Tomra Systems ASA
OSE:TOM
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
97.08
179.8
|
| Price Target |
|
We'll email you a reminder when the closing price reaches NOK.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Tomra Systems ASA
You don't have any saved screeners yet
Good morning, ladies and gentleman, my name is Stefan Ranstrand, I am the CEO of Tomra. Together with me today here is Espen Gundersen and Elisabet Sandnes, and we together want to present to you the first quarter results of Tomra in 2018. It's nice to see that Tomra is in a good marketplace. We are seeing growth aspects in many dimensions. We see improved or increased focus on environmental matters. We see need in the industry to increase productivity, to increase quality and to enable higher consistency. And these are actions and these are needs which we can meet with our sensor-based solutions. The first quarter as a result of this environment is interesting. We have sound growth. The group is growing with about 10% after adjustment for currencies and for acquisition, so organic 10% growth. We experienced a very strong order intake in Sorting Solutions with a very strong order backlog increase and we made a smaller acquisition, a company called BBC in New Zealand. And we'll talk a little bit more about that later but first I will let you listen to Espen to hear all the numbers.
Thank you, Stefan. Just a quick look at currencies first, rather significant swings this quarter compared to same quarter last year. The euro has become stronger, a little more than 7% stronger versus Norwegian krone. And the U.S. dollar has weakened with 7%, 7.5%, so the euro-U.S. dollar swing is actually close to 15% now.So in Collection, we get a positive effect from the strong euro, somewhat offset by the weaker U.S. dollar but in totality measured in Norwegian krone is slightly positive to us. In Sorting, we have the negative effect of weak U.S. dollar. We have significant sales in U.S. dollars and combined with the strong euro and New Zealand dollar to some extent, which is representing more the cost base. So consequently, we have a negative impact from currencies in Sorting even though converted back to Norwegian krone some positive effect there also. We will look at this when we come into the segments under currency adjusted figures. Looking at the financial statements. We have 12% growth in the quarter, 10% adjusted for acquisitions and currencies. Margin is slightly up because of better margins in Tomra Sorting. Operating expenses is significantly up due to inorganic activities, meaning BBC was acquired 1st of March, so we have 1 month of BBC in there which was not there last year. We have Compac now consolidated with 3 months. Last year, it was only for 3 months. Then we have the ramp-up expenses in New South Wales in Collection. And then we have also the currency effects.So bottom line, we are at NOK 142 million in EBITA compared to NOK 158 million last year. Currency adjusted however, looking at the extreme right-hand side, we are at NOK 138 million last year and NOK 142 million on this year. So slightly up adjusted for currencies.Looking at the balance sheet, the last 3 months, at least looking at the balance sheet dates, the -- both the euro and the dollar has weakened towards the Norwegian krone, so the balance sheet has been somewhat slimmer compared to what we had at the end of last year for that reason. But still, the balance sheet has increased from NOK 8.4 billion to NOK 8.8 billion, and that's mainly about BBC, the acquisition. You see the increase in intangibles from NOK 3.4 billion to a little more than NOK 3.6 billion because of goodwill of all the intangibles. We also actually have an increase in tangible assets that's related to New South Wales ramp-up, more machines, even though the figures look to be almost the same with the last 3 months. Remember that weaker U.S. dollar has decreased the figures and then it has been increased again due to the acquisitions and the investments done in New South Wales.Then we have some increase in working capital, some from BBC and some from New South Wales, which activity is increasing month-over-month. And adjusting for all these effects, the balance sheet is rather stable compared to what we had previously. So despite the ramp-up in New South Wales, we still managed to report cash flow from operations of NOK 120 million which is in line with last year and good compared to previous year which also had somewhat slower cash flow in the beginning of the year. Significant investments in the quarter, NOK 502 million, this is stemming mainly from BBC acquisition, NOK 363 million. Then we have ramp-up in New South Wales, more centers installed and then the replacement CapEx so to say, adding up, as I said, to NOK 502 million. This compared to NOK 490 million last year, in which the significant figure was Compac, NOK 412 million acquisition price for Compac. Still solid balance sheet, 53% equity. Interest-bearing debt on EBITDA is now increased to 0.8 due to the acquisition but still strong. And last night, we had our Annual General Meeting. The meeting approved a dividend of NOK 2.35, in line with the board's suggestion, which will be paid out 8th of May. So remember, today, the Tomra share will be traded ex dividend.Moving on to Collection Solutions.
Thank you, Espen. Collection Solutions continue to be a fascinating business for us. Remember, this is where we started our journey in 1972 as a company where we innovated the automation of taking back bottles and cans. Meanwhile, we have some 80,000 reverse vending machines out in some 30 to 40 different marketplaces and we have an absolute leading role. The sheer fact that we, over this long time, have been able to establish this strong market position and maintaining that market leadership and maintaining our market shares I think, in itself, is worth noticing. And if we look into the quarter as such, we experienced growth that is in this case fully driven by our new market, New South Wales. But all the existing markets continue to perform stable. We still experience a good momentum in Germany. We are in the midst or towards the end, I would say, of what we define as this replacement phase where we are now replacing machines which were installed when the system was introduced in 2006 and we originally planned that to be a event going for about 4 years and we had a very strong increase in the beginning in 2015 and 2016, better than we have expected. And we are consequently experiencing a slower replacement activity level in '17 and '18. And what we can see is that we anticipate that '18 would be somewhat looking like 2017, which again is a good result, it's in high level for Germany compared to historic levels. So again that runs well. Nordic, not too much changes there. We had the replacement activity in Sweden which was finalized about a year back and we are on stable grounds there right now. We continue to be pleased with the new market, Lithuania, which we went into in 2016 and I'm just pleased to see how well that is functioning when we can open up a new market in such a short period in time and making sure that it not only works in the beginning but also over time. It proves the technology and service professionalism that the team is delivering on here. So well done there. And North America faced quite a harsh winter. It has been cold, it's been stormy. That normally affects our volumes. So if we look, compare quarter-to-quarter we are actually flat which, in itself, should be a positive sign. So nothing big to report there. So the big event in the quarter is really about our new market which is New South Wales and a new potential market which I will also talk about shortly. New South Wales, we started go live December 1 in 2017, so it's only some 4 months away. Today, we -- until -- to date, we have collected more than 250 million objects. Remember, the authorities in New South Wales introduced a system in order to reduce littering and are very concerned of course about marine littering and sensitive ecosystems around the Australia coast and globally. So they put up a target to reduce littering by 40%, and with that collecting volumes through our automated and manual collection solutions is our answer to that. So 250 million, more than 250 million objects, bottles and cans have been collected until today and we are pleased with that development.In fact, it is slightly better than we had anticipated when we launched the system. So comparing with our internal forecasts and where we are today, that's a positive. So for me that's a proof that the model works, the system we have put in place with the automation, with the manual collection points, with the data system, with the organization -- remember we have gone from 0 people about a year back until 100 people now operating here, all doing green jobs and saving environment. That all is functioning well. So well done there to that team. And we are still, however, in a ramp-up phase, so this will continue for a while more for us. We will continue to invest more sites, install more machines and that will go until probably third quarter this year. Then we should be complete. So as a result we're also carrying a burden of ramp-up cost and installation, or investment cost on our result and balance sheet for a continued period of time. But this is all calculated and all as we have expected it to be. News for us is that the environmental minister of U.K. has gone out publicly and announced that they will now launch a process to look into deploying a deposit system in England. And the main purpose of this, similar to what we have seen in Australia, is to reduce plastic pollution or littering. It's quite a sizable market, so -- and there is a lot of containers being consumed every day, so it's something we warmly appreciate and salute that they take this initiative in sake of a better environment and cleaner society. A lot is still unknown when we talk about timing, about how the system will look, legislation process, et cetera, that's all not announced to us. So for this time we just want to take notice of that there has been announcement, there has been a clear indication that something will happen. And as soon as we know more, we are happy to report back to you. But right now, we avoid any speculations and just to confirm that we are keen to look into this and support the government and authorities in the U.K. for implementing such a system. With that, I will hand over to Espen to listen to some of the financial details in Collection Solutions.
Thanks, Stefan. Yes, top line growth of 5%, currency adjusted in Collection. The markets, as Stefan also touched upon, is flattish even though in Norwegian krone, it's up in Europe and down in U.S., but when you adjust for currencies, the underlying activity is stable and in line with the last quarter in -- or first quarter in 2017. And the growth is consequently coming from Australia, from New South Wales, and it's close to NOK 50 million revenue recorded from this operations in first quarter 2018. Gross margins are stable. The OpEx is up due to currencies and ramp-up effect and activities in New South Wales. It's 6% to 7% organic growth in OpEx in the quarter when you adjust for currencies. Bottom line is consequently down because of the loss from New South Wales. Moving on to Sorting Solutions.
I would say it doesn't matter which dimension you take. Looking at Sorting Solutions it's a brilliant quarter. The market is asking for more automation in the areas of food, recycling and in mining. In food, it's much driven by the need to improve quality and consistency and also to automate, to make the value chain more efficient. Hence, we have with our portfolio and with our broad portfolio, I would like to say, where we are covering some 100 different food applications all from food for processing, dried food, fresh food like fruit and now also berries we have a broad coverage and can play in many different geographies at the same time. We see an ever-increase in demand in food products, and also new structured changes like digital economy plays a role in how the market develops. Food experienced a sound growth, both in order intake and in revenues and our technologies prove again that we have a high degree in innovation. We have a very broad platform, both from a sensing technology point of view and from mechanical platforms, and we can serve most needs and are, by that, also able to go into very complex applications. If we look into recycling, that is maybe the highlight now. I should maybe have started with that. I just started with food because it's bigger, but recycling is really in a very dynamic phase. I think the biggest driver here is the China regulation, what they call National Sword where China has gone out publicly and said we don't want to be the world's waste dump, which is right. Why should we send waste from different parts of the world just to be handled in China? Why don't we take care of our own waste? That is the rhetoric here, and this is something I think from a macro perspective which makes full sense. But as a result of this, a lot of waste was in the past recycled in China, handled in China and that opportunity is just gone, and many markets, many countries are facing challenges because they were not prepared with their capacity, with their technology and processing to handle all the waste. Therefore, a lot of emergency actions are taking place right now and we are, with our technologies, in a good position to support both our clients and the national systems to improve that. So as result of this Sorting Solutions is in recycling has experienced a moment of very strong market momentum. This will not last forever, but as we see it right now, historically and for the near future, we see continuous good momentum here. So as result very strong development in order intake in recycling.Mining, for the period was a bit slower, no events actually. However, we see that also here momentum is there, is also picking up, is just quarter-to-quarter with quite a small business. It can swing a little bit. But we have absolutely no concern. And some of the highlights here definitely, our solutions for the diamond industry are proven, are delivering exceptional results I would say since 2015. I heard some 80% of all big diamonds being found were detected with our technologies and by that being recovered before they are destroyed in the processes. Also further developments like requirements for lithium for car batteries are increasing in demand and with that our focus on industry minerals. So that sector is exciting also going forward and we continue to support it. What makes us unique as Tomra is our broad technology base. We have over years now invested significantly in building a leading technology base with a broad platform of sensors with a broad technology platform where we combined our technologies across the different business to get economy of scale. Our vast geographical footprint and our willingness to continue invest in innovation and technology pioneering, that makes us unique. And also I think that is a reflection we see here that many significant clients turn to us to look for an answer and hence we see good activity levels. In the quarter we also made a acquisition, the company BBC. And -- BBC Technologies, sorry I should be complete. Very nice opportunity for us. They are active in blueberry sorting. They have a dedicated machine for blueberries, new technology called KATO. And we experienced good market dynamics and we experienced good momentum for BBC Technologies. It's only been with us for a month, so we got to be careful. But I'm overwhelmed with what we have seen there, how they have developed this business, how the whole organization and team, the spirit behind it and the drive to serve customers on a global basis. Despite being fairly small company based in New Zealand it's been quite remarkable delivery they have or performance they have put up to the street here.But of course being part of Tomra now we can support them further with our global footprint, and I think that was pretty much the motivation from their end also to join up with us. To bring more people when it comes to sales and service in the different geographies where we are already placed and they want to expand, and also looking to other opportunities, how we can advance technologies given our broad library of technologies. And also searching for synergy areas in, say, operations where we have quite an extended low-cost country sourcing network for instance where we are working for many many years in that area. So if I just sum up, I have said most of it. But good momentum in food. Revenue growing and strong order intake. And also the acquisition which was completed on March 1. So 1 month with BBC Technologies onboard. Not a long history but a sweet start. Recycling, very strong dynamics, as I talked about. And in mining we continue to be positive about the prospects and we are proud of the results the team delivers in that regard. With that I hand over to Espen.
Yes. Then it's time to look at the figures for Sorting. We came in at NOK 820 million. It's very much in line with what we indicated at the end of last quarter, remembering that's BBC came in on top with NOK 12 million of revenues in the month of March. The margin is up from last quarter and it's actually significantly up when you adjust for currencies. So it's a good margin development. And it's mainly about business dreams, product mix and also the fact that Compac has improved their margins compared to what we had the 2 first months we consolidated them into our accounts last year. Operating expenses is also increasing. Again, remember 1 more month of Compac, 1 more month of BBC. Some currency effects but underlying organic growth is between 6% and 7% also in this business area. So ending the quarter with NOK 41 million profit compared to NOK 30 million or NOK 8 million adjusted for currencies. So now you see how much currency actually counts for when you look at the 2 right-hand columns on currency and on currency-adjusted figures in Sorting Solutions. Order situation, it's very positive, very strong order intake in the quarter, all-time high with good margin actually. So despite we have rather good growth in revenue, meaning first quarter revenue growth was significant upon first quarter last year. So [indiscernible] has been taken to P&L also. Despite this we have a very high order backlog at the end of this quarter. So it's a good situation going into second and third quarter. And the conversion rates, as I always say, is not a guiding but an estimate for those of you that want to model Tomra on a quarterly basis. It's assumed to be 70%, 7-0%. Talking about the future. In Collection it's -- first quarter was stable. Europe was stable, U.S. was stable. And the big picture is going into second quarter and also for the year to be stable. Also Germany which has been kind of stabilizing on a level which is in line with what we saw in 2017 which is a good level but somewhat lower than '15 and '16. So overall stable business in both Europe and U.S. for the rest of the year. In New South Wales of course activity will increase. And we had close to [ NOK 50 million ] of revenues in this quarter, NOK 10 million, maybe NOK 20 million more in the next quarter. We still will continue to lose money because of the ramp-up effect. We are also going into the winter, so the volumes is slightly lower as the temperature is falling in Australia. But the loss will be less in second quarter than in first quarter, third quarter probably close to breakeven, and then in fourth quarter we will make moment. In Sorting Solutions it's good momentum in all business streams. And we are -- have a positive outlook and you can also look at the 70% that's mentioned on the conversation ratio for second quarter. Also for second quarter you have to remember currency is 7% down on euro, at least looking at the spot rate today. And 3% -- sorry, 3% up on the euro and 7% down on the U.S. dollars.That completes the presentation and we open up for questions from the web panel.
We have some questions from the web. The first one is from Mikkel Nyholt with Carnegie. When can we expect an answer on the Queensland deposit center?
Can you take that one, Espen? Queensland tender.
Yes, Queensland is doing a process now. When it comes to implementing deposits in the states its tender is out. We have been participating in the tender process. And the commencement date was previously 1st of July now postponed to 1st of November. So we need very quickly to get the response on this if the 1st of November is a date that will still stand. But it's nothing more to communicate around that, it's an open tender process [indiscernible]. Stakeholders, competitors are delivering tenders on that. And it's open to see whether we will have a role or eventually what kind of role we will have on that. But given the commencement date in 1st of November we assume that it will be rather quick response on that process now.
Thank you. Second question also from Mikkel Nyholt. Are you able to say anything about how big the effect from China is to the recycling vertical and how -- and for how long you expect it to last?
You're talking about the National Sword. How long it will last, very difficult for us to say. I think though it's quite significant amount of improvement processes that need to be taking place and in many places. So actually that's a challenge also to be able to serve too many different markets. And size also very very difficult. It also depends on what will be the ambition. What ultimately would the different markets ultimately want to do with the plastic, do they want to recycle it into a closed loop, then there is more of downstream investments for them in doing high-quality processing. Do they want to make a minimalistic approach and recover it, separate it and note down, cascade the material, so difficult to say. Just be cautious that it is not a normal we are in where we are, experiences this very high momentum, that's all we can say for now actually.
Thank you. Last question from Mikkel from Carnegie. Was Compac improving margins also quarter-on-quarter? What run rate margins do you anticipate it to stabilize at?
Yes. We can say that Compac -- good question, Compac had a good first year for us last year. We labeled it as a turnaround case and it delivered. And I can also confirm that the first quarter was deep into the positive, so well into the positive is a better word maybe. But it was a positive result. And we are on the right track here. I think for a business like Compac where you have quite substantial operations base, critical will be there ordering take. So if the order intakes in the volumes continue well, which they have done so far, if the market is with us, so to say, then I have very little concern about the future. So far everything looks good and we will keep on with the market development.
Thank you. Question from Glenn Kringhaug with ABG. Can you put a number on the earnings impact from New South Wales in Q1, and also an indication on what it should be in Q2?
Yes, I think I said most of that in the outlook statement. But as I said topline close to NOK 50 million in this quarter. We are due to the ramp up still negative. So it's still double digit, but low double-digit loss on the bottom line. NOK 10 million to NOK 20 million depending upon how you are measured. This will improve going into second quarter as we get more installations, more volume going through our infrastructure but still ramp up effect, pending additional cost to running this, and third quarter breakeven, fourth quarter positive. That's the way we have kind of budgeted this. And it's also the way it looks today, to end up.
Thank you. A question from [ Thomas Ravior ], company unknown. Were Tomra involved when representatives from China, India, and France visited Norway early this year in order to look at how its successful deposit, bottle deposit system is working?
I must just say the following, there is a lot of delegations coming here and we are involving many of the delegation. I don't know exactly which delegation this was. If there was a combined, China, India, and some -- which were the third one?
The countries mentioned was China -- they were China, India and France.
And France. I am not aware that we have been evolving in such a delegation with a combination of these 3 countries where they are. But if you look at individual visits, there's quite a lot. And the Norwegian system actually as such is studied quite a lot because it's a rather well-functioning system in our views. Anything you had to add there?
No.
No.
This might be something that Infinitum is more involved in.
Yes.
Second question from Thomas Ravior. Any update on the Queensland bottle deposit operatorship in Australia? I guess you did address it, Espen, but for the sake of color. So with that we have no more questions from the web. And we'll leave it to you to conclude the webcast.
Thank you very much for listening in, for supporting us. And again we are pleased with the quarter. Good organic revenues growth. We made some inorganic moves. Good progress in New South Wales. And we are in an exciting marketplace, both for Collection Solutions where we see more momentum with new markets than ever whilst the traditional markets are performing well, albeit not growing, which we fully understand, but given our -- the high penetration, given our high market share this is already very good. And it's pleasant to see the new developments. And it's very pleasant to see our good progress in New South Wales. I am proud of that. And of course with Sorting Solutions we have now invested so much in technology, building our structures, building our marketing and sales footprint to see that that's paying off. That is a great pleasure for us and we look forward to continue serving our customers on a global basis and see you soon again. Thank you.