PRO-PAC PACKAGING LIMITED — Interim / Quarterly Report 2013

Feb 24, 2013

PRO-PAC PACKAGING LIMITED

(ASX: PPG)

Commentary on Results for the Six Months Ended 31 December 2012

Revenue for the six months ended 31 December 2012 of $85m was 31% higher than the previous corresponding period. During the period under review the Company incurred non-recurring relocation, restructuring and business combination costs of $1.1m, resulting in a 5% reduction in after tax profits of $3.3m when compared to the previous corresponding period. Before accounting for these non-recurring costs, EBITDA was up 9% at $7.6m while PBT of $5.9m was up 16% on the previous corresponding period.

In the face of an extremely competitive market and a difficult economic environment, the growth in top line revenue is very pleasing. The Industrial Division’s sales, inclusive of acquisitions, grew by 44% while the Rigid Division also recorded a solid performance achieving 9% top line growth.

During the period under review, in addition to its ongoing acquisition and organic growth strategies, the Company focused on finalising its site consolidations, the integration of recent acquisitions and the migration of the various business units onto the main ERP system.

During the period under review, the Company established a China procurement and quality assurance office to support product sourcing and supply chain efficiencies. This is an important initiative as we continue to increase our sourcing and importation of products from the Asian region. It will also provide the Company with enhanced quality control and the ability to improve shipping costs by consolidating container loads. This strategy should deliver competitive advantages in the future.

The Company has a strategic focus on growing its product offering and business in the food processing and packaging industries, particularly the meat, chicken, seafood and fresh fruit and vegetable sectors and during the period under review has had some significant new contract wins exceeding $20m on a per annum basis, the benefits of which will commence to flow during Q4 of the current financial year. During the period under review, the Company completed four acquisitions with annualised combined revenues of approximately $20m. The Company also has an active pipeline of synergistic acquisition opportunities predominantly in the SME space.

Continued significant top line growth does mean that a greater investment in working capital is required. During the period under review, net working capital increased by $9.7m.

The outlook remains positive and the Company is well positioned to gain significantly more market share and to deliver positive returns to shareholders going forward.

The Company has today declared a fully franked interim dividend of one cent per share. The shares will go exdividend on 28 February 2013. The record date for determining entitlement to the dividend will be 7 March 2013 and the dividend will be paid on 16 May 2013.

Enquiries

For further information please contact Mr. Brandon Penn CEO, Pro-Pac Packaging Limited on Tel (02) 8781 0500.

About PPG

Pro-Pac Packaging Limited is a diversified manufacturing and distribution company, providing innovative, flexible and rigid packaging solutions for a broad group of clients. PPG is headquartered in Sydney with a national footprint including operations in all mainland states. PPG’s securities are listed and quoted on the ASX. For further information on PPG visit www.ppgaust.com.au.

Appendix 4D

Half Yearly Report

Results for announcement to the market

Pro-Pac Packaging Limited

	Pro-Pac Packaging Limited	Pro-Pac Packaging Limited	Pro-Pac Packaging Limited
ACN 112 971 874 Results	Half Year ended (‘Reporting Period’) 31 December 2012			Previous Half Year ended (‘Corresponding period’)
				31 December 2011
Revenue from ordinary activities Up Profit before income tax, relocation, restructuring and business combination costs from ordinary activities Up Profit from continuing operations after tax attributable to shareholders Down Net profit attributable to shareholders Down				$ 000’s 30.7 % to 85,204 15.7 % to 5,880 5.4 % to 3,335 5.4 % to 3,335
**Dividends (distributions) **
		Amount per security			Franked amount per security
Interim dividend		1.0¢			1.0¢
Prior year interim dividend		1.0¢			1.0¢
Information on dividends: The Company will pay an interim dividend of one cent per share on 16 May 2013. The Company’s Dividend Reinvestment Plan has not been activated. Record Date for determining entitlements to the dividend 7 March 2013 Last date for receipt of election notices for participation in the Pro-Pac Packaging Limited Dividend Reinvestment Plan Not applicable
			7 March 2013
			Not applicable

Control gained over entities

Name of entities	Start Food-Tech	Source & Sell	Stronghold
Date controlgained	1/07/2012	1/11/2012	1/11/2012

Contribution of such entities to the reporting entity’s $ 000’s profit/(loss) from ordinary activities during the period 750

Commentary

Brief explanation of any of the figures reported above: Please refer to the attached Half Year Report for a detailed review.

NTA backing Reporting Period Previous corresponding period

Net tangible asset backing per ordinary security 14.32 cents 10.37 cents

PRO-PAC PACKAGING LIMITED

ACN 112 971 874

HALF YEAR FINANCIAL REPORT

For the half-year ended 31 December 2012

PRO-PAC PACKAGING LIMITED

DIRECTORS’ REPORT

The directors present their report, together with the financial statements, on the consolidated entity consisting of Pro-Pac Packaging Limited and the entities it controlled for the half year ended 31 December 2012.

DIRECTORS

The names of the company’s Directors in office during the half year and up to the date of this report are:

Elliott Kaplan (Non Executive Director) BAcc, CA

Dr Gary Weiss (Non Executive Director) LL.B (Hons), LL.M (with distinction), JSD

Brandon Penn (Executive Director) BCom

PRINCIPAL ACTIVITIES

Pro-Pac Packaging Limited is a company limited by shares that is incorporated and domiciled in Australia. The principle activities of the consolidated entity during the half year were the manufacture and distribution of industrial, protective and rigid packaging products. There have been no significant changes in the nature of these activities during the half year.

REVIEW AND RESULTS OF OPERATIONS

Revenue for the six months ended 31 December 2012 of $85m was 31% higher than the previous corresponding period. During the period under review the Company incurred non-recurring relocation, restructuring and business combination costs of $1.1m, resulting in a 5% reduction in after tax profits of $3.3m when compared to the previous corresponding period. Before accounting for these non-recurring costs, EBITDA was up 9% at $7.6m while PBT of $5.9m was up 16% on the previous corresponding period.

The Directors declared a fully franked interim dividend of one (1c) cent per share. The Record Date for determining entitlements to the dividend is 7 March 2013. The dividend will be paid on 16 May 2013.

The company is of a kind referred to in Class Order 98/100, issued by ASIC, accordingly amounts on this report have been rounded off to the nearest thousand dollars.

AUDITOR’S INDEPENDENCE DECLARATION

The auditors have provided the Board of Directors with a signed Independence Declaration in accordance with s307C of the Corporations Act 2001. This declaration is included on page 3 of this Half Year Financial Report .

This report is signed in accordance with a resolution of the Board of Directors, pursuant to Section 306(3)(a) of the Corporations Act 2001.

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Brandon Penn Director Sydney 22 February 2013

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Auditor’s Independence Declaration Under Section 307C of the Corporations Act 2001

To the Directors of Pro-Pac Packaging Limited

I declare that, to the best of my knowledge and belief, during the half-year ended 31 December 2012 there has been:

• (i) No contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the review; and

• (ii) No contraventions of any applicable code of professional conduct in relation to the review.

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Mark Nicholaeff Partner Sydney 22 February 2013

UHY Haines Norton

Chartered Accountants

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PRO-PAC PACKAGING LIMITED

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE HALF YEAR TO 31 DECEMBER 2012

Revenue Sales of goods and services Interest income Total Revenue Expenses Amortisation of prepaid royalty Depreciation expense Distribution costs Employee benefits expense Finance costs Occupancy costs Other expenses from ordinary activities Purchases, materials and consumables Relocation, restructuring and business combination costs Total Expenses Profit before income tax Income tax expense Profit after tax Other comprehensive income Total comprehensive income for the half year Earnings per share (cents per share) - Basic earnings per share - Diluted earnings per share	Consolidated 2012 $ 000 85,204 37 85,241 161 1,316 1,832 12,758 325 2,959 6,814 53,196 1,113 80,474 4,767 1,432 3,335 - 3,335 1.59 1.58	Consolidated 2011 $ 000
		65,192 37
		65,229
		161 1,148 1,190 10,400 695 2,263 5,158 39,134 -
		60,149 5,080 1,553
		3,527 -
		3,527
		2.53 2.53

The above statement should be read in conjunction with the accompanying notes.

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PRO-PAC PACKAGING LIMITED

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31 DECEMBER 2012

Assets Current Assets Cash and cash equivalents Trade and other receivables Inventories Prepayments Total Current Assets Non-Current Assets Prepayments Property, plant and equipment Deferred tax assets Intangible assets Total Non-Current Assets TOTAL ASSETS Liabilities Current liabilities Trade and other payables Borrowings Provisions Current tax liabilities Total Current Liabilities Non-current liabilities Provisions Other non-current payables Borrowings Total Non-Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Retained earnings TOTAL EQUITY	Consolidated December 2012 $ 000 2,233 31,144 25,041 4,296 62,714 511 15,673 1,704 65,076 82,964 145,678 23,797 2,107 2,856 837 29,597 551 3,185 14,733 18,469 48,066 97,612 85,285 56 12,271 97,612	Consolidated June 2012 $ 000
		3,911 25,599 18,698 1,370
		49,578
		672 14,921 1,559 56,226
		73,378
		122,956
		18,683 1,745 2,597 474
		23,499
		498 - 2,572
		3,070
		26,569
		96,387
		85,285 56 11,046
		96,387

The above statement should be read in conjunction with the accompanying notes.

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PRO-PAC PACKAGING LIMITED

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE HALF YEAR TO 31 DECEMBER 2012

Cash flows from operating activities Receipts from customers Payments to suppliers & employees Interest received Interest paid Income tax paid Relocation, restructuring and business combination costs Net cash flows provided by operating activities Cash flows from investing activities Payments for property, plant and equipment Proceeds from sale of property, plant and equipment Payment for unincorporated businesses Working capital for businesses acquired during the period Net cash flows used in investing activities Cash flows from financing activities Payment of finance lease liabilities Hire purchase and finance leases raised Proceeds from borrowings Dividend paid Cost of issue of shares Net cash flows provided by financing activities Net (decrease) in cash and cash equivalents Cash & cash equivalents at beginning of the half year Cash & cash equivalents at end of half year Non-cash financing transactions Hire purchase and finance leases raised Issue of shares for dividend re-investment plan	Consolidated 2012 $ 000 81,763 (77,501) 37 (272) (1,472) (1,113) 1,442 (1,790) 39 (6,526) (5,203) (13,480) (1,060) 826 12,704 (2,110) - 10,360 (1,678) 3,911 2,233 826 -	Consolidated 2011 $ 000
		63,019 (58,922) 37 (706) (1,666) -
		1,762
		(1,627) 196 (1,952) -
		(3,383)
		(1,072) 820 1,809 (450) (7)
		1,100
		(521) 1,461
		940
		820 943

The above statement should be read in conjunction with the accompanying notes.

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PRO-PAC PACKAGING LIMITED

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE HALF YEAR TO 31 DECEMBER 2012

	Issued	Retained	Option		Total
	capital	earnings	reserve		equity
	$ 000	$ 000	$ 000		$ 000
Consolidated
Balance as at 1 July 2011	54,005	8,110		44	62,159
Issue of shares for dividend re-investment plan	943	-		-	943
Shares issued to vendors of businesses acquired	395	-		-	395
Prior year adjustment	-	4		-	4
Dividends	-	(1,397)		-	(1,397)
Total comprehensive income for theperiod	-	3,527		-	3,527
At 31 December 2011	55,343	10,244		44	65,631

	Issued	Retained	Option		Total
	capital	earnings	reserve		equity
	$ 000	$ 000	$ 000		$ 000
Consolidated
Balance as at 1 July 2012	85,285	11,046		56	96,387
Dividends	-	(2,110)		-	(2,110)
Total comprehensive income for theperiod	-	3,335		-	3,335
At 31 December 2012	85,285	12,271		56	97,612

The above statement should be read in conjunction with the accompanying notes.

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NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

• (a) Basis of Preparation

These general purpose financial statements for the interim half-year period ended 31 December 2012 have been prepared in accordance with the Corporations Act 2001 and AASB 134: Interim Financial Reporting. Compliance with Australian Accounting Standards ensures that the financial statements and notes also comply with International Financial Reporting Standards.

This interim financial report is intended to provide users with an update on the latest annual financial statements of Pro-Pac Packaging Limited and its controlled entities (the Group). As such, it does not contain information that represents relatively insignificant changes occurring during the half-year within the Group. The half year financial report does not include full disclosures of the type normally included in an annual report. It is therefore recommended that this financial report be read in conjunction with the annual report of the Group for the year ended 30 June 2012, together with any public announcements made by the Group during the half-year.

The same accounting policies and methods of computation have been followed in this interim financial report as were applied in the most recent annual financial report.

(b) New, revised or amending Accounting Standards and Interpretations adopted

The consolidated entity has adopted all of the new, revised or amending Accounting Standards and Interpretations issued by the Australian Accounting Standards Board (‘AASB’) that are mandatory for the current reporting period.

Any new, revised or amending Accounting Standards or Interpretations that are not yet mandatory have not been early adopted.

Any significant impact on the accounting policies of the consolidated entity from the adoption of these Accounting Standards and Interpretations are disclosed in the relevant accounting policy. The adoption of these Accounting Standards and Interpretations did not have any significant impact on the financial performance or position of the consolidated entity:

AASB 2010-6 Amendments to Australian Accounting Standards - Disclosures on Transfers of Financial Assets

The consolidated entity has applied AASB 2011-6 amendments from 1 July 2011. These amendments add and amended disclosure requirements in AASB 7 about transfer of financial assets, including the nature of the financial assets involved and the risks associated with them. Additional disclosures are now required and when (i) an asset is transferred but is not derecognised; and (ii) when assets are derecognised but the consolidated entity has a continuing exposure to the asset after the sale.

AASB 1054 Australian Additional Disclosures

The consolidated entity has applied AASB 1054 from 1 July 2011. The standard sets out the Australian-specific disclosures, which are in addition to International Financial Reporting Standards, for entities that have adopted Australian Accounting Standards.

AASB 2011-1 Amendments to Australian Accounting Standards arising from the Trans-Tasman Convergence Project

The consolidated entity has applied AASB 2012-1 amendments from 1 July 2011. These amendments made changes to a range of Australian Accounting Standards and Interpretations for the purpose of closer alignment to International Financial Reporting Standards (‘IFRSs’) and harmonisation between Australian and New Zealand Standards. The amendments removed certain guidance and definitions from Australian Accounting Standards for conformity of drafting with IFRSs but without any intention to change requirements.

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NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

AASB 2011-5 Amendments to Australian Accounting Standards – Extending Relief from Consolidation, the Equity Method and Proportionate Consolidation

The consolidated entity has applied AASB 2011-5 amendments from 1 July 2011. These amendments extended relief from consolidation, the equity method and proportionate consolidation where the ultimate or intermediate parent applied not-for-profit Aus paragraphs in Australian IFRSs as adopted in Australia.

NOTE 2: SEGMENT INFORMATION

The Group has identified its operating segments based on the internal reports that are reviewed and used by the Board of Directors (chief operating decision makers) in assessing performance and determining the allocation of resources.

The Group is managed primarily on the basis of product category and service offerings since the diversification of the Group’s operations inherently have notably different risk profiles and performance assessment criteria. Operating segments are therefore determined on the same basis.

Reportable segments disclosed are based on aggregating operating segments where the segments are considered to have similar economic characteristics and are also similar with respect to the following:

• The products sold and/or services provided by the segment;

• The manufacturing process;

Types of products and services by segment

Industrial packaging

The Industrial packaging division manufactures, sources and distributes industrial packaging materials and related products and services. All products produced or distributed are aggregated as one reportable segment as the products are similar in nature and are distributed to similar types of customers. The industrial packaging segment also installs, supports and maintains packaging machines.

Rigid packaging

The Rigid packaging division manufactures, sources and distributes containers and closures and related products and services. All products produced or distributed are aggregated as one reportable segment as the products are similar in nature and are manufactured and distributed to similar types of customers.

Basis of accounting for purposes of reporting by operating segments

Accounting policies adopted

Unless stated otherwise, all amounts reported to the Board of Directors as the chief decision maker with respect to operating segments, are determined in accordance with accounting policies that are consistent to those adopted in the annual financial statements of the Group.

Inter-segment transactions

An internally determined transfer price is set for all inter-entity sales. This price is re-set regularly and is usually based on what would be realised in the event the sale was made to an external party at arm’s length. All such transactions are eliminated on consolidation for the Group’s financial statements.

Inter-segment loans payable and receivable are initially recognised at the consideration received net of transaction costs. If inter-segment loans receivable and payable are not on commercial terms, these are not adjusted to fair value based on market interest rates. Inter-segment loans are eliminated on consolidation.

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NOTE 2: SEGMENT INFORMATION (continued)

Segment Assets

Where an asset is used across multiple segments, the asset is allocated to the segment that receives the majority of economic value from the asset. In the majority of instances segment assets are clearly identifiable on the basis of their nature and physical location.

Unless indicated otherwise in the assets role, investments in financial assets, deferred tax assets and intangible assets have not been allocated to operating segments.

Segment Liabilities

Liabilities are allocated to segments where there is direct nexus between the incurrence of the liability and the operations of the segment. Borrowings and tax liabilities are generally considered to relate to the Group as a whole and are not allocated. Segment liabilities include trade and other payables and certain borrowings.

Unallocated items

The following items of revenue, expenses, assets and liabilities are not allocated to operating segments as they are not considered part of the core operations of any segment: impairment of assets and other non-recurring revenue or expenses; income tax expense; deferred tax asset and liabilities; current tax liabilities; other financial liabilities and intangible assets.

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NOTE 2: SEGMENT INFORMATION (continued)

	Rigid packaging Industrial packaging Intersegment eliminations / unallocated Total Rigid packaging Industrial packaging Intersegment eliminations / unallocated Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000	Rigid packaging Industrial packaging Intersegment eliminations / unallocated Total Rigid packaging Industrial packaging Intersegment eliminations / unallocated Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000	Rigid packaging Industrial packaging Intersegment eliminations / unallocated Total Rigid packaging Industrial packaging Intersegment eliminations / unallocated Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000	Rigid packaging Industrial packaging Intersegment eliminations / unallocated Total Rigid packaging Industrial packaging Intersegment eliminations / unallocated Total $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000 $ 000
(i) Segment performance Six months ended 31 December Revenue External sales	2012 2012 2012 2012 2011 2011 2011 2011 27,146 58,058 - 85,204 24,844 40,348 - 65,192
Inter-segment sales	4,015 4,497 (8,512) - 3,563 3,594 (7,157) -
Total segment revenue	31,161 62,555 (8,512) 85,204 28,407 43,942 (7,157) 65,192
EBITDA	3,961 4,107 (1,536) 6,532 3,680 4,312 (945) 7,047
Depreciation and amortisation Interest revenue Finance costs Profit before income tax Income tax expense Profit after income tax (ii) Segment assets As at 31 December		(1,477) 37 (325) 4,767 (1,432) 3,335		(1,309) 37 (695)
				5,080
				(1,553)
				3,527
Segment assets Reconciliation of segment assets to group assets Inter -segment eliminations Unallocated assets Deferred tax assets Other Total group assets from continuing operations	63,172 79,387 -	142,559 52,986 65,754 - (1,561) 4,680		118,740 (1,959) 6,175
		1,704 2,976		1,559 4,616
		145,678
				122,956
(iii) Segment liabilities As at 31 December Segment liablities 10,983 24,610 - Reconciliation of segment liablities to group liabilities Inter -segment eliminations Unallocated liabilities Deferred tax liabilities Other liabilities Total group liabilities from continuing operations		35,593 10,988 16,531 - (1,405) 13,878		27,519 (1,665) 715
		- 13,878		- 715
		48,066
				26,569

(iv) The Group operates solely within Australia. As such there is only one geographical segment.

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NOTE 3: EARNINGS PER SHARES

Basic and diluted earnings per share amounts are calculated by dividing net profit for the half year attributable to ordinary equity holders of the parent by the weighted average number of ordinary shares outstanding during the period.

The following reflects the income and share data used in the total operations basic and diluted earnings per share computations:

	Consolidated	Consolidated
	2012	2011
Net profit attributable to equity holders ($000)	3,335	3,527
Weighted average number of ordinary shares for basic earnings per share	209,452,804	139,643,997
Weighted average number of ordinary shares for diluted earnings per share	211,130,811	139,643,997
Basic earnings per share (cents per share) *	1.59	2.53
Diluted earnings per share (cents per share) *	1.58	2.53

• The difference between basic and diluted shares on issue represents the PPG Executive Long Term Incentive Plan shares on issue which are treated as an option grant. During the prior period, the average exercise price of the options was higher than the average market price. As such, the options would not have been exercised and therefore no dilution would have occurred.

NOTE 4: DIVIDENDS PAID AND PROPOSED

The Directors have declared an interim dividend of 1.0 cent per share in respect of the half year ended 31 December 2012. The company has determined a record date of 7 March 2013 and a payment date of 16 May 2013.

Franking credit balance

The half-year financial report has been prepared on the basis that the Group has adopted the provisions of the tax consolidation regime for the year ending 30 June 2012 and 30 June 2011. As such franking credits arising from the other Group companies totalling $13,049,291 will be available to the parent entity.

NOTE 5: CONTRIBUTED EQUITY

Ordinary shares Issued and fully paid Movement in ordinary shares on issue Balance at beginning of the half year Shares issued under the dividend re-investment plan Shares issued to vendors of businesses acquired Issue of shares for Executive Long Term Incentive plan Cancellation of shares for Executive Long Term Incentive Plan Balance at the end of the half year	Consolidated Consolidated 2012 2011 $000 $000 85,285 55,343 Number $ 000 Number $ 000 210,987,804 85,285 139,735,576 54,005 - - 2,860,951 943 - - 883,334 395 430,000 (160,000) - - - - - -
	211,257,804 85,285 143,479,861 55,343

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NOTE 5: CONTRIBUTED EQUITY (continued)

There was no par value for the shares issued. The company has an Executive Long Term Incentive Plan under which the company’s shares have been granted.

NOTE 6: SIGNIFICANT EVENTS DURING THE PERIOD

Business Combinations

Acquisition of businesses

Pro-Pac Packaging (Aust) Pty Ltd, a wholly owned subsidiary, acquired the business and assets of the following:

**Effective date **	Acquired	Location	Business description
01/07/2012	Start Food-Tech Australia	Geelong	National supplier of packaging consumables and products to the meat,chicken and fishprocessingindustries
01/07/2012	Metro Cartons	Melbourne	Niche carton and industrialproducts distributor
01/11/2012	Source & Sell	Sydney	Packaging supplier to the food industry including growers, packers and bakers
01/11/2012	Stronghold	Melbourne	Niche distributor ofgeneral industrialproducts

The effect of above transactions can be summarised as follows:

Assets Currents Assets Inventories Other assets Total Current Assets Non-Current Assets Property, plant and equipment Total Non-Current Assets Total Assets Liabilities Current Liabilities Provision for AL Other Liabilities Total Current Liabilities Non-Current Liabilities Provision for LSL Total Non-Current Liabilities Total Liabilities NET ASSETS CONSIDERATION PAID Cash Vendor Loan Deferred Payment Total GOODWILL	Fair Value $000 815 566
	1,381
	339
	339
	1,720
	14 35
	49
	30
	30
	79
	1,641
	6,526 489 3,476
	10,491
	8,850

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NOTE 6: SIGNIFICANT EVENTS DURING THE PERIOD (continued)

Deferred payments represent deferred earn outs in the acquisition of Start Food-Tech Australia, Source & Sell and Stronghold Packaging based on meeting future profit targets.

Contribution of revenue and profits from acquired entities

Contribution of revenue andprofits from acquired entities	Contribution of revenue andprofits from acquired entities
	$000
Total revenue to 31/12/2012	7,360
Profit after tax to 31/12/2012	750
Total revenue to 31/12/2012 if acquired at 1/7/11	10,210
Profit after tax to 31/12/2012 if acquired at 1/7/11	932

NOTE 7: CONTINGENT LIABILITIES AND COMMITMENTS

As at statement of financial position date the company had commitments for future capital expenditure of $84,756.

As at statement of financial position date, the company issued security deposit guarantees and standby letters of credit to the value of $1,693,780.

NOTE 8: EVENTS AFTER THE STATEMENT OF FINANCIAL POSITION DATE

Apart from the dividend declared as disclosed in note 4, no other matter or circumstance has arisen since 31 December 2012 that has significantly affected or may significantly affect the consolidated entity’s operations, the results of those operations, or the consolidated entity’s state of affairs in future financial years.

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DIRECTORS' DECLARATION

In accordance with a resolution of the Directors of Pro-Pac Packaging Limited, I state that:

In the opinion of the Directors:

• (a) The financial statements and notes of the consolidated entity:

• (i) give a true and fair view of the financial position as at 31 December 2012 and the performance for the half year ended on that date; and

• (ii) comply with Australian Accounting Standard AASB 134 “Interim Financial Reporting”, the Corporations Act 2001 and other mandatory professional reporting requirements; and

• (b) There are reasonable grounds to believe the Company will be able to pay its debts as and when they become due and payable.

On behalf of the Board

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Brandon Penn Director

Sydney 22 February 2013

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INDEPENDENT AUDITOR’S REVIEW REPORT

To the members of Pro-Pac Packaging Limited

Report on the Half-Year Financial Report

We have reviewed the accompanying half-year financial report of Pro-Pac Packaging Limited, which comprises the interim consolidated statement of financial position as at 31 December 2012, the interim consolidated statement of comprehensive income, interim consolidated statement of changes in equity and interim consolidated statement of cash flows for the half-year ended on that date, notes comprising a summary of significant accounting policies and other explanatory information, and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the end of the half-year or from time to time during the half-year.

Directors’ Responsibility for the Half-Year Financial Report

The directors of the company are responsible for the preparation of the half-year financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the half-year financial report that is free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express a conclusion on the half-year financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity , in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the half-year financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the consolidated entity’s financial position as at 31 December 2012 and its performance for the half-year ended on that date; and complying with Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001 . As the auditor of Pro-Pac Packaging Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report.

A review of a half-year financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Independence

In conducting our review, we have complied with the independence requirements of the Corporations Act 2001 .

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Conclusion

Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the half-year financial report of Pro-Pac Packaging Limited is not in accordance with the Corporations Act 2001 including:

• (a) giving a true and fair view of the consolidated entity’s financial position as at 31 December 2012 and of its performance for the half-year ended on that date; and

• (b) complying with Accounting Standard AASB 134 Interim Financial Reporting and Corporations Regulations 2001 .

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Mark Nicholaeff Partner Sydney 22 February 2013

UHY Haines Norton

Chartered Accountants

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