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Ardagh Group S.A. (NYSE:ARD)
Q2 2019 Earnings Call
Jul 25, 2019, 10:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Hello and welcome to the Ardagh Second Quarter 2019 Results Call. [Operator Instructions]

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

Paul Coulson -- Chairman and Chief Executive Officer

Welcome everyone to our second quarter earnings call, which follows the publication earlier today of our results for the quarter. With me, as usual, are David Matthews, our CFO; and John Sheehan, our Corporate Development and Investor Relations Director.

Our remarks today will include certain forward-looking statements. These reflect circumstances at the time they're 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 our guidelines -- in our SEC filings and in our news releases.

Our earnings release, as well as our financial report for the period and related materials can be found at our 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. Full details of the Company's statutory forward-looking statements disclaimer can be found in the Company's filings with the SEC.

So having said that, if I could turn to the second quarter performance for the Group. Overall results for the quarter were inline with our expectations, with Group revenue rising 1% at constant currency to $2.3 billion, and adjusted EBITDA of $395 million, a 5% advance on the same period last year at constant currency. Currency effects on revenue and adjusted EBITDA, principally on translation of euro earnings to US dollars were $92 million and $16 million respectively in the quarter. Three of our four divisions recorded constant currency growth in revenue and the adjusted EBITDA for the quarter. And adjusted EBITDA margin for the quarter increased by 70 basis points to 17.4%.

Earnings per share for the quarter was US$0.29 a share, a 16% increase on the -- $0.25 reported in the same period last year. Adjusted EPS of $0.48 per share, a reduction on the $0.51 per share earned in the same period last year as a result of higher depreciation. Our full-year outlook is unchanged, and before taking -- before taking account of the recently announced Trivium Packaging transaction, which I will discuss later.

If we looked at the segmental performance, revenues in Metal Packaging Europe of $874 million increased by -- compared with the same period last year due to a positive volume mix effect of 1%. Beverage Can growth moderated from the high single digits seen in the first quarter, reflecting the impact of poor weather in the quarter, and some likely unwind of Brexit stock building seen in the first quarter. Adjusted EBITDA of $140 million for the quarter declined by 5% after IFRS 16 effects as a result of some temporary under recovery of input costs in beverage cans as a result of legacy contractual arrangements.

If you move to the first half Metal Packaging Europe. Volume mix increased by 3%, with beverage cans increasing by 6%, and food and specialty slightly ahead of the same period last year. Demand for Metal Packaging in Europe remains healthy with the sustainability benefits of the substrate increasingly apparent. Our beverage cans footprint remains well placed to capitalize on this growth, but in Food and Specialty, we have continued to pursue selective growth and investment opportunities during the quarter in areas such as nutrition and pet food.

Metal Packaging Americas revenue increased by 1% to $549 million in the quarter, volume mix growth of 4% was partly offset by the pass-through of lower input cost. Volumes increased in our bev can businesses in North America and Brazil by a combined 5% with favorable mix and more than offset -- and this more than offset the impact of the closure of a small food specialty plant in late 2018. Adjusted EBITDA increased by 12% to $83 million, compared to the same period last year.

Our asset investments on our existing -- in our existing North American and Brazilian footprint continue, backed by strong demand for premium differentiated metal can packaging. In parallel, our efforts to pursue commercial improvements in the North American market continue -- continue apace. In Food and Specialty, our leading asset base in North America will underpin Trivium's attractive positioning in this market as brand owners seek more attractive and higher quality packaging solutions for their products.

Turning to Glass. In Europe, underlying market conditions remain very healthy. Second quarter revenue $412 million, increased by 5% at constant currency, and positive mix including from higher glass engineering activity, as well as the pass-through of higher costs. Adjusted EBITDA for the quarter of $99 million, was 16% increased on a constant currency basis from last year. This reflects positive mix, strong operating performance and good cost control, as well as IFRS 16 effects. We continue to engage with customers and see strong demand for committed long-term capacity from these customers as the purity premium association ability to differentiate with vast packaging containers continues to appeal to brand owners.

In North America, in Glass, revenue decreased by 5% to $433 million in the second quarter. This reflected lower demand. Our cost reduction initiatives, including freights and logistics, as well as capacity adjustments already made -- limited the -- they are the ones that we've already made have limited the impact of reduced volumes and adjusted EBITDA for the quarter, and this increased by 4% to $73 million. And as we've previously set out, the closure of our Lincoln, Illinois facility, took place in April. Overall, the North American Glass market continues to see significant levels of imports, though there's been some moderation noted in certain Dan markets as a result of the increase in tariffs on Chinese imports. And while our focus on our data remains on targeted investment in our footprint and the pursuit of cost optimization initiatives, we continue to believe that the industry as a whole must adapt to lower demand.

If I could then turn to the Trivium transaction, which we announced last week. As you know, we've agreed to combine our Food and Specialty Metal Packaging business with Exal Corporation, which is the leading producer of aluminum containers in the Americas, and the combined company will be known as Trivium Packaging. And this -- this new combination with Exal, which is currently controlled by Ontario Teachers' Pension Plan, will create one of the largest metal packaging companies in the world, with leading number one or number two positions in substantially all of the markets in which it will serve. To be headquartered in the Netherlands, Trivium will operate 57 production facilities, principally across Europe and the Americas, and will employ approximately 7,800 people.

Annual pro forma revenues were $2.7 billion and adjusted EBITDA of $469 million in the year 31 March 2019. Trivium will serve a diverse range of leading customers in a wide array of end markets, including food, seafood, pet food, nutrition, beauty and personal care, household care and premium beverages. This combination brings together Ardagh's stable Europe and North America businesses, which offer attractive growth opportunities in areas such as nutrition and two piece food cans, mainly focused -- and this business is mainly focused on tin plate steel packaging with Exal's leadership in the faster growing America's aluminum aerosol packaging sector. Trivium will produce an extensive and sustainable product range backed by dedicated research and development resources.

I will become Chairman of Trivium and Michael Mapes -- Mapes, who is currently the CEO of Exal, will become CEO of Trivium, and he will lead a highly experienced team, drawn from across Exal and Ardagh. We will hold in Ardagh a 43% stake in Trivium, with the balance of 57% being controlled by Ontario Teachers. Ardagh will also receive approximately $2.5 billion in cash proceeds from the transaction, which we will use to reduce debt at Ardagh. And we outlined how we plan to do that debt reduction last week and also in our call materials today.

This transaction is important strategic move for us in several respects. Firstly, it gives us a large stake in a faster growing global Metal Packaging business than Food and Specialty on its own. Secondly, it enables us to focus in Ardagh on our Glass Packaging and Beverage Can businesses and keep a 100% ownership of both these businesses underpinning our relationships with major customers in the Beverage end-market. And thirdly, it results in immediate deleveraging of about half a turn of the adjusted EBITDA with the receipt of the $2.5 billion.

Ardagh and our partners in Ontario Teachers, with whom we've been working on this transaction for several months, share a common vision for a medium-to-long term value creation at Trivium. And as a producer of infinitely recyclable and sustainable metal packaging, we believe that Trivium is well placed to benefit from secular tailwinds. Over the course of the past year, we've had several approaches for our Food and Speciality business, but we wanted to retain a significant stake given the attractive outlook as the wider consumer focus increasingly turns to sustainability, and this is a business that we wanted to remain involved in.

On Friday last, Trivium priced debt offering of $2.85 billion in seven year and eight year bonds at a post swap blended interest rate of approximately 4.8%. The offering was over 7 times subscribed and we're now focused on completing the Trivium transaction and we expect completion to take place in the fourth quarter of this year. We look forward to working with our new partners in Ontario Teachers and with Michael Mapes and his team in delivering value from Trivium over the medium and long-term.

You will also see today that as part of our long-term succession planning, we've announced that Shaun Murphy will join Ardagh as Chief Operating Officer in September. Shaun will report to me and he will also join the Board of Ardagh. He recently completed a highly successful six year term as Managing Partner of KPMG in Ireland. KPMG Ireland is the country's largest professional services firm that employs over 3,000 people serving a wide range of domestic and multinational clients with a broad range of advisory services. Shaun has been a partner at KPMG for almost 20 years, and has -- and served as the Lead Director on KPMG's Global Board from 2015 until earlier this year.

And separately, Johan Gorter has decided to retire as the CEO of our Glass business by the end of this year. And also following the recent agreement to combine our Food and Specialty business with Exal to form Trivium, David Wall has decided to step down as CEO of our Metal division by -- also by the end of this year. And following these changes, the heads of our Metal and Glass Business units will report directly to Shaun Murphy.

So as we look to the remainder of the year, our full -- our full year outlook is unchanged, despite an additional currency headwinds since our first quarter results. And just to confirm is as follows: it's at least $1.5 billion in adjusted EBITDA; adjusted free cash flow of approximately $450 million before spending on short payback projects; and adjusted earnings per share of -- in the range of $1.60 to $1.75. This outlook does not, however, reflect the impact of the Trivium transaction announced last week. As I said earlier, we expect to close that in the fourth quarter. Pro forma for the divestment of Food and Specialty -- full year of 2019 pro forma adjusted EBITDA is expected to be at least $1.15 billion.

So having made these opening remarks, we will now be 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 Tyler Langton from JP Morgan. Please go ahead. Your line is now open.

Tyler Langton -- JP Morgan -- Analyst

Hey, good morning. Thanks for taking my question. Just regarding the Trivium transaction, I know you kind of provided -- provided with the pro forma EBITDA would look like. Can you just give a sense on how to impact free cash, I guess, since the food can business I think is probably relatively lower CapEx levels?

Paul Coulson -- Chairman and Chief Executive Officer

I think the free cash flow for the business as it is, it is around $450 million and on a pro forma basis, it will come down to about $350 million.

Tyler Langton -- JP Morgan -- Analyst

Okay. That's helpful. And then for European metal, just the decline in EBITDA, I think, Paul, you mentioned in your opening remarks that it was more from higher costs. And beverage can, I was just also wondering what you're seeing in food can, I think some of your peers have talked about some pricing pressure in the European food can market?

Paul Coulson -- Chairman and Chief Executive Officer

I think on the food can side, we're pretty much steady as it goes. We've been happy with the performance there in Q2 and you know we -- we know what others have been saying, we've had a reasonable quarter. We have had some pressures, but the performance is very good. Also, a lot of our business, we've a very strong business in nutrition and a very strong business in pet food.

Tyler Langton -- JP Morgan -- Analyst

Got it. Okay. And then just final question, I guess, with the sale of the food can business, I guess, would anything change in terms of how you view, I guess, the beverage can business in terms of maybe looking to grow more in emerging markets or sort of adding capacity sort of in the markets that you're in and kind of growing with your customers. Just any thoughts there would be helpful ?

Paul Coulson -- Chairman and Chief Executive Officer

I think as you know, Tyler, our attitude to growth in emerging markets has been one -- it's been a negative one. We see our future in the markets we're in, Brazil, the US and Europe. We're not sure that the experiences of others in emerging markets has been that -- has always been that great. And in terms of, I think, what you will see us do is look at some interesting opportunities to invest in our business, in our bev can business, in those three jurisdictions, not in any new plants, but more in the way of line conversions that we've done to Specialty, for example, or indeed adding selectively on the back of customer demand and customer contracts some additional capacity, but no new plants or anything like that and I don't see any geographic diversification.

Tyler Langton -- JP Morgan -- Analyst

Okay. Great and thank you so much.

Paul Coulson -- Chairman and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Kyle White from Deutsche Bank. Please go ahead. Your line is open.

Kyle White -- Deutsche Bank -- Analyst

Good morning, everyone, and thanks for taking my question. I'm curious you called out the adverse weather -- just kind of curious what kind of impact you think that had on your business, on food and in beverage throughout the quarter?

Paul Coulson -- Chairman and Chief Executive Officer

Yeah, I think Kyle, it was a limited, not impacted the first couple of months on the beverage side of the quarter. I think it was quite cold and wet and the heat wave was slow to rise. 30th June was better [Phonetic] but the first couple of the months were difficult in that respect and part of the beverage business. On the food side, as we said, you know, we're very well diversified of our food business, you know about 40% in this pet food debt were well dispersed and diversified in terms of where we operate. So yeah, there's a huge challenges attributed at the harvest as to play for -- over the course of the summer, but the impact there was -- it was fairly moderate, maybe a bit of delay, but nothing that significant in the second quarter.

Kyle White -- Deutsche Bank -- Analyst

Got you. And then on the kind of the inflationary costs, the input costs that you called out in Metal Packaging Europe, just curious what exactly are these costs and when can we kind of expect them to be passed through? And I guess, why aren't they being passed through currently through your normal kind of traditional pass-through mechanisms that you have in that business?

Paul Coulson -- Chairman and Chief Executive Officer

I think, Kyle, they will work their way out through the system. These are some legacy contracts that were entered into, you know, at the start of our ownership and even before it. And as we moved to better contracts, you know, they will disappear hopefully. And also, I think, you know, as we flagged previously, some of the pass through mechanisms that we inherited when we came into the bev can business are less than perfect, and some of them aren't caught. Some of these inflationary costs are not caught by them and we've been working in our -- as we renew contracts, we've been working to change the pass through arrangements, so that they accurately reflect up and down -- customers and ourselves the cost that impact the business.

Kyle White -- Deutsche Bank -- Analyst

Got you. And then following Trivium and getting the $2.5 billion of proceeds in the pro forma deleveraging there, just curious, what kind of impact does this have and how you think about the HoldCo structure in that strategy going forward and also the timeline of that?

Paul Coulson -- Chairman and Chief Executive Officer

I think, Kyle, we -- that's unchanged really in terms of -- we will examine our options following the receipt when we up $2.5 billion, when we close -- when we close the Trivium transaction. And again, as we've flagged over recent quarters, I see that as being something we'll look at in 2020, I don't see anything happening on the HoldCo 2019, but we'll look at our various options and see what the markets are, etc., etc.

Kyle White -- Deutsche Bank -- Analyst

Thank you, and good luck in the quarter.

Paul Coulson -- Chairman and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Anojja Shah from BMO Capital Markets. Please go ahead. Your line is open.

Anojja Shah -- BMO Capital Markets -- Analyst

Good morning.

Paul Coulson -- Chairman and Chief Executive Officer

Good morning.

Anojja Shah -- BMO Capital Markets -- Analyst

It seems like you're getting good cost savings now from the North American Glass footprint restructuring. Are you fully satisfied with the way things stand now or should we expect further changes?

Paul Coulson -- Chairman and Chief Executive Officer

No, I think we -- certainly we don't expect to make any further footprint changes. We've made enough changes there. I think we're satisfied. You know, you're never satisfied until you get the business really humming, and we've much more work to do there. But I think we're satisfied in the progress we've made to date. You know, in a market where volumes are declining, where we've addressed our cost base and are adjusting our cost base to the new environment we find ourselves in. I mean, this is not something new for us. You know, we -- years and years ago, we had the same situation in Europe where there were declining volumes and it's a matter of adjusting our footprint which we've done and adjusting our cost base to the market conditions we find. So I think so far so good.

Anojja Shah -- BMO Capital Markets -- Analyst

Okay, great. Thank you. And then second question is, can we get some perspective on the leadership changes you announced this morning, maybe just a bit of background and if -- what if any changes we should expect?

Paul Coulson -- Chairman and Chief Executive Officer

I think the changes are as per what we've announced this morning. We -- obviously, you know, succession planning is important and we have been looking to bring in someone into the Group who would be a leader of the operating businesses overall, and Shaun Murphy, who will be joining us in September will fulfill that role. He will be reporting to me. I will remain the CEO and heavily involved on an executive basis in the Group.

In relation to the other changes, Johan had for some time indicated that he wanted to retire. Although he will remain involved with us as a consultant which is great to have his expertise available, but we have over the last couple of years been bringing -- developing two managers, one in the US and one -- CEO's, one in the US and one in Europe, who would eventually reporting to a COO and this has been planned for quite some time in relation then and similarly on the Bev Can business, obviously with the Trivium transaction, we don't have direct management of the food can business or won't have anymore from later in the year. And David Wall indicated to me some weeks back that has that business a trump [Phonetic] that he was responsible for -- he would like to step down and pursue some other opportunities outside of Ardagh. Again, he will be doing some consulting work for us. So we'll have the benefit of his expertise as well. So I see this as a natural evolution. I plan to stay with the business, but you know, like everyone, nobody goes on forever. So we need to make -- we need to plan for the future.

Anojja Shah -- BMO Capital Markets -- Analyst

Great. Thank you very much.

Operator

Thank you. Our next question comes from the line of Roger Spitz from Bank of America Merrill Lynch [Phonetic]. Please go ahead. Your line is open.

Roger Spitz -- Bank of America Securities -- Analyst

Thank you. Good afternoon. Could you say what your off balance sheet securitization was at June 2019? How much of that might be going with the Food and Specialty Metal Packaging business to Trivium?

Paul Coulson -- Chairman and Chief Executive Officer

That's about $600 million at the end of June and an appropriate proportion will be going with the Trivium business.

Roger Spitz -- Bank of America Securities -- Analyst

I'm sorry. Did you say a proforma amount would be going with Trivium?

Paul Coulson -- Chairman and Chief Executive Officer

An appropriate proportion will be going with that business.

Roger Spitz -- Bank of America Securities -- Analyst

Appropriate. Okay. And would you be willing to say how much off balance sheet securitization with Trivium totaled in March '19 or June '19, because that may be -- Exal had some off-balance sheet securitization outstanding?

Paul Coulson -- Chairman and Chief Executive Officer

I think it would be relatively small with regard to Exal.

Roger Spitz -- Bank of America Securities -- Analyst

Okay. Those Trivium transaction accelerate potentially the collapse of your capital structure that you've been discussing. Does it accelerate in any way? I recognize it's not going to happen in 2019, but just wondering what the timing might have changed with it?

Paul Coulson -- Chairman and Chief Executive Officer

I think it was an important step on the way, and we've been working on the Trivium transaction for all of this year. So I don't think it changes the timing as I said to an -- an answer to an earlier question, Roger. We will-you know we will look at all that next year, but it's an important step in kick-starting deleveraging and it opens up various options to us as to how we deal with the HoldCo. But we will -- the first step is to close the Trivium transaction, and then to -- in the new year, we'll look at what the options are. But as I said earlier, it's not something you should expect to see happen this year.

Roger Spitz -- Bank of America Securities -- Analyst

Thanks. Lastly, you've given a $90 million CapEx for short-term payback projects which is outside the $450 million, so that pro forma the $350 million. Does the $90 million pro forma to a smaller number with Trivium please?

Paul Coulson -- Chairman and Chief Executive Officer

It will be slightly smaller, but clearly Trivium is being part of the Group and will be part of the Group, mostly yes. So the $90 million will be broadly that number for the full year.

Roger Spitz -- Bank of America Securities -- Analyst

Thank you very much.

Paul Coulson -- Chairman and Chief Executive Officer

Thank you

Operator

Thank you. [Operator Instructions] And our next question comes from the line of Karl Blunden from Goldman Sachs. Please go ahead. Your line is now open.

Travis Edwards -- Goldman Sachs -- Analyst

Hi. Good morning. This is Travis Edwards on for Karl. One quick follow-up on HoldCo. With most of the beverage beer can bonds coming out following the paydown with the asset sale proceeds, how are you thinking about the remaining constraints in RP? Would you consider addressing maybe the remaining unsecured 24s to increase that basket?

Paul Coulson -- Chairman and Chief Executive Officer

Yeah, that's something that we would consider. We keep our capital structure under constant review, and obviously, you know, that's one of the bonds that we would look at.

Travis Edwards -- Goldman Sachs -- Analyst

Awesome. And then do you have a balance of your RP capacity right now?

Paul Coulson -- Chairman and Chief Executive Officer

Yes, it's just about $680 million at the end of June.

Travis Edwards -- Goldman Sachs -- Analyst

Got it. Thank you. And then a quick one if I can on fundamentals. Are you able to elaborate a bit on how the North Am glass improvement, maybe help us bridge current operations to how you're thinking about the business at more run rate levels, you know, when it's humming along as you said. Can you quantify some of the drivers of that improvement?

Paul Coulson -- Chairman and Chief Executive Officer

Well, I think we've -- you know, I think we've said that we expect modest improvement in -- for the year as a whole. I think the drivers of that are improving the cost base, taking out excess capacity which we've done and cost savings there. Working with the workforce to improve the labor costs, because labor costs are much higher in the US than in our continental European glass plants. It's one of the big differentiating factors, and improving operating performance and improving efficiency. So it's quiet across a very wide range of initiatives that we've been working on and there's more to go and there's more progress to be made, but there's been good progress so far.

David Matthews -- Chief Financial Officer

We've taken out about 10% of our capacity and -- on the beer side, around 20%. And in addition to capacity reductions, we've been making targeting -- targeted investments in things like automation and inspection equipment which have attracted paybacks. So it's been both investing and cost reduction and some of them connected.

Travis Edwards -- Goldman Sachs -- Analyst

Got it. That's super helpful. If I may sneak one more real quick. Is there any impact to RP with the Trivium deal?

Paul Coulson -- Chairman and Chief Executive Officer

No. Minor kind of $20 million, maybe $20 million. I'm sorry $20 million reduction [Phonetic].

Travis Edwards -- Goldman Sachs -- Analyst

All right. Thanks for the time.

Paul Coulson -- Chairman and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Arun Viswanathan from RBC Capital Markets. Please go ahead. Your line is open.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Hey, good day. Thanks good morning. I'm just curious on Beverage Can volumes. I guess, would you characterize those as kind of in line with your expectations or was it slightly weaker than what you thought you would achieve in the quarter?

John Sheehan -- Corporate Development and Investor Relations Director.

I think if you look across the regions in Europe and we had growth that was high-single-digit in the first quarter, you know, there may have been a bit of Brexit pull forward there, it's hard to gauge, and some of that may have overwhelmed. So you know, it was fairly moderate in the second quarter. In North America, we're relatively constrained and so we had lowest single digit growth plus very good mix there in terms of the sales, and in Brazil, we were well into double digits. So you know, quarter-to-quarter it can vary, but we've been very pleased with the progress that the business combined, the 6% volume mix growth hasn't changed.

Paul Coulson -- Chairman and Chief Executive Officer

I think in Bev Cans in Europe, the -- when you take the half year as a whole, it brings -- it points us to the sort of percentage increase we expected for bev can volumes in Europe as a whole for the year. And as John has said, in North America, we're full, full, full. So it's not much we can add there. But we're happy with the demand situation in all three Bev Can markets.

Arun Viswanathan -- RBC Capital Markets -- Analyst

And then -- thanks for that. And then on the food side, some of your competitors have reported some challenges, especially in Europe, over the last couple of months. Any thoughts that you can share on food can in Europe? I guess, are you guys in early indications on the path or anything that would help us understand that market?

Paul Coulson -- Chairman and Chief Executive Officer

Yeah, I think, again, as we said, we have quite a diverse business there. So within the food segment itself about, you know, well over a third in the pet food [Phonetic], so that's on non-seasonal. We've got an attractively growing and significant nutrition business which has got a very positive outlook to it. On the harvested, it's too early to say yes. You know, maybe you see a bit of delay, but it's been relatively stable and what we've seen in the year to date.

Arun Viswanathan -- RBC Capital Markets -- Analyst

And just lastly there. I guess, we've heard of some competitive activity in food can in Europe. Obviously, it's a slightly different situation now for you given the separation. But I guess, was that kind of the motivating factor? How did this kind of conclusion come about for you guys to exit and -- you know at least partially?

Paul Coulson -- Chairman and Chief Executive Officer

Oh, no, that has nothing to do with it whatsoever. In fact, our our motivation in putting this transaction together was that we liked this business, we wanted to remain in it. And we saw an opportunity to grow the range of the business, particularly on the aluminum side, obviously with Exal and diversification into Latin America and into the United States in aerosols. And as I said earlier on the call, you know, we did have a number of approaches to sell that business wholly. So we are not far from exiting. We plan to be a very active partner with a 43% shareholding in it, and we saw it as an opportunity to combine and achieve a number of objectives together. One was to deleverage Ardagh itself by the receipt of the $2.5 billion; two, increase the breadth of the actual food can and specialty and aerosol business.

And also we thought that was a good opportunity for us to bring on board Michael Mapes and his team who have done a great job at Exal. And so, you know, we saw a number of factors in this that made this transaction very attractive for us. And as you saw last week, it was very well received by the debt market. So far from exiting, you know, we see this as the vehicle which will grow significant value for us over the coming years.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Right. Of course. And then just lastly, on your own capacity, any plans -- there was competitor's announcement in past additions in North America, but I guess any plans to increase Beverage Can capacity globally for you guys?

Paul Coulson -- Chairman and Chief Executive Officer

Well, I think, I said earlier that we will focus our attention on the three markets we're involved in the US, Brazil and Europe. I think where there are opportunities as we've had in the past -- over the past three years. We will either convert or perhaps in some cases increase capacity in our existing facilities. In those three jurisdictions, we do not plan to build any new plants and any increases that take place will: a) we'll be -- we will make sure that financially they are very attractive for us; and secondly that they are backed up by customer contracts and increased demand. I mean, we are seeing increased demand for metal due to the sustainability factors and that no doubt is what's behind some of the other increases by our competitors that you're talking about. But we will as ever be very disciplined in this area, both in terms of the return that we get from our investment, but we are -- you see some attractive opportunities within our existing footprint, which as you know is very large.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Great. Thanks.

Operator

Thank you. Our next question comes from the line of Karl Griffith from Guggenheim Partners. Please go ahead. Your line is now open.

Karl Griffith -- Guggenheim Partners -- Analyst

Hi. Thanks for the presentation. Just following on the last question there, rather than Bev Cans, in terms of the Food and Specialty business that you divided into Trivium, what's the capacity outlook look like in Europe? Have you seen much additional capacity come by or come on or have you seen, in general, what sort of utilization the markets running at?

Paul Coulson -- Chairman and Chief Executive Officer

It hasn't really change much there. It's a different structure to the Bev Can market, because you have different types of plants, gives much -- much greater number of smaller plants. So it operates in a very different way. But if your question is, have there been changes there, no is the answer to that.

Karl Griffith -- Guggenheim Partners -- Analyst

Okay. Thanks.

Operator

Thank you. And our next question comes from the line of Brian Lalli from Barclays. Please go ahead. Your line is open.

Brian Lalli -- Barclays -- Analyst

Hey guys, good afternoon. Just a couple of quick follow-ups from me. Maybe first and I was out of the office last week, so I apologize if I missed this, but on your pro forma capitalization, the $88 million reduction in lease obligations, is that just simply that's going with the assets. Is that correct?

Paul Coulson -- Chairman and Chief Executive Officer

That's correct.

Brian Lalli -- Barclays -- Analyst

Okay, great. And then my second one would just be obviously with the anticipated use of the proceeds, you know maybe you're a bit under levered on the secured layer, is that something that you would think about rebalancing going forward and maybe what's the right level of secured versus unsecured as you think about -- not just the HoldCo, but maybe also the 7 1/4 [Phonetic] of 24, which you know maybe the call price drops a bit in May of next year as you think about the maybe longer term refi?

Paul Coulson -- Chairman and Chief Executive Officer

Well, as I mentioned to an earlier question, we will review our capital structure and those bonds are one -- ones that's callable, clearly or one of the bonds that are callable. You're quite right. We've had a policy over the last three years when the delta between the cost of secured and unsecured debt was very small. We raised a lot of unsecured debt to leave ourselves with plenty of spare capacity, and we do have quite a large amount of spare capacity on the secured side. And that's something we look at transaction by transaction. I expect that we would actually seek to use more secured capacity, but still seek to have some -- use rates on debt on the unsecured markets. We certainly saw last week in the Trivium fundraising, where -- both in Europe and the US, very strong demand for packaging stuff like ours and packaging businesses, particularly in the metal and sustainable space. So we were -- we were very pleased with the demand and with the results that we had in the market last week.

Brian Lalli -- Barclays -- Analyst

That's great. And then one last quick follow-up for me. I appreciate that, you know, when you get there, you'll have a better answer on this. But when you think about the refinancing and starting to collapse the HoldCo into the OpCo, is the view still that you may need to do it in a couple step process given you may not have the capacity to deal with the full, you know basically $2 billion of debt that sits at ARD Fin and ARD Sec levels. Is that -- is that still the right way to think about it?

Paul Coulson -- Chairman and Chief Executive Officer

I think there are a number of options there. I mean, you could envisage a situation where you took it all out, it's more likely. I suspect that it will be taken out in part, but -- you know and -- but I think probably you'll see a refinancing of everything there. I don't think you'll see the [Indecipherable] left and the tacos [Phonetic] taken out, etc. But, you know, I don't want to be -- I don't want to speak prescriptive about that now. We haven't decided what to do. We haven't decided what to do. I mean, you know, a more likely scenario is that it's done in stages or part of it is refinanced on favorable terms. A lot of that depends on the markets that we find next year.

Brian Lalli -- Barclays -- Analyst

Sure, yeah, and I apologize. Maybe I should've been more clear. What I meant is that, you maybe still need to do -- and a new financing still at HoldCo box, because you can't bring all $2 billion back into the...

Paul Coulson -- Chairman and Chief Executive Officer

Oh yeah. Yeah. Absolutely. Sorry. Yeah. We're certainly not planning that. The $2 billion refinancing at the OpCo to be dividends of HolCo. No, we're not planning on that. Sorry, I misunderstood you.

Brian Lalli -- Barclays -- Analyst

Okay. Right. So you could look to refinance all of it again, a portion which could come from the operating company, you know refinancing plus dividend and then maybe some additional new ARD Fin notes or something along the line.

Paul Coulson -- Chairman and Chief Executive Officer

There are many, many, many ways of getting that particular cash.

Brian Lalli -- Barclays -- Analyst

Sure. All right, Paul. Thank you very much. Appreciate the time.

Paul Coulson -- Chairman and Chief Executive Officer

Thank you.

Operator

Thank you. Our next question comes from the line of Kyle White from Deutsche Bank. Please go ahead. Your line is open.

Kyle White -- Deutsche Bank -- Analyst

Hi. Thanks for taking my follow-up. Just one question. In Glass Packaging North America, the unfavorable volume mix of 8%, could you just pass that out, how much was volume versus mix? And then more importantly, was this primarily market related or was any of it driven kind of by the recent capacity closures and maybe walking away from some lower margin business?

Paul Coulson -- Chairman and Chief Executive Officer

No, that was -- the market bascially has moved more or less in time -- back from the date that we see over the past year. We've actually gained slightly on the -- in terms of market share versus the rest of the US industry. Trading imports have been having adverse effect on the industry itself. And in terms of that level of decline, that was principally volume, but you know, quarter-to-quarter it can move around. You know in the previous quarter, it has been fairly modest. And I think if you look at the revenue line, the decline is close to 5%.

Kyle White -- Deutsche Bank -- Analyst

Okay. Thank you.

Operator

Thank you. And since we have no more questions registered, I now hand back to our speakers for any closing comments.

Paul Coulson -- Chairman and Chief Executive Officer

Well, thank you everyone for joining us today and thank you for your support, and we look forward to talking to you when we present our Q3 results. Thank you very much indeed.

Operator

[Operator Closing Remarks]

Duration: 41 minutes

Call participants:

Paul Coulson -- Chairman and Chief Executive Officer

David Matthews -- Chief Financial Officer

John Sheehan -- Corporate Development and Investor Relations Director.

Tyler Langton -- JP Morgan -- Analyst

Kyle White -- Deutsche Bank -- Analyst

Anojja Shah -- BMO Capital Markets -- Analyst

Roger Spitz -- Bank of America Securities -- Analyst

Travis Edwards -- Goldman Sachs -- Analyst

Arun Viswanathan -- RBC Capital Markets -- Analyst

Karl Griffith -- Guggenheim Partners -- Analyst

Brian Lalli -- Barclays -- Analyst

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