Earnings call transcript: Tomra Systems sees revenue growth in Q1 2026

Tomra Systems Q1 2026 revenue rose 9% year over year to EUR 334 million, with EBITDA flat at EUR 26 million on a normalized basis despite gross margin pressure to 40.2% from product and mix effects. Collection and Food delivered strong growth, offset by a 19% revenue decline in Recycling and a EUR 13 million restructuring charge, while management reaffirmed full-year Collection gross margin above 40% and highlighted new product launches in the T-100 and 4C. Shares fell 3.56% after the release, but the company continues to target growth from Poland, Portugal, and the upcoming U.K. rollout.

Analysis

The cleaner read-through is that the quarter is less about demand deterioration and more about mix distortion masking operating leverage. In Collection and Food, management is explicitly trading near-term gross margin for share capture in newly opening markets and high-value categories; that is the right call if these placements convert into service, replacement, and annuity-like install bases over the next 12-24 months. The market is likely underestimating how quickly Poland/Portugal/Singapore can become a multi-quarter revenue glidepath, with the real optionality in the UK tender cycle landing mostly next year.

The weak spot is Recycling, where the issue is not just cyclical softness but a delayed earnings response to prior order weakness. The restructuring program creates a classic back-half setup: revenue can stay depressed while savings only gradually flow through, meaning the “bad news” is partially deferred into H2 before the full margin benefit shows up in 2027. That makes the stock vulnerable to one more quarter of disappointing tape if order intake remains choppy, even if the longer-term earnings power is intact.

The contrarian miss is that the current drawdown may be over-penalizing what is essentially an execution-and-timing quarter in a business with visible end-market catalysts and a high-service mix. The market is pricing the margin compression as structural, but management is framing it as transitory and partly strategic; if that proves right, the rerating trigger is not a big macro improvement but simply a cleaner Q2/Q3 conversion cadence. The main risk is that geopolitics/tariffs keep softening recycling investment sentiment long enough to offset Collection’s ramp and delay the multiple recovery.

Key Decisions for Investors

• Add to long 0KV7 on post-earnings weakness, with a 3-6 month horizon: the setup is for margin normalization plus visible conversion from new-market installs; target a rebound toward fair-value-style rerating if Q2 confirms Poland/Portugal delivery momentum.
• Use a pairs trade: long 0KV7 / short a recycling-exposed industrial or equipment peer with weaker balance sheet and lower new-market visibility; the spread should widen if Collection remains resilient while Recycling drags peers with more cyclical exposure.
• If you want convexity, buy 3-6 month call spreads in 0KV7 rather than stock: the stock’s main upside catalyst is not immediate EPS beats but a re-acceleration narrative from UK tender wins and Q2 margin stabilization.
• Avoid chasing strength in the next 2-4 weeks; wait for evidence that Collection gross margin holds near the guided floor and that Recycling backlog converts as promised before adding aggressively.
• Trim or hedge if Recycling order intake fails to stabilize by the next print: that would push the earnings inflection into 2027 and likely cap the multiple despite Collection growth.