4.  Nature of the Business

    1.  Nature of products and services

        The Company operates in the manufacturing and sales of the
        cement and mortar products under INSEE brands as follows:

        INSEE Cement

  ----------------- -----------------------------------------------------
  Brand             Type

  INSEE Petch       Portland cement Type-1, for high strength reinforced
                    concrete

  INSEE Dum         Portland cement Type-3, for high early strength
                    concrete

  INSEE Fah         Portland cement Type-5 - sulfate resistance cement

  INSEE Ngarn Lor   Composite Portland cement, for concrete casting and
                    molding works

  INSEE Samut       Portland pozzolan cement - Sulfate and Choride
                    Resistance Cement

  INSEE Keaw        Portland pozzolan cement (Fly ash Cement), for high
                    durability concrete or mass concrete structures

  INSEE Dang        Mixed cement, for plastering, bricklaying and
                    ordinary concrete works

  INSEE Poon Keaw   Mixed cement, for plastering, bricklaying and
                    ordinary concrete works

  INSEE Power Plus  Mixed cement, concentrated formula for plastering,
                    bricklaying and ordinary concrete works

  INSEE Tong        Masonry cement, specially formulated for plastering
                    works
  ----------------- -----------------------------------------------------

INSEE Mortar

  -----------------------------------------------------------------------
  Brand                               Type
  ----------------------------------- -----------------------------------
  INSEE Mortar Max 11, Green-Red      General Plastering Mortar

  INSEE Mortar Max 12, Green-Pink     Fine Plastering Mortar

  INSEE Mortar Max 13, Green-Blue     Lightweight block Plastering Mortar

  INSEE Mortar Max 14, Green-Dark     Lightweight block
  Blue                                Plastering-Special Fine Mortar

  INSEE Mortar Max 15, Green-Gray     Concrete Plastering Mortar

  INSEE Mortar Max 21, Dark blue-Red  Normal Bricklaying Mortar

  INSEE Mortar Max 23, Dark blue-Blue Lightweight block Bricklaying
                                      Mortar

  INSEE Mortar Max 31, Brown-Red      Floor Leveling Mortar

  INSEE Mortar Max 41, Black-Dark     INSEE TileFix Pro-Tile Adhesive
  blue                                

  INSEE Mortar Max 42, Black-Silver   INSEE TileFix Silver – High
                                      adhesion Tile Adhesive
  -----------------------------------------------------------------------

The Company has focused on value creation on our products and services
in order to fulfil our aspiration – “Solution Provider”. With such
aspiration, timely respond to customers’ needs and meet customer
satisfactions with advanced manufacturing technology and absolute
quality control system is the path that we follow. These ensure that our
products and services contain higher quality than normal standards.

The Company produces clinker, cement and mortar to serve the demand both
domestic and export. Currently, SCCC has three cement plants, located in
Saraburi. With the market share of approximately 27 percent, SCCC is the
second largest cement producer in the country.

For the domestic sales, the company has extent the new sales channel
through WebSALES for customers. Moreover, The Company has developed a
new distribution channel concept, called “INSEE SuperPro” to be an agent
from a traditional store to a more modern look with systematic sales
processes. Our customers and sales consultants have also been
professionally trained to take care of valued dealers in all aspects,
providing service, sharing knowledge, offering consultation, and most
importantly, delivering solutions. In addition to high quality control
and assurance, the company not only provides technical service teams to
recommend product usage and solve any related problems; customers can
promptly notify their problems via the Company’s Customer Service
Centre. But the company also increased the number of Mobile Lab for
mobile lab crew to increase our technical service supports.

Key channels of domestic distribution are through: 1) the Company agent
network, 2) subsidiaries that produce related products such as
ready-mixed concrete, and wood replace product 3) a direct sale to
their-party ready-mixed concrete, concrete product manufacturers and
large contractors. For overseas sales, Vietnam remained the Company’s
biggest export market for clinker.

Furthermore, the company and its subsidiaries produce and sale products
related to cement such as;

-   Siam City Concrete Co., Ltd. Ready mixed concrete and aggregates

  SCCO is a Ready Mixed Concrete producer, under the brand of “INSEE
  Concrete” for many type of construction projects using and “INSEE
  Aggregate” product, together with service center that genuinely meet
  customers’ requirements, and a qualified concrete lab supervised by
  concrete experts who can respond, can provide consultation including
  after sales service and reliable delivery that equipped with vehicle
  status control system.

  Presently the company supplies the product through over 60 own
  concrete plants and over 60 concrete plants of INSEE Concrete
  franchisees.

-   CONWOOD Co., Ltd. Fiber cement

  Products under the name of “CONWOOD” brand are the new innovation of
  construction material that we can replace natural wood from CONWOOD
  Co., Ltd. (Siam City Cement Group Company). We use green technology
  from Switzerland to mix with Portland cement and cellulose-fiber
  without asbestos that is medically proved that cause the pollution and
  poor health.

  Because of their wood-like property and lightness comparing with other
  fiber cement materials, CONWOOD products offer a wide range of
  applications in terms of construction and renovation. They can be
  easily used as decorative construction materials such as ceilings,
  eaves, lathes. Flexible as wood and strong as concrete, CONWOOD
  products are now becoming the preferred choice among the professional
  group such as Architects, Home Builders and Home Developers.

  As an alternative replacement of natural wood, CONWOOD not only offer
  a wood-like property, but also provides lightness, heat insulation and
  greatest workability. They can be cut, nailed, screwed, grooved, and
  sanded, and provide strong, termite-free, fire resistant properties,
  as well as dimensional stability and durability.

  In addition, CONWOOD still focus on new product development with
  innovation, beauty and creative application. We also provide the
  service, “i-service”, in order to provide the standard installation by
  well training team.

-   Geocycle - a business unit providing total waste management services
    for

  industrial, municipal and agricultural sectors in Thailand.

  The Company is aware of the important of development for alternative
  fuels and raw materials in cement production process. It is one of the
  first pioneers in AFR development in Thailand, founding a business
  unit to focus on AFR development. With Factory 101 and 106 Licenses
  granted by Department of Industrial Works, Ministry of Industry, it
  allows us to handle both hazardous and non-hazardous wastes. This
  business unit has been well developed until now it is well equipped
  with experienced employees together with one of the best and biggest
  alternative fuels pre-processing platforms in Thailand, as well as
  Geocycle networks which are regarded as leader in waste management at
  international level.

  Geocycle received BOI privilege and received Integrated Management
  System (ISO 9001, ISO 14001 and OHSAS 18001) as well as international
  standard for laboratory, ISO17025, to re-affirm our laboratory
  capability. In order to raise services’ standard and protect our
  customers’ reputation from illegal dump or non-compliance activities,
  Geocycle’s fleet has been equipped with GPS to monitor and control the
  movement at all times.

  Moreover, Geocycle has played a significant role collaborating with
  government agencies i.e. Department of Industrial Works, Industrial
  Estate Authority of Thailand, and other non-profit organizations i.e.
  Environmental Management Industry Club, Federation of the Thai
  Industries (FTI) to build up a capacity of waste generators through
  seminars, training workshop on Law and Regulation on waste management
  and eco-industrial town. Recently, after the 2011 flood catastrophe
  was settled, Geocycle joined the cooperation center for industrial
  waste management providing consultation to waste generators who were
  flood-victims.

-   Siam City Power Co.,Ltd. Energy

  Siam City Power is a subsidiary, incorporated on 4 April 2011, to
  operate the energy business and to receive the promotional certificate
  No.1390(2)/2552 for waste heat arising from cement production process
  from SCCC and to receive , the energy operation permit and energy
  control permission and assets for the operation of electricity
  generation.

-   INSEE Super Block Co.,Ltd. Light weight block

  INSEE Super Block is a new subsidiary, incorporated on 28 November
  2012, and purchased the Assets utilized in the manufacturing business
  of the lightweight block from Superblock Public Company Limited and
  its subsidiary. The purchase prices aggregated to Baht 500 million,
  inclusive of Baht 20 million for the inventory and Baht 480 million
  for the rest. The operation started on 1 March 2012.

1.  Market and Competition

Domestic Market

The Thai Economy in Y2012 was rebounded at a rate of 5.5 percent,
accelerating from the previous year as production constraints were
relieved. Consumption spending and private investment returned to their
normal conditions. Moreover, the government stimulus measures, for
example, the higher minimum wage policy for low-income workers and
government officials, the first-time car buyer program, the first-time
house buyer program, the reduction of corporate income taxes, and the
rice mortgage scheme proved to be supportive of domestic spending.
Public consumption and public investment still played important roles in
boosting economic recovery. Nonetheless, external demand grew at a
decreasing rate due to risks from the global economic slowdown,
especially from the European sovereign debt crisis. For internal
stability, headline inflation in Y2012 was 3.3 percent, which was lower
than the previous year. The decline was attributed to the slowdown in
the growth of fuel prices due to the lower growth of fuel demand
following the fragile global economic recovery and the government’s fuel
retail price controls.

Regarding to the domestic cement consumption, the severe floods in the
central part of Thailand resulted in a positive influence to cement
industry in Y2012. A lot of construction and repairs of damaged
infrastructures and buildings were undergone from late Q1 till end of
Q3. With Thailand's prospective economy, the flooding did not slow down
the foreign investments in industrial sector. Eastern Seaboard became
the first priority for many factories formerly located in Ayudhya to
migrate to, as well as the top choice for new foreign investors to set
up their production facilities, in order to reduce the risk of possible
floods in the future. Property and commercial developments are the key
drivers for the construction growth in upcountry, in preparing for AEC
in 2015. Modern trade and retail businesses have put their footholds in
all the first tier provinces, and pinpointed the potential cities in the
second and third tier provinces nationwide. In Bangkok, the
mega-projects of mass transit expansion (purple line, blue line and
green line) continued to nurture the construction industry. Other new
logistics developments are the expressway expansion from Mochit to
Western ring road, Route 81: Bangyai-Kanchanaburi and Route 6: Bangpa-In
Korat. The upside of construction industry hiked up the cement
consumption, with an estimated growth of 14%. SCCC's performance was
also positive, aligning with the market growth, contributed mainly from
the consumption of ready mixed concrete and concrete products.

Consequently, strongly supported by the Government recovery policy and
the private investment, the cement consumption was climbed up by 10
percent.

Business Forecast for the Cement Industry in 2013

The Thai economic growth rate in Y2013 is likely to return to its normal
growth path. The momentum of domestic demand remains healthy. New
investment from both public and private sectors will play more roles in
driving the overall investment forward, despite the slowdown in
consumption and investment due to the faded-out effect from the
post-flood reconstruction spending. At the same time, the improvement of
global economic condition will better support export recovery and make
greater contribution to economic growth in Y2013. The prospect of
economic stability is likely to be positive in terms of price stability,
employment, and the current account. Nevertheless, Thai economy is still
faced with an increasing risk from capital flow. Under such conditions,
the macroeconomic management in Y2013 should give priority to enabling
the economy to grow at its full potential, along with enhancing the
long-term economic potential while managing and maintaining economic
stability.

Hence, the Thai economy in Y2013 is projected to grow at an annual rate
of 4.5-5.5 percent. The main driver will be the continuous expansion of
demand from public and external sectors. Public investment will grow at
a high expected annual rate of 16.9 percent supported by the annual
budget disbursement and the 350-billion-baht long term water management
investment scheme which will be continuously invested in Y2013. Public
consumption is expected to grow at a rate of 3.2 percent. Furthermore,
the global economy is expected to show an improvement, resulting in the
expansion of exports of goods and services at a rate of 7.3 percent.
This is in line with expected higher imports, projected to grow at 5.4
percent. Private investment will grow at a higher rate of 10 percent
based on various supporting factors, for example, the increasing in the
business opportunity in Greater Mekong Sub-region, where Thailand is a
center of the region with the most organized infrastructure, the
appreciation in Thai baht resulted in an increase in purchasing power
and a lower import cost of capital goods.

Focusing on domestic cement market consumption, the development of
transportation and logistics routes will be the key driver of domestic
cement demand in Y2013. Continued from Y2012 and new projects on hands,
four routes of mass transit system (the extension of red line and green
line; and the new pink and orange lines) will come along with many
residential and commercial downstream projects. Industrial sector in the
Eastern Seaboard will continue to grow from the favorable Thailand's
economy and investment policies, yet at a slowr pace comparing to Y2012.
With Bangkok being saturated, condominiums and housing projects by top
real estate developers are moving upcountry towards the first tier
provinces, namely Chiangmai, Khonkaen, Prachua KiriKhan (Hua Hin
District, in particular) and Phuket. The channel of modern trades and
retails will also be another key driver for cement consumption in the
upcountry as they will continue to expand in numbers and locations
nationwide.

Based on the above reasons, the cement industry is expected to grow in
line with the country’s economy increase of 5 percent from last year.

Industry Outlook,

Domestic Market

Amidst the global economic slowdown spread out from Europe and US,
Thailand’s domestic market posted positive growth throughout the year
2012. Thanks to strong domestic consumption and recovery of investors’
confidence resulting from an easing of political tensions and from the
flood preventive measures taken by the government.

The construction industry experienced a very strong activity in 2012, as
evidenced by the growth in volume of essential construction materials
over the previous year, namely 11 percent in cement, 14 percent in ready
mixed concrete, or even 13 percent in aggregates, boosted by expediting
stalled construction work carried over from flood affected 2011, new
projects during the year, and the granted budget for the long-term water
resource management worth 300 billion THB.

In 2013, the construction activity is anticipated to further expand,
supported by stronger consumers’ purchasing power from the nationwide
enforcement of the 300-baht minimum wage policy, the continuing strong
public investment in infrastructure projects and the Expansionary
Monetary Policy of the Bank of Thailand.

Overall, growth at 7 percent is foreseen for domestic cement consumption
in the year ahead.

Export Markets

There was a limited impact of the global economic slowdown to the
construction segment in South-East Asian (SEA) countries, as
demonstrated by an increase of 7 percent year on year in clinker and
cement export volume of Thailand. Core markets of clinker export were
Bangladesh, Malaysia and Indonesia, whilst Cambodia, Myanmar and Laos
were major countries importing cement. As a consequence of China’s
investment in ASEAN especially in infrastructures, a drastic growth from
2011 of Thailand’s cement export to the bordering countries was
registered at 59 percent in Laos, 23 percent in Myanmar and 29 percent
in Cambodia.

In 2013, the clinker and cement demand in the region is expected to
expand in accordance with the Asian economic growth. Nonetheless,
surplus supply in North Vietnam, China, and Korea together with the
upward trend of domestic demand in Thailand may result in stable export
volumes and prices compared to 2012.

4.3 Procurement of Raw Materials and Services

Production Capacity

The Company has 3 cement production plants, with total clinker
production capacity of 12.3 million tones per year or cement production
capacity of 14.8 million tones per year.

Raw Materials and Raw Material Suppliers

91% of raw materials are produced in-house. The Company possesses mining
concessions, which entitle it to produce major raw materials for cement
manufacturing, i.e. limestone, shale and gypsum. The rest of 9% is
procured from outside sources, both domestically and overseas.

Alternative Fuels and Raw Materials (AFR)

Since 2005, Geocycle has been offering a total waste management service
to our customers by transforming those wastes into alternative fuels and
raw materials and used in cement production process. Wastes derived from
industrial, community and agricultural sectors. Wastes derived from
various industrial sectors are, such as, electronic, food and beverage,
paint and garment, power generation, rubber and leather, steel and metal
manufacturing, automotive, furniture, petroleum, pharmaceutical. In
addition, wastes derived from community and agriculture are, such as,
sorted municipal solid waste, rice husk and wood bark.

Environmental Impact

One of the SCCC’s Policy is “Concern for Social Responsibility” which
includes the environment conservation. Therefore, the business has
chosen “Clean Technology” which is up-to-date, efficient, energy saving
and environmental friendly technology – in the production process. The
business has implemented the Environmental Management Best Practices by
using 5Rs (Reduce Reuse Recycle Reinvent and Replace) and eco-efficiency
concepts together with Best Available Control Technology which are one
of the business’ commitment to protect the environment and operate its
business on sustainability concept.

Moreover, the business has applied and certified with ISO 14001
Environmental Management Standard, Carbon Reduction label, Green
Industry Awards level 4 (Green Culture) and develop Eco-Friendly Product
named Green Heart Label.

Environmental Impact from Waste Heat Recovery (WHR) Power Plant Project

This project dose not require construction of power plant, but will use
the thermodynamic technology therefore will not generate any
problematical pollution. So its has positive impact, such as less dust
emission from kiln process through due to no any fuel combustion. In
addition, the project can potentially help to reduce the Carbon Dioxide
emission through the reduction of consuming the fossil fuel based power
generation from Electic Generating Authority of Thailand (EGAT).This
project has obtained the investment promotion from Thailand’s Board of
Investment (BOI) for import tax privileges on machinery.

In 2008, the Company revisited its initiative on waste heat recovery
that once used with No.4 as the first kiln in South East Asia that used
the waste heat from cooling tower to generate electricity. Each year
Kiln No.4 generated electricity up to 8,000 kilowatt hours.

The Waste Heat Recovery Power Plants used with Kiln 5 and Kiln 6,
operated by Siam City Power Co.Ltd.

4.  Work in Progress

None