TOMRA Systems — Earnings Release 2019

Jul 19, 2019

2 nd quarter 2019 results announcement

TOMRA Systems ASA @TOMRA 19 July 2019

HIGHLIGHTS FROM THE QUARTER

Highlights from the quarter

Revenues	• Revenues of 2,318 MNOK (2,128 MNOK in second quarter 2018) – up 9% Adjusted for currency, revenues were: - Up 6% for TOMRA Group - Stable in TOMRA Collection Solutions - Up 11% in TOMRA Sorting Solutions
Gross margin	• Gross margin 45%, up from 43% in second quarter 2018 - Improved margins in both business areas
Operating expenses	• Operating expenses of 689 MNOK (609 MNOK in second quarter 2018) - Higher activity - Ramp-up - Currencies
EBITA	• EBITA of 352 MNOK – up 15% from second quarter 2018 - Positive effect from IFRS 16 of 9 MNOK

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 1,088 MNOK, up from 1,055 MNOK in second quarter 2018 - Revenues stable in local currencies, higher activity in Australia offset by somewhat lower in Europe and North America • Gross margin was 43% in the period - Up from 42% in second quarter 2018 • Operating expenses of 288 MNOK, up from 259 MNOK in second quarter 2018 - Ramp-up - Currencies • EBITA increased from 182 MNOK to 183 MNOK
Europe • Currency adjusted, revenues were down 5% in Europe - Somewhat down in Central Europe, due to timing of orders • Single use plastic directive published 12 June 2019 in EU's official journal	North America • Currency adjusted, revenues were down 2% in North America - Overall stable, machine sales slightly down partly offset by increased throughput volumes	Australia • 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

Initiatives on new container deposit markets

Western Australia	Scotland	Portugal	England	France
• September 2016, the government announced plans for a deposit return scheme • Scheme coordinator selected in March 2019 • Collection network tender to be launched followed by final regulatory approval	• September 2017, First Minister Nicola Sturgeon announced a deposit return scheme • Consultation round ended 25th of September 2018 • Minister of Environment presented a draft proposal and system design in May 2019	• 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 • December 2018, UK Waste and Resource Strategy was published • Consultation round 13th ended of May 2019	• June 2019, State Secretary of Environment opened for discussions on a deposit return scheme • Draft bill on circular economy presented to the Council in July 2019 that provides for possibility to implement a deposit system

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

Highlights Sorting Solutions

P/L Food

• Revenues equaled 1,230 MNOK in second quarter 2019, up 15% yearover-year
• Adjusted for currency, revenues were up 11%
• Gross margin 46%
• Up from 44% in second quarter 2018
• Operating expenses up from 330 MNOK to 377 MNOK
• Higher activity
• Currency
• EBITA of 193 MNOK (145 MNOK in second quarter 2018)

• Margin 16%, up from 14% in second quarter 2018

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

• Improvements in revenues and gross margin compared to same period last year
• Somewhat slower order intake mainly due to macro uncertainty in US
• Order backlog down from end of 2Q18 also due to more orders taken to P/L

Recycling & Mining

• Business drivers: Growth in waste volume combined with stronger consumer awareness, legislative push and market pull for better recycling
• Continued strong revenue growth in Recycling compared to 2Q18
• Order intake slightly up in Recycling and down in Mining from same quarter last year
• Order backlog slightly down from end of 2Q18

Circular economy – redefining value creation

FINANCIALS AND OUTLOOK

Currency

Revenues and expenses per currency:

	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						NOTE: Rounded figures

Financial highlights | P&L statement

	2nd quarter			1st half
Amounts in NOK million	2019	2018	2018 Adj*	2019	2018	2018 Adj*
Revenues	2,318	2,128	2,198	4,399	3,882	4,013
Collection Solutions	1,088	1,055	1,088	2,130	1,989	2,050
Sorting Solutions	1,230	1,073	1,110	2,269	1,893	1,963
Gross contribution	1,041	916	951	1,915	1,638	1,700
in %	45%	43%	43%	44%	42%	42%
Operating expenses	689	609	627	1,356	1,189	1,222
EBITA	352	307	324	559	449	478
in %	15%	14%	15%	13%	12%	12%

10

Collection Solutions financials

	2nd quarter		1st half
Amounts in NOK million	2019	2018	2018 Adj*	2019	2018	2018 Adj*
Revenues	1,088	1,055	1,088	2,130	1,989	2,050
Northern Europe	153	162		305	310
Europe (ex Northern)	370	403		761	812
North America	435	413		788	735
Rest of the world	130	77		276	132
Gross contribution	471	441	454	888	815	835
in %	43%	42%	42%	42%	41%	41%
Operating expenses	288	259	268	566	512	528
EBITA	183	182	186	322	303	307
in %	17%	17%	15%	15%	15%	15%

Sorting Solutions financials

	2nd quarter						1st half
Amounts in NOK million	2019	2018	2018 Adj*	2019	2018	2018 Adj*
Revenues	1,230	1,073	1,110	2,269	1,893	1,963
Europe	482	428		885	684
America	428	445		787	756
Asia	144	88		293	203
Rest of the world	176	112		304	250
Gross contribution	570	475	498	1,027	823	866
in %	46%	44%	45%	45%	43%	44%
Operating expenses	377	330	340	742	637	655
EBITA	193	145	158	285	186	211
in %	16%	14%	14%	13%	10%	11%

Development in order intake and order backlog

Revenues

Order intake Order backlog

• TOMRA Sorting Solutions (TSS):

• Revenues of 1,230 MNOK, up from 1,073 MNOK last year
• Order intake of 1,111 MNOK in the quarter, compared to 1,144 MNOK last year
• Order backlog of 1,345 MNOK by the end of second quarter, compared to 1,585 MNOK by the end of second quarter 2018
• Estimated backlog conversion ratio in 3Q19: 80-85%*

Financial highlights | Balance sheet, cash flow and capital structure

	With IFRS 16	Without IFRS 16
Amounts in NOK million	30 June 2019	30 June 2019	30 June 2018	31 Dec 2018
ASSETS	10,760	9,696	8,849	9,595
Intangible non-current assets	3,752	3,741	3,662	3,821
Tangible non-current assets	2,321	1,268	1,066	1,276
Financial non-current assets	330	330	352	340
Inventory	1,619	1,619	1,290	1,447
Receivables	2,422	2,422	2,140	2,314
Cash and cash equivalents	316	316	339	397
LIABILITIES AND EQUITY	10,760	9,696	8,849	9,595
Equity	4,581	4,627	4,363	5,077
Minority interest	178	178	162	159
Interest bearing liabilities	3,318	2,208	1,845	1,524
Non interestbearing liabilities	2,683	2,683	2,479	2,835

Ordinary cashflow from operations 1st half

• 274 MNOK (247 MNOK in first half 2018)
• Positive effect from IFRS 16 of 133 MNOK

Solidity

• 44% equity (49% ex. IFRS 16)
• NIBD/EBITDA = 1.1x (Rolling 12 months), ex IFRS 16 effects

Dividend: Dividend of NOK 2.50 (ordinary) + NOK 2.00 (extraordinary) paid out in May 2019

Outlook

Collection Solutions	• Overall stable business • Increased operating expenses due to preparation for new markets
Sorting Solutions	• Continued high activity within Recycling • Mixed picture in Food 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 and NZD, TOMRA Sorting is exposed to USD/EUR and USD/NZD.

Copyright

The material in this Document (which may be a presentation, video, brochure or other material), hereafter called Document , including copy, photographs, drawings and other images, remains the property of TOMRA Systems ASA or third party contributors where appropriate. No part of this Document may be reproduced or used in any form without express written prior permission from TOMRA Systems ASA and applicable acknowledgements. No trademark, copyright or other notice shall be altered or removed from any reproduction

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