MYECO GROUP LTD — Investor Presentation 2016

Nov 1, 2016

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Investor Presentation Leading developer & manufacturer of sustainable packaging

November 2016

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Disclaimer

Forward looking statements disclaimer

This presentation contains “forward-looking statements.” Such forward-looking statements may include, without limitation:

• (i) estimates of future earnings;

• (ii) estimates of future production and sales;

• (ii) estimates of future cash costs;

• (iv) estimates of future cash flows;

• (v) statements regarding future debt repayments; and

• (vi) estimates of future capital expenditures.

Where the Company expresses or implies an expectation or belief as to future events or results, such expectation or belief is expressed in good faith and believed to have a reasonable basis. However, forward looking statements are subject to risks, uncertainties and other factors, which could cause actual results to differ materially from future results expressed, projected or implied by such forward-looking statements. Such risks include, but are not limited to increased production costs, as well as political and operational risks in the countries and states in which we operate or sell product to, and governmental regulation and judicial outcomes.

The Company does not undertake any obligation to release publicly any revisions to any “forward-looking statement” to reflect events or circumstances after the date of this presentation, or to reflect the occurrence of unanticipated events, except as may be required under applicable securities laws.

All financial amounts are expressed in Australian dollars unless otherwise indicated.

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Corporate Overview

Business Overview

• SECOS develops and manufactures patented renewable resource-based bioplastic* resins and finished products for the global packaging and plastic products industries

• Uniquely positioned - a leading global supplier of sustainable and compostable packaging solutions

• Core market segments

• Films & Packaging

• Waste Management Solutions

• Global manufacturing and distribution

• Formed through merger of Cardia Bioplastics and Stellar Films in April 2015

• Highly experienced Board and executive team

Capital Structure
ASX code	SES
Shares on issue	162.2mil
Share price (31 October 2016)	7.9 cents
Market capitalisation	$12.2mil
12 Monthly rolling turnover	$1.1mil
Top 20 shareholders	57.13%
Total number of shareholders (30th September 2016)	1457

• Bioplastics: sustainable bio-based and/or biodegradable plastics

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FY16 - Achievements and Outlook

IMPROVING SALES MOMENTUM • Dog waste bags demand exceeds supply • Re-entry to Middle East with new film sales orders • Strong sales pipeline with short & long term opportunities	STRONG GROWTH IN WASTE MANAGEMENT • 58% increase in dog waste bag capacity in Nanjing • Capacity increased to 15 x 20’ containers/ month by March 2017 • R&D for High Speed Composting product range completed BALANCE SHEET STRENGTHENED • $2.0m+ in new equity from well supported SPP and placement • Balance sheet supports capex plans to increase capacity [in Nanjing and Malaysia] • Significant reduction in losses & cash burn	ONGOING BUSINESS TRANSFORMATION
		• Improved manufacturing efficiency & measurement • Merger cost savings continue (insurance, raw materials, IT) • Transition away from low margin business

• Exit from non performing business units – Cardia Brazil and Akronn JV completed

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Financial Results Overview – “Like for Like”

Significant improvement in operating and trading profile:

($’000)	30/6/2016	30/6/2015	Variance
Sales Revenue	20,955	24,040	(3,085)
Gross Profit	1,429	842	+587
Gross Margin	6.8%	3.5%	+3.3%
Other Income	281	300	(19)
Expenses	(6,041)	(7,074)	1,033
Tax Expense	(280)	-	(280)
Reported NPAT from continuing operations	(4,610)	(5,932)	+1,322

• Sales decrease due to focus on higher margin business, reflected in 94% increase in Gross Margin to 6.8%

• Margin growth is expected to continue through improvements in efficiency & scale

• Group expenses have reduced by $1M Post merger with further improvements expected

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Improved Operating Cash Flows

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Receipts from customers Net operating cash flows
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Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16
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• Sharper focus on improving higher margin sales resulting in lower cash receipts in June quarter

• September quarter receipts decreased due to lower production to accommodate planned Nanjing expansion

• Expanded capacity will lead to stronger receipts in next quarter and to will continue the improvement in cash flow

• Review of all activities has led to a reduction in operational costs

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Leadership Team

Mr Richard Tegoni Executive Chairman	Background in Finance, Banking, Sales & Marketing. MBA (AGSM), Diploma in Financial Markets (SIA) Appointed Executive Chairman September 2014. Appointed Non-Executive Director December 2012 and Non-Executive Chairman October 2013.
Mr Stephen Walters Group Managing Director	More than 20 years experience in plastics & packaging in General Management, Commercial & Sales roles. B.Bus (Marketing) Appointed as Group Managing Director in April 2015.
Mr Donald Haller Jr. Non-executive Director	Major shareholder in EarthVision Bio Solutions, Inc. , a key distributor of SECOS products in the USA. Background in accounting and management consulting as a Partner with PwC and Ernst & Young. Former CFO of a top 15 US insurance company.
Mr Trevor Haines Executive Director – Corporate Development	More than 20 years experience in senior accounting & group controlling management roles in various divisions of ICI Australia, AVC & Orica Australia. B.Com, FCPA. Appointed as Chief Financial Officer in April 2015.
Mr Edmond Tern CFO	More than 25 years manufacturing accounting experience across a number of Australian and multinational businesses. B.Ec and Bus. Admin., CPA Appointed as Chief Financial Officer in August 2016.

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Global Market Opportunity

SECOS is strategically positioned to benefit from the trend to sustainable packaging

• Global bioplastics market is forecast to grow by >280% from 2016 to 2019

Bioplastics packaging is less than 1% of the global plastics packaging market with exponential growth potential, driven by:

Global Bioplastics Growth

• Increasing government regulation of environment and waste management

• Increasing organic waste recycling

• Increased cost of landfills

• Increased consumer demand for sustainable products

• Global brands transitioning to bioplastics to meet social demand

Source: European Bioplastics/ IfBB Industry Report 2015

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SECOS Unique Product Benefits

• SECOS products

• use less petroleum and contain up to 50% renewable material

• have up to a 70% lower carbon footprint than conventional petroleum based polyethylene

• meet international standards for compostability and biodegradability

• are fully recyclable via the normal plastic waste stream

• are printable, colourable, and can be processed efficiently on standard plastics processing equipment

• are heavy metal free and food-safe compliant

• Product positioning

• more environmentally friendly

• price competitive with traditional plastics

• Quality approved for top tier packaging companies – GMO Free, Certified Compostable, Food Handling approved, ISO9001, independent life cycle assessment

• SECOS products do not compromise on performance, softness or strength

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Product Differentiation

• SECOS is unique in its ability to deliver sustainable packaging solutions

• SECOS’ Cardia BioHybrid[TM] resin which is GMO free & uses renewable plant based product as its major raw material

• SECOS’ Cardia BioHybrid[TM] technology can be applied to a wide range of renewable plastic solutions

• The current core product focus is on:

• Compostable waste management solutions

• Compostable laminates & resins as part of a more environmentally friendly product offering

• Sustainable bioplastic film and packaging products where an improved carbon footprint is required without a sacrifice in product performance

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Product Mix

• BioHybrid[TM] resin sales will increase as traditional packaging moves to become more sustainable

Sales 15/16

• Waste management growth expected in 2017 across Australia & New

Zealand

• Ongoing transition to higher margin products

• Hygiene will benefit from sustainable

• & breathable product range expansion

• Growth in Films & Packaging will benefit from commercialisation of ongoing R&D projects

Waste Management Films & Packaging Hygiene Resin Trading

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Waste Management Solutions

Key products - Compostable

• Shopping bags, garbage bags, bin liners, kitchen tidy bags, garden waste bags, nappy bags and dog waste bags

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Waste Management Solutions

Focus on diverting organic waste from landfill

Australia

Overseas

• Leading market position in the supply of organic waste management systems

• Organic waste management solutions being sold into the US and UK markets

• SECOS supplies products to local government for organic kitchen waste programs, now implemented in 120,000 Victorian households

• Direct sales of Biohybrid[TM] and compostable pet waste and kitchen tidy bags to major US and European retailers (with benchmark sustainability criteria) and pet store chains

• SECOS waste management products are also distributed through independent supermarkets and hardware stores across Australia

• High speed compostable bags specifically developed for hospitals, entertainment venues, airlines & sporting arenas.

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Significant Demand for Dog Waste Bags

Recent Developments

• Secured new business with a large chain of Pet Stores in Canada & the USA

Gross Biohybrid Dog Bag Sales ‘000 FY 15/16 (Actual) & FY16/17 (Forecast) $900 $800 $700 $600 $500 $400 $300 $200 $100 $0

• Additional production capacity at Nanjing plant to meet the increased demand for Biohybrid[TM] and Compostable dog waste bags

• August 2016 expanded capacity by 58% which is now fully utilised

• Further 70% capacity increase by March 2017 to meet additional demand from the US

• Outlook for 2017 dog bag sales expected to exceed $2.4M (+400% on 2016 sales)

• Additional bag lines required to exceed sales of $800k per quarter

Dog bag sales impacted by installation of new assets in Q4 with growth expected to continue in 2017

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Bioplastic Films & Packaging Products Key products

• High quality cast films, thermal and adhesive laminates (textile back sheet) with excellent barrier properties for use in food packaging, feminine hygiene products, pet drop sheets and disposable diapers

• Customers can choose from standard, Biohybrid[TM] or compostable resin technology

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Bioplastic Films & Packaging Products

Recent Developments

• Successful development of biodegradable air cushion packaging bags

• Growing global demand for bioplastics coffee bags

• SECOS Compostable resins being used in sustainable dental products

• Biohybrid[TM] resin approved for use in Bag-in-Bag water packaging in China

• Major multinational approves use of Biohybrid[TM] resin for more sustainable adhesive bottles

• Growing global demand for more environmentally friendly courier bags

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Hygiene Products

Key markets and customers

• The hygiene products market is worth $76 billion annually and growing at 5.5% p.a. (driven by demographics and economic development across both developed and developing markets)

  • Emerging middle class creating higher demand for quality hygiene products

• SECOS has 25 years experience in manufacturing & exporting globally with enviable reputation for quality & customer service

• SECOS provides the following products to tier 1 & tier 2 hygiene product manufacturers across 17 countries:

• thin gauge films for baby diaper and sanitary napkin back sheet

• multi colour printed films for baby diaper & sanitary products

• high speed wrapping films for sanitary napkin packaging that are soft and quiet

• wrapping & packaging films that are used where a coating of silicone is required

• thermal and adhesive laminates with excellent barrier properties

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Hygiene Films

Recent Developments

• Positive trials of Biohybrid[TM] hygiene film from four customers in Thailand, USA, Mexico and Australia

• New business secured from a large global hygiene manufacturer, for sanitary napkin backsheet

• New orders received from a global silicone coating business for supply of hygiene base film

• New product development with Itasa Malaysia for silicone coatable Biohybrid film

• New orders received from new Middle East customers

• Expansion of sales into the Japanese pet sheet market

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$M
$4.5
$4.0
$3.5
$3.0
$2.5
$2.0
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Quarterly Sales

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Sanitary & Breathable Bioplastic Films

A significant growth opportunity

• SECOS due to launch a range of unique breathable Biohybrid™ films

• Breathable Biohybrid™films represent a significant growth opportunity

• Strong growth in adult diapers to $2.7b by 2020 driven by global ageing population

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Sanitary Products Sales
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• Sanitary products in Asia are projected to grow to 180 billion units by 2019 due to the growing middle class

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Source: European Bioplastics/ IfBB Industry Report 2015

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Global Manufacturing and Sales capability

SECOS has the ability to service customers globally from three manufacturing hubs with a global network of sales offices and distribution partners

Annual Capacity of 7,200MT of resin, 270 million bags & 1,500MT of film

20 patents granted in key markets

9,500MT pa of film capacity

Resin Production Finished Goods Sales Offices Distributors

6,000MT pa of film capacity

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Growth Strategy & Action Plans

• Expand dog waste bag sales in the Japanese, Australian and US markets

• Expand compostable bag sales (in USA, Australia & Malaysia) to governments, councils and retail as part of waste diversion program rollouts

• Focus on the group’s top 20 major sales opportunities with the highest probability of conversion within the next six to twelve months

• Improve the sales strike rate by focusing on commercially ready products

• Increase sales of hygiene films by leveraging sustainable technology

• Expand Malaysian production to allow production of wide width compostable packaging films

• Establish bag making & resin manufacturing at Malaysian plant to expand capacity

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Strong Sales Growth Pipeline

Short Term Sales Pipeline - Potential additional $7m p.a.

Large Pet Store Chain	USA	Biohybrid Dog Waste Bags
Global Packaging Convertor	USA	Compostable Delivery Air Cushions
Packaging Convertor	USA	Compostable T-Shirt Bags & Boutique Carry Bags
Large Pet Sheet Manufacturer	Japan	Pet Sheet Pads
High Speed Composting	Australia	Bags For Local Government, Business & Public Venues

Medium Term Sales Pipeline - Potential additional $12m p.a.

Blow Moulding Business	UK	Biohybrid Resin For Cosmetic Bottles
Local Governmet	USA	Compostable Bin Liners
Large Regional Hygiene Manufacturer	Thailand	Baby Diaper & Sanitary Napkin Films
Pet Sheet Manufacturer	USA	Biohybrid Pet Sheets
Wholesale/Distributor	USA	Compostable Film & Resin for Coffee Bags
New Age Breathable Film	Australia	Biohybrid Breathable Film

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Investment Summary

• Growing rapidly in the bioplastics and sustainable packaging market

• Expanding sales driven by unique environmentally friendly products

• Strong IP and patent position

• Sales strategy focused on high profile brand owners, retailers, packaging companies and local government

• Joint product development with leading global consumer goods and packaging companies

• Cost-effective manufacturing in Nanjing, Kuala Lumpur and Melbourne, with low cost expansion options and global distribution

• Fully integrated business supplying compostable and Biohybrid™resins and films and waste management products ensuring product quality and cost competiveness.

• Highly focused management team with internationally recognised industry experts

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