Thank you to everyone, both of you joining us here live in Oslo, or joining in, listening at the webcast. This is the third quarter presentation for Tomra. My name is Espen Gundersen. I am the CFO. Together with me, I have Elisabet Sandnes, Head of Strategy, and Ping Xiao, which is our Investor Officer. Stefan Ranstrand is unfortunately traveling, joining the Circular Economy Summit in Japan, consequently not joining in on this presentation. Let's look at the figures. Strong quarter, best ever, NOK 2.247 million of revenues. This is actually 21% more than last year, some inflated by acquisitions and currency. Even if we take that out, the growth is 14%. A pretty healthy top line, mainly coming from sorting of 20%, definitely a contribution from collection also with 9%. The gross margin is also improving, now at 44%.
It is the highest we had in 6 years, actually. Again, sorting, that is the contributor with significant improvement in margins, stable in collection. Operating expenses is, however, also increasing. It is partly about higher activity, it is partly about the acquisition, partly about New South Wales, and in general, investments preparing for new markets opening up. Bottom line, still NOK 408, which is 35% up from last year. Decent cash flow of NOK 433, NOK 375 in third quarter last year. Headlines in collection is a stable business in the regular markets in Europe and North America, the growth is mainly coming from Australia, New South Wales. In sorting, we have strong order intake, NOK 1.1 billion, 6% up organic, and high order backlog of almost NOK 1.6 billion. Quick look at currencies. After several quarters with headwind because of, wrong way.
Because of a somewhat weaker U.S. dollar, particularly measured against the euro, we now have the opposite effect, where both the euro and the U.S. dollar is stronger than it was one year ago compared to the Norwegian krone, consequently, also a positive effect from this. Which you also see on the currency-adjusted figures, where both top and bottom line has had some positive effect from currency in the quarter. In the year-to-date figure, you still see that the bottom line has a negative effect, particularly because the euro-U.S. dollar cross has been hitting sorting in the two first quarter of the year. All in the quarter, top line is up 21% and 35% up on bottom line. For the year, for the first 9 months, we are up 13% on top line and 16% on bottom line.
Looking at the balance sheet, fixed assets or non-current assets is increasing. Measuring against what we had 12 months ago, the increase is entirely explained by New South Wales, which is tangible, the centers. BBC, which is intangible, meaning mainly goodwill. Taking those out, there is really no significant change, meaning all investment replacement happens more or less match the depreciations that has been booked during the period. Looking at the rest of the balance sheet, working capital, defined as inventory plus receivable, minus non-interest bearing debt, has increased with 7%. This is due to higher activity. As you know, top line has increased 21%, consequently, a 7% increase in working capital is, in our view, acceptable.
For this reason, you also see good cash flow in the quarter of NOK 433 million and up from last year and high compared to what we have had the last 10 years also. Solidity stays strong with 50% equity. The gearing is rather low, is going down from last quarter, measured as interest-bearing debt on EBITDA. It's 0.8, and it will probably go down also into fourth and first quarter because of limited investments in pipeline. Save for some investment in Queensland, there is no significant in that respect. For that reason, it is also assumed that the gearing will also decrease all the way up until May next year when we pay a dividend. Looking closer to Collection Solutions, 9% up on top line. The base business is flattish, stable. This is the nature of the business we are working in.
In the existing markets, if you go to a store, you accept to find the machine in there. If you establish a new store, as part of quarter-over-quarter, year-over-year, you will usually see the stability in the existing business. A lot of recurring revenue related to service and replacements from now and then. Not often big orders, but it's more one machine here, one machine there. This quarter, it was somewhat down in Europe, mainly Germany, and it was some up in North America, equals this out. The growth is consequently coming from New South Wales. Margin has been stable during the period, but we are investing, so the operating expenses is significantly up. It's partly about New South Wales, but it's also the new deposit markets that are in pipeline, and we need to prepare for.
This is offsetting some of the positive effect from higher volumes. EBITA is close to unchanged, NOK 244 million up from NOK 236 million last year. As I said, New South Wales is kind of the new event. Last year, they introduced deposit 1st of December in 2017. Tomra, together with Cleanaway, bid for seven zones, which was all the different zones that were set up in New South Wales, and we won all of them. By this, we have the obligation to establish an infrastructure in New South Wales, for collecting all the beverage containers in this state. All the way from, we got the contract at the end of July last year until third quarter this year, we have been ramping up, but the ramp-up period is now concluded.
We now have a little more than 1,100 reverse vending machines in New South Wales, placed at a little more than 300 centers. It's on average close to four reverse vending machines on this automated center. We have investing, meaning losing money, all the way up until third quarter. This quarter, we are around breakeven. Going forward, we expect to make money in this market, particularly also because we're going into the busy season, which is also improving performance because drinking consumption is higher during their summer. The other event, so to say, this quarter has been Queensland. Queensland is the state that's north of New South Wales, where they also are about to introduce deposit. They have chosen a slightly different approach to this than New South Wales.
In New South Wales, the EPA, Environmental Protection Agency, had a rather thorough process, were very involved in the setup, establishing targets, focusing upon convenience. In Queensland, it has been a process where much more responsibility has been placed upon the industry. The beverage industry has established COEX, which is the scheme coordinator. They have a large responsibility when it comes to establishing the system. Instead of operating network operators or establishing network operator infrastructure, we see that they have chosen to establish direct contracts with different operators, being the container refund point operators or collection points, as we call them in New South Wales, being the logistic providers, and the processing providers. There's been separate tender processes for this contract.
We have won 10 contracts mainly in Brisbane and the larger cities for operating depots where we collect beverage containers inside centers, which is bigger than the automated centers we have in New South Wales. On average, there will be 10 reverse vending machines per center. Cleanaway will also be present in Queensland, but they have separate contracts on logistics and processing with COEX, and we are not in a joint venture with them in that respect. The system will be live from 1st of November. Very round figures, we will invest NOK 50 million in this state, and revenues, very round figures, we'll assume to be around NOK 50 million per year when fully operational. We have, of course, other markets coming up also. As I said in the bottom, Tomra is a rather stable business in collection.
What's really driving growth is these new deposit markets. We can never market Tomra based upon this because we never know exactly which market will materialize, and it's political processes, so we never know the outcome on this. Those three that's really worth mentioning now is the one on the screen here. Starting with Western Australia, this is a smaller project, two and a half million citizens in Western Australia. They had the consultation period, which has ended in September. They are looking at both Queensland, New South Wales, to some extent Europe, to decide what type of system they will go for. There's also the process now where we're now allowed to bid or participate in the setup of the scheme coordinator, which will be Have a deadline in the middle of December.
Let's see what type of system they choose to go for, and whether Tomra eventually will have a role in that respect. This is one out of several initiatives in Australia, and to some extent, all states and major territories in the process somewhere for establishing deposits. The second one is Scotland. It's double the size of Western Australia, with more than five million citizens. Very clear process. The consultation period ended the 25th of September. They have introduced four different solutions, which they now want to provide to get feedback on. Probably some kind of return to retail system, but a little unclear whether return will happen inside the store or in the close proximity of the stores.
Also when it comes to financing model, will it be a regular sales service market as we know them from Europe historically, or will there be more throughput markets like we have in New South Wales? Remains to be seen. The big one, of course, is England. Then it is 10 times bigger than Scotland and 20 times bigger than Western Australia, 55 million citizens. Michael Gove has announced that this will happen. It is expected, the consultation period, to start very soon, and the estimated start-up is in the beginning of 2021. Of course, we all know the Brexit negotiations and what impact this might have on the British initiatives is impossible for us to say.
This seems to be a clear commitment, but we don't know more than you do when it comes to the political processes in England and what consequence eventually Brexit might have for these processes. Let's see. Seems to be a clear commitment among most of the countries in EU to implement this directive. There is some resistance and discussions from some of the Eastern European countries when it comes to ambition level. In general, there seems to be a high support for the main target, which is to introduce 90% target on beverage containers made of plastic by 2025. The process from here is that it's currently being debated in the Parliament. After that, if approved, it will go to the council. Stakeholders has signaled that a conclusion before the next election in May 2019 is a clear target.
Of course, if implemented the way it's drafted, it will be a positive for Tomra, not only for the collection business, but also for the sorting business. In summary, top line driven by New South Wales, which is reported in the rest of the world and the North America. Margin stables. Operating expenses up because of investment, and a small increase on the EBITA line. Moving to sorting solutions. Again, good growth on top line. Even if you adjust for currencies and acquisitions, we have a 20% organic growth. BBC is included with the figures with NOK 93 million. If you want more details on BBC, you'll find it on the appendix to the report, the quarterly report, where we have included some information on that one. Gross margins are significantly up to now 46%.
Its effect both coming from mix because of different products, distinct streams, but also higher activity. In general, you can say that the cost of goods sold in Tomra, both for collection and sorting, are rather fixed, but you see when you get significant higher revenues, that we get some leverage effect also because some fixed cost components in the cost of goods sold. That also has been a contributor in this quarter. Even though we have also been investing, employing people, being prepared in sorting and increasing OpEx for this reason, EBITA came in at NOK 184 compared to NOK 183 last year. Order intake at NOK 1.1 billion, 6% up organic, and an order backlog of close to NOK 1.6 billion, which is actually up 29% compared to same time last year. Some comments on the business streams.
Let's say the old Tomra Sorting Food, the bulk sorting, which comprises the business established based upon the Odenberg and BEST acquisitions. This is everything from nuts to potatoes in size, sorted by on belts or free-fall sorters. Then we have Compac, which has the lane sorters, sorting mainly bigger objects, more fragile objects, one at a time, typically apples, oranges, kiwis. We have BBC, which is the new acquisition, also into lane sorting, but more the small objects like blueberries to some extent. Slightly down in the quarter, but it is up year to date, so it is a stable business overall. In Compac, we acquired this company 1st of February 2017. It was a distressed company when we bought it, but we were back in black in last year, and the improvements are continuing. This year is also reporting better profitability than last year.
BBC, as I said, look at the figures in the appendix. It is an amazing start we have had with that company, and it is performing very well, with good growth and very healthy margins. It is a good contributor. In recycling is really the star among the business streams in food for the time being, and regardless of what parameter you are looking at, being revenues, order intake, order backlog, it is significantly improved. There is more than one reason for this, but to point out maybe the most important one is what is happening in China, the National Sword, where now the quality requirements in China has increased significantly. Previously, it was 90%, now it is 99.5%, meaning it is only allowed half a percentage point of contamination in the waste being imported for China. As a consequence of this, import of waste to China has almost disappeared.
Each of the previous exporters has to deal with their own waste. Waste is piling up, and there is a demand for recycling coming out of this. In addition, or in combination with this, we also see the marine littering and the concerns about all the waste in the seas, and the Single-Use Plastics Directive we talked about in the EU is a direct consequence of this. You see also other initiatives around the world coming out of this problem, and governments all around the world want to find solutions to deal with this challenge. There is no quick fix, but what they can do is going for deposit on beverage containers, and they can also ban plastic bags. You can focus upon plastic littering, trying to build more sustainable models, reusing the plastic we have out there.
For this reason, we also see initiatives that benefits Tomra Recycling in Tomra Sorting. I also think it is worth mentioning the focus upon larger corporations' initiatives when it comes to corporate social responsibility. A lot of what happened 10, 15 years ago was more greenwashing, where really the focus was really not to increase recycling rates, but the willingness to really invest money into this is much higher. I think a lot will also come as a consequence of these bigger companies' initiatives for creating circular solutions, reusing the plastic in a different way than done historically. Good development in recycling. Mining, a small unit, slightly below 10% of revenue today, of the total revenues within sorting. It was larger five, six years ago, but because of falling commodity prices, we have had low activity for three, four years.
Still living on breakeven or a small plus coming from sale of diamond sorters. There is a significant uptick also in this segment, though from a low level. It is also interesting to see that the demand is coming in several segments, not only the diamond segments, but also, for instance, industrial minerals. A positive development also in mining. Strong top-line growth in regions. All major regions is contributing and has a significant increase in revenues. Improved margins. OpEx is increasing, but bottom line is, round figures, 100% up from last year. The order situation is comfortable. Revenues, on the bottom left of the chart, is all-time high this quarter. Order intake is high. It is three consecutive quarters with the higher order intake now, even if you take out the inorganic effect from BBC.
Despite a lot of orders being taken to P&L, meaning a lot of revenue, the order intake has offset this, and we end the quarter with a high order backlog, almost in line with last quarter, which was all-time high. The estimated conversion ratio is 80%, meaning we assume that the revenues for fourth quarter will be around 80% of the order backlog we have of the beginning of the quarter. As we always say, this is not guiding. This is just an indication for you that want to model Tomra on a quarterly basis, and our best guess on how much of this that will be delivered the coming three months. Looking forward. Starting with TOMRA Collection. Also, the coming quarters, it is fair to assume that the base business within TOMRA Collection is stable. Maybe slightly slower in Europe, offset by slightly more activity in the U.S.
You get the New South Wales effect, as I said, now going into fully operational mode. The infrastructure is in place going into the busy season, will improve performance on top line and bottom line in TOMRA Collection. One side comment is also that the seasonality in TOMRA Collection probably will be less now because as you maybe remember, we have the seasonality in material recovery in U.S., which has their busy season during the second and third quarter when it is summer there. Getting New South Wales on the Southern hemisphere, we will have seasonality the other way around. This offsets some of these swings that we have previously seen in the poor performance in Tomra. As I said, New South Wales will contribute on top line, but at the same time, we will increase operating expenses.
There will be ramp-up in Queensland because they go live 1st of November, meaning during fourth quarter. In general, we will invest in new markets, preparing for new initiatives. In Tomra Sorting, there is in general a good momentum, particularly in Tomra Recycling. Overall, with the 80% indication on the conversion ratio, we implicitly say that we will have a strong quarter coming up in sorting as well. All the systemic currencies, and the impact we have. Today it seems like the dollar is somewhat stronger and the euro is somewhat weaker than it was one year ago. Maybe if it continues like that out the quarter, it will not be any significant impact from currencies because it is a wash. That can of course change. One more slide. We had our capital markets day in 15th of September.
We think it was a success in respect that we managed to convey what we wanted to convey, partly focusing upon the environment Tomra is operating on and how Tomra will benefit from those drivers and monetize based upon the opportunities that's out there, how Tomra has the right to participate and win in these markets. It was a little more than 100 participants physically in Asker and a little more than 400 looking in on the webcast. We also, as part of this, communicated new financial targets. I just want to very short repeat this, making sure that everyone has received them. Top line growth for the next five-year period, we assume should be at least 10% on average for the period. Knowing of course, that at least in collection, we are depending on political processes.
Still adding up the opportunities we have in pipeline, we think this is a fair commitment to make. Of course, each year will be different and maybe particularly in the beginning it will be harder to make this because there is today not any known significant deposit initiative that will trigger significant revenue in 2019. That will maybe be a tougher year. Then 2020 and particularly 2021 could be upside down. On bottom line, on margin, we target at least 18%. We are not there today. It will probably take some time to get there. It's more on the end of the period in a normalized situation, we think this will be possible, because we need to invest and increase OpEx today to meet the opportunities that we assume will materialize later in the period.
With the growth that this again will generate, we assume that this is possible to achieve. Dividend, we have a low gearing today. We have a good cash flow, a stable cash flow, we are consequently committed to continue to provide a decent return to our shareholders. 40%-60% of earnings should be paid out as dividend. Capital structure. Some of the new initiatives will probably be capital intensive like New South Wales. We need to invest, we have a significant capability in the balance sheet we have today. We are not willing to go above or below investment grade, being defined as BBB- in Standard & Poor's index. This will probably mean that we can go to three times interest bearing debt on the EBITDA, maybe as high as four times in the ramp-up periods, but not over longer periods.
That's how we defined investment capabilities. Rest assured that we will continue to focus upon return on capital employed. We have a very high return today, we want to continue to have that going forward. Also going forward, we want to have at least 20% return on the capital employed, including also the new projects. That concludes the presentation. We are opening up for questions both from the audience and from the web.
Okay. I think we start with a question from web.
We have one question from Glenn Kringhaug in ABG.
You are mentioning an increase in collection OpEx going forward.
This is in preparation for new markets. Can you give some flavor on the magnitude of the increase?
Internally, we are now using rolling forecasts 6 quarters because it's the dynamic environment. This is changing every month because the timing on the different projects. Even internally, we have different scenarios and for that reason, it's hard to be precise on this. In the short run, you should assume that we had a significant cost last year in fourth quarter related to the establishment of the New South Wales system. Now we do not have that cost, but we have the regular ongoing revenues from New South Wales. We said when we started the project that we thought that it will be very round figures, AUD 50 million of revenues per year and based upon an investment around AUD 50 million.
With the seasonality that we know there is in New South Wales, the revenues will be somewhat higher in the fourth quarter than on average. With these parameters and some assumption upon the margins, you will probably be able to have a guess on what the OpEx in fourth quarter will be. On top of that, you have to add Queensland ramp up, round figures maybe NOK 10 million, then some additional costs related to other markets, maybe round figures also NOK 10 million. Just give you some reference points on how fourth quarter might look when it comes to OpEx and cost related to expansion.
We have not received more questions from the web, if there are any questions in the audience, we can take that. Yes, please, Knut Erik.
Knut Erik Løvstad from Kepler Cheuvreux. Just a question on Scotland and England and the U.K. There has also been talks that the 4 ministers of the U.K. sort of countries are talking together considering one deposit solution for the entire U.K. Has that been put on the side and sort of each country is going ahead individually, sort of what we are seeing in Australia? Do you think that we will see sort of one common system for the U.K.?
Do you have any input on that?
Nothing firm that they are considering a joint one, but I think it's definitely a willingness from England side. Michael Gove said that they would look to Scotland, and he was also mentioning a uniform solution. I guess Scotland has come further than the other regions. England is following. Perhaps it's a positive for the other regions that Scotland has investigated and done research. Perhaps they can piggyback on that. The other way around, I guess they can also argue that they might be delayed because they want to have a uniform solution. I guess it could go both ways.
I think Scotland think it's a little fun being the first one, so I'm not sure they will wait for England. We'll just see.
You also mentioned that it's not sure that we will see sort of a return to retail. It can be sort of return to something outside the retail stores, the parking lots or whatever, or it could also be a throughput model, or is it likely to be a return to retail?
Yeah, in Scotland as part of this hearing, they draw four different scenarios and ask for feedback on these different, being everything from what we know from, for instance, the Scandinavian countries with the return to retail inside the store. More and then different versions of this into more kind of recycling centers, still close in the proximity of stores, but not inside. Let's see where they end up with this scale. It will probably be one of the four that they have suggested. I assume also England is looking a lot upon what Scotland is doing and looking upon the models that's been presented there. But we don't know more than that, and we don't know where they will end when it comes to the financing. Will companies like Tomra need to play a role when it comes to financing this?
Will it be an obligation for those selling beverage containers to take back and finance themselves the solutions? It's open question, we just have to deal with the solution that the governments choose to implement. We are prepared for doing both. We have talked a lot about this previously. There are pros and cons. Of course, selling machines, doing service upon them is the business we know and done for several years and made good money on. We also proven that take large responsibility owning the infrastructure like we do in New South Wales, like we do in Lithuania, could be a good model for us. Even though more capital intensive, we are prepared to stand up and deliver solutions if that's what they want also.
You also said that there is a commitment from many of the EU countries for this EU recycling or plastic initiative, achieving sort of a 90% return rate on plastic beverage containers. Have they started sort of looking at how to facilitate that in some of these countries? Are they talking about it, talking with you, talking with others, et cetera, in order to prepare for that, or we're not at that stage yet?
I think what you see in Scotland and England as examples, is not necessarily a direct consequence, but it's linked to this. Some countries are moving on despite or independent of what EU do. Still 2025 is some years down the road, there are definitely some kind of processes in most EU countries now looking at this and discussing how they eventually should prepare for this. Yes, discussions have started in many places, but are on several different kind of stages towards an implementation. As I said, it's never given, the outcome of political processes. You can only point out what's happening here. It seems to be a lot of commitment around this new plastic economy directive. I think the discussions remaining is about ambitions level. Is 90% the right target, and so on.
That's at least what we get out of this talking to people being close to the process.
To add on to that, what we have seen is obviously a flurry of newspaper articles across any geography really, in terms of on the back of the EU initiative. I don't think it's a coincidence that we're talking about collection rates in a higher number, given that we need to establish sustainable infrastructure locally now that we cannot, as Europe or the U.S. export to China. These things come at the same time. Definitely don't think it's a coincidence, in terms of the targets. I think it's ambitious and what you can see is that so far, there has not been higher than 90% collection rates from any other system than a deposit scheme.
To our knowledge, it's a good solution to implement, quite surely the beverage industry will look into this from a producer responsibility angle, because that's also called upon in the draft regulative as one of the solutions in order to get to a higher return rate.
Last question from me. With regards to a throughput system, obviously we don't have the answers yet with regards to Australia, how the return on investment and margins, et cetera, are going to be for that system. From Latvia, you have now a couple of years where that system has been in operation. How would you say sort of that throughput system works in terms of return on investments and margins, et cetera, for you compared to the traditional return to retail system that you have in other countries?
Yeah. When it comes to return on investment, it's a little hard to calculate it on the sales and service because the investment is rather low actually. It's not hard, but it becomes extreme figures. I think the relevant question is maybe, what's the net present value of those two initiatives? What we have seen so far that, no doubt the throughput model has a higher net present value. It's more capital intensive, but you take a bigger responsibility and set up the right way and with the right volumes, it has a higher net present value for us than the regular sales and service models. In finance theory it should also, because you're taking a higher risk, you do an investment upfront, not knowing exactly what kind of volumes that will hit you.
You take a higher risk and you should be rewarded for that as well.
Thank you.
Thank you. Do we have more questions from the audience? Okay.
Okay. Thank you for joining us. As I said, we are proud of the capital markets day that we had. Those presentations are still on the web, I encourage you, if you not have seen them, to go to Tomra's website and look at them if time allows. Thank you.