Good morning, everyone. I'm Jim Owens, President and CEO of H.B. Fuller Company, and thank you for joining us today. Our people are passionate innovators. If I could take you around to any one of our technical locations, you would understand why H.B. Fuller Company is winning in the adhesive industry. The markets we're choosing to compete in are exciting. The new technologies we develop are connecting what matters and making the products that all of us use every day better, whether that's in how we communicate on our cell phones, how we're making buildings more energy efficient, or the planes that we fly in. Our goal today is that you will come away with a better understanding of how H.B. Fuller Company is gaining market share and expanding margins in this exciting industry.
Today, we're going to provide deeper insights, both for those of you who are new to following the company, as well as those of you who've known us for quite a while. You will hear from eight leaders at H.B. Fuller Company, including the former CEO of Royal, Ted Clark, our CFO, John Corkrean, who's bringing a deep level of rigor around our commitment to deliver our targets, the leaders of our operating segments, and the former owner of Cyberbond, another one of our strategic acquisitions. During this opening presentation, I will first talk about our company and the markets we serve, the adhesive industry overall, our competitive landscape, and why, as a leader in this high-growth adhesive market, H.B. Fuller Company is poised for continued success.
After that, I'll summarize the significant progress we've made in transforming this company over the last eight years and demonstrate how we are applying the lessons learned over that period to further improve our performance and deliver consistency in our results going forward. I'll then review our strategy, and finally, before Q&A, I'll review our action plan. These are the three key areas that will enable our success in delivering the 2020 financial targets and will drive significant value for shareholders over the next couple of years. We'll cover the reasons we're confident that you should invest in H.B. Fuller Company today. We'll have our first Q&A session before I turn things over to my team to discuss H.B. Fuller Company's business segments and the 2020 plan in more detail.
We will then have a quick break at about 11:00 A.M., and we hope that you can join us for lunch in the foyer outside this ballroom when we conclude at 12:15 P.M. During lunch, my teams and I will be walking around and be available to answer any of your questions. We'll also have an innovation showcase over lunch, where you can learn more about our technologies and our applications. H.B. Fuller Company is the largest pure-play adhesive company in the world, and we have the second largest market share in this diverse space. Our global headquarters are near St. Paul, Minnesota, but our operations are very global, with 30 technology centers around the world, directed by over 500 field and lab-based technical experts. They drive our culture of innovation.
We have 71 manufacturing factories, which produce thousands of different adhesives that we sell to customers in more than 125 countries around the world. We've been in business for over 130 years. We celebrated our 50th anniversary as a publicly traded company this year. In this past decade, we have experienced the most dynamic growth in our company's long history. On the bottom of the slide, we've highlighted just some of the products that have helped us build successful decades-long relationships with our customers. As we'll talk about today, H.B. Fuller solves our customers' adhesive challenges across a variety of diverse, high-margin industries, including Electronics, Transportation, hygiene, and packaging, to name just a few. The strategy we are implementing has already resulted in the transformation of this business over the last eight years.
We were a company with $1.3 billion in revenue, which would be $1.1 billion at today's currency rates, and $148 million in EBITDA back in 2010. Today, we are a dynamic company that's on track to achieve $3.1 billion in revenue and $470 million in EBITDA this year. We've done this by building a great team, investing in the right market segments, being a prudent acquirer, and winning with customers through innovation. Since 2010, we have invested in 12 strategic acquisitions. The largest and most significant of these have been Forbo, Tonsan, and Royal.
In 2017, we executed on integrating three strategic acquisitions, including adding key capabilities and applications with Cyberbond, making the most important strategic acquisition and move we've made in Latin America in more than 30 years with the addition of Adecol, and successfully completing the biggest and most transformational transaction in the company's history with Royal Adhesives & Sealants. The Royal acquisition demonstrates the strength of our vision and our commitment to being the leading pure-play adhesives company in the world. We worked diligently to seize this opportunity and finalize the deal, while at the same time, developing an integration plan that was ready to be executed on day one. The success of this plan is supported by our integration achievements to date, which you'll hear about later today from Ted Clark.
In addition, our portfolio has both expanded and become more focused on highly specified adhesive applications in fast-growing markets. Even before the Royal acquisition, as you will see and hear more about later today, after pro forma Royal, 53% of our 2017 revenues came from our highly specified market segments. Our organic investments and acquisition strategy enabled us to introduce the Engineering Adhesives segment in 2016, which, as we have communicated, will be a primary driver of our growth going forward. We're also committed to our core businesses. We've been investing in our research and development capabilities and are fostering a culture of continuous innovation across the organization. We have created an entrepreneurial, energetic mindset throughout our commercial and technical organizations, and that drives growth.
We have been enhancing our world-class manufacturing capabilities for a number of years by restructuring and upgrading our facilities in Europe, investing in world-class SAP systems, and building state-of-the-art facilities in India, China, and Indonesia. Our SAP implementation began in 2014, and we continue to steadily roll it out around the world. In addition, we have built world-class pricing tools and sourcing models to enable us to effectively manage our margins and our pricing strategies. We've developed our people by investing in their personal growth, their professional growth, and by continuing to attract the most capable and talented and experienced people in the adhesives industry. All of these investments have helped us to lead the way in the adhesive industry. We are experiencing organic revenue growth above industry levels. We have unparalleled R&D and market expertise, and we have expanding margins.
The executive team you'll hear from today have a combined experience of more than 250 years in the adhesive and sealants business. Nearly all of them have worked for multiple adhesive companies and have lived on multiple continents in countries such as China, Japan, Chile, Switzerland, Germany, Italy, Brazil, and the U.K. They each individually have an outstanding track record of success. Together, they are creating a lasting legacy of collaborative and global innovation throughout the company. Most people in the market would agree that we have the best leadership team in the industry. It's clear to me that this is the right team to successfully execute the 2020 strategy. We're very proud of what we've accomplished over the last years. We've also learned great lessons from each challenge.
As a result, we have built stronger governance, financial rigor, risk mitigation, and contingency planning into our company as a result of these lessons. All of this has ultimately made H.B. Fuller a stronger company that has never been as prepared for the future as it is today. I'd next like to address a question that a number of investors have asked us, and that is how does H.B. Fuller go to market, and why is H.B. Fuller organized the way that it is? On a high level, we have organized our targeted businesses into six groupings, which I will largely refer to as markets from here on. This enables us to better and more strategically identify the appropriate sub-markets, customers, and applications where we need to focus. Two of these markets operate and are reported globally, Engineering Adhesives and Construction Adhesives.
Our other three reporting segments, Americas Adhesives, Europe, India, Middle East, and Africa, and Asia-Pacific Adhesives, are comprised of four distinct market areas. These end markets, durable assembly, hygiene, packaging, and paper and other, are managed regionally through our Americas, EIMEA, and Asia segments. This slide shows the proportion of sales in each market. Our teams develop strategic plans globally for each of these end markets, but execute those plans regionally and locally through our reporting segments. This ability to effectively develop strategies and work together at a global level, but execute regionally gives us a competitive advantage versus both our global competitors who are not as well coordinated and versus our local competitors who don't have the extensive global reach that we have. The organizational design is the best way to enable us to be both global and regional in how we build strategies and execute our plans.
Our executive leadership team takes on two roles, which ensures that management is engaged both regionally and globally, and that as an overall company, we are coordinated and working collaboratively across the world. For example, Heather Campe, who you'll hear from later today, is the global leader for hygiene and the P&L leader for our Americas segment. Slide 11 is an overview of the company that you'll be seeing a few times today. Here we provide additional details on the end markets that H.B. Fuller competes in. You'll hear about the specifics of each of our markets during its respective presentation today, but I'd like to highlight a few key characteristics before moving on. First, across nearly every segment, we expect to continue to grow share, most notably in Engineering Adhesives, durable assembly, hygiene, and packaging. Most markets are characterized by low to moderate cyclicality.
While each has different pricing power in our highly specified segments, meaning Engineering, Construction, and durable assembly, H.B. Fuller has moderate to high pricing power and therefore a greater ability to retain customers when we need to implement price increases. This slide gives you a sense of the size of each of the end markets globally on a 2017 pro forma basis, including the impact of Royal. At the right of this slide, I'd like to emphasize the proportion of our business that we classify as highly specified segments, which following the Royal acquisition, now comprises 53% of our $2.9 billion portfolio. Our less specified business, our paper and other segment, now only consists of 17% of our total portfolio. This portfolio shift is a key driver of our future growth and margin expansion expectations.
A key driver of our success, and one of the themes we'll be consistently emphasizing today, is that innovation is embedded in the culture at H.B. Fuller, and the fact that our company has the ability to stay on top of evolving market trends and changes across the industry has enabled us to build multi-decade relationships with customers all over the world. We help our customers in 1 of 3 ways. 1, we help them improve their existing manufacturing process. 2, we help them introduce new manufacturing processes to produce their products. 3, we help them develop and introduce completely new products to the market. This is what we do for customers. We help them develop new products, new processes, or improve their existing processes. We've been able to do this and retain our customer relationships, in part, simply because H.B.
H.B. Fuller is viewed globally as an applications expert in the market we serve. We're able to take that expertise and the convergence of technology across our markets to help solve our customers' challenges every day. Our global R&D team with our technical and application experts in each one of our segments and markets ensures that our products meet the evolving and demanding requirements of different customers around the globe. With some customers, H.B. Fuller has been one of their greatest collaborators for more than 30 years. These long-term relationships provide our customers, including some of the world's largest brand owners, with assurance and confidence that H.B. Fuller can always be relied upon to provide assistance when and where needed. I can go on giving you my thoughts on how I think our customers view H.B.
Fuller, but I thought it might be more impactful for you to hear directly from some of our customers. One of our customers described their relationship with the company and our value as follows. "We have been impressed by the seamless interactions across the joint [inaudible]," which is Royal, "and H.B. Fuller teams. The technical and commercial teams come to us with solutions, and we feel strongly they are focused 100% on our needs." This customer is in our durable assembly business and traditionally had interfaced with Royal, but has benefited greatly from the additional technology and application support H.B. Fuller's team is providing to their business. Another customer reflected on the strong collaboration and good communication at all levels from the plant floor on up and said that H.B. Fuller's leadership is supportive and connects globally with our key players.
This global hygiene customer is a true partner with whom we've had open communication on all issues, ranging from technology development to quality and supply chain planning. This theme, longstanding customer relationships that are built upon decades of trust, innovation, and collaboration and partnership, will be heard throughout our presentations today. By the end of today, my goal is to ensure that everyone in this room and participating on the webcast has an understanding of why H.B. Fuller is a global market leader in the adhesive industry with a significant competitive advantage, and why it is that we are poised for continued growth. The main reasons are that we have a resilient, diversified, innovation-focused business model that allows us to be able to provide enormous value to our customers on products that are a relatively low percentage of the customer spend.
We're a leader in the markets we choose to compete in, and therefore, the overall adhesive industry, an industry with sustainable, annuitized high margin potential, and with attractive growth prospects, in part, due to changing market trends that present powerful opportunities for both the industry as a whole and for our company. Third, the strategic plan that we will discuss in more detail today will drive long-term profitable growth for the company and provide a great investment opportunity for you as an investor. H.B. Fuller leverages both our deep multi-decade customer relationships and our R&D pipeline to achieve volume growth. Lastly, the company has one of the most experienced and long-tenured management teams in the industry, and we are dedicated to meeting our future targets. Turning to slide 17, there are a number of reasons why the adhesive industry is inherently attractive.
First, in nearly every segment of our business, a very small amount of adhesive, and therefore a very small amount of spend, creates a great deal of value for our customers. For most customers, adhesives make up less than 1% of their cost of goods sold, but they are a critical component to determining product performance and manufacturing productivity. Adhesives are an annuitized business, meaning after H.B. Fuller acquires a customer, they often don't change adhesive products during the life cycle of the end product. In addition, switching costs are high. Typically, customers and markets do not want to or are unable to change adhesive suppliers after they are integrated into a production process or a particular product. This is one of the reasons that more than 95% of our revenue is recurring revenue.
On a high level, adhesives are formulated blends of between three and sometimes more than 10 specialty chemicals. This means that no two competitive formulas are the same. Which in turn, again, leads to high switching costs when customers change suppliers. Many times, a change would require the entire design, testing, and production validation process for the adhesive to begin from scratch. Adhesives are used in a diverse set of end markets by nearly every manufacturer in the world, and therefore, involve a huge variety of raw materials. This diversity minimizes our overall company's risk profile. No one customer, raw material, or market can dramatically affect this business. With that said, raw material inflation in aggregate is an important issue for us to manage, and we'll discuss this and the steps we take to monitor and mitigate raw material impact later in the presentation.
We are currently executing our strategy in a market where the competitive dynamics are favorable. The adhesive market has expanded at a compounded annual growth rate of 3.6% over the last 38 years. Today, the market is not concentrated. With a 6% market share, we are the second-largest adhesive and sealant producer in the world. This allows us to choose the most attractive market segments in which to operate. There are more than 80 markets within the overall adhesive industry. We elect not to participate in certain markets, like the commoditized particle board manufacturing, where we can't differentiate versus basic materials. We choose to participate in those markets that we think have the greatest profit and margin potential, and markets where we know we can win. Our competitors fall broadly into three categories.
There are a couple of other diverse global adhesive companies, there are chemical companies that operate within a certain niche of the adhesive industry, and there are also a number of small and regional and local players. However, the competitive dynamics vary very much by the market and application where we compete. The dynamics in hygiene will be very different than construction, for example. We'll elaborate on this throughout the presentations today. We're often number 1 or 2 in the particular sub-segment or sub-market that we are actively committed to competing in. Our competitive advantage in a sub-market comes from being more globally connected than some of the global competitors and providing better global reach and innovative capabilities than our small competitors. As the products the world produces and uses change over time, trends in the adhesive market will continue to evolve. H.B.
Fuller will capitalize on these opportunities to grow and expand our business. The profit potential for this market is significant because customers have evolving performance and productivity needs, and increasingly high-margin areas of the business are growing. As the chart on this page demonstrates, the adhesive industry is estimated to grow from approximately $50 billion today to $70 billion over the next 10 years. Our strategy is to build capabilities and invest in the highest margin, most profitable market segments within this industry. When we analyze the adhesive industry, we take major splices and split them into $500 million or $1 billion markets of like customers and applications. Then we decide where to compete and how we're going to win in each of those sub-markets. Some of these sub-markets have significant growth potential, such as electric car batteries and solar panels.
While others are more mature, but remain resilient in their own right, such as baby diapers. The opportunity for growth exists across many markets, and the complexity of this business works in our favor because we focus on the markets, sub-markets, and applications where there is a strong profit, changing needs, growth opportunities, and margin potential, and where we're confident H.B. Fuller is in the best position to win. There are a number of ongoing trends that are positioning the industry to grow to $70 billion by 2027. Therefore, H.B. Fuller for future growth. For example, the shift to replace fasteners, such as to manufacture personal electronic devices with adhesives, is driving growth in the overall adhesive market at a faster rate than the individual growth rates of the personal electronic devices that we sell into.
The increased use of composites is driving increased overall adhesive usage and is also increasing the growth rates of the market we serve. Increased demand for alternative sustainable energy sources is leading to opportunities in new energy and technology design and production, such as adhesives and sealants for long-term durable solar panels. Globally, the demand for disposable hygiene products continues to grow, particularly amongst fast-growing emerging market populations in India, Southeast Asia, and China. In more mature economies, there is an increasingly aging population and a rising demand for adult incontinence products. The growing demand for energy-efficient buildings is also creating opportunities in insulation adhesives and tapes for sealing roofing edges and windows. While trends in e-commerce and increasing demand for sustainable packaging is creating new opportunities for automated, low-cost, more sustainable packaging solutions for online retailers.
Simply put, our strategy is to focus on these and other major opportunities where we know we can win. On slide 22, I've listed the five topics that are top of mind for investors, raw material inflation, pricing, organic growth, Royal integration, and leverage. We will dive deeper into all of them, either in the slides that follow or through presentations from my colleagues later this morning. In summarizing these issues, first, on the topic of raw material inflation, H.B. Fuller's raw material exposure is highly manageable. The largest raw material comprises less than 5% of all of the company's raw material purchases, and volatility of our basket of raw materials is muted relative to other specialty chemical companies. I'll discuss this more on the next slide.
In terms of pricing, we have developed advanced pricing tools to continuously monitor and project raw material inflation and help determine where and how to raise prices. We're on track to realize $90 million of annualized pricing this year, with $50 million achieved during the second quarter alone. On organic growth, I'm confident in our ability to hit our organic growth target, in part due to the success of our engineering adhesive business. That is consistently delivering double-digit organic growth. Zhiwei Cai and Jim East will elaborate on this in an upcoming presentation. In terms of the Royal integration, we are on track to achieve our synergy target, which I'm happy to report is progressing well.
Finally, as John will talk about later, we're on track to reduce our debt by $170 million this year and $600 million in aggregate by 2020, which will effectively reduce our leverage by 2020. The raw material inflation dynamic that customers are interested in in the adhesive industry, particularly for H.B. Fuller, is muted relative to other specialty chemical companies. For our company, raw materials have increased in aggregate by 1%-2% per year over the last 10 years. Based on our current basket of raw materials, is unlikely to increase by more than 5% in any one given year. Certain materials or segments can increase much more than this, but the aggregate increases are muted. This is due to the diversity of our raw materials and the specialty nature of the materials we buy.
It's demonstrated by the fact that our largest raw material, vinyl acetate monomer, makes up less than 5% of our purchases, our next material makes up less than 1% of our purchases. Our top 25 individually sourced materials listed on this chart make up less than 20% of our total raw material purchase annually. Each of these materials has their own pricing dynamic. The second chart shows that only 13% of our materials are considered to be commodity chemicals. These are materials like ethylene, VAM, acrylic monomers, and solvents, such as acetone or glycol. These materials are relatively volatile, and their cost can be tracked on public indices. The remaining 87% of our materials are unique specialty chemicals derived from these basic chemicals and include specialty polymers, tackifiers, or crosslinking agents.
Our cost for each of these specialty chem materials is determined by the individual supply-demand dynamics of any one material and its substitutes more than by the cost of the feed streams. Any price movements related to feed streams for these materials is typically delayed by nine to 12 months and dampened relative to commodity materials. We have invested heavily in a sourcing team that strategically manages each of these raw materials and leverage alternative sources from around the globe. The sourcing team also works closely with our R&D chemists to introduce substitute materials and formulas wherever appropriate. Our team of procurement experts is a source of competitive advantage for H.B. Fuller. As Ted will discuss more later this morning, our acquisition of Royal is allowing us to leverage this team to achieve raw material synergies as we've been combined with Royal.
I'd like to provide some more information on the pricing strategy that I just mentioned. As I talked about earlier during the market overview, some of H.B. Fuller businesses have attributes that make them more attractive because they have higher levels of pricing power than others. Each of these markets has a different level of inherent attractiveness and pricing power dependent on the nature of the business. We work to differentiate ourselves in each of these markets, primarily through the strength of our expert teams and innovation. These teams are constantly developing new adhesive technologies, strengthening our application science capabilities, building partnerships with equipment suppliers and customers, and managing our global supply chain, all of which helps us to differentiate from competition. You can see in this chart that numerous elements affect pricing power, including the level of specification, technical challenges, global needs, switching costs, chemical uniqueness, and available alternatives.
While we price our products based on the value we deliver to our customers, we have developed advanced pricing tools that enable us to constantly monitor and project the future of raw material costs so that we can effectively raise prices as and when needed. Strategic pricing is a key driver of our current and future success, as demonstrated by our most recent quarter, where price drove more than 3% of total net revenue growth, and the fact that we are on track to realize $90 million of annualized pricing in 2018. We have implemented price increases in each of the first three quarters of 2018, with the largest being $50 million in annualized pricing in the second quarter.
We expect continued escalation of raw material costs this year and next, accordingly, we're planning for further pricing actions either in Q4 of this year or early next year in anticipation of those raw material movements. Maintaining our margin targets while we continue to grow is a key priority for us. As I mentioned earlier, the adhesives we sell are chemically differentiated from our competitors' materials, which creates a barrier to change related to switching costs. Customers can seek out competitive alternatives with different chemistries if the pricing delta is large enough. Our business model enables us to raise prices on existing products as the cost of raw materials increase, while our pricing model enables us to continue to be the partner of choice for customers' new applications in the future.
On this slide, we have outlined for each segment and market our drivers for achieving both market growth and share gain. You'll hear more about each of these drivers in the individual segment and market presentations that follow. However, I'll highlight engineering adhesives. In particular, as you can see, that is where we expect to derive the greatest amount of organic growth. This growth will be driven by certain industry trends, such as increased product complexity, faster replacement, and lightweighting. H.B. Fuller will gain share through our speed of innovation and overall expertise and our global leverage of the businesses that we have recently acquired. By working on the right opportunities that grow faster than the market, we expect higher organic growth in the market. We also expect to generate 5%-7% organic growth in both durable assembly and hygiene.
The hygiene growth will be driven by both the increased usage of disposable hygiene products in emerging markets and aging populations in mature economies. H.B. Fuller's leading long-term partnership with various global multinational customers will drive our market share growth. As many of you are aware, in September 2017, the company announced that it purchased Royal Adhesives & Sealants, a leading manufacturer of high-value specialty adhesives and sealants, with 2017 pro forma net revenue of approximately $600 million. This transformational addition of Royal demonstrated H.B. Fuller's ability to capitalize upon an opportunity that will help us execute our 2020 plan. We're in progress of executing on an integration plan that has been developed before the acquisition and has been in place since day one. Ted Clark will give a full review of the progress on this plan later this morning.
One part of this transaction that I wanted to highlight is the impact Royal is already having on our overall portfolio, particularly on our mix of highly specified business segments. Following the deal, we immediately increased our construction adhesives, engineering adhesives, and durable assembly market presence. This resulted in a 9% increase in the highly specified business as a percentage of our overall portfolio. As you know, we financed the Royal acquisition entirely using debt, without using any additional equity. We are committed to reducing our debt-to-EBITDA ratio to between 2.0 and 3.0, which are the more normal levels that you are used to seeing with H.B. Fuller. To achieve that, we're committed to paying down $600 million of debt through 2020, and $170 million of that will occur in fiscal year 2018 alone.
To date, we have paid down $40 million and are on track to meet our fiscal year 2018 and our 2020 debt paydown goals. The chart on the right-hand side of this slide shows that less than a third of our outstanding debt today is floating, and we've been conservative in our financing by fixing a large portion of our debt and developing extended time periods in which to pay down debt while maintaining the flexibility to prepay debt. We have built contingency plans and have modeled past recessions in order to make certain that our company is resilient and able to continue to pay down debt effectively in the case of a major economic shock. Our cash flow generating capability has shown great resilience throughout our 130-year history, and our contingency plans are robust.
Let me spend some time providing a high-level overview of our financial achievements since we set out to fundamentally transform this company's portfolio mix, our geographic reach, and our growth trajectory. Our vision all along has been to create a stronger business that allows us to opportunistically go after new markets and win with customers all over the world. We have achieved that and are continuing to evolve into an even stronger and more agile business. As a refresher, in 2010, the company was a $1.3 billion business that generated $148 million in EBITDA. In 2017, we generated $2.2 billion in revenue and $287 million in EBITDA. In 2017, combined with Royal, we would have generated nearly $2.9 billion in revenue and $420 million in EBITDA. For fiscal 2018, we're currently on pace to deliver $3.1 billion in revenue and $470 million in EBITDA.
From 2010 to 2017, the stock price has moved from about $20 a share to over $50 per share. You can see in these charts the important strategic shift that has also occurred. Not only are we more than 75% larger and twice as profitable heading into the Royal deal, but we are also in a much stronger position in terms of our mix. With Royal, we have increased our highly specified segments from 34% of our $1.3 billion business in 2010 to 53% of a $2.9 billion business after Royal. We also have increased our portfolio of business around the globe with important investments. Acquisitions in China, Malaysia, India, Africa, Brazil, Indonesia, Egypt, Colombia, and Dubai. Our emerging market revenue has grown from 22% of a $1.3 billion business in 2010 to 29% of a $2.9 billion business after Royal.
We are a bigger and more profitable company, more importantly, we are a stronger company, well-positioned for global growth where opportunities exist. This solid foundation has enabled us to be in a great position as we look forward toward the future. Our updated financial targets are clear. By 2020, we will be a $3.4 billion company with approximately 4.5% annual organic growth, generating $605 million in EBITDA and an EBITDA margin of 17.8%. We will reduce our debt by $600 million while continuing to invest $260 million in capital to grow and improve our business, while at the same time, continuing to return capital to shareholders through a growing dividend. Our revenue, EBITDA, and EBITDA margin targets all reflect increases since our last Investor Day in 2016. John will speak more about our 2020 targets and our path to achieve them in his presentation later this morning.
We believe that the enterprise value associated with these 2020 numbers will result in a near doubling of H.B. Fuller's stock price from where it is today, assuming today's multiples. We will talk about this in more detail later in my presentation. These projected results are built on a detailed plan, the actions we are already taking in the business, and a modest view of global market growth. Delivery of these numbers will also make us a much more valuable and capable company beyond 2020, with significant annual cash flow and a sizable market position in some of the world's most important market segments. This slide shows our 2020 plan all on one page. Since our 2016 Investor Day, most of the information on this slide has remained the same. Our competitive advantage lies squarely with our people. We are the best globally connected team of adhesive experts.
Our way of operating is unique. We have created a norm of partnership across business units and country lines, our compensation systems and our organizational design are aligned with this approach. As we have continued to acquire new businesses, our focus on high-performance collaboration has only strengthened. Our small competitors can't do what we do globally, our big competitors don't work together as effectively as our team does. Our people and how they are organized to work together as a collaborative team is a key source of our ability to win in the market. We win in the market by being both experts in adhesives and experts in our customers' businesses and their applications. In addition, as I have already mentioned a few times, innovation is a part of the culture at H.B. Fuller.
The innovation of our globally connected teams drives our strong customer relationships, our growth and our margins. Manufacturing excellence is important in order to serve our customers well, given the diverse nature of our materials, we must partner with suppliers, both to get low costs and to further drive innovation. In terms of our financial targets, as I mentioned on the previous slide, by 2020, we will be a $3.4 billion company with approximately 4.5% organic growth and achieve $605 million in EBITDA. This is an increase compared to the targets we announced in 2016, when we were projecting $3 billion in revenue and $515 million in EBITDA in 2020. This original target included planned acquisitions of $500 million in revenue.
Our operating principles around winning the right way drive our success, which means we operate ethically all around the world. This is good business, and it results in the best customers, the best suppliers, and the best people wanting to work for our company. Finally, looking toward 2020, we will continue to grow aggressively in our high-value business segments and markets. We will do this by creating teams of experts who develop unique applications that cannot be replicated by our competitors, by leveraging our business processes and tools, and by making informed decisions about how and where we allocate our resources. In the slides that follow, I am going to discuss the three primary actions within this plan that will drive our future success and allow us to achieve our stated 2020 objectives.
On this slide, we have highlighted the three primary actions that will be the drivers of our EBITDA growth over the next three years. Continued profitable growth in the Engineering Adhesives segment, realization of our Royal-related synergy targets, and increased efficiency from manufacturing excellence across all of our businesses. In addition, underpinning each of these revenue and profit drivers are two other important factors that play an unquantifiable but hugely important role in our business. The expertise in technology and innovation and our team of dedicated global experts, these are unmatched by our competitors and are instrumental in helping us maintain existing relationships and building new long-term customer relationships to achieve growth. They are also critical in our ability to drive cost and improve margins. The first part of our action plan is to capture the momentum we have built in Engineering Adhesives segment to drive continued growth.
We have built this business organically over a number of years. Then we added the Tonsan acquisition in 2015. This enabled us to introduce this business as a separate operating segment for the first time at our Investor Day in 2016. Engineering Adhesives was also a focus of Royal, where it made up 20% of its $660 million portfolio. Pro forma resulted in Engineering Adhesives comprising 14% of H.B. Fuller's revenues. Royal also allowed us to exceed our original 2020 Engineering Adhesives target last year, and we have subsequently increased our 2020 goal to $580 million by 2020. At the same time, we will deliver an expanded margin in this segment, growing from 15.9% in 2017 to an estimated 22% in 2020. We will achieve this growth by continuing to target several sub-segments and technologies, including Electronics, Transportation, renewable energy, and batteries.
We will do this with our differentiated reactive chemistry and our unique packaging capabilities. Zhiwei Cai and Jim East are going to provide a deeper dive review of how we consistently achieve this high level of organic growth at the top of the hour. Our second valuation driver is to realize our Royal-related synergy targets. The Royal acquisition is the largest transaction in our 131-year history. This transformative deal was highly accretive, adding over $130 million in EBITDA before synergies. The combination shifted our portfolio to higher margin segments and has materially improved our cash flow. We are on track to achieve our synergy targets for the 2018 fiscal year, and as of Q2, have generated more than $6 million of synergies. By 2020, we are expecting to generate a total of $50 million in synergies, of which $35 million will be cost reductions, and the balance will be comprised of revenue synergies.
Our third driver is to increase efficiency from manufacturing excellence. We have a world-class manufacturing footprint. We continue to leverage an improvement process to determine where and when to invest to enhance our manufacturing capabilities. As we laid out in 2016, we have a solid plan that we are working to deliver on five critical fronts: global sourcing excellence, lower manufacturing costs, improving quality, leveraging SAP globally, and improving inventory and supply chain. We're making progress in all of these areas. We began to build a competency in global sourcing in 2013. Today, our closely connected global strategic sourcing team works together with our R&D and commercial teams to identify and secure the right raw materials at the best price.
Over the past 5 years, this team has delivered tens of millions in savings and has strategically worked with our R&D team to enable us to create multiple sources for the raw materials we buy. Their work is also currently integral in our Royal synergy plan. As of today, we have identified $23 million in sourcing savings. We are well on track to meet this goal, with $6 million achieved to date. Second, we have put into place a rigorous review of manufacturing process to identify the most efficient and effective way to manufacture the highest quality products for our customers. Operational discipline is a structured process to improve uniformity and drive out waste in factory labor costs, depreciation, manufacturing overhead, and any cost of non-conformance. We also created a quality-focused culture that's woven into everything we do at all levels of the organization.
To win with exacting customers and consumer-driven markets, we must deliver high-quality products with 0 defects 100% of the time. Over the past 2 years, we deployed a global quality standard and trained our employees around the world on it. We use 8D root cause analysis of any quality issue and create action plans that solve problems for the long term and reinforce our quality mindset across the company. We're well on our way to leveraging SAP globally. We have taken an approach where we go live in an identified geography every 9 to 12 months, so that rather than 1 big, potentially disruptive project, it resembles a seamless transition, step by step, every quarter along the way. Importantly, this approach has proven to be an enabler of consistency in terms of being a globally disciplined, high-performing, operationally excellent organization.
This was demonstrated by the flawlessly executed launches in the Cyberbond business and in our Argentina business that happened in 2017. Finally, we are refining our inventory and supply chain management by improving our delivery performance and working capital. As John will review later this morning, we'll be reducing working capital as a percentage of sales by over 100 basis points by 2020. That's over $40 million in cash savings. By the end of 2020, we'll reduce our conversion cost as a percentage of sales by more than 130 basis points compared to our 2017 pro forma Royal business. Our manufacturing cost ratio reductions will be driven by volume leverage, leveraging our infrastructure investments in Europe, achieving efficiencies from our SAP implementation, and reducing inventory-related waste costs.
This will have a significant impact on our profitability by 2020, and these investments will provide quantifiable benefits well into the future, beyond 2020. Underpinning our success is our innovative culture and market expertise. We aim to continually drive at least 25% of revenue from products developed in the last five years. We have an innovative culture and people, but we are also planful and strategic in how we analyze each and every innovation opportunity. We do this through a strategic lens that helps us grow and expand our margins. This process ensures that we are considering trends in the industry, future potential demand for the product. We make certain we can leverage our existing intellectual property or create new IP or create a different competitive advantage. We assess the potential risk associated with investing in an innovation, and above all, we evaluate the overall financial opportunity.
We begin this process before we initiate the project, and we monitor these factors throughout the development process. This facilitates the greatest amount of efficiency when evaluating new opportunities and makes certain we invest in winning opportunities and kill those that are less viable. The acquisition of Royal has helped expand our technology portfolio with innovative products such as aerospace sealants that have a 33% quicker cure time than the competitor solutions, and foam structural adhesives, where one small package can replace three 50-pound bags of concrete, or adhesive systems that eliminate VOCs in asphalt roofing systems. These and many other Royal innovations have added to our technology toolbox.
As a result of the combined company's technical expertise, our dedication to innovation, and the longstanding relationships we have with customers, we are confident that we will continue to meet or exceed our goal to derive 25% of revenue from new products that we've introduced to the market over the previous five years. As demonstrated by this pie chart on this slide, we have 115 projects in our pipeline with projected annual revenues, each of the projects in excess of $2 million. This represents $800 million in new product revenue. We have been and always will be committed to continuous innovation for the benefit of our customers and for the strength of our business. Our people drive innovation. The company has over 500 scientists and engineers who work in our labs and at our customer locations to meet customer needs faster and better than our competition.
We're able to achieve this by developing teams of experts that are market-driven and market-focused. We have separate technology teams for aerospace, electronics, hygiene, filters, and each of the markets where we operate. These teams identify needs and opportunities based on their interactions with customers, co-suppliers, and equipment manufacturers out in the market. These teams then develop innovative solutions that help our customers improve their process, introduce new processes, or introduce new products. In addition to specialized adhesives, in many cases, H.B. Fuller provides proprietary equipment, a unique packaging solution, or has an advantage partnership with an equipment supplier or a customer. Our innovative team of experts is at the center of driving our organic growth at above market rates in the segments and markets in which we choose to compete.
You'll hear numerous examples of our technological innovation during the presentations later this morning and in our technology session during lunch. In combination with our culture of innovation, our global team of experts, our 2020 action plan is focused to deliver results. As a reminder, our plan has three main revenue and EBITDA drivers: continued profitable growth in the Engineering Adhesives segment, realization of overall related synergy targets, and increased efficiency through manufacturing excellence. You can see here that of the $185 million in EBITDA growth targeted between 2017 and 2020, more than $125 million is expected to come from these three value drivers. The remaining $58 million in EBITDA is to be generated through a mix of approximately $50 million from organic growth in our other business outside of Engineering Adhesives and $8 million from SG&A leverage.
You will hear more about each of these and other elements of the strategic plan as we go through the rest of the day. I've had a number of conversations with many of you about H.B. Fuller's peer group and our valuation. I wanted to take a minute to talk about this today. As you all know, H.B. Fuller is unique and that we don't have a natural peer group because we're the only pure-play adhesive company in the market. This slide contains a list of the companies with whom we aspire to be compared to, that we believe are relevant to us in a number of ways. All of them are specialty chemical companies, but they are all different from typical specialty chemical companies because of the nature of their customers. Their customers are not specialty chemical companies.
The companies on this list have this important characteristic in common with H.B. Fuller. Like us, they sell to consumers or manufacturers who use chemicals in a non-chemical industry. This dynamic creates a different value equation for customers. The companies listed here, like H.B. Fuller, provide a service or function. They capture value doing that better than others in their markets. They all have a strong track record of dependability and consistency, a dependability that we are working hard to deliver for our investors. Like us, nearly all of them expect to achieve long-term EBITDA margins above 17%. All expect to be leaders in the markets they serve. As you can see, H.B.
Fuller is in line with nearly all of our peers in terms of our projected revenue CAGR for 2017 to 2020. Is expected to outperform nearly every peer with respect to our EBITDA CAGR over the same time period. However, on an EV to EBITDA multiple, our multiple is below our peers. This is in part because our transformation over the last eight years has been an evolution. The consistency and reputation does not yet match the level of some of these peers. The fundamentals that we are building into our future strategy and the value we create in the market are clearly similar. H.B. Fuller, having learned from our previous challenges, is committed to further improve our performance and the consistency of results in line with this peer group.
Finally, let me now turn my attention to our valuation and how the transformation of our company is driving shareholder returns. Looking toward 2020 at today's multiples, our business would generate an enterprise value of $7 billion. After debt paydown, a market capitalization of $5 billion-$5.5 billion, or $92-$104 per share. Of course, the multiple is a key driver of that valuation and potentially could go higher as we seek to consistently deliver according to our plan. As you will hear about more later during John Corkrean's presentation, we are pleased to be able to say that we remain on track to meet the 2020 targets that I've outlined today. I'm confident that we have the right plan in place that will allow us to deliver $605 million in EBITDA and $230 million of free cash flow in 2020.
That confidence is largely because we have a great team in place to execute that plan. In these next two slides, we've listed the executives who will be presenting along with me today, and I think you'll be very impressed with the strength of this team. For those of you who don't know me, I've now been the CEO at H.B. Fuller for almost eight years. I've committed my career to success in the adhesive industry. If you cut me open, you'd see that I bleed adhesives. I've run businesses in numerous segments, worked for three different adhesive companies, including the last 10 years at H.B. Fuller. I've executed dozens of acquisitions, and have lived around the globe. I have a chemical engineering degree from the University of Delaware and an MBA from Wharton Business School.
I've been the chairman of the Adhesive and Sealant Council, in this industry, I've met with nearly every major customer, supplier, and competitor in the world. I believe above all in the power of people and leadership. Building the best team at all levels is my core belief on what it takes to win in this business. That's why I'm so proud that so many impressive executives have decided to join H.B. Fuller. Some of these outstanding business leaders have joined our company since our last Investor Day, and I encourage you to introduce yourselves to all of them and ask them questions during one of our breaks or during lunch today. There are two new faces on this slide. Ted Clark, formerly CEO of Royal. Ted built an impressive company and has been a great partner to me.
I'm so glad that he has remained and is leading the integration, as well as taking on a leadership role in our segment strategy processes and our future performance. Jim East, former CEO and owner of Cyberbond, has joined us as a key member of the engineering adhesive leadership team and has been a great addition. Both are great entrepreneurial business leaders who will impress you. Zhiwei and Traci are familiar faces who presented at Investor Day before and have built a great deal of our success. On this slide, John Corkrean, who many of you know, is new to H.B. Fuller since our last Investor Day. John took over as our CFO last year after a successful 17-year career at Ecolab, where he was instrumental in Ecolab's Nalco and Champion integrations.
With these executives, I'm joined by other familiar faces, Heather Campe, Steven Kenny, and Patrick Kivits, who are here to help tell the story of our business. Our team is rounded out by Dietrich and Abe. While they're not presenting today, their experience and expertise are invaluable and help make H.B. Fuller what it is today, and they will be available during lunch if you have questions for them. Tim Keenan, our general counsel, is also present today as part of our executive team. As a whole, we have an impressive group of executives who know the business, know how to win, and have delivered throughout their respective careers. I think you'll be impressed with them and their perspective on our journey to build the best adhesive company in the world.
I'd also like to point out that each of these executives you'll hear from today, in addition to the top 100 leaders in the company, are highly incentivized to deliver on the $605 million EBITDA target in 2020. They have each been awarded stock option grants that vest in January of 2021, but only if we reach our targeted EBITDA target level. I'd like to conclude my opening remarks by reminding you of the three drivers that will ensure that we reach our 2020 financial targets: continued profitable growth in engineering adhesives, realization of our Royal-related synergies, and increased efficiency through manufacturing excellence. We participate in a great industry, have a solid strategy, and are led by a great team of leaders. Our plan is specific and detailed, and it's built upon a solid foundation that's continually being strengthened by applying the lessons we've learned to date.
The 2020 plan will create significant value for those shareholders who invest in our company. Together, along with our leadership team, I am hugely committed to making this happen. Before we move to our next session, I'd like to take a few minutes to answer your questions, and then we'll move on to some other presenters. Who's got the microphones?
Over here.
Good. Okay.
Thank you, Dave Begleiter, Deutsche Bank. Jim On the EBITDA target, I'm not sure if this is correct, but 2016 EBITDA was $515, adding Royal about $180, including synergies, that brings us to $695. Can you bridge the gap to $605? What's gotten worse, so to speak, since-
Yeah. One of the things, and John will point this out later in his presentation, and thanks for asking that question, the $515 target included about $500 million of acquisitions. That wasn't just an organic target. That included acquisitions. Of course, the Royal acquisition was larger than that $500 million. Fundamentally, the underlying EBITDA dollars that we'll deliver ex Royal are exactly the same. You can add on to that Royal and the synergy, and you'd come to the same number. Fundamentally, the targets are unchanged. They're just bigger.
Hey, Jim. Mike Sison, KeyBanc.
Hi, Mike.
A lot of the EBITDA growth from 2017 hinges on Engineering Adhesives. It's been a really nice business the last couple of years. What is that business doing? Are there technology? What type of voids is it sort of picking up in the marketplace that's allowing it to continue to grow at that pace?
Yeah. Thanks for the question, Mike. You'll hear a lot more of this from Zhiwei and Jim. Fundamentally, the team is innovating faster and better than our competition, and they're targeting applications where growth is higher than the market. If I were to think of three things that they're doing to gain market share, they're faster, they come up with better solutions from an innovative standpoint, and they're targeting the right application. There's a lot of opportunity in that space. We're picking the right ones and winning. I guess the fourth thing that's happening there, though, Mike, is leverage of technology. Organically, we've built some nice business, but we bought Tonsan, we bought Cyberbond, and we bought Royal. They each have different strengths in different regions. Those are coming together to accelerate the growth. You see that quarter after quarter in our numbers, right?
I get this question a lot. How is this going to continue? Hopefully, after you hear Zhiwei and Jim, you'll say, "Yeah, that is going to continue." It's continuing quarter after quarter and very much fundamental in our plan.
A two-part question, Jim. It looks to me like in going from 2018 to 2020 to hit your EBITDA targets, you need a margin improvement of about 260 basis points, to go from 15% EBITDA to 17.5%. If you had to say, would it come in SG&A or would it come in the gross margin, how would you divide it between those two factors? The second part of the question is, if you look at H.B. Fuller over a really long period of time, you look at H.B. Fuller 20 years ago. Twenty years ago, the company was a third of the size or half the size, and the gross margin was 31%. Today, we're two to three times bigger, and the gross margin is, I don't know, 27% or 28%.
Which is very different than all of the comparables and the coatings companies that you put up there. What is it about the adhesives industry such that scale doesn't seem to make much difference over a longer period of time in terms of the operating returns, or at least in terms of the gross margin?
Two very good questions, and thanks for both of them.
Sure.
The margin expansion that we're seeing, I think we were at 15.5% margin last quarter, right?
Yes.
John will talk about where we're at. We're seeing good, strong progression there. As I said, 130 basis points of that comes from our manufacturing costs, which are in gross margin.
Okay.
A big chunk of that comes from the portfolio shift that you're seeing. What you see in the businesses that are more highly specified is the gross margin and the contribution margin are higher. There's a sizable amount of growth there because of the shift in the portfolio. There's the pricing actions that we've taken this year that are helping to drive some of that, and then there's a piece of SG&A leverage. We can give you the exact numbers on that.
Sure.
Those are the buckets. They all exist, but the active drivers of the plan are manufacturing excellence is reducing costs, Royal integration cost synergies are driving margins, and the portfolio shift with much better growth in these higher engineered areas as a big driver. In terms of our industry and how it's structured and what's different, the company's completely different than it was 20 years ago. What I showed here is it's completely different than it was in 2010. This paper area, when I took over, it was a big chunk of the business. There was a paints business in H.B. Fuller Company. Packaging and hygiene were the higher margin businesses within the company. Today, 53% of the company is in these segments where we have much higher margins than we have in the other segments.
I think what you'll see as we go forward is an expansion of those gross margins, and that's going to be a big driver of the change in the overall performance of the business. Because it's inherent in the nature of those businesses. You saw it in the Royal business that we acquired. You see it in a couple of the segments that our competitors report. Those are much better gross margin businesses, and that's what's transforming in our company, so.
Jim, Rosemarie Morbelli with Gabelli. Going back to the paper industry, your business, you estimate that the market is going to decline by 3%. At best it will be flat. How large is that business, and is that something you would consider small core, or is that something that may just go away?
Yeah. Today it's about 17% of our portfolio, 17, one seven, that paper and other segment. It is in decline, these are things like books and envelopes and paper products. I think as a business to sell, it's overlapped in certain facilities and it's worth certain cost structures in other businesses. It's not an attractive business to sell. If you're interested in buying it, Rosemarie, you can talk to me.
Thank you. No thank you.
I think fundamentally it's integrated into our business. Managing it for cash is the strategy that we've decided to employ there. We think that's the most appropriate strategic way to manage it within our portfolio.
Moving on, you said it was integrated in terms of manufacturing facilities. Royal was also formed, so to speak, as a combination of small acquisitions. When you look at it, now you are still at the early stages of the integration, but are there more manufacturing facilities that you think can be consolidated, and therefore, the synergy that you would get would be way above that $50 million?
Ted will go through the details on our 2020 plan, Rosemarie, in a bit of detail. You'll see in there the biggest piece is sourcing synergies from a cost standpoint of the $35 million. There's a nice chunk of manufacturing synergies. Those are about a half a dozen plant consolidations of the 19 facilities. Again, some of them are our facilities, some of them are former Royal. Is there more long term? Yes. Probably is. I think when we look at 2020, the real opportunity is to drive the value out of the combined businesses. In the 2020 plan, I see us executing on the $50 million in synergies, $35 and $15 for revenue, and then us driving the growth that we want to get out of the businesses, and then planning for other future opportunities.
Part of our plan is not to try and do too much, too fast. What we want to do is effectively and aggressively drive the margin and profit improvement of the business over the next three years. Good. Good morning.
Eric Petrie with Citi.
Hi, Eric.
Last Investor Day, a large focus was on EMEA and improving margins there. I didn't hear so much in your introductory comments. Could you just give us an update on the strategy in the region?
I mentioned it, and part of why I didn't mention it is because we're making great progress, as you've seen in the numbers, right? Patrick, who you'll hear from later today, is responsible for that business. I did mention in manufacturing that those investments we made in Europe are a big driver of our results. John will give you the specific numbers about what we expect out of our EIMEA business, but a combination of what we're doing from a manufacturing standpoint, and then the synergies we're delivering with Royal, will see us get 200 more basis points of margin improvement. EIMEA is a great example of the transformation that happened in this company.
It had historically, for a long time, been a 7%, 8% EBITDA business, and today it's consistently 11%, 12%, and moving its way to 14% over the next few years. Thanks for that. One more question, and then we'll get on to the next set of presenters.
Chris Perrella, Bloomberg Intelligence. We're seeing now how you're getting the pricing with the raw material increases, and it rolls through. I'll give an assumption, and maybe you can correct me on this. The highly specified, you'll be able to hold onto that pricing when raw materials begin to come off. In the less specified portion of the business, which is still a large chunk of the company, how should we think about customer pressure on prices in a declining raw material environment, similar to what we saw the past couple of years, 2016, 2015 timeframe?
Right. Yeah. One of the interesting dynamics when you are a company like ours that doesn't sell to specialty chemical companies is customers don't buy a chemical, so they don't track as tightly those materials. It's market dynamics that drive things. Fundamentally, in a deflationary environment, what you see in our business in those moderately specified areas like hygiene and packaging, is it takes a while for any kind of price decreases to take hold. Our business is one that after we hit the hump, you don't really see much change, and then it lasts for 12 or 16 months, then the market starts catching up with those as new products are introduced or new competitive dynamics happen. That's typically how you would see it delayed, with actually some margin expansion as raw materials come down until the market takes over.
That's the way I think of it. Great. I'm going to invite my other colleagues to come up and introduce the next segment here. Okay, we need the next script up. Where is Zhiwei? Yep, you're good there. Go back. Sorry about this. We're going to start off with Zhiwei Cai and Jim East, who will provide details about our growth opportunities in Engineering Adhesives. Ted Clark will provide an update on the Royal integration and the details on how we're achieving the synergy targets. Traci Jensen will follow with an update on Construction Adhesives, which has grown significantly with the Royal acquisition. After a short break, I'm going to give a brief overview of our geographic reporting segments.
We'll hear from Steve Kenny, Heather Campe, and Patrick Kivits about how and why we've been successful in Durable, Assembly, Hygiene, and Packaging, respectively. What we're going to do to continue to build our success. Finally, John Corkrean is going to include the presentation with details on the financials. We'll wrap up with a final round of Q&A just before lunch. It's now my pleasure to introduce Zhiwei Cai. He's the Senior Vice President of our global Engineering Adhesives segment. Zhiwei led this business to a 15.9% EBITDA margin in 2017, which is expected to grow to 22% and generate $580 million in revenue by 2020.
With his deep knowledge of the advanced electronics industry, he has been integral to the creation and expansion of our portfolio in Transportation, Electronics, renewable energy, and other highly specified adhesive applications. Zhiwei was born in China, lived in Germany, now a U.S. citizen, lived here for over 10 years. Zhiwei joined H.B. Fuller in 2012 with well over a decade of experience in this industry. With his strong network and his personal professional reputation, his connections has led to some of the most important acquisitions, including Tonsan and Cyberbond. Please join me in welcoming Zhiwei Cai. Zhiwei.
Thank you, Jim. Good morning, everyone. My name is Zhiwei Cai. I'm a Senior Vice President of H.B. Fuller's Global Engineering Adhesives segment. In a few minutes, I will be joined by my colleague, Jim East, who will share some successes that demonstrate the strength of our strategic plan and our perspective for long-term profitability in this segment. The last time we had this event, we had just announced the formation of Engineering Adhesives segment, which I'm going to refer to as EA during this presentation. We had a strong vision for how H.B. Fuller could win in this space by acquiring the right capabilities and gaining access to established sales channels. We have been delivering on that vision. We are leveraging our global R&D and supply chain, and we are continuing to build ever stronger customer relationships. First, let's take a step back.
For those of you who may be unfamiliar with this business, the global EA segment is estimated at about $22 billion. The high value-added sub-segment we are targeting represent about $12 billion of the overall market and are growing at a range between 2%-10% annually. The adhesive technology and applications included in EA are generally highly engineered to solve range of performance challenges, like harsh environmental conditions and consumer preference for lighter, safer, stronger, and more sustainable products. H.B. Fuller has emerged as a strong competitor in the EA market over the last two years. The addition of Tonsan, Cyberbond, and now our Royal business, has strengthened our position significantly. As one of handful adhesive providers with global scope, we are confident that we will increase our share in the market. We are targeting to 5% by 2020, which means our expected revenue will be $580 million.
This is why EA comprise one of the three key action drivers for H.B. Fuller's overall 2020 plan, as Jim just talked about. Our strategy is designed to target specific market opportunities where we can generate high margins based on the value of the solutions we offer and where we believe we can compete and win. There are four target sub-segments that makes up EA at H.B. Fuller, including Clean Energy, Industrials, General Industrial, and Transportation, Electronics. As just Jim mentioned earlier, the capability of delivering adhesive solutions technology to the changing of the dynamics in the market enables us to grow faster than the current space. Clean Energy primarily includes solar, wind, battery for electric vehicles, and energy storage. Our solutions address the growing need for high performing solar panel frame sealing and junction box attaching, as well as mounting solutions.
What sets us apart is our focus on enabling more efficient processes that lower the labor hours required to complete a single or multiple panel installations. For us, the electronics market includes device assembly, bottom-level materials, underfills, and edge bonding materials. It also includes covers and soft goods, like protective covers, headphones, or earbuds. Our solutions improve performance, durability, and aesthetic of a wide range of applications. This includes fingerprint sensors, image sensors, flat panel displays, automotive electronics, and more. We also have a diverse line of high performance, high technology, specialty adhesives, sealants, and dispensing solutions for both OEM and MRO markets, which we group in the category general industry. This technology includes flange sealant products that are resistant to oils, chemicals, vibration, and edging.
We also offer structural adhesives that can be used on a wide variety of materials, such as metals, ceramics, plastics, wood, glass, and stone. Finally, our functional coating and rebuilding products prevent wear and tear of mechanical equipment, and can be used in both low pressure and high temperature environments. The Transportation subsegment includes automotive, aerospace, and defense, and large vehicles such as construction and farm equipment. Above trend, the legacy H.B. Fuller business was strong in automotive interior trim, as well as interior and exterior lighting. With Tonsan and Cyberbond, we add powertrain application technology like silicone gap padding, sealing and pre-applied adhesives and sealants for thread fasteners. We group this market segment together in one organization so that we are better able to bridge applications between product platforms. We have grown this business from almost nothing in 2010 to near 16% of H.B.
Fuller's total revenue in 2017. Last year, our legacy EA business delivered $289 million in net revenue globally. With the addition of Royal, that pro forma figure would have been $410 million, and is projected to reach approximately $480 million in total revenue by end of the year. Our initial plan in 2016 was to double EA by 2020 to a $400 million business. Thanks to Royal, we exceeded that target last year. So we have increased the goal, and we are now on track to achieve $580 million by end of 2020, which translates to an increase in EBITDA margin from just under 16% in 2017 to 22% in 2020. Looking to 2020 and beyond, this segment will continually provide an outstanding opportunity for revenue growth, margin improvement, and geographic expansion.
I'm a firm believer in the strategy that Jim outlined early this morning, and we spend the remainder of my presentation explaining why you should all share in the confidence that H.B. Fuller is placing in the segment as part of overall 2020 plan. When we look across the EA segment, there are several ma crotrends driving growth and change in this market. First, manufacturers continually demand more and more products that meet more specifications, adhesives are giving engineers more options for fastening and joining consumer and industry products. This shift from fasteners to adhesives is giving way to new advancements, in particular in our Electronics devices, General Industries, and Transportation subsegments. Increased environmental concerns are driving manufacturers to focus on sustainability and to find alternative sustainable energy sources that lower their overall carbon footprint. Manufacturers want to reduce waste and increase efficiency.
Consumers want products that are less harsh on the environment to produce or are easy to recycle or refurbish. Everyone wants to reduce exposure to hazardous materials and eliminate hazardous waste. Similarly, the trend towards lightweight is driving huge opportunity for adhesive applications in the Transportation industry. This can enhance the driving experience, providing greater comfort and safety, resulting in better fuel efficiency and reduced CO2 emissions. In the electronics industry, the weight of most components in personal devices has decreased significantly over the past 20 years. The disappearance of CRT glass, the move to LCD and LED TVs, the introduction of ferrous metals and plastics, as well as printed circuit boards, have contributed to this trend. Finally, adhesive support process efficiency. Customers' requirements to drive cost out of manufacturing process have led to increased demand for fast setting, fast curing adhesive technologies.
Manufacturers in this space invest a lot of time and resources to find the right adhesive solutions. The trend to build long-term supply relationships, this is why there's a high level of convergence within EA. H.B. Fuller is well-positioned to capitalize on this market correct right, which gives us confidence that we can exceed expected market growth in every EA segment. While there are challenges for solar panel manufacturers to overcome, like price compression and government regulations, this market continues to grow. The most obvious example of convergency is the prominence of electronics in all automobiles. In the past, the only electronic component found in the car was the radio. Fast forward to today, cars are running more and more off of the electronic components in them.
For example, the high-end luxury car has up to 150 electronic control units to ensure its performance, including fuel economy, driver handling, and safety, and emission control. If we look at the market-specific trends driving growth across EA segment, they all provide opportunity for H.B. Fuller. Globalization, the shift from the traditional fasteners to adhesives, consumer demanding repeat and constant changes in product design and functionality. To grow manufacturers across our EA sub-segments must innovate quickly, H.B. Fuller is able to partner with our customers to effectively and efficiently develop the innovation. This is why technology portfolio and consistent innovation is key to our success. With the addition of Royal's technology platform, which include sound damping, cold coating, and lightweight patching sealant. We now offer extensive adhesive solutions for automotive brand owners and their design and production partners.
This also including CILBOND, which offers unique high-performance primers and bonding agents that chemically bond rubber and polyurethane elastomer to a variety of substrates like metal and fabric. In part, due to acquisitions we have made since 2015, we now offer highly specialized, high-performing adhesives to address automotive requirements. We have had some major successes working closely with our tier 1 OEMs to form customer partnerships with some of the world's most luxury automobile manufacturers. The instrument panel, for example, is a key element of automobile cockpit and consists of sophisticated system of trims, foams, composites, and metals that house various components like speed meters, gauges, and other key communication systems. It also acts as a safety device for the vehicle's occupants. Really what consumers want is something sleek and modern-looking.
Leather and foil laminated instrument panel in luxury car, like BMW's latest X7, 8, 9 series, provide both necessary style and safety. In addition, the trend to use more high-end applications in the broad automotive market is growing. For H.B. Fuller, the demand for these applications represent high-margin, multi-million dollar opportunities. Because this business is application-driving and because many products are designed well in advance of prototyping, let alone production, we manage our EA spreads globally where the designers are, and then we manage production and distribution regionally where end-use manufacturing happens. Electronics is a great example of this. The constant change in this market plays to our strengths. Unlike in the automotive sector, consumer electronics companies launch new product models every year.
We are fast at delivering what the customer needs, and we are innovative, developing products that allow electronics manufacturers to produce new options and features like waterproofing and smaller accessories. We are focused on winning with global and regional players, so EA is a globally connected team. Our collaboration around the world is an asset that enables us to be quick innovators because we share R&D and commercial expertise across geographies and the market. We also understanding the nuance of production and selling in each region. What works in China is different in Germany. Again, it's also different in the U.S. and so on around the world. Additionally, the convergence of electronics in the automotive sector is driving tremendous growth and diversity within electronic sensor design and production. This is going to be key to our future growth in EA.
We believe that we can grow faster than the market by gaining traction and winning new business with our key accounts. We will do this by being innovation-driving, channel-driving, and geographic-driving. Different from other core business at H.B. Fuller that sell and ship bulk quantities of adhesives, EA is often characterized by selling small quantities of high-value adhesives. This requires unique manufacturing and supply chain process, the highest-quality standard, and a different approach to manage customer relationships, including being innovation-driving. Customers in this market space also have some similar characteristics. They usually have standards for specifying adhesives, yet manufacture globally. Big brand owners like Microsoft, [Inaudible], Tesla, Volkswagen, and Boeing have similar business models. They develop a highly engineered product in one region and produce this product at different locations around the globe.
With those type of customers, you usually have to get spec'd in at early stages of a design. Once in, H.B. Fuller successfully develops specified adhesives to deliver what a customer needs, when they need it, where they need it. Being channel-driving allows us to maximize the penetration of product lines by leverage distribution. We are attacking manufacture of goods across wide range of Industrial, from marine and rail to elevators and audio equipment. This customer requires similar highly-engineered adhesive technology, but do not require customized solutions. We market our branded adhesives through a network of distributors around the globe. We have a unique technology and the packaging solutions, and a broad product portfolio that enables us to better support these manufacturers through a highly-trained distribution network.
We invest more in innovation with the key accounts, where we can be specced in early in the design phase, and we develop products that meet their precise needs. For our more general market, we invest less in innovation, instead leverage our extensive toolbox of technologies and the formulation to serve these customers. Our geographic driving approach is also driving faster than the market growth in our EA segment. Similar to convergence of technology between market segments, we are well positioned to sell EA solutions in different geographies. What we do is leverage proven products from one market into other markets and geographies in other parts of the globe, including developing countries like India and Korea. As these developing markets grow and advance, their demand for goods within our EA subsegment will too.
I would like to turn the podium over to Jim East, who will share a few success that demonstrate the strength of our EA team and our technology. Jim joined H.B. Fuller as part of the Cyberbond acquisition in 2016, where he was the founding owner and CEO. Over the past two years, he has been an integral member of our EA leadership team and now leads both our Americas P&L and our global automotive business. Jim, please.
Thanks, Zhiwei. Thank you. Thanks, Zhiwei, again. Good morning, everyone, certainly thanks for your time this morning for joining the group. I'm thrilled with the progress we've made in building a successful, profitable global engineering adhesives business unit at H.B. Fuller thus far, I'm confident in our strategy moving forward. When H.B. Fuller first came knocking, I'll be honest with you, Cyberbond wasn't for sale. The more I talked to the management, the more I realized that Cyberbond would be better as part of H.B. Fuller than it would be on its own. Our management team was intrigued by the company's plan to create the engineered adhesives segment, then H.B. Fuller bought Tonsan. At that point, we realized together we could be a powerful force in this market space, we are already demonstrating that today. The cross-selling opportunities were fantastic.
Our technologies were complementary, our customer base and target markets differed. Together, Tonsan could expand its market presence outside China, Cyberbond could expand its presence into China. Before the acquisition, Cyberbond couldn't provide everything to everybody from a global perspective, neither could Tonsan. With the acquisition of Royal, H.B. Fuller has really unlocked the potential of this business. We have a broader technology portfolio, we have expanded applications expertise, we have significantly increased our customer base. Accordingly, because we deliver high value that improves performance of high-end products in this segment, our pricing power has increased, we are in a great position to achieve our 2020 EBITDA target of 22%. The key to success in engineering adhesives is in technology. In the Cyberbond business, we sold cyanoacrylates, anaerobics, specialty products through approximately 100 distributors.
There was a big mix that we weren't able to supply. With the acquisition of Royal, and specifically the ASI business, we've been able to add a sophisticated methyl methacrylate formulation program. Now we are able to provide the whole package of adhesive to our customers and are well positioned to leverage this in the future. The market reaction has been extraordinary. We have many examples of how our broad portfolio of highly specified adhesives and globally connected team are supporting the changes occurring in manufacturing of a wide range of products, from personal electronic devices to high-speed rail, to farm equipment repair, and so much more. Our self-foaming adhesive technology lowers the potential for electric vehicle batteries to catch on fire.
Our expertise in reactive hot melt technology has supported chemical resistance, vibration tolerance, and waterproofing that has helped generate substantial growth in the personal wearable devices and accessories market. Our water-based technology replaced a solvent-based solution to drive performance in train bogies. These components are critical to a train's drive system because they connect the wheels to the body. They are regularly exposed to extreme environmental conditions. The components are made in China. Prior to 2017, Royal had a superior solution in North America, and Tonsan had the sales channel in China. Together, our globally connected team identified the opportunity and can demonstrate the power of H.B. Fuller's technology, service, and global assurance. In our automotive business, through the investments in our capabilities, particularly in the addition of Royal, we've been able to gain entry into key OEMs.
Historically, we've been strong in the tier 1, tier 2 suppliers serving the automotive market. We didn't do as well in the OEMs. The Tonsan business jumped that hurdle in China into selling into companies such as General Motors in Shanghai. It was getting in the door in Detroit and Europe that was difficult. To Royal, they had great relationships as a result of their powertrain adhesive technology, which is in the engine and transmission. We can now provide customers with a wide range of adhesive products to meet their end product needs, ranging from interior and exterior lighting to interior trim and powertrain. The broader product portfolio, proven technology, and strong customer relationships have now enabled us to get specified into programs like providing the sound dampening adhesives in the new Ford SUVs and Fiat Chrysler Jeep models.
To summarize, engineering adhesives is a very attractive $12-plus billion market. It's growing in the high single digits, and convergence across subsegments presents many opportunities. It's why my partners and I founded Cyberbond. It's exciting to be part of this innovative, customer-focused team that is leveraging diverse technology and world-class service to win customers. We see a lot of future opportunity, and we are confident that we have the people and the expertise to achieve our $580 million revenue and 22% EBITDA margin goals in 2020. Thank you again. I'm now going to turn the podium over to Senior Vice President, Ted Clark, who will provide an update on the Royal integration. Ted.
Thank you, Jim. Well, it's great to be with you this morning to talk about the Royal integration. As Jim Owens mentioned earlier, I joined H.B. Fuller with the Royal acquisition, and I'm now leading the integration efforts. Our story is a little different from Cyberbond's. As a co-founder and CEO of Royal since 2003 and a 40-year industry veteran, I knew that Royal was building a great business through organic and acquisition growth. I also knew that at some point it would be the right strategic step to merge with or be acquired by a larger adhesive company. H.B. Fuller was by far the best fit with Royal's complementary offerings. H.B. Fuller was also the best fit culturally, as Royal shared H.B. Fuller's objective of being the best adhesives and sealants company in the world. Together, we will now get there winning the right way.
Through this deal, we've created a truly global pure-play adhesive company, and overall, this business is moving towards more highly specified, higher margin adhesives. This is a solid strategic move. The resource requirements to specify an adhesive in certain highly engineered products are high, so manufacturers aren't quick to change suppliers. Highly specified adhesives now make up over 50% of H.B. Fuller's overall product portfolio. Royal deepened H.B. Fuller's presence in North America, Europe, and China, which is enabling our combined teams to cross-sell technologies in different geographies and end-use markets. It's also allowing us to provide our customers with a more comprehensive set of products that they can use to solve adhesion challenges.
We thought it was important for you to understand our integration strategy because it's the foundation of how the combined businesses will deliver the targets that Jim discussed earlier today and ultimately create value for shareholders. First off, we knew we had to define success from the beginning, so our combined H.B. Fuller and Royal management teams really took the time to listen and learn and then build out our action plans. This is important. We identified six guiding principles that have been at the forefront of our integration efforts since the deal closed in late 2017. Our primary goal in this deal was to protect and grow the base business. This is most important because these customers represent the best opportunity for us to sell our combined range of products and technologies. Secondly, we've created a cash-driven mentality across H.B.
Fuller in order to optimize our balance sheet, maximize returns for our investors, and drive efficiency across the organization. The third principle focuses on taking a staggered integration approach. We have a clear three-year horizon and are leveraging our resources to deliver synergies. We have already mapped out $50 million in synergies across just over 100 different projects. Of these, 30 projects represent 80% of the $50 million. As one company, we're a lot bigger with more buying power. On the procurement side, we've identified $23 million in synergies. On the commercial side, we've identified $50 million in revenue synergies, which equates to about $15 million in EBITDA. Together, we can really drive commercial growth in the current segments where we operate, and we now have broader technology to include things like our flooring market, where Royal's adhesives for resilient and wood flooring complement H.B.
Fuller's adhesives and grouts for tile flooring. In our fast-growing aircraft sealants business, H.B. Fuller operations in Japan and China will allow us to more quickly enter and service aerospace customers that Royal would otherwise not have access to. We have teams organized around all of these projects and many more. On the operations side, the integration is focused on driving efficient manufacturing processes and creating centers of excellence around our best production assets. Our fourth priority was to align integration projects across our business segments. As a strategic growth acquisition, our goal was not only to capture the value in the deal, but also focus on winning with new customers in both known and new markets. We have a strong integration team that is coordinating and tracking our progress. Synergy capture and revenue growth is being driven by each segment leader.
We have already seen the benefit of this as we have been able to gain new customers that neither company would've been able to achieve as a standalone business. Number five is about ensuring business continuity. While we've done a lot of work to join the teams and align our business segments, we also have a clear and defined principle that is to balance the integration work with the independent operation of certain Royal businesses in order to leverage them as effectively as possible. Finally, retaining talent and building a unified culture is crucial to our success. We've done a great job with that. We've connected people and their new teams, and the early results are strong. Importantly, the key senior leaders at Royal have been integrated into the H.B. Fuller management team in key leadership roles, reporting directly to the executive leaders who are presenting today.
Let's look at our plan and results in a little bit more detail. One, we are solidly on track at this early stage in our three-year plan. The big accomplishment has been how quickly we've mapped the Royal businesses to H.B. Fuller's. While we have complementary technologies and applications, our organization structures were different, and we had a number of employees whose roles fell across segments. Within 120 days, we identified where changes were needed, communicated broadly with employees. We did this while remaining focused on selling adhesives. We've delivered some quick hits in selling new applications for current customers and expanding in different geographies based on the breadth of our combined product portfolio and the range of our truly global supply chain.
This includes adding offerings in key geographies like India and Southeast Asia, expanding sales of insulating glass sealants in North America, flooring adhesives in construction. Leveraging H.B. Fuller's distribution channel in Europe to provide a wider range of assembly adhesives, combining our respective automotive products to provide sound dampening, light weighting, moisture adhesive and sealant solutions to the global automotive market. Let's look at our opportunity our combined businesses present in terms of sourcing raw materials. We have a lot of examples that have been identified. As Jim said earlier, we've already delivered $6 million in savings related to raw materials and other expenses year to date. Here's one great example. We identified a specialty rubber polymer used in Royal's insulating glass sealants products, as well as H.B. Fuller's IG products and automotive products.
Shortly after the closing of the deal, we were able to leverage our combined volumes to lower the cost for this material by about 20%, or $800,000 annually. This is just one example of how our sourcing synergies will provide long-term profitable growth. We have numerous raw material projects that we are tracking and are confident in our overall goal of $23 million in raw material synergies run rate by 2020. As we continue to grow and change, we will focus on R&D and manufacturing excellence across our network to grow as our markets change and grow. This will drive additional shareholder value. At Royal, we were in the process of building a state-of-the-art product development and production facility in Frankfort, Illinois, for high performance adhesives such as cyanoacrylates, two-part methacrylates, UV light curing adhesives, anaerobics, and two-part epoxies. H.B.
Fuller's Cyberbond facility in Batavia, Illinois, produces similar technologies for different applications. Both are in the Chicagoland area, so it only made sense to consolidate. The Frankfort facility includes a high tech R&D lab, world class production capabilities, and meeting spaces, so it's going to become a showcase site for our prospective customers and distributors. This move eliminates certain fixed costs, and the new site has automation capabilities that will lower our labor cost. Another example is in our construction business. We will be upgrading our manufacturing facility in Mansfield, Texas, which came from Royal, and we'll be consolidating powders production and closing facilities in La Mirada, California and Eagle Lake, Texas by mid-2019. Once this consolidation is complete, we will produce over 40 million pounds of powder products like grouts and mortars in Mansfield.
This move will allow the construction adhesive business to take a more aggressive approach to winning new customers in the fast-growing southwest U.S. construction market. This consolidation will eliminate fixed costs at Eagle Lake and reduce variable costs by consolidating from three operations to one. These and the other projects we have planned will result in $9 million in synergy savings by 2020. The joint H.B. Fuller, Royal organization's been hard at work partnering with each other to deliver for our customers, and we're hearing from many of them. On this slide are a few direct quotes from recent customer communications. We have a globally connected team who are working to solve customers' adhesion challenges and providing application solutions wherever and whenever they're needed.
Our ability to leverage our technical expertise and develop innovative adhesive solutions that address market trends enables our customers' innovations, and our worldwide supply network gives customers peace of mind. Our combined customers recognize that our adhesives, coupled with world-class service, the global availability of our technical solutions, and our strong supply chain network, make us a supplier of choice. We are unique in our scope and reach, and this adds to the value of the company's overall prospects. We have a solid plan, and we're already delivering. We will continue to create value with higher EBITDA and asset-light businesses, which will strengthen our cash flow. The combination of Royal and H.B. Fuller has shifted our portfolio to complementary higher value, higher margin segments.
Our technology platform is broader, enabling us to address new and different adhesion challenges and allowing us to better serve our existing customers as well as gain new ones. Our integration projects are aligned, and we are staggering the work to deliver over a three-year horizon. We are not overwhelming the organization, and we're able to leverage our best tools, people, and processes. Our plan supports an optimized balance sheet and higher returns. Personally, I'm excited to be part of this leadership team as we continue to transfer H.B. Fuller into a value-added solution provider to our global customers and achieving our goal of becoming the best adhesives company in the world, and making good on our 2020 plan. Now I'd like to turn the podium over to my colleague, Traci Jensen, to give you an update on construction adhesives.
Thanks, Ted. Well, as I'm standing between you and a break, let's get to it. My name is Traci Jensen. I'm our Senior Vice President for H.B. Fuller Global Adhesives Construction segment. I'm very excited to talk to you about this segment today. With the combination of Royal and H.B. Fuller businesses, we're stronger, growing, and global. We have a more balanced portfolio than ever before. We also believe that we have the right team in place to successfully execute and deliver on our strategy. Most of H.B. Fuller's adhesives are sold to a manufacturing facility, which then use our adhesives to make their products, which they, in then turn, sell to the market. What differentiates the construction adhesive from any other segment across H.B. Fuller is that our products are applied directly by tradesmen or craftsmen right on the job site.
Based on our global projections, this business is expected to reach about $520 million in revenue with a 20% EBITDA margin by 2020 and will be a strong performer in H.B. Fuller's overall portfolio. Let's take a look at the three subsegments within construction adhesives. The first is commercial roofing business that we acquired from Royal, and that makes up a little more than 30% of the construction portfolio. The business is very dynamic and growing and is highly specified. The first application is urethane foam adhesives that glue insulation onto cement or steel roofing decks. The second application includes water-based and solvent-borne adhesives that laminate a thermoplastic, polyolefin, or other types of materials onto the insulation. Third is structural and butyl tapes that seal edges and seams to ensure that roofs won't leak or buckle.
The second segment, flooring, has been the area where we've traditionally dedicated our focus, and it's about 50% of the revenue of construction. This part of the business includes mortars and grouts for tile setting, surface preparation, and flooring adhesives. Our strategy in flooring is to create bonding materials that set up and cure faster than our competitors, so that installers can get the job done as fast as possible, saving them time and money. The third segment is utilities and infrastructure. This includes several different niche markets in which we're a very strong player or in which we have a very unique technology that can be applied to the market space. In addition to the legacy H.B. Fuller Foster brand, there are unique technologies and adhesive applications that we acquired with Royal. We offer pole and post setting forms that replace cement.
We produce loop sealant that protect the sensors in the road when you pull up to a traffic light. Our potting adhesives seal light into runways at airports. We also offer adhesives and sealants that anchor metal posts and poles and fittings into cement, replacing the need for bolts and screws that could corrode or degrade over time. You can see this is a varied market with lots of interesting innovations that add significant value in terms of diversification to the overall H.B. Fuller construction portfolio. Utilities and infrastructure currently accounts for about 20% of this construction segment. Prior to the Royal acquisition, our construction adhesive segment was predominantly a North America business focused on flooring. It was mostly cementitious-based powder, a technology that we don't produce anywhere else in H.B. Fuller.
However, today, in part due to Royal, we have been able to achieve a more balanced portfolio and can offer our customers a wide range of technologies and capabilities across a broader geographic area. We're going to achieve our growth by addressing key trends in construction. First, in commercial roofing, that means providing installers with high performance solutions that address the unique requirements of low slope and flat roofing. Second, demand for hard surface and luxury vinyl flooring continues to grow, and our innovation team is focused on staying ahead of the curve. Finally, this new and very unique part of the business, utilities and infrastructure, presents nearly limitless potential. It has added to our highly diversified portfolio, and the primary focus will be on entering niche markets, where our technology will solve the customers' adhesion challenges.
There are several macro trends that Jim touched upon in his presentation earlier today that are also driving growth and change across the construction sub-segments. For example, consumer demand for more energy efficient buildings and more sustainable products is a trend that continues to increase around the globe. Supporting sustainability goals, our roofing systems aim to provide the most efficient insulation system to keep the building cool and warm during the summer and winter months, respectively. Our low VOC roofing adhesives are a good alternative to oil-based asphalt. Our pole and post setting foam solution replaces concrete, which lowers carbon emissions in transport, as well as eliminates the need for water. H.B. Fuller's agility in delivering innovation targeted to key industry trends positions us to capitalize on opportunities driven by rapid changes in the markets that we serve.
As the headline says, our team of experts are working every day to create innovative new technology or to identify new applications for current technology. We have longstanding relationships with customers because we are the innovation leaders. We listen to consumers. We listen to installers. We listen to distributors and retailers. We formulate the solutions that meet the challenges in the ever-changing residential and commercial construction market, supporting more advanced modern construction. There are literally millions of roofs and buildings out there. Imagine how many there are in Manhattan alone. This is a $5 billion market in North America that is expected to grow annually at about 6% for new construction and 3% for repair and replacement roofs.
Methods involved with commercial roofing have changed dramatically over the past couple of decades. Today, roofs need to provide better resistance to storms and play a part in lowering energy costs and minimizing their environmental impact and liabilities. Increased demand is coming from macro trends such as the millennial generation's return to city dwelling, increased new builds for large data centers and healthcare facilities, and retrofitting large commercial buildings to drive energy efficiency improvement. In fact, retrofit and repair account for nearly 75% of the commercial roofing. The flooring adhesive market is $2 billion in the United States alone. It's grown about double the rate of GDP and is projected to continue growing in the range of at least 2.5%-4% annually. Included in the range of flooring types is resilient flooring, such as luxury vinyl tile or planks.
It's growing at a 15% annually and is gaining popularity. H.B. Fuller has innovation flooring adhesives like Roll-Fast, which stay open longer and set faster, increasing the efficiency and reducing the amount of time installers are on the job. We're unique in the fact that we have a full line of adhesives for any type of flooring and any type of technology needed, from water-based to urethane and epoxy to cementitious products. Most of our competitors predominantly play in just one of these areas. The other differentiator that H.B. Fuller brings to this market is that we design unique and specialty polymers that then can be used by our flooring R&D team to turn them into one-of-a-kind formulation that can save contractors time. Another illustration of our innovation leadership is with high-end, high performance grout, which we first introduced in 2012 with Power Grout.
It's a stain-resistant, water-resistant, higher strength, and color consistency. Competitive products introduced since 2014 do not perform at the level of Power Grout, which is a preferred grout for contractors in North America. Overall, H.B. Fuller is able to focus on continual innovation by understanding our end users better than our competitors and developing new applications that can help them complete the job faster and more efficiently with less time and less money. Finally, I want to highlight our very unique innovation, Fast 2K, that uses two-part urethane technology, plus some interesting and patented packaging capabilities. Think of the benefits. First, it supports sustainability efforts. Shipping this 16-ounce pouch instead of three 50-pound bags of cement. It lowers the carbon emissions in transit. Second, it's less complex to deliver, store, and use on the job. There's no mixture with water, and it sets up in 10-15 minutes.
Concrete, on the other hand, takes 24 hours, and the poles have to be stabilized in an upright position before you can place any pressure on them. This is not the case with our product. The packaging Royal developed for Fast 2K is also unique in that it comes in a functional, flexible pouch. This allows us to ship two-part urethane packaging by packaging both parts on each side. It's separated by a clip that prevents them from activating. The pouch is then easily pulled apart, activating the materials inside. This allows the user to mix the components in the pouch and then pour it in the hole without ever coming into contact with material. Within 30 seconds, the product foams up. Within 10-15 minutes, the product has secured the pole at full strength. Today, this is almost an entire market for cement.
If we can replace just 10% of the cement used in this market, we're looking at $200 million of sales in this technology. H.B. Fuller's key differentiator is how well we know our customers and their customers, how well we understand the construction market, including all three subsegments I've talked about today. Our goal is simple: to enable our customers to make the end user's job easier. We want to get people on and off the job site faster. We want to make sure that the product's set up quickly and can be available for daily use sooner. We want installers to be able to set the flooring as fast as possible so that the plumbers and the fixture guys can get into the site and complete their jobs.
We want the roof to be completed as fast as possible so that other tradesmen and craftsmen can finish the work on the rest of the building. This makes us invaluable to our customers. We leverage this understanding of our end users to develop solutions that are easier to apply than our competitors, adding value through our deep expertise. We are also committed to reducing complexity in this segment so that we can focus on winning in these high-value, high-margin, solid growth areas, and can build on the strength of our partnerships with distributors and wholesalers to position the company for success as we focus on accelerating our growth in construction adhesives outside of North America. Moving forward, we're selectively identifying technologies and geographies where we can win globally.
This includes selling epoxy cement anchors and pole and post setting foam in places like the Middle East and India, selling flooring adhesives, epoxy anchors, and doming resins in countries like Brazil and Chile, and expanding our commercial roofing business in Europe and the Arabian Peninsula. Based on our global growth projections, this business is expected to achieve $520 million in revenue with 20% EBITDA by 2020 and will be a strong performer in H.B. Fuller's overall portfolio. In short, we believe that our prospects in the construction industry around the world are strong. We are very excited about the opportunities that lie ahead. Thank you for your time this morning. Now we are going to take a 10-minute break. I would ask that we be back about 11:20 promptly. Thank you.
Okay, where's Max? Okay, I think Max is rounding everyone up. If you can grab your seats. Okay, welcome back, everyone. As you're taking your seats, and just before we get started, I'd like to begin by showing a short video we created. That video provides some insights into how we leverage our global reach to serve customers at a local level. Our market experts know our customers' business inside and out and are ready to help them solve their product design and adhesion problems wherever they are, whenever they need it. Let's show the video.
At H.B. Fuller, we help our customers deliver what people need all over the world. We know that the key to our customers' success is to deepen our relationship with them and to become a critical component of their end product. We achieve this through accessibility and connectivity. Our nearly 100 local manufacturing facilities, regional hubs, and technology centers, all linked to our world headquarters, provide a seamless network of support for our partners across the globe. Changing demographics in Asia, including fast-growing populations in places like India, Indonesia, and China, and an expanding middle class, are driving an increase in consumerism. We understand consumer requirements differ across borders and cultures, and our experts are on the ground working with manufacturers to design and produce lighter, safer, cleaner, and more durable products to meet consumer demand.
We are committed to leveraging local expertise to deliver innovative adhesive solutions that meet local requirements. Over the past 30 years, our local presence has grown throughout China to Australia and New Zealand and across Southeast Asia. We are a customer-focused, market-driven adhesive supplier. We invest in building local capabilities where we see growing demand in the markets we serve. We have invested in Kenya and Egypt in response to the demand for packaged food, bottled beverages, and personal hygiene products growing at an unprecedented rate across Africa. More than half of the anticipated growth in global population between now and 2050 is expected to occur in Africa, and H.B. Fuller is ready to leverage our global network to partner with local teams who understand the needs of this region.
Our global footprint is designed to address market trends. Lightweighting is certainly one of them, particularly for building greener and more efficient vehicles. In Europe, our automotive competency center in Mannheim, Germany, is dedicated to helping European car makers enhance the driving experience through greater comfort, safety, and fuel efficiency. Our close proximity to these manufacturers puts our technical know-how within arm's reach. The construction industry continues to grow and change. We are lockstep with the manufacturers within the many markets in this global industry, with a strong focus in North America. From flooring to windows to engineered wood products and roofing, our solutions are improving aesthetics and durability. By being strategically positioned close to our customers' facilities, we're able to deliver the products they need more quickly, helping build structures faster and keeping pace with increasingly changing environmental regulations.
Our products are not always seen. We're always highly visible to our customers. Our global reach enables us to share technical knowledge and processes. Our commitment to local expertise results in strong partnerships that serve diverse people and industries and gives us the perspective and vision to remain competitive and innovative in an interconnected world, all while helping to solve our customers' toughest adhesion challenges.
As I said before the video, as a customer-centric organization, our focus is on leveraging our global reach to serve our customers wherever they are around the world. Our 6,300 employees serve customers across our five operating segments from our 71 manufacturing facilities and our 30 technology centers. Earlier this morning, we presented two of our segments, Engineering Adhesives and Construction Adhesives, both of which are global businesses with global P&Ls. Our other three targeted growth markets, Durable Assembly, Hygiene, and Packaging, have commercial, technical, or structural nuances that require more regional processes. As a result, we combine these growth markets and our paper converting segment into certain geographic segments that I'll give a brief overview right now.
Our regional operating segments are the Americas, which includes North, Central, and South America, Asia Pacific, which spans from Greater China to Southeast Asia to Australia and New Zealand, and EIMEA, which includes Europe, India, Middle East, and Africa. The Americas is our largest operating segment, representing 37% of our global business. We serve a range of markets in North and Latin America, including Hygiene, Durable Assembly, Packaging, and paper. In 2017, these businesses generated $1.06 billion in revenue and $168 million in EBITDA, 15.8% of net revenue. We expect long-term growth in the Americas to be about 2%. We continue to grow in Asia Pacific with an ever-stronger presence in China, Southeast Asia, Australia, New Zealand, and Japan. In this segment, we serve markets that are similar to the Americas. In 2017, these businesses generated $269 million in revenue and $27 million in EBITDA, or 9.9% of net revenue.
We expect long-term growth in Asia Pacific to be 7% and expect margins to expand to 14%. Our EIMEA business is stronger than ever, having delivered its transformation goals by addressing every site, every process, every product, and every person. We have revitalized this region and capitalized on our momentum. In 2017, these businesses outpaced their targeted growth rates, particularly in our Durable Assembly segment and emerging geographies like India and the Middle East. Overall, the EIMEA segment delivered $695 million in revenue and $79 million in EBITDA at 11.4% margin. With the addition of Royal's Kömmerling businesses, we're poised to achieve 3% organic CAGR through 2020 while substantially improving the profitability of the combined businesses. Thus far this morning, we have discussed our Engineering Adhesives and Construction Adhesives segments, now we'd like to address the additional three markets where we compete.
They are Durable Assembly, which includes highly specified, high volume, and highly durable adhesives. Hygiene, which includes adhesives that improve the performance and functionality of disposable hygiene products and where we're a long partner to large multinational producers. Packaging, which is a fragmented market where we are a long-term innovation leader and focused on adhesive solutions that drive process efficiencies for packagers of materials. These three segments are managed regionally through our Americas, EIMEA, and Asia operating segments. Now, Steven Kenny, Heather Campe, and Patrick Kivits will provide more detail around our strategy and the results for Durable Assembly, Hygiene, and Packaging. I'd first like to introduce Steven Kenny, a 35-year veteran of the adhesive industry who started his career in Scotland in Durable Assembly and has grown into one of the most seasoned global leaders in the adhesive industry.
In addition to his role as the durable assembly leader, Steve has been a driver of our growth in emerging and developing geographies. Please welcome Steve Kenny.
Thank you, Jim. That makes me feel old, I guess, but I really appreciate it. Thanks, Jim, again, good morning, everyone. My name is Steve Kenny, and I'm the Senior Vice President of H.B. Fuller's emerging markets and the executive leader of our global durable assembly business. As the name implies, durable assembly has to do with the manufacture of durable goods such as insulating glass, specialized modes of transport, including buses, large trucks, and recreational vehicles, engineered wood products such as doors, floors, and laminated panels, domestic appliances, industrial filtration units for water, beverages, and dairy, and also textiles. This fragmented market demands high performing, highly specified adhesives. This is a system market to EA's engineering adhesive segment and generally encompasses high volume production and the bulk use of adhesives. H.B.
Fuller and Royal both have a long and successful history in this space, creating extensive depth and breadth in our combined technology toolbox as well as a strong patent portfolio. Durable assembly is all about helping customers build goods that will endure. The bonding challenge involves adhering dissimilar substrates together, and the products that result have to withstand tough environments and highly stressed end-use conditions for extended periods of time. We've earned a strong reputation around the world for the performance in application of our full range of chemistries and our global connectivity and accessibility. Typically, in the durable assembly world, customers won't readily change adhesive suppliers. This is because the products are largely built around specified adhesives, critical materials that they don't want to take risks with. If the adhesives fails to do its job in durable assembly, the consequential cost can be extremely high.
Our strategy is to focus on markets with high growth rates, such as water filtration and insulating glass, and to be proactive in identifying meaningful changes in those markets. We go after businesses where we have the strongest technical capabilities and can seize upon opportunities to be specced in and into the design project early on and for the long term. Historically, durable assembly has been a solid contributor to H.B. Fuller's success. Our growth rate has been steady and profitability has been strong. With the addition of the Royal businesses, we are well positioned to be the supplier of choice in our targeted durable assembly submarkets. Our portfolios are complementary, and we now have a broader range of technologies and a deeper well of knowledge from which to draw in order to solve tough bonding challenges. Our scale in many markets has grown substantially.
Our margin profile is stronger and will strengthen further as we realize synergies from the Royal integration. We have tripled our sales and assembly applications, which includes markets like appliances, sporting and leisure goods, sporting and leisure goods. Apologies. We are now the global leader in insulating glass adhesives and sealants. With our broader portfolio, deeper technical capabilities, and a greater focus on geographic expansion, durable assembly is set on track to deliver sales of $800 million in 2020 at higher than average EBITDA levels. When we look across this $8 billion global market, there are several macro trends driving change and generating growth. First, the shift from mechanical fasteners to adhesives is giving rise to new advances in design and functionality of personal lifestyle products, like RVs and home finishes.
As the use of composites continues to grow, our technology improves the durability of engineered wood products like flooring, doors, and furniture. Sustainability is also driving a lot of innovation in durable goods manufacturing. Light weighting is an important trend in this segment, H.B. Fuller's wood panel adhesives are helping manufacturers build lighter, thinner, and stronger wall panels that lower carbon emissions in buses, trucks, and RVs. The need for more energy efficient homes, commercial buildings, and industrial structures is increasing demand for the improved thermal and acoustic insulation properties and products. Our insulating glass solutions address this trend. To give you an idea of how this business will enable H.B. Fuller's future growth and profitability, I'd like to take a few minutes to highlight three submarkets, recreational vehicles, textiles, and insulating glass.
With the addition of Royal's technology and market expertise, we have strengthened our position in the bus, truck, and recreational vehicle market. The legacy H.B. Fuller is a leader in panel lamination and adhesives for interior trim, whereas the Royal side is extremely strong in structural adhesives, sealants, caulks, and tapes. As a combined business, we bring comprehensive and unrivaled solutions to customers. For example, sandwich elements in buses, trucks, and RVs have different interior and exterior deck layers that are bonded together to create a robust panel used for sidewalls, roofs, and floors. The panels are bonded together to form a trailer of the vehicle. The construction and finishing of the cabin is important to prevent water ingress and to create aesthetically pleasing environments. Finally, window bonding protects the vehicle and dampens noise and creates a more pleasant experience for driver and for passengers.
In textiles, we have strong capabilities in both polyurethane and epoxy-based adhesives and coatings. We are now able to comprehensively address performance challenges in textile lamination, from lingerie to footwear, from inflatables to uniforms, and from abrasives to breathable sportswear all around the world. One key segment that has been transformed following the acquisition of Royal is insulating glass. At H.B. Fuller, we had built a highly successful windows business in North America. It was largely focused on the residential market and centered on polyurethane and butyl technology. With the addition of the Royal business, we've added strong geographic presence in Europe, Asia, and several emerging markets. We have significantly strengthened our product portfolio with the addition of polysulfide and silicon technology. We've increased the numbers and enhanced the knowledge base of our dedicated expert sales and technical teams.
Royal has a long track record of supplying solutions to the architectural glazing market and therefore complements our North American residential business nicely. One of the key innovations we're focused on developing is the patented Ködispace 4SG system. This solution incorporates the application of a warm-applied reactive sealant between panes of either double or triple glass, thereby eliminating the need for the use of metal or foam spacers, and this delivers best-in-industry insulation performance. This solution provides a superior seal in the glazing unit, not achievable using traditional spacers. New ASTM standards require ever higher levels of argon gas retention to ensure optimal thermal insulation properties. We anticipate similar standards will become more prevalent in all regions around the world as legislators intervene to ensure we conserve more energy in homes, offices, and public buildings.
Additionally, the 4SG solution incorporates the desiccant into the adhesive, which is beaded into position in a fully automated line, and thereby increasing the level of precision in application. This reduces the number of defects compared to hand-built glazing units. Because this spacer is a liquid-applied adhesive, producers are able to build glazing units in a wide variety of shapes and sizes. This is a market primed for accelerated growth, and we are exceptionally well positioned to capitalize on this outstanding opportunity born from the combined strengths of H.B. Fuller and Royal. To be successful in any durable assembly market, you have to deliver flawlessly year after year. To meet these challenges, we invariably turn to toughened reactive products, and therefore, great reactive chemistry is key to our success. Now combined, the H.B.
H.B. Fuller and Royal businesses have a long and successful track record of innovating in reactive chemistries, and we have earned our reputation in the markets we serve for dependability and reliability, along with superior performance. As several of my colleagues have already said, it is our market knowledge and technical expertise that sets us apart from our competitors. We have earned our reputation as a trusted, competent, and long-term committed supplier to key industries in the durable assembly space. We have decades of proven partnering with market leaders in these demanding industries. Our adhesives experts enable customers to adapt to change and to innovate in order to deliver improvements in terms of product performance, compliance, unit cost, and overall productivity. We are amongst a small number of truly global players able to transfer knowledge from one part of the world to another quickly in order to benefit customers locally.
The supply assurance and performance consistency we provide is a key competitive advantage. In summary, durable assembly is a highly attractive market for H.B. Fuller. It's growing at a nice pace, and profitability is driven by specifications and manufacturers' reluctance to change suppliers. We are supremely well positioned to enable our customers to be successful in terms of remaining at the forefront of market trends, legislative changes, and technological innovation. We are actively helping customers to operate at the leading edge of production efficiency and to commercialize great products to meet evolving customer needs in the future. Now I'd like to turn the podium over to my colleague, Heather Campe, who will provide an update on global hygiene.
Thank you, Steve. Good morning, everyone. My name is Heather Campe, and I'm the Senior Vice President of H.B. Fuller's Americas Segment and the executive leader for our global hygiene market. The hygiene market includes baby diapers, adult incontinence, and feminine care products, and other specialty nonwovens products like medical drapes. This is an attractive market that is growing globally, especially in emerging markets where increased usage of baby diapers are driving higher usage rates. In mature economies, consumers' adoption of adult incontinence products are continuing to drive baby care products with enhanced functionality are creating opportunities to capture market share. The entire supply chain through to the end consumer is demanding lower odor, lighter, thinner, more flexible hygiene products that also deliver exceptional durability, absorbency, and in-use integrity. Our customers understand that they can rely on H.B.
Fuller to innovate with them to answer these demands. At H.B. Fuller, our local industry experts partner with our world-class global R&D team to address these opportunities in a market where we have a proven track record of success. With more raw materials to choose from, more processing variables, more application techniques, and greater collaboration between manufacturers and suppliers, adhesives are at the very core of innovation. Our dedicated experts understand adhesives and also all of the other materials and processes involved in making hygiene products. They know what works and what our customers demand in different regions, countries, and cultures. We tailor our product and process innovations to meet these critical needs, and with our in-house coding and global technical capabilities, we can rigorously test and fine-tune our solutions to perform as required before they go on a customer's line.
Historically, we've grown our hygiene business in the high single digits, which is something we're proud of, and it's pretty impressive. As well as it's double the market growth rate. The hygiene market is relatively consolidated as far as the number of customers are concerned, particularly when you compare it to the durable assembly or packaging markets. Key to our growth strategy is how closely we partner with disposable hygiene product manufacturers to address growing consumer demands. From tackling an aging population to consumer demand for thinner, more comfortable, more absorbent products, H.B. Fuller continues to innovate with customers to create better performing disposable baby diapers, feminine care products, and adult incontinence solutions. We are a leader in the overall hygiene market, as demonstrated by our strong number 1 or number 2 positions in the markets we serve.
Our overall share is currently about 30%, and we plan to increase that to 34% by the end of 2020. About half of our customers are large, global, or multinational disposable hygiene product manufacturers. Let's look at what's driving innovation and our financial performance in this market. In the U.S. alone, there are 10,000 people turning 65 years of age every day, and it's estimated that some 20 million adult women and 6 million adult men experience incontinence issues. Demographic and health factors are driving a growing awareness and understanding of the condition. Improved dialogue, cultural acceptance, better access to products, and a wider range of available designs are helping address specific needs and conditions. The global potential for retail of adult incontinence products alone is estimated at well over 8 billion units. In addition, there are more than 250 babies born every minute of the day.
Market penetration rates are increasing as a higher percentage of consumers in developing countries are using more disposable diapers and feminine products. In mature economies, the demands for improved product features continue to create growth opportunities. These multinational manufacturers like P&G, Kimberly-Clark, Essity, and Unicharm are focused on product innovation that reduces waste, improves absorption, and allows for thinner, more discreet cores and greater comfort. Advancements in adhesives have played a huge role in the transformation of hygiene solutions and products. Adhesives enable the design and production of thinner products that are softer, stretch more, and have lower odor. H.B. Fuller has been a trusted adhesive partner for over 50 years because in addition to product innovation, we're helping our customers speed up their lines and improve manufacturing efficiencies. We have a strong track record of innovation.
Our position as a leader in polyolefin technology has given us a competitive advantage. Our strategic management of raw materials on a global scale is helping H.B. Fuller to ensure supply security for our customers, identify new materials to formulate with, and help our customers manage production costs. Because our footprint and commitment to developing local expertise where our customers need it, we can offer quick and creative responses to changing consumer demand or regulatory requirements. The opportunity driven by our innovations are wide ranging, but I'd like to take just a minute or two to highlight one of Fuller's many innovations, H.B. Fuller's patented technology used in wetness indicators. One key element to a modern disposable diaper is the wetness indicator.
This technology immediately alerts caregivers that a diaper needs to be changed, and this is very important for babies, as well as in elder care and hospital settings, where long-term skin exposure to urine is a concern. Diaper wetness indicator adhesives are different to other hot melt technologies because they quickly and distinctly change color at the moment of wetness. Our patent-pending technology provides a fast and distinct bright blue visual indication of wetness. Our first generation wetness indicator adhesive was introduced in 2006. Since then, we've been working closely with the world's largest disposable hygiene product manufacturers to advance its performance. As a result, we commercialized our new patented solution in 2017. With our key technological advances, H.B. Fuller's wetness indicator adhesive delivers five important performance requirements. First, the adhesive quickly turns a distinct deep blue color when wet, alerting the caregiver that the diaper needs changing.
Secondly, the adhesive itself has lower odor. This is very important to caregivers worldwide. Third, the adhesive is applied at a lower application temperature, supporting less energy usage. Its thermal stability allows for better machining. This means less cleanup, less downtime, and higher productivity rates for our customers. Finally, H.B. Fuller's wetness indicator is highly resistant to humidity. This is important because users do not want premature indication caused by humid environmental conditions. It should only change color when fully wet. Our solution virtually eliminates this problem due to its high humidity resistance. Fast action, low odor, less energy usage, improved productivity, long shelf life. This solution is just one of our best-in-class hygiene adhesives.
In a market that is growing globally at 3%, our ability to deliver adhesive solutions that improve our customers' products everywhere in the world is key to our success and is a main driver of why we will continue to be able to grow share in this market in the near future. In summary, consumers want thinner, more comfortable, more absorbent hygiene products, and adhesives are central to improving these products because they enable the use of less core material, improving fit and function. They also reduce odors and provide functionality like wetness indication. Hygiene continues to be a very attractive market for us. Demand for more functional diapers and feminine care products, the growing adult incontinence market in mature economies, and the increased usage of hygiene products in emerging markets are all contributing to long-term sustainable growth in the overall segment.
We have a solid track record of global R&D collaboration supported by our local industry experts. Long term, we'll build on our innovation success, and we'll deliver $500 million in revenue by 2020. Now I'd like to turn over the podium to my colleague, Patrick Kivits, who will provide an update on global packaging.
Thank you, Heather. Good morning, everyone. My name is Patrick Kivits, and I'm the Senior Vice President for the Europe, India, Middle East, and Africa region. I'm also the executive leader for our global packaging business. Similar to our engineering adhesive and durable assembly business, packaging is a fragmented market segment that helps us to protect against cyclicality. With all of the different boxes and pouches and bottles that you see every day, it is very important to understand that adhesives are not only present in all of them, but they are crucial to protecting the products inside. Growth in the packaging market is for a large part driven by increased consumer demand for packaged goods. For instance, there's a greater demand for more attractive packaging, and consumers want to be using boxes and cases that contain less packaging materials.
These trends and the desire to produce more sustainable packaging is driving opportunities to develop integrated adhesive solutions and equipment solutions. We are solving a number of challenges, and this puts H.B. Fuller in a very strong position to grow our share in the markets that we compete in. Our competitive advantage lies in our ability to partner with brand owners and OEMs to develop unique solutions. Our globally connected chemists and application experts are solving a range of adhesion challenges, and our local service teams deliver what's needed by customers in different parts of the world. H.B. Fuller's overall growth rate in this segment has been well above market growth rates, at roughly 9% over the last three years. Much of this growth came through the acquisition of Wisdom, Adecol, and some parts of Royal. Our organic growth strategy is built on our ability to understand changing trends.
We identify the best channels to market based on consumer demand and advances in application equipment. We expect to continue to achieve growth rates in the 3% range. Let's look more specifically at the submarkets that we serve. We sell adhesives into roughly four different market segments. First of all, end of line, the largest segment in packaging, consists of case and carton sealing, cereal boxes, and corrugated materials for online retailers. The second submarket is bottle labeling, with applications such as beverage bottles, vegetable jars, and other labels placed on glass and PET. The third one is flexible packaging. Flexible packaging is the safest and most economical way to package fresh food. That's one of the main reasons why this market has been growing faster than other markets within packaging. The final sub-market where we continue to grow is called adhesive coated solutions.
These applications reinforce corrugated boxes, and they also enable easy opening and closing of envelopes or boxes for retail packaging. As consumerism grows, particularly in emerging markets, we are focused on more than just sealing packaging materials. Packing and shipping fresh and frozen products require a different strategy. Temperature and bacterial control are critical, and regulations for food safety are much more stringent. How quickly deliveries are able to reach their destination becomes even more important. Consequently, the replacement of manual operations with packaging automation is a logical next step. When efficiencies improvements and high-quality standards are required, H.B. Fuller Company is working with equipment manufacturers and retailers to provide a best-in-class solution. E-commerce, for example, is driving significant change in packaging making. Boxes and envelopes need to better suit the size and weight of goods mailed for home delivery.
Growing requirements for easy opening and visually sized designs are changing how boxes, cases, and pouches are manufactured. The consolidation of multinational food companies is also changing the packaging making industry. Today, there are more large-scale food manufacturers and distributors that demand process efficiencies, higher performance, and supply assurance. New distributors are merging to drive growth in smaller niche accounts, like healthy and organic foods, small batch beverages, and other specialty consumer products. The growing demand for sustainable manufacturing processes, products, and packaging is driving our R&D, technical service, and commercial teams to collaborate on creating and delivering technology that supports improved production, less waste, and lower energy usage. It also requires packaging makers to seal more packages. This means the adhesive must perform more reliably than ever before. Let's look at one specific example where we are leveraging current technology to enter new markets.
As more and more individuals shop online, there is a growing need for more functional packaging solutions. E-retailers supply thousands of different brands and merchandise of different shapes and sizes. Historically, the shipping boxes used to fulfill product orders were one size fits all. They were not well proportioned at all to the specific merchandise being shipped. As a result, excessive material, air, and cushioning material was shipped along with the merchandise. This results in higher freight, material costs, and carbon footprints. The good news is that automated cut-to-size packaging lines are allowing for less material waste and optimized freight costs, essentially supporting the circular economy. This new type of end-of-line packaging equipment evaluates the exact dimension of each individual item and then cuts and flaps the box to adjust the size accordingly.
This process avoids the need of sourcing a variety of boxes of different sizes, and thereby reducing the number of stock keeping units for packaging material. Economies of scale, reduction of cardboard waste, and optimized freight, all really good ideas to drive efficiencies and to raise profits. Although packaging on demand solves many problems of our customers, it also introduces new challenges. While the boxes are the rightly sized for the product, the board material is the same thickness, whether the merchandise inside is small and light or large and heavy. We as H.B. Fuller have developed a solution to this problem in the form of a unique adhesive coated tape solution that can be laminated inside the corrugated substrate. Simply put, what it does is strengthens the packaging material so that a thinner box or envelope performs exactly like a heavy-duty traditional package.
Using less corrugated material to create a very strong shipping package helps to lower the carbon footprint of e-retailers. The use of our specialty reinforcement, as well as our open and closing tape systems, add important features. They make packaging easier to open and even to reclose if needed, so they can be reused to return products. These solutions are very exciting and full of possibility. They drive us closer to the brand owners, and that will open up new opportunities for our company to develop next generation packaging that, for example, keeps food safer and fresher for longer. It ensures that your new watch or your new lamp arrives in pristine condition. In summary, we have a long history of success in the packaging markets, and it remains a very attractive market that continues to evolve.
In recent years, we have shifted to a more profitable mix and are targeting higher margin markets. As brand owners respond to consumer demand for advanced design and sustainability processes, our packaging adhesives experts are there, dreaming up new ways to form, coat, seal, and ship packages that protect the precious cargo carried inside. The sub-markets within the overall consumer goods packaging industry are growing. We will continue to be there to work with customers on their journey from farm to table, from factory to retail outlet, and from distribution center to consumers' homes. Increasing demand for easy open and resealable packaging and the development of better recyclable or lighter weight packaging materials offer broad opportunities for adhesive application innovation. H.B.
Fuller is poised to seize current and future opportunities in innovative packaging designs, as emphasized by our expectation to achieve a 3% growth between now and 2020 and to reach $540 million in revenue. Thank you very much for your time this morning, and now please join me in welcoming John Corkrean, our CFO, who will provide an overview and update on our financial performance.
Thanks, Patrick. Good morning. I'm John Corkrean, Executive Vice President, Chief Financial Officer. My goal for this section is going to be to wrap up the information you've just heard into quantifiable financial metrics and provide a clear demonstration of how we'll deliver each one of them. Here's a short outline of the topics that I'll cover in the next 15 minutes or so. I'll start with a summary of the new 2020 financial targets, then take a quick look back at our recent historical performance. Next, I'll discuss the implications of the Royal acquisition on our financial targets, I'll finish with a full review of the significant components of our 2020 financial deliverables and how we plan to get there. This slide shows the three key metrics that define the financial commitments within our 2020 strategic plan.
The metrics themselves have not changed, the specific targets have been updated from what we showed you two years ago. For the 2020 strategic plan, our key financial targets are achieving $3.4 billion in revenue in 2020, reflecting organic revenue growth of approximately 4.5% per annum from 2017 to 2020. $605 million of EBITDA in 2020, representing an EBITDA margin of approximately 18% by 2020. Free cash flow as defined by operating cash flow, less capital expenditures and dividends equal to $230 million in 2020 or $600 million in aggregate between 2018 and 2020. These targets are achievable in part due to the foundational work that's been done over the last several years.
Therefore, before I go into more detail about how we will deliver these results and how they compare to the targets for the same period that we laid out two years ago, allow me to take a few minutes to reflect on the progression of the company through the last seven years to demonstrate how we got to where we are today, a company with a strong foundation that is well-positioned for the future. This slide shows our revenue performance over the past 15 years on a currency-adjusted basis. As you can see, the years before the start of the 2015 strategic plan that we announced in 2011 showed minimal growth. In 2011, we committed to change that trend and created a sustainable growing enterprise.
Consistent with that objective, we have achieved a compound annual growth rate of about 9% over the past eight years, both organically and through acquisitions. A clear indication that a shift in strategy has been successfully executed. Over this period from 2011 to 2017, we had healthy growth in every segment and every global market. It was also during this period that we sold our paints business and made other changes to focus our portfolio, emphasizing the markets and technologies that represented the biggest opportunity for top-line growth and profit improvement. This shift in our portfolio to highly specified and bigger opportunity markets not only ignited faster revenue growth, also enabled margin improvement as we focused on higher value segments of the adhesives market.
Specifically, as Jim discussed earlier today, we put a greater emphasis on growing in the Engineering Adhesives, Durable Assembly, and Construction Adhesives end markets, the most highly specified parts of our business, which has helped drive our margins up by 200 basis points over this seven-year period. As of the end of 2017, those three highly specified and more profitable segments comprise 10% more of our portfolio than they did in 2010, and the portfolio itself also grew by about 70%. As I'll discuss shortly, the Royal acquisition has only further helped advance this shift. As we begin to identify the shift in focus to the higher value parts of the adhesive market, it formed a cornerstone of the strategy we developed for our original 2020 financial target, shown here, compared to fiscal year 2015 results.
As you can see, our original targets reflected a company that would have achieved $3 billion in revenue, $515 million in EBITDA, a 17% EBITDA margin, and $435 million in EBITDA, less CapEx in 2020. These numbers reflected an assumption of generating approximately $500 million of acquired revenue during the 2016-2020 period, meaning that strategic M&A would play a key part of the continued shift of our portfolio to higher margin parts of the market, which is exactly what we sought out to achieve via a successful Royal acquisition. This transaction has allowed us to significantly increase our exposure to the most highly specified parts of the adhesives market.
As Jim and Ted said in their remarks, this is a highly complementary acquisition that combines two pure-play adhesive manufacturers, bringing new resources and exciting opportunities in adjacent and overlapping markets that will make the combined company stronger and better. In 2017, Royal generated about $660 million of revenue and about $133 million of EBITDA, with almost 90% of sales coming from those more highly specified markets, meaning Engineering, Durable Assembly, and Construction. As you can see in the chart on the left, in 2017, the legacy H.B. Fuller business was a $2.2 billion business in which Engineering, Durable Assembly, and Construction end markets made up about 44% of our revenue. By adding the Royal business, shown in the middle chart, we became a $2.9 billion business where those three segments make up 53% of the portfolio, as shown on the right.
The end result is a significant shift in the richness of our portfolio, especially related to those highly specified applications, and consequently results in a higher level of EBITDA margin now and in the future. Here we show the key financial metrics on a pro forma combined basis for 2017, which again reflected nearly $2.9 billion of revenue, generated $420 million of adjusted EBITDA, a 14.5% EBITDA margin, and over $350 million of EBITDA less CapEx. The combination of these two companies also provides meaningful synergy opportunities, both cost and revenue synergies, which Jim and Ted detailed earlier. What you see here are the four buckets that make up our synergy plan. The largest piece of the plan is procurement or sourcing synergies, which represents about half of the total synergies from an EBITDA standpoint.
As discussed, these are the cost synergies that are the least disruptive and can be realized the quickest, which is why we expect to realize all of the procurement synergies by the end of 2019. The manufacturing cost savings are a combination of improved efficiencies at existing Royal plants and some consolidation that will be attained over the next three years. We do not plan to undertake any major consolidation projects. We have found a number of efficiencies and improvement projects, along with some areas of overlapping capacity, such as the consolidation of engineering adhesives production in Illinois to our new Frankfort plant, and the consolidation of the construction adhesives production from certain facilities in California and Texas to our Mansfield plant, as Ted mentioned earlier.
Finally, we have revenue synergies, as Ted discussed earlier, which includes the bigger opportunities to globalize engineering adhesives and drive faster growth of the Tonsan technologies into North America and the Royal technologies across the globe. The Royal businesses are currently run regionally, either Europe or North America. The first geographic synergy is to better leverage Royal's technologies and application knowledge around the globe, including opportunities to deliver Royal solutions into emerging markets. On the right, we show the expected timing of when these synergies will hit our P&L, with about $18 million expected to be realized in 2018, an additional $21 million in 2019, and another $11 million in 2020.
For a total of $50 million of synergies in our P&L in 2020. For 2018, we're on track to realize the $18 million of expected synergies. Most recently, we generated an incremental $4 million of cost synergies in Q2, totaling $6 million year to date. As a result of our strong foundation and the Royal acquisition, we've updated our financial targets to reflect the progress that we've made on our plan over the last two years and what we can expect to successfully achieve over the remaining two years of our strategic plan. Here we show the key financial targets for 2020 compared to the original targets that we established back in early 2016. As of today, our new targets are to achieve $3.4 billion in revenue, $605 million in EBITDA, a 17.8% EBITDA margin, and $514 million of EBITDA less CapEx by 2020.
All of which surpass our original targets and reflect a larger, more profitable company that has a better free cash flow potential than was the company depicted in our original plan. As Jim outlined in his opening presentation this morning, we have identified three primary actions that we'll take to enable us to successfully achieve our 2020 financial targets. These will be the primary drivers of our profitable growth over the next three years and are shown here in order of their overall impact. They are continued profitable growth in the engineering adhesive segment, realization of our Royal related synergy targets, and increased efficiencies through manufacturing excellence across all businesses. On this slide, we show how each one of these actions will drive EBITDA growth over the next three years, from $420 million of EBITDA on a pro forma basis in 2017 to $605 million of EBITDA in 2020.
Our plan includes about $64 million of EBITDA growth, or a little over one-third of the total from our Engineering Adhesives business, based on the strong expected organic growth and margin leverage in this business. We've already discussed the $35 million of cost synergies related to the Royal acquisition, and we expect a little less than $30 million of EBITDA improvement, or about 80 basis points to come from manufacturing leverage and efficiencies, including continuing to drive efficiencies and reduce waste in our manufacturing processes, as well as fixed cost leverage related to volume growth. The remainder of approximately $58 million in EBITDA improvement will come from non-Engineering Adhesives top-line volume growth and the net of pricing and raw material costs. This slide shows a revenue growth bridge based on the expected growth rates of each of our operating segments.
Our revenue target of $3.4 billion represents about 5.6% total growth over the period, with about 1.3% of the growth from the impact of currency and annualization of acquisitions we made in 2017, and 4.3% from organic growth. As shown here, each segment is expected to grow, but at varying rates. The most significant growth in terms of both dollars and percentage growth rate is expected to come from our Engineering Adhesives segment, which is expected to continue to grow at a double-digit rate. We're also planning for strong growth in the Asia Pacific region, which has a higher exposure to faster growing emerging markets, with solid growth in Construction Adhesives, the Americas, and the EIMEA segments. This slide shows the same EBITDA bridge that I showed earlier, but by reporting segment.
Note that the height of the bars indicate the incremental EBITDA dollars provided by each reporting segment, and the percentages above the respective bars indicate the 2020 margin target for each segment, meaning all segments show improvement versus the 2017 baseline. The Engineering Adhesives segment is expected to deliver the largest portion of our profit delivery based on the combination of revenue growth and margin expansion. Our results for the first two quarters of the remaining 12-quarter plan demonstrate we're on track and support our confidence that we'll achieve the targets we've outlined today. In the table on this slide, we show the key financial metrics for the second quarter and year-to-date basis through Q2. All of the numbers for 2017, except EPS, are on a pro forma basis, including the impact of Royal.
You can see on a year-to-date basis, revenue is up over 9% versus last year, with strong growth in all segments except Construction Adhesives, which is down less than 1%, and a solid 6% growth in EBITDA, despite significantly higher raw material costs compared to a year ago, and 13.6% earnings per share growth. A few weeks ago, we announced very strong results for the second quarter, with continued strong revenue performance, including double-digit year-over-year revenue growth from our Engineering Adhesives, EIMEA, and Asia Pacific businesses. Gross profit margin was up 30 basis points versus the same period last year, again, despite the higher raw material costs compared to a year ago, reflecting our significant pricing gains since the beginning of this year and the impact of the procurement synergies from the Royal acquisition that we discussed a few minutes ago.
All of this resulted in 12% year-over-year EBITDA growth on a pro forma basis for Royal and EPS growth of over 40% versus Q2 2017. It puts us in a great position to successfully deliver the first year of our remaining three-year plan. Turning to cash flow and capital allocation, this slide outlines our capital allocation philosophy, which has remained consistent over the years. Looking ahead toward 2020, however, different elements of our philosophy will be emphasized in the short term as we look to delever the balance sheet over the next couple of years. Our objective from a capital allocation philosophy standpoint are shown on the right, I'm sorry, on the left-hand side of this slide. We consistently strive to maintain a balance of these four objectives over the long run.
On the right, we show the prioritization of our capital allocation over the next few years based on our debt paydown plan. We will continue to invest in the business by maintaining annual capital expenditures at about 2.5% of revenue and will return cash to shareholders by targeting a dividend equal to 25% of the prior three-year average of net income. It's worth noting that we have a very strong track record on dividend payments, demonstrated by the fact that we've increased our dividend every year for the last 49, including this year. All available cash after capital expenditures and dividends will be used to pay down debt, with a target of reducing the debt to EBITDA ratio to three times by the end of 2020.
We'll achieve this by delivering on our $605 million EBITDA target in 2020, as well as by driving efficiency in working capital management and reducing working capital by 1% of revenue over the next three years. Only after we've achieved our targeted capital structure and stated financial objectives will we reengage in strategic M&A and use share purchase to offset dilution associated with shares issued through employee compensation plans. Once we achieve our targeted debt paydown in 2020, the cash flow of the combined companies will be significant and will provide ample capacity for prudent and strategic M&A, which we expect to account for a meaningful amount of our investments post-2020. However, if we were to see M&A slow down and our debt-to-EBITDA ratio sink below our targeted range, we'd increase share repurchase to keep our capital structure in line with our long-term objectives.
The combination of revenue growth, margin improvement, and our capital deployment strategy is expected to generate $600 million of free cash flow to pay down debt from 2017 to 2020, starting with $170 million this year. We have a very capital-light business model with a target of using about 2.5% of revenue for capital expenditures each year. This chart shows the capital spending for H.B. Fuller and Royal on a combined pro forma basis for 2015, projected through 2020. You can see that we have been and will continue to be very consistent with our target of 2.5% revenue growth each year. In the stacked bars, we show the breakdown of capital expenditures between sustain, also referred to as maintenance capital, strategic, which typically includes projects that enable growth, including capital related to our SAP deployment, and finally, integration or capital expenditures related to the Royal acquisition.
The last category represents between $25 million and $30 million of incremental capital that will be required over the three-year period, which should fall away after 2020 and reflects the capital investments that are required to capture our manufacturing synergies, as well as some improvements that are being made to certain Royal facilities from both a safety and environmental standpoint. In general, maintenance capital typically represents between 55% and 75% of our total annual capital spend. Strategic capital spend, on the other hand, tends to be a little lumpier. Some of the larger strategic capital projects that are planned for the next few years include the deployment of a greenfield manufacturing facility in Egypt to meet increasing demand, expanding our capacity and operational capabilities in Brazil to leverage the combination of the Adecol acquisition with the legacy H.B.
Fuller business there, the development of solvent-based manufacturing capabilities in China that will allow us to insource production. Our free cash flow plan includes a modest improvement in working capital for the period and will decrease from about 21% of revenue in 2015 to a little less than 19% of revenue in 2020, with 130 basis point improvement between 2017 and 2020 on top of the 70 basis points achieved over the last two years. We expect about two-thirds of the incremental improvement will come from an improvement in payables and the remainder from better inventory management. Here we illustrate what our cash flow progression should look like from 2018 to 2020, showing the impact of EBITDA growth, interest expense, taxes, and working capital on operating cash flow for these periods.
As I discussed, we'll target capital expenditures at 2.5% of revenue for each year and dividends equal to 25% of the previous three years' net income. This will yield free cash flow of $170 million in 2018, increasing to $230 million by 2020, with aggregate cash flow available to pay down debt of $600 million over the three-year period. This debt paydown will allow us to reduce our debt-to-EBITDA ratio from 5.8 times at the end of last year to 4.9 times at the end of 2018 and three times by the end of 2020. By the end of 2020, we will have subsequently reduced our total debt to $1.8 billion, while at the same time generating $605 million of EBITDA for the year. On the right-hand side of the chart, we show the composition of our debt portfolio, which Jim briefly mentioned earlier.
You can see that the vast majority of our outstanding debt is in the pre-payable Term Loan B financing that was arranged as part of the Royal acquisition. This note has a maturity of 2022 but is 100% pre-payable, and this flexibility allows us to quickly delever as we generate cash over the next few years. We have a small amount of borrowing on our local currency credit lines, which are also pre-payable, as well as a $400 million undrawn revolving credit facility. Finally, we have a $300 million unsecured bond with a maturity of 2027 and a 4% coupon. In short, we have a lot of flexibility here.
As you can see from the pie chart above the table, although the Term Loan B is a floating rate facility, we have entered into interest rate swaps that will enable us to maintain a ratio of at least 70% fixed-rate debt, significantly reducing our exposure to increasing interest rates. We're able to maintain this protection while still achieving an overall cost of borrowing for the company of about 4%. In summary, the 2020 strategic plan, when achieved, will solidify and build on the transformation of H.B. Fuller that began with the announcement of the 2015 plan back in 2011. The financial commitments that we've laid out here are clear, and as we've emphasized throughout the day, we're confident that they are achievable and will create significant shareholder value over the next three years.
Just as important, achieving these goals will make us, by the time that we complete them in 2020, a larger, stronger, more profitable company with an outstanding cash flow that will position us for significant growth and value creation for the next five years and beyond. That's the end of my remarks, and I'll turn the podium back over to Jim.
Okay. Well, there you have it, right? It's a great business in a growing industry with an outstanding leadership team. We have a very specific, detailed plan that's gonna generate significant shareholder value for those investors who decide to invest in the company. We really appreciate your time today. Before I open it up to Q&A, I'd like a moment to talk about a couple of exciting personnel moves. First, I'm very pleased to announce that Max Marcy has been promoted to Assistant Treasurer of H.B. Fuller. Over the last nine years, Max has done an outstanding job of building and leading H.B. Fuller's investor relations activities, as well as managing the company's international treasury department and capital markets. This promotion's a reflection of the great work that he's done in both of those areas. I'm also happy to announce that Barbara Doyle will be joining H.B.
Fuller as our new Vice President of Investor Relations. Barbara has a proven track record and more than 30 years of experience in finance. For the past seven years, she's been the Vice President of Investor Relations for Itron, where she helped reframe the company's position within the investment community as they went through several acquisitions and expanded the global reach of their business. Prior to joining Itron, Barbara led investor relations at Lawson Software and held various roles at IBM. Although Barbara won't be joining us until August, she is with us today, so I'd encourage all of you that know Max to congratulate him on his promotion and thank him, and also introduce yourself to Barbara, who will be a key contact for us to the investment community.
With that, we are definitely beyond our 12:15 note. I will open the floor up to questions before we go off to lunch.
Hi, it's Mike Harrison with Seaport Global. It seems like one of the key drivers of the EBITDA growth over the next 3 years is going to come from Engineering Adhesives. I think you did a good job laying out why that should grow very nicely. Can you help us understand your confidence level around getting from kind of the 16% EBITDA margin level up to 22%? Where does that come from? Kind of how do we leverage the investments that you've been putting in place there?
Thanks for that question, Mike. I think the answer to that question ties a little bit to the question we heard earlier from Jeff Zekauskas, right? These are high incremental margin businesses. The growth inherently brings more profit to the bottom line. By generating that much growth in a business that has higher material margins and gross margins, the natural incremental margin that you generate with that much growth is very significant. That's especially true in Engineering Adhesives, but it's also true in Durable Assembly and Construction. Fundamentally, that's where it comes from. John, do you something you want to add to that?
I'm not sure if this is on or not.
Yep.
It's on? Okay. Yeah, I'd echo that. I think it's also a place where we're going to see some of those synergies we've talked about, both of cost and revenue synergies, both on, and from a cost standpoint, both on the procurement side and manufacturing side. That'll help boost that margin progression.
Good. Dmitry.
Dmitry Silverstein with Longbow Research. In your growth projections, one of the things that kind of stood out was the 2% CAGR you expect out of the Americas in terms of top line, the slowest of any of the regions. I understand the mature market argument, but 2% is sub-GDP for this region, from what I can tell.
Yeah.
Is there some attrition built into it from your non-core businesses? Is there a negative mix that's going to be affecting it? Sort of, how do you explain the fact that you're going to be, or projecting to grow over the next couple of years at a rate that seems to be underperforming the GDP?
You weren't overwhelmed with the 2%, is what you're saying.
I was not overwhelmed. I'd just like to understand why.
A couple things to keep in mind. Americas is our Americas segment. A lot of our engineering adhesives growth will happen in North America. When you think about the overall Americas economy, a lot of that growth that Zhiwei is showing is happening in North America. Likewise, some of our construction growth is happening in North America. It's not a description of what happens overall in our growth in the Americas. It's that segment. When you think about that segment, I indicated that 17% of our business overall was in this paper segment, it's a higher proportion of our Americas business. It's those dynamics. The kind of growth we talked about in durable assembly globally of 5%-7%, Heather's delivering that in the Americas. The hygiene growth that we're seeing, we're seeing that in the Americas, especially in Latin America.
The packaging growth is solid, you do have that drag of some of these more mature markets that dampen that number. I would say fundamentally, if you dug beneath it, that's what you would see. Good growth in all those areas, a lot of the growth in Zhiwei. Overall, we're outperforming the Americas economies, what's called the Americas segment doesn't show up that way. Okay.
Charlie Rose, Cruiser Capital Advisors. First of all, I want to tell you that I've been doing this 40 years. You did a fabulous job. You get an A+ today.
Well, thank you very much, Charlie.
I got three simple questions, maybe. How much visibility does the adhesives manufacturer have when the game changes a bit? Does he have backlog, or how does that measure up? Second question really is, what are the dynamics of the Henkel's and other players in this business in terms of competitive characteristics that enable you to lift your growth rates and your margin profile? The third question really relates to your question, your issues of management compensation. What are the strike prices? What are the structure of these options that your management is realizing? I'd like a better definition of incentive issues.
Right.
The alignment with shareholders.
Right. Okay, let me tackle them one at a time, and if I forget them, you can remind me. The first one is about our visibility on our business. As we said a couple times in the presentation, it's annuitized business. When we get a piece of business, it's not changing, and if we have changes in our customers' dynamics, we generally get notice on that. Some segments, it's less than others. The aerospace business that Ted developed, and now we're growing nicely because of the work they've done, it's very visible in a market like that. The Electronics business that Zhiwei is growing, we don't know if we're specced in on those new products until sometime around now, but we have a very good visibility of what those builds are going to be in those products.
Automotive and those highly specified markets, they need planning and they need our support. We have really solid visibility from a growth standpoint. It varies by market, but generally, it's annuitized business. We have good visibility in terms of where the projections are going with these businesses. Anything to add on that?
No.
The second question was about the competitive dynamics. Yeah. I would say we're unique in that we're the only company in the world that everybody in the company works up every day and worries about adhesives. Henkel's a very good competitor. Half of their business is in consumer goods and other issues, and where they're investing from a specialty chemical space is things beyond adhesives. In the adhesives space, the competitive dynamic is really driven by the particular sub-segment. It's in hygiene, it's in construction, it's in solar panels, it's in filtration, and it's our team against their team in those areas. I'd say at a macro level, we're the company in the world that worries the most about this whole space every day. At a micro level, Henkel's a very responsible competitor that does good work in various segments.
As I indicated a number of times, I think our competitive advantage relative to them and some other global competitors is how well this team works together, not just at the senior level, but down the organization to tackle opportunities. The bigger dynamic is there's a lot of small competitors out there. They either have a chemistry niche or an application niche or a region niche, and it's there that we have a really stronger global competence to bring new raw materials, new ideas, new maybe equipment relationships into the mix to drive our success. That's the dynamic. Yeah. The question that was just asked is, are we able to see appreciable market share changes?
I would say on certain applications, we definitely see it, especially the ones where there's a very well-defined market, such as hygiene, as Heather mentioned, or cell phone assembly, which there's a lot of good external data. Others, there's less external data, and you might see differences in the amount of adhesives that are used. Market share is clear, but maybe less precise in terms of the numbers. We are able to measure, and we do measure our market share by each one of our particular segments. The third question
It was on stock options.
Oh, on stock options. Yeah. The way the stock option plan worked was they were granted back shortly after the Royal deal was announced. In fact, I think the strike price is around $57 because the stock price was at that point. They issue in January of 2021. I think there's a threshold minimum at $550 and a maximum at $650. The target level of payout is at $600 million EBITDA, which has been adjusted to $605 million based on the accounting rules that we have. That's how those work, and they're publicly disclosed in our 8-K. Very much driven toward hit the $600 million in EBITDA, and the options would pay off.
Eric Petrie with Citi. I just wanted to dive deeper into the visibility that you have in EA. What gives you the confidence that you're going to be able to grow up to four or five times the market rate in Electronics, General Industry, and Transportation? A win rate assumption, or are you taking share from larger producers or more local mom and pops?
I think the message that Zhiwei was trying to get across was twofold. One is that our team is solving problems that are out there faster and better than our competition. A lot of times, that's smaller competitors. In some cases, it's our large global competitors. By solving those problems faster, we get specced in to the new opportunity. Our win rate is definitely higher than the rest of the market. The second thing that Zhiwei and Jim and the rest of the team are doing is they're targeting very specific applications where the growth rate is much higher than the market growth rate. Electronic personal devices are growing at X, but if we choose those applications where adhesive use or value is higher, then we'll grow at a rate of X plus Y. That's fundamental.
Those are the two fundamental things that are happening within their business. Something that I should add to that? No. Is that clear? Yeah.
A follow-up question, if I could. In construction, with the revenue growth of the $450 to roughly $520 by 2020, does that include any upside from increasing your market share with Lowe's?
No. I would say it's not a specific targeted growth rate at Lowe's. This is fundamental to this now broader portfolio of businesses that we have. Question. I think there's a question over here.
Yep. John Roberts, UBS.
Hi, John.
Jim, is silicone a gap in your portfolio? That's kind of a funny industry because of the integration, and it goes into so many things besides adhesives. I don't know if you can penetrate that or not. Then maybe related to that and Charlie's question, what's going on at DowDuPont these days? I think they're splitting the adhesive business. Silicones are staying, I think, with Dow. Some of the other businesses are going to DuPont. Are they disruptive, and does that provide opportunities to you right now?
Yeah. Thanks for both those questions, John. One of the things we acquired with Tonsan was really good silicone formulating and manufacturing capabilities. A big part of our new energy business is actually silicone adhesives, and we're looking to leverage that into other areas. We've always had targeted areas. Royal had some interesting silicone business. Fuller had a couple niches, but the real base of that came in Tonsan and is a very interesting piece of technology that we're trying to leverage into other markets. As far as DowDuPont is concerned, a couple of the segments where their adhesive businesses are not directly competing with us. We have a little overlap in automotive, but not in the other parts of their adhesive businesses.
I'd say we see them as a supplier and the disruption there more on the supplier side than as a competitor out in the market in the segments where we operate.
Chris Perrella of Bloomberg Intelligence . John, how do you feel about the debt rating? You have a target leverage ratio, can you go a little bit above that? If there's some acquisitions, some small bolt-ons in the next couple of years, can you reach up to 4 by 2020 to do some of those deals? What have your discussions been like with the ratings agency?
I think we're going to be very disciplined, I would say, around M&A. Our commitment is to get back to our historical ranges. I think we're going to continue to cull the acquisition pipeline and get ourselves prepared to when we get back to that range. I think our position has been we want to stay on the path that we're on.
I think we probably have a longer relationship with S&P and Moody's, I think this story has played out over the last couple of acquisitions we've done. We've levered up a little bit above the top end of our historical range, and we've gotten back down very quickly. We're higher with this deal than we are with the other deals, but we also have a business that's generating a lot more cash flow.
We think we create the most value by executing this plan, dedicate our resources to this, deliver the $600 million in EBITDA. After that, we can be in a position where we can invest in other acquisitions.
Steve Wilson, Lapides Asset Management. Several questions. One is, the construction products business before you merged with Royal, which was very profitable, was always sort of break even, slight loss. Have you been able to make any real inroads in making that a better business? If not, do you sort of look at this and say, "Since the rest of the portfolio has made such great progress, is this no longer something that stands on its own and should stay in the portfolio?" The other side is you talked about the businesses that are not differentiated. The percentages fall because you've made so many acquisitions, but the actual revenue from that business is up 50% in the last seven years. I'm not sure what's going on there, but it seems like neglecting it has done pretty well.
Yeah.
My guess is because it's a cash cow, it's a very profitable business. Is that unusually profitable? If it does continue to erode as you've outlined, do we have an issue of, we're going to lose that profitability, and it's going to undermine some of what you're trying to accomplish. The last one is as this portfolio shifts, it seems like 1% of revenue for R&D is not enough to stay ahead of the innovation that you need to offer to gain the market share and to move into these higher value areas. Yet, I really haven't heard anything specific about, we need to ramp that up, and we need to put a lot more resources behind that.
Right.
Is that, in fact, something that needs to be done, or can you get by on a $30 million R&D budget for a $3 billion-plus company?
Right. Okay, I've forgotten the first question. I have the last two. The first one was around
The construction business.
Oh.
The legacy.
The legacy construction business. Yeah, I think, the legacy construction business, if you look underneath the numbers, it has this amortization from a deal that was done back in 2004 underlying it. The EBITDA of that business, and the cash generation of that business, has turned around. Under Traci's leadership, we've got that business back up to double-digit EBITDA, and the legacy business back up into double-digit EBITDA ranges with good growth expected going forward. We had a couple issues in not driving as much cash flow out of that business as we needed to. That's been turned around here over the last six quarters, and now we've got to get that business back to growing again. We see a lot of opportunity. We need to strategically target the pieces of that business that we want to grow.
I think from us, it's that innovation piece that Traci talked about, not trying to be this broad-based flooring company, but one that finds those pieces and customers where we can deliver value. If we can't, we need to exit certain portions of it. Whether we need to exit the whole business, I would say probably not, but certainly certain portions of it, we want to focus on those that are the highest growth. As far as that low end of the business, I would say it has been in decline. There were a couple acquisitions along the way, particularly Forbo, that grew that a little bit. Some of that growth you see is inorganic growth, not organic growth. From a profitability standpoint, I'd love to see it be usually profitable. It should be, if we were really driving the cash flow.
I would say it's just slightly below our average profitability, would be the way I'd describe it.
Yeah, I think that's right. No capital investment involved, it's cash flow. It's very good.
Very positive. Yeah. The third question, did I answer the third question?
The R&D.
The R&D spend. If you take a look at what's technically reported in the 10-K, it maybe understates some of our R&D investments. We invest a lot in application engineers, technical engineers. I mentioned there's 500 individuals, that's a big chunk of our census, that are technologists in application. If you were to also look at our technical sales group, that number would grow close to 900 people across our organization of 6,300 people. It's a sizable investment in technology, application expertise, and market development. Not core R&D, because for our business, it's a combination of the science of the adhesives, but the application science. As far as further investment, significant investments in engineering. The investments there are in the high single digits as a percentage of R&D and a number of the spaces within his business.
Yes, it's growing as a percentage. Certainly, it's shifting. While the dollars have not gone up that dramatically, it's shifted dramatically to those highly specified areas, and especially engineering adhesives. Question over here.
Paritosh Mitra, Berenberg Capital Markets. I had questions on your engineering adhesive business. When in 2020, when you achieve your revenue target, about $600 million, what would be the biggest piece in that? Would that be automotive or airplanes or electronics? Question two is that how consolidated is that market, the engineering adhesive market? Is it very consolidated, like hygiene or
Okay. I would say the largest piece today is Transportation, which is not just automotive. It includes aerospace and rail and other vehicles. I think if you look at the growth rates, certainly our Electronics business would rival that. I'd have to go look at the specific numbers, but that's growing at a faster rate than our. Those would be the two strongest pillars. Our Clean Energy business is a very nice business, and depending on how you classify this electronic batteries business, you'd call that Electronics or new energy or automotive. Those two would be the main pillars of that business with a sizable new energy piece around it. Does that sound right?
I think that's right. I think your other question was the concentration relative to, say, hygiene, which would be probably less concentrated than hygiene.
Much less concentrated, right? We have one major global competitor in that space who's diversified like we are, and then many different competitors who have maybe a specific chemistry, a specific application, or a specific opportunity. Really in that space, there's two global competitors, and then a lot of different people that have chemistry that fits certain applications, but aren't as broad-based as we are in those spaces. Q&A, is that right? I know where Q&A is. Is that accurate?
Yeah.
Okay, good. Okay.
Thank you. Dave Deutsche Bank. Jim, how much could global growth slow and you still achieve your 2020 targets? I assume there'd be some leverage you could pull on the cost side, maybe some of the clients and raw you could keep as well.
Yeah. I don't know if we're sharing like all our specific models on various growth rates, but I can maybe broadly indicate that what we've done under John's leadership is look at various scenarios of what happens if global growth goes up or it goes down. Fundamentally, we think as global growth slows down, our raw material inflation slows down, and that gives us more opportunities there. We certainly see that we can manage our capital and working capital spend in a slower economy. Then, if there's slower growth in certain areas, there's certain investments that we can pull back from an SG&A standpoint. I think there's a number of scenarios we've built out that still have us at that $605 million EBITDA. We are extremely committed to delivering that number. I think it creates a lot of value for shareholders.
It also enables us to pay down that debt in an effective way and really positions us nicely. I think there's a few levers that we'd be willing to pull, whether those are pricing levers or cost levers in the case of a cost scenario. Do you want to elaborate further?
No, I think you hit all the key points.
Yeah.
Rosemarie Morbelli with Gabelli. I'm competing for time with Jeff Zekauskas, quick answer to my quick question, please. Outside of the Royal integration, is the restructuring in Europe done and anything more needed in other geographies? When we look at the tariffs and the nascent trade war, do you see anything or hear anything if you are not going to be impacted directly in terms of punitive actions towards U.S. companies?
Right. On the first question, I'd encourage you to meet with Patrick Kivits afterwards to get the detailed update because a couple of people wanted to know things about Europe. Fundamentally, the restructuring's behind us. There are a few things that were part of that plan that are still being implemented, but most of the work we did to restructure Europe is done with some specific things we're doing tied to Royal to help us accelerate the opportunities there. There are some savings built into the plan there and no other restructuring plans at this point outside of the Royal work that we're doing. As far as tariffs are concerned, we're very well positioned vis-à-vis tariffs because we produce products where we sell products.
Around the world, being the global company we are that sell and produce in the same region, in some ways could put us at an advantage. The biggest risk to us of tariffs is the one to everybody else, is if it created recessionary forces or inflationary forces that were extreme or uncontrolled. I think, for us, fundamentally, we're advantaged because we are making products where we sell products, and we also buy materials in those regions. Jeff Zekauskas.
Just quickly, what's your cash tax rate now, and what might it be in 2020? In the beginning, it looks like in your slides you have share creep of about two or two and a half million shares to 2020.
Yep.
What you said is that then what you'd try to do is pay it down. If your EBITDA really grows at 30% and you hold your multiple, or hold your multiple, maybe it goes up a tiny bit. You'll be paying $30 million or $50 million more to repurchase those shares in 2021. Why not have a more balanced-
Why not take $100 million and put it towards share repurchase and just pay down debt by $500 million?
Right. Cash tax rate. Our cash tax rate this year, as we said, it'll be approximately 26%, reflecting the new tax legislation. The expectation is it's going to creep up a little bit next year, and we're still refining that. The significant impact is that we're a November 30th filer. Unlike the calendar filers, there's certain elements of the legislation that won't impact us till 2019. We don't have a precise number, but it could tick up a point or two, and that was all reflected in the expectations that you saw. From a share creep standpoint, I think the thought is we want to be very disciplined in putting all available cash towards debt paydown. I think we will pick up share repurchase after we get back to our targeted range.
We'll do it in the same way we've done in the past, which is use share repurchase to offset dilution. I think the goal from here until the end of 2020 is to devote all excess cash to debt paydown. At that point, it'll be share dilution going forward. I don't think we're looking to go backwards.
Correct. Thanks.
Okay. Last question. Chris.
The volume statistics understandably get a lot of attention on the quarterly reports. I guess the question is, as the nature of the business changes and what you're delivering to customers changes with more higher spec products, more vials, fewer drums, is there something that you think is being missed or not fully captured in what's aggregated and presented to the investment community in terms of those volume stats? If so, is there any ability to kind of highlight some of that change that might be more reflective of the progress in the business?
Well, I really appreciate that question, and because the volume numbers that we present are historic, and you're right, they don't reflect really what's happening in our business. Mix changes, price changes fundamentally speak to some of the things we talked about today that are changing our business. I'd encourage investors to look at our organic growth in aggregate and not try and pick apart some of those numbers. We report them because we historically have, and John's working hard to try and find a better way to reflect that, but so if we can do that in 2019, we would do that. We don't want to take away data. We want to bring forward data. I think there is some deceiving things that happen sometimes through those volume numbers, and I'd encourage everyone to look at our overall organic growth rate. Anything you want to add?
No, I think that's right. I think your point's right. As you look across these businesses, they're so diverse that measuring volume in any specific segment or in aggregate's very tough. We're trying to provide the best information we can, and we may tweak the way we do that in the future to try to be more transparent.
The nature of a product that goes from a container that's this big to a container that's this big is huge in terms of the value that we generate, even if the volume is different. Great. Okay, well we are going to be here over lunch. We hope everyone can join us for lunch. Certainly open to answer any questions personally. Really appreciate your time today and your interest in H.B. Fuller. Thanks for your time, and please join us for lunch.