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Crown Holdings Inc (CCK) Q1 2019 Earnings Call Transcript

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Crown Holdings Inc  (NYSE: CCK)
Q1 2019 Earnings Call
April 18, 2019, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good morning, and welcome to Crown Holdings' First Quarter 2019 Conference Call. Your lines have been placed on a listen-only mode until the question-and-answer session. Please be advised that this conference is being recorded.

I would now like to turn the call over to Mr. Thomas Kelly, Senior Vice President and Chief Financial Officer. Sir, you may begin.

Thomas A. Kelly -- Senior Vice President and Chief Financial Officer

Thank you, Christ and good morning. With me on today's call is Tim Donahue, President and Chief Executive Officer. On this call, as in the earnings release, we will be making a number of forward-looking statements. Actual results could vary materially from such statements. Additional information concerning factors that could cause actual results to vary is contained in the press release and in our SEC filings, including in our Form 10-K for 2018 and subsequent filings.

Earnings for the quarter were $0.77 per share compared to $0.67 in the prior year quarter. Comparable earnings per share increased to $1.5 in the quarter versus $0.94 in 2018. Net sales grew 25% in 2019 versus 2018, primarily due to the acquisition of the Transit Packaging business in April 2018 and increased beverage can volumes partially offset by $100 million of unfavorable currency translation.

Segment income in the quarter improved primarily due to the Signode acquisition, as higher global beverage can volumes were offset by lower European food can results and start-up costs at the two new beverage can plants in Europe. As outlined in the release, we estimate second quarter 2019 adjusted earnings of between $1.45 -- $1.43 to $1.53 per share. The reaffirmed full year adjusted earnings of between $5.20 and $5.40 per share. These estimates assume exchange rates remain at their current levels and a full year tax rate of between 25% and 26%.

Also consistent with our previous guidance, we currently estimate 2019 full year adjusted free cash flow of approximately $775 million with between $400 million and $425 million in capital spending. Net leverage at the end of 2019 is expected to be in the low 4s.

With that, I'll turn the call over to Tim.

Timothy J. Donahue -- President and Chief Executive Officer

Thank you, Tom, and good morning to everyone. I'll be brief and then we'll open the call to questions. As reflected in last night's release and as Tom just summarized, the first quarter was on plan and puts us directly on path to achieve free cash flow of $775 million for 2019. While results were mixed across the operating segments, food and beverage unit demand was up in most geographies, demonstrating the strong fundamentals across our global businesses. We have reviewed the progress on major projects under way or recently completed in the release, all of which are on the same timing as we described in February.

In a supplemental table to the release, we have provided a currency impact on sales and segment income by operating segment, so my comments will focus on currency neutral performance. In Americas Beverage sales units advanced 2.5% due to solid performances across Latin American operations with volumes in North America level to the prior year. Segment income improved $60 million due to the volume increases in Latin American cans and Mexican glass, pricing recovery and 2018 start-up costs from the three major projects in Chihuahua, Monterrey and Nichols now behind us. Our 2019 outlook for the segment remains positive.

Unit volumes in European Beverage advanced 3% over the prior year, as strong performances in Eastern Europe, France and Spain offset softness in Jordan and the UK. As we noted in February start up cost and currency weighed on the seasonally small first quarter. Beginning with the second quarter, comparable results will accelerate, as we cycle through start up in currency with the second quarter and full year results expected to be in line with 2018. Sales unit volumes in European Food were up 3% in the first quarter with most product categories showing gains over 2018.

Segment income ex-currency was off $4 million as contribution from the volume gains in the seasonally small first quarter was not enough to offset inflationary increases in costs such as energy and labor. Currently, our expectation is for a normal seasonal pack and full year income performance to be in line with 2018. For your modeling purposes, Q2 will be a bit short of the prior year, as we still experience currency headwinds with growth in the second half.

Beverage can volumes in Asia Pacific advanced 1%, as demand remain strong across Southeast Asia, offsetting the impact from the closure of the two facilities in China. Adjusting for currency and step-up depreciation from the acquisition, segment income in Transit was in line with the first quarter of 2018. Strong demand in Europe and protective offset some softness in the US strapping business. Excluding currency, our 2019 transit outlook is for sales growth of 2% to 2.5%, and segment income in line with 2018.

Directionally, we expect Q2 to be a bit short of last year's record performance with growth to be experienced in both Q3 and Q4. Our GDP plus or minus business, the transit performance is right in line with our pre-acquisition expectations. Strong sales volumes and good cost control in North American food and closures drove the segment income growth in non-reportables.

So in summary, a solid start to the year, with results mixed, but overall on plan and as many of you are well aware, the first quarter is seasonally small, so it's far too early to comment on our seasonal food packs.

And with that, Chris, we're now ready to take questions.

Questions and Answers:

Operator

Thank you participants on the phone. We will now begin the question-and-answer session. (Operator Instructions) Our first question will come from Tyler Langton of JPMorgan. You have an open line.

Tyler Langton -- JPMorgan -- Analyst

Yeah, good morning. Thanks for taking my question.

Thomas A. Kelly -- Senior Vice President and Chief Financial Officer

Good morning.

Tyler Langton -- JPMorgan -- Analyst

Just on Americas Beverage, I think your margins were up around 140 basis points, and you kind of mentioned the factors that driving that. I mean is that, and I know Q1 is a seasonally slower quarter, but is that sort of level improvement, sustainable for the rest of the year? If you could kind of provide some color on that

Timothy J. Donahue -- President and Chief Executive Officer

In a crystal ball, the answer is, we sure hope so. I think we're going to see as far as I can see right now, we're going to see considerable improvement again in Q2 versus the prior year, perhaps a little too early to call Q3 and Q4. But I think overall, we're feeling much more positive about the segment. I don't want to characterize the performance to Q1, as you say, it's a smaller quarter. So, any increase you have and specifically the lack of the start-up costs in the first quarter this year compared to last year have a much more meaningful impact on a small quarter like Q1. So, I think Q2 will see gains. I think we'll have gains all year. I think the percentage gains are, as you get into the bigger quarters are just smaller, that's all.

Tyler Langton -- JPMorgan -- Analyst

Okay, that's helpful. And then in transit, did you say flat segment income for the year? Was that including the impacts of like FX, or excluding it, and I guess if you can just provide a little bit more.

Timothy J. Donahue -- President and Chief Executive Officer

So, If we excluded FX, we'd be up a bit, but with FX will be flat for the year.

Tyler Langton -- JPMorgan -- Analyst

Got it. Okay.

Timothy J. Donahue -- President and Chief Executive Officer

We're modeling about $7 million or $8 million of FX in the business, I think for the full year.

Tyler Langton -- JPMorgan -- Analyst

And now you're seeing it just within Transit, I think you mentioned the U.S. strapping business was a little weaker, Europe protective up. Now, are you seeing any signs of slowing instead of the other businesses that you have, the transit competes in?

Timothy J. Donahue -- President and Chief Executive Officer

Yes, what I would tell you is -- a little confusing in that, we would have just given all the news that's coming out of Europe. Now, we would have expected Europe to be a bit slower and Europe actually had some acceleration across most of its product lines, which we're still trying to understand. Just given the broader macro news coming out of Europe right now.

In the U.S., I think more of it, it had to do with some competitive efforts made by others and in our unwillingness to cut price. So, we'll see, where it takes us. I think in general and we're seeing this. You know, in some of our transit businesses, and I'm reading this in some general economic news. I think people are just a bit more cautious now. I don't think there's any real signs of a looming recession, but people are a little bit more cautious. And obviously the longer we go, until we have a recession that cautious nature, eventually they have to refill their pipeline. So, I think we're fairly confident, we're going to have a another strong performance in transit.

And as I said, this is a business that and we've always maintained it's a GDP-plus or minus business, given the very low capital requirements of the business, you're not expecting huge growth, unless you do bolt-on acquisitions. So, this is a business that's operating right in line with our expectations and continues to, to flow enormous amounts of cash.

Tyler Langton -- JPMorgan -- Analyst

Great. Thanks so much.

Timothy J. Donahue -- President and Chief Executive Officer

Thank you.

Operator

Our next question will come from Scott Gaffner of Barclays. You have an open line.

Scott Gaffner -- Barclays -- Analyst

Thanks. Good morning, Tim. Good morning, Tom.

Timothy J. Donahue -- President and Chief Executive Officer

Good morning, Scott.

Thomas A. Kelly -- Senior Vice President and Chief Financial Officer

Good morning.

Scott Gaffner -- Barclays -- Analyst

Tim, if we could just talk a little bit about the North American volumes, I mean, I think you said they were flat in the quarter and obviously the industry data was quite strong. I think maybe you coming off a difficult comp year-over-year. Can you talk about what you're seeing relative to the industry wide? Why your volumes would have been flat?

Timothy J. Donahue -- President and Chief Executive Officer

Well, I think, what one thing we did talk about in February, was that we expected to under-index the market this year. We've over-indexed the market for several years in a row, where we're pretty tight on capacity. As you know, we were sourcing cans from the competition last year and incurring higher cost than we could produce those cans for and higher costs in terms of freight. And we did make some decisions this year that for some contracts that rolled over and for some other situations, we made some decisions that, it didn't make a lot of sense for us to continue to outsell our own capacity.

So, what we're trying to do is, is only sell directly our capacity and so we'll under-index this year. But nothing wrong. Obviously, the fundamentals in the market are extremely strong and the overall market and the demand for our customers from our locations and our capacity footprint is also strong. It's just our operational change this year to try to reduce the extra costs that we were incurring last year. At the end of the day, Scott, we were making and sourcing cans for practice in some cases last year, we don't -- that's a bad practice to get into. We don't want to do that anymore.

Scott Gaffner -- Barclays -- Analyst

Completely agree. If we look at the year-over-year change in our profit you said plus $16 million, you mentioned a few things, LatAm cans, glass, and start-up costs and price recovery. Can you just help us get a little bit more granular on those buckets, so that we can make our own judgment on the continued improvement as we move to the year.

Timothy J. Donahue -- President and Chief Executive Officer

How much do I want to tell you. So, is the million-dollar question, right?

Scott Gaffner -- Barclays -- Analyst

Well, maybe the easiest one is just, I mean, the start up costs sort of how much was that?

Timothy J. Donahue -- President and Chief Executive Officer

Well, so I'll give you a number because it's, -- I don't have the start. I can tell you that our glass results in Mexico were up $4 million year-on-year. So, that's an easy number to tell you. And some of that will be start-up from the new furnace last year, but more to the point, the furnace is fully operational and fully sold out this year. So, if we are talking $16 million ex-currency, you've got $4 million coming out of glass, boy Nichols and, Nichols and Monterrey, there is probably $3 million in there just start up. Nichols', our efficiency numbers in Nichols are now 90% plus , whereas this time last year, we were probably still in the 70s.

I'm trying to stay away from pricing, obviously. You can tell, right. The plants generally the system is running better operationally and so as I was describing earlier, our willingness to give up volume and not try to make every can for every order and source from others, is saving us money. We're not experiencing any freight increases year-on-year and we're not changing labels is often. So, operationally in the factories, we're running better. But if you wanted to cut this up in four buckets. I'd say glass, start up costs in Monterrey and Nichols, better volumes in Brazil, pricing you can cut it up four ways times four is 16, something like that.

Scott Gaffner -- Barclays -- Analyst

Okay. Fair enough. Just last one on Transit Packaging. I mean, I know you don't have huge backlogs in that business, but coming into 2019, I think, you said the backlog at the end of 2018 were relatively strong. Did you see any significant shift in the backlog throughout the first quarter?

Timothy J. Donahue -- President and Chief Executive Officer

So, I would say, the backlog is lower. So, at the end of '18 and we were stronger than at the end of '17. At the end of March this year, it's stronger than it was at the end of December '18, but it's low -- a little bit lower about 3% or 4% lower than it was at the end of March of '18. And that's kind of in line with what I said, there's a lot of hesitancy in the market right now for people to, to step out and place orders. But I think it's just a time -- our guys feel pretty confident that's just timing at this point and it's going to be recovered because they don't -- we don't see any underlying issues in the economy or real demand, which is just people a being very cautious at the beginning of the year.

Scott Gaffner -- Barclays -- Analyst

Sounds good. I appreciate it guys.

Timothy J. Donahue -- President and Chief Executive Officer

Thanks, Scott.

Operator

Our next question will come from Anthony Pettinari of Citi. You have an open line.

Anthony Pettinari -- Citigroup -- Analyst

Good morning.

Timothy J. Donahue -- President and Chief Executive Officer

Good morning.

Anthony Pettinari -- Citigroup -- Analyst

On the last call, I think, you talked about a $0.09 impact from FX on full year EPS. Just marking to market, what are your expectations for the year now? And then assuming FX is a bit more of a headwind than it was at the beginning of the year. Has your free cash flow bridge changed at all, compared to three months ago, if you look at FX and then maybe just the performance of the individual businesses?

Timothy J. Donahue -- President and Chief Executive Officer

So, Tom and I were talking, while you were talking. I think if we said $0.09 before, maybe it's $0.10 or $0.11 now. That the euro is a little touch weaker. Cash flow bridge hasn't really changed. Okay, there's a little more currency in there. But we are -- one thing I would say is that, we are -- the North American beverage plants operationally running exceptionally well. And perhaps they're running better quicker than we had anticipated. So, that you know the team would have come through with a budget and a target and we -- at corporate, we'd put all the hedge on that. I just worried that they wouldn't get there as quick. And I think they're getting there quicker than we anticipated. So, we're going to overcome currency with performance.

Anthony Pettinari -- Citigroup -- Analyst

Okay, that's helpful. And on non-European bev, I wondering if it was possible to break out vols in Europe proper versus what you saw in the Middle East. And then in terms of the timing of lapping some of those headwinds in the Middle East, is that a 2Q or 3Q event? And when can that -- when it can that part of the business kind of grow more in line with what Continental Europe to see?

Timothy J. Donahue -- President and Chief Executive Officer

Yeah. So, in Europe, and again we described to you back in February, we were a little capacity constrained last year. We've got the three new lines up now. We are experiencing start up and I'll touch upon one of the little one issue we had there. But European volumes up about 4.5% in the quarter. Middle East down about 2%. But operationally income in the Middle East is only down about $0.5 million to $1 million from an operational standpoint. So, most of the shortfall you're seeing as currency and start-up and then there is some price cost pressure in that again, a small quarter. So, you don't have enough volume to overcome in the first quarter energy and other labor inflation that you'll be able to overcome in later quarters, when you have more volume.

The one issue just to mention in -- with the start up. One little problem we had exacerbating a start up in Spain, until I think April 2nd or April 3rd, we weren't hooked up to the Power Grid in Spain. So, we were running the plant, the one line and then the second line of diesel generators and that's a little bit more expensive than you would like to do, but we're -- that's behind us now. So, we're not going to experience that any longer.

Anthony Pettinari -- Citigroup -- Analyst

Okay, that's very helpful. I'll turn it over.

Timothy J. Donahue -- President and Chief Executive Officer

Thank you.

Operator

Our next question will come from Ghansham Panjabi from Baird. You have an open line.

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

Hey guys, good morning.

Timothy J. Donahue -- President and Chief Executive Officer

Hi Ghansham.

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

Hi, Tim. I guess going back to Signode, maybe you could just break out and I'm sorry if I missed this. But how machine sales did versus the consumables? How does the cadence of volume factor in the quarter? An early look at April, they're starting up with a normal seasonality. Just give some more color on Signode. Thanks.

Timothy J. Donahue -- President and Chief Executive Officer

Yeah, I think you know most of the volume shortfall we saw -- the big volume shortfall we saw was within the U.S. strapping business and that's both plastic and steel strap for the reasons I described. I think it's more to do with competitive pressure than anything else and that the team has been pretty firm on, on price policy. Equipment and tools, more or less right in line with the prior year and Europe up, protective up as I said. Demand in Asia a little softer than we expected and mainly the Asian business is a strapping business for a large part of the business are steel strapping business. They've got a big steel strapping business in Australia and one of the big mill in Australia was on strike in Q1. So, we didn't ship any strap to the one large customer there.

But generally February was a pretty soft month, March firmed up a bit. March was pretty much in line with last year. So, nothing out of the ordinary, it's a -- as we've described, it's an extremely diverse business and individually if you looked at any one product line, in any one geography, the movements from period to period in terms of volume can be quite shocking up or down. But it doesn't translate to a whole lot on the top-line because individually everything is so small compared to the unit as a whole.

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

Okay. And then just to clarify on U.S. the pricing comments you've made, I guess, I really don't understand that. I mean steel prices are still pretty and plastic prices pull back a little bit. But what's driving this competitive sort of hesitancy if you will or these connected terms of what you represent from a pricing standpoint in the U.S.?

Timothy J. Donahue -- President and Chief Executive Officer

Yes. You've got -- the CRU is pretty high and you've got a couple of customers out there that are, or couple of competitors out there that are trying to gain volume. So, it's just competition, Ghansham.

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

Okay. And then just one final one in European Food. Volumes were pretty strong, but you called out in -- just energy and labor, I haven't heard you really called it out in the past specific to that region. Just some more context on that. Thanks so much.

Timothy J. Donahue -- President and Chief Executive Officer

Yes, I mean the only thing I was trying to point out is that, every year or a lot of years, we have inflationary pressure. And you've heard us talk about inflation before in North America, as it relates to the PPI and we have similar mechanisms in the contracts in other geographies around the world, plus or minus sometimes they work better than others. But in a small quarter like Q1, where there's the volume is well you do have volume gains, there is not enough volume to offset price escalation that may -- price or cost escalation that maybe above your price modifiers.

Energy has been, I'm sure if you talk to -- and I'm talking about electricity. If you talk to any manufacturer across Europe, they are going to tell you electricity rates across Europe have been skyrocketing over the last couple of years. And it's just something we have to do a better job covering and there are a lot of ways to cover it, you can cover it with increased volume, you can cover it with better cost management and you can cover it with better terms within a contract, when those contracts come for renegotiation. But it's just a -- it's a headwind that, that's more meaningful in a small quarter like Q1.

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

Got it. Thanks so much, Tim.

Timothy J. Donahue -- President and Chief Executive Officer

You're welcome.

Operator

Our next question will come from Mark Wilde of Bank of Montreal. You have an open line.

Mark William Wilde -- BMO Capital Markets -- Analyst

Thanks. Good morning, Tim. Good morning, Tom.

Timothy J. Donahue -- President and Chief Executive Officer

Good morning, Mark.

Thomas A. Kelly -- Senior Vice President and Chief Financial Officer

Good morning, Mark.

Mark William Wilde -- BMO Capital Markets -- Analyst

Tim, just coming back to Europe for a couple of things, in the beverage can area. Can you give us some sense of how big those start up costs were in the first quarter, and then just cadencing through the balance of the year?

Timothy J. Donahue -- President and Chief Executive Officer

I could tell you that the start-up in the first quarter is on the order of, including the increased depreciation on the order of $10 million. So, it's not insignificant. There are three lines, and all three lines are larger lines, they are not the smaller lines, we typically put in Asia for a start-up. For example, they are pretty full lines, just given the demand patterns that we see in Europe and the fact that we're sold out in the expectation we have for continued can growth across Europe, as the sustainability push continues to become more meaningful. So, about $10 million.

A little -- we'll have a little bit in Q2, maybe on the order of $3 million or $4 million, but I do believe, as we sit here today, as I said in the prepared remarks, I do believe that our performance in Q2, if we were $15 million or $16 million short in Q1, we are going to be pretty much right on top of Q2 last year, than Q2 this year.

Mark William Wilde -- BMO Capital Markets -- Analyst

Okay. And then this sustainability growth in Europe, can you talk about, what that really is translating to right now? Is it just discussions with customers about potential conversions, or what are you actually seeing and hearing from them right now?

Timothy J. Donahue -- President and Chief Executive Officer

We have to be little careful because you got one or two customers don't want us to say much. But if you want to think about products, which have typically been package in a competing substrate, you've got a number of customers now understanding and trialing cans for those products. And so they are beyond talking, they are now at the trialing stage.

Mark William Wilde -- BMO Capital Markets -- Analyst

Okay. All right. And then finally just that new line or third line in Cambodia, is that actually some of the equipment that you're moving out of China?

Timothy J. Donahue -- President and Chief Executive Officer

No, that's new equipment,. The Chinese equipment will go to one of the factories in Vietnam and Ho Chi Minh. And the other line is slated to, I think, we're going to move in to Da Nang -- not Da Nang, I'm sorry Hanoi. So, both will go to Vietnam.

Mark William Wilde -- BMO Capital Markets -- Analyst

Okay. All right.

Timothy J. Donahue -- President and Chief Executive Officer

It's just timing. One is happening now. The other will happen later.

Mark William Wilde -- BMO Capital Markets -- Analyst

Okay, very good. I'll turn it over. Thanks, Tim.

Timothy J. Donahue -- President and Chief Executive Officer

Thank you.

Operator

Our next question will come from Debbie Jones of Deutsche Bank. You have an open line.

Debbie Jones -- Deutsche Bank -- Analyst

Hi, good morning.

Timothy J. Donahue -- President and Chief Executive Officer

Good morning.

Thomas A. Kelly -- Senior Vice President and Chief Financial Officer

Good morning, Debbie.

Debbie Jones -- Deutsche Bank -- Analyst

You mentioned in the release, robust growth in Southeast Asia and Brazil, I know you talked about it a little bit. But one I didn't catch the Brazil growth, if you mentioned that. And two, I was hoping to get some commentary on whether or not this is kind of above your expectations of what you've been seeing? If there's anything notable about trends in either of those regions that's changing driving the pack mix?

Timothy J. Donahue -- President and Chief Executive Officer

So, I think Southeast Asia was up on the order of close to 10% and that would have been pretty much in line with our expectation coming back to -- I don't have Brazil. I have Latin America in front of me. In Latin America it looks like it's up about 7%, 7.5% in total. I will tell you, Brazil is up more than that. And then, Mexico and Colombia are up a touch below that. I think, you know, honestly speaking, I think the Brazil growth is a bit more than we expected.

Now having said that, they just came out of, what two or three years of some of the worst economy in the recession, they had from what 14 or 15, 16, 17. And it's a market that's undergoing incredible reforms, whether they're political, social, economic. I think the future is exceptionally bright for Brazil. So, we're exceptionally bullish and notwithstanding our current capacity constraints until we get the new plant in Rio already running in late Q3. We expect Brazil to be quite healthy throughout this full year.

Debbie Jones -- Deutsche Bank -- Analyst

Okay. That was actually my second question. I was a little surprised by the growth and results, I saw you are a bit capacity constraints, given that the start up is until later this year. So, I was curious if you could just comment on that. And then your thoughts on the overall supply demand balance in the region. Just because it does seem like there's a little bit trickling in from a lot of different directions, but we are seeing the growth.

Timothy J. Donahue -- President and Chief Executive Officer

Yeah. So, I think certainly, if you think about months, the months of August or September through Carnival, we are -- all of us, all the companies were sold out. And then leading up to that, you know, a bit capacity constrained and how much inventory we can build. We're coming out of Carnival, usually the month of March, -- month of March, April, May are a little bit lighter. So, we do have the ability, as the market grows this year compared to the prior year to experience growth.

I think in terms of utilization in the market, the markets, what 28 billion, 29 billion cans and I think over the last couple of years, we've picked up 4 or 5 percentage points in the pack mix from glass to can. So, really positive. And while there is a little bit excess capacity currently, I think, it's going to quickly be absorbed. I don't see it creating any real issue in the near term. I think this is a market that's 200, 210 million people. And as we've said before, the beer market is now 50% in cans. United States is 70% in cans for beer and there's no reason, why over the next, what, 5, 7, 10 years that the Brazil can be 70% in cans. And I think I know you guys follow the glass market. I think the glass guys would tell you they are pretty much sold out in glass right now in Brazil. So, as the fillers need more, more packaging they're coming to the cans. So, it's pretty exciting right now in Brazil.

Debbie Jones -- Deutsche Bank -- Analyst

Great. Thanks and good luck in the quarter.

Timothy J. Donahue -- President and Chief Executive Officer

Thank you.

Operator

Our next question will come from George Staphos from Bank of America. You have an open line.

George Staphos -- Bank of America -- Analyst

Thanks. Hi everyone. Good morning.

Timothy J. Donahue -- President and Chief Executive Officer

Hi George.

George Staphos -- Bank of America -- Analyst

Thanks for the details. I guess the first question that I have is on beverage cans. A lot of my questions are already asked and answered. But you know on the one hand, you're seeing a very tight market condition across a lot of your geographies and that's a good thing. On the other hand, while you want to keep that market tight, you often want to meet your customers' needs for various reason, including avoiding others, who might be considering entering the market to come in.

Are you finding with new customers, with new facilities, with discussions you're having with customers right now about potential additions projects would have you, that the terms -- forgetting about pricing for a minute because I know you can't really go there. But are they getting more favorable for you in terms of what is expected from the customer relative to what's expected from Crown? And are you finding that you're at least being able to majority sellout your new lines, as they're coming on, is that ratio heading higher from what you can see again, given this currently, really good market condition. We haven't seen this in 20, 30 years.

Timothy J. Donahue -- President and Chief Executive Officer

Yes, so similar to the question you asked in February, George, because we talked about the cola wars of the '80s and I know that's what you're referring to. I would say it's different by geography, but certainly we are tight everywhere. We're doing our best to bring up as much capacity as we can. We've got several projects in Asia. We've got several in Europe that just completed. We've got one under way in Brazil. And North America, we've got a situation, where it's the biggest market in the world. And traditionally, it's been the most -- the least profitable on a percentage basis.

Not necessary the least profitable on a cash flow basis, but on a percentage basis. So, if you look at allocating capital and making capital decisions and returns, it's the least attractive market historically. So, we're trying to get to a situation, where we can make it a bit more attractive. So, that as we present opportunities and capital request to the company and to the Board, we can do it with the idea that it makes sense to do.

And now having said that, whether the customers understand that or don't understand that, I don't think they really care. They've kind of been in the driver seat for the last 30 years, dictating terms to, to the suppliers. And clearly, it's a little shocking for them. But their margins are 40% and our margins are 10%. So, anytime they want to trade that margin profile and work back toward the middle. We're prepared to do that.

But we're trying to get to a situation, where returns justify new capital. And the first goal is, you want to service your customers with quality product and high service. And we don't want to limit their ability to get their products on the shelf. But at the same time, we have to be -- we've got to be fairly compensated for what we're trying to do. You spent a lot of time George, over the years in a number of different factories for a variety of different products that are made and you fully understand, the engineering feat behind beverage cans at 3,000 cans a minute, is no short fee. So, we do need to be fairly compensated for that. And so that's what we are endeavoring to do, at least here in North America and we'll see if we can do a little better in some of the other regions as well.

George Staphos -- Bank of America -- Analyst

And I realize it's a tough question to answer. And ultimately, no guarantees in life on anything. But the window, if you want to frame it that way. Do you see it staying at least as widely open as it is now to have more constructive discussions with your customers around the globe? Is there anything that you see on the horizon that maybe again it is giving you some caution in terms of your ability to again push, better terms I guess more fairly compensated, again beyond price, terms, all the other ways that you can bring value and get value for what you do. How would you discuss that to the extent possible?

Timothy J. Donahue -- President and Chief Executive Officer

Probably I want to stay away from that. The only thing I would say, this is kind of, you know this already, but I'll say it anyway. We have goals and aspirations and our competitors have goals and aspirations, and so do our customers. And those three different buckets of aspirations are not always aligned. And so, the one thing that gives you caution is, how far do you push and how much risk are you willing to take, and that goes along with capacity as well.

We've had situations in the past, when we thought it was a great idea to put a lot of capacity in, because it look like things are going to be great for a long time. And then the industry wakes up one day and it's not running at 97% utilization, it's running at 88% or 90% and that's not a good answer for the beverage can business. So, we are always a bit cautious around how much capacity we're going to rush to put in, understanding that, that others may do the same and understanding that the other substrates, whether they have issues or not, currently they may figure out a solution to their issue and they'll become relevant. Again, we're more relevant than we think they are right now.

George Staphos -- Bank of America -- Analyst

Two last ones and I'll turn it over. And the first one, you can just to quickly relative to where you were a year ago, that opportunity to gain share from other substrates and markets, where environmental concerns is most pronounced. Has that accelerated, or is it pretty much the same pace, as we would've seen a year ago?

And then a one-off question, there was a charge that you took for intangible amortization from prior acquisitions in the quarter, you just reported. What was that related to? Was it related to an acquisition that didn't necessarily have the value you thought it would have and yet write it down here? Thank you, guys. Good luck in the quarter.

Timothy J. Donahue -- President and Chief Executive Officer

So, the first answer is, it may or may not be at the same pace, it was a year ago, the sustainability question you had. But I will tell you, I certainly believe it a 180 degrees more today than I would have believed that a year ago. So, my conviction is much stronger today than it was a year ago. I think others, customers included, their conviction levels are much higher. George, you're going have to give Tom a little more -- we are little puzzled by the second question. Tom is looking at me puzzled.

George Staphos -- Bank of America -- Analyst

I thought there was a charge you took in the quarter in your non-reportive that you took out of operating earnings for amortization of prior acquisitions, did I miscast that?

Timothy J. Donahue -- President and Chief Executive Officer

Signode and--

Thomas A. Kelly -- Senior Vice President and Chief Financial Officer

I don't think so. The amortization we have is just the normal amortization from Signode as well as--

Timothy J. Donahue -- President and Chief Executive Officer

Mivisa and EMPAQUE.

Thomas A. Kelly -- Senior Vice President and Chief Financial Officer

Mivisa and EMPAQUE, which we had last year. So I'm not sure what that is.

George Staphos -- Bank of America -- Analyst

Footnote one in the first quarter of 2019 Crown recorded charges of $47 million for intangible amortization from prior acquisitions. We can take it offline, but that's what I was asking about.

Thomas A. Kelly -- Senior Vice President and Chief Financial Officer

Yeah. That's the amortization of the intangibles. It's not a one-time. It's just the normal amortization flowing through.

George Staphos -- Bank of America -- Analyst

Okay.

Thomas A. Kelly -- Senior Vice President and Chief Financial Officer

Flows through every quarter.

George Staphos -- Bank of America -- Analyst

Got it. Apologies guys. Have good quarter.

Thomas A. Kelly -- Senior Vice President and Chief Financial Officer

Thank you.

Timothy J. Donahue -- President and Chief Executive Officer

Thank you, George.

Operator

Our next question will come from Adam Josephson of KeyBanc Capital Markets. You have an open line.

Adam Josephson -- KeyBanc Capital Markets -- Analyst

Tim, and Tom, good morning.

Thomas A. Kelly -- Senior Vice President and Chief Financial Officer

Good morning.

Timothy J. Donahue -- President and Chief Executive Officer

Hi Adam.

Adam Josephson -- KeyBanc Capital Markets -- Analyst

Tim, just on the segment commentary for '19, correct me if I misheard you. But I think you said for all segments ex-Americas beverage you would be flat ex-currency . And I think currency is going to be about at $20 million, also drag this year. So, that would, correct me if I'm wrong, that would imply that Americas bev would be up pushing $60 million this year? I know you didn't quantify Americas bev, but--

Timothy J. Donahue -- President and Chief Executive Officer

Yeah. So, let's just back up a second, what I said was not ex-currency. So, if when I talk about European Beverage, European Food, Transit Asia, with the currency headwind for the full year, they will all be more or less in line with the prior year.

Adam Josephson -- KeyBanc Capital Markets -- Analyst

Okay. And so, but all of the growth this year will be in Americas bev?

Timothy J. Donahue -- President and Chief Executive Officer

That's -- and in the non-reportable yes.

Adam Josephson -- KeyBanc Capital Markets -- Analyst

Non-reportable. Okay. You mentioned you're obviously capacity constrained in North America. We've seen the CMI data it's been growing 3%, 3.5% last couple of quarters. I'll ask you in a moment about what your longer-term view is there? But how long do you intend to remain this capacity constrained in North America, and what if anything do you plan to do about it?

Timothy J. Donahue -- President and Chief Executive Officer

Well, I think we've been pretty clear that we're trying to get fair compensation for the products and services we provide. Before we dedicate any more capital to a market that historically has been the, the lowest return market of any of the markets that we operate in around the world. And we're prepared to consider that in the future, but what not at the return rates that have existed over the last several years.

I do think the market will remain extremely tight. There are some product categories within the market that are over sold right now. There are some sizes that are short in the market. But -- and I think as we look for the rest of the year and in the next year, I wouldn't be surprised, if can came growth is 1.5% to 3%, that's a wide range, but it's from quarter to quarter, It's, you don't know how it's going to play out. But I think that -- I think we're starting to see customers react to pressure in certain jurisdictions, where some other substrates are out of favor and they're looking to pack more in can. So, this could remain tight for some time.

Adam Josephson -- KeyBanc Capital Markets -- Analyst

And you're comfortable ceding share for a year or two in the meantime, if it comes to that?

Timothy J. Donahue -- President and Chief Executive Officer

I can't. I can't tell you what others are going to do. I can only tell you, we're going to try to get fairly compensated before we make any more investments.

Adam Josephson -- KeyBanc Capital Markets -- Analyst

Right. And just on that longer term outlook Tim, 1.5 to 3-ish obviously the last 10, 15 years, the market's been flattish down a bit. Last two quarters up 3.5% or so. Is there something that you would point to, is starting in the last, starting six months ago that notably changed, or did you see something building up such that you were not surprised to see these huge growth rates relative to what we've seen over the past 10,15. I'm just trying to understand what would have seemingly changed on a dime really in the last six months? And why would that be sustainable?

Timothy J. Donahue -- President and Chief Executive Officer

So, beginning several years ago, you started to see the -- an increase in energy drinks, sparkling waters, craft beers and then craft beer usage of cans accelerating. But over the last six months what has happened that's allowed that's a bubble to the surface, is that mass beer has not experienced the large declines that have experienced in several quarters before that. So, mass has been pretty and can has been or alcoholic in cans has been fairly consistent. It's not been down. So, it has allowed the other categories to bubble up and show growth across the entire industry.

Adam Josephson -- KeyBanc Capital Markets -- Analyst

Got it. And just last question on the substrate shift and sustainability. Obviously glasses have been losing share over the years. Do you have any data as to cans versus plastic over the years? Have cans been gaining any share from plastic? Do you expect that to happen just because, when we're talking sustainability, I assume you're referring more to plastic than to glass, although I could be mistaken? But, is there any data you have that support this idea that there has been a substrate shift away from plastic?

Timothy J. Donahue -- President and Chief Executive Officer

Yeah, break it down into -- there is no plastic to speak of in beer. And there's no glass to speak of in CSD. So, in beer it's cans versus glass and soft drink it's cans versus PET. I think the big thing that's happened in CSD is the, over the last decade, the literage sold in two-liter bottles, the larger bottles are shrinking and it's more a single-serve. So, their units maybe up, but the leaders have moved a little bit. I think it's in the United States maybe a little too early to say that we're seeing anything from the CSD players. But what you are seeing and we talked about this last time and I think it was specific to one of your questions' Adam, for whatever reason we're seeing how to get that in I'm sorry. We're seeing new product introductions more and more considering the can, whereas the can would not even have been considered 5 or 10 years ago. Now it's top of mind for people introducing new products.

Adam Josephson -- KeyBanc Capital Markets -- Analyst

Thanks, Tim.

Timothy J. Donahue -- President and Chief Executive Officer

Thank you.

Operator

Our next question will come from Arun Viswanathan of RBC Capital Markets. You have an open line.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Hi, thanks. Good morning, guys.

Timothy J. Donahue -- President and Chief Executive Officer

Good morning.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Just wanted to ask, I guess, going back to the other issues around your position, given that the beverage can growth is pretty robust here. Would you consider resourcing cans elsewhere, if it came to that and you found yourself too constrained to meet your customer demand?

Timothy J. Donahue -- President and Chief Executive Officer

Well, so what we try to do coming into this year is, not have ourselves in the position, where we have to source from others. And from time to time through the industry, we are all pretty good about helping each other out, if somebody has a fire or a strike, and certainly on commercial terms. But if we have an issue, a production issue that requires us or limits our capacity, our ability to make cans to satisfy the contracts we have in place, then we'll source cans. But we're not actively trying to source cans, just so we can say, we're selling more cans.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Okay, understood. And then also just looking out, I guess, do you expect your overall growth kind of in -- on volumes to kind of continue at this in this 2% to 4% range? And maybe if you can just run through your expectations for each geography mainly, Americas, Europe and APAC and Latin America, I guess that will be great.

Timothy J. Donahue -- President and Chief Executive Officer

Yes. So, I think globally we expect 2% to 4%. We've been, what 3% to 5% every year for the last 10 years I guess. And this year, maybe we're going to be on the order of 2.5% to 3%. The largest market we have North America, we're going to be largely flattish this year, just because of capacity. But the other markets Brazil, we're going to be up, we're going to sell every can, we can make. So, hopefully in the softer months of the Brazilian winter week, we obviously have compared to last year, last year we would had capacity, this year we will sell the capacity perhaps in Brazil will be up high-single digits. Mexico will be up.

Europe with the new factories coming online, especially as they come through learning curve and the start up is behind us in the second, third and fourth quarters, we could be up this year 8% to 10%. That's obviously not a sustainable number, that just a number that's in place because we've got capacity coming on this year and some others had capacity coming on in the prior years.

Middle East flattish, that's a plus or minus 1%. China, we're going to be down substantially this year because we basically cut the business in half when we took three lines out. We only have three lines left. But Southeast Asia will be up 10%. So, it's a mixed bag, but all in all, it's fairly positive. The only market, where we're probably as somebody used the term earlier ceding share if we in fact are doing that is North America, and we're just trying to do that until we get ourselves in the position where return rates justify more capital.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Great, thanks. And then on Signode, if I may lastly. I guess, how would you characterize the performance in the quarter? And I guess how would you kind of view the trajectory from here? I mean do you think there was any impact from macro headwinds in China and Europe? And have you seen any signs of life of those getting better? And this baseline of earnings, is there any seasonality that we should keep in mind for future quarters that would make those higher or lower or?

Timothy J. Donahue -- President and Chief Executive Officer

Yes. So, the second and third quarters are a bit stronger. The seasonality is not as it cute as in beverage or food cans. Signode has an extremely small operation in China. I think our revenues in China are $20 million. But having said that, the Chinese-US trade negotiations do have impacts throughout the Asian region. And as I said, Asia was a little softer. I don't think that, it hasn't anything do with the overall economies and notably India, because India is our biggest market in the Asian business. I think it just has to do with the cautiousness of people that are the buyers currently. I think that's going to come back only timing.

As I said earlier, we were very surprised just given the macro news out of Europe, that the European business was as strong as it was in Q1. And Q2 looks like it'll be OK as well. And North America, as I described, I don't think there's any fundamental underlying issue other than we decided to let some business go for price reasons. But all in all, it's going to be a pretty firm performance. It will be flattish to last year, which means they're going to overcome $8 million or $9 million of currency. And the second quarter last year was, -- was a blowout quarter, if you remember. So, there will be a little short of that in the second quarter of this year. But third and fourth quarters will be up against last year.

Arun Viswanathan -- RBC Capital Markets -- Analyst

Great, thanks.

Timothy J. Donahue -- President and Chief Executive Officer

Thank you.

Operator

Our next question will come from Chip Dillon of Vertical Research. You have an open line.

Chip Dillon -- Vertical Research -- Analyst

Hi, good morning, Tim and Tom.

Timothy J. Donahue -- President and Chief Executive Officer

Hi Chip.

Thomas A. Kelly -- Senior Vice President and Chief Financial Officer

Hi Chip.

Chip Dillon -- Vertical Research -- Analyst

Hey, first question is, basically, when you look at the yield curve and I know it's started to steepen a little bit. But it looks like interest rates, especially in Europe have gone straight down in the first quarter. And I don't know if you have been thinking about, or does it make sense to, to do some refinancing, or if you have maturities coming up that could lower your interest expense in reaction to that?

Thomas A. Kelly -- Senior Vice President and Chief Financial Officer

Yeah. Chip on the term loan side, I mean, that's the debt we plan on repaying with our cash flow to delever. So, that wouldn't be a good thing to refinance right now. And on the fixed rate side, most of that debt is not callable, so we're not really in a position to refinance that.

Timothy J. Donahue -- President and Chief Executive Officer

Yeah, Chip. This is the result of decades of bad policy across almost every country in Europe, right. So, hopefully this doesn't come to United States anytime soon. This is -- it's almost remarkable that, that real rates are negative right. Nominal rates might still be a touch positive. Real rates are negative. It's unbelievable.

Chip Dillon -- Vertical Research -- Analyst

It is. But if you are in a period, where you have to borrow money, there is that silver lining that you're not paying that much. But that's not what we hear yet.

Timothy J. Donahue -- President and Chief Executive Officer

But -- listen this is exactly what we did when we finance the Signode acquisition, Tom would tell you, if you, whether you can see it in the Annual Report or not, you look at, we borrowed 8 and 10-year money under 3% unsecured, just it's remarkable that I wouldn't lend money myself at that rate.

Chip Dillon -- Vertical Research -- Analyst

You're not alone on that one. Hey, I don't think you gave us a split between Europe proper and the Middle East in that segment, if you did I apologize for missing it. Do you have that?

Timothy J. Donahue -- President and Chief Executive Officer

On volume, yeah. I said Europe was up 4.5% and the Middle East was down 2%

Chip Dillon -- Vertical Research -- Analyst

All right. And then lastly, I know, it's still early in the year, but you look at the array of projects you have coming on and they're all coming on this year. Is it -- could we see next year's CapEx come down, or said differently? Do you see visibility into certain areas? I mean, you mentioned Brazil has some slack, but that might change in the next year or two. I mean should we expect to see more start-ups next year in the bev cans space around the world by you?

Timothy J. Donahue -- President and Chief Executive Officer

Yeah, listen, my hope is, one of the nice things about having the real privilege to run a company like Crown is the opportunity and it's a -- it is a real privilege. So, my hope is that, that number is not going to come down. That we're going to continue to have opportunities. And I think the exciting thing now globally in beverage cans just giving the -- given the high recycle -- recyclability of the product and the high recycled content that goes into the can sheet, the opportunities look really promising. So, I think the answer is, you're not going to see capital come down. We're going to continue to have opportunities and we're going to continue to build a business and we're going to have an industry that continues to build over time here. It's a pretty good time to be in beverage cans.

Chip Dillon -- Vertical Research -- Analyst

I hear you. Thank you.

Timothy J. Donahue -- President and Chief Executive Officer

Thank you.

Operator

Our next question will come from Gabe Hajde. You have an open line.

Gabe Hajde -- Wells Fargo -- Analyst

Good morning, Tim and Tom. Thank you for taking the question.

Thomas A. Kelly -- Senior Vice President and Chief Financial Officer

Good morning.

Gabe Hajde -- Wells Fargo -- Analyst

As George stated halfway through the call lot of questions have already been asked. But if you could give us any sense for, I know, it's early in the season. But any flooding impact to North American Food plantings, or discussions from customers that orders maybe a little bit later, just because things got in the ground late?

Timothy J. Donahue -- President and Chief Executive Officer

No, I don't -- I don't, you know, from a lot of the products nothing is going into the ground yet, right. So, this flooding will happen before the planting season and hopefully, I can't talk about this with 100% specificity, but hopefully the water recedes and the ground dries enough, so they can get into the field and do the planting. But we have not heard anything yet.

Gabe Hajde -- Wells Fargo -- Analyst

Okay. And maybe I'll try to take one last stab at the question in Americas bev profitability. When I look at EBITDA margins, I think, they went from mid-19s to something in the mid-16s. There are a couple issues in 2018 with higher transport cost and as you pointed out, sourcing cans. Can you parse out for us or sort of help us understand, what in your mind justifies putting more capital to work there from an EBITDA perspective, or how you look at it?

Timothy J. Donahue -- President and Chief Executive Officer

The other big thing that happened in '18 versus '17, if you're looking at margins was a lot of 20% increase in the cost of aluminum. So, the denominator effect on a one-for-one pass-through just in percentage terms, reduces the margin, not the absolute margin. So, yeah, I'm probably going to stay away from, you're asking me to justify yes or no and putting capital on our business is making 16% versus 19%.

I think we've been pretty clear that, where we're at now. And keep in mind our Americas Beverage includes Latin America, right. So, -- and we've been more than happy to expand the businesses in Mexico and Brazil over the last several years. And we've been hesitant to do the same in North Americas, which leads you to understand that those margins are different in those geographies. Not a whole lot different, but different enough that we've been unwilling to put more capital in the US until we can reasonably restore margins in the U.S. to a level we like.

Gabe Hajde -- Wells Fargo -- Analyst

Got it. Thank you, Tim. One last one. Trying to take a different angle at the beverage can shipments. They were stronger here in the fourth and the first quarter, which are seasonally smaller. Can you -- do you have any, from your vantage point any visibility as to, if this is customers trying to better plan, coming into the summer season? Or if it's some of these less sort of seasonally sensitive products that are being successful, maybe sparkling water, something like that?

Timothy J. Donahue -- President and Chief Executive Officer

No, I think, it's -- as I answered -- the answer to Adam's question. I think we've been seeing great momentum in a lot of the non-alcoholic categories other than CSD for the last several years. We saw it all through last year, but last year, the big beer guys were down early in the year and they seem to have recovered and/or stopped the slide in Q4 and Q1. So, you're starting to see the other categories that performance come through the overall CMI data. And I think that'll continue. I think the promotions, the beer guys are running the adequate promotions to continue to push the product and while the imports from Mexico, especially across the one label are doing, continue to do exceptionally well. The U.S. guys are doing a better job of maintaining their share and driving more volume, allowing the growth in sparkling and energy to come to the top.

Gabe Hajde -- Wells Fargo -- Analyst

Got it. Thank you. Good luck.

Timothy J. Donahue -- President and Chief Executive Officer

Thank you.

Operator

Our next question will come from Edlain Rodriguez of UBS. Your line is open.

Edlain Rodriguez -- UBS -- Analyst

Thank you. Good morning, guys.

Thomas A. Kelly -- Senior Vice President and Chief Financial Officer

Good morning.

Timothy J. Donahue -- President and Chief Executive Officer

Good morning.

Edlain Rodriguez -- UBS -- Analyst

Tim, one quick one for you on Signode. I mean you've talked about that the competitive pressure in the U.S. and your unwillingness to lower prices. So, how does that get resolved? Is it a question of demand is going to have to pickup, where everyone want to be willing to raise prices? So, how does that get resolved in your view?

Timothy J. Donahue -- President and Chief Executive Officer

Well, I think, like any other competitive situation, there is some business you're prepared to leave and there are some business, you're not prepared to leave. So, you react to that. And there will be other opportunities in the future. But we are -- it is a, I'm not sure we showed you at the Analyst Day, the revenues by product line, by geography, but it's so diverse that we don't get overly concerned from product to product across geography from quarter-to-quarter. We're trying to run a business and have a policy that makes sense for the long term. So, it gets resolved by growing the business in other areas. We're having an opportunity to recover, what may have been lost a quarter ago or a year ago.

Edlain Rodriguez -- UBS -- Analyst

Okay. And as a follow-up to that, in terms of this unexpected strength you saw in Europe, like is it prebuy, I mean, are you able to tell at all, what what's going on?

Timothy J. Donahue -- President and Chief Executive Officer

Yeah, I don't think it's pre-buy. It just I think the demand was stronger than we expected and what I don't know is, how weak they were in Q1 last year in Europe. But they did better than expected and they did better than we expected. And from our expectation and had to do, as I said earlier, just the macro news coming out of Europe doesn't sound great. And they were remarkably strong compared to that macro news. And it looks like they're going to remain pretty firm throughout the year.

So, I -- we will have to endeavor to understand some more. But again I know I said it earlier, I know, it could be a little frustrating for you to hear it again. All of these things, the business is so diverse and the cost of the product to the customer is so small relative to the product, they're protecting that. Volumes swings plus or minus, don't necessarily move the income number plus or minus, anywhere near the same ratio, as you would expect in cans.

Edlain Rodriguez -- UBS -- Analyst

Okay. Thank you very much.

Timothy J. Donahue -- President and Chief Executive Officer

Thank you.

Operator

Our next question will come from Brian Maguire of Goldman Sachs. You have an open line.

Brian Maguire -- Goldman Sachs -- Analyst

Hey, good morning.

Timothy J. Donahue -- President and Chief Executive Officer

Hi, Brian.

Brian Maguire -- Goldman Sachs -- Analyst

Thanks for taking my question. I had a two part question on aluminum sheet supply. One just was there any impact in 1Q from some of the 4Q issues that you and others in the industry talked about? And then sort of on a different note, you talked about even be fairly compensated from your customers for capital you put in place, some of the aluminum sheet guys particularly North America are talking the same language these days about needing to raise price in the market there being tight. Just wondering if you could remind us how those contracts are structured? Is that pass-through to the customer or do you just pass-through the raw aluminum price, any kind of concern you might have about supply agreements for aluminum sheet and price increases there?

Timothy J. Donahue -- President and Chief Executive Officer

So, the issue that we faced in Q4 with the sheet quality is behind us. As we think about being fairly compensated, yeah, I was an aluminum guy, I feel worse than I do as a can guy. And the customers sort of beating our brains in and we've been beating the aluminum guys' brains in for 25 years. And if I was an aluminum guy, I'd say, I want to be fairly compensated as well. And so the ingot prices quoted on the LME that, that is what it is. Their margin to convert ingot to can sheet or end stock or tab stock is the negotiating point

Certainly, in North America and for much of -- much of Europe and many jurisdictions around the world, these are strong pass-throughs that we have with our customer base, you always worry about the relative cost differential between your product and a product in another substrates. But we're on the right side of the environmental argument right now. And then there are some -- there are several customers that buy aluminum directly and we just tole the metal for them into can.

So, I'm less concerned about price right now. I don't know what it takes for the aluminum guys to be happy with returns. Certainly, if they double the price, that's a problem for everybody, but I don't think they're going to double the price. I think they've got some other percentage in mind. I'd be -- in the longer term, certainly in the near term, Crown is pretty well fixed with supply. I don't know how the others are fixed, right now. One of the big mills in Tennessee went down for can sheet. They're going to do auto stock and so supply is another issue, just given the tariff situation. And the tariff situation is not something that's sustainable just given the amount of aluminum that needs to come into the country to deal with domestic supply or domestic demand needs. And not an issue for Crown right now, but longer term that needs to be resolved.

Brian Maguire -- Goldman Sachs -- Analyst

Yeah, I guess like my question is along the lines of, if we are in this new period with like as George put across, we haven't seen in 30 years, the whole supply chain needs to react. And do you think there is enough spare of capacity in aluminum sheet today to absorb that? Or do they need to put more capital to work and be compensated for it?

Timothy J. Donahue -- President and Chief Executive Officer

Yeah, the answer is, there's not enough capacity, especially with the Tennessee mill to going into auto. There's not enough can capacity -- sheet capacity in the United States. And we would certainly love to put them to put more -- have them put more capacity in, just like our customers would like us to put more capacity in. And it comes down to economics. And so we all have to, our problems are our problems and their problems are their problems. And so we all have to manage our own problems.

And, but you're right, I mean the, the question behind your question is, the right question. It just, who is going to get there first and how are we going to make sure everybody is properly rewarded for the efforts and risks they're taking.

Brian Maguire -- Goldman Sachs -- Analyst

Makes sense. Just last one from me. I noticed some of the trade periodicals are reporting, there was a probably a small PET food can plant in the UK that of all things is converting to plastic pouches and it did cite you as being one of the suppliers there. Just wanted to, if you're expecting an impact from that, or there could be some other customers you pickup, but is that factored into your outlook for European Food cans volume this year?

Timothy J. Donahue -- President and Chief Executive Officer

Yeah, it's not a big number. A little interesting in that they're going to go from a sustainable product to a pouch, and so we've talked about recyclability. And so a PET bottle has some recyclability characteristics to it, not like the can, but it has some. A pouch has none, multi-layer with all kinds of other contaminants in it, it's pure trash. So, a little interesting that a food company would make that switch in an environment like Europe right now, where sustainability in the environment is top of mind for everybody.

If I was the beverage -- I was one of the beverage companies, I want to know why they're not attacking the food companies the same, why they are attacking the beverage company. So, but it's a small impact on us.

Brian Maguire -- Goldman Sachs -- Analyst

Okay. Sounds good. Appreciate it.

Timothy J. Donahue -- President and Chief Executive Officer

Thank you.

Operator

Our next question will come from Neel Kumar of Morgan Stanley. You have an open line.

Neel Kumar -- Morgan Stanley -- Analyst

Hi, good morning.

Thomas A. Kelly -- Senior Vice President and Chief Financial Officer

Good morning.

Timothy J. Donahue -- President and Chief Executive Officer

Good morning.

Neel Kumar -- Morgan Stanley -- Analyst

With your contract renegotiations, you've obviously talked about getting benefits of pricing. But if there have been any other terms, you're looking to get improvements then like customer order patterns or freight?

Timothy J. Donahue -- President and Chief Executive Officer

Yeah. So, without going into detail, the answer is yes.

Neel Kumar -- Morgan Stanley -- Analyst

Okay. And then I was just wondering in terms of your working capital expectations for the year, are they still set to be flattish? And what generally drove the $120 million working capital build in the first quarter? Is that just seasonal and in-line with your expectations?

Thomas A. Kelly -- Senior Vice President and Chief Financial Officer

Yes, we would expect the number to be flat for the year. The build this year was more or less in line with last year. That's not all working capital. There is also the difference between for example, cash interest and interest expense in there and some other things, taxes versus cash tax. But large leases, the seasonal working capital build that we typically see, plus some from Signode had a little bit in the first quarter as well.

Neel Kumar -- Morgan Stanley -- Analyst

Okay. And then just lastly, I guess, versus your expectations coming into the year, is your guidance for 2019, a little bit more back half weighted than you anticipated, just because of weaker FX and some of the plant start-ups, or is it generally in line with your expectations?

Timothy J. Donahue -- President and Chief Executive Officer

I think we characterized in February the performance this year would be stronger in the back half of the year versus the front half due to currency, which was going to hit Q1 and Q2. And the start up -- the big start up costs in the beverage business in Europe in Q1 and a little bit more in Q2. So, that's kind of in line. The only -- maybe we brought down internally our expectations for the second quarter, just to touch just because currencies moved a little bit lower, but we feel pretty strongly, we can recover that in the back half.

Neel Kumar -- Morgan Stanley -- Analyst

Thank you.

Timothy J. Donahue -- President and Chief Executive Officer

Thank you.

Operator

Our last question will come from Mark Wilde of Bank of Montreal. You have an open line.

Mark William Wilde -- BMO Capital Markets -- Analyst

Yeah, just a two quick follow-ons Tim. One, can you just give us a sense of kind of how we might think about sort of cadencing and comps for that Middle Eastern business for the balance of the year? And then also on Signode, I recall about a year ago, you saying you felt pretty good about kind of growth prospects for the first couple of years for Signode because you thought a lot about was kind of dialed in. And then you're talking about 2% or 2.5% growth here in '19, that doesn't seem like a real big growth number to me?

Timothy J. Donahue -- President and Chief Executive Officer

So, Middle East, I think we're generally going to have a flattish year. So, as I said volumes plus or minus 1. And I think we're going to see that flatten out in Q2 through the balance of the year. And income performance similar maybe plus or minus $2 million or $3 million versus the prior year. So, no big moves like we saw last year. And then on Signode, at the risk of disagreeing with you, I'm going to disagree with you.

Mark William Wilde -- BMO Capital Markets -- Analyst

Okay.

Timothy J. Donahue -- President and Chief Executive Officer

So, for a business that has roughly $2.5 billion in revenue, or you spend $30 million in capital, 2% to 2.5% growth is pretty good. Right, I mean, historically in the can industry, if we had 2% or 2.5% growth, we were doing back flips. We are always thrilled. We're kind of in this iPhone world now, where if things don't go up 10% every week, somehow that's a disappointment. But I'll take 2.5% growth all day long in a business that has 90% free cash flow conversion because it has very little capital requirement. And then to the point, where we can supplement it with bolt-on or several years now something perhaps a little larger, well that's a -- it's a nice position to be in, from our standpoint. I'm happy to listen to, why you're disappointed in that. But I do disagree with that.

Mark William Wilde -- BMO Capital Markets -- Analyst

Okay, fair enough.

Timothy J. Donahue -- President and Chief Executive Officer

Okay. Thanks, Mark. So, Chris, I think you said that was the last call. So, that the last question. So, that concludes the call and we thank all of you for joining us and we'll speak to you again in July. Bye now.

Operator

Thank you, speakers. And that concludes today's conference call. Thank you all for participating. You may now disconnect.

Duration: 72 minutes

Call participants:

Thomas A. Kelly -- Senior Vice President and Chief Financial Officer

Timothy J. Donahue -- President and Chief Executive Officer

Tyler Langton -- JPMorgan -- Analyst

Scott Gaffner -- Barclays -- Analyst

Anthony Pettinari -- Citigroup -- Analyst

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

Mark William Wilde -- BMO Capital Markets -- Analyst

Debbie Jones -- Deutsche Bank -- Analyst

George Staphos -- Bank of America -- Analyst

Adam Josephson -- KeyBanc Capital Markets -- Analyst

Arun Viswanathan -- RBC Capital Markets -- Analyst

Chip Dillon -- Vertical Research -- Analyst

Gabe Hajde -- Wells Fargo -- Analyst

Edlain Rodriguez -- UBS -- Analyst

Brian Maguire -- Goldman Sachs -- Analyst

Neel Kumar -- Morgan Stanley -- Analyst

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