3 Business Operations

PTL is the producer and distributor of thin PET film (Thin Polyethylene
Terephthalate Film, also called PET film), most of the company’s
production is exported to the foreign customers. PTL focus on 3 key
segments - Packaging, Industrial and Electrical. PTL’s customers use the
company’s products as raw material to produce their end-products which
are then sold to their consumers. Some examples of products made from
thin PET film are Coffee/Tea bag, snack bag, softener bag, detergent
bag, wire/cable wrap and hot stamping foil.

3.1 Product Description

  PTL is the producer and distributor of thin PET film which has a wide
  range from 9 microns to 50 microns in thickness. The film is a high
  performance plastic film made from PET resin. The thin film product
  produced by the company can be categorized as follow:

  A.) Transparent films which can divided into 5 sub-categories

-   Plain

-   Corona or chemically treated

-   High adhesion and Barrier films

-   Ultra clear films

-   Co-extruded films

  B.) Hazy films

  C.) Metallized films

3.1.1 Characteristic of PET film

PET film characteristic properties are as follow:

-   Optically brilliant, clear appearance

-   Excellent mechanical strength and toughness

-   Good dielectric properties

-   Good flatness and coefficient of friction (COF)

-   Tear-resistant and puncture - resistant characteristics

-   Excellent dimensional stability over a wide range of temperatures

-   Very good resistance to most common solvents, moisture, oil, and
    grease

-   Excellent barrier against a wide range of gases

  PET film can also be modified with varying degrees of shrinkage,
  opacity & colours and different surface textures for it to be used
  over a wide range of applications.

  A wide range of chemical treatments (in addition to corona) can be
  applied to PET film during its manufacture to help it adhere to
  various coatings.

3.1.2 End Use segment

  Thin PET film can be used in the 3 key segments

  ------------- ---------------------------------------------------------
  1) Packaging  Clear and Metallized thin PET film can be used as part of
                the outer layer and middle layer of the flexible
                packaging such as coffee bag, snack bag, softener bag,
                and detergent bag.

  2) Industrial Comprising of Hot stamping foils, flexible
                air-conditioning ducts, labels /ID cards, lamination
                products and many more.

  3) Electrical Wire and cable wrap, membrane switches, flexible printed
                circuits, capacitors and motor insulation.
  ------------- ---------------------------------------------------------

  The segmental break-up of revenue from PET film sale (Plain &
  Metallized films) has been estimated as follows:

  ­

  --------------- ---------- -------- ---------- -------- ---------- --------
  Segment         2004-05             2005-06             2006-07    

                  Bt. Mn     %        Bt. Mn     %        Bt. Mn     %

  Industrial Use  751.51     23.03    790.18     27.01    640.71     24.33

  Electrical Use  102.14     3.13     10.90      0.37     11.49      0.44

  Packaging Use   2,409.31   73.84    2,124.96   72.62    1,981.02   75.23

  Total Sales     3,262.96   100.00   2,926.04   100.00   2,633.22   100.00
  --------------- ---------- -------- ---------- -------- ---------- --------

3.1.3 Products with similar properties

  In certain applications like primarily graphics and magnetic
  recordings, substituting PET film would result in sacrificing
  performance characteristics of the product (e.g., strength, flatness,
  clarity, tear resistance, thermal stability and chemical resistance).
  However, in other applications, for which certain PET film performance
  characteristics may not be needed, PET film competes with a wide
  variety of substitute materials. These applications tend to fall in
  the low end of the product range, where other plastic films (e.g.,
  polyvinyl chloride, polypropylene, and polyethylene films) and paper
  may be considered as lower-priced substitutes. Applications for which
  a variety of substitute products may exist are primarily packaging and
  general-purpose industrial applications.

  BOPP Films (Biaxially Oriented Polypropylene) is one such close
  substitute product type, which is comparable in terms of its broad
  physical and mechanical properties to Polyester films. However, there
  are pros and cons of using PET film or BOPP films and depending upon
  the application requirements, a choice of the substrate would be made.
  As a result of this, both PET films and BOPP films have largely
  demarcated pockets where one is preferred over the other.

  A Comparison of BOPP Films and BOPET (Polyester) Films

  Polyester film is considered as the premium plastic film in the
  flexible packaging industry. This is also reflected by the difference
  in the volume of the two products.

+-------------------------------------------+------------+-------------+
| Features                                  | BOPP       | BOPET       |
+-------------------------------------------+------------+-------------+
| Water vapour barrier                      | Excellent  | Fair        |
+-------------------------------------------+------------+-------------+
| Gas barrier properties                    | Poor       | Excellent   |
+-------------------------------------------+------------+-------------+
| Break down voltage                        | Poor       | Excellent   |
+-------------------------------------------+------------+-------------+
| Machineability                            | Fair       | Excellent   |
+-------------------------------------------+------------+-------------+
| Printability                              | Fair       | Excellent   |
+-------------------------------------------+------------+-------------+
| Suitability for metallizing               | Poor       | Excellent   |
+-------------------------------------------+------------+-------------+
| Density (gm/cc)                           | Low (0.91) | High (1.39) |
+-------------------------------------------+------------+-------------+
| Strength                                  | Fair       | Excellent   |
+-------------------------------------------+------------+-------------+
| Temperature Sensitivity                   | Poor       | Excellent   |
+-------------------------------------------+------------+-------------+

  Polyester film when stretched in both directions gives excellent
  dimensional stability, gas barrier properties, break-down voltage etc.
  BOPP, despite stretching remains a ‘limp film’. Polyester film has
  better handling capabilities for fluctuations in temperatures etc. and
  is therefore also preferred in the less sophisticated markets. In
  tropical countries PET is also preferred due to its moisture and
  oxygen barrier properties. In addition products where aroma retention
  is important require the use of PET; e.g. coffee, tea.

  On the other hand, the low density of BOPP (0.91 Vs. 1.39 for PET)
  makes it a ‘cheaper’ alternative in packaging. However, the advantage
  of density is to some extent offset by the need to typically have a
  thicker film when using BOPP as compared to PET for the same
  application. Further, since PET is not ordinarily heat sealable, BOPP
  is preferred in heat sealable applications.

  All over the world BOPP and PET have established their respective
  segments in the packaging market and overlap is insignificant. Even
  with the recent decline in BOPP selling prices, there has been no
  visible impact on the growth in PET films consumption. This
  establishes the limited substitutability between the two products.

  3.2 Business Strategy

  Key elements of the strategy are:

  - Attain cost leadership by way of capacity expansion and vertical
  integration,

Capture growth markets and build good customer relationship

  - To build strong global delivery capabilities with near-shoring and
  efficient onward distribution network. Acquisition of the distribution
  company in the USA has been a strategic move of the company in this
  direction.

  - Further broad base the product portfolio by investing in upgrading
  technical and R&D capabilities. PTL is now setting up an extrusion
  coated project to add to its product offering to customers.

  - Consolidate market position in key geographic locations before the
  next phase of growth.

  Moving in this direction, the following initiatives have been taken by
  the Company in the past and planned for future:

-   The setting up of 2 successive film lines in Thailand was the first
    step towards achieving cost leadership position along with
    diversification of customer base.

-   With the start up of the additional film line in Turkey by mid-2008,
    the subsidiary will also have a cost effective production base to
    service its expanding customer base in Europe, Middle East &
    CIS/Russia.

-   Backward integration into the manufacturing of PET chips has
    strengthened the cost structure of the Company in Thailand and also
    of the subsidiary in Turkey.

-   PTL is also setting up an Extrusion Coating plant to increase its
    product offering to its customers.

-   PTL is also planning to set up additional Metallizers in Thailand
    and Turkey to increase capacity for value added products

-   The company has also instituted the implementation of the Total
    Productive Maintenance (TPM) philosophy to improve the productivity
    at the plant and this has started bringing about considerable
    improvements in capacity utilizations in Thailand and Turkey.

  3.3 Distribution Channel

  The Company distributes its products to both domestic and overseas
  markets, with main focus put on the latter, constituting about 80-85%
  of its total sale revenues. Such export markets are classified by
  region into three groups, namely Asia, North America and Europe.

  The product distribution has been made directly to the end users using
  its own marketing arm and indirectly through distributors in
  designated areas, such as those in the USA and Europe. Its indirect
  distribution through distributors can help support and even boost its
  sales as these distributors are in close proximity of the target
  markets, hence allowing for closer service provision to the customers
  with rapid delivery, and also better market penetration to access
  small customers. The proportion of sales to distributors has come down
  this year as compared to the previous year as the subsidiary in Turkey
  is largely meeting the requirements of one of the major distributors
  in Europe.

  Value of export and domestic PET film sales (Plain & Metallized films)
  are as follows:

  ­

  --------------- ---------- -------- ---------- -------- ---------- --------
  Customers       2004/05             2005/06             2006/07    

                  Bt.        %        Bt.        %        Bt.        %
                  million             million             million    

  Exports                                                            

  Asia            1,090.16   33.41    740.27     25.30    953.73     36.22

  North America   820.50     25.15    705.25     24.10    579.36     22.00

  Europe          863.14     26.45    915.86     31.30    442.87     16.82

  Other           126.71     3.88     101.26     3.46     195.48     7.42

  Total exports   2,900.51   88.89    2,462.64   84.16    2,171.44   82.46

  Domestic sales  362.45     11.11    463.41     15.84    461.78     17.54

  Grand total     3,262.96   100.00   2,926.05   100.00   2,633.22   100.00
  --------------- ---------- -------- ---------- -------- ---------- --------

  Value of sales to end users and distributors are as follows:

­

  --------------- ---------- -------- ---------- -------- ---------- --------
  Customers       2004/05             2005/06             2006/07    

                  Bt.        %        Bt.        %        Bt.        %
                  million             million             million    

  End Users       1,647.04   50.48    1,447.72   49.48    1,790.58   68.00

  Distributors    1,615.92   49.52    1,478.32   50.52    842.64     32.00

  Total           3,262.96   100.00   2,926.04   100.00   2,633.22   100.00
  --------------- ---------- -------- ---------- -------- ---------- --------

  3.4 Markets and competitive environment

  3.4.1 Global Demand

  The worldwide merchant market of PET film in 2006 was 1.61 million
  tons, up from 1.29 million tons in 2002, which represents a CAGR of
  5.63 % with the growth in 2006 over 2005 being in excess of 8%. Of
  this market, about 80% of demand is estimated to be driven by thin
  films. The sector with highest demand for thin PET film is packaging,
  followed by industrial and electrical films respectively. Their
  combined demand accounted for 77% in 2002, rising to 91% in 2006, with
  a cumulative growth of almost 46% during 2002-2006. Electrical segment
  recorded the highest growth of 91.31%, packaging 38.97% and industrial
  36.42%.

  Table to illustrate global consumption of PET film by business sectors

  (unit: thousand tons)

  ------------ -------- ----- -------- ----- -------- ----- -------- ----- -------- -----
  Type         2002           2003           2004           2005           2006     

               volume   %     volume   %     volume   %     volume   %     volume   %

  Magnetic     198      15    170      13    110      8     74       5     48       3
  media                                                                             

  Packaging    509      39    526      40    620      42    662      45    707      44

  Electrical   149      12    162      12    197      13    228      15    285      18

  Imaging      94       7     93       7     115      8     102      7     103      6

  Industrial   342      26    374      28    423      29    420      28    467      29

  Total        1,293    100   1,325    100   1,465    100   1,486    100   1,610    100
  ------------ -------- ----- -------- ----- -------- ----- -------- ----- -------- -----

Source: Company Data

  Classified by region, demand for PET film in 2002 was the highest in
  North America followed by Other Asia, West Europe and Japan at similar
  levels. In 2006, other Asian countries’ demand for PET film is the
  largest accounting for 33% of world demand, followed by America and
  Japan with 21% and 19% respectively. With the expansion of packaging,
  industrial and electrical businesses (CAGR of 9.90% during 2002-2006
  and 11.37% in 2006 over 2005) and hence growing demand for thin PET
  film since 2002, demand from other Asian countries recorded a healthy
  CAGR of 15.11% during 2002-2006.

Table to illustrate global consumption of PET film classified by regions

(unit : thousand tons)

  --------- -------- ----- -------- ----- -------- ----- -------- ----- -------- ------
  Region    2002           2003           2004           2005           2006     

            volume   %     volume   %     volume   %     volume   %     volume   %

  America   327      25    318      24    329      22    326      21    338      21

  Japan     221      17    245      18    267      18    283      19    309      19

  Korea     175      14    169      13    164      11    144      10    143      9

  Other     299      23    338      26    436      30    462      31    525      33
  Asian                                                                          

  W Europe  248      19    226      17    232      16    233      16    248      15

  RoW       23       2     29       2     37       3     38       3     46       3

  Total     1,293    100   1,325    100   1,465    100   1,486    100   1,610    100

  Thin film 1,048    81    1,066    80    1,157    79    1,175    79    1,272    79

  Thick     245      19    259      20    308      21    311      21    338      21
  film                                                                           
  --------- -------- ----- -------- ----- -------- ----- -------- ----- -------- ------

Source: Company Data

  3.4.2 Global Supply

  The global merchant capacity for PET film in 2006 was almost 2.27
  million tons up from 1.55 million tons in 2002, which represents a
  CAGR of 9.94%. Thin film capacity was 1.74 million tons in 2006 (about
  77% of the total) up from 1.16 million tons in 2002( about 75% of the
  total), which represents a CAGR of 10.68%. Since 1999, there has been
  a shift of production towards Asian markets (excluding Japan and
  Korea) whereas the capacity in all the other markets has remained
  largely unchanged.

  Table to illustrate global capacity by types of PET film (unit:
  thousand tons)

  Source: Industry estimates

  Thin film: < 36 micron (µ) Thick film: > 36 micron

  Classified by region, Other Asia had the highest capacity in producing
  PET film in 2006. Its share compared to total capacity was 48.20%,
  followed by America and Korea with 13.90% and 13.3% respectively.
  During 2002-2006, Other Asia also was the region that had the highest
  growth rate of PET film production capacity with growth rate 145.25%
  due to the expansions by existing producers as also entry of several
  new producers in the region, especially China and India in order to
  meet the increase in PET film demand.

  Table to illustrate shows global capacity of thin & thick film (unit:
  thousand tons)

Source: Company Data

Note to Table :

  --------------- --- -----------------------------------------------------
  America         :   America Continent

  Other Asia      :   Countries in Asia except Japan and Korea

  West Europe     :   Countries in West Europe

  The Rest of the :   Countries in : Europe other than West Europe, Africa,
  World               Australia and New Zealand
  --------------- --- -----------------------------------------------------

3.4.3 Industry condition

  Global competition

  There are currently three distinct classes of PET film manufacturers
  classified by size of production capacity:

(i) World majors with production capacity of over 100,000 tons per year
    (e.g. Dupont-Teijin, Mitsubishi and Toray, etc). Recently, a Chinese
    producer Cifu has also attained a capacity level of more than
    100,000 tons.

(ii) Mid-size players with production capacity between 50,000 – 100,000
     tons per year (e.g. Kolon, Polyplex, SKC, Flex and Jindal, etc.)
     and

(iii) Small / local producers with production capacity of less than
      50,000 tons per year

  With the start-up of the additional thin film line in Turkey, Polyplex
  group production capacity of thin film will exceed 100,000 tons and it
  would become one of the World major players.

  Demand for PET film for magnetic media application has been high in
  the past, prompting major producers to focus mainly on this segment.
  Competition in the magnetic media segment is thus confined only to
  these major ones based on their long and well established expertise
  and experience.

  For other PET films including thin film, competition is seen among all
  groups of producers thanks to the consistently rising demand,
  especially for thin film which is used in packaging, industrial and
  electrical segments where healthy growth of demand is recorded. Thus
  small and mid sized producers (including Polyplex group) have expanded
  their capacity to cope with the increasing demand in these segments.
  This has lead to the expectation of higher market share by some small
  and mid sized producers in various countries which have surplus
  production capacity.

  Domestic competition

  Thailand’s PET film market is of small scale. PTL forecasts that
  domestic demand in Thailand is approximately 16,500 tons per year with
  an annual growth rate of about 7-8%. In the past, domestic producers
  have put emphasis on producing BOPP film rather than any other types.
  PTL itself has principally focused on PET film with initial production
  capacity of 15,000 tons per year, rising to 48,000 tons per year at
  present, hence the largest PET film production capacity in the
  country.

  The production capacities of the various plastic film producers in
  Thailand are as follows:

  (unit: tons)

+--------------------+--------------------+-------------+-------------+
|   Production line  |   Thai Film        |   A. J.     |   PTL       |
|                    |   Industries Plc.  |   Plast     |             |
|   (tons per year)  |                    |   Plc.      |             |
+--------------------+--------------------+-------------+-------------+
|   BOPP film        |   100,000          |   36,500    |   -         |
+--------------------+--------------------+-------------+-------------+
|   PET film         |   3,500            |   28,500    |   48,000    |
+--------------------+--------------------+-------------+-------------+
|   CPP film         |   3,500            |   -         |   -         |
+--------------------+--------------------+-------------+-------------+
|   Metallized film  |   7,000            |   9,275     |   7,500     |
+--------------------+--------------------+-------------+-------------+
|   Other coated     |   3,000            |   -         |   -         |
|   films            |                    |             |             |
+--------------------+--------------------+-------------+-------------+
|   BOPA Film        |   -                |   8,000     |   -         |
+--------------------+--------------------+-------------+-------------+
|   Total            |   117,000          |   82,275    |   55,500    |
+--------------------+--------------------+-------------+-------------+

  Source: Annual Report of A.J.Plast Plc and T.F.I Plc

  In 2002, Thailand’s production capacity of PET film was around 12,000
  tons, rising to 51,000 tons by 2003 year-end and about 80,000 tons
  currently.

  Most of PTL’s production is intended for exports while the other PET
  film producers have been more focused on the domestic markets. Despite
  the disparity between domestic supply and demand, PTL does not foresee
  any specific threat due to its different sales profile.

  Conclusion on PET film industry

  The PET film industry has expanded successively up to the present with
  good future prospects also foreseeable. The main driving factor for
  the past five years has been the growth of the packaging, industrial
  and electrical segments. Meanwhile, PET film producers have boosted
  their capacity utilization and/or their production capacity
  aggressively to respond to the increasing growth of demand. During
  1999-2003, global average capacity utilization of PET film accounted
  for 82-91% of rated or nameplate capacity, considered a high
  utilization rate being close to the full machinery capacity. In
  practice, some producers can produce lower than the nameplate capacity
  due to the long use and hence the poor condition of machinery while
  some can produce with capacity utilization even higher than 100% of
  the nameplate capacity using new and modern machinery and based on
  their long-time expertise and experience.

  However, from 2004 onwards, as a result of excess capacity built up,
  the average capacity utilization for thin films has declined to 73-82%
  and is reflected in the overall sharp decline in margins and
  profitability in the industry. This is the cyclical nature of the
  industry and the demand growth will catch up with the available supply
  to bring about improvement in capacity utilization to normal levels.

  []

  Despite the rising demand for PET film, it is not easy for new
  entrants to compete with the existing players. It is because it is an
  industry that needs high levels of know-how, skills and expertise to
  ensure the exact product size, standard and specifications required by
  the customers. Project management skills are also needed to enhance
  efficiency and cost effectiveness that will lead to competitiveness
  against other producers. Capacity expansion may be unavoidable to
  attain larger size and hence economy of scale.

  Polyplex group has accumulated over 19 years experience in the PET
  film industry. It has been strengthened with consistent expansion in
  production capacity. Its management is highly competent. Delivery of
  products is efficient by having distributed production bases that
  allow for easy access to the customers. It has clear classification of
  markets among the companies in the group. For example, PTL which is
  based in Thailand is in charge of catering to markets in Thailand,
  East Asian countries, China, Southeast Asian countries and America,
  while PE which is based in Turkey, will serve customers in Europe,
  Middle East and Russia/CIS.

  The emphasis on the countries with high demand growth and such
  business segments as packaging, industrial and electrical segments
  which have recorded healthy growth all along has contributed to the
  Polyplex group becoming the fifth largest producer of thin PET film
  (excluding capacity for magnetic media).

  In view of tariff barrier measures taken by importing countries such
  as anti-dumping and anti-subsidy duties, the Company’s parent company
  based in India has experienced such threat from both the EU and the
  USA several times. It has thus been keen on the issue, having
  information on the criteria and inspection process adopted by those
  countries and knowing how to deal with the problem. As an outcome of
  the understanding of the process, that USA has levied zero duties till
  date under the anti-dumping measure against the parent company.

  As regards Thailand, it is also unlikely that the EU will take this
  measure against the Company as the distribution to the EU is now
  largely handled by the subsidiary in Turkey. As for export to the USA,
  the Company has never experienced any tax measures since its inception
  in April 2003.

  Recently in March-2007, the appropriate authority in the Government of
  Brazil has initiated an anti dumping investigation against Thailand
  besides India against imports of Pet films into Brazil. The company as
  also its parent company in India have fully cooperated with the same
  and submitted their detailed questionnaire responses. The outcome of
  the investigation is expected in late 2007 / early 2008. PTL’s export
  sale to Brazil during 2006-07 was about 460 MT only. As such, any
  adverse fall out of such investigation by the Government of Brazil
  will have a minimal impact.

  The company is undertaking all the safeguards to insulate against the
  risk arising out of anti-dumping duties and other protective barriers
  imposed by the importing countries.

  Outlook for the PET film industry:

-   Most of the planned capacity expansion has already started
    production within the last 2-3 years. Within the next 12 months,
    capacity expansion of about 60,000 tons is expected in Dubai from
    Indian companies. Except for a few other producers who may consider
    expanding their capacities, there is unlikely to be any significant
    increase in production capacity from developing countries in Asia or
    from Europe, the USA or Japan/Korea.

-   New entrants from China would increasingly dominate the market for
    PET film but their production is expected to mainly fulfill domestic
    demand which is growing rapidly.. Moreover, with their limited
    skills, expertise and experience, their production cost and
    productivity levels fail to be competitive globally. They need some
    time to have their potential developed to be on a par with the
    existing global players.

-   The cyclical nature of the industry would continue but the severity
    of the ups and downs as witnessed in 1995 would be moderated.

-   Dominance of the existing large producers with market share of about
    30-40% is likely to continue though with a reducing share. However,
    decline in their traditional market segments and slower growth in
    their home markets has constrained their ability to improve their
    PET film operations. Lowering production cost through acquisitions
    and joint ventures with low-cost Asian countries, rationalization of
    capacity and continued emphasis on technology intensive niche
    products could be an important strategic response.

-   The transitioning of the industry to Asia would pose higher
    competitive pressure in the years to come.

-   Demand for the products is likely to grow between 5-8% in the
    packaging, industrial and electrical segments.

-   Mid size and new producers would increasingly look to diversify
    their product range from commodity grades to improve margins.

-   Besides Polyplex group, some other low cost producers are attempting
    to duplicate the distributed manufacturing model as evidenced from
    the move by an Indian producer to set up base in Dubai.

-   Increasingly, the larger producers are trying to tie up strategic
    partnerships or acquisitions in order to ensure growth, presence in
    diversified markets or products or even as a measure to acquire
    technology for newer and sophisticated product range.

  3.5 Manufacturing of product

  3.5.1 Production

  PTL’s plant is located at No. 60/24 Moo 3, Siam Eastern Industrial
  Park, Rayong Province, on an area of 28 rai 50.9 square wah. In order
  to have better control over raw material quality and availability as
  also costs, PTL has also set up a captive Pet Resin facility. The
  first phase of the backward integration project involving setting up
  of a batch polycondensation plant of 20 tons/day capacity commenced
  operations in September-2004 and the second phase, being the
  Continuous process plant started operations in February, 2005. In
  August, 2005, PTL commenced production from its Metallizer plant in
  the same location.

  3.5.2 Production capacity

  The Company has two PET film production lines. The first one carrying
  an approved production capacity of 24,000 tons per year commenced
  commercial production on April 2, 2003. The second one carrying the
  same capacity with commercial production commenced on November 12,
  2003. Capacity of Polyplex group, present and projected as on 31^(st)
  March 2007, is as follows:

  ----------------------------- ------------------- ---------------------
                                Capacity (tons per  
                                year)               

                                31^(st) March, 2007 Projected as at
                                                    31^(st) March 2008

  a) PET film                                       

  India                         20,000              20,000

  Thailand*                     48,000              48,000

  Turkey                        24,000              24,000

  Total capacity                92,000              92,000

  b) PET resin                                      

  India                         20,000              20,000

  Thailand*                     52,500              52,500

  Turkey                        45,500-             45,500-

  Total capacity                118,000             118,000

  c) Metallized film                                

  India                         4,800               4,800

  Thailand*                     7,500               7,500

  Turkey                        5,000               5,000

  Total capacity                17,300              17,300

  d) Extrusion Coating film                         

  India                                             -

  Thailand*                                         9,000

  Turkey                                            -

  Total capacity                                    9,000
  ----------------------------- ------------------- ---------------------

  *Capacities for Thailand are as approved by BOI based on theoretical
  output and the actual attainable output could be lower.

  During 2003/04, its production output of PET film accounted for 23,360
  tons, representing a capacity utilization of 96.46% (as per then
  stated pro rata capacity of 24,000 tons per year). Its output reached
  38,199 tons in 2004/05, 36,877 tons in 2005/06 and 36,847 tons in
  2006/07, which represents 97.95%,94.56% and 94.48% capacity
  utilization (on the effective capacity of 39000 tons per year)
  respectively.

(Tons)

3.5.3 Major raw materials

  PET resin

  PET Resin (polyethylene terephthalate resin) is the major raw material
  in the production process for PET films. In beginning, the company had
  procured most of its PET resin requirements from two unrelated
  suppliers belonging to one group with whom the Polyplex group enjoys a
  long-standing good relationship. The requirement of procuring PET
  resin from outside suppliers have gone down since 2004/05 after the
  company commenced production of its captive Pet resin in two phases.

  The table below shows volume of PET resin consumed in 2004/05, 2005/06
  and 2006/07:

  --------------- ----------- -------- ---------- -------- ---------- --------
                  2004/05              2005/06             2006/07    

                  Tons        %        Tons       %        Tons       %

  Local           31,428      80.27    1,365      3.62                

  Imports         3,971       10.14    -          -        989        2.63

  Own Production  3,754       9.59     36,353     96.38    36,618     97.37

  Total           39,153      100.00   37,718     100.00   37,607     100.00
  --------------- ----------- -------- ---------- -------- ---------- --------

  Purified Terephthalic acid (PTA) and mono ethylene glycol (MEG):

  The major raw materials for PET resin production are purified
  terephthalic acid (PTA) and mono ethylene glycol (MEG). To ensure
  uninterrupted procurement of raw materials the Company has currently
  tied up with one local supplier each for PTA and MEG. The company has
  entered into 1-2 year purchase agreement as per which 100% of the
  company’s requirements would be supplied as per the specified price
  formula throughout the contractual period(s).

  3.5.4 Impact on the environment

  There is a negligible impact on environment caused from the production
  process since PET in both film and resins are generally recyclable.

  Since its commencement of production in March 2003, PTL has not faced
  any significant problems relating to the environment. Inspection by
  the Industrial Factory Department has been undertaken on a regular
  basis, the result of which has come out that the Company’s
  manufacturing process poses no environmental impacts. PTL has renewed
  its ISO 14001:2004 certification on environment management system on
  March 9, 2007 for its film plants and the same has been extended for
  the resin and Metallizer plants also. The company has also obtained
  the EIA approval for its resin plant.