2 nd quarter 2020 results announcement

TOMRA Systems ASA 17 July 2020 © TOMRA

HIGHLIGHTS FROM THE QUARTER

Key financial highlights

Revenues	• Revenues of 2,319 MNOK (2,318 MNOK in second quarter 2019) Adjusted for currency, revenues were: - Down 11% for TOMRA Group - Down 13% in TOMRA Collection Solutions - Down 8% in TOMRA Sorting Solutions
Gross margin	• Gross margin 42.9% (down from 44.9% in second quarter 2019) - Reduced margins in Tomra Collection Solutions
Operating expenses	• Operating expenses of 707 MNOK, down 8% currency adjusted - Positive effect from cost measures - Continued investments in Circular Economy
EBITA	• EBITA of 288 MNOK – down from 352 MNOK in second quarter 2019
Cash flow	• Cash flow from operations of 123 MNOK – up from 45 MNOK in second quarter 2019
Order intake Tomra Sorting Solutions	• Order intake slightly down, continued strong order backlog in TOMRA Sorting Solutions - Order intake down 5% currency adjusted - Order backlog down 2% currency adjusted from all time high first quarter 2020 level
COVID-19	• Impacts primarily container volumes in North America and order intake in TOMRA Sorting Solutions

COVID-19 business update for TOMRA Collection Solutions

Recovery from COVID-19 lockdown measures

Europe

Continued stable situation. Strong performance in Northern Europe despite COVID-19 complexities.

North America

Volume shortfall as a result of temporary suspension of bottle bill enforcement mid-March. During June, activities have resumed as redemption is now viewed as essential business and lockdowns have been lifted in the most important deposit states.

Australia

Volume in New South Wales and Queensland are back to normal levels.

Container deposit legislation update2)

Western Australia – October 2020

‒ The launch date for Containers for Change has been set to October 1st, 2020, one month earlier than previously indicated.
‒ TOMRA will operate five refund points, where modern automated depots will be established, each equipped with ~10 RVM.

The Netherlands – July 2021 (expansion)

‒ On April 24th, the DRS expansion law was approved and published. The deposit value for small bottles was set at 0.15 € (large bottles have 0.25 €) and a return target is set to 90% as of January 2022.
‒ No new information has been made available since April.

Scotland – July 2022

‒ On May 13th, the Scottish Parliament approved "The Deposit and Return Scheme for Scotland Regulations 2020 No. 154" and transposed it into a Scottish Statutory Instrument (SSI).
‒ The commencement date of July 1st, 2022 was passed into law.

COVID-19 business update for TOMRA Food

Doing business in extraordinary times Resilient global food supply chains

Processed Food

Lower demand from HORECA
Increased uncertainty short term
Impact on investment sentiment

Fresh Food

Retail channel in good shape
More home cooking
Good momentum to date

Potatoes USA, the marketing arm for 2,000 commercial potato growers, reported a 41% volume increase in fresh potato sales between the start of March and early April.

In another example, market researchers Kantar Worldpanel has reported a 38% increase in the eating of home meals in the United Kingdom.

In the face of changing consumer patterns, the global food supply chains are showing resilience.

TOMRA has had good delivery performance and close customer dialogue despite travel restrictions and increased complexity.

COVID-19 business update for TOMRA Recycling & Mining

Different business streams posing different characteristics TOMRA's first digital product launch

Waste recycling and plastics upgrading

Good resilience
Strong underlying drivers
Low oil prices unfavourable economics

Metal recycling and mining

Negatively impacted
Slow industrial demand
Commodity prices below pre-COVID levels

Circular Economy – "It's time to step up, not step back"

"[…] we encourage the Commission to look into elements of the Green Deal, including the European Green Deal Investment Plan, which can be pushed forward to boost green recovery and a just transition.

We need to scale up investments, notably in the fields of sustainable mobility, renewable energy, building renovations, research and innovation, the recovery of biodiversity and the circular economy. […]"

By 17 European climate and environment ministers

Green Recovery

EU stays committed to its Green Deal and will use COVID-19 funds to support the transition to a sustainable economy. April 14th – launch of informal alliance to increase green investment in EU, led by the initiative of Pascal Canfin.

Brand Commitments

Overall consumer brands remain committed, yet unsure on how to reach their commitments. There is a delay in execution as COVID-19 topics take priority.

Economics

Oil prices are down and thus virgin plastics are cheap. There is less demand coming from automotive, aerospace and construction. However, waste volumes are expected to grow.

Legislation continues to be the major driver for implementation of a circular economy. Waste management is a critical infrastructure and reliant on manual labour.

https://www.ellenmacarthurfoundation.org/news/more-than-50-global-leaders-pledge-to-build-back-better-with-the-circular-economy

FINANCIALS AND OUTLOOK

Currency risk and hedging policy

Revenues and expenses per currency:

	EUR¹	USD	NOK	OTHER²	TOTAL
Revenues	45 %	35 %	0 %	20 %	100 %
Expenses	40 %	25 %	5 %	30 %	100 %

Assets and liabilities per currency:

	EUR¹	USD	NOK	OTHER²	TOTAL
Assets	50 %	15 %	15 %	20 %	100 %
Liabilities	60 %	10 %	20 %	10 %	100 %
¹ EUR includes DKK		² Most important: AUD, NZD, RMB, CAD, SEK, GBP and JPY		NOTE: Estimated and rounded figures

¹ EUR includes DKK NOTE: Estimated and rounded figures

10% change in NOK towards other currencies will impact:

	Revenues	Expenses	EBITA
EUR*	4.5%	4.0%	7.0%
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 hedges B/S items where exchange rate fluctuations could have P/L impact. Gains and losses on B/S hedging are recorded in accordance with IAS 21 and will normally not have P/L impact

Financial highlights | P&L statement

		2nd Quarter			1st half
Amounts in NOK million	2020	2019	2019 Adj*	2020	2019	2019 Adj*
Revenues	2,319	2,318	2,597	4,621	4,399	4,841
Collection Solutions	1,055	1,088	1,219	2,223	2,130	2,335
Sorting Solutions	1,264	1,230	1,378	2,398	2,269	2,506
Gross contribution	995	1,041	1,163	1,968	1,915	2,107
in %	43%	45%	45%	43%	44%	44%
Operating expenses	707	689	767	1,452	1,356	1,481
EBITA	288	352	396	516	559	626
in %	12%	15%	15%	11%	13%	13%

Collection Solutions financials

		2nd Quarter			1st half
Amounts in NOK million	2020	2019	2019 Adj*	2020	2019	2019 Adj*
Revenues	1,055	1,088	1,219	2,223	2,130	2,335
Northern Europe	187	153		379	305
Europe (ex Northern)	411	370		834	761
North America	312	435		698	788
Rest of the world	145	130		312	276
Gross contribution	408	471	524	870	888	969
in %	39%	43%	43%	39%	42%	42%
Operating expenses	290	288	320	601	566	617
EBITA	118	183	250	269	322	398
in %	11%	17%	21%	12%	15%	17%

Sorting Solutions financials

		2nd Quarter			1st half
Amounts in NOK million	2020	2019	2019 Adj*	2020	2019	2019 Adj*
Revenues	1,264	1,230	1,378	2,398	2,269	2,506
Europe	498	482		971	885
America	452	428		810	787
Asia	127	144		279	293
Rest of the world	187	176		338	304
Gross contribution	587	570	639	1,098	1,027	1,138
in %	46%	46%	46%	46%	45%	45%
Operating expenses	381	377	422	778	742	813
EBITA	206	193	216	320	285	324
in %	16%	16%	16%	13%	13%	13%

Development in order intake and order backlog

Revenues

• TOMRA Sorting Solutions:

Revenues of 1,264 MNOK, up from 1,230 MNOK last year, down 8% currency adjusted
Order intake of 1,095 MNOK in the quarter, compared to 1,111 MNOK same quarter last year, down 5% currency adjusted
Order backlog of 1,746 MNOK at the end of 2Q20, down from 1,915 MNOK at the end of 1Q20 – down 2% currency adjusted

• Estimated backlog conversion ratio in 3Q20: 70%**

Financial highlights | Balance sheet and cash flow

	30 June	31 Dec
Amounts in NOK million	2020	2019	2019
ASSETS	12,036	10,761	10,868
Intangible non-current assets	4,087	3,753	3,788
Tangible non-current assets	2,436	2,321	2,330
Financial non-current assets	433	330	406
Inventory	1,941	1,619	1,596
Receivables	2,680	2,422	2,288
Cash and cash equivalents	459	316	460
LIABILITIES AND EQUITY	12,036	10,761	10,868
Equity	5,880	4,760	5,247
Lease liabilities	1,128	1,110	1,102
Interest-bearing liabilities	2,048	2,208	1,880
Non interest-bearing liabilities	2,980	2,683	2,639

Cashflow from operations

• 123 MNOK in the second quarter (45 MNOK in second quarter 2019)

Solidity and gearing

49% equity ratio
NIBD/EBITDA (Rolling 12 months)
o 1.0x without IFRS 16
o 1.4x including IFRS 16

TOMRA has a solid financial position

Weighted average debt maturity of 2.0 years
All interest-bearing debt except for the overdraft is swapped to EUR and is exposed to EUR/NOK exchange rate.

Debt maturity profile Current funding sources

TOMRA has a satisfactory liquidity situation with available unused credit lines of approx. 815 MNOK
The senior unsecured bonds (no financial covenants) of 1000 MNOK (swapped to EUR) have been successfully listed on Oslo Stock Exchange
The financial covenant related to the bank debt is minimum equity ratio of 30%

Outlook

Collection Solutions	• Overall stable business in TOMRA Collection • New potential outbreaks of COVID-19 could have negative impact • Growth in ramp-up expenses slows down
Sorting Solutions - Food	• Regional differences dependent upon severity of COVID-19 outbreak • The fresh food segment assumed to continue better than the processed food segment
Sorting Solutions – Recycling/Mining	• Underlying good momentum • Deviations between business streams due to impact of lower commodity prices and industrial demand
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

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