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Silgan Holdings Inc (SLGN) Q2 2019 Earnings Call Transcript

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Silgan Holdings Inc (NASDAQ: SLGN)
Q2 2019 Earnings Call
Jul 24, 2019, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Thank you for joining the Silgan Holdings Second Quarter 2019 Earnings Results Conference Call. Today's call is being recorded. At this time I'd like to turn the call over to Kim Ulmer Vice President, Finance and Treasurer. Please go ahead, ma'am.

Kimberly I. Ulmer -- VP of Finance & 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 2018 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 -- CEO & Chairman of the Board

Thanks, Kim. Welcome, everyone, to Silgan Holdings second quarter 2019 earnings conference call. Our agenda for the morning, we'll focus on the financial performance for the second quarter. Review our outlook for 2019. After prepared remarks, Bob and I'll be pleased to answer any questions that you might have.

As you saw in the press release, we delivered record second quarter adjusted earnings per share of $0.55, a 6% increase over the prior year quarter and at the upper-end of our range for expectations for the quarter.

We were pleased with the performance and the prospects for each of our businesses. The increase in adjusted earnings per share was primarily due to a 6% volume improvement in the Metal Container business as a result of higher volumes to a seasonal customer who had been destocking inventory in the prior year, as well as continued growth in pet food. The Metal Container business operated and successfully managed the continued challenges of significant metal inflation instigated by tariffs.

Our Closures business were slightly lower in EBIT as a result, the foreign currency and lower pension income. The Plastic Container businesses reported its 12th consecutive quarter of improved result, despite similar pension headwinds.

As part of our relentless focus on costs, we also announced a footprint optimization program in the second quarter, which included the shut down of two metal container manufacturing facilities and the withdrawal from the Central State Pension Fund. We recorded an aggregate restructuring charge of $39.3 million, primarily related to the pension withdrawal liability. Given our performance for the first half of 2019 and our outlook for the remainder of the year. We're reconfirming our full year earnings guidance in the range of $2.10 to $2.20 per share, that's compared to $2.08 in the previous year. With that, I'll turn it over to Bob to review the financial results in more detail and provide additional explanation around our earnings estimate for 2019.

Robert B. Lewis -- EVP and CFO

Great. Thank you, Tony. Good morning, everyone. As Tony highlighted our aggregate results for the quarter were at the high-end of our expectations, as we've benefited from improved volumes in the Metal Container business and strong operating performances across each of our businesses. These benefits were partially offset by lower non-cash pension income across the businesses, unfavorable foreign currency translations and a less favorable mix of products sold in the Closures business. As a result, our adjusted earnings per share were $0.55 for the quarter as compared to $0.52 in the second quarter of 2018.

On a consolidated basis net sales for the second quarter of 2019 were $1.09 billion, an increase of $34.1 million or 3.2%, largely as a result of the pass through of higher raw material costs in the Metal Container business, partially offset by lower sales in the Closures and Plastic businesses.

Results for the second quarter of 2019, include rationalization charges of $39.3 million, primarily for the announced shut-down of two metal container facilities in the US and the recognition of the withdrawal liability associated with the withdrawal from the Central States Pension Fund, which had an aggregate impact with $0.27 per diluted share, but the prior year quarter, included a loss on early extinguishment of debt with an aggregate impact of $0.02 per deluded share.

Foreign currency translation negatively impacted our earnings for the quarter by $0.01. Interest and other debt expense before the loss on early extinguishment of debt decreased $1.5 million to $28.4 million due to the lower average outstanding borrowing, as a result of the repayment of debt at the end of 2018 and the impact from foreign currency translation. The loss on early extinguishment of debt of $2.5 million in the second quarter of 2018 was a result of the redemption of 5% notes due 2020 and the amendment of the credit facility each in early 2018.

The tax rate for the second quarter of 2019 was 23%, slightly lower than expected as a result of the favorable resolution of a prior-year tax audit. The 2018 tax rate of 22.8% benefited from the timing of certain state tax rate changes. Capital expenditures for the second quarter of 2019 totaled $54.4 million, compared with $42.1 million in the prior-year quarter. Year-to-date capital spending total of $116.2 million this year, compared to $91.3 million in 2018. Now we do anticipate capital spending for the full-year to be approximately $200 million and this compares to $191 million in the prior year. Additionally, we paid a quarterly dividend of $0.11 per share in June with a total cash costs of $12.2 million and on a year-to-date basis, cash dividend payments totaled $26.4 million.

Moving on to the performance of each of our businesses. The Metal Container business reported net sales of $575.6 million for the second quarter of 2019, an increase of $50.7 million versus the prior-year quarter. This increase was primarily a result of the pass-through of higher raw material and other manufacturing costs and higher unit volumes of approximately 6%, partially offset by the impact of unfavorable foreign currency translation of approximately $5 million. The unit volume improvement was primarily the result of higher volumes for seasonal customer who had been destocking inventory in the second and third quarters of the prior year, as well as continued growth in pet food.

Segment income in the Metal Container business decreased $34.2 million, a $14 million for the second quarter versus $48.2 million in the same period a year ago. The decrease in segment income was primarily is attributable to the rationalization charges of $39 million in the current year, primarily as a result of the recently announced footprint optimization and withdrawal from the Central States Pension Fund and lower pension income. These decreases were partially offset by higher unit volumes and strong operating performance. Rationalization charges for the second quarter of 2018 totaled $300,000.

Net sales in the Closures business were $363.4 million for the quarter versus $378.8 million in the prior-year quarter. This decrease was primarily the result of unfavorable foreign currency translation of approximately $10 million and a less favorable mix of products sold. Unit volumes in the quarter increased slightly as higher unit volumes for the US beverage market were largely offset by lower unit volumes in the international markets, due primarily to weather challenges.

Segment income in the Closures business for the second quarter of 2019 decreased $800,000 to $46.9 million, primarily due to the impact of unfavorable foreign currency translation, lower pension income and a less favorable mix of products sold, partially offset by strong operating performance.

Net sales in the Plastic Container business decreased $1.1 million to $154.2 million in the second quarter of 2019, primarily a result of the pass-through of lower raw material costs and the impact of favorable foreign currency translation of approximately $1million. Partially offset by volume gains of approximately 1%. Segment income increased $200,000 to $13.4 million for the second quarter of 2019, primarily as a result of higher unit volumes, largely offset by lower pension income.

Turning now, to the outlook for 2019. As you will have seen in the press release, we have confirmed our full-year estimate of adjusted earnings per diluted share in the range of $2.10 to $2.20, which includes the headwind from the reduction of non-cash pension income of $0.13. This compares to prior year record adjusted net income per diluted share of $2.08. We're also providing a third-quarter 2019 estimate of adjusted earnings in the range of $0.73 to $0.78, which includes a $0.3 headwind from the lower pension income versus the prior year record adjusted earnings per diluted share of $0.76. Given the uncertainties around the timing of the fruit and vegetable harvest in the US and Europe, results for the back-half of the year could shift between the third and fourth quarters. And consistent with our prior guidance, we continue to forecast free cash flow generation to be approximate $275 million.

That concludes our prepared comments. So we can open it up for Q&A. And in an effort to allow everyone to participate, I'd like to remind everyone to limit their time to one question and then one follow up. So with that, I'll turn it back to Rushell and she'll provide the directions for the Q&A session.

Operator -- EVP and CFO

Thank you. [Operator Instructions] And we'll take our first question from Chip Dillon with Vertical Research.

Chip Dillon -- Analyst

Yes. Good morning and thanks for all the details.

Anthony J. Allott -- CEO & Chairman of the Board

Good morning, Chip

Chip Dillon -- Analyst

Hey, by the way, and thanks for the meeting a couple of months ago or several weeks ago. My first question has to do with the food can business. You mentioned, the 6% volume growth and I think back in April you were expecting something actually slightly negative and maybe a 4% decline for the full-year. If I understood you right. What has changed there? And with the very strong volume in the second quarter at least versus what you mentioned back in April, why wouldn't we see an increase in the in the guidance for either volume, which you may have and certainly for EPS, which you don't have?

Adam J. Greenlee -- President and Chief Operating Officer

Hey, Jeff, it's Adam. Good questions. The 6% growth that we saw in the quarter, obviously, as both Bob and Tony alluded to, that was a partial recovery of a seasonal customer that we've been talking about for some time. So just for clarity, that volume recovery that we did see was not nearly to the extent of the decline that we saw in the prior year's quarter. So it's only a partial recovery of that customer's volume. I think as we look forward and now being at the beginning of Q3, that customer is continuing to hold product, continuing to fill product. And really the hard part is in front of them. They now have to go sell that through to the market. And we're going to see how that all plays out over the rest of this quarter, certainly.

I think our expectation is -- and in conversations with that customer, the volumes are really focused on Q2 and Q3. So we'll see another follow-up from them in Q4, which now getting back to kind of the full-year expectation that you asked about. We don't see much change for them now year-over-year versus having expected a decline as we came into the year. So moving to the entire category of our food can volumes, you're right, we had talked about 4% down as our expectations. We're likely to do better than that. I think we're right in our seasonally largest quarter, as Bob mentioned. We've got some potential shifts from Q3 to Q4. Any pack volume that moves into Q4 would be subject to late risk of pack, which is frost, which is mold and tomatoes for the West Coast, et cetera,. So kind of normal stuff. We think we'll do better than the 4%, but not moving beyond that at this point.

Chip Dillon -- Analyst

Okay. And then just as a quick follow up, could you talk about the free cash flow guidance? I think of $275 million and now that we have a few -- the plant rationalizations, the two plants that are being taken out, plus the pension, Central States withdrawal. Can you talk about how that will impact free cash flow? And I would assume that $275 million does not include the impact of those, but I might be wrong?

Robert B. Lewis -- EVP and CFO

Yes. So that the $275 million is consistent with the guidance that we started the year with. Essentially the restructuring activity that we recorded doesn't really have much of a cash impact to us. So the biggest part of that, which is $36 million for the -- to recognize the present value of the liability for the withdraw essentially just basically records the future payment obligations, which we've had historically as well. They've just been treated as a pay-as-you-go under the normal accounting treatment. And now that we've initiated the withdrawal that comes off the balance sheet but there's not much of an annual difference in the payment stream. And then, the remaining part of the restructuring, a big part of it is, the asset write down. So,again, non-cash, so no real impact from that restructuring activity on the cash flow guidance.

Chip Dillon -- Analyst

Okay, great. Thank you.

Operator -- Analyst

And next, we move to Anthony Pettinari with Citi.

Anthony Pettinari -- Analyst

Good morning. We saw some pretty extreme weather in 2Q. I guess record wet weather in the US and then a heat wave in Europe. I guess, can you talk about the impact to your volumes across the three businesses and then kind of any early thoughts on the impact that 3Q pack season?

Anthony J. Allott -- CEO & Chairman of the Board

Sure Anthony. Good question, as we kind of look at the Q2 results. There were a couple of things that I think maybe were slightly different than our expectations and one was driven by weather. So you're right, we had extremes across the regions in which our products are filled certainly for food cans. But for Closures as well. So you think about the extreme heat in Europe that did affect the packs in Europe. And so, we see a delayed pack in Europe, probably a weaker pack in Europe than what we had originally expected. Again, we're cycling over a poor crop or a harvest last year in Europe.

And if you come back to the US markets, the early pack in the US market, we're OK. So we're talking things like sweet peas, et cetera, fruits were fine as well. The balance of our Midwest pack for fruits or for vegetables excuse me in our West Coast vegetable, fruit and tomato harvest are going to wind up being delayed a couple of weeks. So that does push us a little bit more into Q3. It brings in the risk of us slide into Q4 that we talked about a little bit earlier as well. But that was one of the big items that probably was different for us than we had anticipated.

Secondly, I think broadly across all three of our business segments, again, we see a slight softening in some of our personal care markets that we serve as well. And that's probably more of a global perspective just as far as what affected volumes in the quarter, maybe a little more to Closures and Plastics, but pretty evenly spread between our core markets in Europe and the US as well.

Anthony Pettinari -- Analyst

Okay. That's very helpful. And then just following up on Chip's earlier question on metal containers and the customer inventory program. This is presumably a fairly big customer. Is there anything about this position that might be read through for the broader customer set and how they're managing their inventories? Or was this just sort of a one-off that turned out maybe a little bit better than you earlier expected?

Anthony J. Allott -- CEO & Chairman of the Board

I think as we look at this specific situation a year ago when we first surfaced this concept, it was a one-off a year ago. And I think it continues to be a one-off with no real read through to the balance of the market.

Anthony Pettinari -- Analyst

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

Operator -- Analyst

And we'll hear from Mark Wilde with Bank of Montreal, next.

Mark Wilde -- Analyst

Good morning, Tony. Bob.

Anthony J. Allott -- CEO & Chairman of the Board

Good morning.

Mark Wilde -- Analyst

I wondered just if we come back to the food can volumes. It didn't seem like there was a lot of drop through to margins. I might have expected margins were essentially flat year-over-year. I know there was that pension change in there, but even with that, I might have expected a little bit of improvement in the year-to-year margin comparison?

Adam J. Greenlee -- President and Chief Operating Officer

Mark, it's Adam, you know, as we look at the margins in the container business, there are a couple of things. You mentioned the negative impact of the lower pension income, that's about $2.5 million for the Container segment. The other item is, you have to also consider that we have significant inflation in raw materials and labor and other that were passing through to customers, that -- call that 10%. It is a significant change to the top-line of the business without any margin impact. So as we look at the margins on an adjusted basis, margins were right where we expected them to be, you just have the negative mathematics impact of inflation on the margin rate.

Mark Wilde -- Analyst

Okay. And then Adam that inflation that you're seeing this year, is that something that'll pass through next year? Or will you be able to capture -- recapture any of that later this year?

Adam J. Greenlee -- President and Chief Operating Officer

Well, for the Containers business, again, we're passing that through essentially on a real-time basis. We've had two years in a row now of significant inflation for '18 and '19. We're in the throes of negotiating steel and understanding what other impacts of inflation we'll have as we go to market for 2020. But at this point, I'd say it's kind of a real-time pass through for us. So, there is no lag on the steel side of that.

Mark Wilde -- Analyst

Okay, just as a follow on, I'm just curious about that 1% growth that you had in plastics volumes, were you satisfied with that and how much more room there is in terms of loading additional volume through your Plastics business?

Adam J. Greenlee -- President and Chief Operating Officer

Sure, good question. We are -- as we've said all along, that the growth in plastics is going to be a little lumpy for us. And looking at it by quarter, it's difficult at times. For starters, I would say we were cycling over a pretty good comp last year where we saw 4% volume growth. So that's good growth on top of really good growth. We think that business is well positioned for further growth. We've got the operational cost platform, where we wanted it to be the businesses at a profit level that that allows us to continue to invest, to grow the business.

We do have some capacity. I think step function changes to our volume growth profile will involve capital and we'll continue to evaluate those. I can tell you, we are winning in the market and we're back to where we're getting good opportunities for growth in the business, both on organic capacity and through growth capacity as well.

Mark Wilde -- Analyst

Okay, that's helpful. Good luck in the second half.

Adam J. Greenlee -- President and Chief Operating Officer

Thank you.

Operator -- President and Chief Operating Officer

And Adam Josephson with KeyBanc Capital Markets. We'll have our next question.

Adam J. Josephson -- Analyst

Thanks good morning, everyone. Adam, just a couple follow ups to what's been asked earlier. So just to be clear, your food can volume expectations for the year have improved despite the weaker than expected pack in Europe and the delayed US pack. Is that correct?

Adam J. Greenlee -- President and Chief Operating Officer

Yes, that is correct. Obviously, we have the pre-volume pack that we're going to be cycling over in Q4. But given the partial recovery that we've talked about with the seasonal customer here and some good strength in other markets. The expectation has improved from the down four that we had talked about previously.

Adam J. Josephson -- Analyst

And so -- thanks for that. And so given that, why are you not raising EPS guidance?

Anthony J. Allott -- CEO & Chairman of the Board

There's sort of two on that, I would give you. One is just broadly Europe is a little bit weaker across the board and if you look at all of our business, you see that we're maintaining a little bit more caution on that. Add to that the packs in Europe are definitely not going to be -- sort of a -- it blended into Adam Armstrong volume, but it's one that's on our mind in there. And then, of course, that in fact has been a bit of a headwind for us along the way. So those two and again, not only i was trying to signal that the volumes are going to be raging again. So, I think it's going to be let down than we have thought on the year, that's going to be entirely driven probably by the pre-buy. But we're talking about, fairly modest moves on the volume, which will help us again, some of the other concerns we have on Europe and on foreign exchange.

Adam J. Josephson -- Analyst

Thanks. And Tony, with respect to the weakness in Europe we're talking about, is that separate from the the weaker than expected pack? You're talking about the economic weakness you're seeing there as well?

Anthony J. Allott -- CEO & Chairman of the Board

I would blend. I would say that the bigger one that impact us right now is definitely weather and you can see it in those weather categories. But then I just looked across all of our European position, which is still relatively small to the total. And I would just say Europe feels a little bit weaker to us than America does and North America does.

Adam J. Josephson -- Analyst

Right. And on the personal care comments, Adam or Tony, can you just elaborate a bit on where you're seeing that slight weakness?

Anthony J. Allott -- CEO & Chairman of the Board

Sure. I think it's in both geographies, North America and in Europe for us. I think, well, we're talking specifically about is our large branded CPG categories, both on the bottle side and on the dispensing side where we're just seeing softness and it's more of a general softness versus anything in particular for one specific market. But just an overall trend that we're seeing that is just a little weaker than we expected. And again, we're going to see how things roll out here in Q3. But that's where we sit today.

Adam J. Josephson -- Analyst

All right. Thanks. I mean, just last one for me on sustainability. Forget about what may happen at some point in the future. Have you seen any actual impact on either your Food Can business or your Plastic Container business to-date?

Anthony J. Allott -- CEO & Chairman of the Board

Nothing materially important.

Adam J. Josephson -- Analyst

Thanks a lot, Tony.

Operator -- Analyst

Next, we'll hear from George Staphos with Bank of America.

Molly Baum -- Analyst

Hi. This is actually Molly Baum sitting on for George. He's traveling today. But thanks for taking my question. The first question I wanted to ask you. Could you give a little bit more color or breakdown for growth in closures between dispensing systems, metal closures and hot fill?

Anthony J. Allott -- CEO & Chairman of the Board

Sure. Yeah, I think we'll try to focus more on the markets that we serve, maybe than the product category. But, I think the first point is that our US beverage business did quite well. So, we were expecting growth coming into the year in the US beverage segment. Again, this is products like hot-fill beverage, et cetera. But that did well for us in the quarter. And we expect continued growth going forward as well. Dispensing systems were flattish for the quarter. And again, I think you can really focus that on growth in certain areas offset by weaker demand in our personal care categories.

And then I think one of those, the bigger items that we talked about was pack-related Metal Closure business that affects both the US, but it's a larger impact to our international markets, particularly in Europe.

Molly Baum -- Analyst

Thank you for that. And then a quick question on footprint rationalization for my follow up. The first part of that being, do you expect savings associated with this rationalization and then should we expect additional footprint rationalization or was this particular action more related to that Central States Pension? Thank you.

Robert B. Lewis -- EVP and CFO

Yeah, Molly, maybe Adam and I split that. I'll take the first part of that. So there's a small portion of savings associated with kind of the shut-down of some of the overhead of the two plants. You think about Silgan like returns, but again, it just wasn't that big. So it doesn't really move the needle. And in terms of the withdrawal from Central States, that really has a bit more of an ongoing cash impact, that the ongoing payments will be slightly higher than what our historical payments were, not materially, but slightly. So no real meaningful impact, one way or the other from that restructuring activity.

Anthony J. Allott -- CEO & Chairman of the Board

But now determined. And so we're no longer subject to an unknown inflation of that number that we had in the past. But much more determined which is why it's going on balance sheet.

Molly Baum -- Analyst

Got it.

Adam J. Greenlee -- President and Chief Operating Officer

And then as far as the ongoing footprint optimization programs, particularly in the metal containers facility, I'd just step back and say, one thing that Silgan has always done and we talk about it a lot is its relentless focus on cost reductions and getting cost out of our systems. And that will never change. We were good at it. We continue to look at opportunities and we have no issue with continuing to tighten the system as we're looking for those cost improvements.

Molly Baum -- Analyst

Got it, thank you. I'll turn it over.

Operator -- Analyst

And we'll hear from Ghansham Panjabi with Baird, next.

Ghansham Panjabi -- Analyst

Hey guys, good morning. I guess going back to Europe on the food can side, did you -- can break out for us how volumes did specific to Europe in the second quarter? What did you initially plan on for the full-year and what do you think it's going to shake out as it relates to your revised outlook, and then also one of your peers was talking about competitive pricing in the region. Are you seeing some of that as well?

Anthony J. Allott -- CEO & Chairman of the Board

Sure. So it's a good question. So we don't confuse everybody. So Europe had a miserable half last year, you'll recall. For us that was more later in the year, not so much early in the year. But that was the case. So in fact, Europe was up slightly during the time period, but we had expected quite a bit more and we expected quite a bit more in the remainder of the year. And so the caution you're hearing from us is things are not setting up to be the kind of rebound that we had been hoping for. It could be comparable with last year. It could be a little bit better than last year. But that sort of what setting up.

As the competition in Europe, I would say that there are some signs, particularly in kind of the Eastern markets, where there's a sizable competitor who seems to be a little more focused on volumes and they are getting cost recovery through. So we've seen a little bit of volume loss, in particularly Eastern Europe. We supply the Central and Eastern. So I don't think that's the big storyline of the business, but that is something that we have seen.

Ghansham Panjabi -- Analyst

Okay, that's helpful. And then just in terms of metal food can ownership in the US and Europe. I mean, obviously quite a few assets have changed hands. You guys are the leaders in North America. You have a very committed position across the industry for many decades and presumably going forward. Does that, Tony, open up any sort of commercialization opportunities for you as you engage your customers, just given your commitment to the business versus maybe some of the others? Thanks so much.

Anthony J. Allott -- CEO & Chairman of the Board

Great. Thanks. Interesting question. Yeah, I don't think it changes a lot. You still have you know, you have sizable food can competitors who are out there. They are still sizable entities. The owners of them before still have a equity ownership in the remaining business. So we don't view it as a change to the fundamental competitive environment in the market. Again, our focus has always been we have a great stable customers. They have very low cost. And we try to provide to those customers the opportunity for them to grow in the market. And that's always been our means to expand and grow our food can business. And I don't really see any big change to that.

Ghansham Panjabi -- Analyst

Thank you, Tony.

Operator -- Analyst

And our next question, we'll hear from Kyle White with Deutsche Bank.

Kyle While -- Analyst

Good morning, everyone. Thanks for taking my question. In your investor presentation back in June, you provided a down 1% to 2% growth estimate for the soup category going forward. I believe two days after this, a large soup customer hosted us a stay where the company talked about kind of winning in soup and taking a big full swing on soup. I'm just curious about your thoughts on this in general. Does it change your growth estimate, for this category or was that already factored in?

Anthony J. Allott -- CEO & Chairman of the Board

Good question. I think, first of all, the story that you're talking about make a lot of sense to us. We still think there's a great story for the soup to be told. It is a great food product. It's been in our mind a little under-sold in the market. And so you have sort of a whole generation of consumers coming up who aren't fully aware of the value they can get a very low price on food side. So, we're very heartened to see our customers getting into that game. The last time they did that, they really did see progress on. And so, we are in every way as possible supportive of that effort. I think it's a really good idea. We haven't really changed yet because that's going to be a long-term goal that you just not get instantaneous. You can discount instantaneous response. But I hope that's only one element of a much bigger plan that will take longer. So I think it's a good question for us to be talking about in a year or two. Now, if that customer really stays or the market stays with this program. But it's not -- you can't quickly turn this card.

Kyle While -- Analyst

Got it, thank you. And then just a quick one for Bob. Are you maintaining the tax rate guidance for the full-year of around 24%? I know, it's turning a little bit lower here in the first half?

Robert B. Lewis -- EVP and CFO

Yes, I think we kind of came into the year thinking it was going to be 23% to 25%. We sort of settled around 24%. Obviously, there have been a few one-offs of changes in tax rates on the state level or settlements of some audits that have bumped it around. But I think that 24% range is a good spot to at least to forecast.

Unidentified Participant -- EVP and CFO

Thank you. I'll hand it over.

Operator -- EVP and CFO

And our next question, we'll hear from a Arun Viswanathan with RBC Capital Markets.

Arun Viswanathan -- Analyst

Great. Thanks for taking my question. Just trying to ask this in a slightly different way. If you think about the volumes, would you expect, your other customers to go through this seasonal restocking as well? And, is that what's giving you some caution in the sense that maybe some of them start destocking or, just trying to understand, given the strong performance in Q2? Again, why you're not a little bit more optimistic on the year? Thanks.

Anthony J. Allott -- CEO & Chairman of the Board

Yes, I don't -- I'm not sure we're -- to be [Indecipherable] we weren't as pessimistic as you all were a year ago. We told you then it was a one-off going on to that market. And some believed, some didn't. We're telling you now it's a one-off for that markets. I wouldn't characterize us as either side of that. We view food cans as being a very stable marketplace. So that's what you're hearing from us is stability. So, to the specifics of your question. The particular -- you have one customer doing something very unique. They were going through a very unique set of challenges and opportunities. The rest of our customers, as a general rule manage their inventories appropriately each year. And so they're trying to get -- they are trying to predict the path ahead, which is part of the trick of their business. How much do they fill? And then they spend the rest of the year selling that off and then they come into another pack season. Look at how much inventory is left. What's their expectation for sales for next year? And they've got to figure out how much to pack. That's the nature of our customer's business. And so it is a -- they do have to think about what's the right amount of fill against the inventory. But this was one unique customer who came out very publicly and said, we're going to make a major move on our inventories. And they did so and then they did -- there was some amount of market selecting they did and pulled away from some markets. And I think fortunately in hindsight their -- I think they looked at that and said there's only so low you want to go before your fixed costs become important. And I think that's what's playing out now is a little bit of a question of how -- what's the right scale for their business. And we thought we'd get some back and that's what's happened.

Arun Viswanathan -- Analyst

And since -- just to clarify, you did get a portion of that back. I guess you're not necessarily expecting this customer to go through a large destocking because maybe they thought that last time they went too low in their inventories. Is that right?

Anthony J. Allott -- CEO & Chairman of the Board

I think we're expecting some volatility here. I think that there's -- first of all, it's a little hard to know for us and for them how much of that market they can reclaim by refilling. And so, I think we'll have to -- we'll probably be talking about this customer next year, too, about how things turned out, et cetera. So I think it'll be a little bit of wait and see on it. The last thing I want to make sure we clear is that our total view on volumes for food can this still -- it's going to be somewhat of a negative, not as much as we said, but that's really all about a buy for it. So that's not about the fundamentals of food can market either. And just make sure we're clear on that point.

Arun Viswanathan -- Analyst

Okay. Thanks. And a quick question on the plastic containers market. Have you seen anything from your customers in the in the area of sustainability, either positive or negative? You know, Coke was talking about rPET the other day. Is there ii greater push toward certain areas of your business that you're well positioned to handle or is are move away in other categories that you'd want to highlight?

Adam J. Greenlee -- President and Chief Operating Officer

Well, I think a couple of quick comments. Number one, I would say, as we've talked before, we think that really the sustainability focus that's going on right now, particularly in plastic products is much more around single-use beverage products. And when you look -- take a step back and you look at the entirety of Silgan we're just over 2% of our total revenue goes to single-use beverage application. So it's really not a big part of what we do. We think is the primary focus of the ocean plastics discussion, if you will.

Secondly, as we've said all along, we spend a great deal of time working with our customers, talking about alternative packaging concepts. And now I'm more talking about bio resins, I'm talking about recycled resins, et cetera. They go into the products that we currently supply them. But as Tony said earlier, there's been no meaningful change to our business around sustainability. The conversations have increased. I think awareness is greater. But no fundamental change.

Arun Viswanathan -- Analyst

Okay, thanks.

Operator -- Analyst

Our next question, we'll hear from Daniel Rizzo with Jefferies.

Daniel Rizzo -- Analyst

Good morning. You mentioned that, you had a terrible pack in Europe last year. I was wondering just how you would characterize the US pack from last year. Are you facing a much more difficult comp domestically than you were overseas?

Adam J. Greenlee -- President and Chief Operating Officer

Sure that the pack in the US was OK last year and not necessarily a good or bad pack, just kind of an as expected, pack. I'd say as we look at 2019 we're expecting a similar pack to last year. I would tell you now that we're further into the year and we talked about the late packs or call it, one to two weeks at this point. We are pushing more into Q4 and that brings a little greater risk profile to the pack. But our expectation is that it would be essentially a comparable pack to prior year.

Anthony J. Allott -- CEO & Chairman of the Board

Which is probably a good time to remind everybody what we say in the release, which is predicting Q3, Q4 is tricky business. So, yes we've assumed even through we know things are running a little late, we've assumed that most of it get done in Q3 in the guidance. So, one of the risks we face always is that might be wrong and when they shift a little Q3 to Q4 have no impact on the year. But just as a reminder, that's who we built them.

Daniel Rizzo -- Analyst

But as you said, though. I mean, if it does get delayed repeatedly, I mean, if you start losing sales, that would not -- that would be a Q4 event, if the weather turns again?

Anthony J. Allott -- CEO & Chairman of the Board

That's correct. You have some point and that's right. What happens if it got delayed? You got a little more chance of more than tomatoes, and [Indecipherable] and corn. So that's correct.

Daniel Rizzo -- Analyst

Okay and then just with the personal care softness, I mean, can that be attributed to tariffs at all or is it just kind of just the general economic malaise in Europe. I mean--?

Adam J. Greenlee -- President and Chief Operating Officer

Yes, I think I would put it more to the general economic malaise and maybe more broadly than just in Europe but certainly in Europe as well. But not related to the tariffs.

Anthony J. Allott -- CEO & Chairman of the Board

And it can be around. I mean, again, that business could be around promoting activity of various products. And so sometimes it's just like the question of what the end consumer is doing in promoting their products and timing of that and filling or timing of that. You do see sort of ups and downs sometimes in that marketplace.

Daniel Rizzo -- Analyst

Okay, thank you very much.

Operator -- Analyst

[Operator Instructions] Next, we'll hear from Zachary Holt with Wells Fargo Securities.

Gabe Hajde -- Analyst

Good morning, gentlemen. This is actually Gabe. Two quick ones for you. I'm scratching my head a little bit with respect to the closures volumes. I'm looking at some scanner data that suggests some of the hot-fill products that you sell into, volumes have been off and part of that, I hate to admit this, probably weather related. Can you talk about any risk that as we roll into the back-half of the year? Those products were filled in the spring time, the sell through may not be as strong and the potential for volumes to fall off a little bit in the back-half of the year? Or am I missing something, not thinking about it correctly, any closures?

Adam J. Greenlee -- President and Chief Operating Officer

No. I think I think you've got that right for the beverage markets and particularly for the hot-fill segment in the US, that pre-selling season started sometime late February, early March range for us. So depending upon how much inventory our customers want to come into the season with. But the reality is that, again we'll just use one example being sports drinks, that sports drinks consumption by consumers is much broader throughout the summer months in the US market. So our customers don't have capacity to handle those peaks, so they sell prior to the season and roll through the season with inventory.

So if you look at our hot-fill volume, Q2 is a big quarter for us. Early part of Q3 is big quarter and that is now subject to kind of the ongoing weather as to how our customers continue on in the hot-fill segment and selling product in the back-half of the year.

Anthony J. Allott -- CEO & Chairman of the Board

So there is a little bit of risk that they sell, they won't sell and that's normal for our business. I guess that I think that they've have gotten really hot since all that information we saw. So I think we feel somewhat better. And then finally, I'll just remind you what we talked about on our analyst meeting, which is we spent a lot of time talking about hot-fill volume because the units drive a lot. But I think that we help explain the dollars and contributions are a little less on that business. And so it's probably more focus on it than need be in terms of what can happen to our closures business

Gabe Hajde -- Analyst

Understood. Did you guys have -- can you remind me if there was a volume expectation coming into the year for closures and if he had to revise it or could revise it, what that might look like? Or what I'm hearing is maybe marginally risk skewed to the downside, but nothing material.

Robert B. Lewis -- EVP and CFO

Yes, I think I would agree with that. I think our broad closures assumption is call it 2% to 3% kind of growth rate. I'd say no real change to that, but if anything, the risks are outweighing the upside as we look at the balance of the year.

Anthony J. Allott -- CEO & Chairman of the Board

And the operating performance on that side, and again, if you look at the results thus far, it's really been about pension and foreign exchange. Foreign exchange become less of a headwind for the rest of the year. But the results have reinforced the fact that despite volume being a little less than we've had been expecting, the numbers look pretty good. And so, we think they'll deliver on the results.

Gabe Hajde -- Analyst

All right. And last one for me, Bob, if you can maybe address just the M&A climate, if anything has changed with respect to seller expectations. There are a few benchmarks out there recently with some larger transactions and my gut tells you with a more dovish Fed, probably expectations haven't come in quite yet enough. But I'm just curious if you can update us there?

Robert B. Lewis -- EVP and CFO

Yes, I think I'll start with the fact that we're well on track to get our leverage back in the range of -- if it's to the mid-point of the range that we've talked about pretty consistently. So that puts us squarely in a position where we could take advantage as opportunities come to bear. We do continue to look and maintain an active pipeline. Obviously, we've got a keen focus on the closure side. But we also look at other parts of the rigid packaging market where we think we can develop a competitive advantage or where we have a competitive advantage already.

So we are active. Obviously the multiples are a bit high. So we need to find the right opportunities where we either have good synergies or we can buy them, right. So I would say -- I'd put it broadly in the category that the Silgan discipline is still in play here as it always has been with a balance sheet that's poised and ready to take advantage should we find the right opportunity.

Gabe Hajde -- Analyst

Thank you, gentlemen. Good luck in the second half.

Operator -- Analyst

And we'll next hear from Edlain Rodriguez with UBS.

Edlain Rodriguez -- Analyst

Thank you. Good morning, guys. Just one quick one on the sustainability issue. I mean, you said you're not seeing any shift yet, but do you expect to see some shift like how do you expect this to play out over the next couple of years? And does that change your view on where you see attractive M&A opportunities?

Anthony J. Allott -- CEO & Chairman of the Board

Sure, so Adam sort of covered, but I'll do it again. So, our view is that the big issue that probably will manifest here is going to be around single-served beverage, primarily because out of home and it's a lot of volume on that thing. So that's our view. We'll see. I think against that's roughly 2% of what we are. It's just not a huge business to us.

And then secondly, what we are primarily around food, personal care and home use, places where you really aren't going to want glass, where the cost matters a lot. So there's a lot of functionality that comes with the plastics in most of the products we sell. When we get into our dispensing business, there's immense amount of functionality that really can't imagine anything but plastics doing. And it's not a huge amount of quantity of plastic. It can all be put into recycling. So our efforts will be more around making things recycle, being sure, maybe it's bio. So we'll keep working down that path. So I really believe for our business is going to be more about the technology that goes into it then it is about replacement of those products. But as to M&A, then I would say roughly the same thing. So those kinds of products we would still see as being very reasonable M&A opportunities. And you just got to be really careful around the edges of that, so thing that are closer and closer to that single-serve beverage will have, if not problems from the consumer than problems from the capacity that being abandoned if single-serve starts to fall off. That's sort of the way we're going about it. So as you get a single serve beverage area, of course, that we're thinking hard about that too, and would be more worried about that marketplace.

Edlain Rodriguez -- Analyst

Okay. And on plastics, I think in the past you've said this is a business that can grow at 3% to 4% seems to be lagging a little bit so far this year. Do you think getting to 4% is still achievable? And what are the puts and takes in there?

Anthony J. Allott -- CEO & Chairman of the Board

Yes, I think 3% growth rate for the plastics businesses is definitely attainable. We had posted really good growth last year as we were again kind of recovering and putting volume back into our system. So there is still opportunity here. As we said all along, we don't think anybody is really winning in this market that we serve with our plastic bottle business.

And in fact, we probably are at the forefront of now winning in that business. So I do think there is opportunity for growth. I think 3% to 4% is probably a little high, somewhere around 3% is a pretty reasonable expectation for that business.

Edlain Rodriguez -- Analyst

Yes, thank you.

Operator -- Analyst

We'll move on to Brian Maguire with Goldman Sachs.

Brian Maguire -- Analyst

Hi good morning, everyone. Just a kind of a bigger picture question on the metal food container volumes. There's a lot of moving pieces this quarter and the last couple of quarters between the customer destocking and now restocking and discrete weather events and things. But I'm just wondering what your sense on end-market trends and the longer-term outlook is and whether it's changed at all. And, just looking back in the last couple of years, you're down a little bit and '17 down more and '18 in volumes. And some of that was the customer destocking. It sounds like this year, even with that customer restock happening, you're still expecting it to be down a little bit. So do you still think that post 2019, we could be in a flat volume environment for that business? Or is there some risk that there could be volume declines ahead?

Anthony J. Allott -- CEO & Chairman of the Board

Yes. Good question. So we talk about a lot at a recent meeting. But I think what we would say is that we still think there's a flattish market, I think to us that encompasses down-one or up-one and flattish. So, some of the cans are I think is definitely down a percent. We're not going to bite that point. The reasons that drive that there are elements of the market that are definitely have been declining and probably will continue to do. So if you look at certain veg markets, fruit being the easiest example, that has been on a very steady decline as there's been alternate packages that are better for kids and the consumption of fruit in that case. So, our view is those will continue to decline. But the point that we've been trying to show everyone is that they have become de minimis to the total volume of food cans anymore. And the things that's been on a steady growth over that same time, like pet foods are becoming a bigger and bigger part of the total. And so, the weight of the things have been growing. So long as they keep growing, we are going to overwhelm the weight of the things have been declining because of the relative scale of them.

That's sort of our view of the market that you'll continue to see that happening, but that ought to stabilize food cans in total. And then, if you look at Silgan and kind of look at that mix, we perhaps gain a little bit more from that because we're a little heavier into that pet market, as an example. There's others -- there's elements of the protein area is another example of that. So probably we would say we still think food cans ought to be relatively flat. It'll change the nature of what it is. There was a question on the call about soup. We do think soup is an untapped potential that could change its trend.

We don't see why that trend necessarily have to continue that. We haven't factored that in but that would be good news to the story. And then there's sustainability. We should remember that this is definitely the most sustainable package that there is, right. It's the most recycle package, infinitely usable. And so, as we said on the call, we don't see anything specific on that. But that doesn't mean that calls aren't coming in and there aren't opportunities. So, I -- we feel pretty good about this being at least flattish in the future and that we're well positioned within that marketplace.

Brian Maguire -- Analyst

Okay. And then when you look specifically at 2019, the reasons why volume will be down. Obviously, you've got the tough comp in the fourth quarter from some of the pre-buying on the metal inflation. But other than that, it seems like, you have an easy comp and you're up. You've got in some of the restock. Anything else that you would call out sort of driving the volume declines other than that sort of tough comp later in the year?

Anthony J. Allott -- CEO & Chairman of the Board

No. That's something, as we've said before, that's roughly a 3% impact. And that affects fair a bit, affects Q1 and affects Q4. So, that is by far the big one. And I think what we've said on this call now is our feeling is that -- we will calling for 4% for the year. So we were calling for a little bit more than that pre-buy initially because we thought this customer might continue to destock and do what they were doing. We're now saying that doesn't look to be the case. So it's probably going to be the total will be less than the impact of the pre-buy, so less than the 3% down. Maybe it's down to I don't know the number. I know you'd write it down. I'm not sure but something better than before, would be our sense on it.

Brian Maguire -- Analyst

Okay, better; appreciate it. Thanks.

Operator -- Analyst

And we'll move on to Mark Wilde with Bank of Montreal.

Mark Wilde -- Analyst

Hi, Tony. I'd like to just come back to that point you were making about the pressure on single-serve, plastic beverage and all the interest that we're seeing now about potential moves from things like bottled water into cans. Is there any scenario that you could see that would bring Silgan into the beverage can market?

Anthony J. Allott -- CEO & Chairman of the Board

Well, I think we've said publicly, if we haven't I'm about to, that we've certainly looked at never before. So --

Mark Wilde -- Analyst

Yes, I know that.

Anthony J. Allott -- CEO & Chairman of the Board

Yes. So there's nothing that would say we wouldn't do it. We make, quite a few cans and we understand the can market. And so, it's just not a market that we found a reason and a presence to step into at this point in time. But I can't sit here today and tell you that that could never happen.

Mark Wilde -- Analyst

Okay. And just general thoughts, I mean, with so much interest and speculation about growth, you think there's a risk that that business might get over-capitalized?

Anthony J. Allott -- CEO & Chairman of the Board

Well, that's a tricky question. I think what Silgan has always said is we'd like businesses that are more stable, relatively low growth, because growth attract capital and drive down returns. Excuse me, so I don't know why the beverage industry, if in fact it happens, would be any different than that. I think you get a lot of -- capacity will come in. I'll see if I can get through this?

Robert B. Lewis -- EVP and CFO

I don't know what you are talking about.

Anthony J. Allott -- CEO & Chairman of the Board

Then you're old enough to wake me to drink. So I think you'll -- we'll see if it grows enough and we'll see if the traffic coming in. That's all I know right now.

Mark Wilde -- Analyst

Okay, all right. Thanks, Tony. Good luck with second half.

Anthony J. Allott -- CEO & Chairman of the Board

Thanks.

Operator -- CEO & Chairman of the Board

Then we'll move on to Adam Josephson with KeyBanc Capital Market.

Adam J. Josephson -- Analyst

Thanks, everyone, for just taking one follow up. Adam, just back and personal care for a moment. Is that, would you say, the most economically sensitive market that you serve or are there other markets within closures that you would consider as if not more economically sensitive than personal care?

Adam J. Greenlee -- President and Chief Operating Officer

I would say it's probably one of the more economically sensitive markets we serve. It's certainly more than our food and beverage markets. Just thinking about the products that we sell into. So yes, I think that's a fair statement.

Adam J. Josephson -- Analyst

And do you have any reason to think that the weakness you talked about was not economically related? In other words, is there any reason why your customers would suddenly be reducing their promotional activity or anything else for that matter?

Adam J. Greenlee -- President and Chief Operating Officer

No, there's nothing that we see in the markets that would indicate that there's anything else at play there.

Only possibly timing of things. But just again, like promoting something -- sometimes you will see it that market slow up for a period of time. And then it comes back and it wasn't a long-term permanent shift.

Adam J. Josephson -- Analyst

Got it. Thank you, Tony.

Anthony J. Allott -- CEO & Chairman of the Board

By the way, now that I can speak, can I go and make -- I wasn't trying to send any strong signal on again beverage cans. And it was really just a joke. So my point is just that, yes, who knows but growth as a --- our view has always been growth, just naturally attracts capital. If that's the question.

Operator -- CEO & Chairman of the Board

Thank you. That will conclude the question-and-answer session at this time. I would like to turn the call back over to Tony Allot for any additional or closing remarks.

Anthony J. Allott -- CEO & Chairman of the Board

Great. Thank you all and we look forward to talking about our third quarter late in October. Have a good day.

Questions and Answers:

Duration: 55 minutes

Call participants:

Kimberly I. Ulmer -- VP of Finance & Treasurer

Anthony J. Allott -- CEO & Chairman of the Board

Robert B. Lewis -- EVP and CFO

Adam J. Greenlee -- President and Chief Operating Officer

Chip Dillon -- Vertical Research Partners -- Analyst

Anthony Pettinari -- Citigroup -- Analyst

Mark Wilde -- BMO Capital -- Analyst

Adam J. Josephson -- KeyBanc Capital Markets -- Analyst

Molly Baum -- Bank of America Merrill Lynch Global Research -- Analyst

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

Kyle While -- Deutsche Bank -- Analyst

Unidentified Participant

Arun Viswanathan -- RBC Capital Markets -- Analyst

Daniel Rizzo -- Jefferies -- Analyst

Gabe Hajde -- Wells Fargo Securities Inc. -- Analyst

Edlain Rodriguez -- UBS Securities -- Analyst

Brian Maguire -- Goldman Sachs -- Analyst


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