Thank you to everyone, both of you joining us here live in Asker in Oslo actually or joining in, listening at the webcast. This is the 3rd quarter presentation for Tamara. My name is Espen Gunderson. I'm the CFO. Together with me, I have Elisabeth Sandnes, Head of Strategy and Ping Chao, which is our Investor Officer.
Stefan Randstad is unfortunately traveling, joining the Circular Economy Seminar Summit in Japan and consequently not joining in on this presentation. So let's look at the figures. Strong quarter, best ever, $47,000,000 of revenues. And this is actually 21% more than last year. Some inflated by acquisitions and currency, but even if we take that out, the growth is 14%.
So a pretty healthy top line mainly coming from sorting of 20%, but definitely had contribution from collection also with 9%. The gross margin is also improving now at 44%. It's the highest we had in 6 years actually. Again sorting, that's the contributor with significant improvement in margins, stable in collection. Operating expenses is however also increasing.
It's partly about higher activity. It's partly about the acquisition, partly about New South Wales and in general investments preparing for new markets opening up. But bottom line, still 587, which is sorry, 4 0 8,000,000 which is 35% up from last year. Decent cash flow of SEK433,000,000 to SEK435,000,000 in Q3 last year. Headlines in collection is a stable business in the regular markets in Europe and North America, and the growth is mainly coming from Australia, New South Wales.
And in sorting, we have strong order intake, dollars 1,100,000,000 6 percent up organic and the high order backlog of almost SEK1.6 billion. Quick look at currencies. After several quarters with headwind because of somewhat weaker dollar, particularly measured against the euro. We now have the opposite effect where both the euro and dollar is stronger than it was 1 year ago compared to Norwegian krone and consequently also a positive effect from this, We should 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 dollar cross is hitting has been hitting sorting for the in the Q1 of the year.
But all in, in the quarter, top line is up 21% and 35% up on bottom line. And for the year or the 1st 9 months, we are up 13% on top line and 16% on bottom line. Looking at balance sheet. Fixed assets or non current assets is increasing, But measuring against what we had 12 months ago, the increase is entirely explained by New South Wales, which is tangible, the centers and BBC, which is intangible, meaning I mean the goodwill. And taking those out, there is really no significant change, meaning all investment replacement happens more or less much the depreciations that's 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%. And this is due to higher activity. As you know, top line has increased 21% and consequently a 7 percent increase in working capital is, in our view, acceptable. So for this reason, you also see good cash flow in the quarter of SEK433 1,000,000 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 4th and first quarter because of limited investments in pipeline. Say for some investment in Queensland, there's no significant in that respect. And for that reason, it's also assumed that 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. And this is the nature of the business we are working in. If in the existing markets, if you go to a store, you accept to find a machine in there. And if you establish a new store as part of the 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, lots often big orders, but it's more of one machine here, one machine there.
So 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. So this is offsetting some of the positive effect from higher volumes.
So EBITA is close to unchanged, 2.44, up from 2.36 last year. As I said, New South Wales is kind of the new event the last year. They introduced deposit 1st December in 2017. Tomra together with Cleanaway bid for 7 zones, which was all the different zones that was set up in New South Wales and we won all of them. And by this, we have the obligation to establish an infrastructure in New South Wales for collecting all the beverage containers in this state.
And all the way from we got the contract at the end of July last year until Q3 this year, we have been ramping up, but the ramp up period is now concluded. So we now have a little more than 1100 reverse vending machines in New South Wales and placed at a little more than 300 centers. So it will average close to 4 reverse vending machines on this automated per automated center. We have investing, meaning losing money all the way up until 1st quarter Q3. So this quarter, we are around breakeven.
And 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, establishing targets, focusing upon the setup, establishing targets, focusing upon convenience.
And in Queensland, it has been a process where much more responsibility has been placed upon the industry. So the beverage industry has established COEX, which is the scheme coordinator and they have a large responsibility when it comes to establishing the system. And instead of operating network operators or establishing network operator infrastructure, you 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. So there's been separate tender processes for this contract. So we have won 10 contracts in mainly in Brisbane and the larger cities for operating depots where we collect reverse 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. So KienaWave 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 November. Very round figures. We will invest NOK50 1,000,000 in this state.
And revenues, very round figures, we'll assume to be around NOK50 1,000,000 per year when fully operational. We have, of course, other markets coming up also. And as I said in the bottom, TOMRA is a rather stable business in collection. And what's really driving growth is these new deposit markets. And 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. But those 2 that's really worth mentioning now is the one on the screen here. Starting with Western Australia, this is a smaller project, 2,500,000 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.
And there's also the process now where we're not allowed to bid or participate in the setup of the scheme coordinator, which will be have a deadline in the mid of December. So let's see what type of system they choose to go for and whether TOMRA eventually will have a role in that respect. But 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 to double the size of Western Australia with more than 5,000,000 citizens.
Very clear process. The consultation period ended 25th September. They have introduced 4 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? And also when it comes to financing model, will this be a regular sales service markets 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.
And the big one, of course, is England. Then it's 10 times bigger than Scotland and 20 times bigger than Western Australia, 55,000,000 citizens. Michael Gough has announced that this will happen. There is expected a 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. So 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. But 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.
So the process from here is that is currently being debated in the Parliament. And after that, if approved, it will go to the Council. And stakeholders has signaled that a conclusion before the next election in May 2019 is a clear target. So of course, if implemented the way it's drafted, it will be a positive for Tamara, not only for the collection business, but also for the sorting business. Yes.
So in summary, top line driven by New South Wales, which is reported in the rest of the world and in North America. Margin stables, operating expenses up because of investments and a small increase on the EBITDA 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 93,000,000. 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%. It's effect both coming from mix because of the different products, the listing streams, but also higher activity. In general, you can say that the cost of goods sold in Tamra, 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. So that also has been a contributor into this quarter. So even though we have also been investing, employing people, being prepared in sorting and increasing OpEx for this reason. EBITDA came in at 84 €184,000,000 compared to 80 gs last year. Order intake at SEK1.1 billion, 6 percent of organic and order backlog of close to SEK1.6 billion, which is actually up 29% compared to same time last year.
Some comments on the business streams. So let's say the old tonnage sorting firms, the bulk sorting, which is comprises the business established based upon the Odenberg and BEST acquisitions. So this is everything from nuts to potatoes in size sorted by on belts or free fall sorters. Then we have Kompak, which is has the line sorters, sorting mainly bigger objects, more fragile objects, 1 and 1 at the time, typically apples, oranges, kiwis. And then 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's up year to date.
So it's a stable business overall. In Kompac, we acquired this company 1st February 2017. It has been it was a distressed company when we bought it, but we were back in black in last year and the improvements are continuing. So this year is also reporting better profitability than last year. And BBC, as I said, looking at the figure look at the figures in the appendix, it's amazing start we have had with that company and it's performing very well with good growth and very healthy margins.
So it's a good contributor. In recycling, recycling is really the star among the business streams in food for the time being. And regardless of what parameter you look at being revenues, order intake, order backlog, it's significantly improved. There's more than one reason for this, but to point out maybe the most important one is then what's happening in China, the national swan where now the quality requirements in China has increased significantly. Previously, it was 90%.
Now it's 99 0.5%, meaning it's only allowed 0.5 percentage point of contamination in the waste being imported for China. And 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 indices and the new plastic directive we talked about in EU is a direct consequence of this. And 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. And there's no one quick no quick fix. But what we can do is going for deposit on beverage containers and it's going to also ban plastic bags.
And you can focus upon plastic littering, trying to build more sustainable models, so we're using the plastic we have out there. And for this reason, we also see at least a Tierstone benefits thermal recycling in thermal sorting. And also I think it's worth mentioning the focus upon larger corporations initiatives when it comes to corporal 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 just willingness to really invest money into this is much higher. So 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 they have done historically.
So good development in recycling. Mining, a small unit, slightly below 10% of revenue today of the total revenues within sorting. It was larger 5, 6 years ago, but because of falling commodity prices, we have had low activity for 3, 4 years. Still living on breakeven or small plus coming from diamond of diamond orders. Now there is a significant uptick also in this segment though from a low level.
And it's also interesting to see that the demand is coming in several segments, not only the diamond segments, but also for instance industrial minerals. So a positive development also in mining. So strong top line growth in regions, all major regions is contributing and has significant increase in revenues, improved margins, OpEx is increasing, but bottom line is around figures 100% up from last year. And the order situation is comfortable. Revenues in the bottom left of the chart is all time high this quarter.
Order intake is high. It's 3 consecutive quarters with a higher order intake now even if you take out the inorganic effect from BBC. So despite a lot of orders being taken to P and 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 4th quarter will be around 80% of the order backlog we have of the beginning of the quarter. As I always say, this is not guiding.
This is just an indication for you that want to model Tamara on a quarterly basis and our best guess on how much of this that will be delivered the coming 3 months. Looking forward, starting with the Collection Solutions. Also, the coming quarters, it's fair to assume that the base business within collection is stable, maybe slightly slower in Europe, offset by slightly more activity in U. S. But then you get the new south waves 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 collection. One side comment is also that the seasonality in collection probably will be less now because as you maybe remember, we have the seasonality in material recovery in U. S, which has their business season during the second and third quarter when it's summer there. Now getting new South Wales on the Southern Hemisphere will have seasonality the other way around. So this offsets some of these swings that we've previously seen in the performance in Tamra.
But 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 November, meaning during Q4. And in general, we will invest in new markets preparing for new initiatives. In sorting, there is in general a good momentum, particularly in recycling, but overall and with the 80% indication on the conversion ratio, we implicitly say that we will have a strong quarter coming up in sorting as well. Yes, all the ceramic currencies and the impact we have today, it seems like the dollar is somewhat stronger and the euro is somewhat weaker than it was 1 year ago.
So maybe if it continues like that after quarter, it will not be any significant impact from currencies because it's a wash, But that can of course change. One more slide. We had our Capital Markets Day in 15th 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. And it was a little more than 100 participants physically in Oscar and a little more than 400 looking in on the webcast.
We also as part of this communicated new financial targets. And I would just want to very short repeat this, making sure that everyone has received them. Top line growth for the next 5 year period, we assume should be at least 10% on average for the period. Knowing of course that at least in connection we are depending on political processes, But still, adding 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.
So that will maybe be a tougher year. But then 'twenty and particularly 'twenty one could be upside down. On bottom line, on margin, we target at least 18%. We are not there today and it will probably take some time to get there. So 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. So but with the growth that this again will generate, we assume that this is possible to achieve. Dividend, we have a lot of gearing today. We have a good cash flow, a stable cash flow and we are consequently committed to continue to provide a decent return to our shareholders, 40% to 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, so we need to invest.
And we have a significant capability in the balance sheet we have today. But we are not willing to go above or below investment grade, I mean defined as BBB- in Standard and Poor's Index. This will probably mean that we can go to 3x interest bearing debt on EBITDA, maybe as high as 4x in the ramp up periods, but not over longer periods. So that's how we have defined investment capabilities. And rest assured that we will continue to focus upon return on capital employed.
We have a very high return today and we want to continue to have that going forward. So also going forward, we want to have at least 20% return on the capital employed including also the new projects. So that concludes the presentation. We're opening up for questions both from the audience and from the web.
I think we start with a question from Webb. So we have one question from Glenn Kinghau in ABG. You are mentioning an increase in collection OpEx going forward in preparation for new markets. Can you give some flavor on the magnitude of the increase?
Internally, we are now using rolling forecast 6 quarters because it's a dynamic environment. So and this is changing every month because the timing on the different projects. So even internally, we have different scenarios. And for that reason, I can't it's hard to be precise on this because I don't know. In the short run, you should assume that we had a significant cost last year in Q4 related to the establishment of the New South Wales system.
Now we don't have that cost, but we have the regular ongoing revenues from New South Wales. We said when we started the project that we think we thought that it will be very round figures AUD 50,000,000 of revenues per year and based upon an investment around AUD 50,000,000 And with the seasonality that we know there is in New South Wales, the revenues will be somewhat higher in the Q4 than on average. So with these parameters and some assumption upon the margins, you will probably be able to have a guess on what OpEx in Q4 would be. And then on top of that, you have to add Queensland ramp up around figures maybe €10,000,000 and then some additional costs related to other markets, maybe around figures also €10,000,000 So just give you some reference points on how Q4 might look when it comes to OpEx and costs to relate to expansion?
We have not received more questions from the web. So if there are any questions in the audience, we can take that. So yes, please, Knut Erik.
Knut Erik Lorstad 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're seeing in Australia? Or 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. But I guess, Scotland has come further than the other regions. England is following. So perhaps it's a positive for the other regions that Scotland has investigated and done research.
Perhaps they can piggyback on that. Or the other way around, I guess, they can also argue that they might be delayed because they want to have a uniform solution. So I guess it could go both ways.
But I think Scotland, I think it's a little fun being the first one. So I'm not sure they will wait for England. So but let's see.
But you also mentioned that it's not sure that we will see sort of a return to retail. It can be sort of a 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?
Yes. It's in Scotland, as part of this hearing, they draw 4 different scenarios and ask for feedback on this difference being everything from what we know from, for instance, the Scandinavian countries with the recycling centers, still close in the proximity of stores, but need to recycling centers still close in the proximity of stores, but not inside. So let's see where they end up at this scale. They will probably be 1 of the 4 that you have suggested. And I assume also Ingles is looking a lot upon what the Skoklatn 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? Or will it be an obligation for those selling beverage containers to take back and finance themselves the solutions? It's open question. And we just have to deal with the solution that the governments choose to implement.
And 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. But we've 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.
And even though more capital intensive, we are prepared to stand up and then deliver solutions if that's what we 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 you seen 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, etcetera, 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 direct consequence, but it's linked to this. So some countries are moving on despite or independent of what you do. But still 2025 is some years down the road, but there are definitely some kind of processes in most EU countries now looking at this and discussing how they eventually should prepare for this. So yes, discussions have started in many places, but are on several different kind of stages towards an implementation. And 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. It 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. And 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. So 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. So to our knowledge, it's a good solution to implement. But 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.
And last question for me. With regards to throughput system, obviously, we don't have the answers yet with regards to Australia, how the return on investment and margins, etcetera, are going to be for that system. But from Latvia, you have now a couple of years where that system has been in operation. So how would you say sort of that throughput system works in terms of return on investments and margins, etcetera, for you compared to the traditional sale to retail system that you have in other countries?
When it comes to the return on investment, it's a little hard to calculate on the sales and service because the investment is rather low actually. It's not hard, but it indicates extreme figures. So but I think it's the relevant question is maybe what's the net present value of those 2 initiatives. And what we have seen so far that no doubt the TruPet model have 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.
And in finance here, Richard also because you're taking a higher risk do an investment upfront not knowing exactly what kind of volume that will hit you. So you take a high risk and you should be rewarded for that as well.
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. So I encourage you, if you not have seen them to go to Tomra's website and look at them if time allows.
Thank you.