Earnings Call: TOMRA Highlights Robust Growth Amid Market Challenges

image

Earnings Call: TOMRA Highlights Robust Growth Amid Market Challenges

TOMRA (TOM.OL), a global leader in separation solutions, reported a 6% increase in revenue, reaching €326 million in its third-quarter 2024 results presentation. Despite a decline in the Recycling segment, CEO Tove Andersen highlighted growth driven by the Collection and Food segments. Adjusted EBITDA rose by 15% to €44 million, with the gross profit margin remaining stable at 43%. Strong cash flow and a record-high order backlog further indicate positive momentum. TOMRA continues to focus on sustainability with science-based targets to reduce emissions and ongoing restructuring efforts to enhance profitability.

Key Highlights

  • Revenue growth of 6%, reaching €326 million, with Collection and Food segments increasing by 14% and 12% respectively.
  • Recycling revenues dropped 18%, but the company boasts a record-high order backlog.
  • Adjusted EBITDA increased by 15% to €44 million despite one-off costs.
  • Strong cash flow of €99 million and stable gross profit margin of 43%.
  • Science-based targets set for significant emission reductions by 2033 and 2050.
  • New market launches in Austria and Tasmania support Collection growth.
  • The Food division focuses on restructuring for profitability, with €30 million in savings expected by year-end.
  • Full-year growth expectation is in the mid to high single digits, with a cautious Q4 outlook.

Company Outlook

  • Continued growth expected in the Collection and Recycling segments.
  • Cautious but optimistic outlook for the Food segment as restructuring efforts take effect.
  • Mid to high single-digit growth expected for the full year.
  • Strong Q4 expected due to a robust order backlog and improved operational efficiency.
  • Q4 capacity increase costs estimated at €20 million.
  • A €50 million capital expenditure projected for Horizon activities.

Challenges

  • Recycling revenues fell 18% due to softer market conditions.
  • Year-to-date Recycling sector revenues declined by 17%.
  • Negative net income of €10 million impacted by currency costs.

Positive Aspects

  • Record-high order backlog, particularly in Recycling and Food.
  • Food order intake rose 20% to €73 million.
  • Solid performance in existing markets and progress in new markets like Austria and Romania.
  • Successful commercial launch of the R2 product.

Shortcomings

  • Declines in Recycling revenues due to market conditions.
  • No significant recovery yet observed in the Food segment.
  • Negative net financial income due to currency fluctuations.

Q&A Highlights

  • Revenues from Poland, though small, show growth potential.
  • Positive momentum with 8% growth in the US.
  • Significant market share targeted in Poland despite competitive pressures.
  • Awaiting start dates for Portugal's new plans and monitoring Spain’s collection rates.

TOMRA's third-quarter performance demonstrates resilience and strategic growth amid market challenges. With a strong focus on innovation, sustainability, and operational efficiency, the company is well-positioned to maintain positive momentum in the upcoming quarters. Investors and stakeholders can anticipate further updates on TOMRA's progress in the next earnings report on February 14, 2025.

InvestingPro Insights TOMRA Systems ASA (TMRAY) showed resilience, aligning with key metrics and projections from InvestingPro in its recent financial performance. The company's impressive gross profit margins reflect the stable 43% gross margin reported in the third-quarter results, particularly noteworthy given the challenging market conditions in the Recycling segment.

InvestingPro data reveals TOMRA’s trailing twelve-month revenue totaling $1,381.2 million by the second quarter of 2024, with an 8.09% revenue growth during the period. This growth trend aligns with the 6% revenue increase reported in the recent quarter, highlighting TOMRA's ability to expand its top line despite sectoral challenges.

An InvestingPro Tip indicates TOMRA’s sustained payment of dividends for 32 years, underscoring the company’s financial stability and commitment to shareholder returns. This longstanding dividend policy aligns well with the strong €99 million cash flow reported last quarter, suggesting a sustainable foundation for future payouts.

According to InvestingPro Tips, it is noteworthy that TOMRA trades with high earnings and valuation multiples. This could indicate market confidence in the company’s growth prospects but also suggests investors have priced in expectations of continued strong performance.

For investors seeking more comprehensive analysis, InvestingPro offers additional tips and insights, providing a deeper understanding of the company's financial health and market position. Currently, there are 12 more InvestingPro Tips available for TOMRA Systems ASA, offering further insights into its financial standing and market presence.