Good morning from Asker, ladies and gentlemen, and welcome to TOMRA's first quarter result presentation of 2025. My name is Daniel Sundahl, and I'm Head of Investor Relations. As always, CEO Tove Andersen will start by giving you the highlights of the quarter, and afterwards, CFO Eva Sagemo will dive deeper into the numbers and present the updated outlook. At the end of the presentation, we will open up for Q&A for participants in the Teams webinar, and a link to the webinar can be found in today's stock exchange release. We aim to conclude the presentation around 8:40. Without further ado, I give the word to Tove Andersen.
Thank you, Daniel, and welcome from me as well to our first quarterly result in 2025. We report today a good first quarter in line with our expectations, both on top and bottom line. I'm especially proud of Food in Quarter, where we continue to see the benefits of the turnaround and their report: record-strong first quarter EBITDA and double-digit growth in both revenues and new orders. Let me then take you through the financial highlights. We delivered a revenue of EUR 306 million in the quarter, which is up 5% versus the same quarter last year. Collections were slightly down compared to a very strong quarter Q1 last year, recycling in line with last year, and then food 16% up. It's very nice to see the continued improvement in gross margin, which landed then at 43%, 3 percentage points up versus the same quarter last year.
We see improved margins in collection and also the high volumes and cost savings in food are improving the gross margins there. Our operating expenses are 3% up in the quarter at EUR 104 million. We continue to have good cost control while we are investing in future opportunities. This then gave us an EBITDA of EUR 26 million. There were no special items in the quarter, and we have delivered a strong cash flow from operations of EUR 65 million. Going then to order intake, the recycling order intake was soft in the quarter at EUR 61 million, but we will end the quarter with a solid order backlog of EUR 122 million. Food had a strong order intake in the quarter of EUR 87 million, and also there we entered Q2 with a strong order backlog of EUR 125 million. Let me then dive into the different divisions.
Collection delivered another good quarter with stable revenues compared to a strong Q1 last year. We have to keep in mind that last year we had the rollouts in Romania, Hungary, and Ireland contributing to Q1. This quarter, we had strong revenue growth in all regions except continental Europe due to this brief pause in new markets. In the new markets, we see a slowdown in Austria after they launched January 1 this year, while Romania actually continued to be strong despite going live more than a year ago. We actually had our highest quarterly revenue in Romania this quarter. It is really great to see how the deposit market is developing in Romania and the high collection rates that they are achieving. Year to date, the collection rate for all beverage containers included in the scheme was above 87%.
This high collection rate drives the need for more collection infrastructure with our existing customers, but also we see that smaller independent stores are now investing into RVMs. In existing markets, we continue to see good growth in the quarter, and we are trending well to achieve our target of 5% growth in existing markets. It is also very nice to see that the profitability continues to increase gradually, where we then landed in collection with a gross margin of 41%. I also want to highlight Tasmania, even though that did not happen in Q1. It happened last week, 1st of May, where we then went live with the deposit scheme in Tasmania. Tasmania is, of course, a fairly small market with 50 collection points featuring a bit more than 100 RVMs, and it is a throughput market.
It is an important and final step to make Australia the first continent which is fully covered by the deposit return system. We are very proud to have been selected together with our partner CleanAway to be the sole provider to Tasmania's deposit return system. As always, we have included here on the bottom right side the list of countries that have announced deposit return schemes with a firm go-live date as well. As you can see, this is a strong pipeline. Of course, most exciting this year, it is Poland and Portugal. If you look at the potential for these two countries combined, the market potential, it is similar to the potential of the markets that went live between 2023 to 2024. Poland and Portugal is similar to Romania, Victoria, Hungary, Ireland, and Austria combined.
Both of these markets are progressing in line with expectations, and there are high commercial activities ongoing. Also, we got some big news regarding the U.K. yesterday. The U.K. Deposit Management Organization has been confirmed as the system operator of their upcoming DRS. This is an organization representing both producers and retailers across England, Northern Ireland, and Scotland, which also we will say is best practice. This is an important step in the process to then be ready for a go-live late 2027. Over to recycling. The recycling division delivered revenues in line with our expectations, marginally below the estimated conversion ratio, but it is in line with the revenue levels that we had same quarter last year. The disappointment in the quarter is the recycling order intake, which is down 16%. However, quarterly variations are normal, and we had a strong order intake in Q4.
We always recommend to look at trailing 12 months when you look at order intake, and if you look at trailing 12 months, our order intake is down 3%. The lower order intake in the quarter is within waste management, mainly then in the U.S. What we are currently seeing in the U.S. is postponement of investment decisions and delays of waste management projects due to macroeconomic uncertainty, which has been amplified by the trade war. We have had very good sales into the U.S. waste management industry the last couple of years, and this has really been driven by modernization of the infrastructure. These types of projects can typically be somewhat pushed out in time without having significant short-term consequences of the operations, and that's what we are seeing.
If you look at the metal segment order intake in the quarter, it is in line with the same quarter last year. Also the same for all sorting and plastic recycling. We have previously talked about the softness in the European plastic recycling market, and despite an increase in the RPET prices as shown on the graph here, we do not see signs of recovery yet, but the market has stabilized. Service revenue is important for us in the recycling division, and it represented 21% of the revenue last year. We do see continued good development, both because we have increased the install base of 30% between 2021 and 2023, and as part of our strategy, we have increased focus and new service solutions to increase the sales of services. Services provide us with a secure recurring revenue, and we expect services in recycling to grow double-digit this year.
The underlying drivers for the recycling business are strong. What we are currently seeing is not a change of the fundamentals, but rather a timing issue. Where needed modernization is somewhat delayed, and the race to increase the needed additional capacity to meet the legislative requirements in, for example, PPWR has not started yet. However, we continue to position ourselves for the future, and I'm very proud to see that one of our innovations, the AI-based GAIN Next technology, has been named the Recycling Machinery Innovation of the Year at the Plastic Recycling Awards in Europe. GAIN Next is based upon deep learning technology, and it complements our Autosort to improve recovery and purity level. Currently, we have sold 128 units of GAIN Next. To food. As I said in my opening, I'm especially pleased with the performance of our food division this quarter.
They deliver strong revenue and order intake growth, and the profitability is improving according to plan. Europe and South America were the key contributors to the revenue increase. South America was particularly strong with deliveries into blueberries, cherries, and potatoes. Due to seasonality in food, with winter in the northern hemisphere, the first quarter is usually the quarter with lowest activity. For the first time, we had a positive first quarter EBITDA contribution from food. We are really seeing the effect of the improvement program in the figures. In addition, the market sentiment has improved, providing us with a strong quarterly order intake in both vegetables and potatoes, and with further potential in, for example, citrus. Of course, there is a risk that trade tensions lead to postponement of investment decisions in food as well.
However, for several segments, we see a need for investments into food sorting technology as new plantations are ready to bear fruit. To Horizon, our portfolio of adjacent business building activities. TOMRA Fysak is entering an exciting period now. TOMRA Fysak is a venture where we focus on solving circularity of plastics. What you see on the bottom right here is a picture from our Norwegian plant, Advanced Sorting Plant, which is now entering the commissioning phase. Actually, we had the first bale going through the plant last week, and everything is progressing as planned, and the official opening is planned later this year. In TOMRA UV USE, where we want to solve the challenges linked to takeaway packaging, the focus is continued piloting both our city solution and our event solution. The ORUS pilot is continuing while we are preparing for the pilot in Lisbon.
SeaTrace, the company, a smart waste management company that, with all of Bratislava, to bring next-level digitalization to the city's waste collection. Before ending my update, I want to summarize how we see the current trade war and tariff situation impacting us. If you look at our total revenues, approximately 25% of our revenue is from the US. However, only 60% of that is based on imports from outside the U.S. and therefore are exposed to tariffs. As you will see from the bar in the middle, less than 5% is imported from China, while more than 95% comes from the EU. Also, what you see is that food is a division with the highest revenue exposure, representing approximately 60%. We have looked at the effects both as first-order effects and second-order effects.
If we first look at the first-order effects, that is really the direct tariff effect on our COGS, we estimate it to be a maximum 1 percentage point on our gross margin. This estimate is then based on a scenario where the EU tariffs will go up to 20% and the China tariffs stay as is today at 14%. The impact in recycling and collection is estimated to be marginal, but we will get the Q2 impact in food on the import from China. Going forward, different mitigating actions will limit the impact. Second-order effects are, of course, harder to estimate as the situation is constantly evolving, but we see both challenges and opportunities arising from the situation. Tariff uncertainty and lower GDP growth may delay recycling and food customers' investments. However, our global customer base and diversified segment exposure balances the risk.
The collection division is deemed to be largely unaffected. On foreign exchange, our main exposure is towards euro. A strengthening or weakening of euro toward other currencies of 10% will normally decrease or increase respectively EBITDA with 5%. If we focus then on the US dollar and euro exposure, if the US dollar weakens in line with forecasted effects curve, that is a 10% weakening towards the euro up until the end of the year and with everything else equal, this may impact our EBITDA percentage negatively with one percentage point. However, we do have a currency hedging strategy in place for future predicted cash flows to mitigate the effects. We also see opportunities arising from the situation. Increased focus on supply security and reduced global trade will increase the need for more recycled material and circular solutions.
For food, changes to trade flows can create new export markets and thereby increase the need for investments into food grading and sorting equipment. In TOMRA, we are well positioned to handle both the first-order and the second-order effects linked to the trade war. We are diversified, operating in many segments and all regions of the world. We do have an agile can-do culture, which means that we're able to adjust quickly. We are monitoring the situation closely to adapt as and when we see fit to mitigate the impact and to explore the opportunities. With that, I will hand over to Eva. Thank you for that, Tove, and good morning from me as well. Starting with the group P&L, we ended the revenues at EUR 306 million, which is then 5% up compared to Q1 last year.
The quarter on top line has been according to our expectations, and we have had a good quarter in TOMRA . We are very pleased to see the improvement of the gross margin and ending at 43%, up 3 percentage points compared to the same quarter last year. As said, we have a strong cost control in the group, OPEX ending at EUR 104 million in the quarter. That gives us an EBITDA of EUR 26 million and an improvement in profitability with 3 percentage points ending at 8% in the quarter. Moving over to collection, top line ended at EUR 185 million, slightly down 2% compared to a very strong Q1 last year where we had high activities from new markets. This quarter, the strong performance, we have had strong performance in existing markets with the contribution from both innovation, but also good throughput volumes.
In new markets, we have had a decline compared to the high activity in Q1 last year, but that is as expected due to the timing of the rollout in new markets. This quarter, new markets represent approximately 15% of the revenue, and we classify or categorize Romania, Poland, and Portugal, but also Austria as new markets in the quarter. There is mainly revenue coming in from Romania and Austria in the quarter related to new markets. Good to see improvements in gross margins in collection. We are now trailing at 41% in the quarter, up 1 percentage point compared to the same quarter last year. Good cost control in collection ending the OPEX at EUR 46 million, which gives us an EBITDA of EUR 30 million. Moving over to recycling.
In recycling, the revenues came in at EUR 46 million, according to our expectations, slightly lower than the ratio that we indicated back in Q4. We have had lower revenues in America. That is due to timing of orders. As you probably remember, we had very strong revenues from that market in Q4. In the quarter, we have had strong performance in aftermarket sales and in service sales. The gross margin ended at 45%, a softer margin compared to the same quarter last year on the same volumes, but that is due to the product mix in the quarter. Good cost control in recycling ending the OPEX at EUR 21 million in line with the same quarter last year. That gives us EBITDA of minus 1 percentage point. 1%, sorry. Looking at the order intake, that has been soft in the quarter.
As we have seen over quite some time, we have had a softer market sentiment in Europe for plastics, but also now in the quarter, we see postponements in the U.S. within the waste management segment. We are down 16% compared to the same quarter last year, ending at EUR 61 million. However, as Tove said, it's important to look at the trailing 12 months, and we are down then 3% on the trailing 12 months. Order backlog ends at EUR 122 million in the quarter. Over to food. Food has had a strong performance on top line, ending revenues at EUR 17 million in line with the conversion ratio that we indicated back in Q4. We have had especially strong performance in our main markets, which is Europe and in Americas. It's also very good to see the improvement in the gross margins ending at 44%.
Quite a good improvement compared to Q1 last year. It is related to the cost-saving program, but also on the volume side. Good cost control coming from, of course, the cost-savings program, but also that we have continued strong focus on cost in the business division. We ended the OPEX at EUR 27 million in the quarter. That gives us a positive EBITDA for the quarter, first ever in the first quarter in food, and we are very pleased with the results, giving us an EBITDA margin of 5%. Looking at the order intake, we are up 13% in the quarter, ending at EUR 87 million. We have seen especially good intake in core categories being vegetables and potatoes. Looking at the trailing 12 months in food, we are up 3%. We end the quarter with a very strong order backlog of EUR 125 million.
In the quarter, or at the end of the quarter, we have a strong and healthy balance sheet. As you can see from the KPIs on the slide, we have a strong cash flow from operations ending at EUR 65 million compared to EUR 19 million in Q1 last year. That is a result from higher profit in the quarter, but also that we operate with lower working capital now being at 10% end of Q1. We have an equity ratio of 38% and a gearing of 1.6. Looking at the return on capital employed, we are trailing now at 19% above the strategic target that we have set for TOMRA at 18%. On the financial position, as you can see on the slide, we have a good spread of weighted average debt maturity now being at 4.1 years.
Looking at the undrawn facilities, we end the quarter at EUR 143 million. We are in a good financial position for future. Over to the outlook, we start with collection. It is a high activity. High activity is expected in both existing and new markets in 2025. The activity and growth in existing markets this year is driven by replacement sales, introduction of new innovation, as well as volume growth in throughput markets. Looking at the new markets, the activity is expected from Romania. Even with that market going live back in 2023, the rollout is expected to continue, but at a slowing pace throughout the year. As you have heard today, Q1 was the strongest quarter in Romania, where we have had sales to both existing customers, but also to smaller independent stores. The sale is driven by consumer behavior and high deposit returns.
We expect them sales to continue due to the technology need to handle the high deposit volumes in the country, trailing now above 87% year to date. The next new market is Poland, and the market plans to go live in October this year, and we expect sales to materialize in the second half of the year. As mentioned earlier, commercial activity in the market is high, and we expect that retailers are beginning preparations for the go-live date. Back in Q4, we mentioned that we experience a high or an interest for both sales and service, but also throughput sales, which is also currently the case. We believe that the market will be a mix of those, but we are leaning now more towards sales and service.
How much Poland will contribute to the collection growth in 2025 will depend on the sales setup and also contracts being signed in the year. We expect the rollout to continue into 2026 and also in 2027. The next market is Portugal. High activity in Portugal as well, and the market plans to go live early 2026. We expect sales towards the end of the year related to this market. Of course, mentioning Tasmania that went live just last week. It is a small throughput market, but nevertheless, we will have revenue coming in from that market over time. All in all, in collection, we expect a revenue growth in 2025 of approximately 5% in existing markets, while the growth in new markets will highly depend on the sales models in Poland. Gross margins should stay above, should stay north of 40%.
On the OPEX revenue levels for full year, excluding the ramp-up variation, these should stay in line with the 2024 run rate. Currently, for ramp-up, we are trailing on a full year run rate at EUR 20 million. Over to recycling. The underlying drivers for the recycling business are still strong, being regulation, decarbonization, as well as the need for modernized and automated recycling sorting processes. Even with important commitments in the EU for packaging, we experience a softer market sentiment in, for example, plastic recycling. On top, the increased macroeconomic uncertainty and trade tension lead to slower short-term growth, especially in the waste management segment in the U.S. We still expect growth in 2025 in recycling, but lower than the previously indicated mid-single digit growth for the year. Where we will end the year will depend on the development of the macroeconomic situation.
Looking into growth, important drivers continue to be growth in the service and aftermarket sales, as well as the growth in the metal segment. We expect strong cost control in this business division and to maintain healthy margins. However, product mix may reduce full year margin with approximately 1 percentage point. We are talking about the EBITDA margin. We estimate a 50% conversion ratio of the order backlog to be recognized as revenue in Q2. However, given the market uncertainty, we may experience orders being postponed over the quarters, which could push the conversion ratio some percentage points down in Q2. Over to food. The need for optimization and increased quality and safety requirements create opportunities mid and long term for our food business. We are currently seeing a positive shift in the market sentiment following two years of challenging conditions.
However, renewed macro uncertainty may impact customers' investment willingness. With a positive momentum in order intake and that in several segments, there is a need to invest in food sorting technology as new plantations begin producing fruit. We are keeping then our full year outlook with an indication of low single-digit growth in 2025 for food. We expect the gross margins in the mid-40% and profitability of 10-11% EBITDA. Further improvement of profitability is expected when the top-line growth materializes. Important to mention is that we expect extra COGS in Q2 of approximately EUR 4 million created to tariffs in the US. For the rest of the year, we plan with mitigating actions to limit the impact from trade war. Based on the order backlog end of Q1, we estimate a 75% conversion ratio of the order backlog to be recognized as revenue in Q2.
Lastly, on Horizon, we have high activity in feedstock where the Norwegian plant Områ will start operations in 2025, while the German plant is expected in 2026. Remaining CapEx for these two plants is approximately EUR 40 million for the year, where EUR 10 million is remaining for Områ. Year to date, we have spent around EUR 6 million. As we prepare to begin operations in Norway, we anticipate a shift in the operating expenses for Horizon. The run rate for the year for Horizon will be approximately at 2024 levels, but on top, we will have an increase, so we will double the run rate, and the increase will be entirely driven by the costs associated with the plant operations in Norway.
Looking at the revenue profile, the plant in Norway is expected to be modest at launch, but will grow in line with ramp-up in capacity over time. That said, we expect the plant to reach a positive EBITDA run rate by the end of 2025. With that, we end the outlook session, Daniel, and move to Q&A.
Thank you, Tove. Thank you, Eva. We'll move over to Q&A, and we have four questions coming in, starting with Elliot Jones at Danske Bank. Please go ahead, Elliot.
Good morning, guys. Congrats on the results. Just in the collection section, we had about tariffs. How are your confidence levels, say, in Poland now versus the Q4 stage with regards to Poland contribution later on in the year? With your conversations with customers, has that changed?
Have you heard them talking about tariffs over here in Europe a lot, or in that segment, is it much more kind of limited?
Yeah, no. As I said, when I talked about tariffs in general, we think that the collection division is not really significant or will not really be impacted by the tariffs, not on both direct and indirect effects. Poland is progressing according to plan. Commercial discussions are progressing according to plan. The setup is also then progressing well, so we do not see any changes there. We actually see, I would say, it is firmer now than last quarter because we have seen that the things are progressing as expected.
Got it. Thank you.
Thank you, Elliot. The next question is coming from Adela Dashian at Jefferies. Please go ahead, Adela.
Thank you, Daniel. I am going to continue on Poland, if that is okay.
Could you maybe just help us understand? I mean, you are expecting revenues to ramp up now in H2, but the market is going live in October, and it seems like there is, at least not in this quarter, any revenue contribution from Poland. Have you sold a single machine to that market yet? If the case is no, then is that because you're still in agreements about what type of, or waiting to hear about what type of model that will go live, which is delaying the agreement processes?
We have signed contracts in Poland. We have installed more than 1,000 reverse vending machines in Poland. The go-live is set to be October 1, but also as we communicated before, we expect that there will be at least a three-month grace period. Probably the firm go-live will be more end of the year.
Got it.
There has been a machine sold in H1 already to the Polish market, okay?
And last year. And last year. It is not significant in Q1, but we have then already now more than 1,000 machines installed. There will be, but we expect in a way to be a busy period from now till the end of the year in Poland.
Okay, great. That is all for me. Thank you.
Thank you, Adela. The next question is coming from Victoria Adesina at Barclays. Please go ahead, Victoria.
Hi, there. Good morning. Yep, Pim Harvengor Jane. Just a few from me. In recycling, obviously, we have seen order intake is slightly down, gross margin slightly down as well year- on- year, but then OPEX still remains at slightly elevated levels. Could it be the case that there needs to be some restructuring here, or is that something that we are missing?
Recycling, first of all, recycling is a well-run, very profitable business for TOMRA . We believe in the future prospects of growth. However, we are always looking at cost optimization and operational excellence. I think recycling has always shown that they've had good cost control. This is something that we work on as a continuous improvement agenda, but we do not see a need for a significant restructuring in the recycling division. We have consistently delivered an EBITDA above 20% in that business.
Okay. I think we lost Victoria, but if she has a follow-up question, we will bring her back later. The next question is coming from Thomas Dowling Næss at SpareBank Inn. Please go ahead, Thomas. We might have some technical issues. There we go.
Can you hear me now?
Now we can hear you, Thomas.
Okay, great. Great. Good morning, guys.
You're saying that the tariffs may delay food and recycling orders, and seeing that we are halfway through the second quarter already, could you give us more color on the current impact you are seeing on order intake?
Yeah. We do not necessarily give indications on the order intake in the quarter, unless giving kind of like the outlook going forward. What we say is that we expect a softer dynamic on the recycling side, but also that in food, it might impact orders going forward when we talk about the uncertainty in the market related to macro. Remember that we have had a strong intake in food this quarter and a softer order intake in recycling, but please look at the trailing 12 months.
I think that is the best indication, and then we need to come back to the order intake in Q2 for Q2 reporting.
Yeah. Obviously, I did not want any concrete figures. It is more, is it kind of a 5%, 10% impact, or is it like, yeah, we got preliminary truck orders in April yesterday or Friday, it was down 50% year- on- year. It was more in kind of the magnitude of impact.
We have given them an updated guidance for the year, where we say that we expect to still have growth in the recycling division. I think that gives an indication based on what we see. Yes, we do see some postponement, but we are a very diversified business operating in many different segments and regions of the world.
Yes, we see some impact, but still, we believe that we'll be able to deliver growth in recycling this year. Okay. Thank you. I think it's good given the current market sentiment.
Absolutely. Could I also add just one quick question on the cost side? You're saying that you're able to, there will be some impact on COGS in second quarter, but then you will be able to impact the tariffs going forward. Is that the full effect, or should we expect kind of a gradual implementation of those mitigating effects?
Yeah. We have, based on the order backlog and what we are going to deliver in, we know that we will have an impact of around EUR 4 million for food in Q2.
We have been working a lot over quite some time now looking into mitigating actions, being, of course, how we are pricing our products, how we are looking at the terms and conditions in the contracts, and so on and so forth. That is also why we believe when we look into Q3 and Q4 and the rest of the year, that we will limit the impact, but we cannot promise a zero impact. We need to come back to that later.
Thank you. Thank you so much.
Thank you, Thomas. I see Victoria is back in the meeting. Victoria, please go ahead and follow up your question.
Yeah, I had some tech issues. Sorry about that. I will check the transcripts of the response on recycling. Just the other questions. Obviously, it was great to see the turnaround in food.
Is there anything you're able to share on how Q2 performance has been so far in terms of if that's continuing on that same strong trajectory? Lastly, just on FX, is there anything notable to note in terms of impact or anything else you can share on the currency hedging for the rest of the year?
Yeah. First, a question on food. With the outlook that we have given today, we stay firm on what we said in Q4 for the year. I think that is kind of like the answer on that question. We can't go into more details on what we see in Q2 and moving forward. We are confident on the outlook that we have given, of course, based on the situation that we see today. On FX, not significant impact on FX in the quarter.
We have not changed the hedging strategy in TOMRA for currency, but this is something that, of course, we are using as a tool to mitigate any currency impacts for TOMRA . We are monitoring that on a weekly basis or even daily basis, especially on the US dollar.
Okay, great.
Thank you, Victoria. After no more questions in line, we have reached the conclusion of today's presentation. Thank you very much for tuning in. We will be back here with our next set of results on the 17th of July for the second quarter. Have a nice day. Good luck.