PRO-PAC PACKAGING LIMITED — AGM Information 2013

Nov 26, 2013

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Pro-Pac Packaging Limited ACN: 112 971 874 Annual General Meeting Wednesday 27[th] November 2013

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Pro-Pac Packaging Limited Annual General Meeting 2013

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Chairman's Address

Good morning and welcome to Pro-Pac’s 2013 Annual General Meeting. Thank you for your attendance. My name is Elliott Kaplan and I am a Director of Pro-Pac and your Chairman. I would like to introduce the other members of the Board, Dr Gary Weiss and our CEO Brandon Penn. Our CFO and Company Secretary, Mark Saus is also in attendance and also present is our auditor, Mark Nicholaeff from UHY Haines Norton.

During the 2013 Financial Year, the Company continued to achieve good top line growth, both organically and through acquisitions. Revenue increased by 30% or $40 million to $173 million, of which acquisitions made during the 2013 financial year contributed approximately $25 million. Despite the increased revenue, difficult trading conditions particularly over the final quarter of the financial year, combined with the impact of increased costs associated with the significantly enhanced infrastructure which was put in place during the financial year to cope with future anticipated growth, negatively impacted reported earnings.

The 2013 result included $1.7 million of relocation, restructuring and business combination costs relating predominantly to the integration of new acquisitions and the consolidation of the Industrial Division’s operations in WA, SA and NSW. After inclusion of these costs, EBITDA was down 8% to $11.1 million and after tax profit was down 11% to $5.2 million.

In line with the Company’s strategy of continuing to expand its product and service offering to the food manufacturing and food processing industries, five of the eight acquisitions completed during the financial year were involved in the distribution or manufacture of primary packaging to the meat, poultry, baking and prepared meals sectors.

While the Company will continue to assess synergistic and accretive acquisitions, focus for the first half of FY14 will be on reaping the benefits from the investments made in expanding and enhancing the Company’s national capability and infrastructure, on implementing the identified cost reduction programs and on maximising the opportunities presented by the recent acquisitions.

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Pro-Pac Packaging Limited Annual General Meeting 2013

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A fully franked interim dividend of 1 cent per share was paid in May and the Board declared a fully franked final dividend of 1 cent per share which was paid on 25 September 2013.

I would like to express my thanks to my fellow directors, senior management and all of the Pro-Pac staff for their effort and contribution in what has been a particularly challenging year. Their dedication and commitment augurs well for the continued growth and future success of Pro-Pac.

On that note, I will hand over to Brandon Penn, our MD and CEO, who will present a more detailed review of the 2013 financial year and provide an update on trading conditions and strategies going forward.

Ends

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Pro-Pac Packaging Limited Annual General Meeting 2013

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Managing Director and CEO’s Address

2013 Financial Year Review

As the Chairman mentioned eight acquisitions were completed in this financial year of which five were strategic acquisitions focusing in the food industry. This was in line with our strategy to increase market share in the more defensive food industry. This includes the fresh meat, poultry and seafood markets as well as fresh produce. During the year we continued to invest in human resources to bolster our national presence in core product expertise and front line sales, primarily in these industry sectors.

Being a product sales and distribution business, increased sales goes hand in hand with the need for increased working capital. Whilst our investment in working capital requirement has increased, the working capital to sales ratio has remained relatively constant.

Trading and Operational Update

The weak trading conditions experienced during the first half of the calendar year continued into the first two months of the current financial year, although I am pleased to advise that we have achieved much improved sales in the September and October months.

Compared to the same period last year revenues are up 31% and EBITDA is up 22% to end October. These increases were generated from both organic growth and from the businesses acquired subsequent to June 2012.

During Q1, we completed the consolidation of our two manufacturing flexible plants by moving the Sydney based Australian Flexographic Printing plant into the Poly Products plant in Adelaide.

We also completed the integration of our Eco Food Pak and Fast Labels businesses into our Sydney distribution centre.

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Pro-Pac Packaging Limited Annual General Meeting 2013

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Subsequent to the financial year end the Rigid division consolidated three NSW injection plants down to two to deliver additional cost savings.

Our consolidation and value extraction strategy is making good progress as we continue to win new business and roll out acquisition products nationally. We have a solid pipeline of new business and we anticipate continued momentum in sales growth.

Strategies Going Forward

The 2014 FY will focus on extracting the value from recent acquisitions and consolidating existing operations. This involves product training and cross-selling nationally to continue the momentum of organic growth.

Cost outs and increasing efficiencies in our supply chain continue to be a major area of focus. We have a number of projects underway to deliver reduced operating costs.

A key project is the establishment of an offshore processing and procurement centre in Malaysia to assist with the processing of many back office functions. Stage one has been successfully deployed and we are now in the process of expanding this further.

Whilst the focus for 2014 is on consolidation and value extraction, we will continue to investigate and assess synergistic and strategic acquisitions in line with our growth strategy.

Finally, I would like to take this opportunity to join the Chairman in thanking our hard working and talented employees whose contribution is integral to our future and our performance.

Ends

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