TOMRA Systems — Earnings Release 2019

Oct 21, 2019

3 rd quarter 2019 results announcement

TOMRA Systems ASA 21 October 2019 © TOMRA

HIGHLIGHTS FROM THE QUARTER

Highlights from the quarter

Revenues	• Revenues of 2,378 MNOK (2,247 MNOK in third quarter 2018) – up 6% Adjusted for currency, revenues were: - Up 2% for TOMRA Group - Up 5% in TOMRA Collection Solutions - Down 1% in TOMRA Sorting Solutions
Gross margin	• Gross margin 45%, up from 44% in third quarter 2018 - Slightly improved margins in both business areas
Operating expenses	• Operating expenses of 648 MNOK (587 MNOK in third quarter 2018) - Higher activity - Ramp-up in TOMRA Collection Solutions - Currencies
EBITA	• EBITA of 414 MNOK – up from 408 MNOK in third quarter 2018 - Positive effect from IFRS 16 of 7 MNOK
Order intake Tomra Sorting	• All time high order intake of 1,224 MNOK in Tomra Sorting, up from 1,105 in third quarter 2018, fueled by improved order intake in Food

Highlights Collection Solutions

Business drivers		Public pressure to reduce waste and littering, handling single-use plastics and deposit legislation being the solution
P/L	• Revenues of 1,238 MNOK, up from 1,135 MNOK in third quarter 2018 - Revenues up 5% in local currencies due to higher activity in Australia • Gross margin was 43% in the period - Stable from third quarter 2018 • Operating expenses of 264 MNOK, up from 240 MNOK in third quarter 2018 - Ramp-up in new markets - Currencies • EBITA increased from 244 MNOK to 270 MNOK
Europe	North America	Australia
• Currency adjusted, revenues were up 2% in Europe - Slightly improved activity in Central Europe - Preparation for implementation of the Single use plastic directive in EU	• Currency adjusted, revenues were unchanged in North America - Overall stable machine sales as well as throughput volumes	• Strong growth in New South Wales - Ramp-up concluded in 2018 - Good volume development continues • Deposit introduced 1 November 2018 in Queensland - Operational with 10 Collection Refund Points since first quarter 2019

Latest update on selected new container deposit markets

Western Australia	Scotland	Portugal	England	France
• September 2016, the government announced plans for a deposit return scheme • WARRRL selected as scheme coordinator in March 2019 • Ongoing application process to become refund point operators	• September 2017, First Minister Nicola Sturgeon announced a deposit return scheme • Minister of Environment presented a draft proposal and system design in May 2019 • Draft regulation submitted to Parliament in September 2019 pending approval	• December 2018, the Government published a law establishing a system for return and deposit of beverage containers • Decree for system design to be worked out during 2019 • Pilot projects implemented during 2019	• March 2018, UK Environment Secretary Michael Gove announced plans for a deposit return scheme • Government responses to the public consultation published in August 2019 • Circular economy bill presented in October 2019 that lays the basis for introduction of a deposit system	• June 2019, State Secretary of Environment opened for discussions on a deposit return scheme • A circular economy bill presented in July 2019 that provides for possibility to implement a deposit system • Ongoing political debates and voting

Estimated startup: Early 2022

Estimated startup: 2 June 2020

Estimated startup: Early 2021

https://data.dre.pt/eli/lei/69/2018/12/26/p/dre/pt/html https://www.gov.uk/government/publications/resources-and-waste-strategy-for-england

Estimated startup: 2023

Estimated startup: to be decided

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Highlights Sorting Solutions

P/L Food

• Revenues equaled 1,140 MNOK in third quarter 2019, up 3% year-overyear
• Adjusted for currency, revenues were down 1%
• Gross margin 46%
• Unchanged from third quarter 2019
• Operating expenses up from 327 MNOK to 360 MNOK
• Higher activity in Recycling
• Currency

• EBITA of 168 MNOK (184 MNOK in third quarter 2018)

• Business drivers: growing population and more demanding consumers, need to increase yield, productivity and food safety/quality with industry automation

• Stable revenues and improved gross margin compared to same period last year
• Despite continued macro uncertainty in US; Improved order intake compared to both 2Q19 and 3Q18
• Order backlog down from end of 3Q18, but up from end of 2Q19

Recycling & Mining

• Business drivers: Growth in waste volume combined with stronger consumer awareness, legislative push and market pull for better recycling
• Stable revenues and gross margin compared to same period last year
• Order intake slightly down in Recycling compared to same quarter last year due to timing of orders
• Order backlog down compared to a high order backlog in the end of 3Q18

Circular Economy Shaper – Alliance to End Plastic Waste

FINANCIALS AND OUTLOOK

Currency risk and hedging policy

Revenues and expenses per currency:

	EUR*	USD	NOK	OTHER**	TOTAL
Revenues	45 %	35 %	0 %	20 %	100 %
Expenses	40 %	25 %	5 %	30 %	100 %

Assets and liabilities per currency:

	EUR*	USD	NOK	OTHER**	TOTAL
Assets	50 %	15 %	15 %	20 %	100 %
Liabilities	60 %	10 %	20 %	10 %	100 %
* EUR includes DKK		** Most important: AUD, NZD, RMB, CAD, SEK, GBP and JPY			NOTE: Estimated and rounded figures

** Most important: AUD, NZD, RMB, CAD, SEK, GBP and JPY

*Average rate 3Q19 vs 3Q18

10% change in NOK towards other currencies will impact:

Positive impact		Revenues	Expenses	EBITA
from	EUR*	4.5%	4.0%	7.0%
stronger USD vs	USD	3.5%	2.5%	8.0%
EUR	OTHER**	2.0%	3.0%	-4.0%
	ALL	10.0%	9.5%	11.0%

HEDGING POLICY

CASHFLOW AND P/L

• TOMRA can hedge up to one year of future predicted cash flows. Gains and losses on these hedges are recorded at the finance line, not influencing EBITA

B/S

• TOMRA only hedge B/S item where exchange rate fluctuations could have P/L impact. Gains and losses on B/S hedging is recorded in accordance with IAS 21 and will normally not have P/L impact

Financial highlights | P&L statement

		3rd quarter			YTD 9 months
Amounts in NOK million	2019	2018	2018 Adj*	2019	2018	2018 Adj*
Revenues	2,378	2,247	2,332	6,777	6,129	6,346
Collection Solutions	1,238	1,135	1,178	3,368	3,124	3,228
Sorting Solutions	1,140	1,112	1,154	3,409	3,005	3,117
Gross contribution	1,062	995	1,033	2,977	2,633	2,734
in %	45%	44%	44%	44%	43%	43%
Operating expenses	648	587	612	2,004	1,776	1,831
EBITA	414	408	422	973	857	902
in %	17%	18%	18%	14%	14%	14%

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Collection Solutions financials

		3rd quarter			YTD 9 months
Amounts in NOK million	2019	2018	2018 Adj*	2019	2018	2018 Adj*
Revenues	1,238	1,135	1,178	3,368	3,124	3,228
Northern Europe	153	147		458	457
Europe (ex Northern)	449	433		1,210	1,245
North America	502	467		1,290	1,202
Rest of the world	134	88		410	220
Gross contribution	534	484	501	1,422	1,299	1,335
in %	43%	43%	43%	42%	42%	41%
Operating expenses	264	240	251	830	752	777
EBITA	270	244	250	592	547	558
in %	22%	21%	21%	18%	18%	17%

Sorting Solutions financials

	3rd quarter			YTD 9 months
Amounts in NOK million	2019	2018	2018 Adj*	2019	2018	2018 Adj*
Revenues	1,140	1,112	1,154	3,409	3,005	3,117
Europe	459	423		1,344	1,107
America	398	410		1,185	1,166
Asia	118	136		411	339
Rest of the world	165	143		469	393
Gross contribution	528	511	533	1,555	1,334	1,398
in %	46%	46%	46%	46%	44%	45%
Operating expenses	360	327	340	1,102	964	994
EBITA	168	184	192	453	370	404
in %	15%	17%	17%	13%	12%	13%

Development in order intake and order backlog

Revenues

Order intake Order backlog

• TOMRA Sorting Solutions (TSS):
• Revenues of 1,140 MNOK, up from 1,112 MNOK last year
• Order intake of 1,224 MNOK in the quarter, compared to 1,105 MNOK last year
• Order backlog of 1,430 MNOK by the end of third quarter, compared to 1,579 MNOK by the end of third quarter 2018
• Estimated backlog conversion ratio in 4Q19: 85-90%

Financial highlights | Balance sheet and cash flow

	With IFRS 16	Without IFRS 16
Amounts in NOK million	30 Sept 2019	30 Sept 2019	30 Sept 2018	31 Dec 2018
ASSETS	11,284	10,211	9,117	9,595
Intangible non-current assets	3,800	3,787	3,653	3,821
Tangible non-current assets	2,409	1,350	1,129	1,276
Financial non-current assets	367	367	327	340
Inventory	1,663	1,663	1,400	1,447
Receivables	2,676	2,676	2,322	2,314
Cash and cash equivalents	368	368	286	397
LIABILITIES AND EQUITY	11,284	10,211	9,117	9,595
Equity	4,973	5,015	4,577	5,077
Minority interest	174	174	156	159
Interest-bearing liabilities	3,123	2,008	1,487	1,524
Non interest-bearing liabilities	3,014	3,014	2,897	2,835

Ordinary cashflow from operations

• 438 MNOK in third quarter (433 MNOK in third quarter 2018)
• Positive effect from IFRS 16 of 68 MNOK
• 712 MNOK YTD 9 months (679 MNOK YTD 9 months in 2018)
• Positive effect from IFRS 16 of 200 MNOK

Solidity

• 46% equity (50% ex. IFRS 16)
• NIBD/EBITDA = 1.0x (Rolling 12 months), ex IFRS 16 effects

Bond issue to refinance existing debt

• Signed mandate letter with DNB Markets and SEB
• Execution during fourth quarter 2019
• Size and maturity dependent upon investor interest and markets conditions:
• o Up to 1,000MNOK
• o Up to 7 years
• o Swapped to EUR
• Roadshows in Oslo and Bergen scheduled for early November
• Debt capacity significantly higher than current leverage ratio:

Outlook

Collection Solutions	• Overall stable business • Increased operating expenses due to ramping up in new markets
Sorting Solutions	• Good momentum within Recycling • Slightly improved momentum in Food, but with regional differences
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, TOMRA Sorting Solutions is exposed to USD/EUR

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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 trademark 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