Tomra Systems A/S/A S/Adr

Good morning from Oscar, ladies and gentlemen, and welcome to Tomra's third quarter results presentation for 2026. My name is Bing Zhao. I am interim head of investor relations. As always, CEO Tove Andersen will start today's presentation by giving you the highlights of the quarter. and afterwards CFO Eva Sagemo will dive deeper into the numbers and present our updated outlook. At the end of the presentation, we will open up for Q&A for participants in the Teams webinar. A link to the Teams webinar can be found in this morning's stock exchange release. With that, I give the word to CEO Tove Andersen.

Thank you Bing and good morning and welcome from me as well to our Q3 2026 presentation. I'm pleased with what we have achieved in the quarter. We have created good top line growth and even better bottom line improvement. Overall profitability is still not where it should be. It is good to see the improvements in recycling's bottom line due to the measures we have made. Also great to see the strong operating cash flow. It was expected, but still nice to see it being realized. Collection continues this quarter to demonstrate the strength of its growth platform with revenues up 21%, driven by strong performance in the existing markets and continued new market activity. The gross margin was down compared to Q3 last year due to business mix, but up from the previous quarter. In recycling, improving profitability is the key priority, and this quarter we start to see the results of the measures taken, both on gross margin and bottom line. Revenues are significantly up in the quarter, but this is compared to a weak quarter last year. The division had a strong order intake due to exceptional orders in the mining segment. Our diverse portfolio in food continues to support top-line growth, and we had stable quarterly gross margin. The order intake was flat as we continued to see a lower pipeline conversion of large projects. Let's then dive into the divisional updates. In collection, our team delivered a new third quarter revenue record of €217 million, up 21% year-on-year. And it's the performance by our existing markets, Germany, North America and Australia, which has delivered most of the growth this quarter. In Germany, we are seeing the start of the upgrade and replacement cycle created by new technology standards in the German deposit system. All RVMs need to comply with these new standards by May 2029, which will support gradual upgrade and replacement opportunity for Tomra. In anticipation of this, our German team has worked on different solutions to support our customers meeting the new requirements. We are offering both upgrades of their existing systems and replacements. It's now a year since the acquisition of Klink in North America. This acquisition gave us access to a complementary collection solution for beverage containers, the BagDrop solution. We still believe this is a good solution for several segments, and we are currently rolling it out with a new customer. Synergy realization with our existing material recovery business in North America was the other key value driver behind the acquisition. The joint Klink and Tommela team has worked hard on taking out these synergies, and we are ahead of plan, and we will spend less to realize them than anticipated. We also had underlying growth in North America in the quarter due to higher throughput volume and kiosk resales in Canada. In Australia, good operation performance and higher collection volume drove growth. As mentioned at the Q2 presentation, together with our joint venture partner, Cleanaway, we have submitted our tender for the continued operation of the New South Wales Collection Network. We are now awaiting for the government's decision. Even though existing markets were the main growth contributors in this quarter, we have had significant activity in the new markets as well. In Poland, we have installed approximately 500 more machines. The initial rollout wave is largely completed, and we have entered phase two, where we are targeting follow-up sales to existing customers and sales to independent and small stores. Our team in Singapore continues to perform well which has resulted in additional sales in the quarter. In the Q3 we had around 500 machines compared to the initial 350 machines allocated to us. And we are still growing. This is a good example of how we can increase our share over time through delivering superior operational performance. Finally, in the United Kingdom, an important milestone was achieved in the quarter, where the first installation took place, as shown on the picture below. As you can see, a very proud UK team. Bottom right on the slide, we have listed the upcoming deposit markets, and I will only comment on key changes from last quarter. France announced in August that they were stopping the DRS consultation process initiated in the spring. This does not change our view that France will need to implement DRS to meet the EU targets. It's not a question about if, but about when. Bulgaria has notified the European Commission of a draft legislation introducing a nationwide deposit return system. The draft envisages an 18-24 month preparation period following operator establishment. And in August, the Welsh government announced the appointment of Exchange for Change as the deposit management organization for its deposit return scheme. This is the same as for the rest of the UK, which is positive for a harmonized rollout. And with one year to go until the launch in the UK, I wanted to share how we currently see the market. On the top right hand of this slide, we have summarized the key characteristics of the UK deposit scheme. I will not run through all the bullets, but I want to highlight two things. First, the deposit value of 20 pence, which based on our experience, is high enough to make it worthwhile for people to return their bottles and cans. This means that we expect high collection rates, which will drive the need for significant investments in collection infrastructure. It is important to keep in mind that it will typically take two to three years to reach a target, the targeted collection rate. And we are talking about because we are talking about changing people's habits. Therefore, it will take some time before the retailers need the full collection capacity. The second item I want to highlight is the last two bullet points, giving the handling fee structure and the grants. The way these are structured, they will incentivize stores to automate collection of the beverage containers, also for smaller stores. Then over to the retail landscape in the UK, which is very diverse. There is a mix of local retailers participating in the deposit return scheme for the first time, while you also have international change well experienced with such systems. And when looking at the store size, there is a particularly large convenience store channel in the UK, but there are also supermarkets and hypermarkets, as illustrated on the bottom left of the slide. There is significant commercial activity in the UK, with a meaningful share of the initial market rollout to be contracted. But based on what we have learned so far, we expect the initial rollout to include a significant share of small and medium standalone solutions. In Tomra, we have leading solutions across the whole portfolio, but with the highest comparative strength in the larger, more complex and integrated systems. We constantly work on understanding the customer needs and adjust our portfolio accordingly. As for example we did in Poland with the S2 which I talked about previously. Over the last year we have also expanded and developed our basic line portfolio to ensure that we have a strong competitive offering for the smaller stores. The newest addition is our B3, which we launched last month in September, which we are currently marketing in the UK. This is the most compact machine we have. It occupies actually less than half a square meter. Below, right on the slide, you see our current view of the rollout. We estimate phase one to represent roughly 25,000 RVMs, mainly installed with the larger retail chains. The majority of the installation will take place in 2027, but with some spillover into 2028. Similar to Poland and Romania, we do not see the initial rollout as the final configuration of the market, and there will be a phase two. As retailers gain experience and actual return volumes increase, we expect capacity expansion and upgrades with the larger retailers and broader RBM adaptation among the smaller independent stores. It is challenging to estimate the size of this phase because it will depend on how many small independent stores will invest in RVMs. But our current indication is that it can represent 5,000 to 10,000 machines. And last but not least, the important phase three with service and other recurring revenue kicking in, followed by replacement sales. We are currently in phase one, and there is significant commercial activity in the UK, as a sizeable share of the market is still open to be won. It is very competitive, as we expect all new markets to be. And it is fair to say that product differentiation is less for the smaller, less complex machines. The customer proposition is so much more than just a machine. The service performance, software applications, secure integrations and reliability are key for the customer value. And our highest comparative strength in the larger, more complex systems will create an even stronger advantage over time, as the market is expected to move towards more integrated systems due to operational efficiency. In addition, the larger stores are expected to handle a disproportionate share of collection volumes and consequently drive a significant share of the investment. We expect the majority of the phase one contracts to be landed by end of this year. So far, we have announced three, totaling 5,900 RBMs. Worth noting is that we will only announce when a contract exceeds 1,000 RBMs. And when talking about market share, it's more relevant to use revenues than machines, as the value per deployment can vary significantly. We believe we are well positioned in the UK, and our ambition remains to become the market leader. Turning to recycling, we had good top line growth in the quarter, but this was compared to a weak Q3 last year. The order intake was strong due to two exceptionally large mining orders. The mining business is a lumpy business due to the nature of mining investment projects. But it's great to see that we have won these orders. It's a confirmation of the strong portfolio and service network we have. If we exclude the mining orders, we see a stable last 12 month development, which is in line with our view that the market sentiment is similar to Q2. It's not improving, but also it's not getting worse. Metals continue to show good momentum and remain the relative area of strength, particularly in aluminum, where we continue to drive orders for our recent innovation, the AutoSort pulse machine. While waste recovery and plastic recycling remain subdued. Custom investments continue to be constrained by high financing costs and energy costs. All the economics of plastic recycling remain challenging. A highlight in the quarter is that the PPWR came into force in the EU. This is a key piece of legislation which will drive growth towards 2030 and beyond due to higher recycled content targets. It is positive to see that EU stays firm and continues to implement this legislation as planned. With the market being down, we focus on what we can influence and it's good to see that the measures we have taken are increasingly supporting the earnings development. The cost reduction program is being executed according to plan and is establishing a lower structural cost base. Finally, the process to explore the option of divesting our mining subdivision is progressing. The process is about strategic fit and focus. Mining is a relatively small part of Tomra, and we believe the business may have greater potential with an owner that can provide scale and focus, while allowing us to concentrate on our core sorting segments. And then the food. where we delivered double digit growth in the quarter with strong momentum in citrus, blueberries and vegetables, offsetting the continued down cycle in potatoes. I'm especially pleased to see that we are harvesting the value of our turnaround a few years back, and we reorganized to leverage better the diversification in the product portfolio. The order intake was broadly stable in the quarter. In EMEA, our team continues to perform very well, as they are beginning to see the results of a structured sales initiative they have been running since last year. We are currently running several sales improvement initiatives in food in all regions with the focus of building a stronger customer relationship within core categories. In the food business, this is crucial as customer relations last over decades. This combined with innovation is the key to drive profitable growth. In Americas, we are behind on order intake as the customers remain cautious on capital commitments despite solid underlying demand. The pipeline is there. Customer activity and pipeline remains healthy. However, investment decisions, particularly for larger projects, are taking longer. We continue to monitor the situation closely through customer surveys, which is confirming this picture. Here today, the order intake is below last year, but we see stable underlying demand and activity. Also, as previously communicated, order intake in 2025 included many large orders with longer lead times. In addition to conducting customer service surveys, we are monitoring plantings as new or increased plantings drive the requirement for additional sorting and grading capacity. Currently we see significant new plantings in all regions and in many of our core categories. So this combined with our broad exposure across the regions and categories supports improving order intake and backlog going forward. Moving to Verizon, our portfolio of business building initiatives. After a period of investing, our focus has turned to scaling and realizing the value of the existing portfolio. SeaTrace, our smart waste management business, is continuing to deliver good profitability, while revenues are down due to phasing. In feedstock, Omro had good operation performance and we are currently running at 60% capacity. The plant is still delivering positive EBITDA, but a significant increase in insulation costs for our residual fractions is putting pressure on margins going forward. We are currently working on different mitigating actions to mitigate this. Reuse our venture for replacing single reuse cups and containers is preparing for scaling. Especially the event sector is looking promising. Last quarter I mentioned the implementation at the Intility Arena, which is performing well and has become an important reference for many potential customers. We have this quarter secured pilots with two major European amusement parks, which have the intent to implement a solution based upon successful pilots. With that, I will hand over to Eva, who will go through the financials and outlook.

Thank you, Tove. Let's start with the collection. Collection revenues came in at 217 million euro in the quarter, up 21% year on year, and somewhat above the phasing implied in our previous outlook due to earlier than expected orders in our existing markets. The growth was supported by strong execution across our installed base, in addition to the contribution of Klink. Key drivers included equipment demand in Germany due to new technology standards in the German deposit system, one-off equipment sales in Canada related to customers transitioning from leasing to ownership, and solid activity in throughput markets, particularly in the US and Australia, supported by Favourable Commodity Prices and Volumes New markets contributed with 24 million euro primarily from Poland but also Singapore and Romania. Gross margin was 40.8% in the quarter improving from Q2 as the share of revenues from Poland was lower than in the previous quarter. Compared with Q3 last year, gross margin declined by 1.5 percentage point primarily due to the revenue mix as we had higher share of RVM equipment sales across both existing and new markets. Operating expenses were €52 million in the quarter, compared with €47 million in Q3 last year. And the increase reflects the continued build-up of activities in new markets, particularly Poland and the UK, which contributed with €2.5 million. In addition, the inclusion of Klink added €1.5 million, while inflation and currency effects accounted for approximately €2 million. This resulted in an EBITDA of 36 million euro in the quarter, up from 29 million euro compared to Q3 last year. And looking at the short term 2026 outlook and with nine months behind us, we have narrowed our expected revenue range for the second half of 2026 to approximately 410 to 430 million euro. Following the strong performance in Q3, we expect growth in existing markets to normalize in the fourth quarter, and new markets revenue will be driven by timing of individual rollouts. We expect some early installations in the UK toward the end of 2026, but the main deliveries are expected to take place in 2027. And our expectations for gross margin and operating expenses remain unchanged. Gross margin is expected to be above 40% in the second half and around 40% for the full year. And quarterly operating expenses are expected to be in the range of current level of around €52 million, with in addition around €1-2 million in negative currency effects reflecting current exchange rates. And then moving over to recycling. Revenue came in at €54 million in the quarter, slightly ahead of the conversion ratio, and up 34% compared to a weak Q3 last year. Gross margin ended at 47.7%, up 3.8 percentage points from Q3 last year. And the margin improvement was supported by higher volumes and COG savings. Operating expenses of €20 million in the quarter Marginally lower compared to previous quarter in Q3 last year. And the cost reduction program continues to progress, although partly offset by quarterly activity variations and inflation. As a result, EBITDA was €6 million in the quarter, up from a negative €3 million in Q3 last year. Auto intake of €73 million in the quarter, up 73% compared to Q3 last year. And the quarter included exceptionally large mining orders of €26 million, which made a significant contribution to the order backlog. And given the project-driven nature of mining business, these orders should not be viewed as representative of the underlying quarterly run rate. And mining projects typically also have a lead time of 9 to 12 months from order intake to revenue recognition, meaning revenue should be expected toward the end of 2027. But with the large orders for mining, we turned the negative last 12-month order intake trend to a positive 5% in the quarter. However, excluding the mining orders, the last 12 months order intake was down 6% year over year. And we end the quarter with an order backlog of 124 million euro. Looking at the short term outlook for 2026 for recycling, we expect full year revenues in the range of 205 to 215 million euros. We estimate that approximately 55% of the Q3 backlog will be converted into revenue in Q4. Cost margins in Q4 is expected to be in the range of 50 to 54% due to project mix and higher volume, and operating expenses are expected to come down to approximately 19 million euro in Q4. The cost reduction programme of gross €16 million savings remain on track, with around two thirds of the savings impacting operating expenses. And the full year effect of the cost reduction is expected from 2027. Moving over to food, revenues came in at €86 million in the quarter, exceeding the expected conversion ratio due to timing of project deliveries, and up 13% compared to Q3 last year. Growth was broad-based across most categories and more than offset the anticipated down cycle in the potato segment. Gross margin was 45% in the quarter in line with Q3 last year. And margins were in line with our expectations, reflecting the volume and mix of projects delivered during the quarter. Operating expenses of 28 million euro in the quarter in line with previous quarter and up from Q3 last year, mainly due to inflation. As a result, EBITDA was €11 million in the quarter, up from €8 million in Q3 last year. Order intake of €75 million in the quarter, flat compared with Q3 last year. And we continue to see good activity across several categories, although customers remain selective and larger projects continue to take longer time to convert into firm orders. On our last 12-month basis, the order intake was down 9% year over year. And we end the quarter with the order backlog of 110 million euro. And also here, looking at the short-term outlook for 2026, we expect full-year revenues in the range of 347 to 357 million euro. And based on the current backlog, we estimate that approximately 80% of the Q3 backlog will convert into revenue during the fourth quarter. Gross margin in Q4 is expected to be in the range of 43 to 47%, and operating expenses for Q4 are expected to remain at the current level. Then moving over to Horizon, revenues came in at 10 million euro in line with the previous two quarters. The continued ramp up of the Omro feedstock plant was offset by revenue phasing and C-trace with part of the expected revenue contribution shifting into Q4. Gross margin of 44.8% in the quarter. And compared with prior year levels, the margin reflects the depreciation following the commissioning of the Omro plant in late 2025, as well as higher disposal costs in this quarter. Operating expenses of €6 million in the quarter in line with previous quarters. And as a result, EBITDA was negative with €2 million in the quarter. Our focus now is on revenue growth, earnings progression and capital efficiency. and the short-term outlook for 2026 reflects this for Horizon. Full year revenues expected in the range of 45 to 50 million euro with a stronger Q4 reflecting the contract structure in C-Trace. Full year operating expenses are expected at approximately 27 million euro reflecting higher activity levels in the second half. And full year capital expenditures are expected below 10 million euro Supporting growth initiatives across seed trays, feedstock and reuse. And combining the results from all divisions, the group achieved total revenues of €366 million in the quarter, a 20% increase compared to Q3 last year, driven by growth across all three divisions. The gross margin was 43% in the quarter, improving from Q2, but down from 44.1% The decline was primarily driven by business mix effects in collection. Operating expenses of €110 million in the quarter unchanged from Q2 and up from €104 million compared to Q3 last year, explained by ramp-up in UK and Poland, the addition of clink, currency effects and inflation. And as a result, EBITDA increased to 47 million euro, up 55% compared to Q3 last year, demonstrating then strong operating leverage despite the impact of the business mix and higher operating expenses. Currency effects had a modest impact on the quarter. Currency provided some support to the reported revenues, especially in collection. while also increasing the operating expenses due to the stronger Norwegian Krone. Overall, the net effect on EBITDA was limited. This quarter, we delivered strong cash flow from operations of 112 million euro up from 64 million euro last year, supported by higher earnings and a favorable development in working capital. Working capital ended the quarter at 16% of revenue, down from 19% a year ago. During the quarter, receivables related to new market activities in collection, particularly Poland, were converted into cash. Cash conversion will reflect the timing of working capital related to new market activities in collection, especially in the UK going forward. Cash flow from investments was negative 12 million euro compared with negative 68 million euro last year. The reduction reflects a lower investment activity in Horizon, while Q3 last year also included the acquisition of Klink. With investment activity front-loaded in the first half, we expect a lower level of investments in the second half, while remaining on track for full-year capital expenditures of approximately 90 to 100 million euro primarily directed towards our core division. Roki improved from the previous quarter ending at 16% supported by higher earnings and lower working capital. Compared with 17% in the same quarter last year, Roki continues to reflect the recent acquisitions, strategic business building activities and lower profitability in recycling. And continued focus on profitability, working capital, discipline and capital allocation is expected to support Roki improvement over time. Our financing position remains solid with a weighted average debt maturity of 3.8 years and a liquidity buffer of 135 million euro in undrawn facilities. The equity ratio improved to 36% following the strong cash generation, and we remain comfortable above our covenant requirements of 30% and continue to have substantial covenant headroom. Gearing improved to 2.08 times at quarter end supported by strong cash generation. Net interest bearing debt at the end of the quarter was 593 million euro down from 651 million euro in Q2. And with maintaining a strong liquidity position in the fourth quarter, we expect gearing to remain stable. And then over to the outlook. We have already covered the outlook for the remainder of 26. So let me close by highlighting that the long term fundamentals supporting TOMRA remain firmly intact. Across our divisions, we continue to benefit from structural trends such as regulation, resource scarcity, automation and circularity. These trends support growing demand for technologies that improve resource productivity and reduce waste. And with their leading market positions, strong technology and a proven track record of execution, we remain well positioned to deliver sustainable, profitable growth over time. And before we conclude, I would like to remind you of our Capital Markets Day on 24th of November here at Tomra head office in Aska. During the day, our executive leadership team will provide a deeper update on our strategy execution priorities and long-term growth opportunities across the group. The event will be webcast for those unable to attend in person, but the participant joining us here in OSCA will have the opportunity to experience live demonstrations of our technologies and engage directly with members of the executive leadership team in smaller breakout sessions. And with that, I hand it back to you, Bing.