For personal use only - ASX2016/11/02  · Appointed as Chief Financial Officer in August 2016. 7 For personal use only Global Market Opportunity Source: European Bioplastics/ IfBB

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Investor Presentation

Leading developer & manufacturer of sustainable packaging

November 2016For

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Disclaimer

Forward looking statements disclaimer

This presentation contains “forward-looking statements.” Such forward-looking statements may include, without limitation:(i) estimates of future earnings;(ii) estimates of future production and sales;(ii) estimates of future cash costs;(iv) estimates of future cash flows;(v) statements regarding future debt repayments; and(vi) estimates of future capital expenditures.

Where the Company expresses or implies an expectation or belief as to future events or results, such expectation or belief is expressed ingood faith and believed to have a reasonable basis. However, forward looking statements are subject to risks, uncertainties and other factors,which could cause actual results to differ materially from future results expressed, projected or implied by such forward-looking statements.Such risks include, but are not limited to increased production costs, as well as political and operational risks in the countries and states inwhich we operate or sell product to, and governmental regulation and judicial outcomes.

The Company does not undertake any obligation to release publicly any revisions to any “forward-looking statement” to reflect events orcircumstances after the date of this presentation, or to reflect the occurrence of unanticipated events, except as may be required underapplicable securities laws.

All financial amounts are expressed in Australian dollars unless otherwise indicated.

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• SECOS develops and manufactures patentedrenewable resource-based bioplastic* resinsand finished products for the global packagingand plastic products industries

• Uniquely positioned - a leading global supplierof sustainable and compostable packagingsolutions

• Core market segments

- Films & Packaging

- Waste Management Solutions

• Global manufacturing and distribution

• Formed through merger of Cardia Bioplasticsand Stellar Films in April 2015

• Highly experienced Board and executive team

* Bioplastics: sustainable bio-based and/or biodegradable plastics

Capital Structure

ASX code SES

Shares on issue 162.2mil

Share price (31 October 2016) 7.9 cents

Market capitalisation $12.2mil

12 Monthly rolling turnover $1.1mil

Top 20 shareholders 57.13%

Total number of shareholders(30th September 2016)

1457

Business Overview

Corporate Overview

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FY16 - Achievements and Outlook

IMPROVING SALESMOMENTUM

• Dog waste bagsdemand exceedssupply

• Re-entry to MiddleEast with new filmsales orders

• Strong sales pipelinewith short & long termopportunities

STRONG GROWTH INWASTE MANAGEMENT

• 58% increase in dogwaste bag capacity inNanjing

• Capacity increased to15 x 20’ containers/month by March 2017

• R&D for High SpeedComposting productrange completed

BALANCE SHEETSTRENGTHENED

• $2.0m+ in new equityfrom well supportedSPP and placement

• Balance sheet supportscapex plans to increasecapacity [in Nanjingand Malaysia]

• Significant reduction inlosses & cash burn

ONGOING BUSINESSTRANSFORMATION

• Improved manufacturingefficiency & measurement

• Merger cost savingscontinue (insurance, rawmaterials, IT)

• Transition away from lowmargin business

• Exit from non performingbusiness units – CardiaBrazil and Akronn JVcompleted

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($’000) 30/6/2016 30/6/2015 Variance

Sales Revenue 20,955 24,040 (3,085)

Gross Profit 1,429 842 +587

Gross Margin 6.8% 3.5% +3.3%

Other Income 281 300 (19)

Expenses (6,041) (7,074) 1,033

Tax Expense (280) - (280)

Reported NPAT from continuing operations (4,610) (5,932) +1,322

• Sales decrease due to focus on higher margin business, reflected in 94% increase in Gross Margin to 6.8%

• Margin growth is expected to continue through improvements in efficiency & scale

• Group expenses have reduced by $1M Post merger with further improvements expected

Significant improvement in operating and trading profile:

Financial Results Overview – “Like for Like”

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Improved Operating Cash Flows

• Sharper focus on improving higher margin sales resulting in lower cash receipts in June quarter

• September quarter receipts decreased due to lower production to accommodate planned Nanjing expansion

• Expanded capacity will lead to stronger receipts in next quarter and to will continue the improvement in cash flow

• Review of all activities has led to a reduction in operational costs

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Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16

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Receipts from customers Net operating cash flows

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Leadership Team

Mr Richard TegoniExecutive Chairman

Background in Finance, Banking, Sales & Marketing. MBA (AGSM), Diploma in FinancialMarkets (SIA)Appointed Executive Chairman September 2014. Appointed Non-Executive DirectorDecember 2012 and Non-Executive Chairman October 2013.

Mr Stephen WaltersGroup Managing Director

More than 20 years experience in plastics & packaging in General Management,Commercial & Sales roles. B.Bus (Marketing)Appointed as Group Managing Director in April 2015.

Mr Donald Haller Jr.Non-executive Director

Major shareholder in EarthVision Bio Solutions, Inc. , a key distributor of SECOSproducts in the USA. Background in accounting and management consulting as aPartner with PwC and Ernst & Young. Former CFO of a top 15 US insurance company.

Mr Trevor HainesExecutive Director –Corporate Development

More than 20 years experience in senior accounting & group controlling managementroles in various divisions of ICI Australia, AVC & Orica Australia. B.Com, FCPA. Appointedas Chief Financial Officer in April 2015.

Mr Edmond TernCFO

More than 25 years manufacturing accounting experience across a number of Australianand multinational businesses. B.Ec and Bus. Admin., CPAAppointed as Chief Financial Officer in August 2016.

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Global Market Opportunity

Source: European Bioplastics/ IfBB Industry Report 2015

SECOS is strategically positioned to benefit from the trend to sustainable packaging

• Global bioplastics market is forecast to grow by >280% from 2016 to 2019

Bioplastics packaging is less than 1% of the global plastics packaging market with exponential growthpotential, driven by:

• Increasing government regulation ofenvironment and waste management

• Increasing organic waste recycling

• Increased cost of landfills

• Increased consumer demand forsustainable products

• Global brands transitioning tobioplastics to meet social demand

Global Bioplastics Growth

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SECOS Unique Product Benefits

• SECOS products

– use less petroleum and contain up to 50% renewable material

– have up to a 70% lower carbon footprint than conventional petroleum based polyethylene

– meet international standards for compostability and biodegradability

– are fully recyclable via the normal plastic waste stream

– are printable, colourable, and can be processed efficiently on standard plastics processing equipment

– are heavy metal free and food-safe compliant

• Product positioning

– more environmentally friendly

– price competitive with traditional plastics

– Quality approved for top tier packaging companies – GMO Free, Certified Compostable, FoodHandling approved, ISO9001, independent life cycle assessment

• SECOS products do not compromise on performance, softness or strength

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Product Differentiation

• SECOS is unique in its ability to deliver sustainable packaging solutions

• SECOS’ Cardia BioHybridTM resin which is GMO free & uses renewable plant based product as its major rawmaterial

• SECOS’ Cardia BioHybridTM technology can be applied to a wide range of renewable plastic solutions

• The current core product focus is on:

– Compostable waste management solutions

– Compostable laminates & resins as part of a more environmentally friendly product offering

– Sustainable bioplastic film and packaging products where an improved carbon footprint is requiredwithout a sacrifice in product performance

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Product Mix

Sales 15/16

Waste Management Films & Packaging

Hygiene Resin

Trading

• BioHybridTM resin sales will increaseas traditional packaging moves tobecome more sustainable

• Waste management growth expectedin 2017 across Australia & NewZealand

• Ongoing transition to higher marginproducts

• Hygiene will benefit from sustainable& breathable product rangeexpansion

• Growth in Films & Packaging willbenefit from commercialisation ofongoing R&D projects

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Waste Management SolutionsKey products - Compostable

• Shopping bags, garbage bags, bin liners, kitchen tidy bags, garden waste bags, nappy bags and dogwaste bags

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Waste Management SolutionsFocus on diverting organic waste from landfill

Australia

• Leading market position in the supply oforganic waste management systems

‒ SECOS supplies products to local government for organic kitchen wasteprograms, now implemented in 120,000Victorian households

• SECOS waste management products are alsodistributed through independent supermarketsand hardware stores across Australia

Overseas

• Organic waste management solutions beingsold into the US and UK markets

• Direct sales of BiohybridTM and compostablepet waste and kitchen tidy bags to major USand European retailers (with benchmarksustainability criteria) and pet store chains

• High speed compostable bags specificallydeveloped for hospitals, entertainmentvenues, airlines & sporting arenas.

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Significant Demand for Dog Waste Bags

Recent Developments

• Secured new business with a large chain of PetStores in Canada & the USA

• Additional production capacity at Nanjing plantto meet the increased demand for BiohybridTM

and Compostable dog waste bags

– August 2016 expanded capacity by 58%which is now fully utilised

– Further 70% capacity increase by March2017 to meet additional demand from theUS

• Outlook for 2017 dog bag sales expected toexceed $2.4M (+400% on 2016 sales)

• Additional bag lines required to exceed salesof $800k per quarter

Dog bag sales impacted by installation of new assetsin Q4 with growth expected to continue in 2017

$0$100$200$300$400$500$600$700$800$900

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Gross Biohybrid Dog Bag SalesFY 15/16 (Actual) & FY16/17 (Forecast)

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Bioplastic Films & Packaging ProductsKey products

• High quality cast films, thermal and adhesive laminates (textile back sheet) with excellent barrier propertiesfor use in food packaging, feminine hygiene products, pet drop sheets and disposable diapers

• Customers can choose from standard, BiohybridTM or compostable resin technology

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Recent Developments

• Successful development of biodegradable air cushion packaging bags

• Growing global demand for bioplastics coffee bags

• SECOS Compostable resins being used in sustainable dental products

• BiohybridTM resin approved for use in Bag-in-Bag water packaging in China

• Major multinational approves use of BiohybridTM resin for more sustainable adhesivebottles

• Growing global demand for more environmentally friendly courier bags

Bioplastic Films & Packaging Products

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Key markets and customers

• The hygiene products market is worth $76 billion annually and growing at 5.5% p.a. (driven bydemographics and economic development across both developed and developing markets)

‒ Emerging middle class creating higher demand for quality hygiene products

• SECOS has 25 years experience in manufacturing & exporting globally with enviablereputation for quality & customer service

• SECOS provides the following products to tier 1 & tier 2 hygiene product manufacturersacross 17 countries:

– thin gauge films for baby diaper and sanitary napkin back sheet

– multi colour printed films for baby diaper & sanitary products

– high speed wrapping films for sanitary napkin packaging that are soft and quiet

– wrapping & packaging films that are used where a coating of silicone is required

– thermal and adhesive laminates with excellent barrier properties

Hygiene Products

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Recent Developments

• Positive trials of BiohybridTM hygiene film from fourcustomers in Thailand, USA, Mexico and Australia

• New business secured from a large global hygienemanufacturer, for sanitary napkin backsheet

• New orders received from a global silicone coatingbusiness for supply of hygiene base film

• New product development with Itasa Malaysia forsilicone coatable Biohybrid film

• New orders received from new Middle East customers

• Expansion of sales into the Japanese pet sheet market

Hygiene Films

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

$3.0

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$4.5

Quarterly Sales$M

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A significant growth opportunity

• SECOS due to launch a range of unique breathable Biohybrid™films

• Breathable Biohybrid™ films represent a significant growthopportunity

• Strong growth in adult diapers to $2.7b by 2020 driven by globalageing population

• Sanitary products in Asia are projected to grow to 180 billionunits by 2019 due to the growing middle class

Sanitary & Breathable Bioplastic Films

Source: European Bioplastics/ IfBB Industry Report 2015

Sanitary Products Sales

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Resin Production Finished Goods Sales Offices Distributors

Global Manufacturing and Sales capability

SECOS has the ability to service customers globally from three manufacturing hubs with a global

network of sales offices and distribution partners

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Annual Capacity of7,200MT of resin, 270

million bags &1,500MT of film

9,500MT pa offilm capacity

6,000MT pa offilm capacity

20 patents grantedin key markets

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Growth Strategy & Action Plans

Expand dog waste bag sales in the Japanese, Australian and US markets

Expand compostable bag sales (in USA, Australia & Malaysia) to governments, councils and retail aspart of waste diversion program rollouts

Focus on the group’s top 20 major sales opportunities with the highest probability of conversion withinthe next six to twelve months

Improve the sales strike rate by focusing on commercially ready products

Increase sales of hygiene films by leveraging sustainable technology

Expand Malaysian production to allow production of wide width compostable packaging films

Establish bag making & resin manufacturing at Malaysian plant to expand capacity

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Strong Sales Growth Pipeline

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Short Term Sales Pipeline - Potential additional $7m p.a.

Large Pet Store Chain USA Biohybrid Dog Waste Bags

Global Packaging Convertor USA Compostable Delivery Air Cushions

Packaging Convertor USA Compostable T-Shirt Bags & Boutique Carry Bags

Large Pet Sheet Manufacturer Japan Pet Sheet Pads

High Speed Composting Australia Bags For Local Government, Business & Public Venues

Blow Moulding Business UK Biohybrid Resin For Cosmetic Bottles

Local Governmet USA Compostable Bin Liners

Large Regional Hygiene Manufacturer Thailand Baby Diaper & Sanitary Napkin Films

Pet Sheet Manufacturer USA Biohybrid Pet Sheets

Wholesale/Distributor USA Compostable Film & Resin for Coffee Bags

New Age Breathable Film Australia Biohybrid Breathable Film

Medium Term Sales Pipeline - Potential additional $12m p.a.

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Investment Summary• Growing rapidly in the bioplastics and sustainable packaging market

• Expanding sales driven by unique environmentally friendly products

• Strong IP and patent position

• Sales strategy focused on high profile brand owners, retailers, packaging companies and localgovernment

• Joint product development with leading global consumer goods and packaging companies

• Cost-effective manufacturing in Nanjing, Kuala Lumpur and Melbourne, with low costexpansion options and global distribution

• Fully integrated business supplying compostable and Biohybrid™ resins and films and wastemanagement products ensuring product quality and cost competiveness.

• Highly focused management team with internationally recognised industry experts

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