Ardagh Group S.A.  (NYSE:ARD)

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Q4 2018 Earnings Conference Call
Feb. 21, 2019, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Hello, and welcome to the Ardagh Fourth Quarter and Year End 2018 Results. Throughout the call, all participants will be in a listen-only mode and afterwards there will be a question-and-answer session. Please note this call is being recorded.

Today, I'm pleased to present Paul Coulson, Chairman and Chief Executive Officer. Please begin your meeting.

Paul Coulson -- Chairman and Chief Executive Officer

Welcome everyone to our fourth quarter and full year 2018 earnings call which follows the publication earlier today of our results for the quarter and the full year. On the call today with me are David Matthews, our CFO and John Sheehan, our Corporate Development and Investor Relations Director.

Just a couple of formal paragraphs, first of all the information provided during this call will contain forward-looking statements. These reflect circumstances at the time they are made and the Company expressly disclaims any obligation to update or revise any forward-looking statements. Actual results or outcomes may differ materially from those that may be expressed or implied due to a wide range of factors, including those set forth in the Company's SEC filings and the news releases.

Our earnings release, financial report and related materials can be found at ardaghgroup.com. Information regarding the use of non-GAAP financial measures may also be found in the Notes section of today's earnings release which includes a reconciliation to the most comparable GAAP measures of adjusted EBITDA and adjusted earnings per share.

This disclaimer is only a summary of the Company's statutory forward-looking statements disclaimer, which is included in the Company's filings with the SEC.

So, if I could turn to the results. First of all, in terms of the group overview, it was a good quarter in our metal packaging business in particular in beverage cans and it was also a good quarter in Glass Europe where we delivered another strong performance for the quarter and the full year.

Glass North America's earnings as expected were lower in the quarter and we continue to execute on our profit improvement initiatives. And as in previous quarters my remarks on volumes/mix exclude IFRS 15 effects. So, if I turn to the results fourth quarter revenue of $2.4 -- $2.14 billion (ph) increased by 1% at actual exchange rates and by 4% at constant exchange rates compared to the same period last year. Higher revenue reflected volume mix growth of 1% and the pass through of increased input costs. Volume mix growth for the quarter, 1% comprised of 3% increase in metal packaging led by our beverage can businesses globally, partially offset by a decline of 1% in glass packaging where broad-based growth in Europe was offset by lower volumes in North America.

Highlights for the quarter included volume mix growth in three of our four divisions, led by advances of 3% in both metal packaging Americas and metal packaging Europe. Global beverage can volume mix growth of 6% with increases of 8% in the Americas, and 4% in Europe. Continued strength in Glass Packaging Europe, where packaging volume/mix increased by 2% in a strong market with a 3% decline in Glass North America.

Adjusted EBITDA growth of 1% to $338 million with lower pension costs offsetting an adverse currency translation effect of $9 million. Organic revenue and adjusted EBITDA growth was recorded in three of our four divisions, and a quarterly dividend of US$0.14 per share as been declared making a payout of US$0.56 for the full year.

Full year adjusted free cash flow was 444 -- $441 million before an outlay of $65 million on quick return projects. If I look to the divisions, metal packaging revenue for the quarter increased by 3% to $1.36 billion, compared to last year revenue growth was 5% at constant exchange rates with advances of 6% in Metal Packaging Europe, and 4% in Metal Packaging Americas.

Growth reflected at 3% increase in volume mix in each region as well as the pass through of higher input costs. In Metal Packaging Europe, volume mix grew by 3%, with broad-based increases achieved in both Bev Cans, which increased by 4% and food and specialty cans, which increased by 1%.

Our substrates remain well positioned to benefit from the heightened importance of this sustainability agenda across Europe. Metal Packaging Americas grew volume mix by 3% in the quarter compared to the same period in 2017, with strong growth in beverage cans, partially offset by lower food can volumes.

Metal Packaging reported adjusted EBITDA of $205 million for the quarter, an increase of 12% at actual exchange rate and 15% at constant currency, compared with 2017. Adjusted EBITDA in Metal Packaging Europe of $123 million in the quarter reached by 7% at actual exchange rate and by 12% at constant exchange rates compared to the same period last year. Growth in adjusted EBITDA primarily affected -- reflected increased volume and mix, as well as our pension costs.

In Metal Packaging America, we had growth of an adjusted EBITDA of 21% to $82 million compared to the same period last year. This reflects continued strong volume mix growth in beverage cans more than offset which more than offset lower food can volumes.

Freight and logistics cost remained elevated, but we are modestly reduced in comparison to the same period in 2017. As we look to 2019, the outlook for metal packaging remains positive. Brand owners in all regions, most notably in Europe recognized the central role of metal packaging and supporting their growth with differentiated premium and sustainable packaging, while enabling them to meet their publicly stated targets.

The level of every day -- the level of everyday engagement with customers on this topic continues to increase and we are committed partner in helping customers to meet their long-term requirements.

Our commitment to delivering sustainable packaging solutions is firmly embedded here at Ardagh. Recently for the fourth consecutive year, we were awarded a gold rating by EcoVadis, a sustainability rating platform putting us in the top three of players rated in each industry group.

Groupwide volume mix in beverage cans increased by 5% in 2018 and with supported demand drivers we intend to invest of our customers' growth in 2019. This will involve cans and ends expansion in Brazil with other targeted investments in Europe and North America. This follows the completion last year of the investment projects identified at the time of the beverage can acquisition in 2016.

Our food and specialty business in metal packaging also remains well positioned for the future. Underlying demand is stable, backed by an attractive value proposition and supported by our well invested and diversified asset base. The move away from other substrates is also expected to be a positive for our food and specialty business.

Operational progress over the past year has been complemented by commercial developments. We've made good progress in our efforts to obtain appropriate value in our North American beverage can business. These efforts are ongoing and will show benefits from 2020 on. In this business, we are seeing attractive growth across our end-markets, customers and product range. And we've also begun to migrate customer contracts to indices, which more accurately reflect the inflation seen in areas such as Freight, Energy and Coating rather than traditional PPI based indices pass-through mechanisms. If I could turn to Glass Packaging, fourth quarter revenue $778 million increased by 1% at constant exchange rates and was 1% lower actual exchange rates. At constant exchange rates, revenue increased by 3% in Europe and fell by 1% in North America.

Volume mix trends in Europe remain positive with glass packaging volume mix increasing by 2% in the quarter and full year. Full year growth was broad-based across all end market sectors. In North America, volume mix declined by 3% in the quarter, principally due to continued weakness in the beer category, partially offset by growth in wines and other beverages.

Fourth quarter, adjusted EBITDA in Glass Packaging was $133 million, a reduction of 12% at actual exchange rates and 10% of constant exchange rates compared to the same period last year. Plus, Europe adjusted EBITDA at $84 million increased by 11% compared to same period last year. Constant currency was offset by a decline in North America, 32% to $49 million compared with the same period last year.

Market conditions in last year remain very positive entering 2019 with strong demand across most end-markets. Glass packaging infinite recyclability and premium association continue to resonate with end-use customers, and end-use consumers.

Shipments in the US glass market by contrast declined almost 7% in 2018. Our actions to restore appropriate and sustainable levels of profitability in Glass North America continued during the period. And we recently completed our footprint optimization program.

Now, this was with the announcement of our Lincoln, Illinois -- the closure of our Lincoln, Illinois facility. Effective business at that branch will be transferred to other parts of our production network. In parallel, our investments in automation and inspection equipment, to enhance productivity and quality continue to take. Combined with improved flexibility in labor practices and supported by increased investment in training and development. We aim to preserve high quality employment in Glass North America.

Whilst our earnings initiatives have been principally focused on internal actions, we very much support measures create a level playing field for the US Glass Packaging Industry. The modest tariffs introduced in September 2018 have had some positive effect on demand in certain segments, but the US market continues to see significant levels of what is effectively subsidized imports from low-cost countries.

In summary, our ongoing actions to improve performance are proceeding as planned and we aim to deliver a stabilized earning in 2019 in Glass North America.

If I turn to 2019, the backdrop for three of our substrates remains positive or three of our divisions remains positive backed by a sustainability tailwind, and in 2019 we expect adjusted EBITDA of at least $1.5 billion, adjusted earnings per share of, in the range of $160 to $175 and free cash flow before quick payback project spending of approximately $450 million.

So having made these opening remarks, we'll now be very pleased to take any questions that you may have. Thank you.

Questions and Answers:

Operator

Thank you. (Operator Instructions) And our first question comes from the line of Anthony Pettinari from Citi. Please go ahead, your line is now open.

Randy Sloan -- Citigroup Inc. -- Analyst

Good morning. This is actually Randy Sloan sitting in for Anthony. Can you provide a little bit more detail into what is baked into your full-year guidance and volume growth in metal packaging and European glass specifically. And then, what level of EBITDA improvement, you expect in North American Glass? Thank you.

Paul Coulson -- Chairman and Chief Executive Officer

Yeah, in terms of the full year guidance on the, on the EBITDA compared to 2018, we are looking at -- on FX headwind of around $50 million at current exchange rates. We also see a few inflationary headwinds that we may or may not be able to pass on. And what's offsetting or more than offsetting that is organic growth and expects in three of our four segments, Glass Europe and the metal business and we will also see a positive impact in 2019 from a change in accounting for leases, and this is operating leases in particular.

If I just elaborate on that, because that will help the conversation little bit more, there will be a positive around 70 million EBITDA on leases as they are capitalized on the balance sheet as we move forward. If I look at your question on restoration glass North America, as I said, we believe there'll be relatively flat performance in North America Glass in 2019. So we don't really see margin restoration in '19. But as we look out further in 2021, we will see the benefits coming through in margin restoration in those periods.

I'm only just going back on the guidance on the cash flow, we've guided to free cash flow to around $450 million, how that is made up is EBITDA in excess of $1.5 billion. We expect CapEx -- based CapEx of around $500 million (ph) in vision that we expect special CapEx of around $90 million (ph), the interest will be around $430 million and we're expecting tax of around $410 million. So excluding short payback CapEx, we see the free cash flow of around $450 million in 2019.

Randy Sloan -- Citigroup Inc. -- Analyst

Okay, that's very helpful. Thank you. And then just following the closure of the Lincoln facility. Can you update us on the end markets served with the current footprint, and in Glass like what percentage is mega beer versus wine and spirits? Thank you.

Paul Coulson -- Chairman and Chief Executive Officer

Yeah, what we've taken as that moves in the past year or so, -- something just over 10% of our total capacity and beer it's a combined between all, but there would be less than the quarter mega beer would be less than (inaudible) the other sectors, we remain attractively diversified with -- the food market and the wine market, spirits and then various other beverages, but the beer is down mega beer would be now this stage in the high teen?

Randy Sloan -- Citigroup Inc. -- Analyst

Okay, that's very helpful. Thank you, I will turn it over.

Operator

Thank you. Our next question comes from the line of Karl Blunden from Goldman Sachs. Please -- your line is now open.

Karl Blunden -- Goldman Sachs -- Analyst

Hi, good morning. Thanks for the time. On the Bev Can business, business it looks like they're performing pretty well across the board. You highlighted some volume growth there and it seems to be coming in above peers, are you seeing market share gains there and are they sustainable, any commentary on that would be helpful.

Paul Coulson -- Chairman and Chief Executive Officer

I don't think so really. I think we're just seeing in -- that the strong demand in all the markets in Bev Can both in Brazil, in the US and in Europe. Europe is certainly tightening there was some new capacity put in there in the last couple of years, but the market has been growing very well. Probably even ahead of us being sustainability tail wind gains there. So, I think we're certainly full out in our plans in North America. Also, I think one of the things that slightly different about our business in North America is that it's a lot more in non-alcohol much less beer in our peers, in North America and there's been strong growth in that area.

So we're very happy with the conditions there and we see our way to getting better value for our products there.

Karl Blunden -- Goldman Sachs -- Analyst

That's helpful. And then just on the balance sheet and strategic priorities their been some headlines recently about some assets in Europe, potentially being up for sale. Could you help us think through where your priorities lie at the moment when you think about potential M&A or the HoldCo refi strategy and your desire to have lower leverage before attempting a potential HoldCo refi?

Paul Coulson -- Chairman and Chief Executive Officer

Well, I don't know what asset you're referring to in Europe, but I don't see anything on the horizon for us, our focus is very much on improving the operating our quality of our business in our earnings with what we've got because we have a very big footprint across all our businesses. That's number one. So it's not a priority for us more M&A. I mean obviously if something came along that makes enormous sense than it gets looked -- we get looked at, but we're certainly nothing that I've seen at the moment that -- in that kind of category.

And in terms, than focus, it's on deleveraging, improving EBITDA, deleveraging and in terms of the HoldCo refi, I think that's something that we'll look at toward the end of the year, but I think it's a 2020 event rather than the 2019 event and it's all subject to market conditions and how the business is performing et cetera, so that remains an important priority for us.

Johan Gorter -- Chief Executive Officer, Glass and Director

And just to round from that -- in terms of the deleveraging, we think we're probably deleverage at the similar sort of level 2018 and in 2019.

Karl Blunden -- Goldman Sachs -- Analyst

Okay. Thanks, that's all, very helpful. I appreciate it.

Operator

Thank you. Our next question comes from the line of Debbie Jones from Deutsche Bank. Please go ahead, your line is now open.

Debbie Jones -- Deutsche Bank -- Analyst

Hi there, how are you guys?

Paul Coulson -- Chairman and Chief Executive Officer

Hi, Debbie.

Johan Gorter -- Chief Executive Officer, Glass and Director

How are you?

Debbie Jones -- Deutsche Bank -- Analyst

I'm great, thank you for taking my question. My first question is around the volume growth in Bev Cans, that we've seen in North America. I just wanted to get your thoughts on how it trended in the fourth quarter versus your expectations? What you thought about the industry growth number as well. And if you think that's something that is sustainable in 2019 and then kind of, lastly on that if you could talk about what you attribute to sustainability efforts by some of your customers?

Johan Gorter -- Chief Executive Officer, Glass and Director

Yeah, I think what we've seen in our business.Debbie is that, it has been consistently strong through the year. As we said, we have a very relative modest exposure to the alcohol and beer sector, which has been much tougher year. So, if you look at our numbers under the quality basis, they haven't changed that much. They've been consistently, the kind of high single digits in North America far pretty much past year, we've said in the past, at times that we've been, we've actually been buying in some cans. So, you know, the right customers, at right hand markets and that helps us well. I think the sustainability agenda, the dialog there is certainly, it has intensified particularly in Europe. It's something that on every brand owners that have rate up and would have both worked with them as we work with other initiatives there. As to what -- it's hard to know, but its a helpful tailwind whether it's a percent or a couple of percent over the next few years for that degree of momentum too.

Debbie Jones -- Deutsche Bank -- Analyst

Okay, thank you. That's helpful. My second question, I was hoping if we could get a little bit more granular on the inflationary pass-through, and I think it's been pretty clear that PPI index hasn't really helped everyone in the packaging industry as much as they would have like just given the inflationary pressures in 2018. What exactly is the shift that you're trying to make in terms of the pass-through and will we see any kind of recapture in 2019 or, are we waiting until 2020. And then you mentioned some cost you might not be able to pass through earlier and I just wanted to see if you could elaborate on that, I might have missed something there.

Paul Coulson -- Chairman and Chief Executive Officer

Yeah, I think what we're trying to do is have greater transparency in terms of the pass-throughs and there are certain things that go through in the PPI versus purely pass-through and freight for example in 2018 hasn't been specifically pass-through in all cases, so that ended up giving us a headwind in '18 of about 40 million. So that's something that as we go forward, we want to try and get some more precise pass-through with our customers as opposed to sitting in an overall general inflation baskets and there are other, other things in that basket that also don't get purely pass-through and what we're trying to do is identify those, sit down with our customers and have a conversation where those are pass through, whether those prices go up or down, its greater transparency for us and greater transparency for our customers as we go forward.

Debbie Jones -- Deutsche Bank -- Analyst

Okay. And is it the type of thing where you would just basically pointed and say, hey this is are the actual costs and how much they're going up or is it you mentioned other indices, I am just trying to understand exactly how we would be tying this or what?

Paul Coulson -- Chairman and Chief Executive Officer

Well, sort of things like coatings and lacquers might fit more in general basket rather than specifically and as a safe freight has been in general, what we're going to do is pass it on specifically to the customers. They know precisely what freight cost is and they will pick that up dollar for dollar.

Debbie Jones -- Deutsche Bank -- Analyst

Okay, thanks, that's helpful and I will turn it over.

Operator

Thank you. Our next question comes from the line of Roger Spitz from Bank of America Merrill Lynch. Please go ahead, your line is now open.

Roger Spitz -- Bank of America Merrill Lynch -- Analyst

Thank you very much. What was at December 31, 2018. What was the amount of the outstanding of balance sheet receivables, please?

Paul Coulson -- Chairman and Chief Executive Officer

It's around $500 million at the year-end, Roger.

Roger Spitz -- Bank of America Merrill Lynch -- Analyst

Thank you. And regarding the $450 million free cash flow. If I just use $1.5 billion of EBITDA for the moment and the other guidance you provided earlier that appears to leave a $380 million benefit of other things. If I'm doing my sums correctly --

Paul Coulson -- Chairman and Chief Executive Officer

I think we might have said, I think to Roger, we might have said $410 million per tax it should be $110 million (ph) -- sorry, that was the -- that probably could cause the issue.

Roger Spitz -- Bank of America Merrill Lynch -- Analyst

Yeah, that closes, it's substantially, that would be 80 maybe some of that was greater than $1.5 billion of EBITDA, but is there any working capital or other cash restructuring costs, for instance, in that $450 million?

Paul Coulson -- Chairman and Chief Executive Officer

No, we see it broadly flat. There might be a small working capital inflow, but there might be a bit of restructuring broadly offset that.

Roger Spitz -- Bank of America Merrill Lynch -- Analyst

I got it. And you know talking about the collapsing of the HoldCo capital structure. You've contemplated potentially doing that I don't know, perhaps in two steps I'm hearing, if that is the case, what would be the first step and what would be the gating -- to get -- to proceed with the second step. If I've heard all this correctly?

Paul Coulson -- Chairman and Chief Executive Officer

Well, I think, Roger, there is various different ways of doing that, right and whether it's a two-stage, or one stage or a partial and to do for instance take out to refinance, repaid through a special dividends some of that debt, while also making distribute rather to the public shareholder market as well or to be deal with the whole lot in one go at a later stage. We haven't really reached any firm conclusions on that except there is something we obviously want to do and will do, but I don't think as I said earlier, I don't think it's something and you're going to see us do this year.

Roger Spitz -- Bank of America Merrill Lynch -- Analyst

I understood. And last, have you seen any change in Glass Container imports into North America more recently or is it been relatively steady for the past quarters or longer?

Johan Gorter -- Chief Executive Officer, Glass and Director

I think it has been modest reduction in it, and we've seen -- the in position of the (inaudible) with the pumping (ph) potential year -- significant increase behind that -- we saw in number of customers an increased concern are to take some additional surprise from onshore. So, nothing dramatic held are put down positive note that.

Roger Spitz -- Bank of America Merrill Lynch -- Analyst

Thank you very much.

Operator

Thank you. Our next question comes from the line of Anojja Shah from BMO Capital Markets. Please go head, your line is now open.

Anojja Shah -- BMO Capital Markets -- Analyst

Hi. Good morning. I just wanted to clarify something from your prepared comments. Did you say that you're adding new capacity in beverage cans. And was that in Brazil as well as other regions or just Brazil, any details you can give would be helpful there?

Paul Coulson -- Chairman and Chief Executive Officer

Yeah, it's more based on stuff. It's not new plans or anything like that in all the areas, its just an increase to support customers -- customer demand and to support projects of customers, but it's nothing specific that we want to bring to your attention.

Anojja Shah -- BMO Capital Markets -- Analyst

And did you say outside of Brazil, as well as in Brazil or --

Paul Coulson -- Chairman and Chief Executive Officer

Outside of Brazil as well. Yes.

Anojja Shah -- BMO Capital Markets -- Analyst

Okay. And then just switching over to those quick payback projects. I believe you started some in 2018. Should we expect any benefit in 2019 from those projects and if so, how much?

Paul Coulson -- Chairman and Chief Executive Officer

Yeah, we spent about $65 million capital in 2018. But that was toward the end of the year. So there will be some modest benefit coming through in 2019. And we're spending another $90 million in '19 and the benefit that will principally come through in 2020. So, yes, there will be some benefit coming through in '19, but that will build as we spend more CapEx over time on these projects.

Anojja Shah -- BMO Capital Markets -- Analyst

Great, thank you.

Operator

Thank you. Our next question comes from the line of Brian Maguire from Goldman Sachs. Please go ahead, your line is open.

Connor Robbins -- Goldman Sachs Group Inc. -- Analyst

Hey, good morning, this is actually Connor Robbins sitting in for Brian. I just had a quick question on the Glass Packaging Europe segment. Seems like margins continue to improve there. I was hoping to get a little more color on some of the trends you're seeing there and maybe what type of volume growth and margin growth you expect maybe over the next few years in that segment?

Paul Coulson -- Chairman and Chief Executive Officer

Well, I think the market in Europe for glass is extremely tight, demand is very strong and put in new capacity is very, very, very expensive and so you're attempt to seeing very good market conditions there, across all segments and I think you see good performance from all the players in the industry. And I think that's really all I can give you in terms of a flavor of it, but it's certainly improving and we're certainly seeking to improve our profitability further there.

Connor Robbins -- Goldman Sachs Group Inc. -- Analyst

Okay, great. And then just in contrast to that on the North America Glass environment, if I heard you correctly it seems like there is that your footprint optimization is maybe done. Do you think the North America Glass environment is now more balanced with in terms of supply and demand and they won't need to be much more capacity taken out and then along with that how close do you think you can be able to improve profitability in that segment compared to the European segment once things are all kind of set and done with the relook at the segment.

Paul Coulson -- Chairman and Chief Executive Officer

Well, I think, we're certainly finished. Our optimization foot print, optimization program rise as said earlier, while others do or while others need to do is for them to decide. I think from the point of view of the business we have, we are happy with the footprint we have now is the correct one. That's number one. I think there are lot of other steps being taken not just footprint optimization, but a lot of improvements in efficiency, profitability, quality et cetera, et cetera, on the way at the moment within our Glass in North America, which will yield benefits as we go forward and I think it will take some time before it comes to the level of profitability, or the level of margin that we currently enjoy in Europe. This also -- the European Glass industry is probably better invested than the US Glass Industry. I think that probably applies -- across our peers as well, certainly it's the case in our own operations so it takes time for -- increased automation, inspection equipment start taking effect and also improving the whole operating performance of the business.

Connor Robbins -- Goldman Sachs Group Inc. -- Analyst

Great, thanks for the color. I'll turn it over.

Operator

Thank you. Our next question comes from the line of Brian (inaudible) from Barclays. Please go ahead, your line is open.

Unidentified Participant -- Barclays -- Analyst

Hi, good morning guys. How are you?

Paul Coulson -- Chairman and Chief Executive Officer

Good morning.

Unidentified Participant -- Barclays -- Analyst

Most of my questions has been asked, I'll take a couple briefly, maybe first from a strategic standpoint a bit of a follow on to the last question, but as you think forward, what do you think at this point is the right strategic, excuse me, longer-term margin on the Glass Business, is this something where you'd hope to get back to the 20 plus percent area given the projects and initiatives you've talked about or is it maybe the goal something below that, given some of the structural issues here in the US and then I have a couple of (Multiple Speakers)

Paul Coulson -- Chairman and Chief Executive Officer

You're talking about the US, it would certainly be our objective to get back to north of 20% absolutely.

Unidentified Participant -- Barclays -- Analyst

Okay. That's the right margin from a return on investment standpoint?

Paul Coulson -- Chairman and Chief Executive Officer

Well, certainly our objective to get north of 20% again absolutely.

Unidentified Participant -- Barclays -- Analyst

Okay, cool. Second, just on the accounting changing you mentioned around the operating leases. I think 70 million was the number and that sounds like a bit of apples and oranges versus the number that you just finished 2018 with. Is there any cash flow associated with that or just how do we sort of think about that in the context of our model going forward that will be helpful color?

Paul Coulson -- Chairman and Chief Executive Officer

Yeah. There's absolutely no cash impact whatsoever, no economic impact and essentially what's happening is operating lease to capitalize. So excess will increase by about $30 million, obligations on the balance sheet -- $300 million, sorry obligations on the balance sheet will increase by about $300 million. The EBITDA will increase by about $70 million and then on the other side of the income statement, depreciation increases by bought $50 million and interest increases by about $20 million. So, once you get to the bottom of the income statement, the net impact is zero. So that's the overall impacts and you will see that coming through in 2019 results.

Unidentified Participant -- Barclays -- Analyst

Okay, that's helpful. Helpful to break that down. And then lastly, is it possible to refresh just what your current RP capacity is at the Opco in terms of making dividends to the finance SA box going forward. That would be helpful if we get the update.

Paul Coulson -- Chairman and Chief Executive Officer

Yeah, both it comes from $70 million, much in line with the last quarter.

Unidentified Participant -- Barclays -- Analyst

And what was that again, I am sorry, I broke up a little bit.

Paul Coulson -- Chairman and Chief Executive Officer

Its about $670 million, 6-7-0.

Unidentified Participant -- Barclays -- Analyst

6-7-0 -- Got it. Thanks so much. Appreciate the time. Thanks guys.

Operator

Thank you. Our next question comes from the line of George Staphos from Bank of America Merrill Lynch. Please go ahead, your line is now open.

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

Thank you. Hi everyone. Thanks for taking my questions and thanks for the details. Guys, I had more of a broader question regarding the food can business. You had mentioned that the metal businesses overall are getting certainly a lot of activity and interest from sustainability. I realize it was a little bit of an estimation, but you mentioned that you're getting maybe like 1% to 2% tailwind on the beverage side from customer engagement around sustainability. How is that translating into the, into the food, you know, our view is that food cans have a little bit less convenience say than beverage cans, which is an important factor as well. Or are you seeing customers really now interested in metal food for sustainability reasons. And can you again put some number in terms to what that mean in terms of activity and the growth plan going forward. Thank you, guys.

Paul Coulson -- Chairman and Chief Executive Officer

I think George first of all, in relation to what John said about the 1% to 2% that was over a period of time, I don't want you to think that was happening now. But you're quite right. This is clearly more discussions going on in the beverage can area than in the food can area, although they are going on in the food can areas well, because I mean for example, one of the things that happened in the food market was that plastic pouches took over with pet food to a greater extent and obviously that's under scrutiny now, so I don't think it's anything though the same level of intensity as the communications and the discussions on beverage can. Is that fair, John.

Johan Gorter -- Chief Executive Officer, Glass and Director

Yeah. So far, yeah.

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

Okay. Well, that's the opportunity then -- all right, but thanks very much guys. Good luck in the quarter.

Paul Coulson -- Chairman and Chief Executive Officer

Thank you.

Operator

(Operator Instructions) And our next question comes from the line of Arun Viswanathan from RBC Capital Markets. Please go ahead, your line is now open.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Hey, thanks. Good morning.

Paul Coulson -- Chairman and Chief Executive Officer

Good morning.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Just curious what you're seeing in North America --

Paul Coulson -- Chairman and Chief Executive Officer

Sorry, we can't quite hear you I'm afraid.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Can you hear me now.

Paul Coulson -- Chairman and Chief Executive Officer

Yeah. Perfect.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Okay, perfect, sorry about that. I'm just curious to what we know, if you're in a position to reach (inaudible) contracts in North America Bev Can and it's --

Paul Coulson -- Chairman and Chief Executive Officer

Sorry, Arun -- we can't make out what you're saying at all. I'm sorry, I don't know whether you moved away from the speaker or whatever your -- left -- or wherever you are at.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Okay, I apologize, I hopefully that's better. I was just curious, if you are in a position to elaborate on any commercial opportunities in North America that may be available to you over the next couple of years. Since, you're reselling contract higher, if you have offset inflation. Thanks.

Paul Coulson -- Chairman and Chief Executive Officer

Well, I think in North American Bev Cans we've seen an environment where the value for our products is certainly improving, but those margins are still relatively lower than what we have in Europe and elsewhere, but there is improvement coming and we have been negotiating improved pricing, which will come on stream next year and I think that will have a knock-on effect elsewhere in our market there. If that's what you're talking about or within our existing portfolio, I think there is room (Multiple Speakers) for further improvement and I think the conditions are good for -- the demand conditions are good, the markets are very tight, certainly the markets we're in, and we see good opportunities to get the proper value for our product, which is not been the case in that business, it certainly in the time before we bought.

Arun Viswanathan -- RBC Capital Markets -- Analyst

And then if I could just ask a follow-up, you provide the guidance of at least $1.5 billion and you have $70 million of that coming from the capitalization of the operating leases, could you provide a buckets of how you get from 1478 (ph) to 15 in '19, if that's possible other than that 70?

Paul Coulson -- Chairman and Chief Executive Officer

While that is a big FX headwind there against this which is about 50.

Johan Gorter -- Chief Executive Officer, Glass and Director

And just clearly inflation refresh as we talked about earlier on that -- as I said, we are looking at growth in three of the four areas in Glass North Americas is going to be pretty flat, but we do see growth in the other areas.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Okay. That helps, thanks.

Paul Coulson -- Chairman and Chief Executive Officer

Thank you.

Operator

Thank you and I have no more questions registered. I'll now hand back to our speakers for any closing comments.

Paul Coulson -- Chairman and Chief Executive Officer

Well, thank you everyone for joining us. We look forward to talking to you again at the end of April, when we report our Q1 numbers. Thank you very much, indeed.

Operator

This now concludes our conference. Thank you all for attending. You may now disconnect.

Duration: 39 minutes

Call participants:

Paul Coulson -- Chairman and Chief Executive Officer

Randy Sloan -- Citigroup Inc. -- Analyst

Karl Blunden -- Goldman Sachs -- Analyst

Johan Gorter -- Chief Executive Officer, Glass and Director

Debbie Jones -- Deutsche Bank -- Analyst

Roger Spitz -- Bank of America Merrill Lynch -- Analyst

Anojja Shah -- BMO Capital Markets -- Analyst

Connor Robbins -- Goldman Sachs Group Inc. -- Analyst

Unidentified Participant -- Barclays -- Analyst

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

Arun Viswanathan -- RBC Capital Markets -- Analyst

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