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Silgan Holdings Inc  (NASDAQ:SLGN)
Q3 2018 Earnings Conference Call
Oct. 24, 2018, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Thank you for joining the Silgan Holdings Third Quarter 2018 Earnings Results Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Kim Ulmer, Vice President, Finance and Treasurer. Please go ahead.

Kimberly Ulmer -- Vice President, Finance and Treasurer

Thank you. Joining me from the call today, I have Tony Allott, President and CEO; Bob Lewis, EVP and CFO; and Adam Greenlee, EVP and COO. Before we begin the call today, we would like to make it clear that certain statements made today on this conference call may be forward-looking statements. These forward-looking statements are made based upon management's expectations and beliefs concerning future events impacting the company and therefore involve a number of uncertainties and risks, including but not limited to, those described in the company's Annual Report on Form 10-K for 2017 and other filings with the SEC. Therefore, the actual results of operations or financial condition of the company could differ materially from those expressed or implied in the forward-looking statements.

With that, I'll turn it over to Tony.

Anthony Allott -- President and Chief Executive Officer

Thanks, Kim. Welcome, everyone, to our third quarter earnings conference call. Our agenda for this morning, we'll focus on the financial performance for the third quarter, review our outlook for 2018 for the remainder of the year and then after that Bob, Adam and I will be pleased to take any questions.

As you saw on the press release, we delivered adjusted earnings per diluted share of $0.76 for the third quarter, an increase of $0.10 per share or 15% versus the prior year quarter and in line with our expectations. This improvement was largely attributable to continued volume growth and solid operational performance in our plastic bottle business and improvement in the closure business as a result of year-over-year synergy benefits and growth in the target markets of Dispensing Systems in the US single-serve beverage markets. These benefits were partly offset by the negative impact from a 6% volume decline in our metal container business. Similar to the second quarter, these declines were driven by one seasonal customer working down inventories and deselecting certain business, a closure of a fruit processing plant in the West Coast and the competitive loss of a previously discussed customer.

Additionally, soup volumes were lower in the quarter due primarily to one customer. Our metal container business did a good job controlling costs in light of these lower volumes. Based on our year-to-date results and our outlook for the fourth quarter, which includes the unfavorable impact of lower overhead absorption resulting from a planned inventory reduction, we're narrowing the range of our full year estimate of adjusted earnings per share to $2.03 to $2.08. The midpoint of this range represents a 25% increase versus prior year earnings.

With that, I'll now turn over to Bob to review the financial results in a bit more detail and provide additional explanation around our earnings estimates for the rest of the year.

Robert Lewis -- Executive Vice President and Chief Financial Officer

Thank you, Tony. Good morning, everyone. As Tony highlighted, we delivered quarterly results within our expectation and 15% above the prior year quarter. Both our plastic container and closures businesses performed well in the quarter. Despite lower unit volumes for the quarter, the metal container business did a good job controlling costs and benefited from not reducing inventory in the quarter. The full inventory reduction is now planned for the fourth quarter of 2018. The quarter also benefited from lower interest expense and a slightly lower tax rate.

On a consolidated basis, net sales for the third quarter of 2018 were $1.3 billion, an increase of $40.1 million as each of our businesses have higher sales for the quarter. Net income for the third quarter was $84.7 million or $0.76 per diluted share compared to third quarter 2017 net income of $72.4 million or $0.65 per diluted share. There were no adjustments to earnings per diluted share in 2018 and 2017 included acquisition cost for a total increase to adjusted earnings per share of $0.01. As a result, we delivered adjusted income per diluted share of $0.76 in 2018 versus $0.66 in 2017. Interest and other debt expense for the third quarter of 2018 decreased $2.4 million to $28.2 million, primarily due to lower weighted average outstanding borrowings, largely as a result of the partial pre-payment of acquisition borrowings at the end of 2017.

Capital expenditures for the third quarter of 2018 totaled $43.3 million, compared with $42.9 million in the prior year quarter. Year-to-date capital expenditures totaled $134.6 million versus $124.2 million in the prior year. Additionally, we paid a quarterly dividend of $0.10 per share in September, with a total cash cost of $11.4 million.

I'll now give some specifics regarding each of the businesses. The metal container business recorded net sales of $797.8 million for the third quarter of 2018, an increase of $25.4 million or 3.3% versus the prior year quarter. This increase is primarily the result of the pass-through of higher raw material and other manufacturing costs and a more favorable mix of products sold, partially offset by lower unit volumes of approximately 6% and the impact of unfavorable foreign currency translation of approximately $1 million. Volumes were down due to the continued impact of previously announced customer initiatives including inventory adjustments at a seasonal customer, a customer plant closure in the fruit market and a competitive loss of a smaller, lower margin customer as well as lower soup volumes in the quarter.

Segment income in the metal container business was $86.9 million for the third quarter of 2018 versus $92.2 million in the same period a year ago. The decrease in segment income was primarily due to the lower unit volumes and higher freight expense partially offset by the contractual pass-through of indexed inflation versus the contractual pass-through of indexed deflation in the prior year quarter, a more favorable mix of products sold and favored by foreign currency transaction losses in the prior year period.

Net sales in the closure business increased $3.5 million to $360.8 million for the quarter, primarily due to the pass through of higher raw material costs, partially offset by the impact of unfavorable foreign currency translation of approximately $1 million. Segment income in the closures business for the third quarter of 2018 was $47.3 million, up $2 million versus the prior year quarter. This improvement was primarily the result of lower cost, largely due to synergies realized from the Dispensing Systems acquisition and a more favorable mix of products sold, partly offset by the unfavorable impact of the lagged pass through of higher resin cost.

Net sales in the plastic container business were $148.4 million for the third quarter of 2018, an increase of $11.2 million versus the prior year quarter. This increase was largely due to the pass through of higher raw material costs and a 3% improvement in volumes, partially offset by the unfavorable impact of foreign currency translation of $1 million. Segment income increased $2 million to $8.5 million for the third quarter of 2018. This increase was primarily attributable to higher volumes and lower manufacturing costs, partially offset by the unfavorable impact from the lagged pass through of higher resin costs and cost associated with the start-up of the Fort Smith, Arkansas facility.

Turning now to our outlook for 2018, based on our year-to-date performance and the outlook for the fourth quarter, we're narrowing our estimate of adjusted net income per diluted share from a range of $2.03 to $2.13, to a range of $2.03 to $2.08 per diluted share. This estimate excludes the impact from certain items outlined in Table B of our press release. At the midpoint of our range, the estimate reflects a 25% increase versus the prior year adjusted net income per diluted share of $1.65. We're also providing a fourth quarter 2018 estimate of adjusted earnings in the range of $0.34 to $0.39 per diluted share, which excludes -- which includes approximately $15 million of unfavorable impact from lower overhead absorption, resulting from the planned inventory reductions in the metal container business to be completed in the fourth quarter. This estimate compares to $0.32 per diluted share in the fourth quarter of 2017.

While we continue to expect free cash flow to be approximately $300 million for the year, we do note that persistent inflation, the timing of year-end customer collections and the completion of the inventory reduction, all pose some risk to this forecast. As a result, we see $300 million as the high side of our free cash flow.

That concludes our prepared comments. So we can turn it over for Q&A and I'll turn it back to Jessica, she will provide instructions for the Q&A session.

Questions and Answers:

Operator

Thank you. (Operator Instructions) We'll go and take our first question from Scott Gaffner with Barclays.

Scott Gaffner -- Barclays Bank PLC -- Analyst

Thanks, good morning guys.

Anthony Allott -- President and Chief Executive Officer

Hey, Scott.

Scott Gaffner -- Barclays Bank PLC -- Analyst

Bob, just focusing on the inventory reduction for a minute, is there any reason why that would have gotten shifted a little bit from 3Q into 4Q and then now may be goes into 1Q versus 4Q? What's sort of the driver there?

Robert Lewis -- Executive Vice President and Chief Financial Officer

Yeah, remember that we came into the year thinking that we were going to get a part of it in Q1 and a part of it in Q4 that we were going to be on the shoulder side of it. And as we came through the second quarter, basically we were net neutral, so thinking we had to get some of that in Q3 and Q4. I think with the volume declines in Q3, that's primarily what's driving it into Q4. So we still feel good about the operational plan, it just drives it into Q4 versus some of it, otherwise being in Q3.

Scott Gaffner -- Barclays Bank PLC -- Analyst

Okay. And then if I look at it, the soup weakness that you had in 3Q, is 3Q normally a big quarter for shipment of soup cans and should we expect more weakness in that category as we move into 4Q based on what you're seeing?

Anthony Allott -- President and Chief Executive Officer

Hey, Scott, it's Tony. No, not really. I would call Q3 more of a transitional quarter in that business, it kind of depends on what they're thinking for the cold season on filling and so I think that's part of what's happening is just sort of what decisions about filling time et cetera are in the plan. So I don't, -- we don't see necessarily as any significant change to the conversations we've had about soup. We do think there's a lot of change going on in the soup market. The players are going through lots of different decisions about what's core and what isn't. And so I think there's a lot that we're watching right now about kind of the future of soup. So I think we're -- I would put out it same as I think most people on the call, we're just watching it and trying to see where the future goes.

Scott Gaffner -- Barclays Bank PLC -- Analyst

Okay. One last one for me, Tony. Just if I look at it, I mean clearly debt pay down is a focus of a lot of your cash right now. But with the shares where they are, is there may be any consideration of just balancing some debt pay down with share repurchase at these levels, how do you think about that?

Anthony Allott -- President and Chief Executive Officer

Sure. I mean we have done buybacks from time to time. We certainly have authorization to do buybacks. So I wouldn't signal anything about that either side, but I think that's always been something that's available to us. I think in terms of kind of major tenders and stop, I think we've been pretty clear that right now our thinking is about debt reduction, we levered up to do what we think was a great acquisition in Dispensing Systems. We said that we would de-lever that fairly quickly and in fact, we were delivering on that and we just need to finish that getting that done before we think about any kind of more long-term capital prospects.

Scott Gaffner -- Barclays Bank PLC -- Analyst

Fair enough. Thanks, Tony. Thanks, Bob.

Anthony Allott -- President and Chief Executive Officer

Thanks, Scott.

Operator

Thank you. We will now go to Chip Dillon with Vertical Research.

Salvator Tiano -- Vertical Research Partners -- Analyst

Hi guys. This is Salvator Tiano filling in for Chip, how are you?

Anthony Allott -- President and Chief Executive Officer

Good day.

Salvator Tiano -- Vertical Research Partners -- Analyst

Great. Yeah, I have a few questions related to volumes and firstly on the metal container side, firstly, is there a way to kind of quantify the impact of the soup volume decline as part of the 6% drop and in the customer de-stocking where that is something you brought up last quarter, has the impact been bigger than what you expected three months ago?

Anthony Allott -- President and Chief Executive Officer

Sure, two good questions. So as we've said in the opening remarks, we were down about 6% in the metal container business. I'll reverse the order of your question, but about a third of that, 2% of that is related to the seasonal customer who's going through an inventory reduction and a portfolio management program. And so to your question, is it bigger. First of all, to be clear, we did not expect that to be a negative on this quarter. We really did believe that the customer and we were talking with the customer thought that they were kind of thought it for this year through the second quarter. They had been pretty clear and we had indicated they were going to try to do the same next year. But I think that customer found opportunities to go a little further. And so a little bit to our surprise, we did see again a negative comparison in the current quarter.

So our expectation with that going forward is, we'll have to wait and see a little bit, they have indicated an intention to get inventory down again next year. So I think as we think about 2018 going in 2019, there may not be a whole lot of recovery on the horizon for us. If they do the same kind of reduction that it probably would be more flattish would be our expectation on that. And then I think the question around the parts of the business that they are portfolio managed whether that comes back or not, I don't know, that's not clear to us right now. So I think we can fairly say it's probably going to be somewhere near this volume for next year at least and may be there's a little bit recovery in '20, not too sure.

The second part of your question is the soup, also made up about 2% of that 6% decline in the quarter and so that scales up already, I think already said and it will -- we don't really know what that means about trend, certainly condensed soup has been in decline for some fairly steady period of time. That's a little more than half of the total volume that we do in that category. And then the ready-to-serve market has been less declined, some brands up, some brands not so much up. Those are kind of the elements that we will keep watching and talking about.

Salvator Tiano -- Vertical Research Partners -- Analyst

Perfect. And on the closures side, with the volumes there, firstly, can you provide a little bit of the breakdown, like you sometimes do about the volume in the Dispensing Systems business versus the legacy closures first of all? And secondly here, I think last quarter, the organic volume was negative despite the Dispensing Systems adding to organic volumes and you indicated you were against a very tough comp in 2Q17. So can you describe a little bit of what happened in 3Q of 2017 with regard to legacy volumes and if it was again near record levels?

Anthony Allott -- President and Chief Executive Officer

Sure. I'm going to have Adam answer the questions on volumes and around closures. I think just in the interest of the flow of the call, I think we can try and hold everybody to two questions per, so we can then go ahead and move on after this answer, just to keep the process going.

Salvator Tiano -- Vertical Research Partners -- Analyst

Sure.

Adam Greenlee -- Executive Vice President & Chief Operating Officer

So the total volume for the closure segment was flat versus the prior year. And as you saw in the release, we did see growth in our target markets and we also had a favorable mix of products. So when you get into the Dispensing Systems markets that we serve, we did see a couple of percent of growth through the Dispensing Systems markets primarily in healthcare, in our pumps and sprayer markets et cetera, offset a little bit by some softness in our lower value-added Dispensing Systems closures markets. So, good performance in Dispensing Systems, good targeted growth in the markets that we serve for that business.

And then when you talk about the US single-serve volumes, again we've talked about sports drinks and ready-to-drink teas on this call for quite some time. And that volume did recover as expected. We were up approximately 3% versus the third quarter of last year. So good growth again on a relatively easy comp. Now the question back to 3Q of 2017, we did have a softer volumes for our closure segment, specifically the US single-serve volumes. So we're coming up over that, but again, I think it's 3% volume growth on the US single-serve business. We were in line with our expectations. That growth for both Dispensing Systems and the US single-serve market was offset primarily by some softer volumes related to the food pack, primarily in Europe. So I think in our target markets, we saw the performance that we were expecting and we're a little bit surprised, there's some weakness out of the European food pack markets.

Salvator Tiano -- Vertical Research Partners -- Analyst

Perfect, thank you very much.

Anthony Allott -- President and Chief Executive Officer

Thanks.

Operator

We'll now take our next question from Mark Wilde with Bank of Montreal.

Mark Wilde -- BMO Capital Markets -- Analyst

Good morning, Tony, good morning, Bob.

Anthony Allott -- President and Chief Executive Officer

Good morning, Mark.

Robert Lewis -- Executive Vice President and Chief Financial Officer

Hey, Mark.

Mark Wilde -- BMO Capital Markets -- Analyst

Tony, I wonder, just coming back to the food can business, if you can talk in light of this weakness that we're seeing here in the second half of the year, whether you think you have room for may be some additional capacity rationalization?

Anthony Allott -- President and Chief Executive Officer

Sure. Good question. Let me answer first by saying, as we've been pretty clear on the call that we've had a couple of unique things happening to us. I think if you look at the industry in total, it's -- the last I saw it was flat, it might be down 1%, something like that. So there's sort of this broad question about what's going on food cans and I think what we're seeing right now is very separate and distinct. If the volumes for our business were to hold at this level, we absolutely would look at our footprint and opportunities. We do that all the time anyhow, but for sure, if this is the volume that we think is a sustainable volume for the business, we do expect to go find cost out in our system and absolutely believe we will do -- we will be able to find them.

Mark Wilde -- BMO Capital Markets -- Analyst

Okay. And then as my follow-on, Tony, could you just talk about how you're viewing the progress in reloading the plastics business after all the recap activity? 3% looks pretty good to us, but I don't know what you guys are really looking for in that business over the next couple of years in terms of incremental volume to get your margins up?

Adam Greenlee -- Executive Vice President & Chief Operating Officer

Hey, Mark, it's Adam. Look, we're very pleased with the performance thus far with the plastics business. We're now delivering the ninth consecutive quarter of year-on-year improvement. So, the business is delivering what they have promised and what we're expecting here. So the 3% volume, as we've said before, really we've done a good job of getting the cost out for the most part of that business and where the growth and income generation is going to come from is putting volume across those fixed cost assets that we have. So we've got core markets that we focus on like food, healthcare, pet food and personal care that are continuing to grow. We're doing a nice job of winning in the market. We've talked before that, we don't think anybody is necessarily hitting it out of the park from a service and customer support standpoint. We've made tremendous strides on that front. And I think we're being rewarded by the volume growth in the market.

So as we look forward to that business, we continue to talk about our 15% EBITDA margin target. We're not there yet. The drop that we saw in this quarter back to 11.9% from the prior quarter was right in line with our expectations. We had the Fort Smith start-up costs and we also had seasonally our smallest quarter that we have for the year in our plastics business. So we feel good about where we are, we're on track with where we want to go. And I think we're having success in the market and we expect to continue to have more success as we go forward as well.

Mark Wilde -- BMO Capital Markets -- Analyst

Super. Thanks, Adam.

Adam Greenlee -- Executive Vice President & Chief Operating Officer

Sure.

Operator

We'll now take a question from Debbie Jones with Deutsche Bank.

Deborah Jones -- Deutsche Bank AG -- Analyst

Hi, good morning. I wanted to follow up on the plastics business, your volumes have been great this year. I just wanted to get a sense if there was anything going on with margins in the quarter and there is some posture related things on timing that you did see lower margins quarter-over-quarter? I want to get a sense of why you think they can be sustainable going forward?

Adam Greenlee -- Executive Vice President & Chief Operating Officer

Sure. I'm going to repeat a little bit of what I just said to Mark's question, Debbie. But we -- on the last call, we did talk about the 14.3% EBITDA margins that we delivered in Q2 that, that was going to reduce by a couple of points in the back half of the year because we had the Fort Smith start-up costs and then we also had a little bit of a resin headwind in the quarter. So I'll scale both of those to about $1 million a piece. And that really is the bridge that gets you from the 14.3% to the roughly 12% EBITDA margin. So as we go forward, the sustainable margins that we're targeting for this business is right at that 15% level and then, we'll see where we go from there, but we need to get there. We're on path, we're on track, we're doing a good job, but we're not waiting to extend the market. We're seeing the volume growth that we wanted to see, and we're well on our way to getting there.

Deborah Jones -- Deutsche Bank AG -- Analyst

Okay. And second question, just on what is going on with food cans, if we take a look going forward here, what are the things that you are most concerned about for the volume trajectory or potential upside risks? It would seem to me that the narrative around plastics is actually good for you. It's also just not clear to me how much more you might expect in share shift per categories or customers going forward? Could you give us like an order of magnitude about what you are concerned about?

Anthony Allott -- President and Chief Executive Officer

Sure, I think we didn't talk about this in the last call. I think our feeling is that the food can, if any benefit from the plastic issue, I think seem to be pretty small. And I hope I'm wrong about that, but I certainly don't think that's a major theme that we're thinking about. So what makes us still feel pretty good about food cans and remember good for us, we've always viewed this more or less a flattish market, I think, and we still view it that way as a first point, I would say to defend that is, just look at what's going on in the market rather than our numbers and that would say nothing has changed there particularly. If I focus a little more on us, I would just say that nearly 40% of the food cans we sell today are pet food cans. The pet food market is growing in the 2% to 4% rate has for a long time and we see no reason why that wouldn't continue. Another 10% of what we do is in kind of protein areas which have interesting growth opportunities around them, so nearly half of what we sell today in North America are in markets that we think have very interesting growth prospects going forward.

The second largest category we have after that is the vegetable category, which is nearly let's call it 20%. But that category was really split into two groups. You've got, the largest bit is tomato and corn. And our feeling is that you look at who uses tomato and corn, and why they use it and we see that as a very solid future. I'm not saying necessarily great growth, but don't -- I also don't see a really serious decline risk for that market. The remaining 30% peas, beans, et cetera, have been declining at some pretty low rate and probably will continue to do so.

Fruit has definitely been declining, that the can is not the preferred package for sending your kids off to school with their fruit. We understand that, that's down to 4%. So we're going to talk about fruit declines et cetera from time-to-time, but if you think about kind of the future of Silgan, it's not a really big point to where we're going. And then that leaves the 20%, that is soup and even soup, as I said earlier, sort of split between the condensed side, which I you will have to assume is going to continue to decline. And the ready to serve side, which is I think a little bit more uncertain in that regard. When you take all that and you take those growth rates, you roll it forward, I think you'll see pretty quickly, why we think that we're going to be fine on our volumes because those growing ones are taking bigger and bigger share. The things that we spend a lot of time on these calls talking about that are declining are becoming smaller and smaller to who we are.

And then finally, as we've said before, really everything we sell today is in a retort process and so it's even the ones that are declining, it's not easy for those customers to shift. They've got to go to a more expensive package and more expensive process. So that's kind of why because I know this question it's sets out there in lots of different forms about food cans. I thought it was worthwhile just to tell you kind of why we think the way we do about our food can business.

Deborah Jones -- Deutsche Bank AG -- Analyst

Yeah, thank you. It was very thorough. I'll pass it on.

Anthony Allott -- President and Chief Executive Officer

Thanks.

Operator

Thank you. We will now take a question from Anthony Pettinari with Citi.

Anthony Pettinari -- Citi -- Analyst

Hi, Good morning.

Anthony Allott -- President and Chief Executive Officer

Good morning, Anthony.

Robert Lewis -- Executive Vice President and Chief Financial Officer

Good morning.

Anthony Pettinari -- Citi -- Analyst

Just following up on the free cash flow guidance. I think you indicated $300 million for the year, might be the upper-end and what you could realize with some risk. I think you referenced the year-end collections and may be rising costs. Is it possible to frame what could be the range of the downside? Would it be $10 million, $20 million, I'm just trying to understand kind of the upper and lower-end of what you might be able to realize?

Robert Lewis -- Executive Vice President and Chief Financial Officer

Yes, sure. The things that I pointed out to the risk side, would have been inflation, the year-end collections and the pending inventory reduction, right? So some of those are new risks. Some of those are risk that sits with us year-in and year-out. As to the inflation, that continues to persist on a year-to-date basis, we've incurred roughly $10 million of incremental freight across the business given the tariff situation we've got, working capital up at the end of the third quarter between $20 million and $30 million associated with those tariffs costs.

And so, that's kind of new risk as it relates to this year, if you will. And then after the inventory reduction, as I said in my earlier comments, we've got a good operational plan to get there, but it is a sizable inventory reduction in a relatively small quarter. So that heightens the risk a little bit and as to the timing of the cash collections, that as I said, that's always a risk and given the holiday and vacation schedules payments, could move a day or two around the year-end cycle, and again, we've got some fairly large customers that make sizable payments at year-end. So that sort of hopefully gives you a little bit of an idea of the types of things that can move around. But again, our focus is on delivering to that sort of the $300 million target, but again, it's got some risk against it.

Anthony Pettinari -- Citi -- Analyst

Got it, got it. That's very helpful. And then, apologies if I missed this, but any early read on 2019 CapEx given Allentown and Fort Smith are kind of behind you?

Robert Lewis -- Executive Vice President and Chief Financial Officer

Yes, look, I think we're, as we said this year $200 million (ph) is kind of the number. I think we'd look to be lower than that going into next year. Again, it's really about the type of return projects that come through the budget process. But I think our view is that given that we have had some fairly large projects this year and certainly prior to, that we ought to see a little bit of decline in the CapEx in the aggregate.

Anthony Allott -- President and Chief Executive Officer

I think you can say, if you're trying to think forward on cash though, you also got to remember, we were counting on a significant benefit from inventory reductions this year. You won't have that next year. I don't think we have any idea of inflation, but I think if you ask me today, my guess is inflation will be further cash headwind next year. And so, it depends on what you're trying to do with that information.

Anthony Pettinari -- Citi -- Analyst

Yes. No, that's very helpful. I'll turn it over.

Operator

Thank you. We'll go now to Ghansham Panjabi with Baird.

Ghansham Panjabi -- Robert W. Baird & Co. -- Analyst

Hey guys, good morning. As you sort of sit here today and you think about 2019 from an operating income perspective, can you just give us some high level variances to think about, are you planning for operating income to be higher year-over-year and if so, what are some of the drivers associated with that?

Anthony Allott -- President and Chief Executive Officer

Sure. Figured this question would come up at some point. To be very clear, we have not finished our budgeting process and so, we reserve the right to come back and change some of these answers as we go through it. But with that said, I think as you look at the container business, we certainly are expecting that we would not have the same scale of inventory reduction, which has sizable P&L into us. Recall there's we're saying something like $15 million cost charge that comes with that. So I certainly wouldn't expect that. I think when you listen everything we've said about volumes on this call, you'd say, they probably will be flat. Yes, right, because we're saying you're not going to see a recovery in that particular customer. You're obviously not going to see recovery in the piece of business that was lost to a competitor.

You -- we still would believe you get a little bit of recovery from the fruit business that was closed out, lest as other customers picked that business up. And then you got the question of kind of where is soup headed, against that, you got the benefit of we're pretty confident the pet food will continue to grow. So when you take all that in, I think we still think probably flat is not -- even though it was down this year in an unusual amount, the primary drivers of that are going to hold with us for another year at least.

Closure business, I think we would continue to expect that we'd see good operating performance and continued growth in those markets. A little bit of recovery in Europe on the food that goes into glass with closures on it. And then in the plastics business, I think we expect to see, as Adam said continued headway plugging out on the commercial side and on the cost side. And then you add to that the fact that we have the Fort Smith plant that would be coming up in the first quarter, which would be helping us as well. So yes, I think we're -- right as we sit here today, we would think the businesses would need to be up and those would be the primary drivers of that. Offsetting that a little bit is your interest to move around a little bit, we'll get the benefit of the debt reduction, but you could predict rates probably better than we can. So those would be the big moving pieces as we see them right now.

Ghansham Panjabi -- Robert W. Baird & Co. -- Analyst

Okay, and then just going back to North American metal food, just to sort of tie in to the earlier questions on capacity and also growth, I mean, you're making a good case for volumes to be relatively stable for North American metal food, but you generate a couple of percent of productivity a year at least, I think you do. And the base businesses probably will not grow materially going forward. So what exactly are you waiting for from a footprint sort of the optimization standpoint. Or do you just feel that this is sort of the utilization you should run based on what you see at this point?

Anthony Allott -- President and Chief Executive Officer

Yes, we're not waiting on anything. I think we've took a plant out a year ago, so we've been asked that all along. We took out some capacity not full plant, but out of our three-piece sides. So I wouldn't describe this as waiting. I think there is a question on the table of what is the -- for us, what is the right volume in 2020 let's say, where does this particular pack of customer come out in terms of sustainable volume. I think we can get rid of all the capacity for that and then have them back if that, all was just a two-year program. So we need to be sure we have that figured out, but we're not waiting on anyway. We always are looking at our costs everyday and kind of a relentless focus on where is costs, where is capacity and where can we take it out. So we're at it.

Ghansham Panjabi -- Robert W. Baird & Co. -- Analyst

Got it. Thank you.

Anthony Allott -- President and Chief Executive Officer

Yeah.

Operator

We will now take a question from George Staphos with Bank of America Merrill Lynch.

George Staphos -- BofA Merrill Lynch -- Analyst

Hi, everyone. Good morning. Thanks for taking my questions and the details so far. I wanted to again a kind of bigger picture question on food cans relative to some of the other ones Ghansham and others asked earlier. So Tony, with Can Vision 2020 that was at one point in time talked about as lowering the cost structure, perhaps opening up new opportunities for the can. And perhaps it has and it's just being covered up by some of the other trends. Are you seeing Can Vision 2020 deliver what you had expected it to be? And taking it from a different standpoint, what are you seeing from your customers using perhaps this lower cost position of the can to innovate and may be find new places for growth for the food can as opposed to it being a -- it's been a steadily declining category when we look at the CMI data going back a number of years. So your thoughts on that and then, I had a follow-on.

Anthony Allott -- President and Chief Executive Officer

Okay. Sure. So if you look at Can Vision 2020, just to be clear, again, it was -- the primary focus there was to drive cost out of the system for our customers. It wasn't about reinnovating, although we certainly talk about innovation could drive other things, but the basic effort was not to reinvent new packages and new markets, because we really don't, there's may be a bit on the fringe on that, but George that's not ever really been what we've been about. Our idea is to drive, be the lowest cost, highest quality supplier to the market. Let our customers win in their markets and not inventing new cans is not a huge part of what we're trying to accomplish, nor was it. So --

Robert Lewis -- Executive Vice President and Chief Financial Officer

Yes, Anthony it wasn't necessarily saying that or saying the fact that you'd have a lower cost position would allow more growth for the can and perhaps innovation on the marketing side. But in any event, keep going. Sorry about that.

Anthony Allott -- President and Chief Executive Officer

Yes. Fair enough. So as we look at the programs, Can Vision 2020, a lot of value got delivered to customers, a lot of customers signed up for new contract periods for us to invest in new opportunities. So when we look at it, we'd say it's actually quite a long collection of successes in doing what we want to do, it's to drive value to customer and relink Silgan to their customer in terms of -- that we were in this together against a pretty harsh environment that our customers were dealing with. Which takes me to the second part of your question is, I would tell you that I think the environment for our customers has only gotten harsher since then.

And so, while I do think we still delivered value, I do think there's something there for the customers. The world has changed much more that our customers would have ever imagined at that stage. Many of them are not the same ownership structure they were. And so there's a lot of change happening on that side as well. So in no way is this mission accomplished and that there are everything great for our customers, that's not the case. Add to that, now we're looking at significant inflation and so the tariffs alone are going undo all the good we did with Can Vision 2020. And so you get a lot of cost now coming in this year and I think next year into the can business, that is going to be a headwind against the point you're making.

George Staphos -- BofA Merrill Lynch -- Analyst

Tony, that's very helpful. And a fair point on the costs in particular. I guess the other question that I had and it's may be partly answered by what you just mentioned, but having looked at the returns on Silgan over a couple of decades, you've seen -- you saw a very steady improvement in return on capital from the early 2000s through really around 2010 as when returned peaked. And in particular, the return on invested capital which takes into consideration acquisition prices has declined more even then kind of just return on kind of a net asset figure of it. What suggests is one, you're having to and probably everybody else to pay more for growth whenever you have an opportunity to buy it. Would you agree with that? And I guess really more importantly, what do you think will be the things that ultimately trigger an improvement in the trend on return on capital for Silgan going forward? Thank you.

Anthony Allott -- President and Chief Executive Officer

Thanks, George. I think it's -- metrics are a funny thing, it's what you measure right. So 2010 roughly marked the time we started doing share buybacks. So the answer to your question is that, we had invested all that money into our assets, we would have had better return on assets I believe at that point in time. I would ask you to go look at return on equity and tell me how we had stacked up and how we've moved our return on equity over that time. So I think it's -- what we've tried to always be as a balanced management team focused on being the best in what we do. And so, sometimes we say we're generating cash, let's buy back shares that's good for the shareholder and we do it. Sometimes we say, let's build a new can plant because that's what the market needs for the can plant. So that's just one backstop is that, we tried to move all the levers to the best answer over time and frankly we feel pretty good about what going to be delivered over time on that.

The second part of your question is an excellent question which is, yes, certainly acquisitions are more expensive and which is, the other half of your question is that the thing that drives down return on asset and we've said this many times, is when you do an acquisition, you buy everything up to the current value. And so that drives down your returns. So one of the things driving our returns write down is this Dispensing Systems business. Now you asked me, do I regret in any way that decision, no that's one of the best things we've done for shareholders in a long time, but it does drive down our return on assets right now. So I think, again, we take the long-term, we think that's a great business to add to our franchise -- family of franchise businesses. It's the right thing to do, definitely we're going to drive down return on capital for period of time as with the share buyback. Andy by over time, we think it's the right spot for us to be and to move forward, but things are expensive right now, that I won't -- I'm not denying that point.

George Staphos -- BofA Merrill Lynch -- Analyst

Yes. I wasn't necessarily calling out the expense incurs, the trend that happened prior and on return on equity, you're right, although your stock tend to have a fairly high correlation with return on invested capital as well on the relative performance and that's why it's bringing it up. I'll turn it over. Thanks for listening. Thank you.

Anthony Allott -- President and Chief Executive Officer

Thanks, George.

Robert Lewis -- Executive Vice President and Chief Financial Officer

Great question.

Operator

We'll go now to Adam Josephson with KeyBanc.

Adam Josephson -- KeyBanc Capital Markets Inc. -- Analyst

Thanks, Tony and Bob, good morning.

Anthony Allott -- President and Chief Executive Officer

Good morning.

Robert Lewis -- Executive Vice President and Chief Financial Officer

Good morning.

Adam Josephson -- KeyBanc Capital Markets Inc. -- Analyst

Now, forgive me -- I think on the last call, Tony, you said you expected your food can volume for the year to be down about 2%, correct me if I'm wrong there. What are your expectations now?

Anthony Allott -- President and Chief Executive Officer

That will be down more than that, since we were wrong in the third quarter, we're not really changing the floor. So we will be down in 4%-ish range, it's on 4% to -- may be even more than that, we'll see.

Adam Josephson -- KeyBanc Capital Markets Inc. -- Analyst

Okay. And just, Tony, on your comment about the volume issues you had are not really reflective of what the broader market is experiencing at the moment. I mean, you are the largest and lowest cost producers. So I would think in a vacuum, if anything you would be taking share, not losing share, just given your low cost position. So can you just -- because you also talked about how some of these categories that are declining are becoming less consequential for you, such as fruit, but yet your volume declines are much more significant this year than they have been in previous years. So I'm just trying to square those things. Can you just help me kind of put all those things together?

Anthony Allott -- President and Chief Executive Officer

Sure, I'll try to. We are also the leader of the market and so we have to -- there is a market, there is excess capacity in the market. So there is some business that we're going to choose to not defend in some cases for a period of time. And so, you've got a bit of that in there. The biggest move as you talk about is, you've got this one particular customer is going through something that's very unique to that customer. They're making a change about their balance sheet and so, I think there's a little bit of this is about us, just letting the market calm itself down. The bigger part is really just a couple of customers going through pretty unusual circumstances right now.

And that and so -- but you're right. So we are unique. I mean if you look at what we should have done to the market, it tells you that the rest of market looks pretty OK, right? Our decline should have brought the market down by more. So the rest of the market is picking up by the way some of what we've lost, which makes sense. Even in the case of the customer who is calling inventory and some business, the business they walk away from, somebody else picks that up and that those cans go somewhere else.

Adam Josephson -- KeyBanc Capital Markets Inc. -- Analyst

Okay. If I can just ask one last one about the ROE comment you made at an earlier time, and your leverage has obviously gone up over the years, which is partly why your return on equity has gone up. I think you've said, you ended the year about 3.5 times, which is at the higher end of your target range. Do you still think just given all the uncertainties you've been talking about that 2.5 to 3.5 is an appropriate leverage range for you, do you think you should be lower than that? Just as we go later into this cycle and these uncertainties grow and grow? Thank you.

Anthony Allott -- President and Chief Executive Officer

Yes, good question. I think we -- that range still makes pretty good sense. And I don't want be dogmatic about it. It was always meant to be sort of a flexible thing, but nothing I see right now would make me think it should change a lot. The -- obviously, the rates are concerned to go up, but against that, our competition is more leveraged than they were. So we need to keep that in mind as well, and I don't see our business is more volatile, I mean, again, a perfect example, we were down 6% in our largest business and we've still hit our numbers here. I think we've still got a model that is incredibly stable. We've got a management team that is able to take costs out when the volume is not there. We think cash, so we know how to -- we will work inventory off and when that makes sense, we're dealing with a lot of inflation and challenges around that in our market well and so, I just --I think we continue to be exactly we always were, which is we're very focused on our markets, we think more so than our competition and we generate a lot of cash and we'd stay focused on that.

Adam Josephson -- KeyBanc Capital Markets Inc. -- Analyst

Thank you, Tony.

Anthony Allott -- President and Chief Executive Officer

Thanks.

Operator

We'll take our next question from Daniel Rizzo with Jefferies.

Daniel Rizzo -- Jefferies LLC -- Analyst

Good morning, guys. Just a quick question. On your freight costs, are your freight costs based on spot rates or are of course locked in like some type of contract?

Anthony Allott -- President and Chief Executive Officer

The freight cost is -- your question is freight costs. It's basically negotiated rates. The fuel is set by a standard, but it's individually negotiated rates. The problem with freight of course is, it's -- can you get a truck and the guy you contracted with get you a truck or how far down your rate is scheduled, do you have to go to get a truck to show up and make the delivery you need.

Daniel Rizzo -- Jefferies LLC -- Analyst

But with -- so -- some certain -- this is showing certain things of freight cost spot prices going down. I was wondering if you're seeing that at all or if freight cost for you at least continue to rise?

Anthony Allott -- President and Chief Executive Officer

Yeah, I wouldn't say, I think, the last I've looked at that, there were kind of at an elevated level, but not necessarily rising. There's a little bit of seasonality to all of that as it is our business unfortunately. So, it was high at our peak shipping time. But I think that the -- one of the things that's driving it is a scarcity of drivers and I don't see any change in that coming at all.

Daniel Rizzo -- Jefferies LLC -- Analyst

Thank you very much.

Operator

We'll go next to Arun Viswanathan with RBC Capital Markets.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Great. Thanks, good morning.

Anthony Allott -- President and Chief Executive Officer

Good morning, Arun.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Just a question on the food can business. I was just wondering, have you guys experienced any price elasticity there of our customers, i.e. you noted that corn and tomato seems pretty solid, I'm just wondering if the tariffs stick and we see those sustain for a while, would that cause further declines in demand across the whole category of food cans? Thanks.

Anthony Allott -- President and Chief Executive Officer

Yes, I don't, I don't know that we've seen that yet. I think for sure, our customers are in a tough fight with retailers to get price through. Some have been successful. Some haven't and so, it's not really clear to me there's a huge amount of price on the shelf right now that would change the demand pattern, nor there an easy price comparable switch the customer can make, because that the food that typically is in a can is so price advantage to it's next best choice. It's not obvious the consumer would shift all that much, but it definitely -- the retailers are playing hard about what's going on in the shelf and so, it's probably really more happening at the retailer right now.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Yes, just to clarify, the reason I asked the question is, there has been discussions around may be you heightened your promotion to kind of reenergize the category especially in soup and I guess, just wondering if the tariffs kind of removed that, so may be you can just address that. And then just as a follow-up on the freight side, any thoughts on if you'd see continued inflation in your P&L next year due to freight or should we just assume stable? Thanks.

Anthony Allott -- President and Chief Executive Officer

So, your question is a little more specific. I think the -- I think soup is a great product. I think, yeah, it should get promoted. I think there is a understanding gap between the consumer and the power of the product. So I think that would be good. And I think it could offset some of the tariff issues. I don't think that the cost of tariff are in the way of that, to your point. I don't think its enough and I'd go back to what is said, which is the next best alternative, it's so much more expensive. That I just don't think the tariff will be the driver of that point. If I were in the soup business, I would still want to push the most profitable means by which I can sell it and that's I think soup in a can.

On your freight question, if I look forward, I would think -- so we pass through a lot of our freight or else, you should have screaming a lot more than you are right now. We absorb everything in our inventory that get moved around, we absorb the stuff we're moving around in our system. And in some contract cases, we pass through on an index, not on an actual. And so I think that my expectation for next year as I sit here, it would be kind of flattish on the cost of freight, so staying up where they are now would be my best guess at it. And we would absorb a small part of that and we will pass through the bulk of that to our customers.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Great, thanks.

Anthony Allott -- President and Chief Executive Officer

Yeah.

Operator

We'll now take a question from Edlain Rodriguez with UBS.

Edlain Rodriguez -- UBS Securities LLC -- Analyst

Thank you, good morning guys.

Anthony Allott -- President and Chief Executive Officer

Good morning.

Robert Lewis -- Executive Vice President and Chief Financial Officer

Good morning.

Edlain Rodriguez -- UBS Securities LLC -- Analyst

So, you've talked about what -- customers walking away from -- no you've talked about yourself walking away from some businesses and you've had a loss of a customer. Given your low cost position, like -- how would someone else be able to serve these customers better? Or is that something that may be over time like these customers will realize that and then kind of come back to you?

Robert Lewis -- Executive Vice President and Chief Financial Officer

Yes. It's a good question. We did talk about it before on that, there's sort of two things. If there is extra capacity, there is extra capacity, and is going to seek some place to go and so as a leader in the industry, we need to acknowledge that there is a capacity out there. That's one part of the answer. The other part is, there's a lot of regional to that because freight is so important to the product, so it -- while we may have the best overall system of costs, there could easily be a competitor in a local area, who have a -- as good or a better cost in that -- in that place -- in that case, excuse me. So that's kind of where this happens, as you got somebody else just got a geographic similar or better position and then they can be competitive on it.

Edlain Rodriguez -- UBS Securities LLC -- Analyst

Okay and one last on raw materials, like have you been successful in passing through all your resin costs, like if resin cost don't go up from now, have you finally caught up with them?

Adam Greenlee -- Executive Vice President & Chief Operating Officer

Sure. This is Adam. We typically have a short lag in the pass-through of our resin cost. So we're typically, I'll just use a broad term, a quarter behind in the lag of passing through resin. So it will take one more quarter to catch up to kind of the current spot pricing on resins. So if resin didn't move from this point forward, we would theoretically be caught up one quarter from now.

Edlain Rodriguez -- UBS Securities LLC -- Analyst

Okay, thank you.

Operator

We'll now go to Brian Maguire with Goldman Sachs.

Brian Maguire -- Goldman Sachs Group Inc. -- Analyst

Hey, good morning guys.

Anthony Allott -- President and Chief Executive Officer

Good morning, Brian.

Robert Lewis -- Executive Vice President and Chief Financial Officer

Hey.

Brian Maguire -- Goldman Sachs Group Inc. -- Analyst

Most of my questions were already asked and answered, but just one or two modeling ones, if you don't mind. On the inventory run down, the fixed cost absorption hit, I think you've talked about $15 million in 4Q. Similarly the volumes are going to be a little bit lower than it down to you had thought of before. So just wondering if some of that won't bleed into 1Q '19 and if not, why would it be a bigger fixed cost hit than you were sort of thinking about before?

Anthony Allott -- President and Chief Executive Officer

It's the same fixed cost hit. So the $15 million relates to the same inventory reduction we talked about at the beginning of the year. We just instead of getting it done one-third in the first quarter and two-thirds in the fourth quarter, we've now got it all to be done in the fourth quarter. So it's that same $15 million hit should drive us somewhere $50 million-ish of inventory reduction. I don't think that should have any impact going into the first quarter, I've seen that question out there, but I'm -- there's nothing that hits me that should be affected by that.

Brian Maguire -- Goldman Sachs Group Inc. -- Analyst

Okay, great. And then just last one, what's the updated tax rate assumptions for the full year and for 4Q?

Robert Lewis -- Executive Vice President and Chief Financial Officer

Yes. So, this is Bob. As you saw, we came in to the lower end of the range, we kind of put 23% to 25% out there. Q3 saw a little bit benefit against that. I think I'd probably be guiding more to the 24% kind of range on a full year basis and for the quarter.

Brian Maguire -- Goldman Sachs Group Inc. -- Analyst

Okay, great. Thanks so much.

Operator

(Operator Instructions) We'll go next to Gabe Hajde with Wells Fargo Securities.

Gabe Hajde -- Wells Fargo Securities, LLC -- Analyst

Good morning gentlemen. Thanks for taking the question.

Anthony Allott -- President and Chief Executive Officer

Hi, Gabe.

Gabe Hajde -- Wells Fargo Securities, LLC -- Analyst

Hate to beat on it, may be just drill down a little bit into this $15 million of under-absorbed overhead and then Tony to your comment about 2019. Is any of that coming I guess from reduced production on the soup side and just trying to understand, normally we would think that most of that might come back, where you guys will be producing in a normal rate, but given where some of the softness is in the comment you already made about the fruit customer perhaps that might not be the case next year, where this sort of the new production rate that we should be thinking about going forward?

Anthony Allott -- President and Chief Executive Officer

No, so the $15 million cost or the $50 million (ph) reduction was always in our plan. So that has much more to do with, we had -- because we had built a new plant now 18 months ago, we had been doing various footprint moves. We had built the inventory up to cover off through all of that and so, we came into the year and so we've got an opportunity to take inventory out for it. It didn't really have do with any particular market specifically, it was just more general inventory around geographic things we were trying to solve. So -- and that's still the case. We are changing a little bit about whose inventory, but not a lot. And again I want to be clear, I'm not -- my point doesn't say that we think something about the line of soup has changed. I don't believe that to be true. It was off more this quarter than it is typical, so it's worth saying that we're watching it. But if you ask me right now, I think soup is going to be on the same kind of a curve, which is a fairly slow decline. And if they get promoting it bit further, may be they can bend that curve a little bit.

Gabe Hajde -- Wells Fargo Securities, LLC -- Analyst

Okay. Thank you, Tony. And then I guess on the plastics side having sort of approaching where acceptable or what your target is, 15% EBITDA margins are, might that business warrant additional investment, and if so, how would you envision that playing out?

Robert Lewis -- Executive Vice President and Chief Financial Officer

Yes, look, I think we've been pretty clear over an extended period of time that this business had to prove itself and earn its stripes from the operational efficiencies in the profitability side. As Adam said earlier, we think we're well on track to get to the margin profile that we looked at. I think as long as it continues to perform, then the idea of us allocating some capital to it, probably does sit there for the right business, with the right return profile. So I don't think that's not a change from where we started this whole thing. So yes, that's kind of where we'd be.

Gabe Hajde -- Wells Fargo Securities, LLC -- Analyst

Thank you, Bob.

Operator

And we'll take our next question from Mark Wilde with Bank of Montreal.

Mark Wilde -- BMO Capital Markets -- Analyst

Yes. Just a couple of cleanups here. I wondered, Adam, is it possible to get any sense for kind of what you think kind of combined resin, steel, tinplate, headwind might have been for you in the third quarter? Just from unrecognized or on pass through input costs?

Adam Greenlee -- Executive Vice President & Chief Operating Officer

Sure. I'll may be try to answer the question specific to plastic just for a second. But for resins in the quarter, I think we're probably something in the $3 million-ish across the entire Silgan platform. I had mentioned $1 million specific to the plastics business, so the balance over to closure is both in our legacy closures and in the Dispensing Systems business.

Anthony Allott -- President and Chief Executive Officer

And then we, I don't think you gave this Bob. But freight was probably about a $2 million inflationary headwind to us in the quarter. And then on top of that steel, I wouldn't put that -- or metals I wouldn't put that way, we've got, as you know, very solid pass-throughs. So essentially, we pass that through and there is no meaningful P&L impact.

Mark Wilde -- BMO Capital Markets -- Analyst

And Tony, that carries through to that kind of metal that goes into the closures as well?

Anthony Allott -- President and Chief Executive Officer

Yes, it does. Yes.

Mark Wilde -- BMO Capital Markets -- Analyst

Yes. Okay. Then --

Anthony Allott -- President and Chief Executive Officer

Where Bob made the point, the one exception is of course, there's -- on a cash basis, again, just to come back to that, that's a different matter entirely, right, you don't necessarily get the -- what's in your inventory, you've spent cash on that and you haven't collected that from customers, yeah?

Mark Wilde -- BMO Capital Markets -- Analyst

Yes, OK. And then the other one I wanted to just kind of clean up, it sounds like most freight is passed straight through, but I wondered whether you have freight or other costs which you really just try and recapture through an index and then the kind of question is, whether the index whether it's a PPI or whatever, is really moving in line or kind of out of line with your actual costs?

Robert Lewis -- Executive Vice President and Chief Financial Officer

Yes. (Multiple Speaker) I just want to get a sense next year.

Anthony Allott -- President and Chief Executive Officer

Yes, I have tried to answer that. So the answer is, it's all of the above. So yes, it is true that some is done through an index. And so, it is true that, that will lag like other inflationary costs that we have in our contract pass-through. And then there are others where it's a direct, either the customer picks up or the customer pays the direct bill. So it's a variety and I don't really -- I don't have the spread mix of that and I'm not sure. It would still be hard for you to know what to do with it, even if I gave it to you. So -- but it is true that in an inflationary time, we will eat some freight.

Mark Wilde -- BMO Capital Markets -- Analyst

Yes, OK. I was just, I think a lot of people, a lot of contracts indeed just use a PPI and I think freight has been in particular has been moving up much, much faster than the PPI in aggregate.

Anthony Allott -- President and Chief Executive Officer

That's correct.

Robert Lewis -- Executive Vice President and Chief Financial Officer

Yeah, that's right.

Anthony Allott -- President and Chief Executive Officer

That's correct.

Mark Wilde -- BMO Capital Markets -- Analyst

Yes. Okay. All right. Good luck in the fourth quarter and into next year, guys.

Anthony Allott -- President and Chief Executive Officer

Thank you, Mark.

Operator

We'll now take additional questions from George Staphos with Bank of America Merrill Lynch.

George Staphos -- BofA Merrill Lynch -- Analyst

Thanks guys. Just one quick one to finish up. Again, back to the can and whether customers or their customers are attempting different marketing strategies. Back a number of years ago, there was a -- it was largely a paperboard company but they had a dispensing system that they were trialing at some of the retailers that would be favorable for the can and the benefit was in terms of loading and restocking. More recently, at some of the trade shows, there's been a lot of focus on retail ready packaging. Is any of that beginning to move the needle at least from your advantage point for your customers? And therefore in particular for the can or still not enough yet anyway? Thanks guys. Good luck in the quarter.

Anthony Allott -- President and Chief Executive Officer

Thanks, George. It's a really interesting question. So, yes, it's one that we've been fortunate around ourselves and with our customers. So the answer is yes, there are -- we definitely have customers who are actually have packages out in that kind of group bundled format and doing more of it, doing distribution that's better for e-commerce or other outlet. So I think the answer is still unfortunately, for you ended, which is I don't it's enough to move the needle yet. But I do think it's sort of an important trend that we want to support and keep engage with our customers on.

Now we do think e-commerce is -- in food, it's underrepresented versus many other products, but we do think e-commerce will become bigger to food. We do think that packages are going to have to be favored to e-commerce, even if they end up going through the old traditional channels. So I think -- and I remember, definitely when you raised it George, I think the time we were not all that interested, I think comparatively that packaging -- secondary packaging choice makes more sense today than it -- than we thought it did three or four years ago.

George Staphos -- BofA Merrill Lynch -- Analyst

All right. Well, we'll keep a look at. Thanks guys.

Operator

We'll now take a question from Chip Dillon with Vertical Research.

Salvator Tiano -- Vertical Research Partners -- Analyst

Hi guys. Salvator Tiano again filling in for Chip. Just very quickly, since we're already at noon, I noticed last quarter that you didn't highlight the resins as a headwind for the plastics business, only closures and this quarter again you actually -- as you said it was a noticeable headwind in plastics and closures. So can you elaborate a little bit on what has changed and why it became again a headwind year-on-year in that business, is it the type of resins you're using or what else happened over there?

Adam Greenlee -- Executive Vice President & Chief Operating Officer

Sure. It's Adam, it's a combination of things and one, you just mentioned. It is the variety of resins that we use. So resins move at different times with different drivers as far as the resins that we purchased, but there were announced increases that took place in the quarter that drove the unfavorableness year-over-year. So it's just the variety of resins and the price moves on those specific resins that drove the year-to-year change.

Salvator Tiano -- Vertical Research Partners -- Analyst

Perfect, thanks.

Operator

And it appears there are no further questions at this time. I'd like to turn the conference back to Mr. Tony Allott for any additional or closing remarks.

Anthony Allott -- President and Chief Executive Officer

Great. Thank you, Jessica. Thank you everyone for the call. We appreciate it and we'll talk to you at the end of January about our year-end results. Thank you.

Duration: 62 minutes

Call participants:

Kimberly Ulmer -- Vice President, Finance and Treasurer

Anthony Allott -- President and Chief Executive Officer

Robert Lewis -- Executive Vice President and Chief Financial Officer

Scott Gaffner -- Barclays Bank PLC -- Analyst

Salvator Tiano -- Vertical Research Partners -- Analyst

Adam Greenlee -- Executive Vice President & Chief Operating Officer

Mark Wilde -- BMO Capital Markets -- Analyst

Deborah Jones -- Deutsche Bank AG -- Analyst

Anthony Pettinari -- Citi -- Analyst

Ghansham Panjabi -- Robert W. Baird & Co. -- Analyst

George Staphos -- BofA Merrill Lynch -- Analyst

Adam Josephson -- KeyBanc Capital Markets Inc. -- Analyst

Daniel Rizzo -- Jefferies LLC -- Analyst

Arun Viswanathan -- RBC Capital Markets -- Analyst

Edlain Rodriguez -- UBS Securities LLC -- Analyst

Brian Maguire -- Goldman Sachs Group Inc. -- Analyst

Gabe Hajde -- Wells Fargo Securities, LLC -- Analyst

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