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Ardagh Group S.A. (ARD)
Q3Â 2019 Earnings Call
Oct 31, 2019, 11:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Unidentified Speaker
(Starts Abruptly) show our food and specialty division as classified, as a discontinued operation within the group's results. This follows our announcement last July. But the food and specialty business would be combined with Exal to form Trivium Packaging. And I'm pleased to say that the Trivium transaction completed earlier today. We will talk about that a little later in the call.
Looking to our results for the quarter. We delivered a strong performance, highlights of which are revenue of $2.4 billion, in line with the same period last year and a constant currency growth of 3% in continuing operations. Adjusted EBITDA of $424 million, an increase by 6% compared to the same period last year and slightly ahead of our guidance. Adjusted EBITDA from continuing operations increased by 9% at constant currency.
Adjusted EBITDA margin from continuing operations of 18.5% in the quarter and of 17.7% in the year to date. Three of our four divisions, as well as our discontinued operation recorded constant currency growth and adjusted EBITDA for the quarter. Glass North America continued to stabilize with adjusted EBITDA growth achieved despite ongoing volume softness and this follows the actions that we've taken over the past two years. Adjusted free cash flow for the group was $244 million in the year to date, an increase of 16% on the prior year.
Adjusted earnings per share of $0.60 for the quarter, an increase of 15% on the same period last year and including the impact of lower depreciation charges arising from the Trivium transaction. We ended the quarter with cash and available liquidity of $1.1 billion and that's before the $2.5 billion cash inflow today from the Trivium transaction. Demand for our sustainable packaging products is very strong. We've increased our guidance for the full year with respect to continuing operations to reflect the stronger than expected third quarter return.
So if I turn to reviewing segmental performance for the quarter and my comments here will be focused on constant currency results. Glass Europe performed well in the third quarter, as the strong operating performance combined with our diversified business mix and healthy market dynamics more than offsets some weather related softness in beer markets. Revenue of $414 million increased by 4% compared to the same period last year, with good growth in the food business and increased activity in our engineering business.
Adjusted EBITDA increased by 11% to $108 million in the quarter, compared to the same period in 2018. This growth primarily reflected an improved mix, the strong operating and price cost performance and the impact of IFRS 16. The outlook for Glass in Europe remains very positive. Consumers trust and appreciate the purity and infinite recyclability of the product. While our customers are attracted by stability to deliver their premiumization and sustainability objectives. We have a diversified business across Europe with a proven record of sustainability, quality and innovation and have seen a strong and growing emphasis on partnering with our customers on a long-term contracted basis.
Market fundamentals are attractive, our inventories are low and our capacity for 2020 is at this point in time virtually all sold. Our glass business in North America continued to stabilize in the third quarter in what remains a challenging market, this result reflects the decisive actions we've taken over the past two years. Revenue of $438 million, increased by 1% compared with last year with a 1% decline in volume mix in the quarter. This was offset by the pass through of increased costs.
Beer end markets remained soft, partly offset by growth in wines and spirits. The capacity adjustments to rightsize our footprint combined with initiatives to optimize our cost base since 2017 have enabled us to better manage softer industry demand and our third quarter adjusted EBITDA increased by 15% to $77 million, including IFRS 16 effects.
It is now little over a year since the initial imposition in the US of tariffs on Chinese glass imports. Since then, we've seen some moderation in imports from the peak levels, so they remained high by historic standards. We previously outlined the initiatives we've undertaken to strengthen our business, including capacity reduction, targeted investment, end market repositioning and enhancing labor flexibility. And in parallel with these actions, we and others recently filed an anti-dumping petition against imports of Chinese glass containers. This petition is currently before the International Trade Commission and the US Department of Commerce in Washington.
As a producer of US made glass containers employing approximately 5,000 colleagues in high quality roles, we're keen to see action taken against what we view as uneconomic and effectively subsidized dumping of product into the US market. Given a level playing field and the various internal improvements, which we are making. We believe that the US Glass business has a promising and profitable future. It is a scale business producing a premium, sustainable and infinitely recyclable products which enjoys a food safe advantage over most of our substrates.
If I turn to our beverage can businesses, unit volumes shipped in the third quarter, increased percent by -- increased, sorry, by 7% in aggregate, with strong demand in both regions. In Europe, revenue was $412 million, this increased by 4% compared with last year with volumes up 3%. Adjusted EBITDA of $68 million declined by 6% at constant currency. Reflecting the continuing impact of less than full recovery of input costs. Year-to-date volume shipped in Europe is also up 3% and market demand remains healthy with our available capacity for the year ahead, virtually also. We remain well placed to capitalize on this growth, given our specialty footprint, which has been augmented by targeted investments as well as an improving cost base.
In the Americas, metal beverage packaging markets remain strong and our end market focus leaves us attractively positioned. Revenue increased by 5% to $460 million -- $464 million in the quarter, volume mix growth in the quarter was 11% with strong gains made in both North America and Brazil. These gains were partly offset by the pass through of lower input costs. Business mix remained positive in both markets and highlight to a strong operating performance contributed to adjusted EBITDA growth of 18% to $67 million in the quarter.
Since the completion of the beverage can business, the acquisition of the business in 2016, the Americas business has made significant progress. Operating performance has been strong and targeted investments in our plant network, including the completion of our new ends plant in Manaus in Brazil in mid 2018 have enhanced an already strong footprint. In addition, we have considerably diversified our customer base and business mix, we are entering into better performing categories while remaining focused on achieving value for all our products.
We view prospects for continued growth through favorable end market exposure, ongoing packs mix shifts and gradual sustainability driven conversion from other substrates is attractive. In both North America and Brazil are available capacity is fully sold for the remainder of this year and for 2020. Demand is strong.
Finally, our food and specialty business, which as I noted earlier, is now classified as the discontinued operation recorded third quarter revenues of $649 million, a reduction of 2% from the prior year. This resulted from a second successive weak harvest in Europe, which more than offset volume growth in other areas, as well as a delayed Food Pack in North America. In response, timely cost reduction initiatives across the business, as well as the impact of IFRS 16 led to adjusted EBITDA growth of 6% to $104 million in the quarter.
The dynamics of the European markets remain attractive, despite recent disappointing harvests in 2018 and 2019. Demand is stable, while there is also attractive growth -- but there are also attractive growth opportunities in areas such as pet food and nutrition. A broad and well invested footprint combined with a continued focus on efficiency and cost recovery will benefit future performance.
In North American food and specialty, we have the industry's best invested asset base, following significant capital expenditure in the 2013 to 2015 period. It remains well placed to continue the strong progress made in recent years through a highly competitive cost base and a superior product offering.
And as with Glass, food and specialty is sole focus on infinitely recyclable metal packaging position it well to benefit from heightened consumer awareness and resulting brand owner engagement.
If I could a few words about Trivium. The transaction closed today, following which Ardagh will hold a stake of approximately 43% in the business with Ontario Teachers, our partners in the joint venture hold controlling the balance of 57%. Trivium is a scale player in metal packaging with over 50 production facilities worldwide. They are principally located in Europe and the Americas and generating pro forma annual revenues of approximately $2.7 billion. Trivium holes leading positions in substantially all the main markets it serves and enjoys a strong reputation for innovation, service and quality.
And we look forward to working with Ontario Teachers in supporting Trivium and its management team led by Michael and Matt to achieve its growth and development potential in the years ahead. Ardagh also received cash proceeds today of $2.5 billion, which we will use for debt repayment. We've today issued redemption notices related to this $2.5 billion and use of proceeds. And this is in line with what we set out in July. And the debt repayment will reduce year end 2019 leverage to approximately 4.5 times adjusted EBITDA pro forma the divestment of food and specialty. So that's 4.5 times adjusted EBITDA at Ardagh pro forma for the divestment of food and specialty to Trivium.
In terms of financing. We took advantage of a favorable market in August to refinance $1.65 billion senior notes due in 2024 and we obtained significant interest cost savings and extension of maturities to 2026. We now have no debt maturities arising in Ardagh before September '22 -- 2022. This refinancing and in conjunction with the use of the Trivium proceeds to repay debt will reduce our annual cash interest cost by approximately $180 million and this will further underpinned free cash flow generation.
So, as we look to the future, we remain focused on working with our customers to meet their evolving needs for sustainable metal and glass packaging, while at all times trying to ensure that we derive appropriate value for our products. We've increased our full year 2019 outlook to reflect performance in the first three quarters and which were partly offset by a slightly increased currency headwinds since our last update.
Our revised guidance is now as follows. We expect adjusted EBITDA of $1.16 billion to $1.18 billion pro forma for the divestment of food and specialty. And this compares to previous guidance of at least $1.15 billion. We expect earnings per share of between $1.65 and $1.75 per share, and this will include, of course, the benefit of food and specialty to its end October divestment.
Net leverage, as I said earlier, of approximately 4.5 times adjusted EBITDA is expected at the end of December 2019, again, pro forma for the divestment of food and specialty and the receipt of the funds relation to that transaction.
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
[Operator Instructions] The first question is from the line of Anthony Pettinari from Citi. Please go ahead, your line is now open.
Randy Troche -- Citygroup -- Analyst
Good morning, guys. This is actually Randy sitting in for Anthony. I just wanted to focus on Glass Packaging in North America. You guys showed year-over-year improvement, while some of your competitors have struggled in the region. Can you just talk about current supply, demand dynamics in the region for Ardagh specifically. And then the industry more broadly? Thank you.
Paul R. Coulson -- Chairman and Chief Executive Officer
Well, as I said in my remarks, Randy, the market is soft in Glass North America, but we did anticipate this and took steps for the last couple of years to reduce capacity and to right size our capacity and we're comfortable where we sit now. Pricing is weak-ish, there's too much capacity. And if you ask me, what the industry should be doing. I believe there is overcapacity there that the rest of the industry needs to do something about. We've done what we going to do, we're comfortable where we fit, but I think others will have to assess the situation and take out capacity.
Randy Troche -- Citygroup -- Analyst
Got you. Understood. And then with all the cost cutting you've done in North American Glass this year and the capital you've put in through automation and your other various projects. How should we think about step up in earnings in 2020 in that business, independent of any volume changes? Thank you.
Paul R. Coulson -- Chairman and Chief Executive Officer
I think one should assume improvement, but I think as with all businesses that are stabilizing and working and operating in soft markets. I wouldn't be anticipating massive increases.
Randy Troche -- Citygroup -- Analyst
Okay. That's helpful. I'll turn it over. Thank you.
Operator
Next question is from Jeff Edwards from Goldman Sachs. Please go ahead, your line is now open.
Travis Arffa -- Goldman Sachs -- Analyst
Hey, this is Travis for Edwards. Just a quick question on fundamentals. I know last quarter you talked a little bit about how you're thinking about capacity expansion on the Bev Can side. I know that industry peers announcing more capacity expansion. I was just wondering if you've revised, so how you're thinking about potentially bringing on new capacity as some of your volumes are constrained?
Paul R. Coulson -- Chairman and Chief Executive Officer
Well, I think, obviously, along with the rest of the industry we're experiencing very strong demand for our products. And as I said earlier, we have purchased no capacity to allocate to anyone in any of the regions we're operating and we are looking at some interesting possibilities with customers. As I think I've said previously, we're likely to make such investments on the back of agreements with customers, so we won't be building any new plants, but we will probably be adding selectively across our footprint in due course.
We are looking now at our plans for the next three years, we're looking at our budget. So I think when we come back to talk again in February we'll be able to give a little bit more guidance on that, but we are looking positively at situations which will give us appropriate returns and look after our customer demand.
Travis Arffa -- Goldman Sachs -- Analyst
Got it. Thanks. That's helpful. And then a question on the balance sheet. Now this comes up in most calls, but with -- as you think about the timing of the HoldCo refinancing, it looks like, again, that's going to be more 2020 timeframe, but are there any sort of benchmarks or thresholds that you're looking to hit ahead of that transactions, such as an overall Opco leverage target or maybe a specific stock price or you just looking at broader market conditions ahead of that?
Paul R. Coulson -- Chairman and Chief Executive Officer
Well, look, I think broad market conditions are very important in this regard and we -- we assess our financing situation and the markets on a very regular basis, and I don't think we're waiting for any particular stock price. I mean, I think we would see in terms of guidance on the Opco I think going forward, we expect to keep the Opco leverage. I mentioned, it will be at the end of this year, somewhere around 4.5 times pro forma and we would expect that to keep that in the range of 4 to 4.5 going -- 4.5 times -- 4 times to 4.5 times EBITDA going forward.
You mentioned the HoldCo in 2020, that could come sooner if we we see good market conditions. So we haven't made any firm decisions or final decisions on that yet, but we are always looking and certainly the markets at the moment are seems to be in good shape and our debt is performing well.
Travis Arffa -- Goldman Sachs -- Analyst
Awesome. I really appreciate the color. I'll turn it over.
Operator
Next question is from Roger Spitz from Bank of America. Please go ahead, your line is open.
Roger Spitz -- Bank of America Merrill Lynch -- Analyst
Hi. Thanks very much. At September 30, 2019 how much was outstanding on your off-balance sheet securitization facility? And how much of that is related to the food and specialty packaging that was transferred to Trivium Packaging.
Paul R. Coulson -- Chairman and Chief Executive Officer
Yeah. Hi, Roger. It's just over $600 million at the end of September, which is broadly similar to the end of June and just over $150 million will be traveling to Trivium.
Roger Spitz -- Bank of America Merrill Lynch -- Analyst
Thank you. And I think of the $333 million capital leases of September 2019, how much will get shifted over to Trivium. I think previously you said around high '80s or something like that.
Paul R. Coulson -- Chairman and Chief Executive Officer
That's about right, that will travel also to Trivium.
Roger Spitz -- Bank of America Merrill Lynch -- Analyst
Okay. And the other thing is, you typically give forward -- one quarter forward EBITDA and free cash flow. I wonder if you might give us what your Q4 EBITDA guidance might be pro forma or with including food and specialty? And what your 2019 free cash flow would be, presumably that would be with 10 months of food and specialty.
David Matthews -- Chief Financial Officer
Yeah. I think the easiest thing to do is to give guidance on the continuing operations, Because clearly Trivium will drop away from this point forward. I think if you look at Q4, the guidance, if you look at the range for the full year, it comes out about $250 million to $275 million and that compares to the constant currency last year of $247 million and that's all continuing operations. In terms of free cash flow, what we said on the last call for continuing operations is about $350 million. And clearly, that will improve as we go forward into next as a result of the refinancing that Paul mentioned earlier on, but around $350 million free cash flow from continuing operations for '19 is probably a good number to be working on at this point in time.
Roger Spitz -- Bank of America Merrill Lynch -- Analyst
And just to be clear, that is before sort of the $90 million of quick payback --
David Matthews -- Chief Financial Officer
That's correct, that's correct. It will be a little lower than that, because some of the short payback CapEx related to the discontinued operations. So 75-ish of the short payback CapEx relates to continuing operations.
Debbie Jones -- Deutsche Bank -- Analyst
Thank you very much.
Operator
And next question is from Anojja Shah from BMO Capital Markets. Please go ahead, your line is now open.
Anojja Shah -- BMO Capital Markets -- Analyst
Hi, good morning.
Paul R. Coulson -- Chairman and Chief Executive Officer
Good morning.
Anojja Shah -- BMO Capital Markets -- Analyst
You had -- Good morning. You had some impressive beverage can growth in North America, that 11% volume mix growth. Can you unpack that a little bit? How much is mix or the shift toward specialty cans? How much is just increased volumes? Any details you can give us there would be great.
Paul R. Coulson -- Chairman and Chief Executive Officer
Yeah. In the quarter it was -- both regions were strong. What we saw was that, we were high-single digit in North America, we were significantly higher than that in South America. And across both standard and specialty it was very healthy.
Anojja Shah -- BMO Capital Markets -- Analyst
Okay. Thank you. And then on the quick payback projects, did you have any contribution built in for 2019? And if so, how much? And then also 2020 EBITDA contribution?
Paul R. Coulson -- Chairman and Chief Executive Officer
There will be some contribution coming through. Just to remind everybody what we've done, we spent about $60 million last year, we are spending about $90 million this year. That's coming through during the course of this year. So once we get to 2020, the full benefits will start to come through from these various projects which are sort of around three years payback period.
Anojja Shah -- BMO Capital Markets -- Analyst
And can you identify an EBITDA contribution amount or no?
Paul R. Coulson -- Chairman and Chief Executive Officer
Well, it's about three years, so once we get into 2020 it will be roughly sort of $40 odd million of continuing operations, because clearly some of the short payback spend has also been in the food and specialty business which will clearly travel to Trivium and Trivium will get the benefits of that short payback CapEx spend.
Anojja Shah -- BMO Capital Markets -- Analyst
Got it. Okay. Thank you very much.
Operator
Next question is from Debbie Jones from Deutsche Bank. Please go ahead, your line is now open.
Debbie Jones -- Deutsche Bank -- Analyst
Hi. Good morning. My first question is, you are one of the few companies that can look at both metal and glass and have a conversation with your customers about what's going to help them hit their sustainability goals. And I'm wondering if you could just give us some color on kind of the glass market. Are you having those conversations with your customers? Because it's clearly helping in metal and I think for investors is a little less -- they can't really see if that's something that's going to help them meet these goals essentially.
Paul R. Coulson -- Chairman and Chief Executive Officer
Well, obviously, Debbie, we are almost unique, in that we have the two in our stable. We are -- yes, there are discussions. I think it's fair to say these discussions are intensifying both in beverage cans and in glass. I think you probably see beverage cans benefit from this sustainability tailwind before glass, although it will also come in glass twoo. I mean, obviously, capacity in European glass industry is extremely tight. Anyway, not just for sustainability reasons, but because you've had a number of the bigger customers moving forward with premiumization campaigns on glass is seen as a way of doing. And we've also seen very strong demand from glass customers and people who are already using glass as substrate in Europe with a huge awareness -- a much, more stronger awareness among our customer base of the importance of the supply chain and the supply base in glass and looking for longer contracts to make sure that they have capacity available to them to support their brands as they go forward.
I think there hasn't been a wholesale conversion yet, but you're seeing both in glass and in Metal, obviously, as you can see from our peers as well, the effects of sustainability tailwinds coming there, we haven't yet seen mass conversions, but we are seeing a lot of new products launched in in metal and some of glass as well. I think it will come probably slightly later in glass than in metal, but that's not to say that glass won't have an important role in the sustainability and we are quite comfortable where we sit, having the two of them and in our stable.
Debbie Jones -- Deutsche Bank -- Analyst
Okay. Thank you. And my second question. You talked about a lot of different things that could potentially be opportunities for you to invest in the coming years, just given the growth that you're seeing. I'm curious if we were to just isolate your footprint in Latin America, is that something that you're happy with at this point or is that also on the table in terms of potentially getting bigger in that region?
Paul R. Coulson -- Chairman and Chief Executive Officer
Well, I -- we are delighted with our business in Brazil, and our team there has done a fantastic job. I was there two weeks ago with my colleagues visiting and we have a terrific operation down there, which is growing very well. The market dynamics down there are very good, given one of the big customers is moving away from returnable glass bottles to beverage cans. So you've got very strong demand features down there. And we are well placed with the three plants we have there. The Manaus plant is already too small, the end plant. And we're going to have to look at some expansion there.
I think we're probably more likely to want to invest in Brazil than further deals in Latin America, quite frankly. I think the focus of additional investment in our Bev Can will be in the US and in Brazil and in Europe. And we're evaluating the different opportunities that we have at the moment. And as I said earlier in the call, we'll come back to you guys in the New Year when we've completed our budgets and strategic plans.
Debbie Jones -- Deutsche Bank -- Analyst
Okay. Thank you. I appreciate the comments.
Operator
Next question is from Karl Griffith from Guggenheim Partners. Please go ahead, your line is now open.
Karl Griffith -- Guggenheim Partners -- Analyst
Hi. Thanks for the presentation. And what's currently the pro forma LTM adjusted EBITDA for the continuing operations? And of that number what is the impact from IFRS 16?
David Matthews -- Chief Financial Officer
The LTM at the end of September is about $11.75 million and IFRS 16 in the nine month is about $6 million. That's clearly the full year of that, because IFRS 16 is being from 1 of January. So putting in the full year of IFRS 16 is by $80 million.
Karl Griffith -- Guggenheim Partners -- Analyst
$80 million. Okay. Perfect. Thanks.
Operator
And next question is from Brian Maguire from Goldman Sachs. Please go ahead, your line is now open.
Arthur Almeida -- Goldman Sachs -- Analyst
Good morning, it's actually Arthur Almeida on for Brian. Thanks for taking my question. I was wondering if you guys could provide just a little bit more detail on the Bev Can expansion that you guys are planning? More specifically, since it won't be coming from new facilities, are you more likely would do it through speedups or adding to existing facilities and what kind of incremental capacity are you seeing in each region? Thank you.
Paul R. Coulson -- Chairman and Chief Executive Officer
Well, as I said when I was answering Debbie, Arthur we're looking at various things at the moment within our existing regions. Things like speedups are an obvious and very efficient way of increasing capacity and getting good return. Clearly, our focus in the regions and in the regions where we operate at the moment will be on making sure that we get very good returns on any investment which we make. And that is designed to support customers and it's backed up by appropriate commercial and contractual ratings with customers, but we haven't yet -- we are -- we'll come back to that in -- early in the New Year when we've completed our budget process, but we are looking at various interesting projects. Yes. But they will be within our existing facilities.
Arthur Almeida -- Goldman Sachs -- Analyst
So no specific number?
Paul R. Coulson -- Chairman and Chief Executive Officer
No.
Arthur Almeida -- Goldman Sachs -- Analyst
Okay. Then just moving on to the contracts in that business. Now that the food business has been taken away from the metal packaging side of things. How does it look relative to the legacy segments in terms of pass-through timing and inclusion of non-metal expenses in those pass-throughs? Is it different, and in what way?
David Matthews -- Chief Financial Officer
I think in Europe, it's probably more favorable. The buyers of the business in beverage will be more tilted toward longer-term contracts and multi-year, whereas in food, it would be roughly 50-50. But the pass through their on an annual basis has generally worked well, also it's an annual negotiation that you have in North America.
All of our businesses have always had very clean and quick and efficient pass-throughs and we have been adjusting some of our arrangements with customers over the past year to move from inappropriate PPI type interstate that were constructed to more actively match match the cost of the product. So we've had some encouraging focus there and we feel reasonably good about that.
Arthur Almeida -- Goldman Sachs -- Analyst
Thanks. And I'll turn it over.
Operator
And next question is from Arun Viswanathan from RBC Capital Markets. Please go ahead, your line is now open.
Arun Viswanathan -- RBC Capital Markets -- Analyst
Sorry about that guys. Good morning.
Paul R. Coulson -- Chairman and Chief Executive Officer
Good morning.
Arun Viswanathan -- RBC Capital Markets -- Analyst
Good morning. I was curious -- so if you look at the Glass business, obviously, you've gone through some -- changing end market dynamics with weakness in mass beer. Is that you're most profitable part of the glass business and most cash generative? I'm just curious, because if the declines continue, would that continue to affect your EBITDA and cash flow generation? Thanks.
David Matthews -- Chief Financial Officer
No I think -- Look, I think it's about balancing the business in the different sectors and depending on the plants and the machine lines you have, et cetera. Configuration is different for different aspects of the business. Yes, the beer market has been weak, but there -- we, as I said at the outset, we believe that we are well positioned now with our footprint to deal with the softer market as it is. And so, we're comfortable that. So I don't -- we're not concerned in relation to seeing a drop off in EBITDA if there is further weakness in beer. I think there's other sectors there where we have getting some growth. We've seen a reduction and thankfully in Chinese imports as I said earlier. I hope that further tariffs are imposed as a result of the actions we and others in the industry have taken with the ITC in Washington. And following that, I hope that will also lead to improved volume through reduced imports.
But we'll see. I mean, I think it's more about being balanced and having the right portfolio of plans and the right footprint to deal with the smaller market that we find ourselves in from previously.
Paul R. Coulson -- Chairman and Chief Executive Officer
The market [Indecipherable] about a fifth of what we do in North america [Indecipherable] we have pivoted away in parts over the past few years. And in terms of capacity, we have taken out probably 20% of our mass beer capacity over the past couple of years. So that has been very positive
Arun Viswanathan -- RBC Capital Markets -- Analyst
All right. That's helpful. So just on the metal side, there has been some capacity additions that have been announced by some of your peers. I guess how are you viewing your footprint, both in North America and Europe and maybe even Latin America? Do you see the need to build any greenfield plants or are there brownfield opportunities, or are you comfortable with your footprint as it stands? Thanks.
Paul R. Coulson -- Chairman and Chief Executive Officer
We -- as I said earlier, we see opportunities in growing capacity, selectively in some of our existing plants in all three regions, in all three areas. But we do not see any greenfield plants. No. And we don't -- we don't see also any likely development outside of the regions in which we operate for the moment. But we see good opportunities within the US, Brazil, and Europe.
Arun Viswanathan -- RBC Capital Markets -- Analyst
Thanks.
Operator
[Operator Instruction] Next question is from Roger Spitz from Bank of America. Please go ahead, your line is open.
Roger Spitz -- Bank of America Merrill Lynch -- Analyst
Thanks for the follow-up. Starting with the pro forma guidance, midpoint $1,170 million and down to the $350 million free cash flow. Can you provide the base CapEx, cash interest, cash taxes, working capital, restructuring or other items that might go in between those two numbers?
David Matthews -- Chief Financial Officer
Yeah. I can do that. I think this is continuing operations starting at $1,170 million, CapEx around $420 million, interest including the benefits of the funds coming in from Trivium, that would be about $310 million, tax around $80 million and then the working capital inflow, which will be broadly offset by the capital amount that you have to pay out on the leases have changed the result of IFRS 16. So that comes to just slightly north of $350 million.
Roger Spitz -- Bank of America Merrill Lynch -- Analyst
Perfect. And should we think of 2020 CapEx in the same for '20 or is that -- should we think of a different number there?
David Matthews -- Chief Financial Officer
Well, I think we're going to come back and update you in February, as Paul has said couple of times on this call. We're looking at some very interesting opportunities, investment opportunity. So we will come back and update you in February with a sort of core level of maintenance CapEx and how we see investment CapEx sitting on top of that, backed by the customer contracts and very good returns.
Roger Spitz -- Bank of America Merrill Lynch -- Analyst
Okay. In terms of -- I just wanted to clarify one thing you said earlier, when you said the HoldCo refi could come before 2020, maybe that was said or I didn't hear correctly, do you mean, historically is before fall of 2020, did you mean before fall 2020 or could it actually happen November, December 2019?
Paul R. Coulson -- Chairman and Chief Executive Officer
I think we're watching -- we review the markets all the time. And I was asked specifically, will it be 2020? It could still be 2020, but it could be sooner. We haven't made any firm decisions on that. Markets are attractive as we see them at the moment. So we are certainly having completed the Trivium transaction today assessing our options. But as I say, no firm decisions yet, but we're certainly seen some attractive ideas put to us. And we -- it's possible we could look to deal with the HoldCo sooner rather than later.
Unidentified Speaker
Got it. Lastly, in North American beer, do you think you gained share in the segment, mainly because of the others lost more than you?
David Matthews -- Chief Financial Officer
I don't think, particularly we have a reasonable representation in the glass market, but the general bear market has been down. I think pivoting some of our volumes away and basically taking a capacity that's worked in our favor rather than the share gain.
Roger Spitz -- Bank of America Merrill Lynch -- Analyst
Thank you very much.
Operator
Next question is from Kevin Beckett from Double Capital. Please go ahead, your line is open.
Kevin Becker -- DoubleLine Capital -- Analyst
Hi. Thanks for the time. In terms of the cost inflation you're seeing out of Europe and metal bev can. What are the main buckets of that? And are you seeing those trends within food and specialty?
Paul R. Coulson -- Chairman and Chief Executive Officer
What we were referring to there, principally was a couple of years ago we had a number of contracts that were up for renewal and there was a new capacity coming into the market at the time. So the recovery provisions that we have in a number of those contract wouldn't be as good as we might like. So we've had that for the past couple of quarters, it's probably with us for another couple as well. And it relate to non-metals, so things like labor, energy, things like that. And it's been in the beverage side, principally.
Kevin Becker -- DoubleLine Capital -- Analyst
And are you seeing the same trends within the food and specialty segment?
Paul R. Coulson -- Chairman and Chief Executive Officer
No, there is more of an annual, as I said earlier, that business has 50-50 between annual. So the reset happens more frequently and it hasn't been at the same challenge. It's related to specific circumstances there, but that's 2 years, 2.5 years ago.
Kevin Becker -- DoubleLine Capital -- Analyst
Excellent. Thank you so much.
Operator
Our next question is from Amelia Avalon from [Indecipherable] Capital. Please go ahead, your line is now open.
Unidentified Participant
Yes. Hi. Actually my question was also around the sort of the weaker profitability. So in metal Europe. So you're saying it's like cost that haven't -- I didn't quite get the answer. Sorry. If you can...
David Matthews -- Chief Financial Officer
Yeah. It's non full recovery of certain non-metal costs, volumes in the business have been good, you've seen there. They over 3% in the quarter and in the year to date. So the market is healthy, but we just have to cycle through few of that contract going back then, but the fundamentals of that market demand are very healthy.
Unidentified Participant
And when -- are those contracts due for renegotiation?
David Matthews -- Chief Financial Officer
Well, it should roll off over the next few quarters.
Kevin Becker -- DoubleLine Capital -- Analyst
Okay. So you expect another couple of quarters of weakening.
David Matthews -- Chief Financial Officer
I think that's reasonable. Yes.
Unidentified Participant
Okay. Thank you.
Operator
And there are currently no further questions registered. So I'll hand the call back to the speakers. Please go ahead.
John Sheehan -- Corporate Development and Investor Relations Director.
Well, thank you very much everyone for joining us today. And we look forward to talking to you in the New Year when we present our annual results. Thank you very much indeed.
Operator
This now concludes the conference call. Thank you all for attending. You may now disconnect your lines.
Duration: 42 minutes
Call participants:
Unidentified Speaker
Paul R. Coulson -- Chairman and Chief Executive Officer
David Matthews -- Chief Financial Officer
John Sheehan -- Corporate Development and Investor Relations Director.
Randy Troche -- Citygroup -- Analyst
Travis Arffa -- Goldman Sachs -- Analyst
Roger Spitz -- Bank of America Merrill Lynch -- Analyst
Debbie Jones -- Deutsche Bank -- Analyst
Anojja Shah -- BMO Capital Markets -- Analyst
Karl Griffith -- Guggenheim Partners -- Analyst
Arthur Almeida -- Goldman Sachs -- Analyst
Arun Viswanathan -- RBC Capital Markets -- Analyst
Kevin Becker -- DoubleLine Capital -- Analyst
Unidentified Participant
