Earnings Reports: NOS and TOMRA Systems Reveal Q2 2024 Performance

NOS, S.G.P.S., S.A (ZONNF) Q2 2024 Earnings Call Transcript

Nuno Vaz - Bernstein António Seladas - AS Independent Research José Antonio Suárez - CaixaBank Ajay Soni - JPMorgan Mathieu Robilliard - Barclays Fernando Cordero Barreira - Banco Santander Hi, good morning everyone. Thank you for making the time and joining the call. As Miguel mentioned, let's go through a couple of highlights from the quarter and then happy to put up any questions you might have. I mean three fundamental questions for the quarter and also building on our previous quarters. Firstly, and I think very importantly, our focus on strategic execution and operational discipline remain very strong and I think we see that in the quality of our services and the positive operational momentum that we are showcasing. That reflects obviously in a very strong quarter in terms of telco performance, both on the B2C and B2B sites, but we'll go a bit into more detail in a while. And then finally, in terms of free cash flow, not only our free cash flow is boosted by our operational performance, but also by a couple of one-off effects that we will go into a bit more detail afterwards. With that in mind, let's go into our telco performance. Just to give you a quick overview and highlight the main numbers of the quarter, revenue wise, we grew at 4.7%, which reflected in an EBITDA of 4.8% growth and EBITDA per leases of 3.8% growth to €156 million. The slight difference between those reflects increase in costs on the lease side, which is driven by more units in terms of towers and also a slight increase in the unit price of those. On the CapEx side, we continue the trajectory that we've been posting in the past quarters, namely with a reduction of 5.1% in total CapEx. I will also review the average of the numbers in a bit. Overall, in the bottom line, our underlying net income increased by 9.3% and underlying free cash flow grew at roughly 18% for the quarter. In terms of return on capital employed, which is a metric that we pay very close attention to, we are today at the end of the quarter at 12.7%, a good 2.2 percentage point increase for the quarter year-on-year. Let's go a bit into the revenue perspective. As you see here, our consolidated revenue grew at 4.7%, as I mentioned before, with the telco posting a 6.1% increase and the audiovisuals and cinema business delivering slower-than-expected numbers for this quarter. This was mostly driven by the calendar of the blockbusters that we expected for the quarter, and we postponed for follow-up quarters. Although we are already seeing in some of these blockbusters, namely Inside Out 2 very positive numbers this quarter. We expect us to be able to recover throughout the year the numbers that we expect to drive. On the B2C side, we continue to see very good value management, particularly on the post mobile side. Pricing is also helping the growth and our continued push towards convergent offers. Day-to-day already represent roughly 70% of the residential connections and we continue to see very positive momentum there. On the B2B side, a very solid performance this quarter, 8.3% growth overall in the segments. In all the sub-segments, we continue to grow, particularly this time in the corporate side, the higher company segment. Very sound recurring revenues growth, although also some growth this quarter on projects and resell. We see that also having a very positive momentum. And finally, on the wholesale side, we also had very strong growth in the 17% range, a lot of it driven also by mask hauling services. So when we look into our EBITDA performance, again, very interesting growth at 3.8%. Overall margin remains fairly stable despite the weight of the poor performance in the audio visuals and entertainment, but overall still at 38%, very, very robust margins. In terms of CapEx, as I was mentioning, we continue the downward trends. As you might see, our expansionary telco CapEx reduced by 40%, so very significant decrease in line with what we've been communicating and expecting, namely by phasing out the 5G program. On the telco customer side, we've seen a bit of increase mostly due to more CPE refurbishments. So it's something that we were expecting in terms of performance overall. Finally, in terms of decomposing some of the components of our EBITDA of operational cash flow, as I mentioned before, some effects on the leasing side, an increase of 10%, roughly again, as I mentioned, by the number of units. On the OpEx side, a couple of effects. Firstly, in the direct costs, the growth that we've seen in the B2C side and also -- in the B2B side, apologies. And also on some equipment sales in B2C drove cost of goods sold up mainly through these equipments. On the B2B side, we also see, again due to growth, some increase in IT costs and some rental costs. On the non-direct side, energy costs as expected rose in the quarter compared to last year. An important effect on this was not only the unit cost, but also some regulated tariffs that have increased in the meantime. So our expectation is, again, on the regulated side for those to maintain, but the unit cost of energy, what we're seeing in terms of futures should drive down a bit the pressure going forward. Again, I would like to highlight that on this side, our transformational program that we are still very focused on has been able to mitigate a significant amount of the inflationary pressures that we face, namely on the people side. So in everything related to customer service and operations, we've been able to have a very good performance. Very quickly, in terms of FTTH coverage, we've increased by 8 points overall the coverage with an increase roughly in total households of 80,000. And on the 5G side, we continue to push and finalize, if you like, the 5G program, which we live in Portugal in terms of coverage, reaching now-a-days virtually the whole population at 96.5%. In terms of RGUs, a bit of the same trend that we've been seeing in the past quarters, namely the prepaid, we continue to push to the convergent side, so pushing some of the prepaid RGUs to postpaid. On the pay TV side and broadband side, we see some continued momentum still with our satellite business being put in a way to fix broadband and pay TV. So this is where we fixed FTTH, I mean. So that's where you see some of the decrease again. I mean, cinemas, as I mentioned before, suffered from timings of some of the blockbusters. So overall, 35% decrease in the number of tickets sold and with a reflection of 30% in terms of revenue. And then finally, when it comes to financial performance, our net income grew by €35 million this quarter, mostly due to the sale of the towers. I would also like to highlight some variations on the D&A, mostly driven from some policies in terms of IT and some network depreciation rules internally. On the free cash flow side, again, underlying free cash flow growing at 18%, but if we take into consideration both the activity fees and the solid sale, we have a total increase of roughly €99 million. Again, on this side, what we see on the underlying free cash flow, mostly an impact in terms of interest, which we expect to stabilize and slightly start to decrease as you go along. Here, we still have an effect from last year in which rates were still going up. Now they are fairly stable as we see in this page. In terms of average cost of debt for the quarter, we were at roughly 4%, 4.06%. Again, this will gradually, depending on the way interest rates evolve will slightly lower. Overall, very strong balance sheet at 1.71 net financial debt-to-EBITDA after leases, well below our strategic funding target of 2x and our liquidity position at roughly €330 million, so quite comfortable with the band ahead. With that, I would end the presentation and maybe hand over for some Q&A. [Operator Instructions] We will now take the first question from the line of Nuno Vaz from Bernstein. Nuno Vaz I have three from my side. They're all quite a bit strategic. Two on mobile and one just on the fiber rollout. First one on mobile, you've once again had a quite good performance in terms of postpaid net adds this quarter. I understand this is driven by the 5G investment, but could you explain what the average consumer sort of sees in their day-to-day that in your view makes them switch to NOS? Do you think you have a significant advantage in terms of speed and just reliability versus your competitors at this point? And then second question also on 5G, but specifically on the mid band, because latest we've seen from the regulators about half of the active 5G sites are mid band versus low band. Do you think your advantage on mid band is even higher than your competitors? What sort of the rollout, if you can talk about it, in terms of mid band 5G? Do you have it enabled in all the sort of cities, urban areas in Portugal? Is that the ultimate goal? Is there more still to roll out? Finally, just very quickly on the FTTH rollout, because I was surprised when it was mentioned that the network sharing agreement with Vodafone has not started yet, because I had assumed that was the reason for the speed up in HomePass in the latest quarters. Is there anything we can expect to change in terms of the pace and potentially CapEx once this sharing agreement starts in the second half of the year? Miguel Almeida So going into your questions, maybe going firstly on the mobile side. In terms of convergent push, well, yes, so firstly, definitely we have the strongest 5G network in Portugal. So we from the older studies that we have, the clients perceive that increased quality aspect. And so they are that obviously creates a good momentum especially when we push our convergence. So clients are more willing to bundle up and to push into complete offerings within our landscape. So that's the large majority of the move into postpaid. Going maybe on the FTTH side, you mentioned a couple of aspects and the surprise around Vodafone or the agreement. So on that front, we continue to expand our FTTH presence, be it through sharing agreements or in our own, if you like HFC networks or building out over those. This quarter, as you've seen, we have a total increase in the overall landscape of 77,000 households in the total footprint. And we have -- and I don't know maybe you need to clarify the question on the Vodafone swap. We have two agreements, as you know, one that is already in place and the second one that we recently announced the 1.1 million additional household, which will play out in the upcoming years. So we continue to have that plan in place and we continue to look for opportunities for other ways to expand FTTH. Nuno Vaz Just to clarify on the FTTH question, because my thinking is that the first deal with Vodafone had already finished. And that you had -- the second one had been already active and that might have explained the accelerated pace in the FTTH rollout. So fundamentally, the question is once the second deal with Vodafone starts in the second half of the year, would the FTTH HomePass accelerate even further? Or potentially easier to ask if you have any target of where you see, for example, at the end of 2025, the percentage of HomePass being FTTH. Is it fair to say a number like 90% would be FTTH by 2025? Miguel Almeida Yes. I think that will be fair to say. It's our expectation. I would like also to highlight that besides Vodafone, there are other third party players in the market, and we are actively exploring efficient ways to expand our FTTH footprint. So besides Vodafone, we explore the expense of our network throughout those players as well. Nuno Vaz Can I ask very quickly, because ANACOM forced [LT mails] to open in some smaller rural municipality access to their network. Is that already included in this? Do you have access and is this already included in your numbers? We will now take the next question from the line of António Seladas from AS Independent Research. António Seladas I've three. First one is, if you can comment on your performance over the second half. I know that, you don't like to talk about it. Nevertheless, taking consideration the current environment, it seems fair to expect the kind of excess performance in second half similar to the first half. But maybe I'm just missing some caveats, some aspects that could undermine our performance. In fact, you just mentioned that the energy cost could be lower. Second question is related with cinema and cinema turnover. There has been some volatility in turnover on a quarterly basis. I don't know if you are considering some cost reductions and fixed cost reduction or not. And last question is like with the traction on your offers related with broadband plus mobile, just without pay TV. How it is performing or are you noticing any traction increasing or not? I don't know if you can comment on idea of also to offer pay TV at least according to the price. If you could comment on this. Miguel Almeida Maybe let's go one-by-one. Firstly, in terms of performance for the second half, our expectation is to keep the momentum that we've been posting in the past. The underlying drivers are there. We don't have any particular information regarding new competitors in the market or timings for their entrants. Until further notice, our expectation is to keep throughout the year the same momentum that we have. Then on the cinema side, obviously, it's a business that has a bit more volatility again due to the drivers of the business winning the ones that affected us this quarter. Naturally, we're always looking into opportunities for cost reduction and to improve this activity. As an example, driven by this lower attendance volume, we've taken the opportunity to optimize HR and personnel at the cinemas. We took the opportunity as well to push some refurbishments that were due, to ensure that by the time that the business is not picking up again in terms of attendance, we are able to maximize that attendance and have the lowest friction possible for our customers. Overall, within the transformation program that we have running, naturally cinemas are also within scope and we are actively looking for opportunities to do so, namely pushing digital sales, which lower our fixed costs through our app, which they account already for more than 50% of sales and other operational efficiency measures. Finally, in terms of broadband and mobile, in terms of expectations, we haven't seen I mean, it's the numbers we posted this quarter and the previous quarters. There's a positive momentum. Again, on the mobile side, mostly on convergence due to the value that we are able to deliver to our customers by bundling up. On the broadband side, we haven't seen any relevant change in the trends. So those continue to be positive in our view, especially in a market that has such a high penetration as ours. Maybe finally, on the DG side, I mean, we have no information on those aspects. So we just have the public information, which is fairly limited. So nothing to add there. We will now take the next question from the line of José Antonio Suárez from CaixaBank. José Antonio Suárez Congratulations for the results. If I may have a couple of questions. One is related to previous questions regarding the expectation performance in the second quarter, if you could provide a little bit more visibility because you have like an EBITDA growth in the first half of 5% -- 5.5%, then it - thus this was dragged down by the evolution of seminar, which should be a little bit more positive in the second half. So do you think that this 5.5% could be a good reference for the EBITDA growth of the year? Or do you expect a slightly weaker evolution in the second half that could drill down a little bit this growth of 5.5%? This would be my first question. And then the second one, it's related a little bit in terms of expected dividend because I was wondering if you could provide a little bit more visibility what are you going to do with the cash in from the sale of the Cellnex Tower, if you're going to distribute an external dividend in 2025 as you did in 2023 with the sale in the previous year? And if you're going to do this distribution of the external dividend, if you would add the activity fees circa €60 million, €70 million from ANACOM, if you would add it in the extraordinary dividend? Miguel Almeida On the first one, I understood it, if we -- a little bit of noise in the background. Antonio, can you put your phone on mute. I think it's interfering. Miguel Almeida So regarding EBITDA activations performance for the rest of the year, I would say that the fundamental trends that we've been seeing are the ones that we expect to maintain throughout the year. Without having a specific guidance to provide, on the revenue side, we continue to see this positive trend, especially in the segments that we've mentioned both in B2C and B2B. On the cost side, we again -- with the -- I would say with the highlight of the energy costs, which obviously have some volatility embedded and have increased vis-a-vis the past. We expect the same drivers to keep in the same proportion. And then on the CapEx side, as we've been commenting, we expect continue our downward trend. So we don't expect any particular changes in the magnitude of results that we've been posting in the recent past. Regarding dividend, as you know, we are committed to a sustainable dividend policy, but this is a fundamental Board decision. This is something that the Board will have to decide in due time. We don't have any specific comments at this point to provide. We will now take the next question from the line of Ajay Soni from JPMorgan. Please go ahead. Ajay Soni I've got a few. Just firstly on your lease costs. I think you said they're around 10% high this quarter. I'm just wondering if that kind of rate of growth should be expected into 2025. I understand quite of that is inflation, quite of that is going on to more towers. I'm just trying to understand how that going forward into 2025. The second one is around your CapEx drop off. I think it's obviously really clear, where we get that CapEx drop off coming from. I just wanted to understand, is there any inflationary pressures on the remainder of the base, which you don't expect to come down from the expansion CapEx. Just the remainder of the CapEx space, is there any inflation pressure you're seeing there? I just kind of highlighted there are inflation pressures with wages. If you could just give some general comments on maybe the competitive and pricing environment within the region, that'd be really helpful as well. Miguel Almeida On the first one regarding lease cost, there are two effects on this increase. The first one is the number of sites that we have in the base. As you know, we throughout the time, we've been selling some sites to some small portfolios to Cellnex and this reflects that increase in units. On the second hand, there is, in fact, a small increase on the unit price, which is always capped to 2%. These two factors combined represent the amount that we've posted. On the CapEx drop off, I'm not sure I understood your question, but mainly trying to build on that. We've been again -- on the network expansion side, the reduction comes mostly from the phase out of the 5G program. So the large majority of the rollout is done. Again, we continue to do network on the fixed side network expansion. That is in line and the level that we have today is the one we expect to keep up in the upcoming months and quarters. On inflationary pressures, yes, naturally, there are some inflationary pressures on the CapEx side, mainly in IT and some of the operations that we have on the network. Through our transformation program, namely artificial intelligence, we are trying to push for smarter ways to address some of those issues and reduce those costs. We're very bringing a lot of attention to that, but we expect them to increase at a slower rate than inflation and obviously revenue side as well. Finally, in terms of pricing environment, the market continues to be quite rational. We haven't seen any changes in the dynamics themselves. Again, on the B2C side, there's a particular dynamic, which is very connected to inflation itself and to the ability that we have to increase prices. On the B2B side, we don't have the same regulatory ability to do so. But still, we see positive price increases also due to inflationary pressures that overall the system in the market is having, and we are able to push that to our clients. So but besides those, that were the same in the previous couple of quarters, we haven't seen any particular changes. We will now take the next question from the line of Mathieu Robilliard from Barclays. Mathieu Robilliard I had a few questions. Actually one is a follow-up from the previous question with regards to the trajectory of the lease costs. The way I would ask you this, you have sold another small portfolio of antennas or towers as you highlighted. Would that also have a further impact on the trajectory of the lease cost? And if you could quantify that going into 2025. The second question was about your mobile network strategy. And I'm trying to understand besides the 5G upgrades, if you are expanding the number of towers in absolute terms? And what is driving that if that's the case? Is it a growth in data traffic? Or is it more a question of coverage? And if I can follow-up, I'd be curious to know what kind of data growth you're seeing on your whole network. Is it still growing fast? Or is it decelerating as we've seen in other markets? Another question on energy. I don't know if you can share with us what is kind of the average price per hour per megawatt that you're paying or at least how it evolved year-on-year? And very lastly, on the competitive environment, as we've seen the deal between Vodafone and Nowo has been blocked by the antitrust. And I guess my question was, how has Nowo behaved in the market since that deal was announced? Were they aggressive, less aggressive? I'm trying to understand if they could change tune now that this deal has been blocked. Miguel Almeida I'm not sure I fully understood the second question, but if you allow me, I'll go through the other ones and then maybe we can come back to that if I -- if you're not able to capture what you needed. So on the lease costs, so yes, the sale that we just did in terms of sites will impact the lease costs going forward because these are additional sites that become live throughout time. And as we ramp up the usage of those, we will have increased lease costs from that side. Again, on the tower side -- on the 5Gs and coverage side, I'll try to answer, but then we might clarify. The work that we've been pushing in terms of coverage remains essentially the same. There's a couple of sites in quite remote locations that we are still building out, but we are far ahead in terms of timing than the program that we have in place to deliver those. We don't see abnormal growth in terms of demand on the network beyond the one that we would expect in other markets. So the natural growth that we see from consumers in terms of data is there. But in terms of capacity, we have a very comfortable position and we don't expect any need to reinforce capacity in the near future. On the energy side, we don't provide specific guidance on those elements. The only thing that I'm able to elaborate is on what you see on the OMIP, on the Iberian market in terms of unit costs. In terms of futures, we expect to gradually decrease, although we see on the spot market some lower costs than we have in place. We are actively looking into opportunities to lower those costs. Again, there's a relevant component of this, which is regulated tariffs that in the past couple of years were quite depressed and now the regulator has pushed those up. We will need to incorporate that into our energy cost, but there's nothing we can do on that front. Finally, on the Nowo side, I mean, as you know, Nowo has a very limited impact on the overall market, because they are geographically constrained. In the past, they've been quite dormant, I would say, in terms of competitive dynamics. We haven't seen any change in that since the news that the deal was not going forward with Vodafone. Nothing really relevant to add there. From the recent numbers from ANACOM that were published, they are still losing market share, both on the fixed side and the mobile side. We haven't seen any reactions since then. Mathieu Robilliard Now you did understand my convoluted question on data. We will now take the next question from the line of Fernando Cordero Barreira from Banco Santander. Fernando Cordero Barreira The first one is related with the B2B segment. I'm interested in understanding which are the major drivers behind the growth that you are facing on this segment? And you have commented that the big corporate sub-segment is the one with the best traction right now. But I would like to understand if you are obtaining that growth from increasing the share on the share of your wallet in the existing customers or are you gaining new customers? At the end, which are the services that are driving the growth, if are those related with connectivity or are those more relatively valuable services on top of connectivity as well? And also if you can point us a little bit of what do you expect in terms of these trends going forward in the B2B segment? The second question is related with the B2C segment. I would like to understand in the areas, where you are having already an overlap cable and fiber network, if you are already fully prioritizing the gross adds into the fiber network? Just to understand, if you are still including new clients or having gross adds in the cable network? José Pedro Regarding the B2B segments, what I think the easiest way to explain is that, we're growing essentially in share of wallet and in tech rather than telco in the large corporate segment. We're growing essentially in market share both in the mid-market and SMEs. Going forward, we expect this structural trend to continue and even to be and even to be slightly reinforced in the sense that we're fine tuning our machines to make this growth effort both in tech and in telco more efficient. Miguel Almeida On building out on the B2C side, we've been as you know, we've been pushing the expansion of FTTH to ensure that we have a future proof network. We haven't been explicitly migrating clients on from the HFC to the FTTH network because the technology that we have allows our clients to have FTTH like experience. But we are increasingly installing the new clients on the FTTH network for two reasons. Firstly, because we are expanding into the areas in which we didn't have a presence. So those naturally we're putting on the FTTH network itself. And then for other clients that have specific needs or on higher bandwidths, we install them as well where we have overlap on FTTH. But again, in terms of the overall performance, HFC is still delivering very good performance for our customers. So we expect that to continue in the near to long-term. We'll now take the last question from the line of António Seladas from AS Independent Research. António Seladas Sorry to come again. It's related with your performance attributable in the second quarter. You explained on your press release. But as it was not clear for me if that was your performance was non-recurrent event or it seems more recurrent so, in the sense that the next quarter performance will be similar. Maybe you can explain. José Pedro I think most of it was the most expression in revenues is the highly fluctuating, a mask hauling services business. There are no further questions at this time. I would like to hand over to the speakers for closing remarks. Maria João Moura Landau Okay. Well, thanks once again for listening into the call. If you want to follow-up with the IR team, we're always available. And have a great summer.

Tomra Systems ASA (TMRAY) Q2 2024 Earnings Call Transcript

Daniel Sundahl - Head of Investor Relations Tove Andersen - Chief Executive Officer Eva Sagemo - Chief Financial Officer Good morning from us [ph] ladies and gentlemen. And welcome to TOMRA's Second Quarter Results Presentation for 2024. My name is Daniel Sundahl and I'm Head of Investor Relations. Today, CEO, Tove Andersen, will start by giving you the highlights of the quarter. And afterwards, CFO, Eva Sagemo will dive deeper into the numbers. At the end of the presentation, as usual, we will open up for Q&A for participants in the team's webinar. A link to the team's webinar registration can be found in this morning's stock exchange release. But without further ado, I give the word to Tove. Tove Andersen Good morning from me as well and welcome to our second quarter presentation. Before I dive into the quarterly highlights, I wanted to do a bit of promotion for our Capital Markets Day. We will have a Capital Markets Day on September 5 in Alicante, Spain. There, we will give updates, me and my leadership team, on our businesses and our strategy. You will have the opportunity to join breakout sessions to have one-to-one engagements also with senior management and we will arrange a visit to one of our Food customers. So you will have the opportunity to visit a citrus packhouse in operations and really see live how our sorting and grading equipment is key for optimizing the production there. So I hope many of you will be able to join us there. But of course, there will also be an option to watch it live on the web. Registration closes at August 16. And for more information, please go to our dot.com page. Then let's dive into the quarter. Second quarter 2024 was a good quarter for us. The Recycling division delivered in line with expectations and our estimated conversion rates amid good gross margins. Our Food business also overall delivered according to our expectations but with somewhat higher revenue versus what we had estimated. And then it is Collection that stands out in the quarter which delivered also above our own expectation and I'll come back to that a bit later why that happened. So this gave us revenue for the quarter of €333 million which is flat compared to the same quarter last year. Collection being up 15% and then Recycling and Food, down 15% and 16%, respectively. It's very pleasing to see that we had good gross margins in the quarter, 44% which is 2 percentage points up versus the same quarter last year. And especially, it's pleasing to see that all 3 divisions increased gross margin versus same quarter last year. The improvements are driven by business mix, it's product mix, it's also the price adjustment, especially in Collection and also cost savings in our Food division. Our operating expenses in the quarter was in line with the 2 previous quarter and landed on €101 million. And that gave us then an EBITA adjusted for special items of €44 million which were €2 million down versus same quarter last year. We had a small one-off cost in the quarter linked to our Food restructuring program of €0.5 million. In the quarter, we had a strong cash flow from operations of €34 million. If you then look at the order intake and backlog. The Recycling order intake was down 12% and landed then at €65 million in the quarter. However, our order backlog grew with 9% to €133 million. While the Food order intake was more or less in line with same quarter last year, €83 million and the order backlog is now 23% higher this quarter -- end of this quarter compared to the end of same quarter last year. Combined, this gives us then an all-time high order backlog at the end of Q2 2024 which gives us good transparency and visibility for the coming quarters to come. Then I'll go through the 3 divisions. As I said in my introduction, Collection had a very strong quarter. And I think if you look here on the lower left side, it's nice to see how this business has developed over the last 5 years. In this quarter, we saw strong sales in all regions. And when we look at the new markets, it's especially Romania and Austria that stood out. Romania, as you know, they launched a deposit system end of last year and we have seen the continued high sales in Romania also now in Q2. And Austria will then launch a deposit system early next year for single-use beverage containers. And the sales in Austria came a bit sooner than we had anticipated and was one of the contributors for why we over delivered versus our expectations in the quarter. Another highlight in the month was that we have in the quarter was that we opened our European Distribution Hub. We have grown significantly in Collection in Europe over the last years. And we also anticipate significant growth there going forward. And we have now created a European Distribution Hub in Poland to optimize our logistics and our inventory levels. This will position us well to handle the future growth to come and also, it will reduce our CO2 footprint. I talked quite a bit about innovations in the last quarters and how we will drive also growth in existing and new markets through innovation. And I talked quite a bit about the multi-feed solution, R2, that we have launched which is a new multi-feeds solution. And also, I mentioned before the RollPac. And highlight in the quarter has been that our RollPac solution have actually won 2 design awards, the iF and the Red Dot design award for the functionality and the innovation and the outstanding design. So RollPac is what you see here on the picture. And what is -- kind of what are the problems and benefits RollPac is providing our customers? It's really 2: One thing is that it optimizes how many beverage containers you can store per square meter because it uses the height. And of course, for retailers, square meters are very expensive because they want to use that to sell products, not to store empty beverage containers. The second thing with the RollPac is that the customers can use these roller cages, so it's the red one you see on the picture. Those roller cages, they also use for many other products into the store. It's easy to handle. It also then means that their employees doesn't need to lift heavy bags. So also, it's a convenience for the employees of the customers. So the RollPac so far has been a success on the design and the awards but also it's been a commercial success. And so far, we have sold 750 -- or actually more than 750 RollPacs and Austria is the main market for it currently. Then on the bottom right here, as always, we have included the countries that have a firm date communicated regarding going live with the deposit system. The list is the same as we had last quarter. So I'm not going to go through that in detail. But of course, it's important to remember that there's always political process is linked to this and that there might be delays. Then moving over to Recycling. So Recycling delivered a quarter in line with the expected lower backlog conversion that we estimated last quarter. And why is there a lower backlog conversion? It's really that we have a higher share of large projects in our order backlog and those typically have longer lead times than smaller projects. However, it's nice to see that our order backlog is continuing to increase. And that we end this quarter actually with the highest order backlog we have ever had in our Recycling business. Looking at the market sentiment in Recycling. There is still a soft market sentiment in the Recycling segment, especially plastic but also in metal. However, waste management which is our main segment in this business, is still healthy. And that's also why you see that still we have a good order intake and that we have a good order backlog. From the picture or the graph down on the right-hand side, you see then the updated figures on pricing our recycled PET versus virgin PET. And of course, you see that the prices have lifted up a bit. But we are currently not really seeing a significant recovery yet in the market. A highlight in the quarter and that also a highlight for me because I attended the opening, it was the opening of TriPlast in Enns in Austria. The written here is the most advanced sorting plant in Austria but they will claim it's the most advanced sorting plant in Europe. It has a capacity of 100,000 tonnes which covers then half of Austria's sorting capacity need for lightweight packaging. And it will have -- the input raw material here will come from both Austria and Germany. And they will take them source separate the plastics, so mixed plastic in as the raw material. This plant is a good example of what we see and how we see the market in recycling sorting is developing. It's a big plant. It has 38 of our AUTOSORT units, all powered with our AI solution. It is sourced then into, of course, all the different plastic fractions like PE, PP, PET, et cetera but also it sources, for example, PE film into 5 different fractions. So this is what we see is that these sorting plants are getting more and more advanced and they want to sort into purer and purer qualities so that you can enable really closed loop recycling. Then over to Food. So Food delivered a revenue slightly above our estimated conversion ratio and a good margin for the quarter. And it's also good to see that we have a solid order backlog at the end of the quarter, up 23% versus same quarter last year. Market sentiment is more or less similar to what I talked about in Q1, still soft market sentiment in the fresh food categories. However, we see investments being made. We see projects coming but the competition is also then quite fierce for those projects being out there. While processed food and especially then the potato category continues to perform well. However, it's also what we communicated before, in Food, our focus this year is not about growth. It is about profitability. We have communicated that we launched an improvement program approximately a year ago. We will take out €30 million in cost and we will have an EBITA run rate of 10% to 11% by end of this year. And the restructuring program and the cost reduction program is progressing as planned and are on track to deliver that. Also in previous quarter, we have explained a bit more about what we are doing as part of the restructuring. And the key element of that is to optimize our production footprint. In the quarter, the last plant or the last product -- sorting product was produced at our Hamilton plant in New Zealand. So that has closed and it's all been transferred to our plant in Slovakia. We also have one more production plant in New Zealand, Auckland, that will be closed during second half of this year. With that, I will end my presentation and hand over to Eva Sagemo to give you an update on the financials and the outlook. Eva Sagemo Thank you for that, Tove. And before we start with the financials, I would like to make an important note. This is the first quarter that we present the TOMRA figures in euros. And previous years and comparison figures have been also adjusted accordingly. Starting with the group P&L. As Tove said, we have had a good quarter, the second quarter of 2023. We have delivered a flat growth compared to same quarter last year but also year-to-date. As you have seen from the figures, we have delivered a very strong result in Collection, a bit higher than what we expected as well, while Recycling and Food come in a bit softer but according to our expectations. So the revenue for the quarter ended at €333 million. The gross contribution in the quarter ended at €145 million which gives us a strong gross margin of 44%. That is up 2 percentage points compared to same quarter last year but also a good growth compared to Q1. Explaining a bit about the strong margin this quarter, one thing is the volume but also that we have a good product mix in the quarter. We have also higher share of service revenue, especially then in Food and Recycling. And we also start to see cost saving effects being positive in the gross margin of Food. The operating expenses ended at €101 million in the quarter which is in line with the run rate that we have had both in Q1 and Q4 last year. That gives us an EBITA of €44 million and an EBITA percent of 13%. Moving over to Collection. As I said, Collection has delivered a strong quarter. It came in a bit higher than we expected and that was -- the main reasons are because Romania has been stronger than what we anticipated. But also that deliveries into Austria has started earlier than what we expected. So the revenues ended at €193 million in the quarter, up 15% compared to same quarter last year. And year-to-date, we are up 14% compared to the first half last year. Looking at the regional split in Collection this quarter, we see 2 regions standing out which is then Europe but also the rest of the world, on volumes. And in the rest of the world is mainly Australia, where also the state of Victoria went live with DRS in November last year. So we see volumes picking up in Australia. When it comes to Europe, that's also where all of the new markets activities are happening now materializing into the P&L, mentioning then Romania, Hungary and Austria, in particular. And out of the growth in the quarter, 70% has come from new market activity. That gives us a gross contribution of €78 million and a margin of -- gross margin of 40% which is also up compared to same quarter last year and slightly up compared to Q1. It is nice to see that positive development in Collection. Operating expenses ended at €46 million, up compared to same quarter last year but in line with what we have seen as a run rate, both in Q4 and Q1 this year. EBITA at €32 million gives us an EBITA percent of 16% in the quarter. Moving over to Recycling. And as we have said, Recycling has experienced a softer market sentiment over the last quarters. And that is materializing in the P&L, giving us a revenue of €57 million in the quarter. That is in line with the conversion ratio but it's a decrease compared to same quarter last year, 15% on the top line. Year-to-date, Recycling is down 16% compared to the first half last year. Looking at the regional split in Recycling. We have had a strong Europe this quarter but a softer Americas. And I want to highlight that it's nothing specific happening here. It's just the timing of the orders coming out of the order book. That gives us a gross contribution of €30 million in the quarter and a gross margin of 53%. So a strong margin in the quarter for Recycling, up compared to same quarter last year and also significantly up if you look at Q1. And reasons for that is, one, is the volume that has been picking up compared to the Q1 result but also that we have had a very good product mix in the quarter and also a higher service revenue this quarter as well. We have operating expenses of €20 million, slightly up compared to same quarter last year but down compared to Q1, so good cost control in recycling with lower top line volumes. That gives us an EBITA of €10 million and an EBITA percent of 17%. Looking at the order intake, it ended at €65 million in the quarter. That is down 12% compared to same quarter last year. But as you can see on the slide, the Q1 and Q2 quarter last year were extraordinary strong quarters on the order intake side. We have a record high order backlog in the quarter, up 9% but ending at €133 million for Recycling. So very strong order backlog which gives us visibility into future deliveries. Moving over to Food. And Food has experienced a weaker market sentiment for quite some quarters now. And that is also materializing in the revenue for the quarter ending at €82 million. That is down 16% compared to same quarter last year and down 16% year-to-date compared to first half last year. Nothing specific to mention on the regional split in Food but worth mentioning that Potato segment is still contributing strong into the figures. We have a gross contribution of €37 million in the quarter which gives us a strong gross margin of 45%. And also here, more or less the same explanations as in Recycling, volume, good product mix but also that we have higher share of service revenue which is in accordance to the strategy in Food but also that we see our savings materializing into the gross margin this quarter. Operating expenses at €29 million which is then down compared to same quarter last year but more or less in line with Q1. And I also want to highlight here that it's -- even if the operating expenses is at the same level as Q1, we still have savings in but we have also variations in the cost base quarter-on-quarter in Food. So we are on track on the cost savings program. EBITA ended at €8 million, with an EBITA percent of 10%. And we have €0.5 million in restructuring costs in this quarter; year-to-date, €2.1 million. Looking at the order intake in Food, it's ending at €83 million, down 2%. And a solid order backlog ending at €119 million, up 23% compared to same quarter last year. Going over to the balance sheet and the cash flow. We have had a strong cash flow from operations this quarter at €34 million. That gives us also a strong cash flow from operations year-to-date at €54 million. Nothing specific to mention on the balance sheet. Net working capital, capital expenditures are trailing at respectively, yes, close to 19% of revenue and 5% of revenue this quarter. But what you can see is that we have had some equity transaction this quarter and we have had the distribution of the dividend, €50 million this quarter, that's what you can see in the equity. So the equity ratio ends at 39% and the gearing at 2.3%. Looking at the financial position. We have had to even this quarter. So first, I would like to mention that Scope Ratings affirmed the rating of TOMRA in June at A minus stable. And then also, we issued NOK 1 billion of green bonds early April. That gives us a weighted average debt maturity of 2.4 years, including the RCF and an undrawn facility of €94 million in the quarter. Looking at the currency risk and hedging policy. This one has also been updated accordingly with the change of presentation currency of TOMRA. And now U.S. dollar and euro is the more important currencies to look at. And looking at the development in the quarter, it has been at yes, 1 percentage points and then year-to-date, that has been rather flat. The split of the revenues and expenses in the different currencies is unchanged where we have updated the currency sensitivity towards the euro instead of the NOK which will then change of the euro of 10%, that will give a change in the EBITA of 5%, so lower than what we have had previously in TOMRA. And then to the outlook. Starting with Collection. Higher activity related to new and expanding markets should be expected, where especially innovation and scheme expansion will drive growth in existing markets and the new DRS legislation will drive growth in new markets. But needless to mention that the quarterly performance will depend upon the timing of these new initiatives. The first half has been stronger than anticipated when we started the year which now gives us room for a mid- to high single-digit growth for the full year in Collection. We expect a slowdown in the second half compared to the first half but we expect also the good momentum in Austria to continue in the next half. On margins, we stay firm that they should be above 40% and OpEx run rate in percentage of sales should be in line with the current levels. Ramp-up cost is currently at €20 million for the year, so the run rate for ramp-up. And that is unchanged, looking at the outlook going forward. Important to note that, that might change given the market development. And in this outlook, we have not built in significant volumes coming in from Poland because that is too early to predict. Moving over to Recycling. As I said, recycling has experienced a softer market sentiment and -- which has then led to slower short-term growth in the business division. We don't see a recovery yet in the market. And as Tove mentioned it, especially the plastics and the metals that are performing on the softer side. So we are now adjusting the full year outlook for Recycling for the year. So at a flat year-over-year growth this year, still, it's important to mention that we believe that 2024 will still be a strong year for Recycling. We estimate the margins to maintain strong with the good cost control that we have seen in the business division. Looking into the coming quarter, Q3, with the high -- with order backlog of €133 million, we estimate a conversion ratio of 45% to be recognized as revenue in the third quarter. And then on Food, as also here, I mentioned that Food has experienced a weaker market sentiment and delayed customer investments due to many reasons. Even if we now see that more projects and activities are ongoing in the market, we don't see a significant recovery yet. So our focus in Food remains. The focus is to deliver on the restructuring program and not focus on growth but to deliver on improved profitability. So we don't expect growth to come in 2024 in Food. We are confident that we will deliver on the cost reduction program, saving €30 million at the cost run rate going into 2025, ending the EBITA margin at 10% to 11% end of 2024. Looking at the coming quarter, we have now estimated a conversion ratio of the order backlog of €119 million of 65% conversion to be recognized as revenue in the third quarter. We have also listed here the capital expenditures in Horizon at €40 million to €50 million expected for the year. We have spent 45% of that already in the first half. So the remaining will then come in the second half of the year. And the run rate when it comes to cost in Horizon will remain at the levels that we have indicated before, around €8 million. And then as ending point, it's important to note that we have changed now the presentation currency in TOMRA from NOK to euro and then also we'll have a different profile when it comes to the currency fluctuations in our figures. Thank you, Eva. Thank you, Tove. And with that, we will move over to Q&A. And please remember to ask a question, raise your hand in the Team's webinar. And I see -- let's see. We have a few questions coming in already, starting with Fabian Jorgensen at Carnegie. Please go ahead, Fabian. Fabian Jorgensen Thank you, Daniel. Recycling guiding now for flattish growth year-over-year would require some 70% uplift Q-over-Q in Q4 versus Q3 now. Can you elaborate a bit on the dynamics there and why you expect it to jump so much? Eva Sagemo Of course. So we expect Q4 to be very strong when it comes to the revenues to deliver on the flat year-over-year growth. And we are preparing accordingly on the production, on the shipping side and these are confirmed orders to be delivered. Fabian Jorgensen Great. Can you also comment a bit on the project mix which you're stating is strong? And I think it's for both Food and Recycling. And what then to expect from gross margins in the quarters ahead? Eva Sagemo Yes. So the product mix is that if we start with Recycling, we have a diversified portfolio with different segments into that. But we see that the waste segment is delivering good still. And with that, we sell mainly AUTOSORT machines into. So we are confident that we will deliver gross margins and margins in line with what you have seen in the past in Recycling. When it comes to Food, it's a mix in the order backlog. As I have mentioned, Potato is strong. But with the initiatives and restructuring program, we see that the focus we have and the cost savings that we take, we will maintain good margins also in Food when you look at the gross margin. Fabian Jorgensen Okay. But then just to confirm, you shouldn't extrapolate the quite extreme gross margins that we've seen in Q2 for the rest of the year then? Eva Sagemo No. You should not do that. As I said, in the Recycling, you should expect the gross margin to be in line with what we have seen in the past. And then you would expect some uplift in the margin in Food compared to last year but not necessarily compared to the previous years. Fabian Jorgensen Great. And just finally, on the Collection side, with mid- to high single-digit growth, is there any significant variations in Q3 and Q4 with Austria now and Romania being strong with that drop off in Q3 or in Q4? Eva Sagemo It's difficult to predict exactly how the quarters will come in but we have given then an indication of the second half. Daniel Sundahl Thank you, Fabian. And the next question will come from Gaurav Jain at Barclays. You are on mute, I think but you are free to talk. Gaurav Jain Sorry about that. I hope you can hear me now. So a few questions from me. One is on the Collection side. So clearly, at the end of the year, you were guiding to weak 1H and it has turned out to be very strong and your expectation was that 2H will be much stronger. So should we expect that Collection growth rate continues to accelerate from here, especially as the Poland DRS scheme -- earlier, you were saying it will probably get delayed but now it seems that it will actually go live on 1 Jan, 2025. So could you just help us dimensionalize like whatever rough numbers you would -- like how should we think about -- I understand you will not give us a guidance but it's more like how should we think of scenarios around Poland, Austria whatever else is happening with PPWR, with more DRS schemes. So if you could just help us with that, that will be great. And second is on the Food side, like if I just look at your order backlog chart now for years, so it is like flattish. And your projections -- you assume that it should grow 5% to 7% CAGR. So when is it that you will conclude that your projection is probably not borne by what you have done historically? So those are the 2 questions. Tove Andersen Yes, I can start and then Eva can add on. But if I start on the Food business. So we believe over a period that the annual growth level in the Food category is as you say, 5% to 6%. But of course, there will be variations year-on-year. Currently, we don't have -- currently, the market sentiment is softer due to lower commodity prices and higher interest rates. However, we are still very firm that over time and if you look over a 5-year period, for example, that you would see the 5% to 6% annual growth. When will it pick up? That is, of course, the big questions. As we said, we are seeing signs of orders coming, investments being made. But this will depend also on interest rates and also in general then, crop prices and harvest. So if you have a good harvest for a certain category, the farmers will earn more money and then they will reinvest. So we believe that this will come gradually and that we will start to see some recovery, hopefully then also already next year. And then the other question was linked to then Collection and how we see different scenarios there? And as we say in the outlook, the quarterly performance will depend on new initiatives. We believe, as we said, Austria will go live beginning next year and we're already seeing good sales in this quarter and that we expect to then continue during second half. Well, for example, Romania which went live last year, we will expect that to be phasing out. And also, we expect the Hungary to be phasing out the second half of this year. And based on that, we have said that our current belief is that we will end up then this year with a growth of mid- to high single digits. In that figure, we have not included significant sales into Poland. We have included some sales into Poland but not significant sales. So that is a potential upside if they go live full blast, 1st of January. We believe that probably -- and based on -- there is significant activity in Poland, there is significant activity on their work, on the regulations and getting everything in place to go live. There is also a significant activity on the commercial side but our belief is still that there will be more a soft launch beginning next year. And that's why we have then, for our estimate for this year, not built in significant sales into Poland. I'm not sure, anything to add, Eva? Okay. Next question will come from Elliott Jones at Danske Bank. Please go ahead, Elliott. Elliott Jones Congrats on the results. Just on the Recycling size, yes, 45% conversion rate this quarter, 45% next quarter. That obviously implies 1 or 2 very, very big projects in Q4. Is there any risk that those projects may be just don't go through? Or are you very, very confident that they will be kind of landed in Q4 and there's no risk to kind of them being delayed into Q1 next year? Tove Andersen So our order backlog is very firm. So we have really any cancellations in our order backlog. Of course, there could always be delays and we can never exclude delays. But based on what we know now and based on what we see now, yes, Q4 will be a very strong quarter. And if we then achieve based on the guidance we have given, what we are saying, it will be a record quarter for Recycling. We are, as Eva said, we are gearing up for it. We are producing and we will produce in advance and make sure that we are ready to deliver. So that's what we are aiming for and that's what we will work hard to be able to deliver on. But of course, you can never exclude that there could be a 1 or 2 months' delay on a project. But then that is not really a key issue for us if it then lands Q4 or early Q1. Elliott Jones Got it. And then in terms of the Recycling margins for Q3, if the -- is it fair to assume that if that kind of conversion rate is similar for Q3 and that's where revenue is same as Q2, is it fair to assume similar EBITA margins in Q3 for Recycling to Q2? Eva Sagemo So when you look at Q4 and with that high volume, you would expect the EBITA in that quarter to be at higher levels. But when you look at the year overall, we should be in line with what we have delivered over the previous years. Daniel Sundahl And it doesn't look like we have any more questions coming from the floor. So with that, we have reached the end of the presentation. I hope we will see many of you in Alicante on the 5th of September. If you haven't registered, please do so and join us in Spain in September. Otherwise, we'll be back here with Q3 results in October. Thank you very much. Have a nice day. Enjoy your summer. Bye, bye.