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.) Metallised films

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)           | : | Comprising of Hot stamping foils, flexible          |
| Industrial   |   | air-conditioning ducts, labels                      |
|              |   |                                                     |
|              |   | /ID cards, lamination products and many more.       |
+--------------+---+-----------------------------------------------------+
| 3)           | : | Wire and cable wrap, membrane switches, flexible    |
| Electrical   |   | printed circuits,                                   |
|              |   |                                                     |
|              |   | capacitors and motor insulation.                    |
+--------------+---+-----------------------------------------------------+

  The segmental break-up of income from PET film sale has been estimated
  as follows:

  ---------------- --------- -------- ---------- -------- ---------- --------
  Segment          2003-04            2004-05             2005-06    

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

  Industrial Use   440.70    26.78    751.51     23.03    790.18     0.37

  Electrical Use   42.47     2.58     102.14     3.13     10.90      27.01

  Packaging Use    1162.30   70.64    2,409.31   73.84    2,124.96   72.62

  Total Sales      1645.47   100.00   3,262.96   100.00   2,926.04   100.00
  ---------------- --------- -------- ---------- -------- ---------- --------

1.  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(ป้องกันการซึมของไอน้ำ)    | Excellent | Fair       |
+--------------------------------------------+-----------+------------+
| Gas barrier properties(ป้องกันการซึมของก๊าซ)   | Poor      | Excellent  |
+--------------------------------------------+-----------+------------+
| Break down                                 | Poor      | Excellent  |
| voltage(ความสามารถในการรรับกระแสไฟฟ้า)       |           |            |
+--------------------------------------------+-----------+------------+
| Machineabi                                 | Fair      | Excellent  |
| lity(ความสามารถในการเปลี่ยนรูปร่างโดยเครื่องจักร) |           |            |
+--------------------------------------------+-----------+------------+
| Printability(ความสามารถในการพิมพ์)           | Fair      | Excellent  |
+--------------------------------------------+-----------+------------+
| Suitability for                            | Poor      | Excellent  |
| metallising(ความเหมาะสมที่ใช้ได้กับโลหะ)        |           |            |
+--------------------------------------------+-----------+------------+
| Density (gm/cc)                            | Low       | High       |
|                                            | (0.91)    | (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 Marketing Strategy

  Key elements of the strategy are:

  - Enhance capacity to capture growth markets & reinforce cost
  leadership position

  - To build strong global delivery capabilities with near-shoring and
  efficient onward distribution network. In this regard, PTL has
  acquired a distribution company in USA.

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

  - Consolidate market position in each geography 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.

-   Backward integration into the manufacturing of PET chips has
    strengthened the cost structure of the Company.

-   PTL has also setting up a metallizer to increase its product
    offering to its customers.

  After the completion of these expansions, PTL has an optimal business
  model with 2 PET film lines, captive PET resin manufacturing and a
  metallizer; which it believes to be the most cost-effective structure.

-   PTL is in the process of setting up an extrusion coating plant to
    further improve the product mix towards value added products.

-   Investment in a Polyester film line, Metallizer and Pet chips in
    Turkey was the next initiative to further spread the manufacturing
    base closer to the customers in Europe, Russia, Middle-East and
    Northern Africa. Based on the initial experience at the new location
    and market conditions, plans call for subsequent setting up of
    another PET film line to have a facility similar to Thailand.

-   Deepening of the distribution reach through a mix of channel
    partnerships, direct presence and dealer representation and
    strengthening of the sales team.

-   Initiation of techniques like Total Productive Maintenance to
    improve the productivity at the plant.

3.3 Distribution Channel

  The Company distributes its products to both domestic and overseas
  markets, with main focus put on the latter, constituting about 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.

  Value of export and domestic PET film sales are as follows:

  ---------------------------------------------------------------------------
  Customers      2003/04             2004/05             2005/06    
  -------------- ---------- -------- ---------- -------- ---------- ---------
                 Bt.        %        Bt.        %        Bt.        %
                 million             million             million    

  Exports                                                           

  Asia           716.63     43.55    1,090.16   33.41    740.27     25.30

  North America  372.54     22.64    820.50     25.15    705.24     24.10

  Europe         351.53     21.36    863.14     26.45    915.86     31.30

  Other          48.35      2.94     126.71     3.88     101.26     3.46

  Total exports  1,489.05   90.49    2,900.51   88.89    2,462.63   84.16

  Domestic sales 156.42     9.51     362.45     11.11    463.41     15.84

  Grand total    1,645.47   100.00   3,262.96   100.00   2,926.04   100.00
  ---------------------------------------------------------------------------

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

  ---------------- ---------- -------- ---------- -------- ---------- --------
  Customers        2003/04             2004/05             2005/06    

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

  End Users        770.68     46.84    1,647.04   50.48    1,447.72   49.48

  Distributors     874.79     53.16    1,615.92   49.52    1,478.32   50.52

  Total            1,645.47   100.00   3,262.96   100.00   2,926.04   100.00
  ---------------- ---------- -------- ---------- -------- ---------- --------

3.4 Markets and competitive environment

  3.4.1 Global Demand

The worldwide merchant market of PET film in 2005 was 1.49 million tons,
up from 1.19 million tons in 2001, which represents a CAGR of 5.71%. 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 74% in 2001, rising to 88% in 2005, with a
cumulative growth of almost 50% during 2001-2005. Electrical segment
recorded the highest growth of 75.38%, packaging 50.11% and industrial
34.19%.

Table to illustrate global consumption of PET film by business sectors
(unit: thousand tons)

  ------------ -------- ----- -------- ----- -------- ----- -------- ----- -------- -----
  Type         2001           2002           2003           2004           2005     

               volume   %     volume   %     volume   %     volume   %     volume   %

  Magnetic     210      18    198      15    170      13    110      8     74       5
  media                                                                             

  Packaging    441      37    509      39    526      40    620      42    662      45

  Electrical   130      11    149      12    162      12    197      13    228      15

  Imaging      96       8     94       7     93       7     115      8     102      7

  Industrial   313      26    342      26    374      28    423      29    420      28

  Total        1,190    100   1,293    100   1,325    100   1,465    100   1,486    100
  ------------ -------- ----- -------- ----- -------- ----- -------- ----- -------- -----

Source: Company Data

Classified by region, demand for PET film in 2001 was the highest in
North America followed by West Europe, Japan and Other Asia at similar
levels. In 2005, other Asian countries’ demand for PET film is the
largest accounting for 31% of world demand, followed by America and
Japan with 21% and 19% respectively. With the expansion of packaging,
industrial and electrical businesses (CAGR of 10.33% during 2001-2005)
and hence growing demand for thin PET film since 2001, demand from other
Asian countries recorded a healthy CAGR of 17.45% during 2001-2005.

Table to illustrate global consumption of PET film classified by regions
(unit : thousand tons)

  --------- -------- ----- -------- ----- -------- ----- -------- ------ -------- -----
  Region    2001           2002           2003           2004            2005     

            volume   %     volume   %     volume   %     volume   %      volume   %

  America   309      26    327      25    318      24    329      22     326      21

  Japan     218      18    221      17    245      18    267      18     283      19

  Korea     161      14    175      14    169      13    164      11     144      10

  Other     243      20    299      23    338      26    436      30     462      31
  Asia                                                                            

  W Europe  237      20    248      19    226      17    232      16     233      16

  RoW       22       2     23       2     29       2     37       3      38       3

  Total     1,190    100   1,293    100   1,325    100   1,465    100    1,486    100

  Thin film 960      81    1,048    81    1,066    80    1,157    79     1,175    79

  Thick     230      19    245      19    259      20    308      21     311      21
  film                                                                            
  --------- -------- ----- -------- ----- -------- ----- -------- ------ -------- -----

Source: Company Data

3.4.2 Global Supply

The global merchant capacity for PET film in 2005 was almost 2 million
tons up from 1.49 million tons in 2001, which represents a CAGR of
7.52%. Thin film capacity was estimated at 1.56 million tons in 2005,
about 78% of the total. 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 illustrate global capacity by types of PET film (unit: thousand
tons)

[TABLE]

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 2005. Its portion compared to total capacity was 42.50%,
followed by America and Korea with 15.30% and 15% respectively. During
2001-2005, Other Asia also was the region that had the highest growth
rate of PET film production capacity with growth rate 109.74% during
2001-2005 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)

  --------------------------- --------- --------- --------- --------- ---------
                              2001      2002      2003      2004      2005

  America                                                              

  - Thin Film                 171.5     168.7     188.5     192.4     197.4

  - Thick Film                106.8     106.8     99.7      103.0     108.6

  Total                       278.3     275.5     288.2     295.4     306.0

  Compare to the World        18.63     17.75     17.87     16.1      15.3
  Capacity (%)                                                        

  Japan                                                                

  - Thin Film                 177.5     198.0     181.5     179.4     177.2

  - Thick Film                77.0      77.0      96.0      101.0     105.0

  Total                       254.5     275.0     277.5     280.4     282.2

  Compare to the World        17.03     17.72     17.21     15.3      14.1
  Capacity (%)                                                        

  Korea                                                                

  - Thin Film                 244.3     250.8     255.6     253.9     252.5

  - Thick Film                55.0      55.0      43.0      43.0      48.0

  Total                       299.3     305.8     298.6     296.9     300.5

  Compare to the World        20.03     19.70     18.52     16.1      15.0
  Capacity (%)                                                        

  Other Asia                                                           

  - Thin Film                 330.8     372.4     430.3     622.4     750.2

  - Thick Film                73.6      73.6      87.0      104.1     98.0

  Total                       404.4     446.0     517.3     726.5     848.2

  Compare to the World        27.07     28.74     32.08     39.5      42.5
  Capacity (%)                                                        

  West Europe                                                          

  - Thin Film                 158.3     152.8     147.7     152.8     165.4

  - Thick Film                69.2      69.2      62.0      59.2      64.4

  Total                       227.5     222.0     209.7     212.0     229.8

  Compare to the World        15.23     14.30     13.01     11.5      11.5
  Capacity (%)                                                        

  The Rest of the World(ROW)                                           

  - Thin Film                 16.6      14.3      13.5      14.2      21.7

  - Thick Film                13.4      13.4      7.6       13.7      9.0

  Total                       30.0      27.7      21.1      27.9      30.7

  Compare to the World        2.01      1.78      1.31      1.5       1.6
  Capacity (%)                                                        

  The World Production        1,494.0   1,552.0   1,612.4   1,839.1   1,997.4
  Capacity                                                            
  --------------------------- --------- --------- --------- --------- ---------

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

Past 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 size is quite small. PTL forecasts that
domestic demand in Thailand is approximately 15,000 tons per year with
an annual growth rate of about 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 (as
approved by BOI) 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. Plast | PTL         |
|                           | Industries   | Plc.        |             |
| (tons per year)           | Plc.         |             |             |
+---------------------------+--------------+-------------+-------------+
| BOPP film                 | 100,000      | 36,000      | -           |
+---------------------------+--------------+-------------+-------------+
| PET film                  | 3,500        | 30,000      | 48,000      |
+---------------------------+--------------+-------------+-------------+
| CPP film                  | 3,500        | -           | -           |
+---------------------------+--------------+-------------+-------------+
| Metallized film           | 7,000        | 6,000       | 7,500       |
+---------------------------+--------------+-------------+-------------+
| Other coated films        | 3,000        | -           | -           |
+---------------------------+--------------+-------------+-------------+
| Total                     | 117,000      | 72,000      | 55,500      |
+---------------------------+--------------+-------------+-------------+

Source: www.ajplast.com and www.thaifilmind.com

In 2002, Thailand’s production capacity of PET film was around 12,000
tons, rising to 51,000 tons by 2003 year-end and 81,500 tons currently
as a result of PET film capacity expansion by some producers such as A.
J. Plast in the wake of predicted growth of this industry.

Most of PTL’s production is intended for exports while the other PET
film producers have been more focused on the domestic markets.
Therefore, with different target markets, PTL does not foresee any
specific threat from the increased capacity of these producers on its
export sales.

The table below shows export value of PET film of the Company compared
with other manufacturers of the country:

Export value of PTL compared with other producers

  ---------------- ---------- --------- ---------- --------- ---------- ---------
                   Apr'03 -             Apr'04 -             Apr'05 -   
                   Mar'04               Mar'05               Mar'06     

                   Million    %         Million    %         Million    %
                   Baht                 Baht                 Baht       

  PTL              1489       95.57     2,783      94.69     2,364      87.09

  Other Companies  69         4.43      156        5.31      350        12.91

                                                                        

  Total            1558       100       2,938      100       2,714      100
  ---------------- ---------- --------- ---------- --------- ---------- ---------

Source : Customs Department's web site and company data

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 1999-2004, 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 in 2005, as a result of excess capacity built up, the average
capacity utilization for thin films has declined to 75% 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.

[]

Source – Company Data

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 ensure
larger size and hence economy of scale.

Polyplex group has accumulated over 18 years experience in the PET film
industry. It has been strengthened with consistent expansion in
production capacity. Its management is highly efficiency. Delivery of
products is efficient by having 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 duties, the Company’s parent company based in India used to
experience such threat from both the EU and the USA. 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. Such problem has been resolved until that, at present, the USA
has levied zero duties till date under the anti-dumping measure against
the parent company. It is also unlikely that the EU will take this
measure against the Company as the distribution to the EU is now handled
by the facility in Turkey. As for export to the USA, with close
monitoring on selling prices, the Company has never experienced any tax
measures since its inception in April 2003.

Projection of PET film industry:

-   Most of the planned capacity expansion has already started
    production within the last two years. Except for a few producers,
    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 high. 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
    40% is likely to continue though with a reducing share. However,
    decline in their traditional market segments and slower growth in
    their home markets have 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.

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)                |                     |
+-------------------------+----------------------+---------------------+
|                         | 31st March, 2006     | Projected as at     |
|                         |                      | 31^(st) March       |
|                         |                      |                     |
|                         |                      | 2007                |
+-------------------------+----------------------+---------------------+
| 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-             |
+-------------------------+----------------------+---------------------+
| Total capacity          | 72,500               | 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              |
+-------------------------+----------------------+---------------------+

  * As approved by BOI

  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 and 36,877 tons in 2005/06, which represents
  97.95% and 94.56% capacity utilization (on the effective capacity of
  39000 tons per year) respectively.

(Tons)

  ---------------------------- --------------- ------------- -------------
                               2003/04         2004/05       2005/06

  Full production capacity     24,217          39,000        39,000

  Production output            23,360          38,199        36,877

  Capacity utilization (%)     96.46           97.95         94.56
  ---------------------------- --------------- ------------- -------------

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 2003/04, 2004/05
  and 2005/06:

  ---------------- ---------- ------- ----------- -------- --------- --------
                   2003/04            2004/05              2005/06   

                   Tons       %       Tons        %        Tons      %

  Local            23,660     99.10   31,428      80.27    1,365     3.62

  Imports          213        0.90    3,971       10.14    -         -

  Own Production   -          -       3,754       9.59     36,353    96.38

  Total            23,873     100.0   39,152      100.00   37,718    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 entered
  into certain renewable one year period purchase agreements with one
  supplier each for PTA (local supplier) and MEG (import source) as per
  which 100% of the company’s requirements could be supplied as per the
  specified price formula throughout the contractual period(s). Within
  the year 2005/06, two new plants for PTA have been set up in Thailand
  and one new MEG plant is expected to commence production from July,
  2006. This will increase the options and raw material security for
  PTL. The company is in the process of discussion with various
  suppliers to finalize its purchase arrangements.

3.5.4 Impact on the environment

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

  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 attained
  ISO 14001:1996 certification on environment management system on May
  21, 2004 for its film plants and the same is under extension for the
  resin and Metallizer plants also. The company has also obtained the
  EIA approval for its resin plant.