Good morning, ladies and gentlemen. My name is Stefan Ranstrand. I'm the head of the Tomra Group. Welcome to the second quarter 2018 results. With me today, I have our CFO, Espen Gundersen, our IR Manager, Elisabet Sandnes, and our new IR Manager, Bing Zhao. Elisabet is moving on to a new role within the group, Bing will step by step take over this function, but they will work in parallel for time being. Let me come back to the quarter. A quarter with which we can be all pleased. We have a growth on the group level of 7%. So that is coming from both Collection, where we have a good contribution from New South Wales, but also organic growth and from Sorting. Particularly for Sorting, it's interesting to note that we have continuous, really good momentum on the order side.
We are experience good growth in all business streams, and I will come back a little bit deeper to that. But we can take with us a good order intake in Sorting Solutions, good growth in both Collection and in Sorting. Of course, event in the month is that we have a good contribution from the New South Wales new initiative. Gross margin fairly flat, slightly up in Sorting Solutions. Then we have quite a lot of increase right now in operating expenses, both coming from, of course, that we have made acquisitions of BBC, which were on board on 1st of March. It's the first full quarter where we have the results of the operating expenses there. But also that we are having New South Wales operation and building up some other market initiatives and new business development.
We are in a stage where we see that the market is favorable short term and long term, and as a result of that, we are willing to invest in going after that. Looking a little bit at the bigger picture, we do have quite a lot of drivers right now around both Collection and Sorting in recycling. If you want to label it under one umbrella, it is actually the circular economy. The main drivers in here are, for sure, the plastic oceans. The plastic oceans are affecting our lives, and it's very emotional. The population drives a debate here, which, of course, ends up on the table of the politicians. United Nations in December 2017 appealed to all countries in the world to introduce a deposit system to reduce litter and the plastic ocean.
In May 2018, the European Union regulation or regulatory framework are working on a proposal for reducing single use of plastic and to collect used beverage containers to a degree of 90% by 2025. The European Federation of Bottled Waters have gone out with a commitment that by 2025 they are targeting to collect 90% of all bottles sold in Europe. On top of that, they aim for having minimum of 25% of recycled materials in every new bottle being produced. These are big steps, not seen before, which gives us good encouragement when it comes to the future market development. The European Federation of Bottled Waters are thinking about how to collect bottles, how to use collected material. They want to innovate in new material types, and they also want to engage the consumer.
This is, all in all, we think, a very positive statement, a good way to do it. It will drive collaboration in the industry, and if it's lived up to, I think it will be cleaning up Europe quite a bit. With that, also a good possibility for us to contribute to a better sustainable and more sustainable society. In addition to that, we have one more big player, which is China, which until now actually have imported significant volumes of waste from all over the world. Many countries have actually neglected their, should I call that requirement or their duty to install waste treatment facilities in their own countries, handling their own waste. It was simply put on ships and gone to China and they are being handled. China has said, "No, this is not the way forward.
We do not want to be the waste dump of the world." They have launched an initiative some time back called National Sword. That was mid last year, pretty much one year ago. We see clear effects of that. We see that countries are clearly struggling with handling the waste. The waste dumps or landfills are getting full. The mountains of PET bottles are piling up, and the only real way forward for them is to build a local infrastructure to handle the waste. That's not bad. It creates a more sustainable society, and it creates green jobs. It's just to do it. We see this happening, and these are two really main drivers which we are observing and we are seeing driving our business as we speak, and we think for the foreseeable future as well.
With that, I will actually hand over to Espen to talk on some financial matters.
Thank you, Stefan. Starting, as always, with currency. Somewhat mixed picture, where the stronger EUR versus Norwegian krone has partly been offset by the weaker USD. In Collection, those two effects are more or less eliminating each other out. In Sorting, we have a negative effect because of the overweight of USD revenues and the overweight of EUR and, to some extent, NZD cost. This will also be reflected in the comparable currency-adjusted figures that you will see on the next pages. As Stefan said, healthy 8% top-line growth in the quarter. Sorting and Collection is almost identical in size now. Sorting is leading this quarter, but very close. Sorting is also the one that contributes to a slightly higher gross margin in the quarter. Collection is stable in that respect.
Also, as Stefan Ranstrand said, we have an increase in operating expenses in New South Wales. It's BBC, and this is general ramp-up cost in both Collection and Sorting. Looking at the balance sheet, comparing against the balance we had 12 months ago, intangibles are increasing because of the BBC acquisition. Fixed assets or tangible non-current assets is increasing because of kiosk and RVMs in New South Wales. Working capital, here defined as inventory plus receivable minus non-interest-bearing liabilities, are increasing with 7%, 8%, in line with the increase in activity, and also with some additional inventory preparing for the third quarter.
Looking at the cash flow, we have a slightly weaker cash flow than last year, but still, compared to the usual cash flow in the first half, it's okay, so to say, in line with what we have had more or less on average the last five years. Going back to the balance sheet and looking at the interest-bearing debt, it has increased because of BBC acquisition, because of investment in New South Wales, and also the dividend that was paid out in May this year. We are now at NOK 1.8 billion compared to around NOK 1.5 billion in interest-bearing debt one year ago. Again, as a consequence of this, the interest-bearing debt on EBITDA has increased to 1.2 from 0.7 one year ago. Still, a very solid balance sheet, close to 50% equity and pretty much in good shape. Then we move to Collection.
Thank you, Espen. Yeah, it's a fine business, Collection Solutions. If we look back on it, years before 2015, we were on a fairly stable rate with a slow growth, then we had the rapid development as a result of the replacement in Germany, which actually started really in 2015, late 2014, we are still on that, so to say, wave when it comes to especially Europe. If I start with that, you can see the graph in the bottom right corner. We saw the increase in 2015 going up sharply from the year before. 2016 stayed on the same high level, and they were, in our view, stronger than we had anticipated the two first years there. Therefore, we anticipated that 2017 would be somewhat slower, and 2018 we anticipated to be more or less similar to 2017.
As it looks right now, we are tracking spot on there. This still is, in combination, a very good level we are in Sorting Solutions. If we look at the whole quarter, we experienced 10% growth. 3% is organic, and the rest is coming from the new growth driver this year, which is New South Wales. When I talk about New South Wales, I think we can be only pleased. We had a little bit of a bumpy start. We have commented about that, predominantly resulting out of the time it took for us to identify and get approval for all the different sites we had to install. Today, we have about 1,000, round number, of reverse vending machines installed, and they are then in about 250 automated sites.
We will continue to install a little bit more as we go forward, but we should be completed with the total installation and building up by the third quarter. If we look from December 1 until today, we have collected about 500 million beverage containers. It's supported by the public. It is more and more seen as a positive contributor, and these 500 million, many of these bottles would otherwise have ended up in the nature and in the ocean. I think we are in a good way to meet the target set out by New South Wales government, which was to reduce littering by 40%, and I think that's something really meaningful in today's world, especially if we think of what I talked about before with ocean littering.
Looking at the traditional markets, we are experience good situation across the board, strong or better momentum in North America, whilst more flattish in the European markets. In the sum, a 3% organic growth, a 10% growth all in all. There are also a number of new deposit markets coming up, I thought I'll let Espen take that part.
Yes. To get meaningful growth in collection, we usually need support from legislation, new deposit initiatives. Historically, there's always been a lot of initiatives out there. Most of them have failed because of resistance from the retailers, from the beverage industry, and its political processes. You never know the outcome of these processes. Every second, every third year on average, a new market has opened up for Tomra. We always have been cautious of market Tomra based upon deposit initiatives because the uncertainty around outcome, because of, to some extent, the resistance and the political processes that you don't have any control over. That said, we will continue to be cautious on market Tomra based upon this, but it's also fair to say that it's never been so many deposit opportunities out there than we see today also.
It's also probably more likely that more of them will materialize because of the general trends that the resistance against deposit systems has been more and more limited. This is not so controversial anymore, and there's a lot of support for them. What we can do is point out the processes that's ongoing, and we don't know the outcome, we feel that at least four of them is worth mentioning because there is good processes, and some of them are very close to conclude really. The first one is Queensland. Sorry. Queensland is the state north of New South Wales and Brisbane area in Australia. They have a tender process out, we are expecting a conclusion any day. It will be a different process or a different system than we have in New South Wales.
The industry has been given the responsibility to organize this, so it is the beverage industry that runs the system. We will assume that the automation will be less than the convenience, probably not the same as you see in New South Wales. Again, consequently, it is probably harder to find a material role for Tomra in this system. Based upon current understanding, Tomra will be present in Queensland, but we will not have a major role in this. As soon as we get a final clarification from the tender process, we will inform you also about the outcome of that process. It will be soon. Western Australia is also committed to introduce deposit. That process is ongoing. They have performed and also finished a consultation period.
Now it seems like they are looking to Queensland and New South Wales and, to some extent, South Australia to see what kind of system they want to set up. That is, for us, unclear what they will end up with, but we assume that also in this market, pretty soon we will get a conclusion on what type of system. Scotland is the third market where the First Minister last year went out and committed her and her government to introduce deposits. There is a consultation period that ends in September. We assume also that 1st of July is the best guess on the start-up date of this initiative. There has been mentioned several different models. Four has been communicated in a separate paper where both return to retail and return to drop-off points and a combination of this is mentioned.
It is still an open question what type of system Scotland will end up with. We have England, where the UK Minister of Environment went out and also started a process in March. They are currently in the phase of collecting input in the consultation process. Probably will end by the end of the year. This is a little further down the road. Hard to guess, but one estimate is that they will start 1st of January 2021, if this process goes on and concludes in a way, of course, we hope it will do. Collection solutions, financials, as Stefan said, stable in Europe. Good growth in this quarter in U.S., both on sales and throughput, even though the figure looks a lot similar. Again, remember the dollar has been weaker, so that explains that there still is growth behind those figures.
Rest of the world is mainly New South Wales and the activity down there. Stable margins and OpEx increased because of New South Wales and ramp-up cost in general. Going to Sorting Solutions.
The Sorting Solutions, we are, as I have mentioned before, in a good situation when it comes to the market. We have built a leading position over years now, where we are number 1 in the world in food, which is the biggest part of Sorting Solutions, in recycling, and in mining, which is rather smaller. We are happy to see that all business streams, all 3 of them, are developing soundly with good market momentum. I will talk a little bit more about that. In summary, we had a orders growth of 20% in the quarter.
We are reporting an all-time high order backlog, despite the fact that we had a revenues growth of 10%. Organic revenues growth was 4%, rather small if you look at it, but that is now all in the backlog and to come. We included BBC as a first quarter, so to say. They came in in March, as I said before. Of course, they also contribute to the situation. All in all, I think BBC was a very good opportunity for us to get. We are pleased with the performance, and they are playing a leading role in sorting of small fruit or berry objects, like blueberries and some cherry solutions. That is really a good fit to our portfolio, where we didn't have that kind of solutions before. Good fit there and everything. Margins slightly up, but nothing significant to talk about there.
The main highlight, I think, is really the order intake and a revenues growth of 10%. Going a little bit deeper then, talking about food. As you know, food is a global business and increasingly global. We see that with the e-commerce, which is also more and more handling food products over their platforms, it's really literally possible to be anywhere in the world and produce some good food products and to sell them to any markets. This is a disruption which we have not seen before.
If you think that you are a small farmer producing, let's say, honey, not that we sort honey, but it's easy to think of, could also be a pear, and you are doing a special type of products, you can today actually reach out to the global markets with fairly limited costs through platforms like Alibaba, Jingdong, or Amazon maybe, to mention a few of the big names here, and really reach consumers. If you hit that sweet spot of what the market is looking for, you are into business. This is something we haven't had in the past. It was actually not possible.
If we think of that, we see that the demand, the opportunities for food products, not only by that the population is growing and we have more and more rich people on this planet or less poverty, if I may say it that way, that all drives the consumption. We look favorably into this, and we see also the more stringent needs for quality, for productivity, for guaranteeing the taste, for guaranteeing a consistent quality. That all are in favor of what we do in the food. Our sorters are contributing to more consistent quality, to more consistent taste experiences, and overall guaranteeing that the brand owners can both protect and enhance their brands with this kind of equipment, which is actually not possible if you do it by manual sorting.
To give you an example, you could not talk about the sweetness of an apple by looking at it. We have to look at it with our sensors, and we do that. That's very nice, and I think we are here seeing a good growth both now, but we anticipate that to continue unless there are some disruptive changes happening on the political landscape. All we can see right now is a good situation there. Recycling is really participating on the effects of the National Sword and on the overall more environmental awareness. We also see a lot of large corporations now taking a much more active role in going for more sustainable businesses, meaning that they try to work out programs whereby they can use recycled materials when they produce new goods.
We, of course, as a leading player here, having the vast experience both from household waste sorting into packaging waste sorting into e-waste and to end-of-life vehicles, we have the
broadest offering in the industry and can really work with these companies. We are demanded for, in that regard also, to help them drive their processes towards a more sustainable business. That sustainable call comes from, I think, more the leadership of the companies start looking more differently into it. It's not only about the dollars, it's also about developing a more sound business and also, of course, the political pressure with social media and so on. People are more and more aware that they have to work on their reputation. We see this is not a trend that is short-term. This is something that actually accelerating. We can talk about the National Sword being an event that will last for a while.
We think that will last for quite some time, because there's so much catch-up work to be done here in the markets to build up the local infrastructure for recycling. The corporate social responsibility, that's rather accelerating from a rather low level, but I see that is going favorably into the future. We are on a short-term strong momentum, and I think the long-term momentum will also accelerate. If we think more into the future with the circular economy, smart cities, there will be another wave which we'll handle that and talk about more in detail when it comes to our Capital Markets Day September 21. Mining. It's small, but it's not insignificant, and we do experience solid development here. Both recycling and mining are talking about good growth, and all streams are in the double-digit, so on. We are pleased with this development.
I have no reasons to be other than very satisfied with the development, I think we look favorably into how this continues in the future. I will not talk more about the numbers because Espen will do that, and also talk about the outlook then.
Yes. A quick look at figures. The growth is around 4% organic, BBC is included with NOK 63 million. Combined, NOK 1 billion, NOK 73 million on top line this quarter. The margin is up 2 percentage points. All business streams has reported improved margins, there are also some positive effect from some product mix here. Overall, a good performance on the margin side. Operating expenses is increasing as a consequence of the BBC acquisition and higher activity in general. At the order side, we came in with, as we saw, NOK 1 billion, NOK 73 million on revenues. That's almost spot on what we indicated 3 months ago on where we thought we will end on the top line, meaning a lot of orders has been taken to P&L because this is an all-time high revenue.
At the same time, the order intake has been very satisfactory, 20% up in the quarter. Consequently, we again end the quarter with a new all-time high backlog on almost NOK 1.6 billion. The conversion ratio is estimated to 70%, meaning revenues in next quarter is assumed to end up around 70% of the current order backlog. As I always say, this is not a guiding, just an indication for you that want to model Tomra on a quarterly basis. Outlook. As Stefan touched upon, it's stable in Germany. The 2 first quarters this year is more or less in line with the 2 first quarter last year, we also assume that trend will continue for the next 2 quarters. This also goes for the other markets. Base business is rather stable in Tomra. No significant swings expected for the next 2 quarters.
Of course, New South Wales will come on top. The ramp-up period will end during third quarter. We will be close to break even in third quarter, fourth quarter will be profitable, both because the ramp-up period is over and then we also go over into the summer season with higher activity. Because of all the opportunities out there, Tomra needs to invest, we will employ people, we will be present. The biggest mistake we can do now is probably not being prepared. This also has some financial consequences, you should expect, as you started to see this quarter, that also coming quarters will be subject to more operating expenses. Exactly how much on the timing is very much depending upon how the markets, and which markets develop and so on.
Higher activity will also mean something for the P&L going forward. On sorting solutions, there is good momentum in all business streams, and based upon the indication we gave, 70% of the NOK 1.6 billion order backlog, you will see that also it seems like a record quarter is coming up in third quarter. On sorting, we get some question on this trade dispute, trade war, China, U.S., and so on, whether that will influence us. So far, we have not seen much. We have production in China. We have sales in both China and the U.S. There might be some minor disturbances, but nothing significant to report so far. The end of this, no one knows. Of course, we follow and monitor the situation closely. I may come back on later quarters if there are anything additional to communicate in that respect.
Currency situation is, as always, dependent upon U.S. dollar and euro. Actually, within today's exchange rate, it seems like it gets some tailwind in the third quarter because of a very weak U.S. dollar third quarter 2017. That remains to be seen. It is only two weeks behind us in the third quarter. There are many weeks left to be going to report third quarter. With that, we end the presentation and we open up for questions. There is no one in the audience, so it has to be from the web.
Yes, we do have some questions from the web. First question is from [Fredrik Casa], company unknown. How is the outlook in Japan?
I can take that one. Japan is and I assume we are talking about the collection solutions here. I will focus on collection. I can mention briefly that we have a good situation in sorting also in Japan, both when it comes to recycling, where we are strong, and we also have good activity levels in food. Mining, I am not aware of. I do not think there is any mining activity there. If I zoom in on collection solutions, it is an interesting market because that is one of the only markets where we can talk about a certain success, despite that it is not a deposit market. We have been working there for some 10 years now. We used to be quite struggling to get some response from the market, and used to have an install base of about 300, 400 machines.
I think as we look today, we are a little bit north of 1,000 machines. We've had a good development there. It's nothing really moving. Again, there is no regulatory drive in the market. It needs all to be on voluntary basis where the industry, i.e. retail or recycling industry, are looking for this, and that makes it slower. There are some things in the future, looking at Tokyo 2020, might drive some needs. There are also some new, fresh discussions going on on political side, and of course, that could influence and change it. There is no major shift. We are having a leading position. We're having a fairly stable position in Japan.
Thank you. A second question from Frederick Casa. Any new deposit states in the U.S.?
Since you had deposit before, I'll let you take this one, too.
Yeah. I wish I could communicate a long list of new potential opportunities in the U.S. Unfortunately, that's not a reality. It's a rather stable market. You have deposit. It mirrors the political map. In the blue states, where you have the Democrats, it's usually have deposits. In the other states, you don't have, and that's been the case for several years. Don't expect any significant changes in the near future when it comes to U.S.
Thank you. A question from Mikkel Nyholt with Carnegie. Depending on how the new markets may be designed, please give some flavors on your thoughts on Tomra's balance sheet and financial position to meet such strong growth.
I think you have to take that one, too.
Yes. Of course, it's an interesting question, we also internally try to model different scenarios here. It's a difficult task because, as you all understand, there are opportunities out there, some of them could be rather costly, meaning we have to invest to execute upon them. It's mainly in Collection where the need is visible today. There has been some tendency, at least the last two markets in Collection has been throughput markets where Tomra has owned and operate infrastructure. It's more capital intensive, but with also with some opportunities. The first question is which direction the new markets will take. Will it be more throughput or more traditional return to retail owned and financed by retail? That's an open question, I think different market will go different direction, choosing different solutions here. Also the speed of this.
To try to give you some general indications, we are of opinion that we have a very strong balance sheet today. We have a low gearing because of all the recurring revenues that we have in current business. It's possible to leverage Tomra's balance sheet significantly more than we have today. To mention figures, 3, maybe 3.5 times EBITDA is probably doable without losing control over the company. We are willing to use our balance sheet as long as possible. If scenarios where even more money is needed, we need to think alternative measures. That's far too early to speculate on now. With the things we have in the near pipeline, the situation is comfortable, so to say.
Thank you. We have a question from Eivind Vadang with DNB. How are you positioning yourselves towards the ongoing processes in Scotland and England? From what we can see in media, a competitor machine is being used in both trial systems in the U.K.
Yeah. I think we can say that when it comes to the island area, we have been active very early. We have run trials in Scotland. We have had installations for quite some time. It is natural that we will see a lot of competitors going into these markets. They are not so far away, they are handleable. That's good. We are in favor of an open competition. This stimulates the market in a better way. There are alternative solutions people can compare. We are definitely committed to serve the markets, provided that the systems are something which we find attractive enough and that we can feel that we can contribute to a better society and a better economy, both for the market as such and for Tomra.
We anticipate that there will be a stiff competition here and hence you will also see a competitor testing out their equipment there. I think as we have developed over the last years, quite nicely in the portfolio, we have now a very complete offering where we can have smart city, small footprint solutions. We have small retail solutions, we have hypermarket solutions. We have even industrial solutions. You can say we have an offering for all. I feel that we are at least well-positioned to be a player in these markets.
Thank you. A second question from Eivind Vadang. Can you elaborate on your role in Queensland compared to what is in place in New South Wales?
Why don't you take that one?
I think we answered that as far as we can do at current stage, respecting that the tender process is not finished. We said that we will have a minor role, not major. Knowing also that Queensland is a smaller state, I think it's 5 million citizens compared to the 8 in New South Wales. You can do some calculation and see that this will probably not be a significant unit for Tomra compared to the size of collection in general. I think we have to leave it with that for now.
Thank you. Second question from Mikkel Nyholt with Carnegie. You say very strong short-term momentum in sorting and emphasizes good long-term growth as well. Is it possible to say for how long the current growth may last?
I hope I have not misquoted myself there, but we are experienced really good, sound, especially as I said in recycling and also very strong in mining, but also strong momentum in food. I call the others very strong and food strong, and that's the truth. Let's look then piece by piece. In recycling, we have the main driver being the National Sword, which is now leading to that many nations on this planet really have a big catch-up work to do, and that will take years. That is not over in a quarter. That will take time because it's a huge amount of material that needs to be an infrastructure that needs to be placed up in order to handle this. That we are seeing as a quite strong driver for some time.
Accelerating in recycling business is the corporate social responsibility effect of large corporations, clearly now working towards using more recycled materials in the production of new goods, that's an accelerating trend. That's from a low start right now, but I think that is really for the long term. In addition to that, we must remember that the e-commerce side will contribute to more packaging waste. If you buy an object in a store, in a retail, it will normally have some kind of packaging. If you would buy the same object over e-commerce, it would have an additional packaging, e-commerce is accelerating. With that, we will see additional packaging waste coming. These are the main trends I would like to look into.
We have some specific events like, I don't have exact figures, but I think it's about 15 million cars being entered into the market in China every year. There will also be an end-of-life vehicle business there are demands in e-waste, which are still continuing. We have many sectors of growth in recycling, we rather see that is stable. We should never, however, forget that recycling is exposed to commodity prices. We don't need to go further back than to 2008, 2009, we saw quite a sharp decline because many of our customers found their economic models unviable when the raw material prices went down dramatically because remember, they are competing with virgin material as per their output. That will, of course, be more limited when these corporations go more into corporate social responsibility.
That will also be more immune to these swings when we have the demand to handle the waste locally instead of exporting it to China. There are effects of that. I think the effects will actually be smaller in the future of commodity prices, we should not neglect them. I hope that covers for recycling. When it comes to food, there is an increasing demand. There is increasing globalization. There is increasing demand for higher quality, for better consistent taste and the like, that is not going to change. There's also a drive in the industry to increase automation, to work on cost levels and automate in order to secure the quality consistently.
I think also here we see a long-term trend, slower growth than in recycling because there are bigger events, if I call it, in recycling, a more long-term steady growth I see in food. Mining, I think we are in some sectors here. We are strong in gemstones. We have some good activities in lithium, which we use for battery production, which is also in favor of the trends there. I think we should be careful in talking about trends and so on. Yeah, I hope that gives a good summary of how we see it.
A follow-on question from Mikkel Nyholt that you quite possibly have answered already, but here it comes. Besides China opening borders for waste again, what could cause the momentum to slow down? On the other side, what would happen if, say, Thailand or Malaysia also closed borders?
Yeah, I think right now we see a certain tendency to that. Some of the volumes are shifted from China to some other markets. Ultimately, the big demand for that raw material will again be China. What they then do is that they might shift into, say, Thailand, Vietnam, or Malaysia, which I think is not the right solution. As I said, I think everybody should care for their own plastic or their waste locally and work for a circular economy. If that happens, the plastic will be upgraded to a certain quality level that is then approved as raw material, for instance, into China. I don't think that will have major effects. We'll see some increase in demand in some of these markets probably, but no, it's probably small in the big scale, I think.
Last question from Mikkel Nyholt with Carnegie. Will hiring of personnel for meeting market opportunities be booked to Collection, Sorting, or group? Is it possible to give a bare minimum of the expected OpEx increase going forwards? Is NOK 4 million-NOK 5 million per quarter a decent proxy?
Yeah, this is a difficult one because we have to maneuver, and internally, we actually started to use rolling forecast now because it's a dynamic world, and we have to monitor the situation closely quarter by quarter here. As a general indication, I can say that we will, this year, at least increase within one percentage point effect on the EBITA line, going probably to 2% next year. This will be also a significant swing. Just remember, fourth quarter last year, when we were in the ramp-up of New South Wales, it had a six percentage point EBITA influence. Just illustrating, if we get more than one of these in parallel, the effect can be very big. We have to follow it.
It is nothing that's going to explode earlier, but we have to start to invest, and one going to two percentage point into next year is maybe an indication that can help you, and hopefully it's not too far away. It will be mainly booked in collection, but also a few resources will be on group, but that's minor in this respect.
Thank you. A question from Henrik Nyblom with CapeView Capital. Sorry if you already addressed this in the presentation, but what was the negative EBITA drag from the ramp-up in New South Wales in Q2 and H1, respectively?
It is just the fact that we did not have employees in New South Wales, and we own and operate collection infrastructure, so this has to be built. Building up an organization and installing the centers and getting everything up and running is an expense. Tomra is rather conservative when it comes to capitalizing expenses into the balance sheet. What you find in the balance sheet is the RVMs, the kiosk they're placed in on the direct installation cost. Everything else of overhead and ramp-up cost is charged to the P&L as they occur.
Thank you. A question from [Tomas Trefuer], company unknown. What is the link between Incom and Tomra in Asia?
We have a joint venture with a company called Incom in China for developing, producing, selling, and servicing RVMs for China market. That is the definition. There might also be some small other markets served. We are producing an adapted technology for the China market. If that is needed in other markets, we might also sell it there. That's the main principle. This is a joint venture with them.
Thank you. With that, last question from Peter Rawlence with Pictet. If the EU directive on single-use containers is required by 2025, should we expect a potential bottleneck in RVM production the coming years? Would this acquire investment in RVM production?
As we are set up in production today, we have more of a model where we rely quite a lot on our suppliers. The main value generation for production actually comes from our suppliers, where they produce modules for us, which we then install fairly simply in our machines. If we go back to 2006, we can remember Tomra came from a very small level and could actually already in one year produce 8,800 machines. That was a dramatic ramp-up. We could do that because we had our own facility in Norway and we had a licensed manufacturing in Poland. We are still operating the same model. When it comes to assembly, we are relying on these two capacities.
We are continuing to invest in our own facility and we have done that all the time, so that's not something dramatic here, but we will continue to upgrade it so we can increase the in-house capacity. We have the other support that is the licensed manufacturing, which is more flexible. This is a manufacturing company which is dedicated to do manufacturing for other providers. There I feel that we have a good flexibility in ramping up capacity in short without investing too much. Of course, important is that we invest in time in working on the supply base, that the suppliers are geared up also, if and when it comes. That we are of course doing.
Very last question from Mikkel Nyholt with Carnegie. Looking longer down the road, what is Tomra's market position 15 to 20 years from now? What kind of new trends and material handling peculiarities may be discussed on quarterly calls then?
Thank you for the question. Why don't we take that as a headline for our Capital Markets Day?
With that, we conclude the Q&A from the web, and I'll leave it to you to give some summary remarks.
Well, I think in short, thank you for dialing in or clicking in. It's vacation time. I hope you have a good summer, those of you having vacation. We are pleased with the quarter. We had a growth in both areas, Collection Solutions recording a 10% growth. Of course, the organic only 3%, the rest come from New South Wales. Sorting Solutions also a good growth, 4% organic, and the rest coming from BBC. Highlight of the quarter, New South Wales is doing well. We are now coming towards the end of the ramp-up. The ramp-up should be completed in Q3, and we are satisfied with the development there. We had BBC entering, this was the first full reported quarter with BBC, and we are only seeing positive signs from that unit. Last but not least, a very good and encouraging order momentum in Sorting Solutions.
With that, I think we are done. Thank you so much.