Tomra Systems ASA

OSE:TOM

Earnings Call Analysis

Robust Growth in Collection and Food Divisions

During the third quarter of 2024, TOMRA reported a total revenue growth of 6%, amounting to EUR 326 million. Notably, the Collection segment experienced a healthy 14% increase, driven by strong performance in both existing and new markets. The Food division also witnessed an uptick of 12%, benefiting from restructuring and improved operational efficiencies. However, the Recycling segment saw a decline of 18% due to expected lower volumes, although this was within the company’s anticipated conversion ratio.

Diverse Market Performance

The strong growth in the Collection segment can be attributed to several factors, including an increase in throughput volumes in North America, particularly from Connecticut due to higher deposit values. Moreover, TOMRA launched its new R2 multi-feed reverse vending machine (RVM), which has already seen sales of over 100 units. Expansion efforts in Austria and Romania are also yielding substantial progress, with Austria’s deposit scheme set to go live on January 1, 2025.

Food Division Restructuring and Efficiency Gains

TOMRA’s Food division is demonstrating positive outcomes from recent restructuring efforts, which have led to a gross margin improvement from 40% to 43%. The management has achieved EUR 20 million in savings year-to-date and is on track to meet its target of EUR 30 million by year-end. The order intake for Food increased by 20%, totaling EUR 73 million, while the order backlog rose by 30% to EUR 114 million, indicating strong future growth potential.

Challenges in Recycling with Optimism for Q4

The Recycling division has experienced lower demand, leading to decreased revenue. However, despite a significant year-over-year drop of 18% to EUR 59 million, the order intake increased by 4%, reaching EUR 61 million. The backlog stands at a record high of EUR 134 million, suggesting a strong fourth quarter ahead. Furthermore, TOMRA anticipates stabilizing gross margins in the low to mid-50% range and is confident in its operational controls.

Strategic Outlook for Future Growth

For the remainder of 2024, TOMRA expects Collection to show mid- to high single-digit growth overall. Despite the projection of softer revenues in Q4, especially in comparison to the strong previous quarter, management remains optimistic about the business’s growth trajectory. The outlook for Recycling remains cautious, with expectations of stabilization in 2025, driven by new market opportunities and continued operational focus.

ESG Commitments and Future Initiatives

TOMRA reaffirmed its commitment to sustainability with validated science-based targets to reduce Scope 1 and 2 emissions by 55% by 2033 and 90% by 2050. The company emphasizes that sustainability initiatives not only align with their corporate responsibility but also enhance competitiveness. These priorities are expected to drive innovation and growth moving forward.

Cash Flow and Financial Stability

The company reported a substantial cash flow of EUR 99 million during the quarter, up significantly from the previous year, which was negatively impacted by a cyber attack. TOMRA's current financial metrics include a 40% equity ratio and a gearing ratio of 1.9x, indicating sound financial health. Moreover, the recent issuance of a NOK 1 billion green bond is set to improve debt maturity profiles in upcoming quarters.

Preparing for Market Fluctuations

Despite current challenges, TOMRA remains vigilant in managing market fluctuations and adapting to changes. The management highlighted ongoing advancements in product offerings, particularly in the Recycling segment, where innovations such as the Autosort PULSE are gaining traction. This approach is crucial to navigate current challenges while positioning TOMRA for sustained growth in a volatile market landscape.

Earnings Call Transcript 2024-Q3

[Daniel Sundahl, executive]

Good morning from Asker, ladies and gentlemen, and welcome to TOMRA's Third Quarter Results Presentation for 2024. My name is Daniel Sundahl, and I'm Head of Investor Relations. As usual, our CEO, Tove Andersen is here to give you the highlights of the quarter. And afterwards, our CFO, Eva Sagemo, will dive deeper into the numbers.

At the end of the presentation, we will open up for Q&A for participants in the Teams webinar. A link to the webinar can be found in this morning's stock exchange release. But before we start, I would just like to take this opportunity to thank all our investors and analysts who joined us in Alicante last month for our Capital Markets Day. And all of you who tuned into the webcast as well. It was a pleasure to see you there and for those of you who missed it, the video and presentation is, of course, available on the TOMRA Investor Relations website.

But without further ado, I give the word to Tove Andersen.

[Tove Andersen, executive]

Thank you, Daniel, and good morning from me as well. I also want to say a big thank you to everybody that joined our Capital Markets Day. I really enjoyed the engagement, the discussions and the comments to our strategy and our updated targets. But then let's go into the quarter Q3 2024. This quarter, we report strong performance in collection.

It's also very pleasing to see the improvements in food based on the restructuring and the reorganization that we have been implementing, and I'm very pleased with how the whole organization has pulled together to deliver on that. And then Recycling is reporting lower volumes, but in line with our expectations, and they are ramping up for a very busy Q4.

So let me take you through the financial highlights. So on revenue, we report a growth of 6%, landing then at EUR 326 million. The contribution comes from Collection and Food, where Collection is up 14%, and Food 12%. Recycling then down 18%. But as I said in the introduction, it is in line with our estimated conversion ratio for the quarter. We had a good gross margin of 43%. That is in line with the same quarter last year. But if you look underneath the figure, we can see improvements both in collection and in food.

And then Recycling has a lower margin this quarter due to the lower volumes. As we previously communicated, we have a fixed cost element in our COGS. So with lower volumes, we also get somewhat lower gross margins.

Operating expenses in the quarter was EUR 97 million, which is lower than the 3 previous quarters. It's nice to see now that we are seeing the improvements in Food and the reduction in OpEx in Food, while we continue to invest in business expansion and growth overall in TOMRA, especially then in Collection.

This gave us then an increased EBITA of 15% -- adjusted EBITA of 15% compared to same quarter last year and landed at EUR 44 million. We had a small one-off cost in the quarter linked to the Food restructuring of EUR 0.5 million.

Very pleasing to see the cash flow in the quarter. We have focused a lot on working capital management in TOMRA, and we are now seeing the results of that, and we had a very strong cash flow of EUR 99 million.

Then looking at the order intake and order backlog. In Recycling, the order intake was EUR 61 million. That is somewhat up versus the same quarter last year. And we are ending the quarter then with a record high order backlog of EUR 134 million. And a significant portion of that will be delivered in Q4.

On Food, we have had good improvements on both order intake and order backlog in the quarter, up -- order intake was up 20% to EUR 73 million and the order backlog is up 30% to EUR 114 million. However, it is important to keep in mind that Q3 last year was a weak quarter. So it is low comps that we are comparing against. However, at the same time, it is nice to see that we have a good intake and that we are building up a solid order backlog.

A highlight in the quarter was that we got confirmed and validated now our science-based targets from the science-based target initiative. We submitted the targets just before summer, and they have now been validated. This means that we have now targets on Scope 1 and 2. We want an aim to reduce 55% to Scope 1 and 2 by 2033 and 90% by 2050. And we should -- we are targeting a 62% reduction on our Scope 3 intensity target.

Sustainability has always been at the core of what TOMRA is doing and the solutions that we are providing, and it's important for us to walk the talk on sustainability. And at our Capital Markets Day, we presented some of the initiatives that we are running currently to reach these targets, and we will pursue looking for more initiatives to ensure that we reach them. It's not going to be straightforward. It's going to be requiring additional innovation. But at the same time, we believe it's important that we walk the talk, that we do the right thing, but also we believe that this will give us a competitive edge.

Let me then take you through the 3 divisions and highlights from the 3 divisions. As I said in my introduction, this is a very strong quarter for Collection. Continued growth, Collection grew then 14% in the quarter versus the same quarter last year. And as you see on the graph here, I think it's really nice to see how we consistently have been growing this business over the last year, really showing the strength of our compositions and the breadth of our Collection business. The growth is coming from both existing markets and new markets. This quarter in existing markets, we had good throughput volumes in North America. One of the contributors is the increased deposit value in Connecticut driving up volumes there.

Also this quarter, we then launched our R2. We have talked about that before. That is our new multi-feed reverse vending machine, and we have already sold more than 100 R2s. Also, we have continued having good sales of our RollPac RVM. I also talked about that one before. That is the one where we use this roller cages to make it easy to handle for the employees of the retailers and also where you can store more beverage containers per square meter.

So continued good sales of that RVM as well, and we have now sold more than 1,000 of our RollPacs. On new markets, what we have seen in the quarter is really high activity that has continued in Austria. Austria will go live with deposit scheme for single-use beverage containers 1st of January 2025. We also have seen continued good sales and installations in Romania, which went live then last year, even though it is somewhat lower than in Q2. And then in Hungary, which went live earlier this year, 1st of January, we are now seeing that we're coming to the end of the initial rollout there.

A highlight for collection in the quarter was Tasmania, where we were then appointed as a sole provider for the upcoming deposit scheme in Tasmania that will go live mid next year. And when Tasmania has gone live, Australia will then be the first continent that has the deposit schemes throughout the whole continent.

Also in the quarter, we completed then the launch of our RVM solutions in Victoria, and we will then gradually see increased revenues from that state. Then as normally, we have included here on the slide, the countries that have a firm -- and announced a firm go-live date for deposit return schemes.

There is, of course, many other countries where there are processes ongoing to implement deposit schemes. But when we listed on this slide, we choose to list those that have a firm communicated launch date. And I'll take you through the update since last quarter. I already mentioned Austria. Then to Poland, there is good progress in Poland linked to licensing operators.

Poland is a decentralized system, which means that there will be several licensing operators and 4 licenses have been granted so far. There is also good progress on an amending act for the deposit return system. So this is the act that will contain the required details that haven't been detailed out yet for making the system operational.

At the same time, there are ongoing discussions regarding the go-live date. The official date in Poland is 1st of January 2025. We have said that we don't think it's realistic that the whole of Poland can go live then, and we have expected a gradual rollout. The beverage industry and the retailers have gone out and asked for both that this amending act should be put in place as soon as possible, but that they will like a delay until 1st of January 2026. The environmental minister in Poland has come out with a proposed compromise, which is a go-live date 1st of July 2025.

This is normal in these kind of processes that we see these kind of discussions. And for us, it's not really having a significant impact on our estimates and forecasts as we have expected Poland to be implemented gradually over a couple of years.

Tasmania already covered, Singapore has changed the go-live date to 1st of April 2026. Their system operator has been appointed, and there is significant activities now detailing out the system and how to tender it. Uruguay still has on this slide, a go-live date December 2024. We don't believe that is realistic, and we're expecting a new date to be announced shortly.

Then over to the Recycling business. As I said, the revenues in the quarter is lower, but it is in line with our expectations. We have had the strong order backlog, but also we have known that due to the size of the order, a significant share of that backlog has a longer lead time than normal. So we then leave the quarter with an all-time high order backlog, EUR 134 million.

These are firm orders which will be delivered, and we are now really ramping up for a very busy Q4 because a significant portion of this order backlog is estimated to be delivered then. If you look at the markets sentiment in Recycling, it is a mixed picture. We still see plastic recycling that there is a softer market, especially then in Europe. Well, for example, in Asia, we had the highest quarter -- I think we had the highest quarter ever on sales there. There are, of course, some positive signs. If you look at the macro picture you see reduced interest rates, which will have an impact on the willingness to invest.

You can also see from the graph here where we have illustrated the PET prices and recycled PET prices that there is starting to be an upswing. But currently, we don't see that in the order intake for plastic recycling. On the other hand, we see waste sorting continue to be a good market for us. The drivers there are more linked to automation and modernization. We also see very good interest and activity within the aluminum segment, especially then linked to our new Autosort PULSE linked to which you can then sort alloys, aluminum alloys, where we then see good market momentum. And also nice to see now that we are getting orders in for wood sorting, which is one of the categories that we have focused on over the last couple of years.

Then I will go to Food. So Food compared to last quarter or Q3 last year had a very good improvement in revenue, order intake and order backlog. But as I said, it's important to keep in mind that last year was a weak quarter. However, it's nice to see the 12% revenue growth, and it's also nice to see how we now have recovered the gross margin. When we look at the market sentiment in Food, it varies region by region and category by category. Still in this quarter, we continue to see a strong market momentum in potatoes. We have talked about this for a few quarters that there has been a potato cycle, and that will soften over time. However, we don't see any signals on that yet currently.

On categories where we see an improved market sentiment is in blueberries and cherries. In cherries, we see increased investments in Latin America linked to the increased consumer demand in Asia. And on blueberries, we see increased plantings in Europe to meet the increased demand there. However, as we have said before, focus in our Food division is profitability. And I'm very pleased to see how that is progressing and how the whole organization in food has pulled together to deliver on the targets that we set. So we have said that we will deliver EUR 30 million of savings by end of this year, which is a combination of OpEx and COGS.

And we are now at around EUR 20 million, and we will deliver on the EUR 30 million by end of the year, similar on the run rate of 10% to 11% EBITA. But also nice to see is the restructuring and the reorganization that we have done, which also then is an implementation of our regional structure, also have benefits beyond the cost reduction.

And we are now seeing that being closer to local customers is also starting to pay off on tenders and deals and then winning deals versus competitors. So that's also very important to see because after restructuring, we do see significant growth opportunities in Food in the medium to long term. So that was the business update in the quarter, and I will then hand over to Eva Sagemo.

[Eva Sagemo, executive]

Thank you for that, Tove. And it's really nice to see and confirm with our figures that we see in our results in the restructuring program in Food.

Starting with the group P&L, looking at the financials. As Tove mentioned, we have had a strong quarter in Q3, but a bit of a mixed picture. Collection has delivered strong quarter yet again this year. Food, they have delivered -- Food and Recycling has delivered in accordance with the conversion ratio that we indicated back in Q2, where Food is progressing well on the improvement program, and we see a stable development in Recycling. So total revenues for the group ended at EUR 326 million in the quarter, up 6% compared to same quarter last year. Collection up 14% and Recycling down 18% and Food up 12%. Our gross contribution ended at EUR 141 million, which gives us an EBITA -- a gross margin of 43%.

As you can see from the overview, it's a stable margin comparing to same quarter last year. But here, we have seen improvement in Collection and Food, and Recycling is a bit down due to the softer volumes. Operating expenses ended at EUR 97 million, which is up 1% compared to same quarter last year, but down compared to Q1 and Q2. That gives us an EBITA adjusted of EUR 44 million, which is up 15% compared to same quarter last year, which gives us an EBITA percent of 13%. And as Tove mentioned, we have also had some costs related to the restructuring in Food this quarter, around EUR 0.5 million.

Then digging into the different business divisions and starting with Collection. As I said, we have had a strong quarter in Collections this quarter. Yes, more or less similar levels as we had in Q2. And we see good activities, strong performance in new markets, but also in existing markets.

In new markets, we have already mentioned Austria, which will go live then 1st of January next year, and we have been delivering good volumes into that market as we did in Q2. Also in Romania, we have continued to deliver machines and equipment and as well as in Hungary. But as Tove mentioned, Hungary is now slowing down due to the initial phase of the rollout.

Looking at the existing markets, we have had a strong performance in the U.S. Normally, in Q3, that is a seasonal effect coming out of the summer in the U.S. But we also have seen good volumes, especially then from the Connecticut state where we had -- where we have effects from the deposit increase, which was implemented 1st of January this year. We have also had improved volume in Australia, given that we have now Victoria added in as a state as of November last year.

So overall, the revenues ended at EUR 189 million in the quarter, which is then up 14% compared to same quarter last year. Gross contribution at EUR 78 million, which gives us gross margin of 41%, up from 40% same quarter last year. So good margin in Collection this quarter. It's coming from price effects where we had this pressure point over quite some time. Now we see good effects coming in from that, but also the seasonal effect in the U.S. and the volume there. Operating expenses at EUR 44 million, which is more or less in line with what we have seen in Q1 and Q2, slightly down, but up compared to same quarter last year, which gives us an EBITA in Collection of EUR 34 million and an EBITA percent of 18%, which is a nice drop-through effect from the top line.

Moving over to Recycling. Recycling has delivered lower volumes this quarter as expected, given the conversion ratio that we indicated back in Q2. And that is related to softer markets, especially in EU and in plastic upgrade projects, but also that we have an order backlog consisting of longer projects -- longer lead time projects that we delivered over time. We also have some timing effects on the orders. And as you know, we will have a very strong quarter coming up in Q4. Total revenues ended at EUR 59 million, down 18% compared to the same quarter last year. Gross contribution at EUR 30 million gives us a gross margin of 51%, which is then lower than same quarter last year due to the softer volumes, but also a bit of product mix.

Operating expenses of EUR 20 million. As you can see, we have good OpEx control or good cost control in Recycling, and we are trailing at the same level as we have had over the last quarters. That gives us an EBITA of EUR 10 million and an EBITA percent of 17%.

Moving over to the order side of things. We are delivering an order intake of EUR 61 million in the quarter, which is then up 4% compared to same quarter last year. And as you can see, we have a very strong order backlog, up 25% compared to same quarter last year, ending at EUR 134 million, a record high. But as you know, we will release some -- quite some orders into Q4.

Then moving over to Food. As expected, Food has delivered in accordance with our conversion ratio. And also here, the P&L is a result of the softer order intake that we have had over the last years. The revenues ended at EUR 78 million in the quarter, which is up 12% compared to same quarter last year. But as Tove mentioned as well, this was a -- this is low comparables.

Cost contribution of EUR 33 million, which gives us a gross margin of 43%. In the margin, you see a nice improvement in the margin from 40% last year to 43% this year. And here, it's a product mix, but also that we see the restructuring, the savings having a positive impact on the gross margin. Operating expenses ended at EUR 27 million in the quarter, which is down compared to same quarter last year. Same story here, we see now clear effects coming in from the savings and the restructuring program in Food. And as I mentioned, we had some special items this quarter as well, yes, of the EUR 0.5 million.

When it comes to the savings cost, as Tove mentioned, we have had year-to-date, EUR 20 million in. It's a mix of COGS and operating expenses roughly 1/3 in COGS and the rest in OpEx. Looking at the order side of things for Food, it's nice to see the positive 20% improvement compared to same quarter last year, ending at EUR 73 million. Important to note is that Q3 was also a soft quarter last year.

That gives us an order backlog up 30%, ending at EUR 114 million. It's good to see that based on what we have done on the working capital management in TOMRA over the last quarters that we have a very strong cash flow in the quarter, ending at EUR 99 million. Also here, a record high in the quarter, it's compared to a negative cash flow last year, which was heavily impacted by the cyber attack.

It's good to see that we also have a positive development in the solidity and the gearing this quarter, up from Q2 this year. So equity ratio of 40% and a gearing of 1.9x. And as you can see, we have added a graph on the return on capital employed, which is one of the 6 targets that we have now for our strategic ambitions up until 2030.

And here, the target is to stay to deliver a ROCE above 18%. And in the quarter, we ended at 16% ROCE. Financial position. We have early October -- end of September, early October, we have placed NOK 1 billion private placement of our new 10-year senior unsecured green bond, which will then be implemented into the figures in Q4. So the weighted average debt maturity end of this quarter, is 2.2 years, and this will then be improved when we go into the next quarter, reflecting the new bond placement. Undrawn facilities end of this quarter ended at EUR 130 million.

And then to the currency risk or the currency impacts in the quarter, we don't have significant impacts coming from the U.S. dollar euro, as you can see from the graph, but we have had some negative currency effects in the P&L related to the balance sheet items, especially then in the Norwegian entities this quarter. These are mainly then unrealized items and a mix of long and short positions. Total effect this quarter is EUR 4.2 million in the net financials in the P&L.

And then over to the outlook. And we start with Collection as always, as you know, high activity related to new and existing markets should be expected also going forward, where then for new markets, it's mainly DRS legislations that are being put in place. And then for existing markets, it's innovation, scheme expansion, replacement and so on that will drive growth. But of course, the quarterly performance will be dependent on the timing of these events. We have delivered again a strong quarter this quarter, which then confirms the assumed mid- to high single-digit growth this year for full year.

We expect a slowdown in Q4, but then we also expect good momentum coming in from, for example, Austria. So it's important when you look at the figures that Q4 last year was a really strong quarter with a lot of machines delivery into Hungary. So the comparables is quite tough. But still, we expect a solid quarter in Q4, ending the year at mid- to high single-digit growth.

Gross margins have been improved over the last quarters, and we expect that to stay above 40% also in the next quarter. So OpEx, we expect that to stay in the same level as we have seen now in Q3 and year-to-date ratios. And then for the ramp-up cost that we always comment on, the current run rate is around EUR 20 million. And we believe that is more or less the right range going into the full year delivering Q4.

If we are looking into 2025, we will come back to that, of course, in the next quarter, but we believe that the existing markets will continue to deliver good growth also next year. For new markets activities, we expect still to have some deliveries into Austria in Q1. And then, of course, the big question mark is Poland. And we need to come back how that plays out for next year once we know more in -- on the legislation side in Poland or the development related to that.

Then moving over to Recycling. It is a softer market sentiment still. So no recovery yet, especially then in EU and upgrading for plastics. Full year is expected to be flattish as we said back in Q2, but it's important to remember that this is still regarded as a strong year for recycling, given the current market conditions in some areas and segment and that also 2023 was a really, really strong year.

Year-to-date revenues in Recycling are down 17%, but with a conversion ratio of 75% of the strong backlog that we have, we are confident that we will be able to deliver in line with the expectations for the year. So we have a strong Q4 ahead of us, and we are preparing for that to be able to deliver on it, both on production, but also on shipments and customer dialogue. So we have strong beliefs in the organization that we are able to deliver on that strong Q4.

Gross margins for the year, it's estimated to stay in the range, yes, low to mid-50s as we have seen also in the previous years, and we estimate to maintain profitability in line with last year as well as we maintain good cost control in this division. Next year, we expect growth in Recycling.

So that's at least what we can see currently. Over to food. It's good to see that we -- yes, that there are some projects are coming in and the activities are that we have some movements in the activities in different markets and different categories. But also here, it's not a significant recovery yet, but it's good to see the positive momentum in food.

The focus for us this year has been the restructuring program and to deliver on the improved profitability in this division. And we are confident that we will be able to deliver on that. We have -- we see clear now the savings coming in, in both COGS and in OpEx. And as you remember, we have an estimated EUR 30 million run rate for savings that we will have with us going into [ 2024 ].

When it comes to the restructuring cost, we expect to have some costs also in Q4. Year-to-date, we have EUR 2.6 million, and we estimate, yes, the second half to be in the range of the same as we had in the first half. As we have said before, for the full year, we have not -- we are not expecting growth this year given the current market momentum, but also the focus that we have in this division.

But -- and we also confirm that with the conversion ratio that we are estimating to have an 80% conversion ratio of the order backlog into Q4. On the gross margin side, we estimate to stay at the low to mid-40% and EBITA run rate to be confirmed to be at the level of 10% to 11% as a run rate out of this year into next year.

And then we also have some comments related to the Horizon activities in TOMRA. As we have indicated before, we will have CapEx of around EUR 50 million for the full year. So far, we have taken in EUR 30 million, so EUR 20 million is expected in the coming quarter.

We also expect to have some internal sales between recycling and Horizon in the coming quarter, more or less at the same level that we had in Q1, around EUR 45 million similar margins than for Q4 as we had in Q1. And I think with that, we can hand over to Daniel and the Q&A section.

[Daniel Sundahl, executive]

Thank you, Eva, and thank you, Tove. We will then start the Q&A session. And I see some questions coming in already. The first one coming from Fabian Jorgensen in Carnegie.

[Fabian Jorgensen, analyst]

I have 3 quick ones here, hopefully. On the Recycling first, you comment that there's still a softer market out there, but you still expect growth for 2025. What sort of ranges are we talking there? Because, I mean, I see that the order intake is still pretty low with the soft market? Is it like low single-digit growth that you envision now? And what kind of visibility do you have on that?

[Tove Andersen, executive]

Yes. So as we said, where we see weaknesses is in the plastic recycling market. We don't really see a recovery yet on that one, but we are compensating them with good activities in the other markets. And on the exact growth figures for next year that we will need to come back to later in our Q4 presentation. We expect growth.

[Fabian Jorgensen, analyst]

And on Poland, with it now being pushed to July, what kind of -- I know it's early, but can you speak a bit about what kind of rollout completion you find likely in 2025?

[Tove Andersen, executive]

Take that one, Eva?

[Eva Sagemo, executive]

Yes, I can take that one. I think it's too early to go into the details about how we think about Poland. First, we need to have feedback from the market on how they are viewing the go live, if it's July or 1st of January 2026. But how we think about Poland as kind of like overall is that -- it will probably look like -- more like Romania, that it will kind of like been taken over a longer period.

So I don't expect everything to be in place and delivered 1st of July '25, if that is the go-live date. And that's, I think, what we can indicate currently.

[Fabian Jorgensen, analyst]

And just finally, here, you say that you expect revenue to be down in Collection in Q4. I assume that's year-over-year and not Q-over-Q. Do you expect, let's say, flattish growth for collection Q-o-Q now. Is that how we should interpret it?

[Eva Sagemo, executive]

So it's, for sure, down compared to the strong Q4 last year, and then I would expect some softer than Q3 in Q4, but you need to look at it as a full year when we indicate the mid- to high single digit for the full year. So a bit down in Q4 compared to this quarter and then down compared to Q4 2023.

[Daniel Sundahl, executive]

And the next question is coming from Daniel Haugland at ABG.

[Daniel Vårdal Haugland, analyst]

Yes. So I have 2 questions. First is on the orders. I think just to kind of put on some context to what we saw last year because in Q3 last year, you had that sudden drop in the orders and then you had this rebound in Q4. So my question is, based on what you know as of today, is there any reason that Q4 order should kind of bounce back this year as well as we saw last year? Or is the decrease now compared to the first half more a consequence of customer macro backdrop? That's my first question.

[Eva Sagemo, executive]

Yes. So when you talk about the orders, are you then talking about both Food and Recycling, Daniel? Or is it mainly...

[Daniel Vårdal Haugland, analyst]

Yes. Combine.

[Eva Sagemo, executive]

Yes. So I would like to split it a bit. So talking first about the Recycling order trends. So we see normally a softer Q3 than Q2. If you look at the last year. So normally, it's down, yes, 6% to 7% if you look back in time.

So what we see now in this quarter is not necessarily a surprise as such, when you look at the trends. Talking about the -- how Q4 would look. We normally do not comment on the order intake in the coming quarter, so we can't be precise on that one.

But of course, everything is related to what kind of orders are put into the market. And as we have said on Recycling, it's a mixed picture across different segments and across the different markets. So sorry not to be too clear on that one.

And also for Food, also here, we have a bit of a mixed picture. As you can see, yes, over the last 2 years, I would say, given the market sentiment being first very weak and then going into a softer and then we will see when the market is recovered.

So talking also about Q4 orders, it's something that we don't do, also in food, so it can't be more precise. But it's positive to see that we now have some more activities in the market as such. Yes, I don't know if you want to add anything on that, but it's -- yes.

[Daniel Vårdal Haugland, analyst]

But there is basically no kind of like, call it, structural or systematic reason that there should be a kind of big moves in the orders between Q3 and Q4 in a normal H2?

[Tove Andersen, executive]

I think as Eva said, in Recycling, typically, we see then Q3 being weaker than Q2. I think in Recycling, the key message is that we don't see the market sentiment become softer. It's stable, and we are seeing some signs of recovery on indicators, but we don't really see it in our order intake yet.

But also as we indicated, as we expect growth next year, we expect that there will be an uptake at sometime in the future. And then as Eva said, we are not more specific on that for the quarter.

[Daniel Vårdal Haugland, analyst]

Okay. And then my second question, so there was some questions around Poland here. And then obviously, nobody really knows when the go-live date is going to be. But a simple question from my side. Have you started to book any revenues from Poland yet?

[Eva Sagemo, executive]

Yes. So we have done that throughout the year, but it's not significant in relation to the market opportunities in Poland. But we have had activities in Poland for Collection.

[Daniel Sundahl, executive]

We'll take the next question from Elliott Jones in Danske.

[Elliott Geoffrey Jones, analyst]

Just [ staying ] in Collection. Is there any way you can provide some color on the split of growth from kind of new markets and existing markets in this quarter?

[Eva Sagemo, executive]

It's -- not necessarily going into the details, I would say. We have had good progress in Austria, in Romania, some from Hungary on the new market site, but then also, for example, 8% growth in the U.S. coming from -- which is an existing market coming from especially volume increase in Connecticut, but general increase in that market.

So not to be more specific than -- at the current stage, Elliott.

[Elliott Geoffrey Jones, analyst]

And then just in terms of the existing markets, obviously, you've been talking about the R2. Is there any way you can kind of go into detail on how you're seeing traction there? And if you're seeing already maybe some developments in existing markets there?

[Tove Andersen, executive]

Yes. So we have had -- we did the commercial launch of R2 in September this year. It's been received very positively by our customers. We have then already sold 100 R2s, and we believe the R2s will be one of the key growth factors in existing markets for next year. And we see the interest in many of our existing markets for it.

[Elliott Geoffrey Jones, analyst]

Got it. And then just quickly 2 more. In terms of the mid- to high single-digit growth guidance for Collection, can you just provide some color on how we would kind of get to the high single-digit growth? Is that perhaps Poland contribution coming in larger than expected? Or is there another potential growth lever at play?

[Eva Sagemo, executive]

Not necessarily Poland, I would say, that we'll leave to 2025. But if you would go to the high, it will be strong development in existing markets and then higher volumes that we have anticipated from -- for Austria and Romania.

[Elliott Geoffrey Jones, analyst]

Got it. And then finally on food. I'm just kind of thinking about the investment cycle. So I know you said that the potato segment has been strong for some time. It may get a bit softer. I'm just wondering how big is that segment versus the other subsegments in Food? And is there kind of a natural hedge here, whereby if we see the potato segment kind of declining in terms of orders, are the other subsegments big enough to kind of cover for that? Or is the potato segment 50% of the last 12 months order intake or something like that?

[Tove Andersen, executive]

Yes. So if you look at our sales in Food category by category year-by-year, it actually varies a lot in the different years because of the cycles. So one year, you could have a significant large portion of potato and other year blueberries and so forth. And I think the strength of our business now in Food is that we are global. So we are in many markets. So we're exposed to all key food producing markets in the world, and we are in many categories.

So our expectation is, yes, when the potato cycle will end, we will be able to compensate them with other categories where we see improved momentum. And as I mentioned in my introduction is that currently the ones that we see are on their way up is really cherry and blueberries. So those are also focus segments for us to capture then the growth there.

So our expectation is, and that's also how we have changed now the organization in Food that we can flex resources both on production between the different categories, sales and service between the different categories. So that we are able then to flex more and adapt to the changes in the categories depending on their cycles.

[Daniel Sundahl, executive]

The next question is coming from Adela Dashian in Jefferies.

[Adela Dashian, analyst]

Just a quick one, going back to the order intake in Recycling and Food. I think you've previously stated that the lead times are shorter in the Food segment. Could you confirm if that's true? And if so, what -- I guess, the general market sentiment actually being more robust in food. I guess you would view that as a more incremental positive for the order intake and the sales recognition in the more near-term quarters? Is that fair to say as well?

[Eva Sagemo, executive]

So when it comes to the intake and the lead times of production, it's correct that Food has a shorter lead time in general than Recycling, around 4-plus months in Food and then higher in Recycling average around 6.

But of course, it depends on what kind of orders you get in -- also in Food. Just to take one example to give you a bit of flavor a blueberry order can be a quick turnaround. But if you kind of like deliver a bigger project that will take more months to deliver to the market. So it's a mixed picture also here, but in general, shorter lead times.

[Adela Dashian, analyst]

Okay. And you haven't provided us with details on what the type of orders have looked like this quarter?

[Eva Sagemo, executive]

No.

[Adela Dashian, analyst]

Okay. And then just on Collection and Poland specifically, have you commented at all about the competitive situation there? And maybe what type of market share you expect to have in that market in 2025?

[Tove Andersen, executive]

Yes. So we always target to get a significant market share in the new markets because that is important to have efficiency, the different players and also what is really key when you select a reverse vending machine provider because then you actually -- you get a partnership for 10 years. We see heavy competition in all new markets, including Poland, and it is a mix of existing -- our existing competitors that we have seen elsewhere and many local start-ups, et cetera, that wants to take a share.

We don't communicate market share per country because I hope you understand that that's a very commercially sensitive topic. But we are building up our organization in Poland. We are developing our portfolio to make sure we have a portfolio that can meet the needs of the Polish customers, so that we can get a good and significant market share when it goes live.

[Daniel Sundahl, executive]

Thank you, Adela, and we'll have 2 more analysts asking questions with the next one coming from Victoria Adesina at Barclays.

[Morayo Adesina, analyst]

Here on behalf of Gaurav Jain. Just 2 from me. Can I just confirm what you were saying on the outlook for order intake in Recycling and Food, that you're not really seeing any green shoot orders here, like no recovery expected? Is that what you're saying?

[Eva Sagemo, executive]

Yes. So what we are saying is that we can't guide on the order intake going forward, but you need to consider what we have said on the market sentiment in Recycling in part of the markets and segments that we operate in and also that we see ongoing or more projects to market in food, but not a full recovery yet.

[Morayo Adesina, analyst]

And then secondly, are there any further developments or news that you can give us on any of the TOMRA Horizons ventures?

[Tove Andersen, executive]

Nothing specific changes versus what we presented in the last quarter at the CMD. So things are progressing in line with our plans. So on the feedstock, the 2 plants are progressing as expected. The one in Norway is being installed, and we will start the commissioning around Christmas time of that one, and then the brownfield in Germany is expected to start up late next year or early the year after. Similar on the reuse and textiles, they're progressing according to the plans that we have already communicated.

[Daniel Sundahl, executive]

And next question is coming from Markus Heiberg at SEB.

[Markus Heiberg, analyst]

So just to follow up a bit on Poland because, of course, there are several dates floating around. Could you provide more details on sort of scenarios if we see a mid-2025 date, how much of the installation value do you think could be installed in '25 and compared with, say, 1st of January 2026, do you think that actually, that won't impact 2025 revenues that much? Or will that have a significant impact? What would be the main drivers of sort of how much of full installation value will come in '25 compared with '26 or '27? A bit more discussion on that could be helpful for our estimates.

[Tove Andersen, executive]

First, I think it's very difficult to speculate on exactly how this will be. So I think the key thing now is to get this landed, both this amending act to get the specifications out and the go-live date. Our expectation has always been that Poland will take a couple of years to roll out.

And as Eva said, more in line with Romania, where we have had 2 years of, I guess, almost, yes, 2 years of good sales into Romania. So our expectation, if it will be 1st of July or 1st of December or 1st of January 2026, it's not going to make such a big difference. We believe -- as we said, we always see some small commercial activities happening. We expect then if this will be the date, you will see an increased sales in next year, but then also going into 2026.

So of course, we are modeling this in different ways. The key thing for us now is that we have a good team on the ground that we are part of all the commercial discussions that we position ourselves for when it comes. And then for the value of, TOMRA, it doesn't matter so much if it comes first half, second half or beginning 2026.

[Markus Heiberg, analyst]

I appreciate that. And then my final question is on Portugal and maybe some implications for the neighboring countries, say, Spain, can you give a bit more details on where you are with discussions in Portugal? And if that's also affecting Spain, for instance, where we saw some news over the summer of low collection rates, et cetera. So it could be interesting to hear any update there?

[Tove Andersen, executive]

So in Portugal, we are waiting for getting a confirmed go-live date for Portugal and the final approval of the scheme operator. So we expect that to come sometime during this autumn. And then I don't want to speculate on what will actually be the go-live date. But there is an expectation that, that will be then confirmed during this autumn and then we will plan for that.

We already have an office in Portugal. We already have a local organization there positioning us for that. On Spain, we are waiting for the publication of the official collection rates in Spain. And as you probably know, they already have a law in place that if they're not meeting then the targets, they shall implement the [ positive ].

So also we expect that to come during this autumn. So exciting times.

[Daniel Sundahl, executive]

We'll take one final question from Kari Hartvedt at Pareto.

[Kari Hartvedt, analyst]

I actually had 2, but you answered the one on Portugal. I understand that other competitors are planning for a lot of sales in Portugal in the next 18 months. So it was nice to get some color from your side as well. And the last one is on the net financial income, which was negative EUR 10 -- EUR 10 million, more than expectations. Do you have any comments on that?

[Eva Sagemo, executive]

Yes. So as I explained on the currency slide, we have EUR 4.2 million in cost related to FX in the quarter, which is then, of course, something that we have not had in the Q1 and Q2 at the same level at all. And it's really because of the NOK versus euro. So we see the main impact coming from the Norwegian entities where we have balance sheet items in Europe, which we have a currency revaluation. And most of this, it's important to note that this is unrealized FX effects.

So hopefully, when the currency changed going forward with the NOK euro, we will have a positive effect on this one. But this is -- yes, it's according to how we hedge the balance sheet and how we secure the currency fluctuations. That's the main comment related to the net financials. We have -- the rest of the part of the net financials is related to interest on our debt, not only the external debt, but also our leasing portfolio according to IFRS 16.

[Daniel Sundahl, executive]

And that concludes the presentation for today. Thank you, everyone, for tuning in. The next time we will be here is on Valentine's, reporting our Q4 figures on the 14th of February 2025. Thank you very much, and have a nice day. Goodbye.