PRO-PAC PACKAGING LIMITED — Investor Presentation 2018

Feb 15, 2018

Investor Presentation

Results for the half ended 31 December 2017

February 2018

Disclaimer

Some of the statements in this presentation constitute "forward-looking statements" that do not directly or exclusively relate to historical facts. These forward-looking statements reflect Pro-Pac Packaging Limited's current intentions, plans, expectations, assumptions and beliefs about future events and are subject to risks, uncertainties and other factors, many of which are outside Pro-Pac Packaging Limited's control.

Important factors that could cause actual results to differ materially from the expectations expressed or implied in the forward-looking statements include known and unknown risks.

Because actual results could differ materially from Pro-Pac Packaging Limited's current intentions, plans, expectations, assumptions and beliefs about the future, you are urged to view all forward-looking statements contained in this presentation with caution.

This management presentation may not be copied or otherwise reproduced.

Half Year Financial Metrics1

1. Results include two months of trading for Integrated Packaging following completion of the acquisition on 6 November, 2017.

2. Before acquisition, rationalisation and relocation costs of $9.9 million

Half Year Summary

• On track for a pro forma underlying sustainable EBITDA of ~$36m (FY18F) and ~$38m (CY18F) (refer p. 20)
• Merger completed with Integrated Packaging Group, established market leading Industrial & Flexible Packaging business
• Despite soft 2017 agricultural market, integration underway and synergies ahead of schedule (refer p. 15)
• Underlying EBITDA of $9.5 million
• One off acquisition, rationalisation & relocation costs of $9.9 million (refer p. 16)
• Statutory loss after tax of $3.2 million
• Launched merchandising strategy
• Digital transformation underway
• Interim fully franked dividend held steady at 1.0 cent per share1.

1. Record date of 27 February and a payment date of 23 May 2018.

PRO-PAC AN INDUSTRY LEADER

Merger - overview

• The merger between IPG and PPG was completed on 6 November, 2017
• The two businesses now operating under a single management structure, realisation of synergies is well underway
• PPG now an industry-leading integrated manufacturer and distributor of industrial & flexible and rigid packaging products, with substantial scope to become a market leader in flexible packaging
• 22 sites across Australia, 16 distribution centers and 6 manufacturing plants
• 10,000+ customers, 800+ staff with annual sales of circa A$450 million

Distribution

Manufacturing

New PPG Group

PPG's strategy is to become market leader in the high growth industrial & flexible packaging segment

• A diversified distribution company, providing innovative, industrial, flexible and rigid packaging solutions for a group of blue chip clients and a broad range of SME
• Services FMCG, industrial and logistics markets, amongst others through the provision of primary and secondary packaging solutions
• Pro-Pac has distribution facilities in Sydney, Melbourne, Brisbane, Adelaide & Perth supplemented by 6 manufacturing sites
• Over 24 years operating history

• Australia's largest specialist manufacturer and distributor of flexibles, film, wrap and associated products
• Services both agricultural and industrial markets focusing on Australia's leading FMCG, food, retail customers
• Established in 1982: 34+ years operating experience
• Manufacturing facilities in Melbourne, Sydney and Perth in Australia, and Auckland NZ with growing export capability

PPG GROUP PRODUCT MIX/SALES

Australian Packaging Industry Overview

Pro-Pac is a leading player in the $2.2 billion Flexible Packaging segment

Growth opportunities in Flexible Packaging

• PPG's future growth will largely be driven by the flexibles market:
• Demand expected to grow 47% over next 10 years (CAGR 4%)1 . Underpinned by favourable consumer trends:
  • Shift towards convenience packaging particularly (eg. pre-sliced carrots in bags)
  • Move towards unitisation to reduce product wastage
  • Move towards shrink wrap as a substitute for crates and boxes (eg; beer & dairy markets)
  • Modified atmosphere packaging helps teduce food wastage and increase product lifespan in supply chain (ie: fresh produce)
  • If you move it you must secure it! (eg: pallet wrapping, stretch hoods etc)
  • Improve brand awareness (eg: printed bags, shrink wrap, etc)

Strategy for Growth

Post merger, PPG is a vertically integrated industry leader in industrial & flexible packaging

Strong platform	Target resilient	Extended capability;	Market
for growth	sectors	greater efficiency	consolidation
•Flexible & Industrialpackaging markets•World-class manufacturingand proven productinnovation capability•Opportunities forgeographic expansion	•Key market sectorsinclude horticultural,agricultural, protein,industrial & beverage•Requirement for localonshore processing•Favourable consumertrends -increasedunitisation, conveniencepackaging, online,product quality	•Combination of PPG'sdistribution and IPG'smanufacturing delivers ahighly efficient andseamless packagingsystem•Complimentary blue-chipcustomer base•Significant cost synergiesand cross sellingopportunities	•Opportunity to driveconsolidation andestablish leadershipposition•Bolt-on acquisitionopportunities, strongM&A pipeline•Building a uniquecompetitive advantage

PPG Shareholder value creation

H1 2017 FINANCIAL RESULTS

Industrial & Flexibles segment

(includes Integrated Packaging Group)

• Revenues up 48.1% to $127 million1.
• EBITDA up 27.6% to $7.2m million1.
• Volumes up in food, industrial & FMCG
• Agricultural volumes impacted by unfavourable weather conditions
• Operating margins down with Ag stock production not selling through
• Commissioned new 5 layer co-extruder into Kewdale plant
• Beverage market continues to expand
• Increased opportunities in fresh produce packaging
• Red meat packaging market remains subdued, chicken volumes steady
• New merchandising focus in distribution beginning to extract improved returns
• Commissioning new high speed flexographic printer into Chester Hill plant
• Online sales strategy to commence in H2 2018

Rigid segment

• Revenues stable at $30.9 million
• EBITDA up 16.8% to $4.4 million
• Operating margins expanded to 14.1% with improved efficiency and increased manufacturing
• Higher volumes in dairy and chemical
• Pharma and automotive markets remained flat
• Expanding market focus into personal care & cosmetics and nutraceutics & supplements
• Strategic review of Rigid segment underway

• Integration synergies ahead of target
  • Phase 1 = $2.0 million annualised savings, includes best buy and optimisation opportunities. Achieved & implemented.
  • Phase 2 synergies, focusing on consolidation and rationalization has already identified additional $3.0 million pa savings. Implementation planning is underway, early benefits to begin flowing from June 2018.
  • Overall cost synergies ahead of initial targets.
  • End goal is to establish lower cost base across a single operating company in distribution & manufacturing, to leverage the collective strengths of both companies.

Reconciliation from underlying EBITDA to reported EBITDA.

	$000's
Underlying EBITDA	9,552

One off acquisition, rationalization & relocation costs:
Surplus leases and exit costs	1,827
Redundancy costs	112
Fixed asset disposals and write offs	1,075
Discontinued and redundant stock lines	3,597
Third party consultants, temporary staff & relocations	497
Other costs and legal fees	2,797
Total one off costs:	9,905
Reported EBITDA	($353)

Underlying Profit & Loss

For the 6 months ended	31Dec 2017*($000's)	31Dec 2016($000's)	%
Sales Revenue:	157,969	116,286	+35.8%
Industrial & Flexible	127,089	85,787	+48.1%
Rigid	30,880	30,499	+1.2%
EBITDA:	9,552	7,336	+30.2%
Industrial & Flexible	7,160	5,613	+27.6%
Rigid	4,353	3,728	+16.8%
HO / Corporate	(1,961)	(2,005)	-2.2%
EBITDA%	6.0%	6.3%
Operating cash flow	14,498	2,976	+387.2%

*Before one off acquisition, rationalization & relocation costs (See page 18 for more detail). *Results include two months of IPG

Statutory Profit & Loss

For 6 months ended:	Consolidated31 December 2017($000's)	Consolidated31 December 2016($000's)
RevenueSales of goods	157,969	116,286
Interest income	52	88
Total Revenue	158,021	116,374
Expenses
Raw materials and consumables used	101,626	77,419
Employee benefits expense	24,715	16,622
Other expenses from ordinary activities	9,255	6,255
Distribution costs	7,435	5,055
Occupancy costs	5,386	3,599
Depreciation and amortisation expense	2,060	1,575
Finance costs	1,596	714
Total Expenses	152,073	111,239
Profit before income tax expense and acquisition, rationalisation and relocation expenses	5,948	5,135
Acquisition, rationalisation and relocation expenses	9,905	124
(Loss) / Profit before income tax expenseIncome tax (benefit) / expense	(3,957)(784)	5,0111,535
(Loss) / Profit after income tax expense for the half year	(3,173)	3,476
Other comprehensive incomeItems that will be subsequently recycled through profit & loss
Cash flow hedgesGain / (loss) taken to equity	(869)	1,429
Total comprehensive income / (expense) for the half year	(4,042)	4,905

Balance Sheet

As at:	31Dec 2017($00,000)	30 Jun2017($00,000)
Cash & equivalents	9.9	12.3
Trade & other receivables	85.9	37.7
Inventories	86.9	35.1
PPE	31.4	15.2
Intangibles	195.7	71.3
Other	21.4	8.3
Total assets	431.2	179.9
Trade & other payables	96.1	31.4
Borrowings	95.0	29.1
Other	19.1	5.7
Total Liabilities	210.2	66.2
Net assets	221.0	113.7
Net Debt	85.1	16.8

• Balance sheet transformed following merger with IPG
• Expect leverage ratios to reduce to targeted range of 1.5x – 2.3x in FY19 (including full year contribution of IPG)

Summary & Outlook

• On track for annualised pro forma sustainable EBITDA of ~$37.7 million
• Now established a strong foundation in Industrial & Flexible market
• Further synergy cost reductions anticipated
• Well positioned to grow earnings in FY19 & beyond

1PPG & IPG combined EBITDA 2Annualised Pro-forma EBITDA, including synergies

Thank You

Pro-Pac Packaging (Aust) Pty Ltd

Building 1, 147-151 Newton Road Wetherill Park, NSW, 2164

T: (02) 8781 0500 F: (02) 8781 0599

www.ppgaust.com.au