TOMRA Systems — Interim / Quarterly Report 2014

Oct 17, 2014

3 RD QUARTER 2014 RESULTS ANNOUNCEMENT

TOMRA SYSTEMS ASA 17th October 2014

HIGHLIGHTS FROM THE QUARTER INCLUDE

Revenues	• Revenues of 1,236 MNOK (1,231 MNOK in third quarter 2013) Currency adjusted revenues were: - Down 3% for TOMRA Group - Down 5% in TOMRA Collection - Up 2% in TOMRA Sorting
Gross margin	• Gross margin 43%, up from 42% in third quarter 2013 - Stable margin in TOMRA Collection - Stable margin in TOMRA Sorting
Operating expenses	• Operating expenses of 317 MNOK (306 MNOK in third quarter 2013) - Up 1% adjusted for currency
EBITA	• EBITA of 210 MNOK (217 MNOK in third quarter 2013)
Cashflow	• Cashflow from operations of 236 MNOK (202 MNOK in third quarter 2013)
TOMRA Collection	• Potential new markets in Lithuania and Croatia • Compaction defined as non-strategic
TOMRA Sorting	• All time high order intake of 550 MNOK, compared to 403 MNOK same period last year • All time high order backlog of 672 MNOK, up from 615 MNOK at the end of second quarter 2014

FINANCIAL HIGHLIGHTS P&L STATEMENT

		3rd Quarter		YTD
Amounts in NOK million	2014	2013	13 Adj*	2014	2013	13 Adj*
Revenues	1,236	1,231	1,270	3,488	3,374	3,550
• Collection Solutions	743	761	785	2,145	2,058	2,168
• Sorting Solutions	493	470	485	1,343	1,316	1,382
Gross contribution	527	523	539	1,493	1,445	1,514
in %	43%	42%	42%	43%	43%	43%
Operating expenses	317	306	315	1,021	943	993
EBITA	210	217	224	472	502	521
in %	17%	18%	18%	14%	15%	15%
One time costs included in operating expenses	-	-	-	25	8	8

** Adjusted for one-time costs

FINANCIAL HIGHLIGHTS BALANCE SHEET, CASH FLOW AND CAPITAL STRUCTURE

Amounts in NOK million	30 Sept 2014	30 Sept 2013	31 Dec 2013
ASSETS	5,963	5,724	5,623
• Intangible non-current assets	2,479	2,451	2,487
• Tangible non-current assets	616	591	608
• Financial non-current assets	285	262	267
• Inventory	923	902	874
• Receivables	1,488	1,371	1,224
• Cash and cash equivalents	172	147	164
LIABILITIES AND EQUITY	5,963	5,724	5,623
• Equity	2,790	2,573	2,741
• Minority interest	91	84	83
• Interest bearing liabilities	1,565	1,654	1,557
• Non-interest bearing liabilities	1,517	1,413	1,242

Ordinary cashflow from operations

• 236 MNOK (202 MNOK in 3Q 2013)

Solidity

• 48% equity
• NIBD/EBITDA = 1.7 (Rolling 12 months)

TOMRA Collection Solutions

HIGHLIGHTS COLLECTION SOLUTIONS

	• Revenues equaled 743 MNOK in third quarter 2014, down from 761 MNOK in third quarter 2013
	- Revenues down 5% in local currencies
	• Gross margin was 42% in the period
Overall	- Unchanged from same period last year
	• Operating expenses was 159 MNOK
	- Stable compared to third quarter 2013
	• EBITA decreased from 161 MNOK to 151 MNOK
	• Currency adjusted revenues down 8% in Europe
Europe	• Slower sales in Central Europe, compared to a strong 3Q13 (was up 25% from 3Q12, currency adjusted)
North America	• Declining through-put volumes
	• Lithuania
Potential new	• Croatia
markets	• Massachusetts (water expansion)
Compaction	• Defined as non-strategic

Figures in billion bottles/cans per year Arrows indicating current trend

POTENTIAL NEW DEPOSIT MARKETS / CHANGE DEPOSIT LEGISLATION

LITHUANIA

• Introduction of national deposit system in Lithuania from February 2016
• Through-put model, where machine provider gets paid based upon units collected thru the machines
• TOMRA in negotiations with system operator to provide equipment
• Potential of up to 1000 machines

CROATIA

• Current deposit system expected to be changed from 2015, allowing bar code recognition and compaction of bottles and cans
• J/V with local distributor established
• Potential of up to 1000 machines

MASSACHUSETTS

• Ballot initiatives in November 2014 to include water and sport drinks in the current deposit system
• Potential for including an additional 1.4 billion bottles per year

TOMRA COMPACTION

• TOMRA acquired Orwak Group in 2005.
• Orwak (later named TOMRA Compaction) is a business stream within TOMRA Collection Solutions, leveraging potential front-end synergies (sales and service) based on overlapping customer segments
• Actual synergies between compaction and reverse vending have proven to be insignificant.
• TOMRA's former strategy of providing recycling technology equipment has changed into creating sensor-based solutions for optimal resource productivity
• As a consequence of TOMRA's strategic shift and the lack of tangible synergies between Compaction and reverse vending solutions, TOMRA will start a process to divest TOMRA Compaction (Orwak).

COLLECTION SOLUTIONS FINANCIALS

		3rd Quarter
Amounts in NOK million	2014	2013	13 Adj*	2014	2013	13 Adj*
Revenues	743	761	785	2,145	2,058	2,168
• Nordic	112	117		380	389
• Central Europe & UK	317	340		899	856
• Rest of Europe	9	3		24	9
• US East/Canada	292	291		810	783
• Rest of the world	13	10		32	21
Gross contribution	310	316	328	900	862	913
in %	42%	42%	42%	42%	42%	42%
Operating expenses	159	155	159	510	482	505
EBITA	151	161	169	390	380	408
in %	20%	21%	22%	18%	18%	19%

TOMRA Sorting Solutions

HIGHLIGHTS SORTING SOLUTIONS

Revenues	• Revenues equaled 493 MNOK in third quarter 2014, up from 470 MNOK in third quarter 2013 • Revenues up 2% in local currencies
Gross margin	• Gross margin stable at 44%
EBITA	• EBITA of 66 MNOK (62 MNOK in third quarter 2013)
Orders	• All time high order intake of 550 MNOK, compared to 403 MNOK same period last year • All time high order backlog of 672 MNOK, up from 615 MNOK at the end of second quarter 2014
Business stream food	• Revenues in 3Q14 slightly down from 3Q13 • Order intake continues to improve quarter over quarter, leading to strong backlog at the end of 3Q14
Business stream recycling	• Revenues in 3Q14 in line with 3Q13 • Order intake in line with previous quarters • Momentum in Metal recycling segment still low
Business stream mining	• Revenues in 3Q14 up from 3Q13 • Significant growth in order intake, fueled by order from Ma'aden in Saudi Arabia1

MA'ADEN MINING PROJECT

• 9 sorters for greenfield plant at Umm Wu'al in Saudi Arabia
• Plant scheduled to be operational primo 2016
• Processing 13.5 million tones of raw material per year
• Machines will sort more than 70% of the run -of mine material by removing flint stones from the phosphate
• TOMRAs XRT new (X -ray transmission) high volume technology enables materials to be recognized and separated based upon their average specific atomic density
• Enables the customer to obtain a high purity level in sorted materials irrespectively of size moisture or contamination
• By removal of waste material, the downstream proses can be downsized
• The gain will be smaller plant footprint, reduced energy and water consumption per ton final product

SORTING SOLUTIONS FINANCIALS

		3rd Quarter		YTD
Amounts in NOK million	2014	2013	13 Adj*	2014	2013	13 Adj*
Revenues	493	470	485	1,343	1,316	1,382
• Nordic	4	6		9	20
• Central Europe & UK	147	141		421	423
• Rest of Europe	44	29		140	79
• US East/Canada	161	150		470	455
• Rest of the world	137	144		303	339
Gross contribution	217	207	211	593	583	601
in %	44%	44%	44%	44%	44%	43%
Operating expenses	151	145	150	490	443	470
EBITA	66	62	61	103	140	131
in %	13%	13%	13%	8%	11%	9%
One time costs included in operating expenses	-	-	-	25	8	8

BACKLOG DEVELOPMENT AND MOMENTUM

Comments

• The order backlog declined in the period 1Q13- 3Q13, explained by
• Large US order signed in 2012 and delivered in 2013
• Generally lower order intake in the first three quarters of 2013
• Resulting in a low order backlog end 3Q13
• Good order intake the last four quarters combined fewer orders taken to P/L during the first 9 months of 2014, leading to
• all time high order backlog at the end of 3Q14
• Expect strong financial performance in 4Q14

15

• Good momentum into 2015
• Estimated backlog conversion ratio in 4Q14: 80- 85%*

Outlook and shareholder structure

OUTLOOK

Long term trends:

• The long term demand for better resource productivity is a result of megatrends such as population increase, a growing middle class consumer base and greater urbanization. TOMRA, as a leader in sensor based solutions, is favorably positioned to capitalize on these trends

Collection Solutions:

• No new markets are expected to generate significant revenues in the coming quarters and activity is consequently assumed to be stable and in line with previous quarters

Sorting Solutions:

• The combination of a stronger order intake four consecutive quarters combined with a limited number of orders taken to P/L, has led to an all time high order backlog at the end of third quarter 2014
• Revenues and profit in TOMRA Sorting are consequently expected to improve in fourth quarter 2014, compared to previous three quarters

TOMRA SHAREHOLDER STRUCTURE

	Top 10 shareholders as of 1st of October 2014	Shareholders by country
1	Investment AB Latour	35 690 000	24.1%
2	Folketrygdfondet	15 076 514	10.2%
3	Jupiter European Fund	8 660 561	5.9%
4	Skandinaviska Enskilda A/C Clients account	6 105 641	4.1%	(NOM)
5	Nordea Nordic Small	4 418 693	3.0%
6	ODIN Norge	3 542 532	2.4%
7	Skandinaviska Enskilda A/C Finnish Resident	2 461 524	1.7%	(NOM)
8	The Bank of New York BNY Mellon	2 355 302	1.6%	(NOM)
9	Clearstream Banking	2 254 704	1.5%	(NOM)
8	Fidelity Funds Nordic	2 202 285	1.4%
	Sum Top 10	82 666 756	55.8%
	Other shareholders	65 353 322	44.2%
	TOTAL (5,843 shareholders)	148 020 078	100.0%

Source: VPS

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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