PRO-PAC PACKAGING LIMITED — Capital/Financing Update 2018

Jul 1, 2018

CAPITAL RAISE – FUND ACQUISITION GROWTH STRATEGY

July 2018

Grant Harrod (PPG CEO) | John Cerini (PPG COO)

The following disclaimer applies to this investor presentation ( Presentation ) and you are therefore advised to read this disclaimer carefully before reading or making any other use of this Presentation or any information contained in this Presentation. By accepting this Presentation, you represent and warrant that you are entitled to receive this Presentation in accordance with the restrictions, and agree to be bound by the limitations, contained within it.

This presentation has been prepared by Pro-Pac Packaging ( ASX:PPG ) in relation to:

• two acquisitions being undertaken by PPG – Polypak and Perfection Packaging (Acquisitions), (with a vendor placement of new fully paid ordinary shares in PPG ( New Shares ) as part consideration for the Perfection Packaging acquisition); and

• the following underwritten issues of additional New Shares:

• a placement of New Shares to sophisticated and professional investors to be made under section 708 of the Corporations Act 2001 (Cth) ( Corporations Act );

• a placement of New Shares to Bennamon Pty Ltd, subject to shareholder approval pursuant to section 611 item 7 of the Corporations Act;

• a placement of New Shares to the Chairman of PPG, Ahmed Fahour, subject to shareholder approval pursuant to Part 2E.1 of the Corporations Act and ASX Listing Rule 10.11;

• a placement of New Shares to a non-executive Director of PPG, Mr Rupert Harrington, subject to shareholder approval pursuant to Part 2E.1 of the Corporations Act and ASX Listing Rule 10.11; and

• a Share Purchase Plan to be offered to all PPG shareholders,

(together, Placements ).

Summary information

This Presentation contains summary information about PPG and its activities which is current only as at the date of this Presentation. The information in this Presentation is of a general nature and does not purport to be complete nor does it contain all the information which a prospective investor may require in evaluating a possible investment in PPG of that would be required in a prospectus or other disclosure document prepared in accordance with the requirements of the Corporations Act.

PPG's historical information in this Presentation is, or is based on, information that has been released to the Australian Securities Exchange ( ASX ). This Presentation should be read in conjunction with PPG's other periodic and continuous disclosure information lodged with ASX, which are available at www.asx.com.au. Certain information in this Presentation has been sourced from the target entities and vendors involved in the Acquisitions, and their representatives or associates. While steps have been taken to review that information, no representation or warranty, express or implied, is made as to its fairness, accuracy, correctness, completeness or adequacy. Certain market and industry data used in connection with this Presentation may have been obtained from research, surveys or studies conducted by third parties, including industry or general publications. Neither PPG nor its representatives have independently verified any such market or industry data provided by third parties or industry or general publications.

Not an offer

This Presentation is not a prospectus or other disclosure document under the Corporations Act and will not be lodged with the Australian Securities and Investments Commission ( ASIC ). This Presentation is for information purposes only and is not an invitation or offer of securities for subscription, purchase or sale in any jurisdiction.

The distribution of this Presentation (including an electronic copy) outside Australia and New Zealand may be restricted by law. If you come into possession of this Presentation, you should observe such restrictions and should seek your own advice on such restrictions. Any non-compliance with these restrictions may contravene applicable securities laws.

Not for release or distribution in the United States of America

This Presentation does not constitute an offer to sell, or the solicitation of an offer to buy, any securities in the United States. This Presentation may not be distributed or released in the United States. New Shares have not been, nor will be, registered under the U.S. Securities Act of 1933 , as amended ( U.S. Securities Act ) or the securities laws of any state or other jurisdiction of the United States. Accordingly, the New Shares may not be offered or sold, directly or indirectly to, persons in the United States or persons who are acting for the account or benefit of a person in the United States unless they have been registered under the U.S. Securities Act (which PPG has no obligation to do so or procure) or in a transaction exempt from, or not subject to, the registration requirements of the U.S. Securities Act and any other applicable U.S. state securities laws.

Not investment advice

The information contained in this Presentation is not investment or financial product advice or any recommendation to acquire New Shares. This Presentation does not and will not form any part of any contract for the acquisition of New Shares. Each recipient of this Presentation should make its own enquiries and investigations regarding all information in this Presentation.

This Presentation been prepared without taking into account your investment objectives, financial situation or particular needs. Before making an investment decision, you should consider whether it is a suitable investment for you in light of your own investment objectives, financial situation and particular needs and having regard to the merits or risks involved.

This Presentation and its contents are provided on the basis that recipients will not deal in the securities or the financial products of PPG in breach of applicable insider trading laws.

Future performance

This Presentation contains forward looking statements and comments about future events, including PPG’s expectations about the performance of its businesses and the effect of the Acquisitions and Placements on that business. Forward looking statements can generally be identified by the use of forward looking words such as, “expect”, “anticipate”, “likely”, “intend”, “should”, “could”, “may”, “predict”, “plan”, “propose”, “will”, “believe”, “forecast”, “estimate”, “target” and other similar expressions. Indications of, and guidance or outlook on, future earnings or financial position or performance are also forward looking statements and include statements in this Presentation regarding the conduct and effect of the Acquisitions, Placements and PPG’s outstanding debt.

You are cautioned not to place undue reliance on any forward looking statement. While due care and attention has been used in the preparation of forward looking statements, forward looking statements, opinions and estimates provided in this Presentation are based on assumptions and contingencies which are subject to change without notice, as are statements about market and industry trends which are based on interpretations of current market conditions. Forward looking statements including projections, guidance on future earnings and estimates are provided as a general guide only and should not be relied upon as an indication or guarantee of future performance and may involve known and unknown risks, uncertainties and other factors, many of which are outside the control of PPG. A number of important factors could cause PPG’s actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward looking statements. Actual results, performance or achievements may vary materially from any forward looking statements and the assumptions on which statements are based. PPG disclaims any intent or obligation to update publicly any forward looking statements, whether as a result of new information, future events or results or otherwise.

The forward looking statements are based on information available to PPG as at the date of this Presentation. Except as required by law or regulation (including the ASX Listing Rules), PPG undertakes no obligation to provide any additional or updated information whether as a result of new information, future events or results or otherwise.

Grant Harrod PPG, Group CEO

• 17 years experience at CEO / MD level in public and listed companies

Former CEO/MD of LJ Hooker Limited (2014 – 2017)

Former CEO/MD of Salmat Limited (2008 – 2013)

John Cerini PPG, Group COO

CEO of IPG since 2003

• More than 25 years of experience in the packaging industry

CEO of Detmold Packaging for 5 years

• Divisional General Manager during 10 years of employment at Amcor

Former CEO/MD of Corporate Express Limited (2002 - 2008)

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TRANSACTION OVERVIEW

• Pro-Pac Packaging Limited[1] (“ PPG ”) has entered into agreements to acquire Perfection Packaging (Project Wrap) and the Polypak business (Project Stretch):

• Perfection Packaging is a privately owned hard flexible packaging manufacturer based in Victoria, Australia

• Perfection Packaging to be acquired for A$49.8 million (7.0x on FY19F EBITDA $7.1m)

• 80% ($39.84 million) payable in cash upon completion

• 20% ($9.96 million) payable in PPG shares, shares to be held in escrow for 2 years

Details

• Perfection Packaging acquisition expected to complete in September 2018

• Acquisition of Perfection Packaging is conditional on the completion of the Placement

• Polypak is a privately owned specialist ‘soft flexible packaging manufacturer & distributor based in Auckland, New Zealand

• The Polypak business to be acquired for NZ$8.8 million (4.5x on FY19F EBITDA NZ$2.0m), with:

  • 80% (NZ$7.04 million) payable upon completion, adjusted for working capital

• 20% (NZ$1.76 million) to be held in escrow, with 50% payable Dec’18 and balance on Jul’19 following achievement of agreed performance targets

• Polypak acquisition expected to complete in July 2018.

• Acquisitions are in line with PPG’s strategy of delivering a scalable platform for future growth

• On strategy to be a leader in the industrial & flexible packaging markets

Impact

  - EPS accretive, up 22% including $8.0m synergies to be delivered in 24 to 36 months post acquisition

  - Net Debt expected to reduce to below 2.0x EBITDA

  - Principals of Polypak and Perfection Packaging to stay on with PPG and integrate into PPG leadership and operations teams

• The Transaction will be funded by:

• A $55.8m two tranche fully underwritten placement at $0.34 per share;

Funding

• A $4.0m fully underwritten Share Purchase Plan at $0.34 per share; and

• An issue of $9.96m of PPG shares to the Perfection Packaging vendors at $0.39 per share.

• Major Shareholder, Bennamon Pty Ltd, Chairman of PPG, Mr Ahmed Fahour, and Non Executive Director, Mr Rupert Harrington to participate in placement to maintain their current level of shareholding and conditional on shareholder approval

1 Via wholly owned subsidiaries

The transaction will:

• Strengthen PPG’s strategy to become one of the leading players in the growing flexibles packaging market

• Provide an entry into the larger hard flexibles segment

• Deliver significant cost synergies to consolidate Australian manufacturing network

• Open access to new markets and products complementing the existing business

• Increase the diversification of revenues, geographies and customers

• Strengthen PPGs leadership and operations teams

• Provide PPG with additional balance sheet flexibility

Pro-Pac will be a leading player in the $2.2 billion Flexible Packaging segment.

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Australian Packaging
A$20-22 billion [1]
Flexible Packaging
Fibre Packaging Rigid Packaging Other Packaging
~$2.2 billion [1]
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• PPG is a segment leader in manufacture & distributor of soft & hard flexible film for, primary (trays, films, bags & laminates), secondary (shrink film) and tertiary (stretch film) packaging solutions

• Top 3 players in flexibles account for 65% of industry revenue and target different end-segments

• Amcor – Focus on global FMCG customers

• Sealed Air – Focus on Meat, Dairy and other technical segments

• PPG is becoming a leading distributor & manufacturer of other packaging and industrial products

• Customers value single source suppliers in this segment for their ability to provide a JIT total solution for all their packaging requirements

• Industrial products include:

  • Tape & Strapping

  • Cartons & Void fill

  • Packaging machinery (including pallet wrapping)

  • PPE & Washroom materials

• PPG – Focus on Industrial & Logistics, FMCG, Food processing (off farm) & Agriculture (on farm) markets

• IBISWorld and PPG management estimates

• PPG future growth to largely be driven by flexible packaging market

• Flexible segment growing faster than GDP and the overall packaging sector

• Relatively fragmented with further consolidation opportunities

• Flexible packaging industry in Australia estimated to be worth $2.2bn p.a[1.]

• Soft flexibles (polyethylene) est. ~$0.9bn p.a[1.]

• Hard flexibles (laminated polypropylene) est. ~$1.3bn pa[1.]

• Demand expected to grow 47% over next 10 years (CAGR 4%)[1] . This is underpinned by:

• Shift towards convenience packaging, eg; fresh produce in bags

• Move towards unitisation to reduce product wastage aa consumer buy for today

• Move towards shrink wrap as a substitute to alternative packaging material (ie beer market)

• Film based packaging is more cost effective alternative to traditional packaging materials

• Growth in healthy ready-to-eat snack foods.

• Pouches replacing alternative rigid packaging.

• IBISWorld and PPG management estimates

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The Perfection Packaging acquisition will provide PPG with scale in the mid-market hard flexible packaging film market.

Flexibles market[1]

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Soft Flexibles
(PPG current
Hard focus)
flexibles $0.9b
(Perfection
Packaging
focus)
$1.3b
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This complements PPG’s current business which largely focusses on soft flexible packaging film.

Hard flexible packaging film make up the majority of the flexibles market ($1.3b of $2.2b market[1] )

• Contains polypropylene printed film, which may be laminated (e.g. with foils)

• Used in confectionary, ready-to-eat snack foods, fresh produce and pet food packaging

Examples of products:

• Barrier based packaging preserves product quality

• Suited to hi-speed automated packaging

• Allows detailed high spec packaging

Industry trends are favourable

• Growth in healthy ready-to-eat snack foods

• Individually packed fresh produce

• Pouches replacing other forms packaging

• Growth in home delivery (online) 1. IBISWorld and PPG management estimates

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Nuts/Fresh
Salty Snacks Dry Foods Snack Bars
Produce
Pet
Foods/Other Dairy Personal Care Fresh Produce
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THE ACQUISITIONS

Background:

• Privately owned flexible packaging manufacturer employing 100 staff based in Victoria, Australia.

• Forecasted production of 80 million meters pa of printed laminate ‘hard flexible’ (BOPP) primary packaging

• Target FMCG mid-market customers, including shelf-stable healthy snacking, personal care and pet food.

• Strategic rationale - bolt-on, on strategy, expand FMCG markets, broaden value add capability, significant synergies, enhance technical skills

History:

• Founded in the 1970’s.

• Current owners acquired business in early 2000’s, now looking to align with larger player to accelerate growth.

• In 2018 further investments were made to expand manufacturing infrastructure to now include; 5 printing presses, 3 laminators & 5 slitters. Provides a 52% increase in capacity. (target production capacity of 134 million meters pa).

Financials:

A$	FY2016	FY2017	FY2018F	FY2019F	3 Year CAGR
Sales	$30.5m	$35.4m	$40.3m	$45.5m	14.26%
EBITDA	$4.5m	$5.4m	$6.2m	$7.1m	16.42%

Core product range:

Perfection Packaging offers a dynamic range of hard flexible packaging solutions:

• High definition prints (up to 10 colours);

• Various lamination offerings providing enhanced barrier properties;

• Development and production of high speed structures for efficient production on packing lines;

• Registered over-print varnish; and

• Pouches and bags.

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FY18F Revenue
$40.3m
Sales by packaging category: Sales by end product category:
Other
Nuts/Fresh
95% of Other Perfection Packaging 18% Produce
Perfection Bags 5% has built a strong 27%
13%
Packaging sales reputation amongst Personal
comes from 2 key Aust mid-market Care
types of FMCG customers as a 7%
products: highly innovative
Dairy
1. Rewind, & short-run 7%
2. Bags manufacturing
partner. Salty Snacks
Snack Bars
Rewind 18%
10% Dry Foods
82%
13%
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Background:

• Privately owned New Zealand specialist soft flexibles packaging manufacturer & distributor of high-quality polyethylene bags, film and tubes.

• Supplying mainly primary food processors; including meat, poultry & fish markets via unique extrusion and conversion IP. Production plant is based in Auckland, New Zealand, employing 28 personnel.

• • Owners looking for generational change.

• Strategic rationale - bolt-on, on strategy, expand into food processing markets, introduce value add capability, resin & related synergies, enhance technical skills

History:

• The business was established in 1978

• Current owners acquired the business in 1983

• 2015 the company invested in new extruders and bag convertors to expand capacity as sales reached NZ$13m.

Financials:

NZ$	FY2016	FY2017	FY2018F	FY2019F	3 year CAGR
Sales	$11.6m	$13.1m	$13.3m	$13.4m	4.93%
EBITDA	$1.0m	$1.8m	$1.9m	$2.0m	25.99%

Polypak holds a strong niche position in specific categories of the soft flexible packaging market, including; custom plastic bags & specialists sheets for lining cartons, & general use packaging specifically for primary food bulk production, inc; red meat, fish & poultry. Polypak’s products are suited where a very high standard of film quality is required to ensure the safe protection of products being shipped, especially into export markets:

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EARNINGS OUTLOOK & IMPACT OF ACQUISITIONS

FY18

• PPG expects to generate (subject to finalisation of the audit):

• FY18 Pro Forma sustainable EBITDA of $34-$35 million

• FY18 Underlying EBITDA expected to be c. $16.0 million

• FY18 has seen favourable results in key cotton, food processing & beverage markets, but rising resin prices and an adverse grain & grass season has impacted sales & margins.

• Integration synergies continue to exceed forecast, now on annualised $6.0 million p.a run rate. ($1.5 million of this benefit is included in FY18 Underlying EBITDA).

• Strategic review of the Rigid division is ongoing.

FY19 outlook

• PPG expects resin price growth to slow and rise & fall contract recoveries to flow through, plus the agricultural market to return to avg. 10 year production yields.

• PPG anticipates FY19 EBITDA (including acquisitions) of c.$46-$47 million subject to no material adverse market conditions

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Forecast EBITDA - FY18 to Maintainable post acquisition
EBITDA
60
56.0-57.0
3
5
48.0-49.0
2
50 46.0-47.0
5.5
2
38.5-39.5
4.5
40
34.0-35.0
4.5
1.8
30 3.5
8.7 c. 24.5
20
c. 16.0
10
0
Page 18
Currency: A$m
Business Growth FY19F EBITDA Project Stretch
FY18F Underlying EBITDA IPG Annualisation 4mths FY18F Pro-forma EBITDA Ag Season Normalisation Capex Timing Annualisation FY18 Synergies Annualisation FY18F Pro-forma Normalised EBITDA Project Wrap (9 Mths) FY19F EBITDA (inc. Acqns) Project Wrap Annualisation (3 Mths) FY19F Pro-Forma EBITDA (inc. Acqns) RATIONALISATION SYERGIES Year FY20 RATIONALISATION SYERGIES Year FY21 Maintainable EBITDA (Incl. Synergies)
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• Substantial synergies to be realised through acquisitions

• $8.0m p.a synergies via rationalisation of manufacturing facilities:

• $5.0m p.a achieved within 24 months post acquisition; and

• An additional $3.0m p.a achieved within 36 months post acquisition

• One off redundancy & rationalisation costs of $10.0m over 18 month period

• Update site consolidation strategy:

Facilities	FY17A	FY18/19A	FY19/20F
Industrial/Flexible Manufacturing:	7 sites	7 sites (includes addition of new ‘Perfection Packaging’ site & closure of 1 site)	6 sites
Industrial/Flexible Distribution Centres:	8 sites	5 sites (closed Acacia Ridge, Laverton & Beverly)	4 sites
Total Industrial/Flexible sites:	15 sites	12 sites	10 sites
Rigid Manufacturing:	5 sites	5 sites	5 sites
Rigid Distribution:	3 sites	3 sites	3 sites
Total Rigid Sites:	8 sites	8 sites	8 sites
Total Group:	23 sites	20 sites	18 sites

1. Acquisitions are on strategy to become a leader in the industrial and flexible packaging market.

2. EPS accretive 22% (3.7 cps), including the $8.0 million of identified synergies to be delivered over a 2 to 3 year period.

3. Net Debt to EBITDA expected to reduce to below 2.0x through increased earnings base

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TRANSACTION FUNDING AND CAPITAL RAISING

• The Transaction will be funded by:

• $55.8m two tranche placement to sophisticated and professional investors at $0.34 per share:

  • Tranche 1 raising A$22.6m under PPG’s existing placement capacity pursuant to ASX Listing Rules 7.1 and 7.1A

  • Tranche 2 raising A$33.2m conditional on shareholder approval.

• $9.96m vendor placement of PPG shares at $0.39 per share

Offer Structure

• $4.0m Share Purchase Plan at $0.34 per share

• Tranche 2 is proposed to be issued to Bennamon Pty Ltd, Chairman of Pro-Pac, Mr Ahmed Fahour, and NonExecutive Director, Mr Rupert Harrington, to allow them to maintain their current level of shareholding in Pro-Pac.

• Tranche 2 will be priced and have the same terms and conditions as Tranche 1, but requires shareholder approval

• Under the Share Purchase Plan (SPP), eligible shareholders will be able to apply and subscribe for up to $15,000 of new shares at the same price at which they are issued under the Placement.

Offer Price

• Placement and SPP shares will be issued at $0.34 per share

• New shares will rank equally with existing shares on issue

Offer Terms

• Bell Potter is Lead Manager to the Placement

• Placement and Share Purchase Plan fully underwritten by Bell Potter

• $48.1m of the placement proceeds will primarily be used to fund the cash component of acquisitions of Polypak and Perfection Packaging

• In addition, $9.96m of consideration to be issued to the Perfection Packaging vendors in the form of PPG shares

• Shares to be issued to Perfection Packaging vendors will be subject to a voluntary escrow of 24 months

• The remainder of funds will be used for restructuring, transaction costs and working capital

Sources of Funds

Uses of Funds

Issue of shares to vendors	Issue of shares to vendors	[$m]	10.0	Cash consideration for acquisitions	Cash consideration for acquisitions	[$m]	48.1	48.1
Placement shares		[$m]	55.8	Share consideration for acquisitions		[$m]	10.0
Share Purchase Plan		[$m]	4.0	Restructuring, transaction costs and working capital		[$m]	11.7
Total Funds required		[$m]	69.8	Total Use of Funds		[$m]	69.8

Indicative Timetable

Event Date/Time (AEST) Record Date for Share Purchase Plan (SPP) 7:00pm, Friday 29 June 2018 Announcement of acquisitions, placement and trading resumes Monday 2 July 2018 Settlement of Tranche 1 shares Thursday, 5 July 2018 Allotment of Tranche 1 shares Friday, 6 July 2018 SPP Opens Monday, 9 July 2018 Tranche 1 shares begin trading Monday, 9 July 2018 SPP closes Monday, 30 July 2018 Allotment of SPP shares Monday, 6 August 2018 General meeting of shareholders to approve the issue of shares to Bennamon Pty Ltd, Chairman and Non-Executive Director Thursday, 30 August 2018 Settlement of Tranche 2 shares Wednesday, 5 September 2018 Allotment of Tranche 2 shares Thursday, 6 September 2018 Tranche 2 shares begin trading Friday, 7 September 2018

Timetable is indicative only and PPG and the Lead Manager reserves the right to amend the dates in this presentation at its discretion and without notice, subject to the ASX Listing Rules and Corporations Act

Thank You

PRO-PAC PACKAGING LIMITED SUITE 2.02, 657 PACIFIC HIGHWAY ST. LEONARDS, NSW, 2065 T: (02) 8781 0500 F: (02) 8781 0599 WWW.PPGAUST.COM.AU