TOMRA SYSTEMS ASA ADR 2025 Q2
Earnings Overview & AI Insights

Earnings Performance

Summary of Financial Performance:

• Record EBITA margin of 18% in Q2, reaching 22% when including special items.
• EUR 106 million in order intake for Food, up 28% YoY, with a record order backlog of EUR 137 million (+15% YoY).
• Cash flow from operations at EUR 17 million in Q2, down from EUR 34 million YoY. Year-to-date cash flow is EUR 83 million, up from EUR 54 million YoY.
• Strong financial metrics: 35% equity ratio, 1.8x gearing, and return on capital employed above 18% target.
• A- credit rating affirmed by Scope Ratings, with EUR 92 million undrawn liquidity.

Company Outlook & Strategy:

• Collection: Growth driven by new markets and replacement sales, with existing markets expected to grow ~5% YoY. Gross margins to remain above 40%.
• Recycling: Growth opportunities from regulation and recycled materials demand, but market uncertainty due to soft European plastics market, trade tensions, and economic volatility. 2025 revenues depend on customer sentiment; near-term order timing uncertain.
• Food: Automation demand and safety standards drive opportunities, but macroeconomic uncertainty may affect customer investments. Targeting EBITA margin of 10%-11% by 2025, with mid-single-digit revenue growth potential.
• Horizon Division: Investments focused on feedstock plants like Områ, which will begin operations in late 2023. Total OpEx run rate for 2025 estimated below EUR 20 million.

Key Industry Trends:

• Increased focus on automation, sustainability, and circular economy regulations supports opportunities across divisions.
• Challenges in European plastics recycling and global trade tensions weigh on Recycling's market sentiment.
• Deposit return systems expansion in Poland and Portugal expected to drive future growth for Collection.

Operational Highlights:

• Cost-reduction programs improved gross margins, particularly in Food.
• Horizon division investing EUR 40 million annually in feedstock plants and smart waste capabilities.
• Positive momentum in Poland's Collection market, with a shift toward sales and service business models.

Challenges & Risks:

• Macroeconomic uncertainty, market volatility, and tariff impacts could delay orders across divisions.
• Lower gross margins in Recycling due to a higher share of metal recycling installations in the backlog.
• Customer investment hesitation in Food amid economic uncertainty.

Key Analyst Questions & Responses:

1. Recycling Outlook: Visibility remains limited due to market uncertainty. A 40% conversion ratio from the backlog is expected in Q3, but growth in 2025 depends on customer responses to challenges.
2. Food Margins: Strong Q2 margins driven by volume and mix. Management affirmed the 2025 EBITA target of 10%-11% and noted potential for quarterly margin variations.
3. Poland Collection Market: Significant progress with >50 staff and active contract negotiations. Business model leaning toward traditional sales and service rather than throughput models. Competitive positioning remains strong.