Tomra Systems ASA

OSE:TOM

Earnings Call Transcript 2020-Q1

[Bing Zhao, Director of Investor Relations & Strategy]

Hi, and welcome to TOMRA's First Quarter Results Presentation. My name is Bing Zhao, and I'm responsible for Investor Relations in TOMRA. This time, we have had to adapt our reporting to a new digital format with our CEO, Stefan Ranstrand, present in Switzerland; and our CFO, Espen Gundersen, and I present in Norway. For those of you watching the webcast, hopefully, you will still get the same seamless experience, thanks to our webcast crew. And you will still have the possibility to post questions, which will be addressed towards end of the presentation.Now I would like to hand it over to our CEO Stefan to take us through the highlights during the past quarter. Please, Stefan.

[Stefan Ranstrand, President & CEO]

Thank you, Bing. And thank you, ladies and gentlemen, for dialing in and listening to our webcast about the first quarter results. I am waiting a little bit because it seems that the slide I want to have just arrived now. So the first quarter 2020 was a good quarter. We experienced top line growth of 11%. However, we have to remember that Norwegian krone had a quite turbulent period. And if we take adjusted for currency, revenues were up 3% for the group.We had an increase in operating expenses that is stemming back to our efforts to invest in future revenues growth, both in ramping up the Collection Solutions business and building our circular economy activities. This is something that is of strategic importance for TOMRA, and you can expect us to continue investing in building up exactly these activities, where we strive for a global leadership program.Cash was good in the quarter, NOK 265 million. And the earnings, EBITA earnings increased with about 10%, NOK 228 million.So one of the highlights of the quarter is definitely that we had a strong order intake in Sorting Solutions. Recycling/Mining had already very strong quarter to compare with last year, so they had less of an increase, but Food had a good -- made a good contribution to the growth. And that also led to that we would now have an all-time high order backlog in TOMRA Sorting Solutions.As you all are aware of, in later part of the quarter, we were hit by the pandemic, coronavirus, and I will talk a little bit more about that on the next pages. Please, next page. But before going into the pandemic, let's just go through the highlights of the quarter. In Collection Solutions, it was a rather uneventful quarter. We had good activity level in Northern Europe. And Australia continued to perform well. The other regions were stable -- kind of stable. And we had the big exhibition, which takes place every 3 years, called EuroShop, and that took place in February this year. We were lucky because we still had a lot of attendance from customers from close and far. And we had made quite a, I'd call it, investment in demonstrating our capabilities and our new developments so the people visiting could see our new multi-feed R1 that attracted a lot of interest, but we also demonstrated our digital capabilities, our connectivity and the broad portfolio covering everything from the smallest of stores up to industrial sites. Really interesting. And of course, we could also have an opportunity there to visit the other industrial players. And I think it was very little doubt that TOMRA stood out as the leader, both when it comes to innovation and broadness of our offerings. So very happy to experience that.Food had a strong quarter, as I mentioned, in order intake. If you recall back from last year, actually, the first and second quarter were a bit slower. So we compare on a lower level, too. We have to admit that. But we did struggle a little bit with the order intake the first and second quarter in Food. Then as of the third and fourth quarter, we could see a stabilization, and it's now nice for us to experience that the fourth -- the first quarter '20 also built on that positive trajectory. So that was really, I think, one of the key highlights here. Another, of course, is that our Food division got a new leader. He started in January. His name is Michel Picandet. He comes from the food industry his entire career, so a very international, very experienced and both leader and food expert. So that has been a very exciting period for us to experience his onboarding, and he's, as we speak, fully in charge. So that's very nice.We also had, in February, the Fruit Logistica, which is one of the most important food processing exhibitions. This took place in Berlin. And here, in the same fashion as when I talked about EuroShop before, we could really see the full capabilities of TOMRA, where we demonstrated the different technology platforms we have, our investments in new sensor and groundbreaking sensor technologies and groundbreaking artificial intelligence applications. So TOMRA is definitely also here at the forefront investing in sensing, in artificial intelligence, in digital platforms, so building on our past strong experience with hardwares.Recycling and Mining, also a strong quarter, strong order intake. As I said, not as strong growth because they really had a strong quarter, first quarter last year. So we just have to remember that history plays a role here, too. And beyond that, not so many events to talk about. But as you can see in the illustration here, we also are proud of our new artificial intelligence solutions or machine learning, with which we can actually sort even more accurately than before, and the machines are now getting quite advanced in finding the smallest of differences between materials that are being sorted. Very important for the future of Recycling.So with that, I ask you to turn to the next page. I'd like to elaborate a little bit with you about the whole coronavirus situation. Actually, we will do that first on the group level and then go through on the division impact. Obviously, it is something that made us all very uncertain initially. And as a leadership team of TOMRA, we have really stepped up our activity level when it comes to how we lead the company, the crisis management. And if we say the following way that before the coronavirus, we used to have one formal meeting every month, now we have one every week. And in fact, we are talking more frequently. If we, before the virus situation or the pandemic situation, used to make a forecast update on a monthly or bimonthly basis, now we do it on a weekly or biweekly. And that has been important because if I look into the financial planning, it started off with quite big uncertainty. So if you look at the gap in between, which we think of a min and max in our possible future scenarios, in the beginning, that gap was quite big because there were a lot of uncertainties. But as we have progressed and tested the drivers, tested the business indicators, talked with customers, talked with our people, we get better and better understanding for how this will impact the business. And that road that was quite broad in the beginning is now much more narrow, which gives us more confidence in our ability to talk about the business going forward. We have to remember that we are still fairly new in this situation, so things can change, but we now feel much more confident, much more educated than we did, say, a month back.Important for us has been really to -- #1 priority, I dare to say, was the whole safety and well-being of our employees. We invested a lot here in making sure that people were protected, setting up home office environment where people physically had to meet. We made clear separations in workforces and took all protective measures you can in order to maintain a controlled or a virus-free environment in, say, workshops or labs. And it has worked out fairly well. We have had, in total, as of yesterday, 6 cases reported in TOMRA of coronavirus infection. 5 are recovered and the sixth are under recovery, and there's no crisis there. So, so far, we feel that it has been working well. We have also stepped up the communication significantly where we talk frequently with our people, recognizing that they are working in an isolated environment. They have questions. They have need for information. They have need to connect and feel part of something. And the feedback we get from the employees through our surveys is positive throughout. So in a way, it's been working very well. I'm very pleased with what the people have done on the whole people and organization side here.Customer. Our livelihood -- we are -- that's the reason for us to exist is to handle our customer request and help them solve their problems. Also here, of course, a big shift since you cannot travel and meet customers so much. Also, in a way, initially, a lot of customers were not very available because they clearly had to figure out how to organize and run the business under this new scenario. Meanwhile, we have been able to establish very good dialogues, in some ways, maybe even more frequent at least. Maybe saying closely is maybe not the best word, but more frequent dialogues with the customers. For instance, if I take the Food business, we've done a 1,000 deep interviews here now to understand the business situation of our customers. So that's quite impressive. We are working with different technologies. The traditional service is continuing, and I'm very proud of that has been able to hold up, but we have also deployed a lot of new technologies with virtual tools, and I'll talk a little bit more about that later.Our ability to produce, covering our entire supply chain, including our suppliers, our own operations is in a good stage. We had some initial hiccups. You might recall that virus initiated in China, that was very much coinciding with the Chinese New Year. In a way, helped us because we had already buffered a little bit for those components, which we source from China, to make sure that we cover the Chinese New Year. And as we speak, our Chinese operations are back to 100%. We have full activity level in our European plants, as we speak. Also, there, we had some hiccups, but they are recovered. And only in New Zealand, we have a slight reduction. So we are maybe at 80% instead of 100% there, but that doesn't cause any disruption because we have been able to offload that operation a bit with the other network of operations we have. So really I'm proud to say that we are able to deliver when it comes to the whole shipment. So we have actually been a little bit proactive shipping to customers in advance, just being cautious so that we are not getting stuck in any importation or transportation issues. So, so far, very, very good. And we have had no serious quality issues when it comes to our order backlog. The customer want the goods, and at maximum, there have been minor delays from some customers and very often because of the new plants might have been delayed due to other reasons, but we have been able to honor our obligations, and I'm very proud about that. So we are up and running, and we have a close to normal operational situation.Obviously, with this kind of completely new economic situation and all the scenarios we are fed with from the external world, a very central part of our activity was really to stress test and try to understand and get the full control of our own situation. And I dare to say that we have a satisfactory situation. We have taken -- and we took very early a lot of measures to reduce costs out, so like hiring freeze, stopping investments, all nonnecessary spending out, travel ban goes -- not ban, but travel restriction goes for free almost here because it's not possible to travel, but also all cash out on consultants. And so we really brutally went in immediately and then just cut on that. And then we have planned also for addressing the workforce activity. And we have done some reductions in areas where we need, both reduction of people and Kurzarbeit or short-term work. So we have used the tools which are there, at the same time, trying to be careful with our employees, finding the right balance here, and I feel we are on a good track there.So we are better in control of our financial outlook than we were in the beginning, and we feel that just -- it's not a disaster here, and I'll come back a little bit to why.We're also preparing for recovery. We see there would be a world after coronavirus. And we want -- we have a clear strategy of where we want to head with TOMRA. We haven't altered that one, so it's more navigating through this lumpy waters now. And we ring-fenced important developments when it comes to new market development, circular economy, ramp up when we need sensor developments, digital developments, we haven't stopped that. There is even more need for our services in the future, and we continue to invest in that. So we try to do the right things here, cutting where it's possible and has an immediate effect and do not disturb the long-term strategic plan, which we have laid out for the company.With that, I ask you to go to the next page. This illustrates what has been the implication of coronavirus for Collection Solutions. So if we just start with the customer base in Collection Solutions, most of the customers are retail. Retail continues in, I think, all markets to operate and pretty robust resilient during such a crisis situation. People will continue to eat food like before. They would probably eat less from hotels, restaurants and catering, also partly because that's been closed. But -- so they would go more to retail. So our retail customers are operating with strong demand, meaning that we have a strong customer, cash-rich customer and the demand activity is high. And actually, in a way, we can see also a snapshot of this on the graph, which we have up on the left side here. So this graph, where you see 3 lines: one is a flat line; one is a pink, which shows a dip and a return; and one is a lighter blue, which is showing a dip, where it stays down for a longer period of time. That is illustrating of the activity level on our reverse vending machines. You know that out of our 83,000 machines we have installed in the world, most of our machines are actually connected today. So we have instant feedback on the activity level. It's almost like if you think of a flight tracker, where you can see what's happening in the air, obviously, it's not very much on the flight tracker today, here, you can see it's not happening on the TOMRA RVM tracker. So the RVM tracker tells us that in the European part of the world, the volume development is -- it's a stable situation.The pink line indicates Australia where we had a dip, but we can also see that in this case, New South Wales in Queensland, we have recovered from that dip. We are back into the original scenario. So there was a dip, where people were afraid of using or there was some restriction in movement of people, but that has recovered.We do, however, still have challenge in parts of North America. So that is the lighter blue one where you can see the volume has gone down there. And that's also where we have been forced to take most of our measures when it comes to cost adjustments. So this is really our online tool [ basis ], we could even do hourly. We have a full understanding of what's happening in our RVMs. And with that, we also much quicker than ever in the past are able to adjust for any scenarios, a positive or a negative scenario, and we are using that. And this is something part of our internal management platform tools.When it comes to new deposit markets, Scotland has indicated they have now submitted their final DRS regulations to the Scottish Parliament, and we expect the legislation to pass in this year. And that in July -- 1st of July 2022, the scheme will go live. So that's, for now, slightly delayed from the original planning they indicated to us, but now things seems to be on the move again.Western Australia is, as you know, done deal. They have decided they have gone out for a tender process and everything clear. There was a disruption in the start-up. So they're talking about starting up the system either by November 2020 or by June 2021 depending on the coronavirus. So there's no disturbance from legislation or things like that. This is purely adjusting the start-up date due to the virus outbreak.And very positive, I'm happy to say, is that the Netherlands have communicated that they will introduce a deposit on smaller plastic bottles as of July 1, 2021. There has been a system in place in Holland for a long period of time for bottles, objects bigger than 1 liter, and now they will also cover the smaller bottles. We think that is just wonderful news. It's great for building up a more sustainable and more circular economy-oriented economy in Europe and, in this case, in Netherlands. So we're very happy about thatBeyond that, our operation -- I think I have covered a lot. Important is again to remember that these customers we have, the retail, it's business essential, it's business -- society-critical services. They do continue. Therefore, we have to continue to support them. We see where we have the activity level, as I talked about the graph before. So what we have learned much more is to do online sales, and that's really working nicely. Our field service needs to continue to operate. We do that. We have live status on the machines, as I talked about, and our production is able to operate, and it's continuing. And then, of course, we have worked a little bit about touch-free RVM concepts so that people are not concerned about the spread from that point of view.So the business is in good shape, and I think the team has responded in a most fantastic way when it comes to how to handle the whole situation. And we are very delighted about the progress, especially here with the Netherlands introducing DRS on small bottles.With that, I would like to move to talking about the next page, which is Food. And in Food business, again, we are lucky in TOMRA because the Food business is also a business-critical and essential -- a society-critical and essential business. We cannot just stop producing food. People need to eat. The trees doesn't stop growing apples because there is coronavirus. They need to be processed. If you have planted an acre of new farmland, you need to process that independent on a virus situation or not. So if we think that there would be stop here in the food, we think wrong. Food will need to continue. Certainly, there would be disruptions. And the food situation, the food processes have gone through quite a test here, and I'll talk a little bit about that. But this is an industry that is in self-resilient, except for some short-term hiccups. And if we just look at what we have experienced in this period, so when it comes to production of food, that goes through both harvesting and processing, when you package it, sort it and so on. Here, the biggest challenge for our customers have been the access to labor. When, for instance, migrants cannot come in, seasonal workers coming in from cross-bordering to help out, that has been for years [ an additional ] pool of resources for the farming industry. And when that is disrupted, that cause a disruption for them. So their supply is under pressure. They are, at some point, even not able to fully harvest what they should. So that -- what have grown. So that has been one of the challenges. I think it's getting better. The politicians have been able to understand the challenges and take measures around it. But it's been, for sure, one of the challenges here.The next has been the whole distribution. So if you take U.S., for instance, I understand about 50% of the food consumption is channeled through hotel, restaurants, catering. That sector has been completely shut down, so people have to turn back to traditional ways of cooking food, how we have cooked food for thousands of years to cook at home. But the processes have not been necessarily all ready for that. So they -- some of them were really focusing on the HORECA sector, and then there's a shift. Obviously, this is a very innovative, a strong sector. So they are able to change, but it takes some time. And also, logistics has been under pressure, especially shipping of fresh produces across borders. We have seen lines of trucks crossing borders -- trying to cross borders in Europe, for instance. And for some product types, that can be devastating.We have also seen -- as a result of HORECA shutdown, we have seen the demand for some categories of food being reduced, for instance, French fries, which is widely sold over McDonald's and the like, that demand is down, and also especially the North American region, where HORECA has such a big part of the whole food value system. That's the most challenged area we have for the time being.Also, the consumption. People continue to eat. They will go more to retail, as we have talked about before. But some of the people have actually forgotten how to cook. So it's also a challenge here. The food industry really has to re-train them. What our grandmother used to teach us has, unfortunately, been lost in the new fast-moving world and, hopefully, we'll come back with that as people learn again.We have used a lot of very innovative ways to handle the customer side. We have virtual tests being -- doing fantastic. We have -- so we are selling through -- using virtual testing. We have used virtual support for installations, and we are doing more and more remote support of our customers when it comes to performance measures. And so it's really interesting. So what we would -- anyway would have had to do in terms of transforming to digital, to more remote tool sets is now catapulted forward. We get the catalyzator here through the virus. So as a company, when I'm on that note, it's not only bad that we have these challenges, we will also draw new -- a lot of new learnings and can accelerate some of the initiatives we have been striving for and having on the strategic agenda for long time. Now is the time to push the bottom and go on. So I think TOMRA will actually be somewhat a different company, more agile and a bit smarter after the crisis. So it helps us to become better also. We just need to ensure this difficult phase now.With that, let's go over and talk a little bit about the Recycling and Mining business. Recycling/Mining, again, I dare to say society-critical, essential business. We need to continue handling waste. People continue to generate waste that needs to be picked up from the homes, that needs to be processed. And that business is ongoing. So our customer, in this case, they don't talk about the crisis. They might have challenges when it comes to how they operate their fleet of trucks and plants. And they might need more automation to have less people in the plants, but they don't talk about crisis. They have long-term contracts, and they work through that. So if we look at, for instance, the municipal solid waste and plastic upgrading, which you see on the left side here, that these together makes about 70% of the Recycling business, these 2, and we experienced very robust business situation there, driven by [ legislation, ] driven by the need to invest in new infrastructure and also driven by the whole sustainable packaging initiatives of the fast-moving consumer goods companies. And we see that is not debated. That is continued. That's a vein that will not stop because of the corona. Now people recognize we need to be smarter, we need to be more sustainable. Our consumers will not reward a company that do not provide smart and more sustainable solutions in the future. So that's a trend what we see is continuing, and we can clearly experience this year.But there are also sectors where we are affecting negatively. And definitely in the metal sector, where our customers, metal scrapyards and the like, which will then process the metal into material that can be reused, for instance, car manufacturing, certainly, that sector is down. The whole commodity price sector is down, look at all metals. And of course, that also affects their business dramatically. So that sector is clearly challenged today. And the mining sector, even though we haven't seen too much challenges until now, we expect that one also to be a bit challenged. So 70% of the Recycling and Mining business is in a good stage with the municipal solid waste and plastic upgrading doing well. Metal is definitely challenged. We expect mining also to be challenged, but I have to say, until now, we've been blessed it's been going well there.And as I said, if we now go to the right-hand side of this picture, we have invested a lot in smarter technologies. I talked about artificial intelligence before, connected machines with digital platforms. The best municipal solid waste treatment plants today, they can operate completely automated. And in times with corona, where you have shortage of labor and you don't want people to be closed, that becomes even more in fashion, that kind of solutions. So spot on for us, I would say, and we will continue to work on that.And I'm also very proud and actually take the opportunity when I address this to all of you. We have some fantastic people. We have some mines, very remote mines, and we have people that have volunteered to stay at the mine for uninterrupted period because they know they cannot go back and forth and meet their families. They have volunteered to stay at the mines for a longer period of time to ride the wave here with the customer or the wave is maybe the wrong word, ride through this customer -- go through this period with the customers and really support them at site here. And it's not something we have pushed our people, but maybe that's a sign for what I consider wonderful culture we have in TOMRA. People are willing to step up. People are willing to go the extra mile. And these are examples for that, and that happens in the mining sector. And there, it's actually needed because the mines are remote and, in some instances, people are not able to travel in this country. So very, very glad to say that. We have also set up a stay-connected site for our employees -- for our customers. So we will really try all the positive ways to ride out this situation.With that, we can change to the next page. And I would just talk shortly about the circular economy. Again, it's a strategic initiative for us. We see that this will be a major part of our business in the future. Right now TOMRA actually plays a very important role in being able to build, be a catalyzator for building these concepts because there are -- there's a desire to do sustainable packaging to go circular economy, but there's a lack of tools, lack of know-how. And one of the companies -- one of the few companies in the world that can really offer solutions to that is TOMRA. And obviously, we want to position ourselves, we want to contribute here through collaboration to position ourselves as the #1. And I think that's actually happening. We are, for instance, part of the Alliance to End Plastic Waste, which is the biggest industrial alliance globally to tackle this problem. Together, we have more than 1 million employees. We are committed as an alliance to invest $1.5 billion over 5 years to develop solutions for ending plastic waste and building up circular economy. We are at the World Economic Forum, meeting with the right people, connecting and sharing our experiences. We are signed up to the European Plastic Pact, which really recognizes that you -- the material needs to be reused. It's too good not to be used. It is essential for society. But today, we don't harvest the full value out of it. Basically we are destroying most of the values, and that's really what we have to do.And on the right side, you can also see where we are working together with a company called Viridor on how we can implement such a circular economy solution in real life, not only on a conceptual stage, but really already today bringing some tangible solutions. So I'm really proud about that. And again, this is a strategic area for us, where we'll continue to invest. And our ambition is clear, we want the work to become more sustainable, and we want TOMRA to be a leader in this future of games.With that, I stop here and pass over to Espen. And he will talk about the financials and the outlook.

[Espen Gundersen, Deputy CEO & CFO]

Thank you, Stefan. Moving to Page 11. As always, starting with currency, more important than ever. The Norwegian krone depreciated significantly in March, and that influences all figures that we present today. If you look at the end of March figures compared to the beginning of March figures, when it comes to exchange rates, we see that the dollar has strengthened almost 20% and the euro is almost 17% versus -- or during the quarter. So for those figures as measured as a point in time, meaning typically the balance sheet or the order backlog. Those are the relevant figures to the [ trend, thus far ]. And if you look at those figures, that's average for the period, typically P&L. You see that figures are somewhat lower because, as I said, the depreciation came mainly during March. But they're relevant figures, year-over-year, quarter-over-quarter, is 10.6% up on the dollars and 7.3% up on the euro.Moving to the next page, we see how this influenced the different balance sheet and P&L line items. Overall, the balance sheet has grown with 14% as a consequence of currency changes, meaning NOK 1.5 billion more of assets. Also, the liability increased with the same percentage. Under the residual, the equity has actually increased with NOK 703 million just because of our currencies during this quarter.If you look at the P&L, as I said, the impact is more modest because the depreciation came late in the period, but still we have a positive 8% on revenues and 11% on EBITA. We also have -- we hedged our predicted future cash flows. But to make this more transparent and simple to understand, both internally and externally, we do not account for this that gone to the EBIT line. We make the spot come through every month -- every day in all line items after EBIT so it's easy to understand how currency impact. We don't need to know that this period was hedged at that level and so on. But instead, we account for this contract, the trade contracts and then consequently book them at market value. And all those contracts need to be revaluated at the end of March, and that created a negative effect of loss of NOK 190 million recorded on the net financial income line during the first quarter.Moving to Page 13. A 11% up on revenues on group. Currency adjusted to 3% is collection. That is the main contributor with a 5% increase. Sorting is just a small increase of 1%. Gross contribution margins are stable. Operating expenses is up 4%, but that's mainly stemming from increased of costs in collection, round figure, NOK 10 million. And the circular economy initiatives, also round figure, NOK 10 million, which is reported under [ retentions ]. So despite a further increase since, let's say, future-oriented costs, we still managed to increase EBITA about NOK 21 million or just pretty flat compared to last year.Going to Page 14, Collection Solutions, strong sales in the Nordic, stable in the rest of Europe. In North America, we had a good period all the way up until mid-March when the throughput volume started to fall because of the lockdown. So in this quarter, trends are just rather unchanged compared to same quarter last year. Rest of the world, mainly Australia, also had good improvement all the way up to the last week of March where also the volumes in this region started to fall. Gross margin is unchanged. Operating expenses, as I said, slightly impacted by increased ramp-up costs, with the bottom line NOK 151 million EBITA and 13% margin.Moving to Page 15, Sorting Solutions. Somewhat slower sales or installations in Americas this quarter but is offset by stronger sales in Europe. In total, a stable business, 1% up on revenues [ currency ] adjusted, and the conversion ratio is 77%, maybe 70% to 80%, which is in the middle of the range as we indicated at the end of last quarter. Gross contribution, gross margin is increasing, and that's the consequence of continuing to improve the margins. Operating expenses almost unchanged. When we adjust for currency, it sometimes gives an improved EBITA, reporting NOK 114 million of EBITA in this quarter.Moving to Page 16. Order development, order backlog significantly affected by currencies. This is illustrated by the red areas in the bars. But looking at order intake, also adjusted for currencies, we were up 11% compared to same quarter last year, particularly if you have a [ higher effect ]. The order backlog also adjusted for currencies still up 13%. And we consequently have an all-time high order backlog by the end of the first quarter.If you look at the estimated backlog conversion ratio, it's now estimated to be 60% to 65%, meaning that the revenues of the upcoming quarter, we believe, will be around the area of 60% to 65% of the current backlog. It's lower than usual, but we have been down in this area 2 times before. We'll come back to this on the outlook statement. And as always said, this is not guiding. This is just an indication for you that want to model us on a quarterly basis.Moving to Page 17, the balance sheet. As I said, it's 13% versus 14% currency effect. And that's more or less all the effects you see on the balance sheet is related to currencies. The underlying fixed currency effects is not very material if you compare to the end of last year. Though -- if you look at the working capital, we have had some inventory buildup, but also a positive development on receivables, payables and contract liabilities, which gives overall positive development on the working capital and, consequently, also an increase in cash flow from operations standing at NOK 265 million compared to NOK 229 million last year. The equity is unchanged, and the gearing measure that's interest-bearing debt on EBITA on a rolling 12-month basis is now at 0.9 without IFRS 16 and 1.4 including IFRS 16. This is slightly up, meaning a higher gearing because we have our loans nominated or swapped into euro, so consequently measured [ in market ] also. The debt has increased in the way we report this and that influenced also the gearing percentage.Moving to Page 18. We have a solid financial position. We have NOK 900 million of unused committed credit lines at the end of the quarter. We have those -- some loans that will expire in first and [ second ] year becoming short-term debt. So we are in the process of looking to refinancing this in the quarters to come, but there is no indication that there should be a problem to refinance. We are in a very good position to dialogue with the banks. Money is still available in the [indiscernible] way for TOMRA.Going to Page 19. Last night, we had our Annual General Meeting. All of the items were approved, my return to Board and nomination committee's proposals. The dividend proposal, being the Board granted an authorization to resolve dividends, after a long division, ended up to NOK 2.75 at a later stage, was approved. We have had the KPMG for 26 years as auditor and, consequently, we ran a tender process and then PwC was nominated and then elected as our new group auditor. And besides that, there's no change in the composition of our Board of Directors.Going to Page 20, the last page. Now is the difficult part. Talking about the history is -- talking about the outlook is always somewhat more difficult, particularly in this somewhat turbulent times. But I think it's important to understand that the momentum in TOMRA has been good through the first quarter before the crisis came. We are maybe not essential business, but we are selling to essential businesses, food retail. They are doing good overall. They are leader, and they do have a demand, and there is a market. As food producers, there will be great opportunities and the momentum and drivers behind that business, they have not gone away.Waste management. Need for solutions and the need for this business is going to be there. So regardless of where you look, our customers are overall in good shape, and that's a very good starting point for TOMRA. But of course, what's happening out there for a period of time also could have a negative influence upon us. There should be problems getting parts, getting machines, getting people across borders. So some installations could be delayed for that reason or store owners or far store owner processing plants, pack houses that don't want activity in their plants for different reasons during these times. Some service could be delayed because we can't send out a service tech or they don't want us to visit them exactly now. So it can be delayed or postponed for a period.And actually throughputs where activity is lower for a period. But we don't see that underlying momentum in the businesses has changed and consequently we talk about more delays or a temporary reduction in activity in some of our businesses.More precise going down to the units, starting with Collection Solutions in Europe, it is resilience overall. The stores are open. The volumes are coming back, but there should be delays because store owners maybe don't want installation this week or this month and have some postponements. But overall the service tech more or less is doing the same job. We have people in the local markets. We don't need to cross much borders and so on. So activity is not very much affected by the current turmoil.In U.S., we have a significant part of our activity dependent upon volumes. And with the lockdown in Northeast, in particular in New York, also going to Connecticut we see redemption centers closed down. We see bottle groups closed for a period. And consequently, lower volumes and lower revenue for TOMRA. We believe that many of these bottles would not go away. They will come back and things will open up again. So this is a delay in revenues. But for the time being, activity is lower in that region.Same thing we experienced in Australia, as Stefan talked about, but it was for a period of time. April was low. But going into May, we see volumes is coming back activity around now -- is now on a level more or less below before the crisis. When it comes to ramp-up expenses, we said at the end of last quarter that we believe that we will, on top of what we have used last year, invest additional NOK 100 million to NOK 150 million on ramp-up and other future-related expenses, mainly in the collection, but also some circular economy costs that hits the [ group pension ] line.In the first quarter, we reported round figures, as I said, NOK 20 million in additional costs, NOK 10 million of them reported in collection and NOK 10 million on group [ functions ]. I think this could be a good indication also of what we will experience in the quarters to come. So consequently, somewhat lower OpEx spending on this than we indicated at the end of fourth quarter. And also, as Stefan said, that we are looking at costs and are cautious on nonessential spend. Going to Sorting Solutions and the Food part of this, we ended last quarter with a solid order backlog, but some delays in installations should be expected. People, machines aren't crossing borders and so on. Also, the order intake, particularly in processed food -- or in processed food could be negatively influenced by this current situation. In Recycling and Mining part of Sorting Solutions, underlying momentum is still good. There are, however, differences between the business streams. Again, as Stefan touched upon, metals and mining are more dependent on commodity prices, and we expect a lower activity and lower order intake in those units as long as the turmoil is ongoing.Currency. As you know, we have a significant positive impact on the Norwegian krone. And if the current regime continues throughout this quarter, this will, of course, also have a very positive effect on our bottom line.That concludes our presentation, and we open up for questions from the web. And Bing, maybe you can guide us through this.

[Bing Zhao, Director of Investor Relations & Strategy]

Yes, of course, Stefan. So I'm starting with a question from [ Frederick Acosta ] regarding dividends. How about the postponed 2019 dividend? How do you see the timing of that now?

[Espen Gundersen, Deputy CEO & CFO]

I think it's the Board's privilege to decide when and what to pay out in the dividend. And I think they will monitor the situation as we go. It's still not more than 1 month ago that they decided to go for this approach to be on the cautious side, and I think they are not ready to report or give any more kind of signals on this at the current stage. So let's see what they end up with, but nothing more to report on that question for the time being.

[Bing Zhao, Director of Investor Relations & Strategy]

Thank you, Espen. Maybe also next question for you. Let's see. A question from Mikkel Nyholtt-Smedseng in Carnegie. Can you best guess the financial impact on the throughput decline in North America for Q2 and 2020?

[Espen Gundersen, Deputy CEO & CFO]

What I can say is that most, maybe 75%, 80% of revenues in Americas is volume dependent. So little more than half of our revenues is from our material recovery business, where we take responsibility for pickup, transportation, processing of materials and, consequently, direct link between volumes and revenues. And also our throughput contracts and our redemption center activity, we have a direct link between the revenues and volumes. So as indicated on the slide Stefan showed, volumes down 50%. So if you say that 80% of our revenues were [ dependent on volumes ] down 50%, then it's [ over 40% ] down. But that's kind of the current status. How this developed months to come is dependent upon, of course, how the easing of the initiatives the closedowns and that's not up to me to speculate upon. But it could also get a positive impact when the things are going back to normal, meaning bottles that has been stored is now being redeemed also. But we should be cautious on speculating on that. But I think you have the reference points and the information that we have from the area to try model this on.

[Bing Zhao, Director of Investor Relations & Strategy]

Thank you, Espen. And then a follow-up question from Mikkel. How do you see the lower OpEx spending in 2020 affecting business estimate for 2021 and beyond?

[Espen Gundersen, Deputy CEO & CFO]

I think so far, we have not done anything that will hit our ability to grow the business. It's more house-holding. Yes, we do not travel because we can't travel. We do not use consultants if we really don't need it. We are not kind of doing anything that hits our core and the R&D projects that we're dependent upon and so on. It's minor in the big context, but you will experience that OpEx reporting in the second quarter will go down at least currency adjusted compared to last year. But at the same time, it is not of a magnitude that it will influence our ability to delivering in the future because we believe that what we see is a temporary situation, and we have to sit through this and through that also prepare ourselves for things to happen afterwards also. And I think that's kind of the view we have upon it, and hope we also answered the questions.

[Bing Zhao, Director of Investor Relations & Strategy]

Thank you, Espen. With that, there's no more questions from the web. It seems like everything was loud and clear. And then we conclude the presentation. Thank you for watching and continue to stay safe. Thank you.