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Aptargroup Inc  (NYSE:ATR)
Q1 2019 Earnings Call
May. 01, 2019, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by. Welcome to AptarGroup's 2019 First Quarter Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session.

Introducing today's conference call is Mr. Matt DellaMaria, Senior Vice President, Investor Relations and Communications. Please go ahead, sir.

Matt DellaMaria -- Senior Vice President, Investor Relations and Communications

Thank you Howard, and welcome everyone. Participating on the call today are Stephan Tanda, President and Chief Executive Officer; and Bob Kuhn, Executive Vice President, Chief Financial Officer and Secretary. You can find a copy of our press release as well as a slide presentation that summarizes our results on our website. We will also post a replay of this conference call on the website.

Lastly, today's call includes some forward-looking statements. Please refer to our SEC filings to review factors that could cause actual results to differ materially from those projected or contained in the forward-looking statements. Aptar undertakes no obligation to update the forward-looking information contained therein.

I would now like to turn the conference call over to Stephan.

Stephan B. Tanda -- President, Cheif Executive Officer and Director

Thank you Matt, and good morning everyone. Thanks for joining us. As you saw yesterday, we reported strong first quarter results including robust core sales growth. Coming of a very strong year and fourth quarter in 2018, we saw a solid first quarter performance.

Our Pharma segment reported well above average core sales growth, which is due to a continuing strong allergy market across all channels combined with growth in demand for our Unidose and Bidose delivery systems, used to administer central nervous system medicines.

With our industry-leading drug delivery portfolio that spans a wide variety of end-market applications, we are helping patients and healthcare providers around the globe with better drug delivery options. In the consumer healthcare market, we also saw increased demand for needle decongestion, saline rinse and eye care delivery systems.

Our beauty and home segment also grew core sales growth with increased demand from our beauty market. Demand was particularly strong for our innovative fragrance pumps, as well as our decorative color cosmetic and facial skincare solutions.

Food and beverage also had a good quarter. With strong demand for our dispensing closures, which was partially offset by lower custom tooling sales.

We continue to penetrate and grow our business in the infant nutrition granular foods and powdered water categories. Now, I would like to share a few recent examples of interesting innovations that we're bringing to market, if you're following along with the presentation that accompanies our press release and is posted to our website and referring now to Slide 4. I will highlight the first three examples, starting with the product from our Pharma segment.

As we highlighted in the recent press release, our Bidose Nasal Spray Device was recently approved by the US FDA for breakthrough therapy in the field of depression. This vital system is a prime less intuitive and easy to use device with 360 degree functionality and precise characteristic delivered two shots of medicine within the single device.

This is the first FDA approval and US launch of a prescription drug using Aptar Pharma's patented Bidose Nasal Spray delivery system. The next product is from our Beauty and Home segment in China. The second photo from the left shows the customers skincare dispensing pen, which features a magnetic applicator which delivers active ingredients to ache spot with three times the absorption rate versus applying the formula with your finger.

Turning to the Food and Beverage product, we continue to develop our customer -- we continue to help our customers innovate to provide the most convenient and control dispensing solution for the sauces in the fundaments category.

Here, you'll see an inverted squeeze product featuring our Flip-lid Closure with SimpliSqueeze Valve technology and the Built-in Tamper Evident Pull Ring fitments for line of organic barbecue sauce found in the United States.

These innovations reflect how we approach and bring to life product dispensers to transform the user experience across categories adding tangible value that did not exist before.

In turn, we are helping to both revolutionize our customers' businesses by giving them first mover advantage and delight consumers who benefit from safer and more convenient healthcare, personal care and food products. I would like to mention as we previously disclosed, we continue to return increasing value to shareholders by raising our quarterly dividend 6% and the Board also authorized a new share repurchase program.

These two actions are part of our long-standing, balanced capital allocation strategy that also includes investing in our business and making strategic acquisitions. Our strong balance sheet and confidence in the long-term growth opportunities for our Company allow us to provide shareholders with additional current returns while we are able to pursue long-term investment opportunities.

Before I turn it over to Bob, I would like to share a few changes to Aptar's Board of Directors. Two Board members Steve Hagge and Alain Chevassus will retire from Aptar's Board of Directors. Both have served as members of the Board since 2001. Steve, of course, led the Company as President and CEO from 2011 until he retired from that position in early 2017, and he was an integral part of Aptar's senior leadership team for over three decades.

A lot of experience in the global beauty industry provided valuable guidance over the years. I want to personally thank both Steve and Alain for their contributions and service to Aptar and wish them well in retirement. We are thrilled to welcome Isabel Marey-Semper to our Board, a trained scientists and experience transformational leader. Isabel, most recently was a member of the Executive Committee of L'Oreal. Previously, she was the CFO of Peugeot-Citroen and before that the Senior Executive at the multinational Saint-Gobain.

Isabel brings tremendous breadth and depth of experience, including serving on the Board of Nokia for several years. She has deep insight into French business culture and at the same time a strong grasp of global business imperatives. She will be a great addition to our Board.

With that I will now turn it over to Bob, who is going to walk through some of the financial details that impacted the quarter. Bob?

Robert W. Kuhn -- Executive Vice President, Chief Financial Officer and Secretary

Thank you Stephan. And good morning everyone. I'll briefly walk through some of the details concerning our first quarter results. If you're following the slides we published with the press release, you can refer to Slide 5. We reported sales growth of 6% that was comprised of core sales growth of 7% with the positive impact from acquisitions of 6% and a negative impact from currency rates of minus 7%. Comparable adjusted earnings per share totaled $1.07 compared to $0.92 adjusted earnings per share in the prior year including comparable exchange rates.

As you saw in our press release, beauty and home core sales, excluding acquisitions and keeping currencies constant increased 3%. Looking at sales growth by market on a core basis, core sales for the Beauty market increased 4% and this was mostly due to strong demand for fragrance pumps as well as dispensing solutions for facial skincare and color cosmetic products.

Core sales for the Personal Care market increased 3% due to an increased demand for dispensing systems for baby care and hair care products. Core sales for the home care market increased 2% due primarily to increased custom tooling sales.

When we look at profitability, our beauty and home segment had an adjusted EBITDA margin of 14%. Margins were positively impacted by increased sales volumes, transformation initiatives, the timing of resin pass-throughs and other pricing effects and the VAT refund related to our Brazilian operations.

Our Pharma segment achieved the core sales growth of 15% and an adjusted EBITDA margin of 36%. The strong sales volumes, along with the project milestone payment contributed to the strong pharma margins. Core sales to the prescription market increased to 22%, primarily due to increased demand for our nasal spray systems used with allergy and central nervous system treatments and metered dose inhalers.

It's worth noting that an increase in tooling sales contributed 2% to the top-line and the milestone project payment also contributed 2% .

Core sales for the consumer healthcare market increased 10% driven primarily by increased demand for decongestants nasal sprays, ophthalmic dispensers for eye care and airless systems for dermal applications.

Lastly, core sales to the injectables market were even with the prior year, mainly due to the comparison to a strong performance in the prior year first quarter and the timing of new molding capacity coming online at our production site in France, which is taking a little longer than anticipated, but we'll be ramping up as the year progresses.

Turning to our food and beverage segment. Core sales increased 3% in the quarter and this includes a negative impact from lower custom tooling sales of minus 7%. This segment had an improved adjusted EBITDA margin of 16%. Margins were positively affected by the increase in sales volume and the timing of resin pass-throughs.

Looking at each market, core sales to the food market increased 2%, in spite of a negative impact from lower custom to tooling sales of about minus 10%. Demand increase for our leading dispensing solutions for granular foods, spread and infant nutrition products.

Core sales for the beverage market increased 7% due to increased sales of dispensing closures for bottled water and functional drinks. On Slide 6, you can see that our adjusted EBITDA for the first quarter increased 15%, primarily due to year-on-year improvements in our pharma and food and beverage segments.

Foreign currency headwinds affected each segment's EBITDA growth. Slide 7 refers to our outlook. We are expecting adjusted earnings per share for the second quarter to be in the range of $1.09 to $1.15 per share using an expected tax rate range for the first quarter of 29% to 31%. I'd like to point out that when we compare to the prior year adjusted earnings per share and we compare using similar exchange rates, the midpoint of our guidance range represents an increase of approximately 7%.

I'd also like to point out that last year's second quarter tax rate was 26% and our growth would've been higher if we adjusted to equalize the tax effects. I have a few other details to share and then I will hand it back to Stephan.

In the quarter, cash flow from operations was approximately $78 million. Capital expenditures were approximately $52 million and our free cash flow was approximately $26 million compared to $11 million a year ago.

Looking at our balance sheet capitalization, on a gross basis, debt to capital was approximately 45%, on a net basis, it was approximately 41% and we remain less than two times levered compared to our 2018 annual adjusted EBITDA.

At this time Stephan will provide a few comments before we move to Q and A.

Stephan B. Tanda -- President, Cheif Executive Officer and Director

Thanks, Bob. So let me summarize a few key takeaways. It was a very good quarter and I'd like to leave you with the comments as shown on Slide 8. We are off to a positive start to the year with core sales growth across all three segments. We did see improved profitability over prior year due to the mix of business, benefits from our transformation and positive effects of the decline in resin costs. Our Board of Directors authorized the repurchase of up to $350 million of Aptar's common stock and we increased the quarterly cash dividend by 6% to $0.36 per share.

This will be our 26th consecutive year of paying an increased annual dividend. Looking to the second quarter we anticipate continued product sales growth across most of our application fields. Though we are not expecting the same level of custom tooling sales as a year ago. So in closing, our drive to adapt to changing markets and create differentiated solutions that help our customers win has always been the key to our success. We will continue to shape the future of consumer dispensing and drug delivery by making it easier, more efficient and more pleasant for people to use the product and medicines they buy.

In doing so, we are creating value for all customers and stakeholders. With that we'd like to open it up for your questions.

Questions and Answers:

Operator

(Operator Instructions) Our first question comes from the line of George Staphos from Bank of America Merrill Lynch. Your line is open.

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

Hi everyone. Good morning, thanks for the details. And really, congratulations on a real strong start to the year. I guess the first question, I had, to the extent it's possible to quantify. When we look at, I think you said the VAT effect in Brazil. And also, you had the milestone payment. How much did they contribute to your performance relative to your guidance and then relatedly when you looked at your original guidance also what transpired this quarter where were the particular surprises to your forecast? And I then had a couple of follow-on.

Stephan B. Tanda -- President, Cheif Executive Officer and Director

Sure. So first, I think the resin positive with slightly more than what we had anticipated. So for beauty and home, it was about $3 million; and for food and beverage it is about $1 million. The VAT actually added about $0.03 to EPS, and again that was not in our original guidance and neither was the milestone payment which is also about $0.02 and then of course the stronger Pharma outperformance also was better than we had anticipated.

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

Okay, thanks for that, Bob. I guess, the related question, I had within pharma what transpired better than your forecast. Was it just a stronger allergy season to flu season come in ultimately stronger than it started back last fall was that part of what drove it and then there were lots of puts and takes in the release and your discussion on tooling, food tooling was down, you had positives elsewhere. What was the ultimate when you put it all together impact to your margin as a Company in total from the the puts and takes in tooling. Thank you.

Stephan B. Tanda -- President, Cheif Executive Officer and Director

George. Let me take the first one and then maybe Bob can address the second one. Pharma really both in prescription and in Consumer Healthcare firing in all cylinders. I don't think it's been a particularly strong or exceptionally strong flu season. But we continue to see tremendous strength in the allergic rhinitis business, and may will lead to congestion business and that's across all channels.

In addition, of course our CNS Central Nervous System delivery system continued to grow both the Narcan type products. In addition, of course we had the launch of J&J's (inaudible), which you saw some pipeline still affecting the first quarter. So it's really across the board in the very strong picture all around.

Robert W. Kuhn -- Executive Vice President, Chief Financial Officer and Secretary

And George, I can. I can take two question, I know you focused on what the puts and take was on the margin, but I mean on the resin side I give you about 4 million on the, on the positive on the margin side.

Tooling sales, we don't really get into the dissecting the exact margin, but just overall, we were down about 4 million in total. Compared to last year on tooling sales. So I would say that it's fair to say that the positive impact from the resin pass-throughs was more than the negative that tooling sales brought.

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

Okay, that's, that's great. I'll turn it over. Thank you. Back thank you guys.

Operator

Thank you. Our next question or comment comes from the line of Edlain Rodriguez from UBS Equity Research. Your line is open.

Edlain Rodriguez -- UBS Equity Research -- Analyst

Thank you. Good morning guys. Clearly, you sort of benefit from lower resin costs. Do you get to keep that or do you have to pass that to your customers over the next couple of months also?

Stephan B. Tanda -- President, Cheif Executive Officer and Director

Yeah. The math works the same way up and down. So with a depending on the contract anywhere between 60 to 90 days lag we pass it on. Now, at the beginning of the -- if its 90 days, again the math works, if it's at the beginning of the quarter 90 days. By the end of the quarter it's 180 days. So you have a lag effect and it works the same way up as it does down.

Edlain Rodriguez -- UBS Equity Research -- Analyst

Okay, that makes sense. And one quick one on food and beverage. I mean, I think over the past several quarters you've had that issue for beverage customer in China, like what can you tell us on that. What's the status of that, that as I have you seen any improvement in there.

Stephan B. Tanda -- President, Cheif Executive Officer and Director

I was looking forward to have a call with -- talking about that.

Edlain Rodriguez -- UBS Equity Research -- Analyst

No chance.

Stephan B. Tanda -- President, Cheif Executive Officer and Director

Though it wasn't really affected this quarter, but the visibility remains limited. They played very closely to the chest.

Edlain Rodriguez -- UBS Equity Research -- Analyst

Okay. That's fair. Thank you.

Operator

Thank you. Our next question or comment comes from the line of Ghansham Panjabi from Robert W. Baird & Co. Your line is open.

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

Hey guys, good morning. I guess going back in the pharmaceutical segment comparisons get quite a bit more difficult for the segment 2Q onwards just given the fantastic sort of 2018? How you think about volumes for the segment as the year progresses. And then related to that you mentioned injectables was flat for the quarter. I'm just trying to reconcile that versus your primary competitor in that market that afforded pretty strong sales for that segment as well . So, just some context there would be helpful.

Stephan B. Tanda -- President, Cheif Executive Officer and Director

Yeah. Sure, Ghansham. I mean overall, our guidance for the pharma growth has not changed. It's 6% to 10% indeed. We have now several quarters where we were above 10%. So it's inevitable that we will have a reversion to mean. But we feel very good about the 6% to 10% range given the pipeline we have, and what we see in the marketplace.

On your second question on injectables. I wouldn't read too much into any particular quarter and please realize that with rest our overlap its minimal in our pharma business. But indeed in injectables. It is there. So we really facing at the moment, some operational bottleneck in France there overall we making some changes to address it. We are adding capacity and the capacity is being as we speak and we will add additional capacity later in the year.

So, and we also facing a pretty strong comparison in Q2, looks to be better, from that point of view. So nothing fundamentally change with injectable business.

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

Okay. That's helpful, Stephan. And then just in terms of the beauty and home segment, you've had several quarters of pretty good growth in that segment from a volume standpoint, your customers are doing quite well in a multi-region basis. Just focusing on the first quarter EBIT margins, even with the resin tailwind up 40 basis points year-over-year.

You're cutting costs as part transformation initiatives, et cetera, are you were -- where you thought you would be for that in terms of margins for this segment at this point, different color there would be helpful as well.

Stephan B. Tanda -- President, Cheif Executive Officer and Director

Yeah, we certainly have our sleeves rolled up and our heavy work but maybe this is a good point to address the overall transformation and so if you, if you remember, the first year really our strong focus was on the top line year two, which is where we now is really in improving operations and then year three, it's about Frank the footprint reducing headcount and G&A, especially in Europe and North America.

The target is to achieve the 80 million improvements run rate by the end of 2020 and be comfortably in our long-term targets, which familiar with our EBITDA point of view is 15% to 17%. On the top line after more than two years of decline or no growth. We now have racked up in the industries, as you said, seven quarters of consecutive top line growth with expanding margins. So clearly the topline has benefited from the transformation efforts. In addition to securing more business. So from a share point of view pricing discipline has also greatly benefited. So are we where we thought we would be at the moment on the topline. I would say, yes, maybe even a little bit ahead of the game.

In operations, these additional sales have clearly highlighted the need for additional improvements and investments in operations and we are knee-deep into improving performance at the handful of sites. We talked about earlier, the decorative site are in France, the analyzing site and on top of that, of course, we bought a start-up with Reboul that also needs attention. So we working at a handful of sites.

I have to say improvements are quite visible on service levels OTFs (ph) has moved from -- I almost don't dare to say to much higher levels, by several 10's of points. Our debt -- our analyzing facility is up to running at normal levels following the start-up. But I would say the operational challenges are certainly a bit more than I had anticipated, so on that one, I would say we are clearly a bit behind.

And then lastly, the headcount reductions in G&A improvements, they are fully mapped out, there actually being discussed with stakeholders in the respective countries. So, I feel pretty good about that. So overall, Bob mentioned last time that we started the year with initiatives under way that will netted about the $50 million run rate an improvement and we continue to build on that to ensure that we meet the target of the $80 million by the end of 2020.

I think that's probably kind of sort of walking around all the topics that you might think of.

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

Okay. Awesome. Thanks so much.

Operator

Thank you. Our next question or comment comes from the line of Mark Wilde from BMO Capital Markets. Your line is open.

Mark Wilde -- BMO Capital Markets -- Analyst

Good morning Stephan, and congratulations on a good quarter. I wondered if you could just walk us around the activity across the portfolio and what it tells you about sort of the state of the global economy. You've got some products that are very much kind of consumer staples, but you have things like high-end fragrances, which are really more consumer discretionary?

Stephan B. Tanda -- President, Cheif Executive Officer and Director

Yeah. I mean, look Pharma, I would kind of exclude it's not really connected to any large extent to the overall industrial like consumer activity and we spoke about the demand there. In beauty and home, we certainly see continued good demand at the, the luxury end and the premium end, particular when it comes to fragrance when it comes to color cosmetics, particularly in Asia, we are well represented in fragrance, which we would be larger in color cosmetics. And Asia continues to pull like the locomotive China travel retail and so on.

We do see some softness in personal care and home care, particularly in the United States. So we see a pullback there. But overall, on balance, we continue to expect product sales growth in beauty and home. And in food and beverage, really there -- this is really still driven very much by innovation and conversion that our growth rate is not as closely related to consumer, general consumer demand and continue to expect good growth in that segment.

Mark Wilde -- BMO Capital Markets -- Analyst

Okay. And then for my follow-on. I wondered if you could just talk a little bit about the progress you feel the Company is making in terms of turning still made from a regional brand into more of a global competitor?

Stephan B. Tanda -- President, Cheif Executive Officer and Director

I think the progress is quite well. I've talked to several customers over the last few months and they recognize the substantial improvements we've made to (inaudible). We're active around the world. (inaudible) is delivering nicely. We have a good demand out of China. Now, as I mentioned, we have some capacity bottlenecks back in France that we are addressing, but overall I think customers recognize the progress. I think service levels in that business or in that segment in general are be challenged given the rapid demand uptick and we are all investing to meet that additional demand.

Mark Wilde -- BMO Capital Markets -- Analyst

Okay. And then the last one for me is just, if we could also get some sense of where you're at in terms of trying to expand the Asian footprint? When you came in, you talked a lot about trying to grow the proportion of the firm's business that was in Asia?

Stephan B. Tanda -- President, Cheif Executive Officer and Director

Yeah, we are making progress is not real strategy, would like -- particularly if you benchmark to Asia speed, but maybe just some anecdotal information. Of course, we have started up the second site in Guangzhou. We are looking at additional sites in China. We actually just came back from having the Board meeting in China, that was very successful trip, exposing the Board to all the consumer dynamics there and yeah we're looking at additional investment opportunities not only in China, but of course China is the biggest part of it.

And certainly, the addition of (inaudible) come has brought the significantly more content of Asia also includes the senior leadership of the Company.

Mark Wilde -- BMO Capital Markets -- Analyst

Okay. I'll turn it over. Thanks very much.

Operator

Thank you. Our next question or comment comes from the line of Adam Josephson from KeyBanc Capital Markets. Your line is open.

Adam Josephson -- KeyBanc Capital Markets -- Analyst

Good morning, everyone. Let me add my congratulations on a really good start to the year. Bob, one question on the transformation as you talked about earlier. So your target is $80 million of incremental EBITDA by the end of next year and obviously most of that was focused on beauty and home. So, last year, in 2018 beauty and home EBITDA was up -- I think 12 million, and it was flat in 1Q.

So, obviously to the extent that most of that 80 is beauty and home were you obviously quite a bit away from getting to that target and obviously almost all the Company's profit growth has been in pharma and not beauty and home. So, do you still expect most of that 80 to be in beauty and home by the end of next year just status update would be helpful. Thank you.

Robert W. Kuhn -- Executive Vice President, Chief Financial Officer and Secretary

Yeah, I mean there is the majority is -- corrected majority of the $80 million is expected in beauty and home. But remember that one pillar of the transformation is around external spend and G&A and those two things span really across all three segments . So we quantify the particulars, well, that but, there is a positive within 80 that is going to be attributable in that has been attributable to the pharma and food and beverage. But it's fair to say that the 80 million, a majority of it is going to rest in the beauty and home segment.

Adam Josephson -- KeyBanc Capital Markets -- Analyst

Thank you. And then just, I think in response to Mark's question you talked about I think one of the areas of softness, you called out was personal and home care in the US. What do you make of what's going on there? What do you attribute that weakness to?

Robert W. Kuhn -- Executive Vice President, Chief Financial Officer and Secretary

To be honest, I don't have a crystal ball there. It -- we just see, what the demand picture looks like and what our customers are looking at, but I cannot tell you more than the flagging at this stage.

Adam Josephson -- KeyBanc Capital Markets -- Analyst

Thank you, Stephan.

Operator

Thank you. Our next question or comment comes from the line of Chip Dillon from Vertical Research Partners. Your line is open.

Chip Dillon -- Vertical Research Partners -- Analyst

Yes, and good morning and again congratulations on a great quarter. I had a question about the Pharma segment, as I go back over the years, it is the engine that just doesn't quit and it is a terrific business. And I just wanted to know how much visibility you feel you have based on your tooling experience. I think you mentioned the sales of tooling might -- I believe it was in that segment might back off a little bit in the second quarter, which I know just might be a one quarter thing, but I guess more broadly, how much of a visibility do you have when you see variations in your tooling equipment sales.

Stephan B. Tanda -- President, Cheif Executive Officer and Director

Yeah, I mean the pharma business while the technology is basically the same technology as we use in our beauty business, I mean its basically fragrance pump injection molding and the clean room and greatly simplifying and then with significant pharma quality systems on the back end. All the technology is similar, the timelines are very different. I mean do -- these projects take years some time in decades. So, for example, the anti-depression drug that is part of our Bidose approval, that's something we've worked on for more than a decade and often we started working with little companies, and they have a successful project and they get bought by big Company in this case as J&J. So the timelines are very long. We track the pipeline out five plus years. So if you add visibility, that visibility is quite good. What you quite never know is what is the timeline of the FDA approvals and what is the ultimate uptake once the approval is obtained and the selling, but there is very good. The other one, I would say is on the milestone payment, and this is an inherent part of our business model because these things take very long we expense significant resources in the shepherding projects along.

We entered into agreements with our customers that if we pass certain milestones, milestones payments become due in this to become bigger we highlight them for you.

Robert W. Kuhn -- Executive Vice President, Chief Financial Officer and Secretary

And Chip maybe I can add a little point on the custom tooling for pharma. So as we highlighted in the past. The pharma business tends to be increasing and step function. So when we see custom tooling sales in Pharma, a lot of times it's our customers investing in capacity increases versus purely a new product on the market.

So a lot of what we saw in the past really was capacity increases that our customers forecasting going forward. And again, I wouldn't look too much negatively into Q2, that we just up against some difficult comps and tooling sales but pharma truly is step function type of grower when it comes to the tooling.

Adam Josephson -- KeyBanc Capital Markets -- Analyst

Good. Totally understand that's super helpful. So just say differently is, don't worry about the tooling from quarter-to-quarter but do be focused on what's in the pipeline and if you have, if you could just tell us, as you look out. I know it takes years to get some of these drugs in pharma, products approved. How does the backlog compared, say over the last 7 to 10 years.

Today, is it about what it was. Is it higher? lower? In terms of what the potential is?

Robert W. Kuhn -- Executive Vice President, Chief Financial Officer and Secretary

Look the backlog in the project pipeline is very solid. And of course, it decreases -- the overall size of the business increases. We often talk about converting categories in our food and beverage business, but that also apply is to quite some extent to the pharma business. So, it take both Narcan and the -- product, those were existing molecules that has been known for many years that were administered one way and the innovation is really administering it in a different way and/or for different indication.

So that is the innovation so there's also conversion and particular I think with the antidepressant approval we get more and more interest and credibility in the central nervous system category. I mean it's very clear to cross the blood brain barrier through the nasal cavity is a lot cleaner and quicker than sending a pill through the gastrointestinal tract.

Adam Josephson -- KeyBanc Capital Markets -- Analyst

Got you. That's very helpful. Thank you.

Operator

Thank you. Our next question or comment comes from the line of Debbie Jones from Deutsche Bank. Your line is open.

Debbie Jones -- Deutsche Bank AG -- Analyst

Hi, good morning.

Stephan B. Tanda -- President, Cheif Executive Officer and Director

Hi Debbie.

Debbie Jones -- Deutsche Bank AG -- Analyst

I've two questions on longer-term growth. The first thing is your beauty and home segments. Can you talk about how dependent you think you're going to be on your customer growth rate over the next few years versus the opportunity to pick up some small to mid size business and if you kind of elaborate on how your customer concentration may have changed a bit in the last year or so?

Stephan B. Tanda -- President, Cheif Executive Officer and Director

Well, I mean ultimately we depend 100 % on our customers. Debbie, but to get at the question and the question, you're right, we really look at it conceptually in three different categories. Kind of the large western multinationals it worked, traditional driver for growth, then the small and independent brands, which have become in the last few years, much more important.

And then lastly, the regional champions, players, which in many cases become large multi-nationals in their own right. And sometimes one of these categories is stronger than the other, so let me just give some examples before the transformation we were overly dependent on the large rest of multinationals. They didn't win out against the small independent brands and the regional champions. All of them have retooled themselves and decentralized put more emphasis and on the regions and start to win again.

So, we see a comeback of them kind of getting their fair share of the market. Small independent brands continue to do well, and of course, the ones that continue to do very well get bought up by the big ones, and we see many example of the -- examples of those. And then lastly, of course, the regional champions. I would say in country and again coming back from China.

We continue to see them being much more agile, much faster and taking the lion's share of the growth .One additional one I would highlight is of course is distribution channel change you and again taking China as a example you see a shift from a multi-level marketers no longer getting their fair share of the growth and more and more being done via e-commerce and there you see more and more small independent brands really jumping on the e-commerce bandwagon.

So, the channel also plays a big role.

Debbie Jones -- Deutsche Bank AG -- Analyst

Okay, thanks. That's helpful. And then another again a little bit broad question, but I wanted to talk about your Pharma growth and over the next couple of years and the various drug delivery applications that you have -- you've done a pretty good job of making sure that you're on trend whether we're developing the product or buying the application and -- but my question is really what's in the pipeline -- next, two to three years is expected to grow kind of ahead of your long-term targets. And what is kind of looking to grow maybe below and are you kind of position to take advantage of the drug delivery terms that you're seeing over the next couple of years?

Stephan B. Tanda -- President, Cheif Executive Officer and Director

Yeah, look -- it's really across the board. I think the one area that we maybe expect additional growth that is yet to materialize as the whole area of connected devices and how that will apply to different categories and compliance, might be more important in central nervous system drugs and in allergy drugs.

So, we'll have to see how they -- whole connected devices space data revenue impact us. So, I can't really call it out, but other than that I don't see any let up in allergy, that's just the nature of our civilization and then I'm very encouraged by what I see in the central nervous system category.

Robert W. Kuhn -- Executive Vice President, Chief Financial Officer and Secretary

Maybe one other point, Debbie. That we've talked about in the past is, as we continue to build out our analytical services, we continue to, to offer additional services to our customers getting them to the market.

So it's a very small piece today of the Pharma revenue, but it's an area that we're emphasizing more and more, and we continue to focus on that. So from a pure growth rate perspective. We're looking to expand that those service offerings.

Debbie Jones -- Deutsche Bank AG -- Analyst

Okay. And just one quick follow-up. Are there any drug delivery mechanisms that you wish you had more exposure to, or anything that kind of looking interesting from a far that you don't have --?

Stephan B. Tanda -- President, Cheif Executive Officer and Director

Well, I mean, we certainly will continue to build out our injectable ecosystem. So there are many different applications within injectables. It's not just rubber stoppers and plungers. So let me leave it at that.

Debbie Jones -- Deutsche Bank AG -- Analyst

Okay. All right, thank you very much. Congratulations on a good quarter.

Stephan B. Tanda -- President, Cheif Executive Officer and Director

Thank you, Debbie.

Operator

Thank you (Operator Instructions) Our next question or comment comes from the line of Daniel Rizzo from Jefferies. Your line is open.

Daniel Rizzo -- Jefferies LLC -- Analyst

Good morning, guys. Just a quick follow-up, you mentioned in beauty and home that small independent brands are growing an importance, large multinationals are rebounding and the regionals are also doing well. So I guess what you're saying and succinctly is everybody is doing well. I mean is that, is that correct. It just seems like it was this broad base?

Stephan B. Tanda -- President, Cheif Executive Officer and Director

Yes, except we see some weakness in Personal Care and Home Care in the US and that effect, I think more of the multinationals, if in the US based players. But yeah, when you -- I mean we had seven quarters of well above average growth part of that was self help and partly of that certainly the markets done well and again well -- we sell a lot of these products into European product often ends up in Asia.

Daniel Rizzo -- Jefferies LLC -- Analyst

Okay. And then you mentioned new capacity in France coming online. Have you quantified what that means in terms of increased volumes or sales, or what that is incrementally?

Stephan B. Tanda -- President, Cheif Executive Officer and Director

No, we won't disclose that detail -- for competitive reasons as you can imagine.

Daniel Rizzo -- Jefferies LLC -- Analyst

Okay. And then finally, you mentioned that you have a new nasal product doing well. I was just wondering how many other drugs are in process that could potentially be using your nasal system over the next, say, three to five years?

Stephan B. Tanda -- President, Cheif Executive Officer and Director

Yeah. Again this is really one of our sweet spots and it goes from allergic rhinitis to the congestion and now increasingly central nervous system -- but I cannot get into the details of the pipeline.

Daniel Rizzo -- Jefferies LLC -- Analyst

Thank you very much.

Operator

Thank you. Our next question or comment comes from the line of Gabe Hajde from Wells Fargo Securities. Your line is open.

Gabe Hajde -- Wells Fargo Securities -- Analyst

Good morning gentlemen. Congrats on the quarter. My questions have been asked, but I was curious about the CSP acquisition, you didn't make mention of it. I'm just curious -- assuming that it's progressing as expected but any surprises there is the upside or downside and you also talked about trying to expand some new applications, I was curious if you can give us an update there?

Stephan B. Tanda -- President, Cheif Executive Officer and Director

Sure, Gabe. I can handle the CSP question. So CSP is performing well. They actually had a very strong, better than we had forecasted Q1 in terms of top-line and we indicated that we're comfortable at the $0.10 per year accretion level, or we a little bit above that in Q1 and added about $0.03 in the first quarter. So, we're comfortable that the $0.10 is a fair number going forward. Yeah, we're about six-months in -- in terms of new application fields. We had a lot of interest from the legacy Aptar business, we got a number of new projects that we're working on. So, yeah, I would say from where they're performing there we're very happy with the results we've had thus far and we are very excited about what new developments, we can bring to market in the future.

Gabe Hajde -- Wells Fargo Securities -- Analyst

Okay. And then, I don't know if you're willing to -- you're sort of asked before, Stephan for a little bit of a finer point on this capacity that you're adding over (inaudible). I'm assuming this is a natural extension of the capacity that you added the mix in capacity last year, but just maybe in terms of timing is that something that we would expect contribution from this year or more of a 2020 event?

Robert W. Kuhn -- Executive Vice President, Chief Financial Officer and Secretary

Yeah, I mean just to -- to talk through the value chain. So, basically you buy rubber bricks or synthetic rubber bricks, they get component through multiple process steps. And then you go into molding where you mold the actual parts. In that molding, they are also being (inaudible) to ensure that the rubber stays where it is supposed to and then go all the finishing steps from washing, coding and what we've invested in the US is mainly the downstream part of that and what we're talking about here is really investments in capacity increases in the upstream part, which is mainly in France. And as I said, to address some of the bottlenecks some of these added upstream capacity is already going in as we speak, it takes little long with the start-up than we anticipated, but it certainly will benefit is already this year.

And as I said, there are also additional investments coming on stream late in the year. I think that's probably as much color as I can give you.

Gabe Hajde -- Wells Fargo Securities -- Analyst

Thank you. Good luck.

Operator

Thank you. I'm showing no additional questions in the queue at this time. I would like to turn the conference back over to Mr. Tanda for any closing remarks.

Stephan B. Tanda -- President, Cheif Executive Officer and Director

Thank you. Well, appreciate all your questions. Look forward to talk to you on the road. This concludes our call today and thanks everyone for joining us. Goodbye.

Operator

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone have a wonderful day.

Duration: 49 minutes

Call participants:

Matt DellaMaria -- Senior Vice President, Investor Relations and Communications

Stephan B. Tanda -- President, Cheif Executive Officer and Director

Robert W. Kuhn -- Executive Vice President, Chief Financial Officer and Secretary

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

Edlain Rodriguez -- UBS Equity Research -- Analyst

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

Mark Wilde -- BMO Capital Markets -- Analyst

Adam Josephson -- KeyBanc Capital Markets -- Analyst

Chip Dillon -- Vertical Research Partners -- Analyst

Debbie Jones -- Deutsche Bank AG -- Analyst

Daniel Rizzo -- Jefferies LLC -- Analyst

Gabe Hajde -- Wells Fargo Securities -- Analyst

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