Ladies and gentlemen, thank you for standing by, and welcome to the H.B. Fuller Third Quarter 2018 Investor Conference Call. This event has been scheduled for one hour. Today's conference call is being webcast live and will also be archived on the company's website for future listening. At this time, I will turn the meeting over to our host, Vice President, Investor Relations, Ms. Barbara Doyle. You may begin.
Thank you very much. Good morning and welcome to our Fiscal Year 2018 Third Quarter Earnings Call. We have two speakers today, Jim Owens, our President and Chief Executive Officer, and John Corkrean, our Executive Vice President and Chief Financial Officer. After our prepared remarks, we will open up the call to take your questions. Let me remind you that comments made by me or others representing H.B. Fuller may contain forward-looking statements which are subject to risks and uncertainties. Our SEC filings contain additional information about factors that could cause actual results to differ from management's expectations. These filings can be found in the investor relations section of our corporate website at hbfuller.com. Also, note that our comments may include references to non-GAAP financial measures. These results are in addition to the GAAP numbers in our earnings release in our Form 10-Qs.
We believe that a discussion of these measures is useful to investors because it assists in understanding our operating performance and our operating segments, as well as the comparability of results. A reconciliation of these non-GAAP measures to the nearest GAAP measure is provided in the earnings release our company issued last night. I also want to remind you that in March of this year, we filed an 8-K that included pro forma 2017 results that illustrate what our consolidated and segment-level financial performance would have been last year had we owned Royal. We chose to file this 8-K to provide you a baseline when comparing year-over-year performance. During our call today, we will make some references to our growth in 2018 versus the pro forma results included in that filing. With that, let me turn the call over to Jim Owens.
Thanks, Barbara. It's good to have you here at H.B. Fuller. Thanks to everyone who's joining us on the call today. We had a very good third quarter with solid organic revenue growth, margin expansion, increased earnings, and strong cash flow generation. For the quarter, organic revenue grew almost 5%, led by pricing gains and double-digit revenue growth in Engineering Adhesives. Adjusted gross profit margin improved by 110 basis points versus the same period last year, reflecting pricing momentum and synergy capture. An adjusted EBITDA of $120 million was 63% above prior year, and is an increase of 7% pro forma for Royal. Adjusted EPS was up 34% to $0.86 in the quarter, and operating cash flow of $84 million enabled us to pay down $41 million in debt in line with our plans. Foreign currency exchange rates changed direction in the quarter and became a headwind.
This impacted our third quarter results by approximately $0.04 and our full-year outlook by about $0.10. We are adjusting our guidance accordingly. Our core underlying business performance was strong, and we continue to make excellent progress toward our 2020 targets. On our first quarter call, we identified three focus areas for fiscal 2018, as shown on slide four, and I'd like to update you on these three key areas. These were and are the top priorities heading into 2018. The first imperative was to realize the annualized pricing to offset last year's raw materials inflation. The pricing actions we have taken so far in 2018 will allow us to achieve this goal and will more than offset raw material inflation.
Pricing gains have helped drive 110 basis points of adjusted gross margin improvement year-over-year on a pro forma basis, and 40 basis points sequentially from the second quarter. We have continued to see increases in raw material feedstock, logistic, and labor costs. Earlier in September, we announced necessary price changes in North America of between 4% and 10%. We will continue to closely monitor our supply chain and will implement the appropriate pricing actions necessary to offset further cost increases. Another priority is to deliver $15 million of cost synergies from the Royal integration. We have achieved $10 million through the third quarter and are on track to realize the $15 million synergy target for fiscal 2018. The third focus area for 2018 is free cash flow generation to enable $170 million of debt paydown by the end of 2018.
Third quarter cash flow from operations was $84 million, and we repaid an additional $41 million of debt. The fourth quarter is our highest cash flow quarter, and we are on track to achieve our 2018 debt repayment target of $170 million. We continue to make notable progress on each of these imperatives, which is demonstrated in our growth, our margin expansion, and our higher cash flow. Now I'll go through the performance of each of our segments in the quarter, which is summarized on slide five, as well as our expectations for the rest of the year. In the Americas segment, organic revenue increased 2% year-over-year, with pricing outpacing lower volume and mix. Similar to the second quarter, volume was down primarily in low-margin businesses and due to the planned exit of lower-margin business from the Wisdom acquisition.
Pricing will continue to be a net contributor to Americas growth, and we expect to see the negative impact of volume moderate as we exit the year. Pricing and acquisition synergy capture are driving significant EBITDA improvement. In the third quarter, Americas Adhesives EBITDA margin of 18% increased sequentially from 16% in the second quarter. We exceeded the 17% target we discussed last quarter. We expect margins to remain in this range as we exit the year. The EIMEA segment organic revenue increased by 6.5% year-over-year, reflecting pricing actions, particularly in emerging markets. EBITDA margin was 10.5%, which was lower than Q2, reflecting typical summer seasonality as well as currency impacts in that region. In Q4, we expect to see slightly slower growth due to currency impacts, but improving margins in the higher volume fourth quarter.
In the Asia Pacific segment, organic growth of 3% was lower than our trend as volume growth slowed from Q2. We saw strong growth in Southeast Asia, Korea, and Australia, but China growth slowed in the quarter as consumers and exporters decreased their spending. We expect this to continue into the fourth quarter. Adjusted EBITDA margin of 10% increased 80 basis points over last year as positive pricing and volume contribution offset raw material inflation. In the fourth quarter, we anticipate similar revenue trends and year-on-year margin expansion. Construction Adhesives revenue pro forma for Royal was flat year-over-year, while EBITDA margins improved by 220 basis points. This is part of our overall strategy in Construction Adhesives to focus on delivering high value, high performance products.
As part of our integration with Royal, we are taking additional actions to reduce costs, adjust our customer and product portfolio, and ensure continued margin expansion in this segment. As a result, we expect continued low single digit growth and significant margin expansion in this segment and in Q4 and through 2019. Lastly, performance in Engineering Adhesives was very strong again as we maintained double-digit organic revenue growth. Results were strong due to the highly differentiated value in our solutions and our ability to quickly solve problems for customers globally as they introduce new and improved products. The EA performance was broad-based with strong growth across all segments and all geographies in both the legacy H.B. Fuller and Royal businesses.
EBITDA margin of 16% increased 20 basis points sequentially from Q2, but was down slightly versus last year due to higher raw material costs and a portion of the business where we are taking price actions to offset higher input costs. We expect to see continued strong top-line performance and sequential margin improvement in the fourth quarter. Overall, we performed well in the third quarter as we managed through the challenges of raw material inflation, dramatic currency fluctuations, and economic unease in China. I'll now provide an update on our Royal integration before handing the call over to John. Ted Clark and the project team continued to execute the integration plan with discipline, rigor, and a sound governance process, successfully keeping projects on track. Our procurement savings programs continue to deliver the expected benefits with $10 million of cost synergies recognized to date.
We're on pace to deliver $15 million targeted cost synergies for the year. In the third quarter, we announced plans around the closure of the New Jersey plant, and we'll consolidate its production into the South Bend, Indiana, site over the next two years. This is in addition to the two plant closures we discussed during our second quarter call. We continue to evaluate other opportunities to optimize our manufacturing footprint. From a revenue standpoint, we continue to identify new opportunities that support our $50 million revenue synergy target by 2021. Many of these synergy opportunities have been refined and validated and are making their way into our 2019 budgeting process. We continue to be pleased with the complementary nature of our technology portfolios.
As discussed at Investor Day in July, we expect to see significant growth coming from our reactive urethane, cyanoacrylate, and anaerobic technologies, as well as metal to rubber bonding capabilities in Engineering Adhesives. This, along with our high efficiency 4SP spacer technology for insulated glass in our durable assemblies business. We have made steady progress on the Royal integration, which is evident in our pro forma growth rates and in our EBITDA results. As we move through the integration, we continue to strengthen our visibility to achieving the expected synergies. Let me turn the call over to John to discuss our financials and guidance in more detail.
Thanks, Jim. As Jim said, overall, we're pleased with the performance of our business in the quarter, especially given the continued inflationary pressure on raw material costs, as well as significant headwinds from currency movements. Net revenue grew approximately 37% compared to the third quarter of 2017, driven by the addition of Royal. Organic revenue growth grew 4.8%. Pricing was a strong contributor to growth as we realized benefits from pricing actions we've taken throughout the year to offset raw material costs. Volume and mix impacts were about flat for the quarter. Foreign currency exchange rates had a negative impact on revenue in the quarter due to a strengthening dollar, as I'll talk more about in a minute, reducing growth by approximately 2% year-on-year.
On a pro forma basis, including Royal in 2017, adjusted gross profit margin of 28.7% improved 110 basis points versus last year and increased 40 basis points sequentially from the second quarter, driven by strong contributions from pricing and synergies more than offsetting raw material inflation. Adjusted selling, general, and administrative expenses increased by 6.5% year-over-year on a pro forma basis, primarily driven by the annualization of last year's Adecol acquisition and timing of other expenses. The net of this was adjusted EPS of $0.86, which increased 32% compared with last year. Adjusted EBITDA of $120 million increased by 63% versus the prior year and increased by 7% on a pro forma basis, including Royal. Adjusted EBITDA margin increased to 15.6% from approximately 13% last year. Let me also comment on our third quarter results versus guidance.
While we showed strong organic growth and margin improvement, currency had a more negative impact on our third quarter results than we considered in our prior guidance. Slide H shows the average depreciation that occurred between the second quarter and the third quarter in the top non-U.S. currencies that impact us. Relative to the exchange rates used in our guidance, the euro, Chinese renminbi, Brazilian real, Argentine peso, Turkish lira, and other currencies turned lower throughout the quarter, with several moving substantially lower. We estimate these currency shifts impacted revenues by approximately $15 million, impacted EBITDA by approximately $4 million, and impacted adjusted EPS by approximately $0.04 relative to our guidance assumptions. In Q4, we estimate that currency will impact revenue by approximately $20 million, EBITDA by approximately $5 million, and EPS by approximately $0.06 relative to our prior guidance.
While we achieved the expected pricing performance, growth in our Asia Pacific segment slowed from 7% in the second quarter to 3% in the third quarter. This was largely reflective of the weakening economic issues in China, as Jim mentioned. We see these headwinds continuing in the fourth quarter and as a result, we are adjusting our guidance for fiscal 2018. Adjusted EPS is now expected to be in the range of $3.05-$3.20 for the year. This represents EPS growth of 25% at the midpoint of the range. We anticipate that net revenue will grow approximately 17% in the fourth quarter, driven by adding the Royal business. On a pro forma basis for Royal, we anticipate revenue to grow by approximately 3%.
At today's rates, we estimate that currency will have a negative impact of 2%-3%. Acquisitions will contribute about 1% of growth. Organic revenue growth of 4%-5% will be driven primarily by pricing to offset raw material cost increases, and to a lesser extent, volume and mix. Positive pricing underlying operational improvements, the Royal acquisition, and synergies from the acquisition will contribute to EBITDA in the range of $455 million-$470 million. This represents a 10% increase on a pro forma combined basis at the midpoint of the range. Full year depreciation and amortization will be approximately $145 million for the full year, with about $55 million of new D&A related to Royal. Full year net interest expense will be about $100 million, with about $65 million related to financing the Royal acquisition.
The company's core tax rate, excluding the impact of discrete items, is unchanged and is expected to be between 25% and 27%. Capital expenditures are now expected to be approximately $70 million in fiscal 2018. We continue to anticipate free cash flow generation that will be used to repay $170 million of debt in the 2018 fiscal year. Let me turn the call back to Jim Owens for closing comments.
Thanks, John. In summary, our business performance in 2018 continues to progress very well in the third quarter, despite the currency movement and a more challenging economic environment in China. We've grown organically, executed on our pricing strategy, and delivered continued margin improvement. We are well on our way to successfully integrating Royal, offering an expanded set of high-value solutions to our customers. We are also delivering on our cost and revenue synergy plans, favorably impacting our financial results. Our EBITDA and cash flow continue to increase, and we're on track to pay down $170 million of debt this year. All of this gives us confidence that we are on the right path toward our 2020 financial deliverables, which we discussed in detail at our recent Investor Day. Thanks to those of you who attended our Investor Day, whether in person or over the webcast.
During our Investor Day, we said that in order to achieve our 2020 EBITDA and cash flow targets, we needed to deliver on three key deliverables. These were to achieve double-digit growth in Engineering Adhesives, $35 million in Royal-related cost synergies, and operating efficiencies in manufacturing to drive margin improvements in our core business. We again this quarter showed significant progress on all three of these strategic objectives with double-digit growth in Engineering Adhesives, excellent delivery on synergies with $10 million delivered year to date, and margin expansion to 15.5% in the quarter, in part due to operating efficiencies. This quarter was strong, and our path to deliver our long-term strategy and financial commitments is proceeding as planned. This wraps up our prepared remarks. Operator, let's open up the call to take some questions.
Thank you. If you would like to ask a question, please signal by pressing *1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press *1 to ask a question. The company would like to provide everyone the opportunity to ask a question. You may re-queue as often as you would like, time permitting. Our first question comes from Mike Harrison with Seaport Global Securities.
Hi, good morning.
Good morning, Mike.
Mike.
Just wondering, Jim, if you can go into maybe a little bit more detail on what you're seeing in China from an uncertainty standpoint. Is this more consumer driven or having to do with government policy? Or maybe just give us your thoughts on what you're seeing and what has you more cautious there.
Yeah, I would say, we've seen reports of this. We report early, so we give a view on China maybe that, as you know, we have a nice sized business there. I would say it's both across the consumer goods businesses, our packaging and our hygiene businesses, and also some of the durable goods that are exporters. I think there's a bit of uncertainty there, I think consumers are spending a little less, I think manufacturers are maybe reducing some of their inventories. We do see some pickup in Southeast Asia, I think for customers who have options as exporters outside of China, I think they're sometimes shifting some of their production over there. Yeah, we definitely see it across a number of our businesses.
I would say it's mostly been in the last two months that we've seen it, and it continues here into this month. That's, I think, a general economic and a business that we've looked at in our Asia-Pacific business to be close to double-digit growth is probably going to be closer to lower single-digit growth, and that has a pretty big impact on our Asia results.
All right. Then.
I'd also say, I don't think this is an inherent problem in China. I think it's a short-term issue, probably related to all the news around tariffs and concerns that consumers have. That's just my supposition based on conversations that I've had with people on the ground.
Then, I was also hoping to get just a better understanding of what drove the EBITDA margin improvement in the Americas. Obviously, you called out some of the volume weakness and some of the reasons there, but maybe just a little bit more detail on kind of how that volume decline is going to trend going forward, or how that's going to play out, and how sustainable something like an 18% EBITDA margin could be in the Americas.
Yeah. I can let John comment on the specifics of the 18%, the Americas team has done a great job. I said this going into Q2, right? They took a pretty strong approach to recovering their prices in Q2. Some of that continued into Q3. Very sustainable where they've brought the business. The Wisdom business had some pieces of business that were very low or zero margin. They shed those at the beginning of this year. Those were very strategic, I think, in terms of improving the portfolio. I think they've been targeted and thoughtful about price increases and where they've had to let business go, it's been lower margin business. We're also seeing some synergies there, right? I think some of the oil-related synergies offensively, as well as on some of the raw material sides, are helping that business as well.
A really good performance and broadly sustainable. I think I said for a long time that we expect that business to run in that 17, 18% range, I think that's the kind of expectation you should have going forward. John, you want to comment?
Yeah, I think that covers it very well. I mean, it really is pricing led as we look at pricing realization, in the second quarter and then particularly in the third quarter, we're definitely seeing that come through and significantly outpace raw material costs. It is a little bit of the synergies that Jim talked about, but all the profit and margin improvement delivery is at the gross profit line.
All right. Thanks very much.
Thanks, Mike.
Thank you. We'll take our next question from David Begleiter with Deutsche Bank.
Thank you. Good morning. Jim, just on Q4, still a pretty wide range of $15 million of EBITDA and $0.10 on EPS. What's driving that wide range at the moment?
Let me give that question to John. We have specific goals exactly where we're going to be, and we're trying to give a range based on the level of uncertainty that's out there in the world, but maybe you can comment more on the size of the range.
I would say it's uncertainty related to exchange and a little bit economically, China in particular. We're probably, I think, $0.05 wider than we were last year, and that's the reason.
I would just comment, David, we report on a quarterly basis, and we have a quarterly target, and we're hitting those. Last quarter, we were a few cents above what everybody expected. This quarter, we're a few cents below. We set an annual target at the beginning of this year, and if you take this $0.10 of currency impact, we're going to end the year spot in the middle of where that started. I think we look really at this on a long-term view on what we're going to deliver for the year, and it's going to end up being a very solid year right in the middle of that target. I think we're not trying to avoid getting into the quarter-to-quarter game, but I think it's a fair question.
Understood. Just, I know it's early, Jim, but any early look on 2019 from either an EBITDA or EPS perspective? Just maybe a range for either one of those two?
Yeah, I think it is a little early for us to give you that. I think we're positive about 2019. I think we feel we laid out some plans at the Investor Day. We feel really good about those. Obviously, the currency's a little different, but currency goes up and down quarter-to-quarter, so we'll have to factor that into 2019. Then, as I said, I think the China issue, while I do think it's going to happen in Q4, I don't think it's a systemic problem. I would say, look at our Investor Day deck and what we said in terms of 2020, 2019 should be a really positive step in that direction. Fundamentally, things haven't changed. The only thing that's changed a bit is the currency.
John, do you want to I'm sure you don't want to add anything to that.
I think that's, yeah. I think that's a very good summary. Yeah.
We feel good about where the business is, David. Yeah.
Great. Thank you very much.
Thank you.
Thank you. We'll take our next question from Eric Petrie with Citi.
Hi, good morning, guys.
Morning, Eric.
Could you give us an update on your expectations for an annualized pricing target this year and how much coverage you have of raw materials in 2018?
Yeah. Again, I gave that number in Q2, so it's not something we update on a regular basis. I think we said we delivered $50 million, which we did in Q2. We delivered more this year. I would say cumulatively, we're today between $90 million and $100 million, maybe closer to $100 million of price increase, executed on an annualized basis. As we've said, that's recovered more than the increases we've gotten this year.
Great.
In raw materials.
On construction products, your volume improved significantly, and you saw acceleration or contribution from the Royal business. Is that sustainable going forward, or did you have any nice product wins there?
There's two stories going on there. I think if you just look at the PVM and our data, you get a really nice look at what's happening to our legacy business. Really strong quarter from a volume standpoint on our legacy business. As I said in the script, though, when you net the two businesses, relatively flat from a top line with very nice margin improvement. I think that's what we're really targeting here over the next 12 months in this business. We think, as we've looked at both businesses strategically and we bring them together, there's some parts of those businesses that are generating a lot of profit performance, and we want to grow those faster and focus on those. There's other customers and portions that are less profitable, and I expect us to decrease our position with those.
I think if you look at that business going forward, it's going to net out a very low growth with good margin improvement. That's what it's going to do going forward. As you point out, we had a very strong top-line quarter relative to last year in the legacy business, which for guys like you that have followed that for a while, it's very encouraging and in line with what we said we'd do.
Thank you, Jim.
Thank you, Eric.
Once again, if you would like to ask a question, please press star one. We'll take our next question from Ghansham Panjabi with Baird.
Hey, guys. Good morning.
Hi, Ghansham.
Morning. I guess going back to Americas Adhesive. Last quarter, you called out the Brazilian strike as part of the reason volumes were down 5%. It was still down 5% during the third quarter in the context of a very strong economy in the U.S. Did that surprise you? Any particular categories that were weaker than you thought they would be?
Yeah, I wouldn't say there's any categories that were weaker. I think if we had predicted the volume number, it would've been a little higher, not much, because of that Brazilian thing. I think it might have been negative four. The biggest driver is the businesses we decided to shed related to Wisdom, that were essentially zero-margin businesses, and then some of the impact of price increases. Those were the two big factors, you're right, the Brazilian thing, of course, didn't happen this quarter. I think we're going to start lapping those Wisdom exits, so you'll see more positive volume as we go into the fourth quarter and certainly into next year. In terms of the overall economy in the U.S., we see positivity.
I think if you parse apart the numbers in the Americas, good positive economic activity, particularly in more of our durable assembly goods. Things like recreational vehicles, of course, are strong, and I think overall very positive. Less positive economic activity in Latin America, but not negative, just not as positive as the U.S.
Okay, just my second question on the back to the weakness in China. From what you're seeing thus far, is it in products that are consumed locally, products that are exported? Which specific end markets are you seeing any sort of incremental weakness? Thanks so much.
It's a little bit of both. I'd say the consumer goods side for us is hygiene and consumer packaging. Generally, the products that we sell into are in the middle to upper-class consumer goods areas. We see some weakness there. Then on the durable assembly side, most of the stuff that's for the domestic market is not weakening, but anybody who's an exporter, you see, whether it's inventory declines or lost volume, you see a little bit of decline there. That's what we see in China.
Again, just to finally clarify, the only incremental weakness from a macro perspective you've seen is in China, correct?
That's correct. Macroeconomically, we see a lot of positive things all around the world.
Got it. Thank you so much.
I'd just add maybe Turkey a little bit. I think the currency has really put Turkey on some uneven footing. I think that'll spring back as people recalibrate. Yeah, China and Turkey would be the two places.
Got it.
Thank you. Once again, if you would like to ask a question, please press star one. We'll take our next question from Christopher Perrella with Bloomberg Intelligence.
Hi, good morning. Question to dig a little deeper on the Americas Adhesives. I would've thought that year-over-year, you would've seen it could still have been negative with the loss of the Wisdom business. Why How much is the de-selection of the Wisdom business contributing to the volume decline in Q3? Just to clarify on the guidance, do you expect to see volumes turn positive in the Americas in 4Q or just less negative?
Yeah. Two big factors. I would say, again, we don't have exactly specifics on each of these to share today, but about half of it is Wisdom business that we purposely exited. I'd say the other piece that you'll see in our volume numbers is business that we've exited as a result of price increases. We've been aggressive with price increases and where we've had to shed lower margin customers where they're making marginal decisions, we've exited some of them. Those are the two biggest factors that are driving the Americas volume numbers. Now, there's a combination of volume and mix you have to look at in our business. Mix was positive. Underlying, I think the team is managing the portfolio to make certain we have a stronger business.
I wouldn't look at that volume number as an indicator of what's happening underlying economically, but more about the strategic moves we're making in our business.
All right. That was my question. Thank you very much.
Okay. Thanks, Chris.
Thank you. We'll take our next question from Jeff Zekauskas with J.P. Morgan.
Thanks very much. Your adjusted SG&A expense is running around $140 million a quarter, maybe a little bit lower. Do you think that'll be true for the fourth quarter, or are there unusual expenses that occur in the fourth quarter?
No, I would say, Jeff, that's going to be kind of our run rate. It's kind of third quarter, maybe trending down a little bit into the fourth quarter. Shouldn't be anything unusual, though.
Your organic volume growth was really pretty good in Engineering Adhesives. Can you remind us, what are the top three geographies for Engineering Adhesives and the top three end markets?
I'd say if you look at our growth, as I mentioned in the script, it was very broad-based. Really nice growth continues in our electronics business. That's off of new consumer goods wins that we have, as well as we're now penetrating some of the areas of microelectronics. That's really positive for us. On automotive, we've done a really good job over the last couple of years of getting specified, particularly on interior trim applications. That's driving the automotive growth, along with a few synergy projects that are starting to come through in the automotive business that are hitting the numbers the second half of this year. U.S. assembly is very strong for us. There's an assembly business that we had with Cyberbond, as well as part of the Royal acquisition, a company they bought called ASI.
Just this broad-based economic growth in the U.S. is showing up in growth in North America. That's where we're seeing the best growth. There's also some positive wins we've had in the truck business in Germany. Those would be the pieces of this that I'd call as our biggest drivers of growth in that business.
Thanks for that. Were you disappointed by the rate of volume growth in EIMEA?
Let me take a look at the numbers here. I would say it's probably a little lower, I guess, Jeff, than I would have expected. Our EIMEA business includes all the Middle East and Africa. Certainly, the Turkey devaluation in the middle of the quarter had an impact on our sales in that country. We got a nice size little piece of business there that slowed down a lot in the quarter. Probably a little less. Again, as the team moves forward, our objective here is to work on the quality of our business. Especially when we're leading relative to smaller competitors, we're going to have a little bit less volume growth in these kind of inflationary times, and we're willing to give that up to improve margins. That would be sort of a high-level look at it.
Probably a little lower than I would have expected.
Lastly, I think you're going to spend $70 million in CapEx this year, and my recollection is maybe you were expecting to spend maybe 80 or more earlier in the year. Is that because there are going to be lower capital outlays or what you don't spend or what's not going to be spent this year will flip into next year?
I think there's a little bit of a delay into next year on a couple projects. We've looked at the timing of some of those projects. A shift by a quarter of certain projects. A couple of the Royal projects are a little smaller than we thought. There's one that's bigger that comes next year. I'd expect a little of it to slip into next year, but some of it is savings that we found relative to what we thought we were going to spend in the year. A little bit of both, I guess, is the short answer, but not a dramatic shift into next year, Jeff. If that's your question.
Okay, great. Thank you so much.
Thank you.
Thank you again. To ask a question, please press star one. We'll take our next question from Paratosh Issar with Berenberg.
Hi, thanks. Just looking at the full year guidance, the implied EBITDA growth rate for the fourth quarter looks quite high, 15%-30%. Is that realistic? Is there anything unusual happening in the fourth quarter, like lower maintenance cost or just some higher shipments or something?
It is a higher volume quarter overall, and I think Paratosh may be looking at this number, not on a pro forma basis. On a pro forma basis, I think it would be growing in the mid-teens from a year-over-year standpoint. We're obviously carrying all the pricing we've gotten to date into the fourth quarter, and it is our higher volume quarter. It's not a dramatic shift from what we saw for the first half of the year and third quarter.
I think we had a 63% increase in EBITDA, like for like this quarter. Not like for like, but ex Royal in both quarters. I think more in the mid-teens is what you should expect in terms of EBITDA growth.
Got it. I'll check. On the slide on the currency outside the EUR and CNY, what are the other one or two biggest exposure, and how much exposure do you have to the TRY?
I would say, again, we don't get into all the specifics of each currency, but fundamentally, I think the right way to think about our business is it's a third exposure to, of the numbers John shared with you, a third for CNY, a third for the EUR, and a third for everything else combined. It's not heavily weighted to the TRY. Obviously, the TRY is a big story for us, but it's broad-based across lots of currencies.
Paratosh, the slide lists the currencies in the order of our largest exposures.
Okay, great. All right. Thanks, guys.
Thank you. Again, if you would like to ask a question, please press star one.
Thanks everyone for your time and your support of H.B. Fuller. We appreciate your input today.
Operator, we'll conclude the call now. Thank you.
You're welcome. Thank you, ladies, for joining today's conference. This concludes the call. You may now disconnect.