notice to bondholders recent developments … · notice to bondholders recent developments recent...

NOTICE TO BONDHOLDERS

Recent Developments

Recent Preliminary Results

As of the date of this notice, we have completed trading for the month ended April 30, 2015. Based on preliminary

results from unaudited management accounts and information currently available, we estimate that net sales

decreased by an amount between $44 million and $46 million, or between 17% and 18%, from $255 million in

the month ended April 30, 2014 to an amount ranging between $209 million to $211 million in the month ended

April 30, 2015. This decrease was primarily due to unfavorable foreign exchange impact of $30 million, pass

through of reduced raw material costs of $8 million, and revenue shortfalls in our European divisions. Our North

American Flexibles operations grew volumes by over 5%.

We estimate that EBITDA decreased by an amount between $2.5 million and $3.5 million, or between 8% and

11%, from $31 million in the month ended April 30, 2014 to an amount ranging between $27.5 million and $28.5

million in the month ended April 30, 2015. This decrease was primarily due to unfavorable foreign exchange

impact of $4 million and resin cost increases ahead of pass through mechanisms.

Third-party net debt, as of April 30, 2015, decreased by approximately $4 million, or 0.3%, from $1,436 million

as of December 31, 2014. The decrease in third-party net debt, as of April 30, 2015 was primarily due to foreign

currency translation rates. As of April 30, 2015, we had approximately $48 million and $44 million (equivalent)

available under our North American ABL Facility and European ABL Facilities, respectively.

This financial information prepared by management is based on preliminary management accounts and is the

responsibility of management. Our independent auditors have not audited, reviewed, compiled or performed any

procedures with respect to the preliminary financial data. Accordingly, our independent auditors do not express

an opinion or any other form of assurance with respect thereto. Our preliminary results are based on a number

of assumptions that are subject to inherent uncertainties and subject to change. Upon completion of our financial

statements for the six months ended June 30, 2015, the results included in our financial statements for the six

months ended June 30, 2015 may differ from the results indicated above. As such, you should not place undue

reliance on these estimates. In addition, certain statements in this section are forward-looking. Actual results and

market developments may differ materially from those described above.

Recent and Planned Acquisitions

Elldex Acquisition

On May 28, 2015, we acquired Elldex Holdings Limited and its consolidated subsidiaries (“Elldex”), a New

Zealand-based full-service flexible packaging company, which was previously owned by Hellaby Holdings LtD.

Elldex is a manufacturer and importer of HDPE and LDPE flexible plastic packaging and provides products that

serve the meat, dairy, seafood, horticulture, agricultural, fast moving consumer good and other industrial sectors.

As of the date of is acquisition, Elldex had more than 125 employees. We believe the acquisition of Elldex will

provide us with the opportunity to expand into Australasia and, consistent with our global strategy, continue our

growth in high-value added segments.

In the twelve months ended March 31, 2015, Elldex generated estimated revenues of $35.3 million and estimated

Adjusted EBITDA of $2.4 million. Following the completion of the acquisition of Elldex, we integrated Elldex’s

operations in our Flexibles segment.

This financial data is based on management information and is the responsibility of management. Our

independent auditors have not audited, reviewed, compiled or performed any procedures with respect to the

financial data of Elldex. Accordingly, our independent auditors do not express an opinion or any other form of

assurance with respect thereto. The financial data is based on a number of assumptions that are subject to inherent

uncertainties and subject to change.

Planned Acquisition of a Leading Technological Agricultural Plastics and Masterbatch Manufacturer

On or about the Issue Date, we intend to acquire a leading technological Central American and Mexican

agricultural plastics and masterbatch manufacturer (the “Target”), which offers a diverse portfolio of

technologically advanced products, including proprietary masterbatch formulations and agricultural films, which

have a successful track record of improving crop yield and enhancing user profitability. With 55 years of

experience in the market and drawing on its agricultural expertise and product know-how, superior product

quality, strong brands and collaborative relationships with vendors, the Target has successfully built and

maintained mutually beneficial relationships with a wide range of customers, from local farmers and agricultural

distributors to multinational companies. The Target also manufactures industrial and commercial plastics and

label products, including twine, insect traps, industrial and food packaging, shrink films and adhesive labels. As

of April 30, 2015, the Target had over 2,000 customers across Central and South America, Mexico and the United

States.

In the twelve months ended March 31, 2015, the Target generated approximately 75% of its revenues from

agricultural plastics and masterbatch products and the remainder of its revenues from industrial and commercial

plastics products and labels. As of March 31, 2015, the Target produced its products at two strategically located,

state-of-the art production facilities. These production facilities are supported by sales offices, representatives and

warehouses in Guatemala, Mexico, Costa Rica, Panama, Colombia and the United States. The Target’s presence

across Central America and Mexico positions the company as the only agricultural films manufacturer in the

region capable of supporting multinational and local customers throughout those markets. In the year ended

December 31, 2014, the Target spent approximately $7.2 million on capital expenditure, primarily related to the

expansion of its two manufacturing facilities. As of March 31, 2015, the Target had approximately 600 employees.

For the year ended December 31, 2014, the Target generated net sales of $117.9 million and Adjusted EBITDA

of $17.0 million and for the twelve months ended March 31, 2015, the Target generated net sales of $119.5 million

and Adjusted EBITDA of $16.8 million.

As of the date of this release, the acquisition agreement relating to the acquisition of the Target has not yet been

signed, and we cannot guarantee that we will acquire the Target as scheduled, or at all.

The financial data for the Target is based on management information and is the responsibility of management.

Our independent auditors have not audited, reviewed, compiled or performed any procedures with respect to the

financial data of the Target. Accordingly, our independent auditors do not express an opinion or any other form

of assurance with respect thereto. The financial data is based on a number of assumptions that are subject to

inherent uncertainties and subject to change.

Update on Cost Savings and Synergies

We have realized savings relating to the procurement of raw materials of $31.8 million and $4.5 million in the

year ended December 31, 2014 and in the three months ended March 31, 2015, respectively, using our scale to

obtain better pricing in key raw materials purchases, including in improved pricing of resin, paper, film, ink and

masterbatch.

We have sought to optimize and consolidate our manufacturing footprint by (i) reducing the number of sites we

have in order to remove redundant or duplicative facilities and (ii) optimizing production at our sites and

rationalizing our cost structure to form a single operating group.

Furthermore, in the year ended December 31, 2014 and the three months ended March 31, 2015, we spent

approximately $19.8 million and $3.0 million in one-off operating expense, respectively, and $16.1 million and

$7.7 million, respectively, in capital expenditures in manufacturing and restructuring initiatives. These initiatives

are designed to move or consolidate product lines at more efficient plants and close inefficient plants, reduce

manufacturing headcount, eliminate product lines with lower margins and upgrade manufacturing facilities to

make them more efficient. As a result of these measures, we have realized savings of $ 33.1 million and $2.6

million in the year ended December 31, 2014 and in the three months ended March 31, 2015, respectively.

We have identified annualized procurement savings of $13.1 million and annualized manufacturing and

restructuring savings of $15.9 million which we will seek to realize by March 31, 2016

This notice does not constitute an offer to sell or the solicitation of an offer to buy any securities.

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This notice does not constitute an offer to sell or the solicitation of an offer to buy any securities. No money,

securities or other consideration is being solicited, and, if sent in response to the information contained herein,

will not be accepted. It may be unlawful to distribute this document in certain jurisdictions. The information in

this document does not constitute an offer of securities for sale in Canada, Japan or Australia.

This press release may include projections and other “forward-looking” statements within the meaning of

applicable securities laws. Any such projections or statements reflect the current views of Coveris about further

events and financial performance. No assurances can be given that such events or performance will occur as

projected and actual results may differ materially from these projections.