PRO-PAC PACKAGING LIMITED — AGM Information 2016

Nov 27, 2016

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Pro-Pac Packaging Limited

ACN 112 971 874

Annual General Meeting Monday 28[th] November 2016

Pro-Pac Packaging Limited Annual General Meeting 2016

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Chairman's Address

Good afternoon and welcome to Pro-Pac’s 2016 Annual General Meeting. Thank you for your attendance. My name is Ahmed Fahour and I am a Director of Pro-Pac and your current Chairman. I would like to introduce the other members of the Board, Elliott Kaplan, Dr Gary Weiss and Brandon Penn who is also the Acting CEO. Our CFO and Company Secretary, Mark Saus is in attendance and also present are our auditors, Messrs Mark Nicholaeff and Vikas Gupta from UHY Haines Norton.

At the outset, I am pleased to note that for the year ended 30 June 2016, the Company reported a solid and pleasing set of results including profit after tax up 19% to $6.9 million which translates to an increase in earnings per share of 16% to 3.01 cents and dividends per share up 10% to 2.75 cents. Net cash from operating activities was also up 162% to $14.2m.

These results were achieved despite continued difficult general industry trading conditions, rising raw material input prices and adverse margin impacts from the significant downward movement in the A$/US$ exchange rate during the year.

Sales were down 1% on the prior year reflecting a sluggish Australian economy and competitive markets. As previously reported, demand from the manufacturing, distribution, resources and meat processing sectors was soft, particularly later in the first half and continued for the remainder of the financial year. However, the Company experienced good growth in the pharmaceutical, healthcare, retail and dairy sectors.

Despite hedging strategies, adverse forex movements due mainly to the ongoing decline of the AUD increased the cost of imported goods sold relative to the prior year, particularly during H1. Consequently, throughout the year the Company progressively increased prices to its customers to recover this cost increase. As a result, margins were maintained broadly in line with the prior year but sales volumes were adversely affected.

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Pro-Pac Packaging Limited Annual General Meeting 2016

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The maintenance of margins and the continued focus on cost out strategies yielded substantial savings in administration, distribution and selling expenses that enabled the Company to record a profit before tax of $10.1 million, an increase of 20% up on the prior year.

Rigid Division had an excellent year, with good top line growth and lower resin costs resulting in EBITDA increasing 18% on the prior year.

Industrial Division, which imports most of its products, was adversely affected by the declining AUD. As alluded to above, steps taken to stabilise margins within the division adversely effected sales which finished lower than the prior year. EBITDA for the division was however up 3% up on the prior year, largely due to effective cost control.

The first 4 months of the 2017 financial year saw a continuation of the harsh general industry trading conditions experienced during the second half of FY16 which have been exacerbated by a decline in certain sectors and in particular the previously buoyant pharmaceutical sector and the meat processing sector.

The Company is now witnessing intense domestic competition in both its Rigid and Industrial business and when combined with a low AUD to USD is bringing strong negative headwinds in sales. The Company will continue to build resilience with disciplined cost management and continues to look for attractive acquisitions that are accretive and meet return on investment hurdles. The Board expects further valueadding acquisitions to be completed in the coming year.

Owing to a strong 2015-16 performance combined with a strong balance sheet and solid cash flows the Board decided to maintain the final dividend at one and half cents per share for the second half . This, combined with the interim dividend, resulted in shareholders receiving a total dividend of 2.75 cents per share fully franked for the financial year, an increase of 10% over the prior year.

In July 2016 Peter Sutton resigned as CEO to pursue private business interests and the Board and I thank Peter for his contribution to the Group during his tenure. As

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Pro-Pac Packaging Limited Annual General Meeting 2016

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previously advised, former long term CEO, major shareholder and Non-Executive Director, Brandon Penn, was appointed “acting CEO” while an active formal executive search is finalised. A leading executive search firm has been appointed by the Board to recruit the next CEO.

Finally, I would like to thank my fellow Directors and the management team which are focused on looking after our employees and customers and together continuing to grow a successful packaging and distribution company in Australia that creates shared value.

On that note, I will hand over to Brandon Penn, our CEO, who will present a more detailed review of the 2016 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 2016

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CEO’s Address

2016 Financial Year Review

Good afternoon. Following the retirement of Peter Sutton as CEO in July this year, I assumed the role of Acting CEO pending the appointment of a new CEO. We are currently active with an executive search firm to find the right candidate to take the business forward and to continue to grow the business and increase shareholder value.

As the Chairman mentioned, for the 12 months ended 30 June 2016, the Company reported a solid and pleasing set of results including profit after tax up 19% to $6.9 million despite an overall 1% decline in sales due to weaker sales in the Industrial division. The latter was countered by a solid performance in the Rigid division which together with cost out strategies, enabled the Company to report healthy bottom line growth over the prior year.

Trading and Operational Update

Trading conditions remain challenging in a sluggish growth economy. Despite this we have some business units performing strongly. While the fresh produce and food processing segments are performing well, the red meat industry has not yet recovered herd numbers from the droughts and that has significantly impacted the volumes being processed and packed by our meat customers. Whilst our Rigid division had a particularly strong FY16 on the back of a strong pharma health care market, recent Chinese regulatory issues have impacted the sales of vitamins and nutraceuticals into China.

Our sales teams are strong and we have a healthy pipeline of new business continually being developed due to the unique value proposition that we are able to offer our customers.

Despite a lower volume first quarter we are seeing a turnaround in sales volumes as we head into the Christmas season and the summer months.

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Pro-Pac Packaging Limited Annual General Meeting 2016

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Packaging distribution remains at the core of what we do but we continue to look for opportunities that add strategic value to our business by adding product and expertise that can be rolled out though our national footprint. We also continue to evaluate acquisition opportunities that provide us with high synergies on integration.

Finally, I would like to thank the Board for their support and our 500+ employees who are motivated by the success of the business and their success within the business.

Ends

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