PRO-PAC PACKAGING LIMITED — Interim / Quarterly Report 2014

Feb 20, 2014

PRO-PAC PACKAGING LIMITED

(ASX: PPG)

Commentary on Results for the Six Months Ended 31 December 2013

The Company reported record revenue for the six months to 31 December 2013 with sales of $112m being 31% higher than the previous corresponding period. While some of the top line growth is acquisition related, it is pleasing to note that organic sales growth of 10% was achieved. EBITDA of circa $8.3m was up 27% and after tax profit of $4.16m was up 25% on the previous corresponding period.

There were no major acquisitions during the period and, as stated in the 2013 annual report, focus for the first half was on restructuring to reduce costs and on maximising the opportunities presented by the earlier acquisitions. As part of the cost reduction program, during the period the Company progressed the establishment of an offshore processing centre in Malaysia. This has resulted in some short term duplication of costs which has had a negative impact on first half earnings, but it will deliver significant cost savings in FY15 once full implementation is completed prior to the end of the current financial year.

The Industrial Division put in a particularly strong performance with sales growth of 45% and 53% EBITDA growth. This is particularly pleasing as this division has been the focus of the company’s growth strategies over the last few years. This momentum is continuing and we expect the Industrial Division to produce further solid sales growth going forward.

The more mature Rigid Division had a 3% growth in sales but margin pressures resulted in a 16% decline in EBITDA. The EBITDA reduction is attributable to a highly competitive landscape coupled with rising input costs. The major decline occurred in the first quarter with some improvement in the second quarter as strategies were implemented to improve margins. This division continues to focus on margin and cost management to improve bottom line performance.

Seasonally first half results are stronger than the second half but the Company has built a highly competitive product offering with a strong value proposition for customers and has a healthy pipeline of new business opportunities which augurs well for continued increases in market share and growth.

The Company has today declared a fully franked interim dividend of one cent per share. The record date for determining entitlement to the dividend will be 7 March 2014 and the dividend will be paid on 20 May 2014. The Company’s Dividend Reinvestment Plan will apply to this dividend.

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 2013			Previous Half Year ended (‘Corresponding period’)
				31 December 2012
Revenue from ordinary activities Up Profit from continuing operations after tax attributable to shareholders Up Netprofit attributable to shareholders Up				$ 000’s 31.3 % to 111,871 24.8 % to 4,163 24.8 % to 4,163
**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 20 May 2014. The Company’s Dividend Reinvestment Plan has been activated. Under the Plan, shareholders can acquire shares in the Company at the volume weighted average sale price per share during the four trading days up to and including the Record Date for determining entitlements. No discount will apply to the issue price. Record Date for determining entitlements to the dividend 7 March 2014 Last date for receipt of election notices for participation in the Pro-Pac Packaging Limited Dividend Reinvestment Plan 7 March 2014
			7 March 2014
			7 March 2014

Control gained over entities

No control was gained over entities that would have had a material impact on the financial report for the period ended 31 December 2013.

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 13.43 cents 14.32 cents

PRO-PAC PACKAGING LIMITED ACN 112 971 874

HALF YEAR FINANCIAL REPORT

For the half-year ended 31 December 2013

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 2013.

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 principal 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

The Company reported record revenue for the six months to 31 December 2013 with sales of $112m being 31% higher than the previous corresponding period.

EBITDA of $8.3m was up 27% and after tax profit of $4.16m was up 25% on the previous corresponding period. Basic earnings per share increased by 25% from 1.59c to 1.98c for the half year.

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 2014. The dividend will be paid on 20 May 2014.

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

21 February 2014

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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 2013 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 21 February 2014

UHY Haines Norton

Chartered Accountants

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PRO-PAC PACKAGING LIMITED

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

FOR THE HALF YEAR TO 31 DECEMBER 2013

Notes Revenue Sales of goods and services Interest income Total Revenue Expenses Purchases, materials and consumables Amortisation of prepaid royalty Depreciation expense Distribution costs Employee benefits expense Finance costs Occupancy costs Relocation, restructuring and business combination costs Other expenses from ordinary activities Total Expenses Profit before income tax Income tax expense Profit after tax Total comprehensive income for the half year Earnings per share (cents per share) - Basic earnings per share 3 - Diluted earnings per share 3	Consolidated 2013 $ 000 111,871 36 111,907 72,997 161 1,526 2,393 15,978 649 3,538 135 8,553 105,930 5,977 1,814 4,163 4,163 1.98 1.96	Consolidated 2012 $ 000
		85,204 37
		85,241
		53,196 161 1,316 1,832 12,758 325 2,959 1,113 6,814
		80,474 4,767 1,432
		3,335
		3,335
		1.59 1.58

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

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PRO-PAC PACKAGING LIMITED

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2013

Assets Current Assets Cash and cash equivalents Trade and other receivables Inventories Prepayments Total Current Assets Non-Current Assets Property, plant and equipment Intangible assets Deferred tax assets Prepayments Total Non-Current Assets TOTAL ASSETS Liabilities Current liabilities Trade and other payables Trade finance Borrowings Provisions Current tax liabilities Total Current Liabilities Non-current liabilities Other payables Provisions Borrowings Total Non-Current Liabilities TOTAL LIABILITIES NET ASSETS EQUITY Issued capital Reserves Retained earnings TOTAL EQUITY	Consolidated 31 December 2013 $ 000 3,100 40,035 31,454 1,960 76,549 17,311 68,673 2,270 189 88,443 164,992 29,277 2,424 1,778 3,977 1,037 38,493 2,150 727 23,880 26,757 65,250 99,742 85,653 71 14,018 99,742	Consolidated 30 June 2013 $ 000
		2,247 30,645 28,091 3,125
		64,108
		17,610 67,867 2,101 350
		87,928
		152,036
		24,681 2,036 1,666 3,651 569
		32,603
		2,625 695 18,780
		22,100
		54,703
		97,333
		85,285 71 11,977
		97,333

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

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PRO-PAC PACKAGING LIMITED

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE HALF YEAR TO 31 DECEMBER 2013

	Notes	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	5	85,285	12,271		56	97,612
		Issued	Retained	Option		Total
		capital	earnings	reserve		equity
		$ 000	$ 000	$ 000		$ 000
Consolidated
Balance as at 1 July 2013		85,285	11,977		71	97,333
Vesting of ESPP shares		368	-		-	368
Dividends		-	(2,122)		-	(2,122)
Total comprehensive income for theperiod		-	4,163		-	4,163
At 31 December 2013	5	85,653	14,018		71	99,742

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

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PRO-PAC PACKAGING LIMITED

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE HALF YEAR TO 31 DECEMBER 2013

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 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 Proceeds from vesting of ESPP shares Dividend paid 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	Consolidated 2013 $ 000 107,571 (102,913) 36 (710) (1,515) (135) 2,334 (1,257) 99 (969) (3,261) (5,388) (1,060) 713 6,008 368 (2,122) 3,907 853 2,247 3,100	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

Hire purchase and finance leases raised 713 826

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 2013 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 2013, 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 10 Consolidated Financial Statements

The consolidated entity has applied AASB 10 from 1 July 2013. It establishes a new control model that applies to all entities. It replaces parts of AASB 127 Consolidated and Separate Financial Statements dealing with the accounting for consolidated financial statements and UIG-112 Consolidation - Special Purpose Entities. The new control model broadens the situations when an entity is considered to be controlled by another entity and includes new guidance for applying the model to specific situations, including when acting as a manager may give control, the impact of potential voting rights and when holding less than a majority voting rights may give control. Consequential amendments were also made to this and other standards via AASB 2011-7 and AASB 2012-10.

AASB 12 Disclosure of Interests in Other Entities

The consolidated entity has applied AASB 12 from 1 July 2013. It includes all disclosures relating to an entity's interests in subsidiaries, joint arrangements, associates and structured entities. New disclosures have been introduced about the judgments made by management to determine whether control exists, and to require summarised information about joint arrangements, associates, structured entities and subsidiaries with non-controlling interests.

AASB 13 Fair Value Measurement

The consolidated entity has applied AASB 13 from 1 July 2013. It establishes a single source of guidance for determining the fair value of assets and liabilities. AASB 13 does not change when an entity is required to use fair value, but rather, provides guidance on how to determine fair value when fair value is required or permitted. Application of this definition may result in different fair values being determined for the relevant assets. It also expands the disclosure requirements for all assets or liabilities carried at fair value. This includes information about the assumptions made and the qualitative impact of those assumptions on the fair value determined. Consequential amendments were also made to other standards via AASB 2011-8.

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NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

AASB 119 Employee Benefits

The consolidated entity has applied AASB 119 from 1 July 2013. The main change introduced by this standard is to revise the accounting for defined benefit plans. The amendment removes the options for accounting for the liability, and requires that the liabilities arising from such plans is recognised in full with actuarial gains and losses being recognised in other comprehensive income. It also revised the method of calculating the return on plan assets. The revised standard changes the definition of shortterm employee benefits. The distinction between short-term and other long-term employee benefits is now based on whether the benefits are expected to be settled wholly within 12 months after the reporting date. Consequential amendments were also made to other standards via AASB 2011-10.

AASB 2012-2 Amendments to Australian Accounting Standards - Disclosures – Offsetting Financial Assets and Financial Liabilities

The consolidated entity has applied AASB 2012-2 from 1 July 2013. It principally amends AASB 7 Financial Instruments: Disclosures to require disclosure of the effect or potential effect of netting arrangements. This includes rights of set-off associated with the entity's recognised financial assets and liabilities on the entity's financial position, when the offsetting criteria of AASB 132 are not all met.

AASB 2012-5 Amendments to Australian Accounting Standards arising from Annual Improvements 2009-2011 Cycle

The consolidated entity has applied AASB 2012-5 from 1 July 2013. It makes amendments resulting from the 2009-2011 Annual Improvements Cycle. The standard addresses a range of improvements, including the following:

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is permitted (AASB 1)

balance sheet (AASB 101 Presentation of Financial Statements)

AASB 2011-4 Amendments to Australian Accounting Standards to Remove Individual Key Management Personnel Disclosure Requirements [AASB 124]

The consolidated entity has applied AASB 2012-4 from 1 July 2013. This amendment deletes from AASB 124 individual key management personnel disclosure requirements for disclosing entities that are not companies. It also removes the individual KMP disclosure requirements for all disclosing entities in relation to equity holdings, loans and other related party transactions.

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.

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NOTE 2: SEGMENT INFORMATION (continued)

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.

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 $ 000 $ 000 $ 000 $ 000	Rigid packaging Industrial packaging Intersegment eliminations / unallocated Total $ 000 $ 000 $ 000 $ 000	Rigid packaging Industrial packaging Intersegment eliminations / unallocated Total $ 000 $ 000 $ 000 $ 000	Rigid packaging Industrial packaging Intersegment eliminations / unallocated Total $ 000 $ 000 $ 000 $ 000	Rigid packaging Industrial packaging Intersegment eliminations / unallocated Total $ 000 $ 000 $ 000 $ 000
(i) Segment performance Six months ended 31 December Revenue External sales	2013 2013 2013 2013 27,842 84,029 - 111,871			2012 2012 2012 2012 27,146 58,058 - 85,204
Inter-segment sales	4,421 4,795 (9,216) -			4,015 4,497 (8,512) -
Total segment revenue	32,263 88,824 (9,216) 111,871			31,161 62,555 (8,512) 85,204
EBITDA	3,333 6,300 (1,356) 8,277			3,961 4,107 (1,536) 6,532
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 (2013: 30 June)		(1,687) 36 (649) 5,977 (1,814) 4,163			(1,477) 37 (325)
					4,767
					(1,432)
					3,335
Segment assets Reconciliation of segment assets to group assets Inter -segment eliminations Unallocated assets Deferred tax assets Other Total group assets from continuing operations	45,236 116,245 -	161,481 (2,121) 5,632		45,538 103,257 -	148,795 (1,497) 4,738
		2,270 3,362			2,101 2,637
		164,992
					152,036
(iii) Segment liabilities As at 31 December (2013: 30 June) Segment liablities Reconciliation of segment liablities to group liabilities Inter -segment eliminations Unallocated liabilities	11,186 32,498 -	43,684 (2,277) 23,843		10,479 27,846 -	38,325 (1,451) 17,829
* Deferred tax liabilities * Other liabilities		- 23,843			- 17,829
Total group liabilities from continuing operations		65,250			54,703

(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
	2013	2012
Net profit attributable to equity holders ($000)	4,163	3,335
Weighted average number of ordinary shares for basic earnings per share	210,196,656	209,452,804
Weighted average number of ordinary shares for diluted earnings per share	212,203,706	211,130,811
Basic earnings per share (cents per share) *	1.98	1.59
Diluted earnings per share (cents per share) *	1.96	1.58

• 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 2013. The company has determined a record date of 7 March 2014 and a payment date of 20 May 2014.

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 2013 and 30 June 2012. As such franking credits arising from the other Group companies totalling $13,630,522 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 Vesting of ESPP shares 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	Number 211,257,804 1,100,000 - (150,000)	Consolidated 2013 $ 000 85,653 $ 000 Number 85,285 210,987,804 368 - - - 430,000 (160,000)	Consolidated 2012 $ 000
			85,285
			$ 000 85,285 - - -
	212,207,804	85,653 211,257,804	85,285

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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: CONTINGENT LIABILITIES AND COMMITMENTS

As at statement of financial position date the company had commitments for future capital expenditure of $115,978.

As at statement of financial position date, the company issued security deposit guarantees and standby letters of credit to the value of $1,735,475.

NOTE 7: EVENTS AFTER THE STATEMENT OF FINANCIAL POSITION DATE

On 14 February 2014, Pro-Pac Packaging (Aust) Pty Ltd, a wholly owned subsidiary, acquired the business and assets of Australian Film Manufacturers Pty Ltd, a niche film importer and distributor of high quality film products.

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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 2013 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 21 February 2014

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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 (“the company”) which comprises the condensed consolidated statement of financial position as at 31 December 2013, the condensed consolidated statement of profit or loss and other comprehensive income, condensed consolidated statement of changes in equity and condensed consolidated statement of cash flows for the half-year ended on that date, notes comprising a statement or description 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 those charged with governance determine is necessary to enable the preparation of the half-year financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express a conclusion on the consolidated 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 2013 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 . We confirm that the independence declaration required by the Corporations

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Act 2001 , which has been given to the directors of Pro-Pac Packaging Limited would be in the same terms if given to the directors as at the time of this auditor’s report.

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 consolidated entity’s financial position as at 31 December 2013 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 21 February 2014

UHY Haines Norton

Chartered Accountants

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