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Silgan Holdings Inc (NASDAQ:SLGN)
Q3 2020 Earnings Call
Oct 21, 2020, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Thank you for joining the Silgan Holdings Third Quarter 2020 Earnings Results Conference Call. [Operator Instructions]

At this time, I would like to turn the call over to Kim Ulmer, Vice President, Finance and Treasurer. Please go ahead.

Kimberly I. Ulmer -- Vice President, Finance and Treasurer

Thank you. Joining me from the company today, I have Tony Allott, Chairman and CEO; Adam Greenlee, President and COO; and Bob Lewis, EVP and CFO.

Before we begin the call today, we would like to make it clear that certain statements made today on this conference call may be forward-looking statements. These forward-looking statements are made based upon management's expectations and beliefs concerning future events impacting the company, and therefore involve a number of uncertainties and risks, including but not limited to those described in the company's Annual Report on Form 10-K for 2019 and other filings with the SEC. Therefore, the actual results of operations or financial condition of the company could differ materially from those expressed or implied in the forward-looking statements.

With that, I'll turn it over to Tony.

Anthony J. Allott -- Chairman of the Board and Chief Executive Officer

Thanks, Kim. Welcome everyone to our third quarter 2020 earnings conference call. Our agenda for this morning will focus on the financial performance for the third quarter, and then to review the outlook for the remainder of the year. After those remarks, Bob, Adam and I will be pleased to answer any questions you might have.

As you saw in the press release, we delivered record adjusted earnings per diluted share of $1.04 for the third quarter, a 37% increase versus the prior year record results. This exceptional performance was a direct result of continued strong demand for our products across our business segments and the success of the entire Silgan team to meet these demands in a very challenging environment.

Since the beginning of this pandemic, our employees have continued working extended hours, followed rigorous safety protocols, and ensured supply of essential products to consumers all over the world. Through these efforts, we've had an excellent opportunity to showcase to our customers just exactly why they do business with Silgan.

During the quarter, our metal food container business benefited from 17% growth in unit volumes, primarily as a result of the increased at home food consumption and growing consumer awareness of the value and benefits of canned foods, as well as the shift in timing of certain pack related volumes from the front half of the year to the third quarter.

We were pleased to see the strong demand continue even though restaurant activity picked up over the summer, supporting the idea of the new consumers are discovering these products and our customers are reenergized in marketing and promoting them.

Our closures business had great demand across most of our product range, but particularly for dispensing systems, where demand for surface cleaners, pumps, and foamers drove a 22% increase in these products. This continued strong demand was partly offset by continued weaker demand for certain beauty products which as expected resulted in the recently acquired dispensing operations from Albea Group having a neutral impact on earnings per share in the quarter.

Our plastics business continued to demonstrate its market leading service model driving further volume growth of 14% and nearly doubling segment income versus the third quarter of 2019. This growth has been driven by strength in certain food and hygiene markets as well as continued success in securing new customer awards in light of our strong operational performance.

We expect market demand levels to remain strong and our operating teams continue to deliver on behalf of our customers, leading us to once again increase our outlook for adjusted earnings per share for 2020 from $2.70 to $2.85 to a range of $2.92 to $2.97, which at the mid-point represents a 36% increase versus the prior year and a 10-year compounded annual growth rate of earnings of over 10%. Finally, given our and our customers' view that the stronger demand levels are holding. We expect overall performance for the company to remain strong at the strong level in 2021.

With that, I'll now turn it over to Bob to review the financial results in more detail and provide additional explanation around our earnings estimates for 2020.

Robert B. Lewis -- Executive Vice President and Chief Financial Officer

Thank you, Tony. Good morning, everyone. As Tony highlighted, we delivered an exceptionally strong quarter across the board including new all-time volume records, outstanding operating performance, and the ongoing integration of two acquisitions leading to record income in each of our businesses. As a result, we delivered adjusted earnings per diluted share for the quarter of $1.04 outpacing expectations and 37% better than the prior year.

On a consolidated basis, net sales for the third quarter of 2020 were $1.490 billion, an increase of $167.2 million or 12.7%, primarily due to record volumes in each business, partially offset by the pass through of lower raw material costs. Results for the third quarter of 2020 included $0.03 per diluted share for rationalization charges, and costs attributable to announced acquisitions. While 2019 included $0.03 per diluted share, attributable to the shutdown of two metal container facilities and a loss on early extinguishment of debt. Therefore, adjusted earnings per share was $1.04 in the third quarter of 2020 versus $0.76 in the third quarter of 2019.

Interest and other debt expense before the loss on early extinguishment of debt for the third quarter of 2020 increased a $1 million to $27.7 million, primarily due to higher average outstanding borrowings largely a result of the second quarter acquisition of the dispensing systems operations from Albea Group, partly offset by lower weighted average interest rate.

Capital expenditures for the third quarter of 2020 totaled $58.8 million compared to $50.6 million in the prior year quarter. Year-to-date capital expenditures totaled $165.2 million versus $166.8 million in the prior year. Additionally, we paid a quarterly dividend of $0.12 per share in September with a total cash cost of $13.3 million. On a year-to-date basis, cash dividends totaled $40.4 million.

We will now get into the specifics regarding the financial performance of each of the three businesses. The metal container business recorded net sales of $856.7 million for the third quarter of 2020, an increase of $34.4 million or 4.2% versus the prior year quarter. This increase was primarily the result of higher unit volumes of approximately 17% and favorable foreign currency of approximately $4 million, partially offset by the pass through of lower raw material costs and a higher percentage of smaller cans sold. A new all-time record in unit volumes in the quarter was primarily the result of the continued consumer demand for at home canned food consumption and the timing of certain pack related volumes that moved from the front half of the year into the third quarter.

Segment income in the metal container business was $94.5 million for the third quarter of 2020 versus $81.1 million in the same period a year ago. The increase in segment income was primarily due to higher unit volumes, strong operating performance, higher pension income, and lower rationalization costs, partially offset by the impact from the renewal of certain significant customer contracts at the end of 2019 and a higher percentage of smaller cans sold.

Net sales in the closures business increased to $121.7 million to $475.1 million for the quarter, primarily due to strong unit volume increases of approximately 10%, a more favorable mix of products sold as dispensing volumes grew by 22% in the legacy business, and favorable foreign currency translation of approximately $2 million, partially offset by the pass-through of lower raw material costs.

Unit volumes in the quarter increased primarily a result of the inclusion of the acquisition of Albea and Cobra Plastics and the continued strong demand for certain consumer health, hygiene, personal care, and food products. These gains were partially offset by weak demand for certain beauty products.

Segment income in the closures business for the third quarter of 2020 was an all-time record of $64.2 million, up $19.4 million versus the prior year quarter. This increase was primarily due to record unit volumes, including recent acquisitions, a more favorable mix of products sold, strong operating performance, and higher pension income.

Net sales in the plastic container business were $156.7 million for the third quarter of 2020, an increase of $11.1 million versus the prior year quarter. This increase was largely due to higher volumes of approximately 14%, partially offset by the pass through of lower raw material costs and a less favorable mix of products sold. The volume improvement was primarily due to higher demand for certain food and consumer health and hygiene products and continued new business awards.

Segment income increased $10.5 million to a record of $21.9 million for the third quarter of 2020. This increase was primarily attributable to higher volumes, strong operating performance, and lower manufacturing costs as well as higher pension income.

Turning now to our outlook for 2020, as is typical for the seasonally smaller fourth quarter, we are tightening our range of estimates to a range of $0.05. As a result and based on our year-to-date performance, continued strong demand, and a strong operating outlook for the remainder of the year, we are providing an estimate of adjusted net income per diluted share for 2020 in the range of $2.92 to $2.97, increase from the previous range of $2.70 to $2.85.

The mid-point of the revised range represents, a 36% year-over-year increase. This estimate excludes the impact from certain adjustments outlined in Table B of our press release. We're also providing a fourth quarter 2020 estimate of adjusted earnings in the range of $0.47 to $0.52 per diluted share, a 30% increase at the midpoint of the range as compared to adjusted net income per diluted share of $0.38 in the prior year. In addition, we continue to estimate free cash flow to be approximately $330 million for the year as we expect slightly higher capital expenditures and a modest increase in working capital to fuel future growth.

That concludes our prepared comments. So we can open it up for Q&A. And I'll turn it back to Emma so that she could provide directions for the Q&A session.

Questions and Answers:

Operator

Thank you. [Operator Instructions] We'll take our first question from Anthony Pettinari with Citi.

Bryan Burgmeier -- Citi -- Analyst

Hi. This is actually Bryan Burgmeier sitting in for Anthony. Is it possible to quantify the impact of the business wins on 3Q volume in plastics and to the extent to which you can comment, can you add any detail on the product lines or the margin profile of those wins?

Adam J. Greenlee -- President and Chief Operating Officer

Sure, Bryan. It's Adam. As we look at our plastics business, they have had a lot of success as we've discussed on previous calls with the new business awards. So some of that is playing out through the course of 2020, but I don't have a specific number for you. It is a portion of their volume. The reality is -- their volume increase, I should say, the reality is that we're seeing increased demand across the board. So I would say the higher volume related to the consumer products and the health and hygiene products that Bob outlined really are the majority of the volume increases we've seen in the quarter.

Bryan Burgmeier -- Citi -- Analyst

Got it.

Robert B. Lewis -- Executive Vice President and Chief Financial Officer

And then, as far as the margin profile of new business awards, it's very consistent. As we've talked over time, we've had our 15% EBITDA margin kind of target for this business. I would say, it's at current margins or better for the new business awards that we not only have already brought in but they will continue to bring in and phase through the business over the next several quarters as well.

Anthony J. Allott -- Chairman of the Board and Chief Executive Officer

And the growth is in I think, yes, in the markets too -- within the same kind of markets that we have typically serve being food, healthcare, home. It's what -- essentially in the terms of the plastics for some period of time is that we've been waiting for someone to emerge as kind of the premier provider of service to customers etc. For a long time, we said, we didn't think there was a player at that spot. Today, we tell you we think absolutely Silgan Plastic is the player and so they are beginning to get rewarded for the consistent strong performance from customers.

Bryan Burgmeier -- Citi -- Analyst

Got it. Thanks. I appreciate the detail. And then, I understand beauty markets are still pretty weak, but did you see any sequential improvement in Albea volumes throughout the quarter or was it pretty consistent throughout?

Adam J. Greenlee -- President and Chief Operating Officer

It was fairly consistent throughout the quarter. I would say, we're starting to hear some positive momentum potentially building and specific to the fragrance market, you look at areas or geographies around the world like China, like Brazil those markets have actually done better than our European or the US market for fragrance, in particular. So it was consistent through the quarter, but I think the dialog with our customers has been positive. One of the challenges they have is the location at which the transaction occurs. So whether it's travel or retail, very little of fragrance was going through an e-commerce channel.

So they've spent a lot of time with us and we're working with them talking about how to reach their consumers, whether through samplers, through e-commerce, through a variety of means, all of which will be good for us in the long term. Because, again, if you think about a sampler fragrance item, you're talking about getting multiple samples for what would essentially be the sale of one bottle of perfume or fragrance. So consistent through the quarter, but we're feeling like there might be some pause in momentum going forward.

Anthony J. Allott -- Chairman of the Board and Chief Executive Officer

Yeah. Bryan, the other point I would add there too is there was no surprise here. That business operated both on a volume basis and an operational basis very much the way we anticipated it to.

Bryan Burgmeier -- Citi -- Analyst

Got it. Thank you.

Operator

We'll take our next question from Mark Wilde with Bank of Montreal.

Mark Wilde -- Bank of Montreal -- Analyst

Good morning, Tony, Adam, Bob.

Anthony J. Allott -- Chairman of the Board and Chief Executive Officer

Good morning, Mark.

Adam J. Greenlee -- President and Chief Operating Officer

Hey, Mark.

Mark Wilde -- Bank of Montreal -- Analyst

Tony, a lot of times, we hear you talk about sort of being in businesses where you have an sustainable competitive advantage. I wondered, given the performance in plastics does that now fit that description, are you confident that you've got that sustainable advantage? And I'd also like to know, if you think you could ever meet that bar in the beverage can business?

Anthony J. Allott -- Chairman of the Board and Chief Executive Officer

In beverage can. Okay. So I'll come back to your second question. So it's a great question. It's exactly what we have always said about all of our businesses that we have to believe that we are the best in our market and that we provide something unique for our customers and that's kind of the standard we hold everything to. And for many years we said in plastics, we just weren't sure of that. I did say earlier in this call, I will say again that I can hold -- we are holding our heads up high, we provide the best service, the best solution for customers in plastic bottles in the North American markets there.

So is it enough? I think so, but we still -- we got to keep pushing. I don't want to -- no way are we at the point where we can drop the football and move on. We got to do more. We've got to continue to provide the value equation for our customers. But we've helped a lot out through this pandemic situation, we are delivering on new products, which is what those customers need. So yeah, I think we're -- we've definitely crossed an important milestone here. Yeah. You said bev, so did you really mean bev can?

Mark Wilde -- Bank of Montreal -- Analyst

Yeah. I did actually really mean bev cans?

Anthony J. Allott -- Chairman of the Board and Chief Executive Officer

Well as you know, we're...

Mark Wilde -- Bank of Montreal -- Analyst

I know you don't like businesses where there is a lot of capital being thrown around, but I'm just -- I'm curious about this business, I mean you are very good at kind of bending metal and making containers.

Anthony J. Allott -- Chairman of the Board and Chief Executive Officer

Sure. So I think -- I mean it's no secret that bev cans to us is -- it's just another can, another two-piece can in that case, we make a lot of them today. So, sure, do we think we could participate in that market space? Yes, we do. I think you've known us well to know what we're going to focus on are, can we bring something unique to the customer and in that case, it would have to be -- we're not going to -- we would not have the scale. So with unique, it's got to be more specific to a particular customer's need that might be geographic or something else. And so you'd have to answer that question before you would make that move.

And then it really come down to where do you see the returns. And I think for us, we've always talked about where you see a lot of organic growth in packaging, you tend to not see the return on capital that you want. And so if you look at this, the example we would show is PET bottle. They were the great booming thing, in fact, they were taking us from bev cans interestingly. And then everyone invested capital there and you didn't get the return. So I think the real question for us to make that kind of move in bev cans would be, do we feel like the capacity and the growth, we're well aligned and there was a good long-term opportunity there.

Mark Wilde -- Bank of Montreal -- Analyst

Okay. I wanted -- just as a follow on. Can we just turn to the food can business, and I wondered if you could give us sort of some sense of the contribution in the quarter from the food can business versus the pet food business. And then what the drag might have been from kind of the institutional business, the big number 10 cans? And then also just whether over time, Tony, you can help us think about the impact on earnings in this business from the shift toward more pet food cans and smaller size cans?

Anthony J. Allott -- Chairman of the Board and Chief Executive Officer

Okay. Lot there, I'll -- maybe together Adam and I work through that. So I think, first of all, we have talked about the shift and the shift has been historically very stable consumption of human food, particularly in areas like vegetable, soup had been consistent for some period of time. I think there's a long way to go in this answer. The first thing I'd say about that is, that the US market was different than other markets like Europe, etc. We had a lower consumption of some of those products, and part of the reason as far as the US market it was a much more eating out market.

So, one thing that's happened, even though wasn't your question, one thing that's happened lately as you're seeing some reversion to a more normal global level of eating at home versus out at restaurants. And that's one of the things that we think may be more of a lasting trend is that maybe the US market just revert to more to a normal amount of eating out. But that sort of what had led that flat for a while. So for many years, we talked about the fact that against that pet food certain proteins we're growing that trend continues.

So we've seen very nice solid growth through pet food this year, even though you would say there is really no COVID reason to speak up for that and yet we've seen that continued growth. So that trend continues to progress. I can't really break the profit for you in our business because it all comes out of the same plants etc. But I would say that they're -- on a contribution margin basis, they are comparable. So there is not a meaningful difference in terms of the profit of those.

Finally, you asked about the institutional cans. It is true that but one of the areas in cans that we have lost this year to some degree are big number 10-gallon cans to restaurants, that is a more dollar -- lot more contribution per can out because it's a much more expensive to package. And so there has been some impact of that and you can see that a bit in margin, those typically sell in the third quarter. So that's one of the points about the can margin in the third quarter is that you had that piece on it. I hope that helped.

Adam J. Greenlee -- President and Chief Operating Officer

It's pretty comprehensive. I think he got a [Indecipherable] so.

Mark Wilde -- Bank of Montreal -- Analyst

Yeah. That's pretty comprehensive. I'll turn it over. Thanks, guys.

Anthony J. Allott -- Chairman of the Board and Chief Executive Officer

Okay. Thanks, Mark.

Operator

We'll take our next question from Adam Josephson with KeyBanc.

Adam Josephson -- KeyBanc -- Analyst

Thanks. Good morning, everyone. I hope you and your families are well. And congrats on another really good quarter. Bob, just to start on Albea. Can you just tell us what the sales and EBIT or EBITDA contribution was in the quarter and just how the business is tracking on a full year basis versus what it was -- first at the number and relatedly -- what realistically how much growth do you think you could get from that business next year in the event the retail etc., returns to some semblance of normalcy?

Robert B. Lewis -- Executive Vice President and Chief Financial Officer

Yeah. So as I made earlier comments, the business really is tracking right along what we expected it to deliver for the quarter. So there is roughly a little more than $80 million of revenue. And then on the bottom line basis, it was neutral to earnings. So it's -- basically it's contributing enough to offset the interest carry on the business, which is exactly where we expected it to be for the quarter. Obviously, it's below where we expected it to be from the acquisition standpoint. But that's largely due to the fragrance shortfall that we're experiencing not only us, but our customers and our competitors as well. And so that business we expected it to be off some $20 million-ish on the bottom. So that's kind of what we're seeing.

So who knows what -- and what the timing for recovery around COVID is going to be moving into next year, but I think our view is that the fragrance business will recover, and it will get back to some more normalized kind of levels. So whether it's fully there next year or not, we'll wait and see but our anticipation is it can get back to the kind of levels that we were expecting when we bought the business.

Adam Josephson -- KeyBanc -- Analyst

Yeah. Thanks, Rob. Tony, also on '21, I mean you had commentary in the release about remaining at these elevated profit levels and I don't remember you're normally commenting on next year in the third quarter. I could be mistaken there, but can you talk about what prompted you to make that comment. How much visibility you have into demand trends next year across your businesses and again just what prompted that comment?

Anthony J. Allott -- Chairman of the Board and Chief Executive Officer

Sure. Actually, your memory is correct. We usually at this quarter say that we have not completed our budgets yet and that we're not going to talk about it. We did mention that we have not completed our budgets yet, so that's true. The reason -- you'll also recall that when COVID hit most companies dropped guidance then we told you that we weren't going to do that, but we felt like we had more knowledge than you all did. There were too many things, issues changes afoot that will be very hard for an outsider being analyst or a shareholder, to really know how it was all going to impact, and we felt that we had an obligation to share what we knew and understood. And so similarly right now, it would be very hard for you all to know all the different things we're hearing from customers, seeing in our markets, understanding about Albea.

So we felt obliged to share with you what we knew. And so what we've said is that we expect that, well, 2020 was really incredible year for us, 38% some improvement, whatever that number ends up being, that we believe that we can hold that. And so that is a put and take a lot of things that we're taking into account. So I've seen some reports since then, we're not necessarily saying we sell exactly the same amount of cans next year. That -- again, we had a pre-buy surge that happened early in this and so we don't know that that will be the case and we're not assuming that will be the case. We are assuming that some of the strong demand we're seeing is last -- certainly lasting through 2021. We actually think further than that, but that's not part of the commentary that we're giving right now.

And so similarly, we look at the wins that Adam was talking about in some of our other businesses, because of the performance we've done. We tally those wins in. We know there was pre-buy in some of the hygiene products as well, but against that we also know a lot of customers want to be more domestically sourced than they were before. So we're trying to take all that in, and when we tabulate that right now, we're saying rather than thinking there is a big come back from this great profit year, we don't believe that, we think the sum of all that plus the improvement you asked Bob on Albea, the sum of all that has us thinking that it ought to be at least as good as this strong year.

Adam Josephson -- KeyBanc -- Analyst

Thank you, Tony. Just last one on the food can supply demand situation. So can you talk about the status of the six plants that you were contemplating closing pre-pandemic? And relatedly, how would you characterize supply demand in the US food can market? Now, obviously, it had been in a pretty significant state of oversupply pre-pandemic and that obviously has changed to some degree. So how would you characterize it now? Is it balanced? Is it still oversupplied? Is it maybe even in short supply? Just talk about that and in the context of those six plants that you were initially planning to shut?

Anthony J. Allott -- Chairman of the Board and Chief Executive Officer

Sure. Well, Adam will do that. And then I think we'll move on to the next question.

Adam Josephson -- KeyBanc -- Analyst

Thanks, Tony.

Anthony J. Allott -- Chairman of the Board and Chief Executive Officer

Yeah.

Adam J. Greenlee -- President and Chief Operating Officer

Thanks, Adam. So as far as the rationalization of the six plants, as we talked about on the last call, obviously a pretty sizable volume increase across our metal platform right now. So we paused those plans to rationalize additional plants and we're constantly evaluating those. A part of this is, what Tony just alluded to our -- we're digging deep into 2021 expectations right now and again, we've got a relentless focus on taking cost out of our system and that will never change. But what we are also incredibly focused on is meeting our customer needs and their requirements. Many of our contracts as you know are requirements based, so we're finalizing 2021 expectations and commitments and we'll evaluate and see where we are at that point.

As far as the supply and demand in the marketplace, it's been an interesting six to nine months here. I would just say, I think basically every can that got made over the last two quarters got sold as well. So you think about the seasonality of the food can business, a lot of volume goes through, certainly, the third quarter, but also the second quarter as well. So, is there capacity available in the first and fourth quarter? Probably, yeah, that's how we run our business. So we'll see how our Q4 plays out and then as we go into next year, but certainly, on the shoulders there's going to be some capacity and we'll see how that's impacting volume expectation.

Adam Josephson -- KeyBanc -- Analyst

Thanks, Adam.

Operator

We'll take our next question from George Staphos with Bank of America.

George Staphos -- Bank of America -- Analyst

Hi, everyone. Good morning. Thanks for the details. I guess, I wanted to try to, if possible, draw a finer point on Albea and the expected improvement in earnings you expect from it for next year because for you to say that you expect earnings to be at least as good as this year's levels and we do appreciate you giving us that guidance, you have to have some sort of view -- recognize this may be a wide range on that view? But if you were in our seat what should we be thinking about in terms of Albea's net increment to EBIT or EBITDA, as we're building up our models '21 versus '20. Could you give us any kind of view on that?

Anthony J. Allott -- Chairman of the Board and Chief Executive Officer

Sure. I could try, Bob gave me a lot of it. So I mean, first off, what we have said and that's exactly how it's performed. It is basically covering its interest costs, so no earnings contribution for the six months of this year that we'll have it. Yeah. So, and that in order to do that you're off some $25 million-ish on an EBITDA if you will. So if you got back to where it was when we bought it, you would expect on an annual basis something like that $20 million to $25 million improvements. Now, that would be all the way back where it was.

The fragrance market, which is about 60% of that business is off something like 30%. So we are not assuming in what we've said to you that we will get all fragrance back starting January 1. That won't surprise you. So the thinking is more that you will see some recovery there. Something like half [Indecipherable] decline would be the kind of recovery that we are thinking into that. So you get, kind of half of what I just said, George. You have the full year impact, and then half of that improvement as I was talking about, is our thinking on it right now.

George Staphos -- Bank of America -- Analyst

Okay. And related point on the synergy front. How much of the $20 million, if you could remind us, do you get next year? Are you all in by '21 on that front?

Adam J. Greenlee -- President and Chief Operating Officer

Hey, George. It's Adam. Again that $20 million was a run rate that we were going to achieve kind of at the 18-month timeline. So we'll be at or above that run rate at 18 months. We just know that some of those synergies are going to take a little longer than normal as far as our other acquisitions had transpired.

George Staphos -- Bank of America -- Analyst

Thanks for going through that. Next question I had, you talked about having anecdotal and other evidence that the food can growth rate, maybe pet food aside for a minute, it looks better than it would have been prior to COVID. Now, those are my words, it's on exactly how you phrased it. Can you talk about what gives you confidence and what phrasing you would use for describing the volume outlook longer-term because of what's happened with COVID and what evidence what data, what studies, you have that drive that? And then I have one last question.

Adam J. Greenlee -- President and Chief Operating Officer

George. It's Adam, again. I want to give you one example of just kind of what we're dealing with them. I'll mix a little bit of CMI data with Silgan data as well. So our soup market. We've spent a lot of time over the years talking about soup and Q2 CMI data had soup up approximately 50% versus the prior year. So, tremendous increase in volume and as we look at Q3, it's a 5% year-over-year growth. The reality is, we shipped the exact same amounts of soup volume in Q3, that we did in Q2, so you had that increase that occurred in Q2 and our whole point is that elevated demand and that demand has maintained at that very high rate.

Our Q4 actually is calling for soup to be up even another increment above Q3 and Q2. So talking about soup again, the soup filling season usually starts in Q3, but our customers were able to take advantage of some of their capacity available to them in Q2 and we've seen an elevated demand rate that, as we sit here today, is going to continue at least for some period of time.

Anthony J. Allott -- Chairman of the Board and Chief Executive Officer

Now, I would just add to that, George. There is a couple of other kind of more macro trends that we look at thinking about too. So on the macro side you've got -- I'm not sure this is macro it's somewhere between, but, firstly, you got Campbell doing some interesting work on new customers. And so I think the first thing we have pretty good data that said there are new customers to cans and that's no exposure.

On the macro side, you also have -- obviously, now we have a lot more at home, work at home, eat at home, etc. I think most of us would probably agree that even coming out of COVID, there's probably going to be an enhanced amount of work at home. Certainly, the real estate market is implying that. So work at home means more eating at home. Firstly, you got lunch at home so start there, then you're also you're launching in a dinner you're already home. So you're not out in the city, etc.

So I think there are some global trends that would lead us to conclude there will be more at-home consumption over time. And then you predict what the economy is going to look like and when it's going to recover, but down economies tend to be good for lower base food, and can, I'll spare you my whole litany on can, but by far the lowest cost way to get good valuable calories, and so down economies tend to be good for that.

And I think a lot of people, by the way, through this pandemic have been surprised how much money they save, those that continue to have their paycheck, by not going out, etc. So we also think -- this is more opinion, I guess, if you will, but there is more visibility to how much was being spent eating out by American consumers.

George Staphos -- Bank of America -- Analyst

Okay. What I had another question but you know what, I'll turn it over for fairness, I'll try to get back in queue. Thanks, guys.

Anthony J. Allott -- Chairman of the Board and Chief Executive Officer

Okay. Come back around.

Adam J. Greenlee -- President and Chief Operating Officer

Thanks, George.

Operator

We'll take our next question from Gabe Hajde with Wells Fargo Securities.

Gabe Hajde -- Wells Fargo Securities -- Analyst

Tony, Bob, Adam, good morning.

Anthony J. Allott -- Chairman of the Board and Chief Executive Officer

Good morning.

Gabe Hajde -- Wells Fargo Securities -- Analyst

Tony, I was curious, there were couple of flexible pouch manufacturers out there that have discussed going into some of these fast casual restaurants with some vertical Fed pouches and I'm assuming some of that for fluid applications and it's part in a way to automate restaurants, etc. I was curious, if you've kind of heard any of that from your restaurant customers as it relates to the number 10 can and maybe view that as a threat as things do in fact reopen? And then maybe just a data point, if you can tell us, directionally, how much of your business is in fact kind of restaurant or large number 10 cans?

Anthony J. Allott -- Chairman of the Board and Chief Executive Officer

So we -- the pouch had been there. So there could be enhance to that. I think you're right that most of that's around fluid etc. The things that come in a number 10 to restaurants are a pretty stable demand, good product for restaurants like it's -- I don't -- I would be very surprised. We are not seeing any trend or shift away from gallon cans for that. So the larger cans are a relatively small percentage. I'm not sure, I really have the exact percentage for you here. I'm not sure how much it would help you, but it's relatively small, but as I said, on a per unit basis it's a lot of drop through. So it does -- it matters to kind of margins in a given period.

Gabe Hajde -- Wells Fargo Securities -- Analyst

Okay. And then, Bob, I know it's early, a lot can happen in a couple of months, but any preliminary view on what pension might look like at least at the income statement impact next year. I think it was $20 million in aggregate benefit this year?

Robert B. Lewis -- Executive Vice President and Chief Financial Officer

Yeah. You're right. It is early. We got to finish out the year with returns and ultimately it's the year end discount rate that will be the big determining factor, and right now, I think the evidence would suggest that there is some pressure there. So it could be -- this is a swag, but it could be $10 million to $15 million of a headwind. Again, that's cheap TVD. I would point out that all of that, either way, is a non-cash impact to earnings, but that's the way we would see it shake out right now.

Gabe Hajde -- Wells Fargo Securities -- Analyst

Excellent. Thank you.

Operator

We'll take our next question from Kyle White with Deutsche Bank.

Kyle White -- Deutsche Bank -- Analyst

Hey. Good morning. Thanks for taking my question. Bob, what is the -- what's the new capex level? And I'm curious is it related to any acceleration of projects or some pull forward of projects or is it new type of investments as a result of all the growth you're seeing?

Robert B. Lewis -- Executive Vice President and Chief Financial Officer

Yeah. That's essentially why we held our free cash flow guidance constant versus what we put out in the prior quarter. Obviously, we've seen some improvement in earnings and we think that as we invest in some of those projects for customers that will provide growth on a go forward basis, as well as provide for the volume that our existing customers half. We're going to see an increased rate of capex versus the $220 million that we had and we're also going to see a little bit higher working capital, which really means we're not going to see as much of a reduction as we were anticipating coming into the year.

And that probably has more to do with the thought process that, given that we're expecting elevated volumes across the board, we're going to try and build as much inventory as we can in Q4 to be ready to support our customers going into next year. So those two things combined will offset the earnings. So I think the capex side, you're probably talking about something that's in the $10 million or $15 million range.

Anthony J. Allott -- Chairman of the Board and Chief Executive Officer

All that said, the free cash flow we're talking about like an 8% yield on current stock price.

Robert B. Lewis -- Executive Vice President and Chief Financial Officer

That's right.

Kyle White -- Deutsche Bank -- Analyst

That makes sense. Thanks. That's helpful. We've talked about a little bit on soup and you referenced Campbell's, they're obviously doing a lot more work in marketability and promoting the soup can. But they also have talked about for this next coming fiscal year in terms of adding supply. I'm just curious in terms of your capacity situation if they do go ahead of some of those capacity increases on their side, how -- what does that mean for your capacity? Would you be able to fulfill that or do you need to make investments?

Adam J. Greenlee -- President and Chief Operating Officer

Sure, Kyle. You think about our soup market, in particular, we're in touch with all of our customers and talking about 2021. So we believe we're in a very good position to be able to supply those requirements in 2021 out of the current footprint out of our current capacity that we have available. It might be -- to the comment, I made earlier about utilizing the shoulders of the year a little bit more to support their increased volume, but we're obviously more than willing to do that.

Kyle White -- Deutsche Bank -- Analyst

Okay. Thank you. I'll turn it over.

Operator

We'll take our next question from Ghansham Panjabi with Baird.

Ghansham Panjabi -- Baird -- Analyst

Yeah. I guess going back to the metal food segment, Tony, can you just give us a sense of supply chain inventory? How would you characterize it, I mean there are a lot of different nodes in their, retailers, customers and inventory at your end as well? And related to your confidence on growth for 2021 and onwards, how should we think about some of these unfavorable contract renewals you've called out in the past? I mean I would assume that there's less excess capacity in the industry, just your thoughts on that as well?

Adam J. Greenlee -- President and Chief Operating Officer

Hey, Ghansham. It's Adam. I'll jump in and I'll let Tony clean up behind me here with whatever I miss. But just looking at the supply chain for metal food can what I would tell you is with the surge that happens, you got to think about the retail point of sale, distribution centers, regional warehouses, our customers' inventory that entire supply chain was a very taxed. And really regardless of the product that goes into the can, I think all products were taxed by what happened earlier in the year.

So we've been working with our customers very closely. We're very focused on meeting their demand, which is really focused on meeting the consumer demand, increased demand for food cans. So the first point of or the first point of business for us is meeting the consumer demand. And the second will be replenishing the supply chain, whenever that happens. So I would just tell you at this point we're not really focused on replenishing the supply chain at this point and we're just trying to get food out to consumers as best we can. Tony, any other thoughts on that?

Anthony J. Allott -- Chairman of the Board and Chief Executive Officer

I would go with you, you kind of said, so what's the market look like and contracts etc. So I think, as Adam said, the market is -- it's pretty full, I would not say, sold out or desperate for capacity, but I think it's pretty full. It does have these shoulder seasons as we do so do our competitors. So I would call the market kind of competitively stable right now. Everyone is just trying to service our customers.

As to contracts and the impact of that specifically, as you know, that kind of comes in -- the big one come in waves. So you may recall, at the end of the year, we did some 40% of our contracted can business was renegotiated long-term, seven-year average I believe term contract. So that's kind of behind us. So if you look the next year or two, there is no expectation that we would need to do anything of that nature in a major way.

Adam J. Greenlee -- President and Chief Operating Officer

And coming into the year. I mean we were 65% over four years left in their contract life in can.

Ghansham Panjabi -- Baird -- Analyst

Okay. Got it. That's super helpful. And then is that I mean the inventory replenishment aspect is that what gives you that sort of adds to that confidence in terms of 2021 earnings? Going back to George's question earlier. And then second for plastics, just given the growth that you're seeing there, is that -- we had a point that we need more capacity to just services the existing customers and then also for the new business wins that you referenced? Thanks so much.

Adam J. Greenlee -- President and Chief Operating Officer

Great. Good question. Thanks, Ghansham. For the 2021 confidence, I do think the inventory plays a role in that. I think we're going to be really running at full capacity next year and whether those cans make it all the way to the consumer or replenish the supply chain, I think that will absolutely be occurring in '21. So it does provide some level of confidence in the volume projections.

So then moving over to plastics, as Bob just mentioned, we've had several wins and new business awards, both in our -- in all three businesses, but particularly in plastics. So there is more capital going into plastics adding capacity, but that's all contractual volume with and a multi-year agreements associated with it and really we're talking about adding a line for a custom solution for our customers. So we feel very good about where that business is, I think some of the increased capital, Bob, talked about, again, is specific to the plastics business as well.

Robert B. Lewis -- Executive Vice President and Chief Financial Officer

Yeah, Ghansham. I would point out here where we've got really nice opportunities to grow the business at good return rates through organic capex, but we're not talking about capex that so outsized that it impairs our free cash flow.

Adam J. Greenlee -- President and Chief Operating Officer

Yeah.

Anthony J. Allott -- Chairman of the Board and Chief Executive Officer

Hey. Just one thing I want to add. Ghansham, I think we've said this. I want to be clear that what we're talking about is, we think the food can volumes will have strength. We have not given you a direction on food can volumes. So we are spending against a pantry stuff in the first part of the pandemic. So to be clear, our language and our confidence is that we think can volumes will remain strong. We haven't necessarily said that's a plus over this current year, we're saying the net of all of our earnings impact including Albea and everything else is a plus, just to be clear.

Ghansham Panjabi -- Baird -- Analyst

Perfect. Thank you.

Operator

We'll take our next question from Jeff Zekauskas with JPMorgan.

Jeff Zekauskas -- JPMorgan -- Analyst

Thanks very much. Your SG&A expense was about $92 million. Was there something unusual in that number or is that a more normalized level of your spending there?

Robert B. Lewis -- Executive Vice President and Chief Financial Officer

Yeah. So the big issue there as you've got the inclusion of the acquisitions in there. So on a comparative basis, it's all acquisitions, I think, well, it's the SG&A of the acquired business. And then you've got some acquisition costs that we strip out of the adjusted earnings per share but are included in the P&L.

Jeff Zekauskas -- JPMorgan -- Analyst

Okay. And you had any difficulties getting all of the resin that you want in the United States and that polypropylene and polyethylene has been very tight and many customers have been on allocation or can you get all the resin that you want?

Adam J. Greenlee -- President and Chief Operating Officer

Well, I think the resin market is very tight and we know certainly of certain suppliers to the packaging companies that they are on allocation, there have been some force majeure [Phonetic] declared. Fortunately for us, and the folks that we purchase our resin materials from, we've been able to get all of our requirements, even at the elevated levels that we've been talking about. And so we feel very good about the supply chain for our business as it relates to resin.

Jeff Zekauskas -- JPMorgan -- Analyst

And then lastly in metal containers, what utilization rate did you run out on average this year, both the last nine months and the forward quarter?

Adam J. Greenlee -- President and Chief Operating Officer

It's a great question. It's not a metric that we typically discuss on this call, I would say, we were fully utilized so whatever percentage you'd like to apportion to fully utilize, it was an incredibly high number year-to-date and we'll continue to do that through the end of the year.

Jeff Zekauskas -- JPMorgan -- Analyst

Okay. Great. Thank you so much.

Operator

We'll take our next question from Arun Viswanathan, Research Analyst. [Phonetic]

Arun Viswanathan -- RBC Capital Markets -- Analyst

Great. Thanks. Good morning. Congratulations on a strong performance. I guess, I just wanted to ask, again, you mentioned really a relentless focus on cost reduction, so could you kind of help us understand what kind of opportunity you have there? Is it the case that you've had some transitory cost reductions that you can make more permanent or is it something more structural that you're going to undertake over the next year or two?

Adam J. Greenlee -- President and Chief Operating Officer

Well, I think it's an everyday exercise at Silgan that we're focused on cost and eliminating or reducing costs. So, it truly is in every day part of our culture. I think specifically what we were talking about was the previously announced rationalization plan that we had for our metal container business. And really as we talked about when we announced that plan, we were taking capacity out of the market, because we were sort of right-sizing our operational capacity with our customers and our commitment.

Obviously, that's changed now with what happened in 2020 and we've got a much higher rig of volume that we're dealing with today that we think will be here for some extended period of time, and we're going to make sure, number one, that we meet our customer requirements and their needs and their growth strategy. So I'll just say again, we paused that program specifically and really when you go across all of our businesses, we're running at a very high rate of utilization and I'll say there is nothing significant, right now, other than meeting our customer requirement that we're focused on operationally.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Thanks. And I guess, I was just kind of curious, just looking at the margin levels obviously understanding it's difficult with the metal pass through, but definitely, you had nice margin performance in metal container, and especially in plastic containers. So maybe could you just characterize the margins that you achieved in Q3. Whether some of it was due to -- if any of it was due to outsized volume that maybe shouldn't continue? Is there any level -- normal level of margins that you would want to have us think about for each business?

Robert B. Lewis -- Executive Vice President and Chief Financial Officer

Well, I would say there were puts and takes in the margin. If you looked at the second quarter. I would say you had outsized margin in the second quarter, particularly in the can business primarily because you had a case where you were building inventory and selling everything. You moved a lot of costs out in the second quarter. That's not -- in fact, the third quarter had a little bit the reverse of that where you sold off inventory, you took in some of those costs.

The third quarter also had -- we did do those contract renewals, I referred to before. There was some pricing impact of that and as we said beginning year that would primarily hit the third quarter. So you had actually couple of things that brought the third quarter margins, and particularly the can business down from the second quarter. But if we look at the third quarter, there is nothing about it, well, all that blended in the prices lasting, so it will be there. I would say that it seems sort of a reasonable level in Q1 and Q2 was a little more elevated.

Arun Viswanathan -- RBC Capital Markets -- Analyst

And then just on Albea, given that it has been impacted by COVID, a little bit, but you are keeping a relatively neutral contribution. Have you been able to discover a little bit more synergy progress or maybe could you just provide an update on the integration? And if there's been any challenges or maybe some tailwinds even in doing this in a COVID world?

Adam J. Greenlee -- President and Chief Operating Officer

Sure, Arun. It's a good question. I mean, you think about trying to integrate an acquisition during a global pandemic. What we like to do is go in and get boots on the ground on day one, and meet with the team, look in the white of the eyes, and really get into the details of that business, because that's the first chance to really get to do it after the due diligence period.

So we've been utilizing all sorts of new tools to be able to do that, whether it's Zoom or Teams or any other technology you're talking about. So it's been a challenge, kind of coming out of the gate in an acquisition and I'll say our teams have done a terrific job. Not only our legacy dispensing team, but the Albea team that came with the business have just been outstanding trying to work together, working through a global pandemic and also a global pandemic that's significantly impacting one of their primary product lines.

So with that, what I'd tell you is, what I said earlier about synergies, we're right where we thought we'd be at this point, I think if you go to the end of the 18-month period where we were targeting that kind of $20 million. I think, we'll be at that run rate or probably slightly above it and feel really good about what we're doing with the business. It's just a market that's very challenged right now.

Anthony J. Allott -- Chairman of the Board and Chief Executive Officer

Great. And Adam I think we'll -- OK, we'll move down the list.

Operator

We will take our next question from Brian Maguire with Goldman Sachs.

Brian Maguire -- Goldman Sachs -- Analyst

Hey. Good morning. Thanks for taking the question. Just wanted to kind of follow-on, on early question on margins, just in the food can business is obviously really strong growth year-over-year, but trying to put the 10% volume growth sort of into context with 14% earnings growth. I was just wondering, if you could kind of bridge the -- why more the volume growth that translate into EBIT growth? And I guess the margin improvement there was good, but maybe not as, as much as you might have expected, given that level of volume growth in the normal fixed cost absorption we're used to seeing in those businesses? So was there some incentive comp or other sort of accruals or true-ups that occurred that we should be thinking about?

Robert B. Lewis -- Executive Vice President and Chief Financial Officer

So, good question. So they just to cover off, the containers volumes were up 17% in the third quarter and the margin was fairly consistent with previous time periods. Not as elevated as Q2, perhaps not as elevators as you might have expected considering you had that strong volume, so just I think that's the basic question. The reasons for that basically we had really great strong operating performance. But as I said we were -- basically we built inventory in the first half of the year, as we have said we were going to do and liquidated in the third quarter.

So you have all of the overhead costs that you've got to take out of Q2, you had the suffer in Q3 as you liquidated that inventory. So, it's -- and obviously sold more. So it's a good thing, but it's on a margin basis, what we call volume benefit is less drop through because of that margin coming in and that cost coming in. So that's a big piece of that.

The other piece that is what I said, we had price concessions under contracts that we renewed and we talk about at the beginning of the year, it was roughly 1% of total price of the contract -- revenue of the contract, so relatively modest price, but that it would -- because of the customer and when they're going to take product it was going to be, predominantly in the third quarter. So you have that also impacting what was happening in the quarter.

So all that said, and when you net it all together, we say that margins seems a normal level to us. Not elevated for the volume it had, but not depressed either and we would view that as a reasonable margin level for the business.

Adam J. Greenlee -- President and Chief Operating Officer

And what we expected as we came into the quarter.

Robert B. Lewis -- Executive Vice President and Chief Financial Officer

Correct.

Brian Maguire -- Goldman Sachs -- Analyst

Okay. That's helpful. Thank you. And then just lastly on closures. I think you said the volumes were up 10% including acquisitions. Wondering if you could just kind of break out what they were on an organic basis? And then just any outlook for the fourth quarter in that segment?

Adam J. Greenlee -- President and Chief Operating Officer

Sure. And Brian, as you know, we've talked a couple of times about the different products that are kind of comprised in our closures segment. And so the first thing you have to just acknowledge right upfront is the fact that our dispensing closures or about 17% of our unit volumes and a little over half of the revenue. So as we've said before, a closure is not a closure, is not a closure from a mix standpoint.

So now to get to your question, our legacy dispensing business had a fantastic quarter. They were up 22% versus the prior year and that's our legacy business, that's not with acquisition. So terrific performance there. For all the product lines that we've talked about for foamers, sprayers, trigger sprayers, our dispensing group in total.

And then you move over to kind of our flat cap business if you will. And we had good volume growth in food. The US market, in particular, was strong for food, it was up almost 20%. And then you think about another market that we've talked about quite a bit is our plastic hot fill closure business, our market, I should say, that's kind of sports drinks and other beverages, that business was up 14% in the quarter.

So really it's the legacy Silgan businesses did fantastic in the quarter and saw a really nice volume growth literally across the board. We saw a little bit of softness outside of the US in some international markets. But really the focus was tremendous in the US market.

Brian Maguire -- Goldman Sachs -- Analyst

Okay. So just to confirm, is there a way to quantify what the acquisition contribution was to the volume in that segment?

Adam J. Greenlee -- President and Chief Operating Officer

Sure. So total legacy closures were up a little over 3%. If you just go straight on unit volume again and our -- addition of the two acquisitions made up the other 7%.

Brian Maguire -- Goldman Sachs -- Analyst

Got it. Okay, perfect. Thanks. That's a great one.

Operator

We'll take our next question from Salvatore Tiano with Seaport Global.

Salvatore Tiano -- Seaport Global -- Analyst

Yeah. Hi, Tony, Adam and Bob. So my first question is a little bit about price cost in 2021. What are your thoughts about some key components like freight and resin?

Adam J. Greenlee -- President and Chief Operating Officer

Sure. Maybe we'll start with resin and just say that with kind of the commentary we had earlier in the call, during the hurricane season, we did see tightness in the resin market that led to producers announcing price increases for the back half of 2020. At this point, as we look into '21, we think those are still on the table, so we're talking through those as we speak, but it's likely resin somewhat of a headwind for '21. Freight availability is difficult right now, again, there's a lot of product that certainly we are putting out over the road and others as well. So freight rates have been slightly inflationary trend here for the back half of the year as well.

And then do you didn't ask specifically about steel, but I'll just make a quick comment on another major input for us. The steel industry is hurting. We had a deflationary year in 2020. I think, the steel industry is looking for increases. We're fighting every day for our customers to mitigate any increase that come through, but the ask is out there at this point and we're in the early process of negotiating for steel going forward.

Anthony J. Allott -- Chairman of the Board and Chief Executive Officer

And just because I -- as a general rule, we passed all of those costs through, So some of that is just giving you some idea of what's going to happen on the raw material side. And then you may on resin or freight you might have some lag issues, etc. But as a general rule that's all passed through.

Salvatore Tiano -- Seaport Global -- Analyst

Yeah. Perfect. And just the last question on M&A, I know, you just did Albea, but given how strong this year has been, you seem like you should end up the year roughly at the higher end of your leverage target already. When do you think you would be ready, both from a leverage standpoint given seasonality working capital, but also operationally to undertake another large M&A move?

Robert B. Lewis -- Executive Vice President and Chief Financial Officer

Yeah, Salv, good question. I think you hit on the right points. We are in the midst of the Albea acquisition integration, right, which is mission critical for us, to get it fully integrated and bring out the synergies. And that's where our focus lives and we feel really good about being able to accomplish both of those as we exit the back half of the year here.

And then given our forecast, we should be kind of right high-end of the range, which I'll remind everybody is 2.5 times to 3.5 times net debt to EBITDA. So I think that says, from a financial metric we'd be ready for the right opportunity. Now, obviously, there is a lot to that, right? And to reiterate how we think about that we're looking for businesses that have competitive positions in their markets. We'd be looking for something that's free cash flow accretive and that has a reasonable return on that M&A target.

So, again, we're opportunistic and you have to be fleet footed if you will, to take advantage of those opportunities. All that said, we don't necessarily feel compelled to have to do anything. We think we've got a good growth catalyst in the business that we have that as it starts to turn the corner around the, particularly, the fragrance side, we think there is good growth opportunity for our business from that standpoint. So we'd be equally as happy just run out 2021 focused on bringing out that value in the business.

Salvatore Tiano -- Seaport Global -- Analyst

Thank you very much.

Operator

We'll take our next question from Adam Josephson with KeyBanc.

Adam Josephson -- KeyBanc -- Analyst

Thanks for taking my follow-up. Tony, at your Analyst Day, a little under a year-and-a-half ago, one of the things you talked about was the valuation discrepancy between yourselves and some of your packaging peers and I think you mentioned earlier on the call that you're at an 8% free cash flow yield, which you consider pretty attractive. And since that Analyst Day, your multiple stayed about the same at about 10 times EBITDA, while those for your beverage can peers have gone skyward, as you know.

And I'm just wondering, I think, Mark, asked you earlier in the call about your willingness or your interest in getting into bev can, I'm just wondering how you're thinking about your relative valuation now compared to what you were thinking at the Analyst Day? And does that color your thinking at all in terms of your desire to get into say up a hot business like beverage cans or something else. How you're thinking about just that overarching situation?

Anthony J. Allott -- Chairman of the Board and Chief Executive Officer

That's a great question, obviously, we and every company are asking themselves that question every day and scratch our head to a certain degree. I think that -- we look for, and I have always look for strong sustainable positions. We think a lot about free cash generation, and so I think where we land on that ultimately is that you can't ignore that the equity market wants growth and we've got to be growth driven. And so, part of what we've done with that is built out a phenomenal dispensing closure franchise that as we talked about on that Investor Day is soon to be 50% of the EBITDA of our business.

And as Bob just said, we've got, I would answer the other question, and as Bob said, we've got a catalyst already in our business, which is the Albea as it comes back on fragrance. We feel very good we'll recover, and so we feel great. There is already one catalyst there and we've been delevering at such a fast pace, as Bob pointed out, we are able to do another deal coming forward, which is exactly we talked at the Analyst Day, is that our view is you have strong sustainable cash generative businesses, you take that cash, you deploy. And over time you will generate better growth than that growth, the [Indecipherable] thing, whatever it might be.

And I think if you look back at us against any of those companies that has high multiples over time you'll find we've outperformed. And so with all that said, all I can do is, say, we play long ball. We know what we're about and we're really clear about it. And investors that like that and want to be, get that kind of reward will stay with us and those that want to get a very quick high growth, and again I want to be clear, we've delivered growth, but if you want to be able to see it organically, then that's a little less our interest because in packaging, we've not seen that organic growth get the reward that some might think it will get.

Adam Josephson -- KeyBanc -- Analyst

Got it. Thanks so much, Tony.

Anthony J. Allott -- Chairman of the Board and Chief Executive Officer

Great. Thank you.

Operator

[Operating Instructions] We'll take our next question from George Staphos with Bank of America.

George Staphos -- Bank of America -- Analyst

Hi, guys. Thanks for taking my follow-on, and I think you already answered the question with some of the other Q&A, but I just want to go through it. If I look at 3Q versus 2Q in metal food containers, 2Q I think we had something around 15% organic growth, revenue grew about 4%. This quarter the year-on-year volume growth was 17% and yet revenue grew again about 4% and you had a little bit of an FX benefit as well from what I remember in the discussion.

So that sort of lack of lift in revenue relative to the improvement in year-on-year volume was that more the mix effect from the smaller cans or is that more of the impact of the contract renewals showing up in the third quarter as you discussed? I realize it's probably all of the above, but if you had to think about it which of it was the predominant effect? And then going forward, are there any implications from that in terms of how we should project out price mix for you in the quarter and '21 ahead? Thank you, guys. Good luck in the quarter.

Anthony J. Allott -- Chairman of the Board and Chief Executive Officer

Thanks, by far the biggest of that is the lower cost of raw materials being passed through. That's your biggest driver of that. And so when you think the price is meaningful but against the entirety of revenue, it's not that meaningful. So I wouldn't say the price is a very big part of it. There is some mix shift. But again, I want to be clear that's the same mix shift we've been talking about, we used slightly different language in the press release, we didn't like our language, but it's the exact same thing. We just -- the things that we've been talking about growing pet food, protein, tend to be smaller cans. And then, yes it is -- you saw that some of the gallon cans are out. So there's a little bit more of a mix this quarter. But mostly it's -- that's really about the raw material pass-through.

George Staphos -- Bank of America -- Analyst

I appreciate the nuances there, Tony. Thanks and have a good quarter. Bye, now.

Anthony J. Allott -- Chairman of the Board and Chief Executive Officer

All right. Thank you.

Operator

At this time, we have no further questions in queue.

Anthony J. Allott -- Chairman of the Board and Chief Executive Officer

All right. Emma, thank you very much. And we appreciate everyone's time and we look forward to talking to you at the end of January for year end results.

Operator

[Operator Closing Remarks]

Duration: 66 minutes

Call participants:

Kimberly I. Ulmer -- Vice President, Finance and Treasurer

Anthony J. Allott -- Chairman of the Board and Chief Executive Officer

Robert B. Lewis -- Executive Vice President and Chief Financial Officer

Adam J. Greenlee -- President and Chief Operating Officer

Bryan Burgmeier -- Citi -- Analyst

Mark Wilde -- Bank of Montreal -- Analyst

Adam Josephson -- KeyBanc -- Analyst

George Staphos -- Bank of America -- Analyst

Gabe Hajde -- Wells Fargo Securities -- Analyst

Kyle White -- Deutsche Bank -- Analyst

Ghansham Panjabi -- Baird -- Analyst

Jeff Zekauskas -- JPMorgan -- Analyst

Arun Viswanathan -- RBC Capital Markets -- Analyst

Brian Maguire -- Goldman Sachs -- Analyst

Salvatore Tiano -- Seaport Global -- Analyst

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