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Ball Corp (NYSE:BLL)
Q4 2018 Earnings Conference Call
Jan. 31, 2019 11:00 a.m. ET

Contents:

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Ball Corporation fourth-quarter earnings conference call. [Operator instructions] As a reminder, this conference is being recorded, Thursday, January 31, 2019. I would now like to turn the conference over to John Hayes, CEO.

Please go ahead.

John Hayes -- Chief Executive Officer

Great. Thank you, Chris, and good morning, everyone. This is Ball Corporation's conference call regarding the company's full-year and fourth-quarter 2018 results. The information provided during this call will contain forward-looking statements, including estimates related to the impact of the U.S.

Tax Cuts and Jobs Act. Actual results or outcomes may differ materially from those that may be expressed or implied. Some factors that could cause the results or outcomes to differ are in the company's latest 10-K and in other company SEC filings as well as company news releases. If you don't already have our fourth-quarter earnings release, it's available on our website at ball.com.

Information regarding the use of non-GAAP financial measures may also be found in the notes section of today's earnings release. The release also includes a table summarizing business consolidation and other activities as well as a reconciliation of comparable operating earnings and diluted earnings per share calculations. Now joining me on the call today are Scott Morrison, senior vice president, chief financial officer; and Dan Fisher, senior vice president and chief operating officer, Global Beverage. I'll provide some introductory remarks.

Dan will discuss the global beverage packaging performance. Scott will discuss key financial metrics, and then we'll finish up with some comments on our aerospace business as well as our outlook for the company.2018 was a strong year for Ball and its shareholders. Strong global demand for our aluminum beverage and aerosol packaging products, growth in our aerospace business and a strong long-term focus on earnings and cash flow performance allowed us to return approximately $850 million to our shareholders, which was well above our original expectations dating back to 2016. Our fourth-quarter results were slightly below our own expectations due to some transitory issues in our North and Central America beverage segment that Dan Fisher will comment on.

Yet as we look forward, we like the position we're in. We have good momentum in terms of our volume growth. We'll begin to reap in earnest the footprint activities that we have implemented and largely completed. We have a clear line of sight to achieve the $2 billion in EBITDA and $1 billion in free cash flow that we set out as a target in 2016 we just need to execute.

And all of our free cash flow will be returned to our shareholders in the form of dividends and share repurchases. During 2018, we continued to actively adjust our overall manufacturing footprint. And since we closed on the Rexam acquisition, we have rationalized eight facilities globally with four in the U.S., two in Brazil and one each in Germany and in Italy. We started up three state-of-the-art beverage can facilities in Arizona, Spain, and our joint venture in Panama to cost-effectively meet growing demand in these regions.

We've installed or are installing additional specialty can capacity with new lines in our existing facilities in Argentina, Chile, Switzerland, Serbia, Texas, and Mexico, in addition to a number of other smaller speedup projects. We've grown our aerospace backlog 26% to over $2.2 billion while also growing headcount by over 35% to approximately 3,700 people and the company continues to expand our aerospace infrastructure to meet growth in this important segment. We've divested our U.S. steel food and aerosol business into a 49% owned joint venture and realized approximately $600 million in cash.

And we announced the sale of our Chinese beverage can business. As we look more deeply into 2019, we are on the cusp of achieving better value for our standard beverage can products as the majority of our negotiations for the next 18 months are largely concluded with much of this value to be received beyond 2019. We are well invested to capture global growth for our specialty product portfolio. We are benefiting from the final phase of initial acquisition-related cost-out programs, we are embarking on additional efforts to streamline global processes, we're commercializing the sustainability benefits of aluminum packaging to provide our customers solutions versus environmentally challenged substrates, and we are initiating additional products to further expand our aerospace infrastructure and testing capabilities.

As we go forward, we will continue to execute our long-term strategy of growing earnings over time through increasing revenues above our cost growth by focusing on our value-over-volume strategy in standard containers, driving more mix shift to specialty containers, further developing innovative aluminum packaging products, and expanding aerospace, all within EVA and return of value to shareholders mindset. Ball is uniquely positioned to lead sustainable growth in global aluminum packaging and aerospace while also continuing to return significant capital to shareholders following the board's recent $50 million share repurchase authorization as well as achieving the three and a half year plan we laid out in mid-'16 of comparable EBITDA and free cash flow of $2 billion and $1 billion, respectively. Thanks to all of our employees who helped our company achieve these results as well as win numerous customer awards and recognitions, including inclusion on the Dow Jones Sustainability Index and the recent humbling recognition of being ranked No. 1 on Forbes magazine's list of America's Best Employers for Diversity.

All of this is possible because of our people and our culture. We're proud of our 139-year history and we'll continue to do what's best for Ball and shareholders' long-term success. And with that, I'll turn it over to Dan.

Dan Fisher -- Senior Vice President and Chief Operating Officer, Global Beverage

Thanks, John. Our global beverage business comparable operating earnings were up 3% year over year on full-year global volume growth of 2%, offset somewhat by plant start-up costs, higher freight, and the late-year plant inefficiencies. Our global teams kept pace with notable growth in Europe, Russia, and North America, which at times, also created some operational and logistic inefficiencies, given an oversold U.S. industry and strong demand in the U.K., Nordics, and Russia.

We left some money on the table in 2018, and with new plants now 80% to 90% up their learning curves, that should flow through in 2019. Moving to the individual segments. Ball's North American segment volumes were up 4% in the quarter. New categories led the way with wine, sparkling water, craft, and SpikedSeltzers experiencing double-digit growth.

And 2018 was truly a tale of two halves. Demand lagged in the U.S. during the first half as mass beer slowed while in contrast, other customers struggled to properly gauge consumer demand for new product introductions during the busy summer selling season, ultimately leading to tight supply demand for specialty cans in the second half, leaving little room for error. At the same time, we were experiencing such growth, U.S.

aluminum suppliers struggled to provide quality metal to us, and this issue wasn't resolved by year-end 2018, leading to plant network inefficiencies late in the year, resulting in our North American business producing lower-than-expected results despite strong volume growth. So far this year, the supplier is delivering metal we can run and our plant efficiencies in the affected plants are improving. In order to ensure that this does not occur again, we have focused our efforts on ensuring that our metal supplier is doing the necessary things to deliver quality metal on time, exploring other metal options despite the aluminum tariff situation, and by working with our customers to lay down safety stocks in the seasonally slower part of the year and ahead of what we anticipate will be a very strong year in North America. Given our customers' current demand profiles, we anticipate selling 2 billion more units in 2019 while also reaping the net $50 million of fixed cost savings following the successful decommissioning of three plants and ramp-up of our four-line specialty plant in Goodyear, Arizona.

Turning to our South American segment. As expected, our Brazilian volumes were flat versus the industry being up 6% in the fourth-quarter. Ball's 2017 decision to forgoe some can business in Brazil and the completion of the [Inaudible] manufacturing contract, required as part of the Rexam transaction, led to lower fourth-quarter and full-year earnings. Looking forward, the second half 2018 trend will continue in first half of 2019 until we anniversary these items.

Overall, the South American industry trends remain strong with cans being the favored package in the beer, tea, energy, and hard alcohol categories. Our expansions in Argentina, Paraguay, and Chile are on track and we are excited about the can continuing to be embraced by customers and consumers across South America. With these expansions benefiting second half 2019, full-year 2019 should be roughly in line with full-year 2018 performance. European beverage earnings were up 29% year over year in the fourth quarter and 21% for the full year.

Volumes increased 10% in the fourth quarter and 8% for the full year. Cans are winning as customers shift their package mix away from plastics and into cans. Tailwinds such as this, the new facility in Spain coming online successfully, and the closure of our one-line San Martino, Italy facility earlier than planned, led to a strong finish in 2018. As we look forward, continued good market growth, the addition of two new lines in Switzerland and Serbia, along with several other specialty line conversions scheduled to be brought online in early 2019, the year-over-year impact of our 2018 G&A improvement and plant cost initiatives will provide further earnings growth and margin expansion in 2019.

Turning to EMEA and Asia. The demand environments in Turkey, Egypt, and India improved but were offset by regional volatility and poor operating performance in our Saudi joint venture, which led to meaningfully lower volumes in the region and operating earnings down by more than $20 million year over year. And in China, the business remains cash flow positive and Ball continues to actively manage the business ahead of its sale to ORG, which, following regulatory approval, should close in the second half of 2019. In summary, global beverage can demand remains robust in our three key regions of North and Central America, Brazil, and Europe.

Supply demand for U.S. standard containers and certain specialty sizes is tight, and commercial and sustainability initiatives will benefit Ball going forward. Thank you again to all of our teams around the globe. With that, I'll turn it over to Scott.

Scott Morrison -- Senior Vice President, Chief Financial Officer and Treasurer

Thanks, Dan. Comparable full-year and fourth-quarter 2018 earnings were $2.20 and $0.55, respectively. Details are provided in the notes section of today's earnings release and additional information will also be provided in our 10-K. Fourth quarter comparable diluted earnings per share reflect solid operational performance across our businesses, a lower effective tax rate than expected and slightly lower corporate costs, offset by the sale of our U.S.

food -- steel food and aerosol business and lower year-over-year performance in North and South America, as Dan just outlined. From an overall cost perspective, our people have been doing a great job with our SG&A as a percent of sales at an industry-leading 4.1% for the full year. Also, we mentioned on prior calls the timing of the U.S. steel food and aerosol sale versus the timing of using the proceeds to repurchase shares was slightly dilutive to earnings in the second half of 2018.

Net debt ended the year at $6 billion, and we anticipate year-end 2019 net debt to remain around $6 billion as we continue to actively buy back stock and pay dividends throughout 2019. Close to 90% of Ball's balance sheet debt is at fixed rates, and we've reached our post-Rexam target leverage levels with net debt to comparable EBITDA at 3.3 times as of year end, leaving us well-positioned in a rising interest rate environment. Our 2018 stock buyback exceeded $700 million, and we paid approximately $140 million in dividends. In 2019, we expect to buy back $1 billion of stock and pay roughly $135 million in dividends.

As of yesterday, we have already acquired roughly $100 million of stock in 2019. Looking forward and including 2018, our plan is to buy back approximately 18% of our outstanding shares by mid-2021 or approximately $1 billion of stock annually in 2019, 2020, and 2021. Once completed, we will have successfully repurchased the 75 million shares issued to execute the Brazilian JV and Rexam acquisitions. As we think about 2019, we continue to expect full-year comparable EBITDA at $2 billion and free cash flow in excess of $1 billion after CAPEX in the range of $600 million.

Full-year interest expense of approximately $300 million and the full-year effective tax rate on comparable earnings will be in the range of 24% for all of 2019 and corporate undistributed should be roughly flat with 2018 levels. By investing in our businesses, pursuing bolt-on M&A, repurchasing stock, and paying quarterly dividends, we continue to put the cash machine to work for the long-term benefit of our fellow shareholders. With that, I'll turn it back to you, John.

John Hayes -- Chief Executive Officer

Great. Thanks, Scott. In 2018, our aerospace business reported 21% revenue growth and 15% operating earnings growth on solid [Inaudible] performance, partially offset by the start-up and ramp-up of many of these new contracts and new hires. As part of this, we welcomed 900 new aerospace employees, of which 42% were diverse hires.

Given recent contract wins, we anticipate adding at least another 600 employees over the next 12 months. The entire management team has done great work to ensure our new people are on boarded, mentored, and trained, our existing people feel part of the success; our facilities are fit and ready for the added throughput and our processes are redesigned and resilient enough for the higher standards expected, all while delivering on our financial commitments. Looking forward, aerospace is poised to grow earnings in the range of 15% in 2019. And with contracted backlog levels exceeding $2.2 billion and our won-not-booked backlog at $4.7 billion, the future looks bright for at least the next three to five years.

As a corporation, I truly believe we are positioned for long-term sustainable growth. We continue to manage our asset base with an EVA mindset. We are leading more efforts on our sustainability initiatives to ensure our aluminum packages are positioned as the environmental solution for our customers' brand portfolios, and we are supporting the rapid growth of our aerospace business. We're controlling the things we can control, managing headwinds and leveraging our strong free cash flow to invest for the long term and consistently return value to shareholders via share buybacks and dividends.

We continue to reaffirm our 2019 goals of $2 billion of comparable EBITDA and free cash flow in excess of $1 billion. And in 2019, we look forward to exceeding our long-term 10% to 15% diluted earnings-per-share growth goal. And with that, Chris, we're ready for questions. 

Questions and Answers:

Operator

Thank you. [Operator instructions] Our first question comes from the line of Anthony Pettinari with Citi. Please go ahead.

Anthony Pettinari -- Citi -- Analyst

Good morning.

John Hayes -- Chief Executive Officer

Good morning.

Anthony Pettinari -- Citi -- Analyst

Yes, I was wondering if it's possible to quantify the impact of the supplier issue in North America for 4Q? And maybe for 1Q if there's an early view there. And then you spoke about steps you're taking to kind of guarantee supply going forward with your suppliers. Do those initiatives -- is that -- does Ball incur costs as a part of those initiatives? Or just any kind of color you can give there would be helpful.

John Hayes -- Chief Executive Officer

Sure. In the fourth quarter, as I said in the comments, in first quarter I don't anticipate any ongoing inefficiencies, this was really marked by late October, November. One supplier and it's a tall relationship with the customer approximately $10 million of the impact is centered around that. Now we are in -- we're in discussions with this particular supplier and the customer, and hope to kind of reconcile that issue.

And the only issue there was we couldn't get to the proper accounting treatment in the fourth quarter to recognize the offset.

Dan Fisher -- Senior Vice President and Chief Operating Officer, Global Beverage

Yes, I'd just add on to that. Those are the direct costs and there is many other indirect costs because it force freight rates to be higher because various plants were down as results of that. And so, that's just the direct cost, but I think it probably had twice the -- double that was for the full impact of what happens in the fourth quarter.

Anthony Pettinari -- Citi -- Analyst

OK. OK. So it sounds like there is still an impact for out-of-pattern fright in 4Q. I guess, same question for 1Q has that kind of dissipated or is there still a freight headwind in 1Q?

John Hayes -- Chief Executive Officer

No, not ongoing in 1Q. And I guess to answer your other question, it's we do have people that are certainly supporting the ongoing efforts there, but you're talking about four to five folks and there's no ongoing costs by us to help support that initiative.

Anthony Pettinari -- Citi -- Analyst

OK. OK. That's helpful. And then maybe just one quick one for Scott.

I'm sorry if I missed this, but for the full year free cash flow guidance is there assumption on working capital embedded in there?

Scott Morrison -- Senior Vice President, Chief Financial Officer and Treasurer

There's not much. We've gotten tremendous benefits in the last couple of years. So, there is not much benefit expected from working capital on those numbers for $1 billion of cash flow in 2019. It's really the earnings growth, kind of tax effect the earnings growth and then a couple of hundred million dollars less in CAPEX from this year to 2019 gets you to the $1 billion or over $1 billion.

Anthony Pettinari -- Citi -- Analyst

Understood. I'll turn it over.

Operator

Our next question comes from the line of George Staphos with Bank of America Merrill Lynch. Please go ahead.

George Staphos -- Bank of America Merrill Lynch -- Analyst

Thank you. Hi, everyone. Good morning. Thanks for taking my question and thanks for all the details.

I guess -- and congratulations for the year. I guess the first question I had is around growth. And so, in the last quarter we saw some interesting patterns in terms of can shipments and some of the end market data. One of things that we had heard recently is you're seeing some pickup in beer consumption partly driven by the new labeling as consumers are starting to sort of look at beer versus alternatives.

Are you hearing that or not really from your customers? And then relatedly in terms of growth, there was a big pickup in can growth in the fourth quarter in non-alcoholic. It would seem that most of that was around the newer beverages categories that you cited. But how much of that is also, at least a part of it was, but -- and how much of that do you think is being driven more by sustainability and the shift out of plastic to can, specifically within North America? And I have a couple of follow-ons.

Dan Fisher -- Senior Vice President and Chief Operating Officer, Global Beverage

Sure, George. This is Dan. And I would say we didn't see any -- in North America specifically in big beer versus craft beer versus the other beer categories, we didn't see anything markedly different in can than what we've been seeing for the last several years. Craft beer continues to grow, cans continue to win share there.

I would say the new alcoholic categories and the new non-alcoholic categories and product launches, those are disproportionately coming up in cans and that we've got IRI data and even Euromonitor data that would suggest that that's a pretty sizable shift from new product launches even 18 months, 24 months ago. We would believe that sustainability influenced. Our customers aren't telling us that specifically, but everything would indicate. They're launching new products.

In specialty can sizes, they're garnering better price points. And I don't know why we continue to build on in already huge issue for a couple of large CPG companies by launching new products and PET. So, that's our view. If that is a sustainability move, I think it's fairly significant but -- and we think that's got a lot of tailwind for a longer period of time.

George Staphos -- Bank of America Merrill Lynch -- Analyst

OK. I mean, it remains to be seen, but we're hearing that even the megabeer guys are starting to see some pick-up in demand. We'll see if it plays out actually or not. In terms of John...

Dan Fisher -- Senior Vice President and Chief Operating Officer, Global Beverage

That's definitely in other parts of the world. We're definitely seeing hectoliter expansion for the first in Russia, for the first time in Brazil, and I think they're putting more dollars behind the promotional and advertising in big beer in North America tailwind to fourth quarter what we've seen to start the year. But whether that trend continues and for how long, that will be something we'll keep our eye on.

George Staphos -- Bank of America Merrill Lynch -- Analyst

OK. Thank you. John, if you could repeat again what you were saying about your value over volume efforts, the commercial activity, the progress. I think you -- that you've seen so far.

I think you mentioned that some percentage, some large percentage of your contract renewals for the next 18 months are largely done. Can you go back over the details that you had in your formal comments and what implications we should be drawing from that, to the extent that you can, related to our own forecasting entries, forecasting of Ball's results?

John Hayes -- Chief Executive Officer

Yes. George, as I said, I think I'll be repeating myself, but the vast majority of our contracts to come due in North America over the next 18 months are largely concluded. And we signed the agreement, not necessarily, but we've reached commercial agreement and now we're getting to the documentation thereof. As you know, many of those kind of kick in at the end of 2019 going into 2020 and that's why I said the majority of the value of that will come after 2019.

George Staphos -- Bank of America Merrill Lynch -- Analyst

Fair enough. Let me leave it there and I'll turn it over to the rest of the queue. Thank you.

John Hayes -- Chief Executive Officer

Thank you, George.

Operator

Our next question comes from the line of Scott Gaffner with Barclays. Please go ahead.

Scott Gaffner -- Barclays Investment Bank -- Analyst

Thanks. Good morning.

John Hayes -- Chief Executive Officer

Good morning.

Scott Gaffner -- Barclays Investment Bank -- Analyst

I think you said before that your freight transportation cost in the U.S. had flattened out. But when we look at the recovery from 2018, when you had fairly significant headwinds on freight costs, are you able to recover meaningfully -- meaningful amounts of that in 2019 based on the current pass-through mechanisms you have or do you have to wait more until 2019 when you get contract resets?

Scott Morrison -- Senior Vice President, Chief Financial Officer and Treasurer

No, Scott. This is Scott Morrison. We have PPI escalators in our contracts, specifically in North America, that will -- there's a catch-up to it. So we'll catch up with the PPI escalation and we're seeing moderation of those other headwinds.

Scott Gaffner -- Barclays Investment Bank -- Analyst

OK. Dan, when you mentioned some weakness in Saudi Arabia, I mean, I think you said Turkey, Egypt, India all improved, but Saudi was still weak. Is that a new trend or is that just a continuation of the sugar taxes that were put in place -- or soda taxes that were put in place in Saudi Arabia over the last year or so?

Dan Fisher -- Senior Vice President and Chief Operating Officer, Global Beverage

Just a -- yes, just a continuation of the sugar tax degradation in that area. Everyone else is. And it's -- we feel like it stabilized in Q4 and starting off on a decent foot, but just a stabilized environment. We're not going to see any appreciable uplift in that country or our JV relationship there for a period of time still.

John Hayes -- Chief Executive Officer

Yes. And, Scott, this is John. Just financially, I'd just point out, you can clearly see that in the equity line that you see the negative impact of that. And Ann can provide you more details.

Scott Gaffner -- Barclays Investment Bank -- Analyst

All right. Last one for me, ust in the prepared remarks, you mentioned 2 billion units of volume growthin North America. Can you remind us what the 2018 number of units in North America were? And then on that volume growth, should we assume that most of that is actually coming in specialty versus 12-ounce? Thanks.

Dan Fisher -- Senior Vice President and Chief Operating Officer, Global Beverage

Yes, I think it'll continue to be a similar composition from a specialty standard can. Probably a little richer on the specialty as those are the new lines that we put in place. We were kind of mid to 46 billion approximately in terms of unit volumes sold. So you put 2 billion on top of that in North -- Central America.

Scott Gaffner -- Barclays Investment Bank -- Analyst

OK. Thanks, guys. Good luck in the quarter.

John Hayes -- Chief Executive Officer

Thanks.

Operator

Our next question comes from the line of Ghansham Panjabi with Baird. Please go ahead.

Matt Krueger -- Ghansham -- Analyst

Hey. Good morning. This is actually Matt Krueger sitting in for Ghansham. How are you doing?

John Hayes -- Chief Executive Officer

Good. Thanks.

Matt Krueger -- Ghansham -- Analyst

Good. Good. So my first question is, can you provide a bridge from the $1.83 billion in EBITDA generated during 2018 to the projected $2 billion for 2019 just in terms of any major puts and takes like volume contribution or cost-savings initiatives, etc., etc.?

Scott Morrison -- Senior Vice President, Chief Financial Officer and Treasurer

Sure. Let me take a shot at that. So if you think about aerospace, given their growth, we expect them to be up $30-plus million in EBITDA. So you're starting at $1.830 billion.

So that's $30 million. North and Central America, we talked about $50 million of fixed cost savings on a full-year basis, 2 billion more units of volume with better mix and the rest is the PPI pickup that I mentioned earlier and moderation of headwinds. All that told should be something in the neighborhood of $125 million on a full-year basis. Europe, we've been able to -- they've done a great job of improving their margins year on year.

We'll get probably another $40 million of growth of EBITDA from both cost out and volume growth. South America is probably pretty flat. And then EMEA and Asia, up a little bit. So kind of a slight positive when you combine those together.

And then aluminum aerosol, up probably $10 million and a little bit of upside in corporate costs. And you have the absence of the tinplate business for seven months. So all that told to a little bit over $2 billion.

Matt Krueger -- Ghansham -- Analyst

That's very helpful. Thank you. And then just expanding a little bit on the cost-savings programs. How should we expect the $50 million in cost savings to flow through the North America business kind of on a quarterly cadence? And then can you detail any of the other cost-savings initiatives that we should expect to impact 2019 region by region in a similar fashion?

Dan Fisher -- Senior Vice President and Chief Operating Officer, Global Beverage

Yes, I would say, in North America, all of the facilities are shuttered and our Goodyear facility is probably closer to 90% through the start-up phase. So absent any kind of marginal cost impact in Q1 as we continue ramp-up for our Goodyear facility, you should see that almost on an annualized basis streamline throughout the year, the $50 million.

John Hayes -- Chief Executive Officer

Yes. And then maybe qualitatively on the other cost initiatives, so we go through Europe, as Scott and Dan had mentioned, Europe's done a very good job from a cost out within the plant perspective. We have the San Martino that came down toward the end of the year and we also have a lot of transformation from a G&A perspective. And as Scott alluded to, we've done a very nice job overall as a corporation on the G&A and particularly in Europe, so kudos to all of them.

I think in South America, we are lapping, as Dan said, some headwinds in terms of the [Inaudible] ends contract as well as forgoing some of the business that we were benefiting in the first quarter and even first half of last year, but they've done a great job on the cost side. And I think we're going to have some headwinds year over year in the first half of this year, but you're going to see it reverse in the second half of the year. So I think that's going well. We talked about EMEA and the issues going on there, and there's a lot of effort and focus and working with our joint venture partner in Saudi to rightsize that business and really participate in the growth of Turkey, Egypt and other places, like he said.

And then lastly, North America, Scott and Dan mentioned the $50 million. We also have been putting a lot of effort on making sure that from an efficient supply demand point of view that we're minimizing any of that out-of-pattern freight that we experienced last year.

Matt Krueger -- Ghansham -- Analyst

Great. That's very helpful. I'll leave it there. Thanks.

Operator

Our next question comes from the line of Neel Kumar with Morgan Stanley. Please go ahead.

Neel Kumar -- Morgan Stanley -- Analyst

Hi, good morning.

John Hayes -- Chief Executive Officer

Good morning.

Dan Fisher -- Senior Vice President and Chief Operating Officer, Global Beverage

Good morning.

Neel Kumar -- Morgan Stanley -- Analyst

I was wondering if could you talk about what plants in particular were impacted by the aluminum issue and you still generated 4% volume growth in North America despite the downtime at the affected plants. So how are you able to increase production at your other plants, given that they were likely already running at capacity from the oversold industry?

Dan Fisher -- Senior Vice President and Chief Operating Officer, Global Beverage

Well, we -- No. 1, to answer your question, we drew down inventories to do that. We're not going to go into specifics of what plants were affected, that's not what we do, but recall that we only have a limited number of metal suppliers. And so, any given -- a metal supplier probably serves multiple plants and you should think about it that way.

Neel Kumar -- Morgan Stanley -- Analyst

OK. That's helpful. And then in terms of the commercial opportunity, you've talked in the past about some con [Inaudible] renegotiations in Europe in 2019. Can you give an estimate of what percent of contracts could be up for renegotiation there?

John Hayes -- Chief Executive Officer

Well, we -- at the -- I'm sorry. What year, at the end of '19, did you say?

Neel Kumar -- Morgan Stanley -- Analyst

For the end of 2018 and 2019.

John Hayes -- Chief Executive Officer

Yes. OK. Yes, approximately a quarter or so of our European volume was renegotiated and we're pleased with where we are right now.

Neel Kumar -- Morgan Stanley -- Analyst

OK. Thanks.

Operator

Our next question comes from the line of Tyler Langton with J.P. Morgan. Please go ahead.

Tyler Langton -- J.P. Morgan -- Analyst

Good morning. Thank you. I just had a question on European volumes and I guess up 8% this year. Could you just talk a little bit about, I guess, what was Russia, what was Europe, and then just kind of thoughts for this year? As you know, it's tough comps, but I guess you're still seeing good growth and benefiting from substitution.

So just some color there would be great.

John Hayes -- Chief Executive Officer

Sure. In -- Russia as you recall had the World Cup and strong summer and benefited from actually some legislative actions in Russia moving away from some larger PET. And so, they grew at approximately 20% for the year. In Central and Eastern Europe, we had one customer, large, large customer that grew nearly 10% that we have a sole supply relationship with.

And then we stepped into the new [Inaudible] facility. We stepped into a new contract. So in the second half of the year, you saw Iberia grow year over year north of 10%. That was contractual volume.

But you saw solid growth low to mid-single digits in the Nordics, in the U.K. and other parts, but the three large areas that really drove our volume were Iberia, Central, and Eastern Europe, and Russia.

Yes. Just to add on to that, it gets to an earlier question about the whole sustainability. You know some of the bigger -- what's perceived is more mature markets. Just to give you context and I think about the UK, I think of France, I think of Germany.

In the fourth quarter alone the U.K. was up 7%, France was up 7.5%, and Germany was up around 20%. So that is on relatively flat overall liquid consumption. So, I think that strength does reinforce our belief around this whole sustainability movement.

Tyler Langton -- J.P. Morgan -- Analyst

Got it. Thanks. And then, Scott, could you just update us sort of the shared services savings. I don't know if there was sort of lump in sort of the segments when you provided the sort of the EBITDA bridge performance, but just what you're expecting there?

Scott Morrison -- Senior Vice President, Chief Financial Officer and Treasurer

It's really kind of spread everywhere. So, there's -- some of it shows up in corporate, but some of it shows up in the business. So we don't really break it down that way, but that's part of the improvement across the board. When you look at the operations, as John mentioned, the cost out that they've done in South America and Europe and in North America as well.

So, it's kind of spread across the board.

Tyler Langton -- J.P. Morgan -- Analyst

Got it. OK. Thanks so much.

John Hayes -- Chief Executive Officer

Thanks.

Operator

Our next question comes from the line of Arun Viswanathan with RBC Capital Markets. Please go ahead.

Arun Viswanathan -- BC Capital Markets -- Analyst

Great. Thanks for taking the question. You guys had talked about kind of 2% to 4% bev can volume growth over the next little while. Obviously, there were some issues in Q4 related to metal but how do you feel about that forecast? Any potential upside or downside given some trends in non-12 ounce and maybe you can just give us your view and also tie that in with your regional expectations.

Thanks.

Dan Fisher -- Senior Vice President and Chief Operating Officer, Global Beverage

Yes, the -- yes, it's a great question, I would say. My lean would be based on what we saw in the second half of the year, what we saw in Q4 particularly and in conversations with our customers and anticipated forecast going into next year and even through our strat plan period. There would be reason to believe that we could grow at an accelerated clip above what we -- kind of the historical norm would have been. So, and I think a lot of that is just probability affecting and assessing the impact of sustainability and how fast that will move.

That's the biggest question mark, but we're certainly excited about it and believe we've got more tailwind there than anything else.

John Hayes -- Chief Executive Officer

Yes. As Dan had mentioned, just the full year, our global volumes were up a little over 2%. But in the fourth quarter they were up 4%, so I think that's a good proof point in terms of the momentum we're seeing.

Arun Viswanathan -- BC Capital Markets -- Analyst

Appreciate that. And just as a follow-up, in Brazil, have you noticed any changes in the market? Have things gotten better or worse? And any thoughts around political shifting that would affect that? Thanks.

Dan Fisher -- Senior Vice President and Chief Operating Officer, Global Beverage

We've been actually reasonably encouraged by the political shifts. We know that -- and from an overall market, you have the new entrant, but with the growth rates that are there, and I think John's commented on this historically, it doesn't take much growth outside of 4% or 5% in the market to start absorbing all the excess capacity that was introduced. So, we think heading into '19 and the plan period here, that market is definitely tightening and there's reason to believe that there's margin expansion opportunities going forward.

Arun Viswanathan -- BC Capital Markets -- Analyst

OK. Thanks.

Operator

Our next question comes from the line of Brian Maguire with Goldman Sachs. Please go ahead.

Brian Maguire -- Goldman Sachs -- Analyst

Hi. Good morning, guys.

John Hayes -- Chief Executive Officer

Good morning.

Dan Fisher -- Senior Vice President and Chief Operating Officer, Global Beverage

Good morning.

Brian Maguire -- Goldman Sachs -- Analyst

I just wanted to come back to the comments around the 2 billion can production growth in North America in 2019. I was just wondering if you'd give a sense of how much of that is just replenishing the inventories you drew down in the quarter due to the aluminum sheet issue. And I ask because it seems like the end markets probably aren't growing that much. And even with the upsurge we saw in fourth quarter, can shipments in the U.S.

were up less than 1 million this year. So just wondering if that comment is indicative of you guys expecting to take a little bit of market share here in 2019 or are you expecting the market growth rate to kind of meaningfully pick up from where it has been the last couple of years?

Dan Fisher -- Senior Vice President and Chief Operating Officer, Global Beverage

Yes, I would -- good question. I would look at it as 2000 -- keep in mind, in 2018, we shuttered three facilities. We stood up a new four-line can plant. We added some additional specialty capacity in Conroe, all with an eye toward contracting that volume, which we have done historically.

So there's a piece of this where we're stepping into increased specialty volume. It's been contracted. There's good line of sight there. We do think the market is going to grow at an accelerated rate in North America versus what we saw in '18, largely on the basis of the second half movements and new product introductions.

The '18 versus '19 for us, we will grow at an accelerated rate versus the market. But again, those are contracted volumes that were initialized by our footprint.

John Hayes -- Chief Executive Officer

Hey. Yes, I'd just layer on top of that. Remember, over the last couple of years, we've put an extremely large focus on specialty. And we can go West Coast to East Coast, north to south, and we have a network and footprint that we think is better than any of our peers.

And as a result of that, as these new product introductions and the shift from standard containers to specialty, it falls right into the sweet spot of what we've been focused on.

Brian Maguire -- Goldman Sachs -- Analyst

OK. I appreciate that. Just as a follow-up, this one might be a little bit of an accounting one. But, Dan, I think you mentioned the $10 million impact in the fourth quarter from the aluminum issue that was a total in-customer and there was just some of the accounting didn't let you recognize maybe offsetting compensation in the quarter.

Do you -- wo do you get $10 million back in 2019? Is there some kind of a passthrough or compensation from the customer here?

Scott Morrison -- Senior Vice President, Chief Financial Officer and Treasurer

We have to wait until we resolve the issue and then we'll let you know.

Brian Maguire -- Goldman Sachs -- Analyst

OK. But anything embedded in the '19 outlook or the $50 million kind of comment of fixed cost saves? I guess, that would be separate, but just anything embedded in the '19 outlook for that?

Scott Morrison -- Senior Vice President, Chief Financial Officer and Treasurer

No. No.

Brian Maguire -- Goldman Sachs -- Analyst

No? OK. Appreciate that.

Operator

Our next question comes from the line of Debbie Jones with Deutsche Bank. Please go ahead.

Debbie Jones -- Deutsche Bank -- Analyst

Hi. Good morning. I'm going to be the -- another person asking on the $2 billion can number you threw out there. But could you comment on -- is this really being driven on the specialty side by a couple of customers shifting into specialty or using it or are you seeing this is very broad-based? And then also how much of the growth in 4Q and the number that you're throwing out for 2019 do you think is related to the sustainability efforts of some of your customers?

Dan Fisher -- Senior Vice President and Chief Operating Officer, Global Beverage

Just to parse out the sustainability one, but if we're -- it could be 1% to 2% of growth in the -- in specific markets where this is a bigger issue and it's more broad, it's in Western Europe, it's in the U.K. and it's starting to manifest in the U.S. The other question was on specialty and I would just -- Debbie I would reference the fact that in North America, we have 800 customers. So, it's across the entire breadth of those customers, it's not a singular focus of one or two, it's everyone's moving.

John Hayes -- Chief Executive Officer

Yes, and as -- in the fourth quarter our specialty was up 13% in North America. And when you look it's everything Dan just said. It was traditional CST, it was spiked seltzer, it was beer, it was energy, it was all new categories, emerging wine, seltzer waters, etc., so it truly is broad-based.

Debbie Jones -- Deutsche Bank -- Analyst

OK. Thank you. And second question, there has been an announcement of a new can plant in the Europe, I think in Belgium with the new entrant. And we've received a lot of questions about it, so I wanted to just see if you had any thoughts on it.

I do think that the European industry is growing enough to absorb this, but I think investors are a little confused as how to think about it and how it might impact some of the larger players there?

John Hayes -- Chief Executive Officer

Yes. Well, I might point out a couple of things. The overall can industry in Europe grew by in the range of 4 billion units or so in 2018. It's our best understanding that this new entrant is a small one line facility in the Benelux region focused on one customer that's going to be using standard containers.

So you have to put this in context. I do think as we look forward, we've -- as Dan had mentioned, we have some new capacity. Obviously, Spain coming up, but we've put some new lines in Serbia as well as Switzerland. And so we've been growing and so we fully anticipate other people that are going to be investing to meet the demands of the market.

Debbie Jones -- Deutsche Bank -- Analyst

OK. Thanks. I'll turn it over.

Operator

Our next question comes from the line of Edlain Rodriguez with UBS. Please go ahead.

Edlain Rodriguez -- UBS -- Analyst

Thank you. Good morning, guys.

John Hayes -- Chief Executive Officer

Good morning.

Edlain Rodriguez -- UBS -- Analyst

Just one quick one. I mean, you seem pretty confident in achieving your targets for 2019, but when you look at everything that's going on, like what do you see like the most risk in achieving those targets?

John Hayes -- Chief Executive Officer

Well, I mean -- this is John Hayes. Maybe I'll take this. I think a lot of what Scott Morrison laid out in the bridge is in our control. Obviously, we had some metal issues in late 2018 were out of our control.

We have been very focused on making sure, No. 1, the situation getting better; No. 2, we have sufficient supply; and No. 3, we're working on other alternatives longer term so that we have a Plan B if something like that were to happen.

Obviously, this whole sustainability provides big tailwind for us, but if for some reason there is a big dislocation in the demand side of our business around the global that could have an impact. But I will point to the financial crisis of 2008 when our volumes in the worst quarter were down 4%, so we don't expect that to happen. I think really the biggest risk to us is our ability or inability to execute on what we have in front of us right now.

Edlain Rodriguez -- UBS -- Analyst

OK. That makes sense. That's all I have.

Operator

Our next question comes from the line of Chris -- Chip Dillon with Vertical Research Partners. Please go ahead.

Chip Dillon -- Vertical Research Partners -- Analyst

I thought I'd be the first one, perhaps, to ask a question about one of your fastest-growing businesses which is aerospace. And you mentioned some pretty large growth initiatives there, including the employee growth. And I believe you said the income growth of 15% '19 versus '18. However, it looks like looking at your backlog that we could see either several years of that kind of growth or maybe it could even accelerate in '20 and '21.

And so obviously not knowing everything, but just given your current line of sight, what kind of progress do you think we will see in '20 and '21, especially given the 30-plus percent increase in the employee base?

John Hayes -- Chief Executive Officer

I think the logic you just laid out is sound, and we would agree with that with one caveat. Our government, we rely on our government to be operating efficiently and funded effectively, and we just have come out of the longest furlough in the history of the U.S. government. There's potentially that going forward.

It has not affected us to date but strategically, when you're running the deficits that we are, something is going to give. That's why we talk about both funded backlog, which is money good, and then won-not-booked. As we said repeatedly over the last six or nine months, the won not booked, we feel good about. But there's some risk to that going forward, and that affects the 2020, 2021, 2022 time frame.

And so as we sit here today, the thing I would be focused on the most is about that because the rest of it's in our control.

Chip Dillon -- Vertical Research Partners -- Analyst

Gotcha. OK. That's very helpful. And then just quickly, as -- you guys give us great data, for example, on volumes.

And periodically, you tell us your mix with specialty versus standard. It just seems with, especially the categories that are growing, that you're seeing so much more growth now in the specialty area. And I didn't know like, for example, if we took just the 2% companywide growth last year, is it fair to say standards were down, I don't know, mid-single digits and specialty way overtook that? Just so that we get a better view or sense of what the mix is doing.

John Hayes -- Chief Executive Officer

Yes, Chip, I'll tell you this, our specialty globally grew for the year at around 9% and are over -- and it's approximately 39% or 40% of our mix. So when you do the math, you can see standard had declined. That's why, to Dan's point, we took out three facilities in North America in 2018. That's why we closed the San Martino, Italy plant, which was a standard container.

So, we've been managing this mix shift as we go forward, and that's why we've been investing on all of these specialty lines.

Chip Dillon -- Vertical Research Partners -- Analyst

OK. And last one quickly. As you look out past '19, CAPEX is coming down. You've listed a lot of growth opportunities you wanted to jump on top of.

Again, based on your line of sight, is $600 million something we would -- would be a good best guess for 2020 or are there reasons it could go up or down from what you see today?

Scott Morrison -- Senior Vice President, Chief Financial Officer and Treasurer

Yes, Chip, I would use $600 million. I think it's a good proxy. If we really -- there's a lot of growth in there. It's probably up $50 million from where we were six months ago in terms of accelerating things and kind of bringing them to the left to take advantage of some of this growth.

I would use that as a decent proxy. But if the sustainability thing really takes off, we could spend more money, but we're going to do it just like we've always done with a mindset of putting capital to work where we're getting the right returns.

Chip Dillon -- Vertical Research Partners -- Analyst

OK. Thank you.

Operator

Our next question comes from the line of Adam Josephson with KeyBanc Capital Markets. Please go ahead.

Adam Josephson -- Keybanc Capital Markets -- Analyst

Good morning. Thanks, everyone. Dan, just a couple of questions on the sustainability topic again. I think Brian was asking about your outlook for the U.S.

market. It was up 0.6% last year and you're expecting that to accelerate. And you saw the acceleration, particularly in the fourth quarter. Do you tie that directly to this sustainability move that you're talking about? Is there any other reason why you think shipments meaningfully accelerated in the fourth quarter and that you're expecting them to accelerate in '19 versus '18?

Dan Fisher -- Senior Vice President and Chief Operating Officer, Global Beverage

That's a good question. I don't think I have the answer, but my thesis would be it's largely because of sustainability. I mean, we know that the large CPG players, in particular, they don't have a very attractive mix shift. I mean, some of their CEOs were getting beat up pretty good over in Davos a week ago.

And the one thing we can point to, Adam, I just keep coming back to, new product launches are -- we're seeing much more activity in and around innovation from a can perspective when we're dealing with the marketing groups and the large CPG companies. And we are attributing it to, in North America, in Western Europe, in the U.K., in the Nordics, to sustainability being a fairly significant driver of that.

John Hayes -- Chief Executive Officer

Yes. Just one little proof point, this is on more of the alcohol side. But craft beer, our best estimation that for the first time ever, can's share of the package mix is now over 40% in the craft market. Our volumes in craft are still up well in excess of 30% despite overall volume of craft, meaning liquid volume, up only about 1%.

So is that sustainability? We can't point to any specific fact to tell you that's the case. But I do think that there is a consumer trend out there that's much more focused on this.

Adam Josephson -- Keybanc Capital Markets -- Analyst

Thanks. And, Dan, just on Europe, I think you said volume was up 8% for the year, if I'm not mistaken. And forgive me for missing this, did you give any expectation for '19 in terms of European volume? And again, how much of whatever growth you're expecting would you attribute to that same sustainability movement?

Dan Fisher -- Senior Vice President and Chief Operating Officer, Global Beverage

I would think it's going to be a little off that. I mean, keep in mind, it was unprecedented weather conditions in a lot of big beer drinking jurisdictions, but I can see mid-single digits. And again, I think where we play and where our network is, we may grow at a faster rate than the overall market just because of our customer mix. Russia continues to be incredibly strong.

We'll lap our Iberian new contracts of the stand-up of Cabanillas. But I'd say market, 4% to 5%. We could do better. That's certainly our plan or our hope.

Adam Josephson -- Keybanc Capital Markets -- Analyst

Thank you.

Operator

OK. Our next question is from the line of Deanna Stottler with Ball Corporation. Please go ahead.

John Hayes -- Chief Executive Officer

Yes. Chris --

Operator

Looks like line has disconnected.

John Hayes -- Chief Executive Officer

Chris, unless there is any other questions I'd recommend we conclude.

Operator

OK. We do have one more question in the queue from the line of Mark Wilde with Bank of Montreal. Please go ahead.

Mark Wilde -- Bank of Montreal -- Analyst

Good morning, John. Good morning, Dan.

John Hayes -- Chief Executive Officer

Good morning.

Mark Wilde -- Bank of Montreal -- Analyst

Just curious, to come back to Europe, how much capacity do you have or how much could you grow in 2019 just given your capacity base?

Dan Fisher -- Senior Vice President and Chief Operating Officer, Global Beverage

Yes. It's a good question. We have, as indicated in the prepared comments, we have added a couple of lines one in Serbia that just came on line actually last week, I was over there earlier this week. Another line in Central and Eastern Europe that one is ready to go.

We haven't flipped the switch on. And then ramp up curves in basically in Spain stepping into improved efficiencies there and approved efficiencies across the rest of the jurisdiction, but we're certainly tight. We've got a couple of pockets of opportunity to continue to grow. But keep in mind, historically we've always got speed up opportunities, we've got a laundry list of areas where we can spend minimal capital.

And we've waited for this tailwind and it's here now. And so we're not going to miss out on volume opportunities at the right price.

Mark Wilde -- Bank of Montreal -- Analyst

OK. And Dan I'm just curious over in Europe in terms of bottled waters or whatever picking up. I know that you've got a lot of people that are interested in looking at the format, but I wonder whether capacity constraints right now make it hard for some of those customers to make a large move. So what kind of conversations are you having, and is there a potential that we could see one or two very large moves over there at some point or do you think it will be just more kind of incremental?

Dan Fisher -- Senior Vice President and Chief Operating Officer, Global Beverage

There will absolutely -- yeah, there will absolutely be the opportunity for large moves. The constraint is not necessarily on our end, it would be some of those major customers making filling investments in their infrastructure. So we wouldn't be the deterrent for those moves. I mean we're in front of a number of them right now as they're contemplating shifts.

There is an off a lot happening from independent start-ups that are driving that inertia from some of the big CPG players. I do think that that is something that we're having conversations on, something that we believe will happen. It will probably start at the high end of the water market, but you know depending on what legislation hits and single-use water bans that are popping up. That conversation is happening everywhere now, something will be a catalyst for a major move, and we will have enough time hopefully to move into that in a meaningful and a smart way.

Mark Wilde -- Bank of Montreal -- Analyst

OK. And then if I could, Scott, you mentioned that PPI escalators. I'm just curious, PPI I think kind of has been moving up maybe 3%, 3-plus percent, but you might had a much bigger move in freight cost. So will the PPI really catch you up for freight this year fully?

Scott Morrison -- Senior Vice President, Chief Financial Officer and Treasurer

Good morning, Mark. It probably won't offset the -- if you look back -- kind of probably what time frame you're looking back, but if you look back at our incremental freight cost all of 2018, the PPI will offset a large portion of that, but not all of it.

Mark Wilde -- Bank of Montreal -- Analyst

OK. That's helpful. Thanks very much. Good luck in '19.

Scott Morrison -- Senior Vice President, Chief Financial Officer and Treasurer

Thanks.

John Hayes -- Chief Executive Officer

Thank you. OK. Chris, I think we're concluded. So thank you all for participating, and we look forward to having a successful and productive 2019 and talking to you three months from now.

Thanks, everyone.

Operator

[Operator signoff]

Duration: 57 minutes

Call Participants:

John Hayes -- Chief Executive Officer

Dan Fisher -- Senior Vice President and Chief Operating Officer, Global Beverage

Scott Morrison -- Senior Vice President, Chief Financial Officer and Treasurer

Anthony Pettinari -- Citi -- Analyst

George Staphos -- Bank of America Merrill Lynch -- Analyst

Scott Gaffner -- Barclays Investment Bank -- Analyst

Matt Krueger -- Ghansham -- Analyst

Neel Kumar -- Morgan Stanley -- Analyst

Tyler Langton -- J.P. Morgan -- Analyst

Arun Viswanathan -- BC Capital Markets -- Analyst

Brian Maguire -- Goldman Sachs -- Analyst

Debbie Jones -- Deutsche Bank -- Analyst

Edlain Rodriguez -- UBS -- Analyst

Chip Dillon -- Vertical Research Partners -- Analyst

John Hayes -- Chief Executive Officer

Adam Josephson -- Keybanc Capital Markets -- Analyst

Mark Wilde -- Bank of Montreal -- Analyst

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