TOMRA: Strong finish to 2025 with record quarter in Collection and solid quarter in Recycling and Food

TOMRA reported Q4 2025 revenues of EUR 382m (-4% y/y) and adjusted EBITA of EUR 71m (margin 19%, down from 20% a year ago), with adjusted EPS of EUR 0.15 (Q4 2024: 0.18). Performance was mixed by segment: Collection delivered record quarterly revenues of EUR 207m and record EBITA of EUR 39m, Recycling fell to EUR 75m revenue with order intake/backlog weakening (order intake EUR 61m; backlog EUR 94m) and a cost reduction program launched, while Food posted EUR 88m revenue, a stronger margin (adj. EBITA margin 18% for the quarter, 13% FY) and a 26% backlog increase to EUR 136m. Operating cash flow dropped to EUR 24m (from 83m), but the board proposed an unchanged ordinary dividend of NOK 2.15/share (payout ratio 58%); management cited market uncertainty but highlighted new market launches including Singapore (April 2026).

Analysis

Market structure: TOMRA (TOM.OL) is bifurcating into a high‑growth, higher‑margin Collection business (record quarter: Collection revs €207m, EBITA €39m, margin 19%) and a cyclical Recycling hardware business (rev down 27% to €75m, backlog €94m). Winners include operators/outsourcers of deposit systems and service/revenue‑based RVM models; losers in near term are capital‑intensive recycling OEM peers exposed to commodity cycle weakness. The Collection mix and Singapore contract (launch 1 Apr 2026) improve pricing power and recurring service revenue visibility, tightening supply‑demand for installations but leaving lumpy cash flows.

Risk assessment: Tail risks include rollout delays in Poland/Portugal/Singapore, warranty/capex overruns, and another material drop in Recycling orders that could force margin cuts or dividend reduction; cash flow from ops collapsed to €24m (4Q25 vs €83m LY) — a key watch metric. Immediate (days-weeks): market reaction to the webcast and any wording on Poland/Portugal pacing; short term (quarters): order intake and cash flow trends through Q1–Q2 2026; long term: transition to services driving 60–70% gross margins if install cadence matures. Hidden dependency: working capital tied to installation timing and government payment schedules.

Trade implications: Tactical long: establish a 2–3% position in TOM.OL within 2–4 weeks ahead of the Singapore launch; target +15–25% in 6–12 months, stop‑loss -10%. Options: buy 6–9 month call spread (delta ~0.35–0.5) to cap premium and sell short dated OTM calls (covered) on any close‑term pop. Hedge: buy 3‑month ATM puts (cost ≤2–3% premium) if sizing >3% exposure. Pair: long TOM.OL vs short STOXX Europe 600 Industrials (relative exposure) to isolate deposit system recovery.

Contrarian angles: The market may over‑penalize YoY revenue and cash flow lumpiness while underweighting secular upside from recurring services (Food backlog +26% to €136m, Collection margin expansion). Historical parallels: infrastructure rollout companies (smart meters/RoW telecom build) trade lumpy quarters then re‑rate on steady service annuities; if Recycling order intake rebounds to >€70m/qtr by H2 2026, upside could be >30%. Red flags: if cash flow from ops remains <€50m for H1 2026 or Recycling backlog falls >20% sequentially, cut size to zero.

Key Decisions for Investors

• Establish a 2–3% long position in TOM.OL within 2–4 weeks ahead of the Singapore launch (1 Apr 2026); target +15–25% upside over 6–12 months, place stop‑loss at -10% from entry.
• If comfortable with options, buy a 6–9 month call spread (buy ATM, sell ~10–15% OTM) to leverage recovery while capping premium; allocate <1% notional of portfolio.
• For downside protection on existing TOM.OL exposure, buy 3‑month ATM puts (cost target ≤2–3% of position) and reassess after Q1 cash flow print; sell covered monthly OTM calls on rallies to collect premium.
• Implement a pair trade: long TOM.OL (2%) vs short equivalent notional of STOXX Europe 600 Industrials (SXIP) to isolate TOMRA’s deposit/system recovery; rebalance after two quarterly prints.
• Cut or exit if (a) cash flow from operations remains <€50m cumulative in H1 2026, or (b) Recycling order backlog declines >20% sequentially — both are hard stop thresholds to preserve capital.