate identities. TOMRA is used as the common brand or trade mark for most of these entities. In this Document we may sometimes use "TOMRA", "TOMRA Systems", "we" or "us" when we refer to TOMRA Systems ASA companies in general or where no useful purpose is served by identifying any particular TOMRA Company