Flexible Packaging Association. Flexible Packaging Association State of the Industry

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1 Flexible Packaging Association 2008 State of the Industry George Thibeault President Constantia Hueck Foils LLC Chairman Flexible Packaging Association

2 2008 State of the Industry Report Industry Overview Issues & Opportunities FPA Initiatives

3 Global Packaging Industry by Region Asia Pacific 14% Japan 15% Latin America 7% Other 8% Eastern Europe 4% Western Europe 28% North America 27% Source: BMO Capital Markets & Flexible Packaging Association Total $ 490 Billion Up 5-6%

4 U.S. Packaging Industry by Segment Misc Rigid Plastics & Bottles 17% Glass 3% Others 16% Metal Cans 11% Flexible 18% Paperboard 11% Corrugated 24% Source: U.S. Census Bureau 2006 ASM data & Flexible Packaging Association Total $ 133 Billion Up 4-5%

5 U.S. Flexible Packaging Value-Added Flexible Packaging Retail Poly Bags Consumer Products Trash & Storage Bags & Wraps Other Poly Bags and Wraps $19.8 Billion $1.8 Billion $2.7 Billion $1.3 Billion TOTAL FLEXIBLE PACKAGING $25.6 Billion Source: US Census Bureau & FPA 2007 State of the Industry Survey - preliminary data

6 Major Flexible Packaging Structures Sold By FPA Survey Participants CATEGORY PARTICIPATION $ VALUE Rollstock 87 % 61 % Bags 58% 16 % Lay Flat Pouches 47 % 2 % Standup Pouches 41 % 4 % Retort Pouches 13 % 1 % Shrink Sleeves 7 % 1 % Lidding 19% 2 % Shrink Wraps 4 % 3 % Stretch Films 10% 6 % Wrappers 6 % 0 % Other 20 % 4 % Source: FPA 2007 State of the Industry & Industry-Wide Converter Surveys preliminary data

7 U.S. Flexible Packaging Industry Overview Compounded Annual Growth Rate (CAGR) of 4.0 percent over last decade 427 Companies Nearly 1,000 Manufacturing Facilities About 80,000 Employees Average $ thousand sales per employee Consolidating, polarized industry structure

8 U.S. Flexible Packaging Industry Growth * 2008* US Flexible Packaging Sales: Profit: $24.9 Billion 4.3% $25.6 Billion ** Flat $26.2 Billion Down Volume: 4.5% Lower Lower $ Growth: 5.1% 2.9% 2.1% GDP (real growth) 2.9% 2.2% 1.7% US Economy (w inflation) 6.1% 4.9% * Estimated ** $19.8 Billion - Valued added packaging ; $5.8 Billion - Retail, Storage, Trash, Other bags, Wraps

9 Flexible Packaging Profitability % 8% 6% 4% 2% 0% 1996 Q2 Q Q2 Q Q2 Q Q2 Q Q2 Q Q2 Q Q2 Q Q2 Q Q2 Q Q2 Q Q2 Q Q2 NPBT AS A % OF GROSS ASSETS NPBT AS A % OF NET SALES Source: Flexible Packaging Association

10 Flexible Packaging vs All US Mfg Profit Margins % All US Manufacturing 8% 6% 4% Flexible Packaging Mfgrs 2% 0% Source: U.S. Census Bureau and Flexible Packaging Association

11 Flexible Packaging Expense Breakdown 2002 vs 2007 Expense Materials 52 % 58% Direct Labor 11 % 10% Sales, Mktg, Admin and R&D 10 % 10 % All Other Mfg. 21 % 18 % Operating Profit 6 % 4 % Source: FPA 2003 State of the Industry and 2007 State of the Industry Surveys preliminary data

12 Converters Resin Use By Category % Resin Used By Respondents Other 14% PVC 4% Nylon 2% Polyester 2% Polypropylene 5% Polyethylene 73% Source: FPA 2007 State of the Industry Report

13 Converters Film Use By Category % Film Used By Respondents Polypropylene 21% Polystyrene 2% Polyester 15% PVC Nylon 3% 3% Poyethylene Other 49% 7% Source: FPA 2007 State of the Industry Report

14 Converters Printing Comparison % $ Value of Shipments for Respondents PRINT TYPE FLEXO 58 % 68 % 61 % GRAVURE 15 % 13 % 11 % OFFSET & OTHER 2 % 1 % 1 % UNPRINTED 26 % 18 % 27 % Source: FPA State of the Industry Reports and FPA 2007 State of the Industry & Industry-Wide Converter Surveys preliminary data

15 U.S. Flexible Packaging Industry Breakdown by End-Use Market Retail Food $ 12.1 B (47%) TOTAL $ 25.6 Billion Institutional Food $ 1.4 B (6%) Institutional Non-Food $ 1.2 B (5%) Consumer Products $ 2.6 B (10%) Retail Poly Bags $1.8 B (7%) Retail Non- Food $ 2.3B (9%) Medical and Pharm. $ 1.9 B (7%) Industrial Applications $ 2.3 B (9%) NOTE: $ 1.3 Billion of other poly bags & wraps included across all categories except consumer products & retail poly bags. Source: Flexible Packaging Association

16 2008 State of the Industry Report Industry Overview Issues & Opportunities FPA Initiatives

17 U.S. Flexible Packaging Converter 2008 Issues # 1 Raw Material cost and availability (85+% respondents rank among top concerns) # 2 Labor getting/retaining skilled & talented people # 3 Very Competitive Environment # 4 Imports trade deficit continues to increase # 5 Energy prices (freight cost impact) # 6 Economy/Interest Rates Source: FPA 2007 State of the Industry & Industry-Wide Converter Surveys preliminary data

18 Flexible Packaging Imports and Exports Billions of Dollars $3.6 $3.2 $2.8 $2.4 $2.0 $1.6 $1.2 $0.8 $0.4 Imports Exports Source: Census Bureau, Foreign Trade Division and Flexible Packaging Association

19 Top Five U.S. Flexible Packaging Import & Export Countries for 2006 IMPORTS EXPORTS Im ports in $ M illions E x ports in $ M illions China Canada Germany Thailand Taiwan Canada Mexico Japan United Kingdom China Source: Census Bureau, Foreign Trade Division and Flexible Packaging Association

20 2007 Global Packaging Industry Mergers & Acquisitions by Sector As a Percentage of Total Transactions (386) Other 11% Paperboard 22% Labels 5% Flexible 26% Machinery 9% Rigid 27% Source: BMO Capital Markets

21 2007 Global Packaging Industry Mergers & Acquisitions by Acquirer Type As a Percentage of Total Deal Volume Acquirer Type All Packaging Flexible Private Equity 19 % 20 % Private Equity Portfolio Company 15 % 15 % Public 34 % 32 % Private 32 % 33 % Source: BMO Capital Markets

22 U.S. Flexible Packaging Mergers and Acquisitions Number of Deals Source: Flexible Packaging Association

23 U.S. Flexible Packaging Industry By Company Size 100 % Share of Total Industry Large Companies (>$500MM Rev) Medium Companies ($50-$500MM Rev) Small Companies (<$50MM Rev) Source: Flexible Packaging Association

24 U.S. Flexible Packaging End-Use Growth Opportunities Dinner Products & Mixes Medical Devices Refrigerated Meat Health & Beauty Aids Pharmaceuticals Misc. Dry Shelf Produce Source: FPA 2007 State of the Industry (Converter & Supplier) Surveys preliminary data

25 2008 Flexible Packaging Achievement Award Program 99 Entries Innovation % of Entries Improved graphics and printing 30% Material Advances (high barrier, peelable, clarity, anti-fog, improved shrink, chemical resistant, improved processability, adhesives and laminates, micro perforations, insulating) Environmental/Sustainability (degradable, material and waste reduction, recyclable materials, renewable resources) Structural (Bags, pouches, package design, die-cut, shelf presence) 30% 15% 11% Microwavable pouches 5% Unique, innovative uses (new products) 4% Valves 2% Commercial/Industrial (conversions from buckets and pails to flexible) 2% Information (retrieve or add data) 1%

26 Flexible Packaging Outlook Slow near-term growth, at 2-3 percent per year (consumer spending slow down ) Further consolidation Raw material costs volatile Globalization & Imports (into U.S.) Pressure on margins & profitability Expect more innovation Impact of Sustainable Packaging

27 2008 State of the Industry Report Industry Overview Issues & Opportunities FPA Initiatives

28 FPA 2008 Initiatives Promote and Grow the Industry Work with Walmart and others on Sustainable Packaging Protect the Industry from costly government regulations Compile Industry Data used by members and investment community Conduct Benchmarking Programs Monitor Impact of Imports Monitor Impact of Imports

29 Flexible Packaging Association 2008 State of the Industry