TOMRA Systems — Investor Presentation 2019

Nov 1, 2019

INVESTOR PRESENTATION

TOMRA SYSTEMS ASA 01.11.2019

© TOMRA

TOMRA AT A GLANCE

3

Creating value through two strong business areas

• Our solutions, in use around the globe, helped keep ~28 millions of tons of CO₂ from being released into the atmosphere in 2018

• ~40 bn used beverage containers are captured every year through our reverse vending machines

• Our steam peelers process ~15 million tons of potatoes per year with a 1% yield improvement over other alternatives

• ~715,000 tons of metal are recovered every year by our metal-recycling machines

TOMRA COLLECTION SOLUTIONS

Elements of a modern reverse vending system

User communication

Recognition system

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An overview of current deposit markets*

* In addition, some markets have refillable deposit systems such as: Austria, Belgium, Chile, Czech Republic, France, Hungary, Poland and South Korea

Undisputed market leader within reverse vending technology

Increasing public pressure to reduce waste and littering

Global focus on single use plastics as a global problem and deposit being the solution…

…leads to a market pull from large brand owners and beverage companies

…leads to a market pull from large brand

…in addition to a legislative push in EU, and some emerging countries

EU enforcing its leadership role on environment

A proven solution to achieve high return rates

Source: Reloop, The Guardian, LeParisien, USAD

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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Shifting business models and stakeholders

Main differences between the two business models

Illustrative cash flow profiles per machine

• Typically fewer machines per capita in throughput markets
• Higher CAPEX needs in a throughput model but normally also higher NPV
• Uncertainties around timing and design of each new container deposit scheme can have significant impact on the cash flow profile

Collection solutions – segment financials

Gross contribution and margin

EBITA and margin TOMRA machines installed in the German market

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%

TOMRA SORTING SOLUTIONS

Strong revenue growth since inception in 1996

How does sensor-based separation work?

High-speed processing of information (material, shape, size, color, defect, damage and location of objects)

A common sensor-based technology portfolio

	RECYCLING	MINING	FOOD
ELECTROMAGNETIC SENSOR (EM) Electro-magnetic properties like conductivity and permeability	X	X	X
LED SPECTOMETRY (LED) Color and spectral properties based on multiple LED light sources in very high optical resolution	X	X	X
NEAR-INFRARED SPECTROSCOPY (NIR) Specific and unique spectral properties of reflected light in the near-infrared spectrum	X	X	X
VISIBLE LIGHT SPECTROMETRY (VIS) Specific and unique spectral propertiesof reflected light in the visible spectrum	X	X	X
X-RAY TRANSMISSION (XRT) Atomic density irrespective of surface properties and thickness	X	X	X
LASER INDUCED BREAKDOWN SPECTROSCOPY (LIBS) Elemental composition	X
X-RAY FLUORESCENCE (XRF) Elemental composition	X	X
INFRARED TRANSMISSION (IRT) Density and shape properties by light absorption			X
IR CAMERA (IR) Heat conductivity and heat dissipation			X
COLOR CAMERA (COLOR) Color properties measured in very high optical resolution	X	X	X
LASER REFLECTION/FLUORESCENCE (LASER) Structural, elemental and biological properties by reflection, absorption and fluorescence of laser light	X	X	X

FOOD FOR THOUGHT

• By 2050 we will be close to 10bn people
• We will need more food in the next 40 years than all the harvests in history combined
• But farmland is constant – at best
• The food you eat will have travelled more than you have

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TOMRA has established the broadest footprint within food sorting

Food competitive landscape

TOMRA competitive positioning

• Size (revenues)
• Widest range of applications (150+)
• Broadest technology base
• Geographic reach (~80 countries)
• Market share in targeted segments
• Bulk Sorting market share*: 25%
• Lane Sorting market share*: 25%

Food: applications and sensor technology

Chips, French fries, peeled, specialty products, sweet potatoes, unpeeled, washed

LASER, CAMERA, BSI, PULSED LED

Apples, blackberries, blueberries, cherries, cranberries, peaches & pears, raspberries, strawberries, tomatoes

LASER, CAMERA, BSI, PULSED LED

Beans, beets, broccoli, carrots, corn, cucumbers, industrial spinach, IQF vegetables, jalapenos/peppers, onions,

LASER, CAMERA, BSI, PULSED LED

peas, pickles

FRUIT FRESH CUT SEAFOOD MEAT

Baby leaves, iceberg lettuce, spinach, spring mix

LASER, CAMERA

Mussels, scallops, seaweed, shrimps, tuna, pet food

LASER, CAMERA, BSI, X-RAY, INTERACTANCE SPECTROSCOPY

POTATOES VEGETABLES NUTS DRIED FRUIT

Apricots, cranberries, dates, figs, prunes, raisins

LASER, CAMERA, BSI, X-RAY

SEEDS & GRAINS

Barley, coffee, corn, dry beans, lentils, oat, pulses, pumpkin, sunflower and watermelon seeds, wheat

LASER, CAMERA, BSI, X-RAY

GUMMIES

LASER, CAMERA

TOBACCO

LASER, CAMERA

Bacon bits, beef, chicken breasts, hot dogs, IQF meat, pork, pork rind, sausages, pet food

LASER, CAMERA, BSI, INTERACTANCE SPECTROSCOPY

New sensor technologies will unlock new opportunities…

• From measuring visual appearance...

Internal defects Taste Shelf life / Freshness Food hazards … to measuring

Our food sorting customers

RESOURCES ARE FINITE

• Today: we are paying to get rid of our waste through landfill fees and incineration
• We are wasting perfectly good materials that can be reused
• Tomorrow: The Circular Economy is a driver for change
• Creating value out of waste
• That is what the Circular Economy is all about

Automation with TOMRA Sorting units

Recycling: competitive landscape

TOMRA competitive positioning

• Largest installed base
• Highest revenues
• Broadest technology platform
• Highest number of applications and markets served
• Leading brand
• Market share: 55-65%

Recycling: applications and sensor technology

MUNICIPAL SOLID WASTE

Hard plastics, plastic film, mixed paper, RDF, metals, organics/biomass

NIR, VIS, XRT, LASER

NF metal, stainless steel, copper cables, copper, brass, aluminum

NIR, VIS, XRT, XRF, EM, COLOR

Plastics, plastic film, cardboard, mixed paper, deinking paper, metal

NIR, VIS, EM

POST-SHREDDER ELECTRONIC SCRAP PAPER

Printed circuit boards, non-ferrous metal concentrates, cables, copper, brass, stainless steel

XRT, XRF, EM, NIR, COLOR

PACKAGING UPGRADING PLASTICS

PET, PE, PP, flakes

NIR, VIS, EM

Deinking, cardboard, carton

NIR, VIS, EM

The circular economy drives a legislative push…

Continued ambitious EU regulations and recycling targets: Attract capital and drives investments

"A common EU target for recycling 70% of packaging waste by 2030"

The Strategy also highlights the need for specific measures, possibly a legislative instrument, to reduce the impact of single-use plastics, particularly in our seas and oceans

• From Green Fence to National Sword: Short-term demand for recycling solutions in waste exporting countries

• Limits the import of contaminated recyclable commodities and increases inspections of recyclable commodity imports
• Purity level set to 99.5%

…and a market pull

Large companies committing to use recycled raw materials = increased demand for recycled offtake

Sorting solutions – segment financials

EBITA and margin Order Intake

Gross contribution and margin

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%

FINANCIALS AND TARGETS

Group financials development – solid track record

EBITA and margin

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019*

Gross contribution and margin

Earnings per share

0

0%

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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Financial highlights | Balance sheet – solidity and debt

	With IFRS 16		Without IFRS 16		1800							1.6
Amounts in NOK million	30 Sept 2019	30 Sept 2019	30 Sept 2018	31 Dec 2018	1600 1400	1.4						1.4 1.2
ASSETS	11,284	10,211	9,117	9,595	1200 K 1000 O							1.0 1.0
Intangible non-current assets	3,800	3,787	3,653	3,821	N 800 M 600		0.7		0.5	0.7		0.8 0.6
Tangible non-current assets	2,409	1,350	1,129	1,276	400			0.3				0.4
Financial non-current assets	367	367	327	340	200 0							0.2 0.0
Inventory	1,663	1,663	1,400	1,447		2014	2015 NIBD	2016	2017 Leverage ratio*	2018	30-Sep-19
Receivables	2,676	2,676	2,322	2,314	70%
Cash and cash equivalents	368	368	286	397	60%			61%
LIABILITIES AND EQUITY	11,284	10,211	9,117	9,595	50% 40%	51%	56%		56%		55%	50%
Equity	4,973	5,015	4,577	5,077	30%
Minority interest	174	174	156	159	20%
Interest-bearing liabilities	3,123	2,008	1,487	1,524	10%
Non interest-bearing liabilities	3,014	3,014	2,897	2,835	0%	2014	2015	2016	2017 Equity ratio		2018	30-Sep-19

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Financial highlights | Cash flow and capital expenditure

Amounts in NOK million	Rolling 12m 3Q19	2018	2017	2016
Profit before tax	1092	1033	887	995
Changes in working capital	-410	-223	61	61
Other operating changes	176	215	75	39
CASH FLOW FROM OPERATIONS	858	1025	1023	1095
Purchase/sales of subsidiaries	0	-363	-424	3
Other cash flow from investments	-612	-714	-506	-320
CASH FLOW FROM INVESTMENTS	-612	-1077	-930	-318
Sales/repurchase of treasury shares	41	32	-1	-11
Dividend paid	-665	-347	-310	-259
Other cash flow from financing	442	167	399	-396
CASH FLOW FROM FINANCING	-182	-148	88	-666
TOTAL CASH FLOW FOR THE PERIOD	64	-199	181	112
All figures excluding IFRS 16

Funding strategy and debt maturity profile

• TOMRA shall always have access to capital in order to cover
  • fluctuations in TOMRA's daily liquidity needs, and
  • investments that are consistent with TOMRA's adopted strategy
• Minimizing the refinancing risk by
  • diversification of the funding sources, and
  • diversification of the maturity profile
• Current external funding is bank debt:

Counterparty	Facility type	Credit Limit	Maturity Date
DNB & SEB	RCF	EUR 110 million	April 2020
DNB & SEB	RCF	EUR 60 million	April 2021
DNB	RCF	EUR 70 million	December 2021
DNB	Overdraft	NOK 300 million	Annual renewal

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

*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 EUR	USD	3.5%	2.5%	8.0%
	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

TOMRA is well-positioned towards megatrends

3 Pioneer in application of sensor-based technology 4 Strong, people minded performance culture

Revenues

Key credit highlights

Strong market position in all segments

Undisputed market leader within reverse vending technology High market share and leading brand within Sorting Solutions

1

Global geographical outreach and technology leadership

Presence on all continents and installed bases in more than 80 markets Widest range of applications and broadest base of sensor technology

4

5

Proven and dynamic business model scaled for growth

Well-positioned towards megatrends Long track record of successfully entering new deposit markets

Strong growth while maintaining a conservative balance sheet

Solid revenue growth and stable margins Modest leverage and high equity ratio

Experienced management team

Long and solid track record with unique industry experience Repeated success of acquisiton integration

Appendices

Collection solutions – segment financials

Revenue (NOKm), geographical split

Gross contribution (NOKm) and margin development (%)

EBITA (NOKm) and margin development (%)

Sorting solutions – segment financials

Revenue (NOKm), geographical split

EBITA (NOKm) and margin development (%)

*2019 last twelve months

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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