Disclaimer DISCLAIMER. RISKS AND FORWARD-LOOKING STATEMENTS

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2 Disclaimer DISCLAIMER. RISKS AND FORWARD-LOOKING STATEMENTS This document has been prepared by Papeles y Cartones de Europa S.A. (the Company ) for information purposes only and it is not a regulated information or information which has been subject to prior registration or control by the Spanish Securities Market Commission. This document neither is a prospectus nor implies a bid or recommendation for investment. This document includes summarized audited and non-audited information. The financial and operational information, as well as the data on the acquisitions which have been carried out, included in the presentation, correspond to the internal recordings and accounting of the Company. Such information may be subject to audit, limited review or any other control by an auditor or an independent third party. Therefore, this information may be modified or amended in the future. The information contained herein has been obtained from sources that the Company considers reliable, but the Company does not represent or warrant that the information is complete or accurate, in particular with respect to data provided by third parties. Neither the Company nor its legal advisors and representatives assure the completeness, impartiality or accuracy of the information or opinions included herein. In addition, they do not assume responsibilities of any kind, whether for misconduct or negligence, with regard to damages or loss that may derive from the use of this document or its contents. The internal analysis has not been subject to independent verification. This document may include forwardlooking representations or statements on purposes, expectations or forecasts of the Company or its management up to the date of release of this document. Said forward-looking representations and statements or forecasts are mere value judgments of the Company and do not imply undertakings of future performance. Additionally, they are subject to risks, uncertainties and other factors, which were unknown or not taken into account by the time this document was produced and released and which may cause such actual results, performance or achievements, to be materially different from those expressed or implied by these forward-looking statements. Under no circumstances the Company undertakes to update or release the review of the information included herein or provide additional information. Neither the Company nor any of its legal advisors or representatives assume any kind of responsibility for any possible deviations that may suffer the forward-looking estimates, forecasts or projections used herein. This document discloses neither all risks nor other material issues regarding the investment on the shares of the Company. The information included in this presentation is subject to, and should be understood together with, all publicly available information. Any person acquiring shares of the Company shall do so on their own risk and judgment over the merits and suitability of the shares of the Company, after having received professional advisory or of any other kind that may be needed or appropriate but not only on the grounds of this presentation. By delivering this presentation, the Company is not providing any advisory, purchase or sale recommendation, or any other instrument of negotiation over the shares or any other securities or financial instrument of the Company. This document does not constitute an offer, bid or invitation to acquire or subscribe shares, in accordance with the provisions of article 35 of Royal Legislative Decree 4/2015, of 23 October, approving the consolidated text of the Securities Market Act, and/or the Royal Decree 1310/2005, of November 4th and their implementing regulations. Furthermore, this document does not imply any purchase or sale bid or offer for the exchange of securities or a request for the vote or authorization in any other jurisdiction. The delivery of this document within other jurisdictions may be forbidden. Consequently, recipients of this document or those persons receiving a copy thereof shall become responsible for being aware of, and comply with, such restrictions. By accepting this document you are accepting the foregoing restrictions and warnings. All the foregoing shall be taking into account with regard to those persons or entities which have to take decisions or issue opinions relating to the securities issued by the Company. All such persons or entities are invited to consult all public documents and information of the Company registered within the Spanish Securities Market Commission. Neither the Company nor any of its advisors or representatives assumes any kind of responsibility for any damages or losses derived from any use of this document or its contents.

3 ENRIQUE ISIDRO OLIVER HASLER JORGE BONNIN FERNANDO VIDAL VICECHARIMAN CEO CFO IR & COMMUNICATIONS

4 CONTENTS 2017 RESULTS pag PLAN pag PLAN pag 28

5 RESULTS 2017

6 Good Governance CORPORATE GOVERNANCE Best practices Composition of the Board Shareholder involvement and remuneration Risk management and control policy Corporate bodies and board committees for oversight and control Mr. Juan Jordano Pérez Mr. Enrique Isidro Rincón Vicechairman Mr. José Miguel Isidro Rincón Chairman D. Fernando Isidro Rincón Vocal Ms. Rocío Hervella Durántez REGULATORY COMPLIANCE Code of conduct Code of ethics and transparency Mr. Vicente Guilarte Gutiérrez TRES AZUL SL Mr. Fernando Padrón AGUASAL SAU Ma. Mª Amelia Isidro Mr. Ricardo de Guindos Latorre Ms. Celine Abecassis Moedas 2017 RESULTS Executive Proprietary Independent External 05

7 Executive Summary Sharp growth in the Group's consolidated EBITDA in 2017: +25% vs and Group s recurring EBITDA +19% vs In strategic terms, Europac maintains its focus on operational excellence, customer service and innovation Period marked by strong pressure of final demand of Paper, volatility in its raw material and lag in transferring the raw material price rise in Packaging Net Profit grew by 59% vs. 2016, to 78m Early achievement of the final objectives of the Strategic Plan 2017 RESULTS 06

8 Consolidated results CONSOLIDATED EBITDA NET DEBT/EBITDA ROCE Consolidated EBITDA +25.0% vs Improvement as a result of management projects and solid final demand. Positive non-recurring effect resulting from sale of assets and receipt of guarantees of acquisitions Recurring EBITDA +19% (vs. 2016) EBITDA margin +18% 2017 (16% 2016) Net Debt/EBITDA: 1.1 Finance costs fell by 48% (- 27% without considering extraordinary effect of + 2.5m) Lower balance of financial debt Optimisation of financing conditions at year-end 2016 Improvement of ROCE to 16.6% Recurring EBIT +32% Fall in capital employed -7%. Optimisation of the financial management of the balance sheet s structure 2017 RESULTS 07

9 Consolidated results SALES ( m) NET PROFIT ( m) EBITDA ( m) EBITDA MARGIN (%) 2017 RESULTS 08

10 Net profit rose by 59% in the year 4Q Q 2017 Dif. % m Dif. % ,5% Aggregate Revenue ,9% ,9% Consolidated Revenue ,4% ,4% Recurring EBITDA ,3% ,0% Consolidated EBITDA ,0% 18,6% 17,6% -1,0pp Consolidated EBITDA Margin 15,8% 18,2% 2,4pp ,5% Recurring EBIT ,7% ,8% Consolidated EBIT ,1% ,3% EBT ,7% ,9% Net Profit ,4% 0,17 0,20 14,7% EPS* 0,50 0,79 56,4% *The growth in EPS is lower than the growth in net profit due to the bonus issue in November RESULTS 09

11 Shareholder remuneration Pay-Out 50% DIVIDEND ( m) and PAYOUT (1) (%) Proposal to GSM of payout of 50%. Dividend growth +35% * payable in 2018 Interim dividend of 0.125/share paid on 26 February ( in 2017) Continuity in 2018 with regard to the bonus issue and cancellation of treasury shares* *Subject to approval at the General Shareholders' Meeting following a proposal by the Board of Directors (1)Pay-out: over Net Profit from the previous year 2017 RESULTS 10

12 Market: Kraft paper EUROPEAN STOCKS BKL (KTONNE) Reduction in average monthly stock in 2017 of 9% Solid demand in Europe Reduction in American exports, in a market in deficit EUROPEAN SHIPMENTS BKL (KTONNE) Kraft paper shipments from European manufacturers: +4.0% Increase in average price of + 74/tonne Price rises that represent an increase of between 27% and 33% PRICES ( /TONNE) 2017 RESULTS 11

13 Market: Recycled paper EUROPEAN STOCKS (KTONNE) Reduction in average monthly stock of 11% as a result of solid structural final demand Shipments by European manufacturers remain solid with a rise of 6.0% EUROPEAN SHIPMENTS (KTONNE) Increase in average price of 45/tonne 2017 vs 2016 Price rises over the year led to an increase of 23%-25%. PRICES ( /TONNE) 2017 RESULTS 12

14 Market: Recovered paper Increase in average stocks of recovered paper since August 2017 due to structural change in the raw materials market as a result of new Chinese legislation EUROPEAN STOCKS (KTONNE) EUROPEAN SHIPMENTS (KTONNE) Exports to China from CEPI countries fell by 14% to December 2017 (-47% in December) Price volatility Increase in average price of + 16/tonne 2017 vs 2016 Sharp fall in prices as a result of increase in availability of raw material in Europe PRICES ( /TONNE) 2017 RESULTS 13

15 Paper revenue KRAFT PRODUCTION VOLUME (Ktonne) RECYCLED PRODUCTION VOLUME (Ktonne) PAPER SALES ( m) Decrease in production volume in Kraftliner Scheduled halt in May Increase in production capacity Recycled production volumes higher as a result of investments made Scheduled halt in May in Rouen Paper sales rose by 14% Sales price rises Positioning in higher added value segm ents 2017 RESULTS 14

16 Packaging revenue SALES ( m) Growth in every market, particularly in Spain. Progressive transfer of the raw material price, which will have its greatest impact in the first quarter of 2018 Increase in production volumes RESULTS 15

17 Recurring EBITDA and Margins PAPER ( m) PACKAGING ( m) GROUP ( m) 42% growth in EBITDA and improvement in margin to 19%. Cost optimisation The investments made to increase the production capacity and efficiency of the machines have made it possible to take full advantage of the impact of the sales price rises. The paper price rises had a negative impact as a result of the increase in the cost of its raw material. Management projects that soften the impact of the rise in raw material prices Transfer to the market of the paper price rises Growth of +19% of EBITDA and EBITDA improvement to 17%. The integrated management model makes it possible to take advantage of moments of market strength, reducing its impact at times of fluctuation, thus ensuring sustainability of the results RESULTS 16

18 Capex Paper Division: Increase in capacity and improvements in production: Viana do Castelo Reduction in specific costs and increase in volume: Rouen Environmental investments Packaging Division: Improvement in productivity at the Val de Seine, Ovar and Albarraque plants Increase in production in Dueñas Development of the Lucena plant New converting lines in Alcolea RESULTS 17

19 Debt Continuous fall in Net Financial Debt, improving the Net Debt/EBITDA ratio to 1.1x 48% decrease in finance costs PROGRESSIVE REDUCTION IN NET DEBT (m ) FALL IN FINANCE COSTS (m ) Optimisation of financing conditions at the end of 2016 Extraordinary net effect of 2.5m (excluding this last effect, net finance costs would have fallen by 27%) x x x x Reduction of leverage* to 29% from 41% in * LEVERAGE: NFD/(NFD+EQUITY) 2017 RESULTS 18

20 Ongoing improvement of ROCE EBIT ( m) AND ROCE (%) PERFORMANCE 96 Ongoing increase in return on capital employed thanks to EBIT for the period doubling and the financial management of the balance sheet structure RESULTS 19

21 PLAN

22 Target Focus on return on assets Efficiency plan STRATEGIC LINES OF ACTION Continuity of our integrated model Increase in return on assets Organic growth in businesses and markets Operational excellence Financial strength Innovation Europac Culture INTERNAL TRANSFORMATION ORIENTED TO VALUE CREATION PLAN 21

23 EBITDA evolution Europac has consolidated a growth trend over the last 10 years ( m) CAGR + 7% x PLAN 22

24 EPS Evolution EPS has doubled since 2007 share CAGR + 6% x2 share PLAN 23

25 Business model An integrated business model as catalyst for growth and a guarantee for the future Increase in overall profitability at Group level Lower volatility in results Improvement of the service as a result of greater control of the integrated supply chain Generation of economies of scale in processes Assets specialisation Circular economy: sustainability Present throughout the paper and packaging value chain PLAN 24

26 Targets In 2017, we achieved our financial objectives early Targets STRATEGIC PLAN EBITDA MARGIN 16,0% DFN/EBITDA 2,0x 15,0% Continuous commitment to generating value for the company s shareholders PLAN 25

27 Our commitment Commitment to economy TRANSPARENCY - CORPORATE GOVERNANCE Generating wealth in the surrounding area Creation of shared value with stakeholders 2,300 direct employees Capital intensive. Commitment to society SOCIAL Promotion of culture and social projects Social and occupational integration of disabled persons Development of human capital/knowledge Commitment to the environment ENVIRONMENTAL Circular economy model - Recycling Environmental compliance Society, media Customers Public authorities, regulatory and financial institutions and sector associations Shareholder, investors and analysts Employees and unions Suppliers and contractors PLAN 26

28 Our vision

29 PLAN

30 New plan Early achievement of plan Success of the previous Plan: continuous process of internal transformation oriented to creating value New operational objectives New financial objectives PLAN 29

31 Target Inorganic growth STRATEGIC LINES OF ACTION Continuity of our integrated model Increase in return on assets Organic growth in businesses and markets Operational excellence Financial strength Innovation Europac Culture CUSTOMER AS THE FOCUS OF STRATEGIC ACTIONS PLAN 30

32 Market Kraftliner paper market: solid demand, order book at maximum levels with paper machines operating at full capacity. Announcement in January of a new sales price rise MARKET EXPECTATIONS 2018 Recycled paper market: strong demand, increase in exports and significant reduction in stocks. Announcement in January of a new sales price rise Recovered paper market: fall in prices in January and February of 45/tonne Packaging market: progressive transfer of the increase in raw material prices. Increase in auxiliary costs (energy, other consumables) and logistics. PLAN PLAN

33 Market Sustainability of market conditions Paper: structural demand in Europe based on an increase in consumption: Kraftliner: reduction in the structural surplus production in the US as a result of a rise in domestic consumption Recycled: : increase in demand greater than increase in production capacity Recovered. paper: change in recovery model Packaging: new applications and product development PRICES EVOLUTION ( /TONNE) Source: FOEX PLAN 32

34 Market Paper packaging sector: growth in consumption of Recycled Paper Western Europe Packaging market growth driven by: Replacement in the use of packaging materials: sustainable paper packaging Packaging as a key factor of differentiation, adaptable to different distribution channels and personalized Added elements integrated into the packaging design Source: CEPI ContanierBoard, Consumption = [ Demand RRCC Exports + Imports ] Packaging for logistics: structural design and cost savings Innovation as a critical element for competitiveness PLAN 33

35 Growth of the packaging market PACKAGING MARKET TRENDS DRIVING GROWTH IN DEMAND CAMBIOS EN ESTILO DE CONSUMO, DE TRENDS LA DISTRIBUCIÓN Y LA CONSIGUIENTE OPTIMIZACIÓN CHANGES IN STYLE OF CONSUMPTION Customizable packaging E-commerce Optimization by structural design and cost savings Embalajes personalizables, capaz de adaptarse a diferentes canales de distribución. Optimización gracias a diseño estructural y ahorro de costes E-commerce SOLUTIONS Shelf Ready Packaging DESIGN, INNOVATION AND COMPETITIVENESS Lower weight, digital printing, smart, flexibility and adaptive SUSTAINABILITY Recyclable, biodegradable, renewable y singlematerial Display New Applications Mechanisation High quality printing PLAN 34

36 Value proposal BUSINESS SECTORS SOLUTIONS TO RESPOND TO MARKET TRENDS Agriculture Chemicals High Quality Printing Retail Ready Packaging Display Food Mechanisation Beverages Heavy-Duty E-Commerce EUROPAC RESPONDS TO TRENDS AND SECTORS PLAN 35

37 Focus on our client Diversified customer portfolio Extremely diversified customer base: Over 6000 customers Positioning of Europac with customers in all value segments in packaging Focus on customers where we can act as strategic partners by entering their operations and developing joint solutions PLAN 36

38 E-commerce Packaging for a world without limits Solutions that think about the needs of our customers and their customers: Resistance in order to protect the shipped product Adaptability both to production and logistics processes and to the product Externally and internally printable Dual-use, suitable for returns 100% recyclable, advantage for the end user when disposing of packaging PLAN 37

39 E-commerce Packaging for a world without limits Packaging for the online sale of wines that prevents breakages: Resistance, design and functionality in order to transport different bottles. Developed jointly with Grupo Freixenet, the internal structure of the packaging creates an air chamber that absorbs impacts from a height of 140 cm. " Each incident involved doubling the cost of product and shipping.", Silvia Ros. Since we started using the new packaging in the online sale of our cava, we have not recorded any incident concerning broken bottles Silva Ros, E-commerce Manager, Freixenet PLAN 38

40 Solutions that transport and sell Advent Calendar Selection of 24 beers Promotional sales unit 4 33cl bottles + glass FOOTPAC Selection of 24 beers + bottle caps game Antoine Working together with Europac on Packaging solutions is allowing us to develop our business and increase sales. De Sutter Brasserie De Sutter Manager. Following publication of the advent calendar on Facebook, they sold out quickly. We plan to repeat this next year PLAN 39

41 Sustainability Replacement of other materials Single-Material Packaging Solution Resistance, design and sustainability using only corrugated board, replacing other non-recyclable materials We wanted to remove polystyrene from our packaging, Europac surprised us with a single-material solution in corrugated cardboard, which ensured product protection and made it easier for the consumer to dispose of it. BEFORE AFTER Véronique Rameau Purchasing Department Electrical Cooking PLAN 40

42 Mechanisation Mechanised Packaging Solution Replacement of plastic trays by trays using a mechanised solution in corrugated board. Packaging that is 100% recyclable and biodegradable. In Las Mercedes plant we needed to have an alternative logistic means to our plastic tub (Picture 1) and compatible for its use in our facilities, we contacted Europac, analyzed together our need in the factory and developed what today is our cardboard tub (Picture 2), which has solved our problem. 1 2 Jose Manuel Asencio Dorantes Gerencia Las Mercedes, Bimbo plant PLAN 41

43 Solutions that transport and sell PLAN 42

44 Tactical lines by business unit PAPER & PACKAGING OPERATIONAL EXCELLENCE STRATEGIC PARTNERS PIONEERS We want to be leaders in cost competitiveness and in generating liquidity in all our operations. We want our customers to feel important, for them to welcome us as part of their team and for our suppliers to form part of ours. We want to be the pioneers adapting processes and technologies in our sector to provide innovation based on our creativity with the aim of offering competitive solutions that anticipate our customers needs PLAN 44

45 Average objectives EBITDA Margin 20% ROCE 20% NFD/EBITDA 2x % Consolidated EBITDA % Recurring EBITDA Improvement in the Group s recurring margins Optimisation of capital employed Financial strength will allow us to undertake corporate acquisitions and/or other additional organic investments SHAREHOLDER REMUNERATION POLICY PAYOUT OF 50% *Objectives calculated with price stability PLAN 45

46 Average objectives POLÍTICA DE RETRIBUCIÓN AL ACCIONISTA: PAY-OUT DE 50% PLAN 46

47 Potential for increase in share price PLAN 47

48 Conclusion A solid history. A model of success with a vision for the future Focus on efficiency in order to improve profitability Additional growth on the basis of inorganic growth Achievement of plan: profitability and financial strength Favourable market conditions: solid demand Customer as centre of strategic actions Circular economy: efficient and sustainable business model as a barrier to entry and differential factor High cash flow generation and reduced net debt Attractive shareholder remuneration policy PLAN 48

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