Tomra Systems ASA

OSE:TOM

Earnings Call Transcript 2020-Q4

[Stefan Ranstrand, President & CEO]

Good morning, good day, good afternoon, ladies and gentlemen. Welcome to the TOMRA Fourth Quarter 2020 Results Announcement. My name is Stefan Ranstrand. I'm here together with Espen Gundersen and Georgiana Radulescu. And we are here to share with you the results of the last quarter of last year. Next page, please, and next. So summarizing on the quarter, we had -- sorry, I have to stop here. I have a problem. I don't see the full-screen here. I apologize for this hiccup here, ladies and gentlemen. I cannot see the full screen. I have to take up another. Please apologize with me here, bear with me. So now I'm back with you. This is the unfortunate thing when you are presenting live, and I have obviously not tested this before. I hope you can see everything now, and I am now talking about the fourth quarter results. So it was a good quarter. So it's a pity to have this hiccup. It was actually the best quarter ever when it came to revenues, which were ending at NOK 2.7 billion, which was up 4% for the growth after currency adjustments, spearheaded by Collection Solutions. So really a strong performance. And if I may say so, a good ending of this difficult year with a pandemic. Also, the earnings came in strong. That partly helped with the revenue growth by solid gross margins, predominantly driven by improvements in collection, and good operating expenses or cost control. So earnings, EBITDA, moved from NOK 408 million, up to NOK 505 million. And on the operating side, I'd like to say I'm very pleased with how the entire team of TOMRA has managed this. We have had a difficult period. We had significant reduction in activities in the beginning of the second quarter last year, actually starting in the first quarter but then really culminating in the second quarter. We have had challenges to travel. We have had challenges to be together to operate. And a lot of people have been forced to work from home offices. And the whole culture, the whole spirit to keep this alive and continue operating, to serve our customers, to make sure we could produce machines in time is something I don't know how to describe. It's just almost like if I may use the word miracle, that is what [Technical Difficulty] comes to operating expenses, we have of course [indiscernible] the spend. We have had a hiring freeze. We have held back on investments. But we have not blocked the long-term strategic initiatives. We have always seen that the pandemic is a temporary event, a temporary challenge. But we do believe that our core strategy is, when it comes to building circular economy, when it comes to equipping countries to support DRS systems, when it comes to sorting plastic, metals, and digging out minerals or when it comes to sorting and grading food, we see that the demand is going to be coming back and it's critical for the society development going forward. So therefore, we have been very cautious in holding back on tactical expenses that we could do without harming the long-term, also catering for that we have maintained the workforce in place so that we have these people which we will need when we see the acceleration coming back, because we have confidence it will be an acceleration. So I just wanted to emphasize a little bit on that area, where I think it's worked well, the whole attitude, the whole planning, the whole response to managing costs in this period. Some costs came automatically down, like traveling, like marketing, like exhibitions. But all in all, it was a balancing effect that the whole team had to support, and they have done so wonderfully. Also, great cash flow, all-time high, ending at NOK 890 million, up from NOK 600 million last year. So that's all in all good. The area we have been a bit worried about in the last year was definitely the order intake, both in Recycling and in Food, different dynamics. I will talk more about them later. We saw towards the end of the year for both divisions an uptick. So really in the fourth quarter, towards the end of that, we could see an improved momentum. And there are signs that the situation is improving, and that's obviously very important going forward. The Board of Directors at the latest board meeting have recommended a dividend of NOK 3 per share, which will then be decided on the Annual General Meeting. With that, on the next page, I'd like to talk a little bit deeper about Collection Solutions. So on the left-hand side of this graph here, you can really see the collection activities, number of objects being collected, bottles and cans, throughout the entire 2020 and comparing that then with '19. So you can clearly see in the end of first quarter and in the beginning of second quarter order, to a large degree in the second quarter, we had major disruption. If we look at the light blue curve there, which represents North America, you could see we have a significant dent there, almost down 50% at its worse. And also Australia, lighter down, quicker recovery, but also there a disruption. Europe, you can also see here, has been trading fairly flattish throughout the period, so no disruption. And we know this with -- this effect behind, because every item being collected is registered in our machines, online and instantly, so we have this access to data all the time. So this is our cockpit, so to say, to see what's happening out there. So Europe was really stable here throughout the year. And if I look into the quarter, Europe was also strong towards end of the year, both due to high activities in Northern Europe where we also launched a new technology, R1, where you can -- you don't need to feed every object one by one, but you can empty whole container or bag into the collection zone there; higher speed, higher convenience. It's been extremely well perceived. And we have launched that successfully now in a number of stores in the Northern Europe, and we will continue going into other markets with that, of course. We also had good development in Central Europe, driven partly in Holland by the deposit expansion there. I will come back to that shortly. But also German market was strong. So all in all, Europe, good in the quarter, good in the year and very stable situation. North America, as I said before, [Technical Difficulty] first, second quarter, as you can see on the graph, back to normal, very stable. I'm very pleased with that. And Australia, very much the same. We have a slight growth there since the systems are fairly new, but in general we can label that a stable business. So business as usual. And as you can see, as of the third and the fourth quarter, absolutely stable, and that's very reassuring for us, since also especially collection makes out about 50% of the TOMRA Group. Let me then talk quickly on the right side of this page here, the new deposit markets. It's quite a pleasure for TOMRA people to look at what's ahead of us. Never ever in the history have we had so many new markets coming alive in such a short period of time. And hopefully, that is also a reassurance, a confirmation of that the European deposit legislation is starting to take effect, and we see moments. First out is the Netherlands. Already mid next year, we will have expansion of the existing systems, where we will have small bottles, plastic bottles, being included in the system. So that will drive activities in the beginning of the year here. Then, end of next year, we will also have cans included in the system. So that would be exciting. So Netherlands will now see, over quite a long period of time, high activity levels, I assume. Slovakia will introduce a deposit legislation as of January 2022. So that's moving on here now. The same with Latvia, February 2022. And then Scotland, July 2022. So within a rather short period of time, we can here with big confidence talk about 4 new markets for Collection Solutions and DRS legislations. If I then move to the next page, I will talk about Recycling and Mining. Here we are dealing with end customers like [Technical Difficulty] like plastic upgrading or recycling of plastic or metal companies. We also have a small business in the mining sector. The industry has been partly challenged last year, especially the metal recycling and mining. As metal demand has been lower, commodity prices have been volatile, at least they have picked -- climbed up a bit later in the year, but they have been volatile. And the whole sentiment for investment in metal and mining was slow all the way, and just we started seeing a recovery in metals towards end of the year. Waste sorting and plastic recycling, however, has been solid throughout the year, and that actually made some 2/3 out of the business, so as you can see on this orange outer layer there that indicates the size of that business in our portfolio. So that's the biggest lion's share of the portfolio, and that has been more solid. We do see some changes here, also driven by more demand for circular economy, higher legislation pushes for caring for waste. So we see -- as a result of that, we also see larger projects emerging. And that in itself also leads to somewhat longer planning times, more complex operations, more equipment coming in -- not only TOMRA equipment, of course, but also other equipments like washers, conveyors, separators, et cetera. So we see that effect, which, in the long term, will be positive because TOMRA is excellently positioned. We have strong technology which covers all the needs. We have good ecosystem partners. We have the right references. We have a lot of know-how, and we have a lot of capable people supporting our customers in this regard. So we see this kind of shift towards larger orders. We see the time delays, much driven by the fact that people cannot come together. But all in all, the business sentiment has remained strong in that. And you can partly also see evidence for that on the right side of this picture. If you look at the price level for recycled PET compared to virgin PET, you can see that the light blue line here demonstrates that recycled PET has a significantly higher market price than virgin PET. That indicates the demand for recycled PET, predominantly driven of course by the bottle industry, who want to create new bottles out of recycled PET, a lot of that material of course coming also from the reverse vending machines, remains strong. But also there you can see that the overall price has moved down, a less dramatic reduction then for virgin PET, but also here a reduction. So a certain investment instability for our customers in that regard. If I look then into very important areas at the bottom right corner here, we have the 2 important legislations to talk about here. First, I start with the European Union Plastic Tax Directive, which is going live January '21, so it's live now, and it says that you have to pay a levy of EUR 800 per ton for using virgin plastics if you are not using recycled plastic in plastic packaging material. And if you go up and look at the price levels up there, where you can see that virgin PET is trading just somewhere EUR 800, EUR 900 per ton. You can see that this levy is really impactful. It's basically doubling the price for virgin PET, if you use that compared to recycled plastic. So of course that will have a big impact on the industry, will drive the whole concept of circular economy, which, by the way, is intentioned by the European Union really to create this -- the green deal here, and starting to treat resources as the resources they are and not as waste, and making full value, full use out of them. And good to see is also that the United Kingdom is going in the same way. They will, as of April 2022, also introduce a similar levy, lower though, it's EUR 200 per -- GBP 200 per tonne, but also that is significant signal here, and that applies if there is less than 30% recycled content in the material. So again, we should anticipate investments to come in this sector to respond to these new legislations. If I go to the next page, I would like to talk a little bit about the Food business. We are proud, being #1 in the world in food sorting and grading. We are servicing both the sector which we call processed food and the sector called fresh food. And for your information, there is only one company set up this way, and that is TOMRA in the entire industry. In the year, as we have reported before, processed food was challenged. They are, to a large degree, servicing sectors -- hotels, restaurants, et cetera -- that are being -- has been dramatically affected by the COVID situation. So a lot of close down of restaurants, hotels, et cetera, has challenged this industry dramatically throughout the year. The fresh business, and you can see there, more or less half-half in size, has been very solid, supported by home consumption, supported that people actually have more money to buy high quality food whilst they don't spend so much in the food services. That business has been strong on a global level throughout the year. We start seeing some signs of recovery in the processed food now. Fresh remains on a good momentum. But luckily, the processed food sector, our customers there are seeing a recovery as they have learned to adapt to the new conditions and as some process food activities, like in the service sector, also are starting to reactivate. And I would like to talk about 2 areas here today. One is the potato sorting, which is actually our biggest activity in the processed food area, where we say that we have a market share globally about 35% to 40%. So it's an important category for us. And we have seen now a strong development in order intake in the fourth quarter, and we have signals that this sector is starting to revitalize and come up again. Another important sector for us is nuts and dried fruit sorting. We were also global #1. We have here a global estimated market share of 30% to 35%, so it's the second largest of our categories. And here, we have seen also good recovery in fourth quarter order intake. It was slow in the earlier parts of the year, but I hope these 2 areas can signal to you that we are of the belief that there is a certain improvement in the market ahead of us. If I then turn to the next page, this is an illustration of something really exciting. As you know, TOMRA has shaped up what we call Circular Economy Division. That -- we have handpicked some of the absolute best experts within the TOMRA Group to form this division. It's really to work throughout the value chain, finding solutions where neither collection or sorting by themselves would go after, because they are bridging where we are combining the technologies together. We have now recently opened up a facility in Germany to get this place called Cinnamon. Together with Borealis, we have created a state-of-the-art demonstration facility. This has a capacity of about 10,000 tons per year. And what we want to do with this one is that we want to demonstrate to brand owners, to customers, that we can produce high-quality and high-volume plastics beyond PET. PET is fairly well-established today, but we have so many other fractions. PET only makes out some 10% of the overall packaging -- plastic packaging as a share, polyethylene, polypropylene, PVC, PUR, PS and other plastics are making up the rest. And then we of course also want to address and create a closed-loop circular economy system for, like we have done for PET. So this facility is capable of taking post-consumer waste, do presorting of that, washing, flake sorting, compounding, and delivering raw material for production of new goods. So this is really exciting. So our intention is really to attract brand owners to this facility, take post-consumer or household waste, run it through and have dialogues with them to see that we can -- demonstrate that we can meet their specification, their needs and also how we can work on them, how we can scale up to get the right quantity [Technical Difficulty] enabling them then to transform into circular economy. This is exactly what the brand owners want to do, but exactly what they have been missing in order to do this transformation. So we are really excited about this investment, and we will follow through and I hope we'll come back to you also with some really interesting stories down the drain, because -- or down in time, because this is really a significant signal from TOMRA that we are serious about leading -- becoming a leader and leading the industry in creating circular economies. On the very far right on that page, you can also see that we have now successfully already tested recycling of polystyrene for food contact. So actually, in this case, for yogurt containers, we have been able now to prove that we can produce that product. It's medically, hygienically tested. It is having the right properties from a functional point of view, and it can be used now, as we speak, for delivering yogurt in a sustainable packaging way to the world. With that, I have come to the end of my presentation. I would like to hand over to Espen to go through the numbers with you. And again, I apologize for the little hiccup in the beginning, that was entirely my mistake.

[Espen Gundersen, Deputy CEO & CFO]

Thank you, Stefan. So looking at currencies on Slide 9. As always, this quarter, not a very big effect on the P&L side as the euro and the dollar is going different ways. That said, [Technical Difficulty] working at the bigger Food division we have some headwind with bit more dollar revenues. And then as the dollar has also weakened towards the euro, that has created some headwinds. Moving to the next page on the consolidated figures for the group. As Stefan said, we are 4% up ending the quarter of NOK 2.742 billion and it's collection that's the driver here, which is actually up 10% in the quarter. We report strong gross margin improvement, both Collection and TRM are improving. And with good cost control, where we have actually down on the operating expenses, down to NOK 716 million from NOK 726 million currency adjusted. We have an all-time high EBITDA of NOK 505 million and also an EBITDA margin of 18.4%, which is above our long-term financial targets. Since this is also the year-end report, a quick look at the consolidated figures for the year. It's a strange year in many ways. So we had 2.5 months without COVID and then 9.5 months with COVID. But it's good to see that overall we have a resilient business, and we actually managed to end up flat versus last year on top line. And it's actually Food that measured on a yearly basis is improving, offsetting some of the shortfall in Recycling Mining when it comes to the top line revenue development. Margin is stable, not only on group level, but also down on the division level. And good cost control. Cost is actually down, currency adjusted. After cost increases in first quarter, the measures and initiatives we took have taken down the cost for the consecutive 3 quarters. So we are proud to present a 2020 which on top line or bottom line is actually better than last year, also when you adjust for currencies. That's an achievement in our opinion. Moving to Collection Solutions. Strong -- actually all-time high performance in Northern Europe, which is really our home market, in the Nordic region and the Baltic region. As Stefan mentioned, R1 has been well received. It's a contributor in this region. Rest of Europe, The Netherlands is starting to have an impact, preparing for the 1st of July this year. And also, Germany has had a good development. And on the margin side, good margins, 42%, driven by part here volume and a bit also mix, and cost control only 1% up on the OpEx line, brings us to NOK 296 million and 21% EBITDA margin. For the year, Northern Europe or Europe in general is offsetting the somewhat slower development in North America. And we are consequently cost adjusted flat on top line in Collection. In North America, as you know, we were hit by lockdowns in second quarter and we lost volume in that region, which explains why we also are below on a yearly basis. Margin has been stable, 41%, operating expenses slightly down, ending the year about NOK 881 million on EBITDA line. If you look at the next page, you see the Recycling Mining figures. It's the first time we see them. This has been a journey, all the way back from 2004 when we acquired Titech. And that was the start of the sorting segment and then [indiscernible] CommoDaS in 2006 and Ultrasort in 2008. All those 3 acquisitions were in the Recycling Mining space also all the way up to 2010. So the sorting was Recycling Mining. But then, as you know, Odenburg were acquired in '11, BEST in 2012 and then the Compac and BBC, you see those at the later years. All those 4 acquisitions were into the food space. And through this journey the Foods business, through acquisitions and organic growth, has become a bigger unit at least revenue-wise compared to Recycling Mining. And because of the size and to get the right focus, it was decided to split this internally. Michel Picandet was appointed as Head of Food from the beginning of 2020, and Volker Rehrmann continuing the position of Head of Recycling Mining and also the Circular Economy Division. So reflecting how we look at our organization internally and providing more transparency, made us decide to just split the figures. So now you see them, it's been also [indiscernible] changed the release Friday morning, the figures for the last 2 years broken down on quarters and geographies, for those that's interested to have somewhat more information about how this performance looks on division level. So looking at the fourth quarter, in total, food and TRM came in good. We indicated a commercial ratio 80% to 85%, and we came in at 84.5%, so high in the range. Of this, NOK 438 million is stemming from Recycling Mining. 54% gross contribution margin is a very strong margin, driven by mix effects. And also here, OpEx under control, and at NOK 102 million of EBITDA, it's 23% EBITDA margin. For the year, we are down. COVID has an influence here, and metals and mining segments, in particular, had a slower development, again as Stefan pointed out. But the margin development has been good, also 54% for the year, and the costs has been under control, even though this unit is absorbing the circular economy investments, which in total comprised NOK 50 million this year, up from NOK 9 million last year. So also significant costs has been absorbed in these very important initiatives that we are organized under circular economy [ investments ]. After the COVID hit us, we have been somewhat lower on the order intake. And also this quarter, we came in at NOK 364 million compared to NOK 428 million comparable quarter last year. And therefore, also the order backlog has gone down somewhat, butt we are more or less back from -- on the level we were 1 year ago at NOK 552 million compared to NOK 561 million at the end of 2019. If you go on to the food financials, as you see Americas is the most important region for food, but it's also differences between the segments where processed foods -- or fresh food business is still doing better, not on the processed part. NOK 838 million on top line, slightly down from last year. The margins are stable at 44%. Good cost control also here; cost is down, NOK 254 million on operating expenses, brings us to NOK 132 million and the 15% EBITDA margin for the quarter. For the full year, we have actually managed to increase activity despite the challenges. And the year over -- slightly above NOK 3.3 billion on top line. Slight improvement in gross margins and then good cost controls makes the EBITDA margin increasing from 9% last year, currency adjusted, to 11% this quarter. And the order intake is picking up after 2 weaker quarters. We are happy to see that we are now at NOK 865 million, almost back on the level we were before COVID, which was NOK 905 million. And consequently also we see a smaller uptick in the order backlog, which is NOK 918 million compared to NOK 891 million on the same quarter last year. The conversion ratio, meaning the assumed orders to be taken to P&L or the revenues in the upcoming quarter compared to the current backlog, is 70%, 7-0 percent. And for TRM, the same figure is 60%, 6-0 percent. As always, it's not intended to be guiding. This is just for those that want to model us on a quarter basis, giving you an indication on how this quarter [Technical Difficulty]Next page, the balance sheet and the cash flow. We have a rather strong balance sheet. The dollar has increased 6% -- sorry, the euro has increased 6% and the dollar 3% from -- measured from the end of '20 versus end of '19. So consequently, the balance sheet has grown somewhat because of currency. But if we adjust for that and look at the separate highlight items, you will see that we have a positive development on the working capital, particularly inventory is down. So the net currency-adjusted assets, part of the working capital is down, and in particular the accounts payable part on the -- reported on current interest-bearing -- sorry, on the noninterest-bearing liabilities is also significantly up. So net working capital is now lower, significantly lower than it was in third quarter and also lower than it was 1 year ago. And that is also reflected in the cash flow from operation. And as you see on the graph, we had a very strong fourth quarter. We always had strong second half years, but this has been exceptional in that respect. So happy to see cash flow from operation of NOK 890 million in the fourth quarter. Close to 50% equity gearing of 0.9 or 0.5 if we take out IFRS 16. TOMRA is committed to provide steady dividends. And the policies is 40% to 60% of the earnings per share. The Board has decided to suggest a dividend of NOK 3, which is up from NOK 2.75. And it's high in the range because it's equal to 57% of our reported EPS. Looking at the financial position, we are also here in a good shape. In December, we established a new NOK 150 million euro credit facility, 3 plus 1 plus 1 year, replacing the facilities that was about to expire in second and fourth quarter this year. So now we have average debt maturity of 3 years and a very solid liquidity situation. We have -- our unused credit lines is almost NOK 1.5 billion. The next slide is just for reference purposes, showing how the new segment is reconciling back to the old segment. I don't need to comment on that one. And then we have the outlook. Starting with Collection. Overall, it's good momentum in TOMRA Collection, a lot of recurring revenue and a stable business in the bottom. And currently, the expansion in Netherlands will have a positive impact, in particular in first and second quarter this year. We'll be continuing to carry ramp-up costs throughout in '19 and also throughout '20. We have on average also NOK 25 million on OpEx on top of the regular OpEx related to preparation for upcoming deposit systems. And we see that will continue into first and second quarter this year also, and then it remains [ to see what ] it turn out to be for the second half and going into next year in which the projects and pipeline that, as Stefan mentioned, it's natural to believe that OpEx will increase due to more ramp-up-related costs as we are approaching the start dates, and sure that we will get a role in these markets, for instance. But for now, I think 25% is a good indication, at least for first and second quarter this year. When it comes to Recycling Mining, the underlying momentum is there. But there are different segments, and mining and metal is still down compared to previous years. And the commercial ratio indicated 60% compared to -- also with the strong comp figures in first quarter -- is indicating that first quarter will be down compared to first quarter last year. But that's also the last quarter when we compared us against pre-COVID situation. So -- and then this also was a strong comp figures. But we have seen a lot of good underlying momentum in the segment are stronger in the longer-term opportunities here. In the Food segment, we have indicated a conversion ratio of 70%. So consequently, first quarter will not be very difficult from first quarter last year if that kicks in as we assume, and it's consequently a good start of the year because, again, we compare ourselves with pre-COVID figures. And remember that for both the food and the TRM business, in the first quarter usually is slower than the other quarters. You see that also on the historical figures when you go back and look at that. So that's normal in this regard. I think that completes my part of the presentation, and we open up for questions on the web.

[Georgiana Radulescu]

Thank you, Espen. The first question is from Kristian Spetalen from Arctic. What drove the very strong 10% growth and 21% EBITDA margin in Collection? How much of revenue was driven by new demand versus business-as-usual market?

[Espen Gundersen, Deputy CEO & CFO]

Yes. It was a strong quarter in Collection. When you say business as usual, but the only thing that's not business as usual, maybe you could say is the Dutch expansion that's starting to kick in, but it's still a minor part of the total. So Germany had some additional deliveries, more than usual. But besides that, everything is business as usual. So there's not very much on top to point out here. And the margin -- EBITDA margin is a consequence of higher volume, in particular. And that, as you know, additional volumes does not necessarily increase the OpEx, and then the gross margin has hit the bottom line.

[Georgiana Radulescu]

Okay. I will continue with a question also on new markets. Any other markets we expect similar expansions as the Netherlands? It's coming from Jurgen Bruaset of Nordea.

[Espen Gundersen, Deputy CEO & CFO]

No, Netherlands is rather unique in this context because you have the only markets where you have kind of deposit of some bottles in Netherlands, it was the big plastic bottles, has been like that for 20 years. And -- but it didn't have for the small bottles, neither the plastic nor the can. And we do not have to my knowledge an example of this expansions coming. So it's more that the market that for practical reasons are without deposits or maybe just older fillable systems that has gone from [ flash ] deposits. And those in the kind of the near term, it was mentioned in -- at least the most important, what was mentioned in Stefan's presentation.

[Georgiana Radulescu]

The next question is about food. Also from Jørgen Bruaset from Nordea. Food was highlighted as a key solid contributor in Q2 and Q3, but the Q4 numbers show negative year-over-year development. Can you provide some color on this? Also, any one-offs in the 2020 margin that we should be aware of, or does this represent a normalized level to expect forward?

[Espen Gundersen, Deputy CEO & CFO]

Yes. I think as a general comment, you would see fluctuations between quarters. And particularly when we now provide more granularity and has showed the food figures separately and the Recycling Mining figures separately, we will see that that dependent upon timing of orders and installations, you would see some fluctuations that maybe it was not that visible when we reported this as a consolidated unit. I think it's been a good development in Foods, both in second and third quarter, knowing the challenges that COVID has created. So we have been good in delivering orders that we have received. The order intake has been somewhat slower, and consequently we have seen a negative impact on the order intake. And so that is also the explanation why fourth quarter is lower than the comparable fourth quarter last year. But with the momentum we now see and the order intake is for -- in fourth quarter, it's not given that it will be a trend going forward. But it will have challenges, both in food and TRM related to the COVID situation until the world is completely normalized and traveling is easier, the fairs are opening and so on. So that's the reality that we are living in.

[Georgiana Radulescu]

Thank you. We have one question about M&A from [indiscernible] at SEB. Any further M&A opportunities or is COVID and/or multiples putting a lid on it?

[Espen Gundersen, Deputy CEO & CFO]

Stefan, maybe a question for you.

[Stefan Ranstrand, President & CEO]

Yes. So we feel that we have a strong portfolio in TOMRA, which is very suitable for the strategic ambitions we have. So having said that, we have a strong platform for organic growth, and that will remain our main focus going forward. So there is no major changes on here. Having said this, we are continuously observing if we can complement the portfolio. That goes in terms of technology, categories served, geographical areas or some kind of disruptive technologies. So I would not rule out that we will do something. On the other hand, I would say that the majority of growth is to be expected to come from organic development in the following periods.

[Georgiana Radulescu]

Thank you. The next question is about Food and Recycling Mining from Kristian Stefalen has asked from Arctic. Is there any difference on lag from order intake to revenue recognition in Food and Recycling Mining? Or is it 3 to 9 months for both segments?

[Espen Gundersen, Deputy CEO & CFO]

Yes. It's -- if you look at the conversion ratio, you can see that TRM has a conversion ratio around 70% and Food is around 85%, that if you calculate the average over the last 8 quarters. So yes, there is a difference, and it takes somewhat more time to take the TRM orders into revenues than the Food. Maybe too detailed, but there is one side here that's in Food, at least in compactor use percentage of completion accounting because that the orders and the installations are rather big. So that explains to some extent why the Food has a higher percentage also when it is -- when we measure the book-to-bill ratio on backlog versus revenue. So we take to income as we produce. So that influenced the figures also. So adjusting for that, it probably will be closer to 70%, which is the TRM figure.

[Georgiana Radulescu]

The next question is a clarification question from [ Erik Wikstrand ] at Anaxo. Can you please repeat what you said about cost ramp-up in Sorting Solutions? Was it not NOK 25 million per quarter in Q1 and Q2 and then remains to be seen for Q3 and Q4?

[Espen Gundersen, Deputy CEO & CFO]

I didn't say -- there's no ramp-up in Sorting Solutions. The ramp-up is related to Collection and it's about new deposit markets opening up. And of course TOMRA will always have future-oriented costs preparing ourselves for new activities. But since there are so many markets in parallel that assumed to comment particularly to generate the average debt maturities directive in EU. We have to build an organization, having people on the ground, also some central staff functions, because we have to be prepared for this and account this -- when things really start to roll. And that isn't kind of over and above the normal costs we're absorbing. And those costs is what we call ramp-up cost. It has been NOK 25 million per quarter or NOK 100 million per year both for '19 and '20 and also the first 2 quarters of this year, around NOK 25 million per quarter. But then as the new market is coming closer, it's likely that this figure will increase as we have to further expand into new regions and hiring people before the time they do not generate revenue yet because the deposit sticker systems are not up and running.

[Georgiana Radulescu]

Thank you. And we have one more question, perhaps the last question. It's about order intake. What was the organic order intake growth in Food and Recycling Mining?

[Espen Gundersen, Deputy CEO & CFO]

Well, it's a little difficult to calculate because of different ways to do that. But as you can assume, we are around 20% on TRM side and it's only a few percentage down on the Food side.

[Georgiana Radulescu]

Okay. I think that concludes the Q&A session. We have no other questions.

[Stefan Ranstrand, President & CEO]

Then we would like to express our gratitude for your support and for your attendance. And I hope that by the next quarter, I will be more skilled in starting my presentation. Have a great day, and we look forward to talk to you continuously. Thank you, and goodbye.

[Espen Gundersen, Deputy CEO & CFO]

Goodbye.

[Georgiana Radulescu]

Thank you.