Good morning from Asker, ladies and gentlemen, and welcome to TOMRA's third quarter result presentation 2023. My name is Daniel Sundahl, and I'm Head of Investor Relations. It's been an eventful quarter, and of course, our CEO, Tove Andersen, and CFO, Eva Sagemo, will tell you all about it. Today, we also have our Executive Vice President of Food, Harald Henriksen, with us to give you an update on the improvement agenda going on there. At the end of the presentation, we will take questions from the audience, and you have an embedded Q&A tool, which you can use to pose questions. Please keep in mind that it can be up to a minute delay in the webcast. Without further ado, I give the word to Tove Andersen.
Thank you, Daniel, and welcome from me as well to the Q3 presentation of the financial result. This quarter has been a special quarter for us in TOMRA. July 16, we were hit by an extensive cyberattack. As a response to contain the attack, we proactively disconnected most of our systems, and we are still not up and running with all applications as of today. With that backdrop, I think we have done extraordinarily well to present a financial result today for the quarter, where if you exclude the direct cost for handling the attack and cash flow, we present a financial result which has not been impacted by the cyberattack. Through manual workarounds, we were able to continue to deliver value to our customers, while also delivering good growth and improved margins in both Collection and Recycling.
Food is challenging short term, but we have seen this coming, and we have been able to progress our improvement agenda in the quarter. Given that we hardly had any systems running the first weeks after the attack, and only a limited number of people with access to ERP and key systems until mid-September, this is a great achievement. It shows the strength of the TOMRA culture, the strength of our people. We care about our company, and there are no problem we can't solve together. I want to extend a big thank you to all our TOMRA people who have supported us through this challenging quarter. Let's dive into the figures. This quarter, we report a total revenue of NOK 3.5 billion. That is 3% up currency adjusted, with good growth both in Collection and Recycling, 11% and 14%, respectively.
Food were down 18% in the quarter. I'm very pleased to see the improvements in gross margin, which has been a continued improvement now for several quarters. We ended on 43%, which is the highest since 2021 and we have improvement in all divisions versus the same quarter last year. Our operating expenses ended on NOK 1.092 million if you don't exclude the direct cost in cyberattack, which were NOK 120 million in the quarter. Adjust for currency and regular inflation we have now had the flat run rate of our OpEx for the last four quarters.
As part of it, we are continuing to invest in our business, in business expansion and in our strategy, and the run rate for ramp-up cost in Collection for new markets and Horizon is at the same level this quarter as the previous quarter. We announced last week a cost reduction program in Food that will reduce the OpEx cost and also the COGS cost in Food over the coming quarters for the next 12-15 months. This then gave us an EBITDA of NOK 434 million, if we exclude the cyberattack cost. This is down from the same quarter last year due to slower sales in Food. We had a negative cash flow in the quarter of NOK 280 million. This is due to the cyberattack, as we have not had access to systems for a while.
This has been delaying invoicing to the customers, and we have increased our accounts receivables with approximately NOK 1 billion. This we expect to normalize during this quarter, Q4. If you now look at order intake, Recycling order intake were down 12% in the quarter, down to then NOK 611 million. We have talked for some quarter that we are expecting a normalization of the growth in Recycling, and this is what we're seeing, but we still have a strong and healthy order backlog of NOK 1.2 billion. Food order intake were down 28% to NOK 651 million. I will then say a few words about the cyberattack before we go into the business updates.
As I said in my introduction, July 16, we discovered a cyberattack against our company that impacted our TOMRA domain and most of our key IT systems. However, swift actions from our information security teams and our IT teams has limited its impact. What we did is that we proactively disconnected our systems to contain the attack. We have then, fortunately, have had no evidence of sensitive data that has been lost, and we have also not received any ransom demands, but we believe this is a failed ransom attack. Also, as part of our proactive measures, we disconnected many of the customer machines, but most of them were able to then remain operational in offline mode. The weeks and months after the attack, we have then put these customer machines back online again.
I've been really impressed by the organization and how they've been able to keep our operations running through this attack. They, through manual workarounds, have made sure that we have continued to produce, we have continued to install equipment, to do service, to take orders and do sales. I think that has been a really and tremendous effort from the whole organization. The main impact of the attack is on our cash flow and, of course, the direct cost linked to the attack. Also we have had some innovation efforts that have been delayed that we are now focusing on regaining the speed on. After the attack, what we have needed to do is to get our systems back up and running.
"We had to validate them and restore them, or some of them also we had to rebuild to ensure that we could take them back online in a safe and secure way. The same time, we have used this opportunities to strengthen our security measures, implemented new procedures, but also new tools and Zero Trust Architecture. This will ensure that we are coming out on the cyberattacks stronger and as a more stronger company. Let's then go into the business update. In TOMRA, we have an ambitiuos strategy.
We want to double our business within 2027, and we want to lift our EBITDA margin to 18%, and we will do that by accelerating the growth in our core, our three existing divisions, but also developing adjacent opportunities, while we walk the talk on sustainability by becoming a fully circular business ourself and a safe, fair, and inclusive place to work. Even though we have short-term challenges in food, the overall fundamentals of our business remain the same as when we launched these targets last year at our Capital Markets Day, and we stay firm on these ambitions. In this quarterly presentation, we will focus on the core, the three divisions, with a special focus on our food division. However, first, I will start off with an update on collection.
Collection had a very strong quarter this quarter, delivering a growth of 11% and a revenue then of NOK 1.9 billion. The main drivers for the increased sales is sales into new deposit markets. We had good sales into Hungary, which will go live with a deposit system early next year. We continue to have sales into Romania that will go live late next month, and also good sales into Netherlands that expanded their deposit system in April to include cans, and by that, doubling, more or less doubling the volume of containers in their deposit systems.
I'm also very pleased that we see the continuation of improving margins in Collection as we have planned and also communicated, and we ended up then with a gross margin this quarter of 40.4%, which is two percentage point up versus same quarter last year. A highlight in the quarter was Poland, who passed a deposit return system law, with the potential then of becoming the second biggest market in Europe to date, with a population of 38 million people. We were disappointed by the news from France, where France then have decided to not implement the deposit regulation as so now, and rather focusing on other measures to increase the collection rates.
We find it difficult to see that they will be able to meet the target set in Single-Use Plastics Directive by doing that, so we do believe that this can potentially be reopened later. However, France still represent a significant potential for us on reuse or refillable bottles. France has a focus on phasing out single-use plastic. They have a target of phasing out all single-use packaging by 2040, and they have a focus on reuse and refillable containers and beverage containers. If you do have that, you will need to have a deposit system to ensure that these are collected so that they can be reused and refilled. On the right-hand side here, you will see the update, the list of countries or states that have a firm decision to go live with the deposit system.
I'm not going to go through them in detail, as I already have mentioned the key changes from last quarter. Recycling had another good quarter. They had a growth of 40% currency adjusted, up to NOK 822 million. We have seen in the quarter high activity level in most regions and market segments. Particularly, it was strong in Asia and Oceania this quarter and within the waste sorting segment. We are now seeing that the growth is normalizing after the last couple of years, which we have had really extraordinary growth in this segment, and we see that in the order intake that is now 12% down, currency adjusted. If you look at the market sentiment within recycling and recycling sorting, it's a mixed picture.
If you look at the PET recyclers, especially in Europe, they are struggling currently and have a difficult financial situation currently, linked to the drop in PET prices, both then on virgin PET, but also then on the recycled PET. However, if you look at the metal market, that's quite good, and especially the aluminum market is strong currently. We see the same in the waste sorting segment, where there is a very good market sentiment. We are now benefiting from the diverse portfolio that we have developed in the last years, where we are less exposed to one segment or one region. We are also less exposed to commodity prices than previously, as legislation and company sustainability commitment are important drivers of demand in certain segments, for example, the waste management segment. To Food.
Food had a weak quarter this quarter. The revenue were down 18%, but if you look inside Food, it is a mixed picture. Our Processed Food segment is doing well, mainly then driven by the category of potato, the potato category segment, while in the Fresh Food segment, the market sentiment is weak. Customers are delaying investments due to challenging macroeconomic environment, high interest rates, and weak harvests. We communicated around this in last quarter and also communicated then and in a stock release last week, that we have now introduced an acceleration of our improvement agenda, and I have then invited Harald Henriksen to join this call today. Harald took over as EVP Food last quarter, and before that, he was heading the Collection division, and he will give you an update on our agenda in the Food division. Over to you, Harald.
Thank you, Tove. Yeah, I'll talk about three things. First of all, the fundamental drivers in the food sorting business, then opportunity for improvements, and then also what we want to do to improve our financials going forward. Since the summer, we have run quite a comprehensive diagnostic of the food sorting business, and it's clear that this is really a market which is attractive to be in. I also wanted to see this myself, so I've, of course, been traveling around to all our main locations. Met many of, most of the employees, really competent and really passionate employees. I also met a lot of customers on all continents. I met the biggest almond producer in California, who had our equipment. I've also met,
I actually had breakfast with a farmer in California, which is delivering citrus products to Sunkist, and he don't have our equipment, but he really wanted to buy it. He wanted also to know whether it was possible to do onions on the same equipment, which of course is possible. He's really considering that, and it's really good to be so close to the customers that we can have these discussions. Also in China, I met the biggest citrus producer in the Nanning district, which have our equipment. Also, other customers sorting dry fish. When I talked to an apple producer in Europe, it was very clear, you know, why they really focus on the sorting equipment, because they are so proud of their own product.
They really want to have the best possible quality, so the product wanted to shine, but at the same time, they want to have the best possible yield at the lowest cost. That really brings me to the drivers of the business. Well, of course, population growth and growth of the middle class will have an impact due to the need of food, but also the need for reduced loss and waste of food is important in order not only to address sustainability issues, but also the operational necessity for many of our customers to increase the value of their product and also the processes. Tighter food safety regulations with an increasing need and demand to actually track and trace how food moves through the value chain will be important.
Maybe the two biggest drivers, the way I see it, is the rising cost of manual labor to sort and process food, which is really driving automation in many geographies. Then it's back to what I said about the quality and the yield and so forth. New technological developments on the sensor side, on artificial intelligence and software, is really enabling better accuracy and better quality of the product, which is being sorted, and also better uptimes. The food market really shows a robust growth going forward, growing at a rate of 6%-7% annually within what we define as our core addressable market. TOMRA Food holds a market leadership position and is the recognized brand in both fresh and processed segments. We have a technology edge, empowering us to innovate and also stay ahead of our industry.
We have a strong market position, as I said, both in fresh and processed, and with a robust market share, where we have the opportunity to grow in both areas. On the other hand, we have not delivered on our revenue targets or profit targets over the last few years. The OpEx has increased to support quite an complex organizational setup, because as you see, and as you know, we are based on four acquisitions over the last years, which has never really been fully integrated. We have five R&D sites, we have four production sites. There is an opportunity to take out synergies by fully merging these companies into one food organization.
The timing is quite good now, both because I'm coming in as a new leader, but also, of course, because we have a slower period within the Fresh segment due to lower customer demand. This poor financial performance shows the urgency and the need to really reverse this trend and ensure financial health of the Food division. What we want to do is to take advantage of the unrealized synergies, as I said, to increase profitability and customer satisfaction. We want to simplify our organization and our processes for faster decision-making and improved customer satisfaction. What we will do is to create a regional structure consisting of EMEA, Americas, and APAC. Within these regions, we will merge our Fresh and Processed sales and service organizations to be consolidated into one team.
We will have a solution hub, where we merge the operations and the R&D units into one team and one leadership for increased operational efficiency and also speed to market, and including in this also optimizing the manufacturing footprint. We believe this regional structure will address the speed to market, as well as simplify decision-making and remove duplications of responsibility. With a closer commercial organization and also a central technology backbone, we have the foundation to capture the market growth in the profitable segments. We have a target to take out EUR 30 million in cost by realizing the synergies related to this change, and this will bring the EBITDA back to 10%-11% at the end of 2024. Since our product is so central to our customers, it's really important that we double down on customer satisfaction.
The organizational setup brings us a lot closer to the customer, ensuring that we have the right people at the right place in the right time zone, and it really improves the clarity of accountability and also the ability to adapt to the market needs. Today, with many R&D sites and also under different leadership, because we have the fresh and processed organizations, we have been lacking the focus on what is actually most important projects to run to improve competitiveness for TOMRA Food. We will now focus our R&D resources on technology that will have the biggest profitability, potential, and competitive edge. We have started this change process and will be done during 2024. As I said in the beginning, the automated food sorting company is a very attractive place to be.
We will now work through this change process, which will be very demanding for all our employees, but we need to do it. My ambition is for us to make TOMRA Food the undisputed leader and the most admired company in the food sorting industry, not only on market share, but also on profitability, customer satisfaction, and with the proudest employees. After this change, I believe we will come out stronger with a more scalable operating model prepared for future growth. I'll leave the word to Eva to talk about financials and outlook.
Thank you, Harald. As mentioned in the beginning of this presentation, it has been a special quarter for TOMRA, but still, we are able to deliver good growth on strong comparables from last year. Collection and Recycling, performing with good top-line growth and improved profitability, whilst Food came in short. The total revenue for the quarter ended at NOK 3,515 million, a 3% growth, currency adjusted, from last year, and improved gross margins, ending at 43%, which is then up two percentage points from last year. OpEx has been in line with our expectations, adjusted for currency, inflation, and cost related to cyberattack of approximately NOK 120 million this quarter.
Our run rate for Horizon remains at NOK 80 million for the year, and run rate for ramp-up in Collection at NOK 250 million, and we have not accounted for any one-off costs in Food this quarter. EBITDA ends at NOK 434 million, a 12% EBITDA margin, but when including the cyberattack cost, we end the EBITDA at 9% for the quarter. Collection has delivered a strong quarter with NOK 1,896 million, a top-line growth of 11%, currency adjusted, where we have had continued good sales in the Netherlands, Romania, but also Hungary, accounting for approximately NOK 250 million this quarter.
As expected, we have had an improvement in the gross margin, ending at 40.4%, which is then up 2.4 percentage points from same quarter last year. There has been a positive business mix this quarter on top of price increases, which are now coming into effect. OpEx is in line with expectations, adjusted for currency, including the ramp-up run rate for new markets still being at NOK 250 million for the quarter. EBITDA ends at NOK 322 million, and EBITDA margin of 17%. All in all, Collection has delivered a strong quarter. Looking at Recycling, Recycling has also delivered a strong quarter, ending revenues at NOK 822 million, a top-line growth of 14% currency adjusted on strong comparables.
As in Q2, we have seen good volumes in all segments and all markets, and North America is steady on good volumes, as we have seen over the last three quarters. In South America, we have had an uptick coming from plastic upgrade projects this quarter. Growth in Oceania is linked to our mining projects in that region. Gross margins are back on track, ending at 53.7%. OpEx is up from last year due to business expansion, but in line with expectations also here, adjusted for currency. EBITDA ends at NOK 205 million, with an EBITDA percent of 25%. As we have said in the previous quarter, the market in recycling has normalized after extraordinary growth over the last two years.
The order intake is 12% down, currency-adjusted this quarter, ending at NOK 611 million. Year-to-date, we are up 8%, currency-adjusted, on a strong last year. Order backlog ends at NOK 1.210 billion, which is then 13% up, currency-adjusted. Our order backlog in Recycling is still strong, and we estimate a conversion ratio of 70% of our order backlog as revenue in the fourth quarter. Looking into Food, top line in Food is down 18%, currency-adjusted, from same period last year, ending at NOK 797 million. Whilst Processed Food is delivering healthy growth, the setback comes from Fresh, where customers have postponed project deliveries this quarter.
With a decline in volume, our resources, especially then in Fresh, are underutilized, resulting in a gross margin of 40%. Looking into OpEx, OpEx is up from last year, as we have built the organization for higher growth, which is not anticipated short-term. As both Tove and Harald mentioned, we are taking actions with our improvement agenda and cost reduction program. For this quarter, our OpEx in Food is in line with the estimated run rate for the year, adjusted for currency. The quarter ended with an EBITDA of -NOK 34 million. Looking into the order intake, we see a decline of 28%, currency-adjusted, for same period last year. The decline is mainly in Fresh, but we also see some softer dynamics due to increased interest rates and also weak harvest in Processed Food.
In this quarter, we have a decline in order backlog of 31%, currency adjusted, as a result then of the weaker market sentiment that we see. Of the ending order backlog of NOK 982 million, we estimate a conversion ratio of 85% of our order backlog as revenue in the fourth quarter. Looking at the balance sheet, we have had some movements this quarter, which I will run through. We have now started our investments in feedstock and has a total of NOK 140 million in investments year to date, which has then mainly taken place this quarter. We have also increased our receivables significantly due to the cyberattack, being delayed on our customer invoicing, not having access to ERP systems.
We are now more or less up to date on the invoicing and expect the current outstanding amounts to decrease towards normalized levels then in Q4. We have increased our leasing liabilities as we have set up new collection centers in Australia and enter into new leasing agreements for office locations in Sweden, Canada, and also New Zealand. We are also in good progress on installing equipment in Victoria, Australia, which is our new throughput market, which has both increased our tangible assets and inventory with NOK 100 million in total this quarter. As a result of the increased receivables, we have had to utilize more of our credit facilities this quarter, which is then explaining the interest-bearing liabilities, which has increased this quarter. Looking at the cash flow.
We have had a negative cash flow of NOK 280 million, explained mainly by the effects from the cyberattack. Equity is still healthy at 44%, and we see an increase in our gearing as a result from the movements in the balance sheet, which I just explained. Our maturity debt level is at 2.3 years, and as a result of the increased debt levels, we have, at the end of Q3, unused credit facilities of close to NOK 270 million. Looking into currency. Currency is an important factor for TOMRA as we report in NOK, but have limited transactions in NOK. As the table in the bottom of the page shows, our exposure is mainly against euro and U.S. dollar.
The movements in those two currencies this quarter compared to same quarter last year have been a strengthening of euro of 13% and a strengthening of U.S. dollar of 5%, which you can see in the graph illustration. Compared to Q2, we have seen a depreciation of 2% of both currencies. As a result, our revenue of the quarter has had a positive effect of 8% from currencies compared to same quarter last year, and a 0.5 percentage points on our EBITDA percentage. The impact from currency on our balance sheet compared to end of last year is positive, approximately 5%. Over to the outlook, and we start with collection.
We expect to see continued high activity related to new markets, and our run rate for ramp-up cost is expected to stay at NOK 250 million for the year. Looking into the next quarter, we expect continued high activity in Hungary. We have currently installed close to 50% of our contract obligations for this market that goes live 1st of January next year. Romania, which is also a new market, goes live next month, and we expect also here to have a volume close to NOK 50 million. In Romania, we have also signed throughput list this quarter, which will then materialize over time. Ireland goes live in February next year, and we also expect the volume in this market to increase the coming quarter.
We expect existing markets to continue at good levels as throughout this year, as we have seen, but that new sales in the Netherlands will slow down from the strong volumes that we have seen over the last three quarters. Now looking into 2024, we expect the volumes coming from new markets to be softer for the first half, whereas the second half holds strong and high activity levels as four new markets aim to go live in December 2024 or January 2025, being then Uruguay, Austria, Poland, and Singapore. For gross margins, which has been a pressure point in Collection, especially, we expect to stay at current levels for the next quarter, with a potential for incremental improvement in 2024, and that this is based on continued price increases in combination with business mix.
OpEx levels are expected to stay at current run rates in the coming quarter. Over to recycling. Our operation in recycling is diversified, looking at product and customer portfolio, including then materials, regions, and customer size. The demand for recycling materials continues to drive the need for high-quality sorting, and the underlying fundamentals are both commercial but also regulatory-driven for our recycling business. We will now put behind us two extraordinary strong years in recycling, currency adjusted year-over-year, given the estimated conversion ratio of the coming quarter. Again, this is estimations and not a revenue guiding. We expect gross margins to stay healthy in line with normal variation, given product and project mix as previous years. Also for OpEx level, that is expected to stay at current run rate for the coming quarter. Over to food.
Challenging macroeconomic environment and weak harvest have delayed customer investment, and then especially in our fresh food business. We expect 2023 not to deliver growth, and with the current estimated run rate for the next quarter, we expect the top line to decline approximately 9% compared to last year, currency-adjusted. Looking into next year, we do not expect top-line growth given the current market dynamics. External factors are difficult to impact, but for the internal factors, we are taking clear actions. As previously presented by Harald, we have initiated a cost reduction program to take out approximately NOK 350 million from current run rates. That means one-third in COGS and two-third in OpEx, which is expected to get us back to a profitability of 10%-11% in the end of 2024.
We take prompt actions now, and we believe that the drivers in the food market is sound, with growth potential of approximately 6%-7% on a yearly basis. We have taken clear actions on pricing and cost control to mitigate inflation, and we do not expect any negative impact going forward as this is well managed in TOMRA. In addition, the risk related to sourcing and logistical bottlenecks remain low. As a final note, we will continue to be exposed to currency risk as we are reporting in NOK. With that, that's what I had for the outlook, and I think we are ready for the Q&A, Daniel.
Thank you, Eva. Thank you, Tove, and thank you, Harald, for the presentation. We'll now move over to the Q&A. We have quite a few questions coming in already, and there's a couple of questions on the cyberattack, so I just will start with that. It's partly been answered, I believe, but what impact had the cyberattack on your sales organization and your revenues? Secondly, a question from Christian Diebitsch: How much of the exceptional NOK 120 million cyberattack costs are redeemable by insurance policies?
Yeah, so maybe I can take that question. As we have presented today, we are delivering a quarter with good and strong revenues, and we have not been impacted in the business as such by the cyberattack, being able to deliver sales, and producing, and doing service. When it comes to the cyberattack cost that we currently have, and we'll also have more to come in Q4, it's really limited on what we can claim back from insurance of cyber.
Thank you, Eva. We have quite a few questions coming in now on food. I'll start with a question from Gaurav Jain in Barclays. Hi. At the current order run rate in food and current gross margins, it's unlikely that food breaks even at the current OpEx cuts plan. Shouldn't you be stepping up cost cuts in food?
Yeah, I'll answer that one. The way we see it, we target EUR 30 million, and we believe that is sufficient to reach, as we said, 10%-11% at the end of 2024. We expect the rest of 2023 to be quite slow and also, a major, major part of 2024, but we have also said that it is a good place to be in the food sorting market, because the long-term growth rate is 6%-7% within the core categories, categories where we are going forward. We believe EUR 30 million is sufficient to deliver on the targets we have going forward.
We have a question from Markus Heiberg: "How much of the cost reduction in food will come from OpEx, and how much will come from cost of sales?
Of course, it's early in the process, and we are working on it now, but we estimate that one-third will be related to OpEx, and 2/3, approximately, will be related to OpEx. Did I say COGS?
Yeah.
Yeah. One-third on COGS and two-thirds on OpEx. That's the current estimate.
Also from Marcus Heiberg at SEB: "At your Capital Markets Day, you highlighted potential M&A in Food. Is this still the case? Could we see M&A in..." There's a question, yeah, parallel to Food: "Could we see an M&A in Collection Recycling as well, or in any adjacent opportunities?" Let's start with Food.
Yeah, on the food side, of course, there are always, you know, some M&A opportunities coming up. With the current situation, when we now are integrating for a company, it's not the right priority for us to drive M&A, but we will not stop looking into it. It depends on the opportunity that comes, but as I said, for the next, at least 15 months, that will not be on top of our priority list.
I can comment a bit more general. If you then also look at the recycling and collection and the strategies that we have there is mainly based on organic growth. We don't believe that there are large M&A opportunities there, but there might be smaller add-ons linked to, for example, technology. Of course, as part of our adjacent opportunities and our Horizon portfolio, we are continuously, you know, also screening the market to see if there are interesting opportunities, and we'll come back if there is something that comes up.
To continue on food, a question from Petrine Jörgensen: "How can it be that you only now, when problems arise, start to consider the synergies from years-old acquisitions in food? This is a bit hard to understand for an investor.
I can take it because Harald has only been in charge for a few months and not been part of that history. You know, these four acquisitions, as you've seen, happened over the last 12 years. There has been partly integration happening, so from going from four acquisitions, we merged it into two units, Processed Food and Fresh Food. We have had a strategy, which also has been explained previously, where we wanted to balance managing growth and operational excellence. That has then determined also at what kind of speed the synergies were to be taken out. Now we want to utilize a weaker market sentiment to really accelerate this and focus and double down now really on profitability and customer satisfaction.
A technical question from Daniel Haugland: "When will we see the EUR 20 million costs, the one-off costs in Food hit the P&L? Will it come this year or in 2024?
Yeah, maybe I can take that question, Daniel. When it comes to the phasing of the cost, it's too early to give clear indications on when the cost will come. We have a clear understanding of how much this approximately will be, but we will come back to more details in the coming quarters.
A question from Andreas Nygaard: Have you applied any recycling technology in food that would make a divestment a risk to the competitive position of recycling, if we were to divest food?
I can take that one, because first of all, we have no plans of divesting food. We like the food business. I think the work that has been done now over the summer, where we are dig into this segment again, has really reconfirmed that this is a good segment to be in. There is real potentials here to improve the profitability and to really create value from further growth. There is no plans about selling food. However, the way we are structured as a company, and that's actually for all three divisions, we are structured in the way that they are managed fairly independently. We do share some best practices, competence, et cetera, for example, on the technology, but they are fairly independent units, the way we operate it.
Good. One sustainability-related question on this cost program in Food from Venice Shelton. Will the EUR 30 million cost reduction program have any negative impact on TOMRA Food and TOMRA's sustainability targets and progress towards net zero?
No, the way we see it, as everyone has said here, it's still early in the process, but the sustainability impact from the savings, without knowing the details yet, will improve. I talked about, you know, optimizing the manufacturing footprint. That is one thing. We need to look at the distance we're sending equipment. It's about the number of sites. I would believe that the sustainability impact will be positive out of the changes we are planning to do.
Moving over to Recycling. "Can you please elaborate more on the -16% order intake in Recycling? What portion is from metal and mining compared with plastics? Secondly, do you expect lower plastic and waste prices to affect profitability of your feedstock investments, and what is the status on offtake agreements there?
Maybe I can answer that question. When it comes to the order intake decline in recycling, we need to remember that last year was also quite strong. It's not like one segment in the recycling business that has declined more than the others. It's really the variation across the segments. It is important to remember, even if we see a negative decline in order intake this quarter, we are a very diversified business in recycling, operating in many markets and many different segments. Even if you would see a softer market, for example, in Europe currently on plastics, you won't necessarily see the same in other markets where they also are operating with plastic recycling.
If the question was also on feedstock and the prices, it's too early to say. We have said that we will be operational with the two feedstock plants that we have committed to in early 2025. Now we are in the end of 2023, so it's still some time to go before we are up and running, and that will also take some time to be fully operational in those plants. Of course, when it comes to the agreements, this is still a work in progress, and we have high activity on and high interest on the feedstock. We will come back to more information when those can be announced. Not necessarily any big concerns related to feedstock, given the current market.
Moving over to Collection, we have a few questions on that division, starting with Scotland. Question from Adela Dashian in Jefferies: "Could you please provide any update on the exit plans in Scotland?
Yeah. Maybe should I take that one as well?
Mm-hmm.
As we said in Q2, we have done downscale the organization in Scotland because of the postponement of that market into 2025 and then the risk of further delays. We have then downsized the organization. We still have some people working in Scotland, but then providing services for other markets, such as, for example, Ireland. We have taken most of the cost related to redundancy already in Q3.
New markets, Singapore is one coming up. I have a question from Elliott Jones: "Do you expect similar market shares here as we have in Europe?
We don't indicate market share per country. In all new markets, we are positioning ourselves to make sure that we can take a significant share of the market. So far, also in the markets that have gone live and the markets that are due to go live now over the next months, we have been happy and satisfied with the market shares that we have attained.
A question on digital deposit return schemes. A question from Jutta Rosenbaum: Would TOMRA be able and interested in doing a digital deposit return scheme?
Yes, there is quite some buzz around what is called digital DRS. I'm not sure if all our listeners are aware of what that is because all kind of deposit schemes are digital. This is about, could you have a deposit system where you don't use an regular RVM technology and rather you have, you know, use collection systems at home with scanning, for example, the bottles with your mobile phone? First of all, I want to highlight that our division is called Collection. It's not called reverse vending machines. Our focus is actually collection of beverage containers. One of the key targets we have in collection is the number of containers that we are collecting.
Of course, we are constantly looking at alternative collection models if we think they will be more efficient. Currently in Europe and given the current maturity of these kind of systems, it's hard to see that they will play a role there short term, but this is something that we are looking into. I'm very committed that if somebody's going to disrupt our business, that it's going to be us.
Moving more specifically over to France, a question from Marcus Heiberg as well. How do you see TOMRA's position? How is TOMRA positioned to France and other markets moving forward with these digital solutions based on QR codes and digital watermarks? May this cause a shift in your growth ambitions from collection and towards recycling?
Yeah, so I mean, we believe that we have good growth opportunities in collection and in recycling, and also in food after we have come through this downturn. We believe that we are well positioned in France, both to take advantage of a reuse refillable market that we'll think will appear. Also now, because what is France doing when they're not implementing deposit return scheme, is that they want to utilize more the normal collection route in municipalities, which also will increase then the need for sorting at the waste management facilities, because they are going to take out then, for example, the beverage containers there. We also see it's going to give an opportunity in our sorting business. I don't see this decision that has been made in France now really altering our future outlook for collection.
We believe that there are significant growth opportunities going forward there, both in Europe and then also outside.
And how does France's decision that the implemented DRS system impact your view that 1/3 of EU will implement DRS systems within the next five years as you said at the Capital Markets Day? A question from Niclas from DNB.
Yeah, we, you know, we know that these decisions about implementing a deposit return scheme is not a straightforward decision. We know that it's a lot of different stakeholders that take part in those decisions, and there are many different views that are being weighed through it. We are not surprised that there are some bumps in the road versus our targets, and we have never assumed that everything would go straightforward. We do see, you know, good momentum in many countries, so we should not kind of forget that. Yes, of course, it was disappointing to get France announcement this quarter, but it was very positive to get Poland announcing to going ahead.
We have now, you know, over the next months, we have Romania, we have Hungary, we have Victoria, we have Tasmania coming next year. You still see, you know, there is movement in many countries. This is not something that surprised us. It's disappointing, and when we get a decision like that, we look at, you know, "Okay, how can we then still make a profitable and good business in France?" Also based on our experience, it's difficult to see how France is going to meet the target set in the Single-Use Plastics Directive through the measures that they're now putting in place. We don't see this as a final decision.
Based on, you know, the only proven method to be able to deliver on the targets in the Single-Use Plastics Directive, the only proven method is through a deposit scheme. No other countries have shown that you're able to do that without it. No, this doesn't alter our view on the opportunities going forward, nor the targets that we have set.
If a question from Gaurav on the ramp-up costs: If collection revenues are lower next year, and new markets, you know, and less new markets going live, will the new market development cost of NOK 250 million go away?
Yeah, when it comes to the ramp-up cost, as we have said before, we are having a flexible organization, really running new markets, and we are ramping up when it's needed to do that for preparation of new markets. The ramp-up cost will vary between the different quarters or between the different years, based on the activity levels in Collection.
Moving in over and talk a little bit more about the whole group, we have a question coming in from Jens Starkenwünscho: "Understand all three business divisions have huge growth potentials. What is the current TOMRA global market share in each of the three, and where do you want to be at the end of this decade?
I like that question. First of all, you know, we have ambitious targets. We want to be the global technology enabler for circular economy and resource optimization. On actual targets, we have not communicated end of the decade. We have communicated 2027, where we want to be twice as big as we were last year. Of course, we want to also, in five years, have positioned ourselves to further growth in the years to come. On market share, we are not giving out specific market shares, but we have leading positions in all the segments that we are operating in.
We are significantly larger than number two in all the segments that we are operating in, which really then position ourself very different than our competitors, and also can enable us to then afford more innovation and technology developments that will be key to really then achieve the targets we have set.
Steven Walker noted your recent trip to Asia, Tove. What opportunities are there in Asia over the next three to five years?
Yeah. I spent a couple of weeks in Asia in August focusing on China, Vietnam, and India. I think Asia is, of course, an interesting opportunity for us. You know, we already have good sales, both within food sorting and the recycling into Asia, much more limited than on collection. If you look at China, it's an interesting market for both food and recycling sorting. On the collection side, we are now implementing a couple of pilots linked to deposit schemes. We participate in a pilot in Hong Kong and also a small pilot in Xiamen, where we have our operation. I think, short term, it's not going to be a significant development on deposits in China, but the medium to long term, I think definitely it is an interesting opportunity.
Also, what we then see in the rest of Asia is that we see an increased implementation of EPR, Extended Producer Responsibility, and that is typically, you know, the first legislation you need to have in place if you're really going to drive increased collection and recycling rates. Both, for example, Vietnam and India, they do have an EPR now in place for packaging. That creates interesting opportunities for us. I think we need to think different in these markets. I don't think we can copy directly our setup in Europe or the kind of solutions we have in Europe, but the principles will be quite the same. I think if you look short term, short to medium term, the main growth in TOMRA will still come from Europe and North America.
Medium to long term, I think there are really interesting opportunities in Asia, and what we are doing now is that we have small teams there. We are very keen to do some pilot tests to see that we can then really find the right solutions, because we can't expect these countries to go from where they are today, with almost no waste management infrastructure, into the really advanced setup that we have in Europe and North America. It was very interesting, very inspiring, and we have some concrete kind of opportunities there short term to really then pilot and test new solutions in those interesting markets to come.
We're soon running out of time. We have a few more questions, but just want to take, you know, one technical one on the cyberattack costs. Will there be, or what will the Q4 cyberattack cost be that we have guided on that will come, and will this be the end of additional cyberattack costs?
Yeah. When it comes to the cyberattack cost, we have had NOK 120 million this quarter, and then we anticipate, based on how we are running the rebuild structure today and what we need to get up and back into operation again, when it comes to the internal systems, to be at a run rate at the year-end at approximately NOK 200 million. But that we need to come back to with more details when we are reporting Q4.
And with that, we have to conclude this presentation. I know there's a few more questions that are coming in. But please feel free to forward them to myself, investor relations and we'll make our best to answer those questions. The next time we will be here is on the 15th of February where we'll present our fourth quarter result presentation. In the meantime, have a nice day. Thank you for tuning in.