2.  Business Operation

In the first quarter of 2006, SCG consolidated the accounts of Thai
Plastic and Chemicals PLC and Thai British Security Printing PLC, due to
the implied management control over both companies.

In 2006 SCG has divested main investments as follows:

  SCG divested all investments in Tata Steel (Thailand) PLC (Formerly:
  Millennium Steel PLC) , Siam Asahi Technoglass Co., Ltd. and The Deves
  Insurance PLC, while divested part of an investment in The Siam United
  Steel (1995) Co., Ltd.

In 2006 SCG has acquired investment as follows:

-   The Siam Cement PLC increased investment in The Siam Pulp and Paper
    PLC to 98.34 percent, The Thai Plastic and Chemicals PLC to 44.67
    percent, PTT Chemical PLC to 20.27 percent (direct and indirect
    investment of The Siam Cement PLC was 20.95 percent) and The
    Aromatics (Thailand) PLC to 8.65 percent.

-   Chemicals business increased investment in Bangkok Synthetics Co.,
    Ltd. to 21.62 percent which effected to the company changed status
    to associates with changed accounting method from cost to equity
    method.

-   Paper business increased investment in Phoenix Pulp and Paper PLC to
    98.96 percent (direct and indirect investment of The Siam Cement
    PLC. was 97.32 percent) and Thai Cane Paper PLC to 70.74 percent
    (direct and indirect investment of The Siam Cement PLC was 69.57
    percent).

Since The Siam Cement PLC has become a holding company, aiming for a
transparent management, efficient resource management, strong long-term
business strategy and good governance, the Company has organized its
structure as follows:

-   Five strategic business units, comprising Chemicals, Paper, Cement,
    Building Materials and Distribution.

-   Two holding companies, consisting of, Cementhai Holding Co., Ltd.
    and Cementhai Property (2001) PLC.

  Attribute of each business unit is summarized hereunder:

Chemicals Business

SCG Chemicals Co., Ltd. is a holding company for which the Chemicals
Business of The Siam Cement Group operates under, through an integrated
production of both upstream products (Olefins) and downstream products
(Polyolefins).

+---------------------+------------------------------------------------+
| Key Information     |                                                |
+---------------------+------------------------------------------------+
| Capacity            | 1.08 Million tons per year of Polyolefins      |
+---------------------+------------------------------------------------+
| Main Products       | Olefins and Polyolefins.                       |
+---------------------+------------------------------------------------+
| Strengths           | -   High competitive advantage in upstream     |
|                     |     products.                                  |
|                     |                                                |
|                     | -   Low Olefins/ Polyolefins production costs. |
+---------------------+------------------------------------------------+
| Major Business      | -   Emphasize on Polyolefins product portfolio |
| Policy              |     which is the company’s strength to         |
|                     |     increase the company’s competitive         |
|                     |     advantage.                                 |
|                     |                                                |
|                     | -   Become a regional leader in both Olefins   |
|                     |     and Polyolefins business.                  |
+---------------------+------------------------------------------------+
| Business            | -   Seek business opportunities in both        |
| Development Policy  |     domestic and international markets,        |
|                     |     focusing on Olefins and Polyolefins.       |
+---------------------+------------------------------------------------+

Paper Business

The Siam Pulp and Paper PLC was established in 1980 by The Siam Cement
PLC and Siam Kraft Co., Ltd., to produce and sell pulp. Its original
capital was Baht 100 million under the name of The Siam Pulp and Paper
Co., Ltd. In 1994, it was converted into a public company under the
current name with a capital of Baht 1,400 million. Its capital is now
Baht 1,536 million and was delisted from the Stock Exchange of Thailand
in 2003.

The Siam Pulp and Paper PLC and subsidiaries are the country only
integrated producers of high quality pulp, paper, and containers. Their
main businesses are Pulp, Printing and Writing Paper, Packaging Paper,
and Containers.

+---------------------+------------------------------------------------+
| Key Information     |                                                |
+=====================+================================================+
| Capacity            | Packaging paper 1,557,300 tons per year        |
|                     |                                                |
|                     | Pulp 418,900 tons per year                     |
|                     |                                                |
|                     | Printing and writing paper 365,000 tons per    |
|                     | year                                           |
+---------------------+------------------------------------------------+
| Main Products       | Kraft paper, corrugated paper boxes, pulp and  |
|                     | printing & writing paper.                      |
+---------------------+------------------------------------------------+
| Strengths           | -   Only integrated producer of pulp, paper,   |
|                     |     and containers in Thailand.                |
|                     |                                                |
|                     | -   World-class quality.                       |
|                     |                                                |
|                     | -   Continuously create innovative production  |
|                     |     and services.                              |
|                     |                                                |
|                     | -   Strong domestic channel of distribution    |
|                     |     and marketing system. Exports throughout   |
|                     |     the world available.                       |
|                     |                                                |
|                     | -   Efficient production cost control.         |
|                     |                                                |
|                     | -   Total Quality Management – TQM.            |
+---------------------+------------------------------------------------+
| Major Business      | -   Maintain domestic market leadership.       |
| Policy              |                                                |
|                     | -   Go to regional leadership for pulp and     |
|                     |     paper.                                     |
|                     |                                                |
|                     | -   Sustainable grow for a valuable return to  |
|                     |     shareholders and stakeholders              |
|                     |                                                |
|                     | -   Conserve environment.                      |
+---------------------+------------------------------------------------+
| Business            | -   Seek opportunities in expanding its        |
| Development Policy  |     business by purchasing, merging with pulp  |
|                     |     and paper producer both domestic and       |
|                     |     overseas.                                  |
|                     |                                                |
|                     | -   Improve existing machine to get higher     |
|                     |     efficiency.                                |
|                     |                                                |
|                     | -   Develop knowledge, skill and experience    |
|                     |     for all level of employee to maintain      |
|                     |     competitive advantage to achieve a         |
|                     |     regional leader.                           |
+---------------------+------------------------------------------------+

Cement Business

The Siam Cement Industry Co., Ltd., was founded on November 11, 1998,
upon the transfer of all cement related assets from The Siam Cement
Public Company. The Concrete Products and Aggregate Co., Ltd. is
currently a 100 percent shareholder of The Siam Cement Industry Co., Ltd
which is primarily responsible for producing various types of cements
and concrete products of which comprise: 1) Grey Cement 2) Concrete
Products 3) Dry Mortar 4) White Cement 5) Refractory Products. It also
provides plant and machinery installation and maintenance service,
instrument metrological service, including energy conservation
consultation and disposal of industrial waste.

+---------------------+------------------------------------------------+
| Key Information     |                                                |
+=====================+================================================+
| Capacity            | 23 million tons per year                       |
+---------------------+------------------------------------------------+
| Main Products       | Grey cement, concrete product (ready-mixed     |
|                     | concrete, prefabricated concrete floor, and    |
|                     | post tension concrete floor), dry mortar,      |
|                     | white cement, fireclay bricks, and special     |
|                     | refractory.                                    |
+---------------------+------------------------------------------------+
| Brand               | -   Cement: Elephant, Tiger Brands and Tiger   |
|                     |     Plus                                       |
|                     |                                                |
|                     | -   Ready-Mixed Concrete: CPAC Brand           |
+---------------------+------------------------------------------------+
| Major Business      | -   Step up as a regional leader.              |
| Policy              |                                                |
|                     | -   Maintain price level and market stability. |
|                     |     Enhance its domestic market leadership.    |
|                     |                                                |
|                     | -   Create high value product & service        |
|                     |                                                |
|                     | -   Continuously conserve natural resources    |
|                     |     and environment as well as join creative   |
|                     |     activities with local community and social |
|                     |     development program.                       |
+---------------------+------------------------------------------------+
| Business            | -   Continuously develop and improve product   |
| Development Policy  |     quality.                                   |
|                     |                                                |
|                     | -   Continuously reduce costs and expenses,    |
|                     |     especially energy costs and raw material   |
|                     |     costs, with fuel and raw material          |
|                     |     substitutes.                               |
|                     |                                                |
|                     | -   Develop knowledge, skills, and competency  |
|                     |     for every employee with assorted methods.  |
|                     |                                                |
|                     | -   Bring innovative idea to develop products  |
|                     |     and working process.                       |
+---------------------+------------------------------------------------+

Building Materials Business

Cementhai Building Products Co., Ltd. was established to concentrate in
the production of building and related products of the Group. The
Company employs modern production technology and quality control along
with its experts, enabling the Business to become market leaders for
both domestic market and ASEAN countries.

+--------------------+-------------------------------------------------+
| Key Information    |                                                 |
+====================+=================================================+
| Capacity           |   Fiber-cement products 110 million Sq. M. per  |
|                    |   year                                          |
|                    |                                                 |
|                    |   Concrete roof tile 30 million Sq. M. per year |
|                    |                                                 |
|                    |   Ceramic tile 65 million Sq. M. per year       |
|                    |                                                 |
|                    | Concrete products 3 million Sq. M. per year     |
+--------------------+-------------------------------------------------+
| Main Products      | -   Roofing products: fiber-cement roof tile,   |
|                    |     concrete roof tile, and ceramic roof tile.  |
|                    |                                                 |
|                    | -   Ceramic floor and wall tile.                |
|                    |                                                 |
|                    | -   Concrete blocks, concrete floor tiles, and  |
|                    |     precast concrete slabs.                     |
+--------------------+-------------------------------------------------+
| Brand              | -   Roofing products: Elephant, Tiger, CPAC     |
|                    |     Monier, Excella, NeuStile and Ayara         |
|                    |                                                 |
|                    | -   Ceramic floor and wall tiles: COTTO and     |
|                    |     SGI.                                        |
|                    |                                                 |
|                    | -   Concrete blocks, concrete floor tiles, and  |
|                    |     precast concrete slabs: CPAC                |
+--------------------+-------------------------------------------------+
| Strengths          | -   Market leader with continuous product       |
|                    |     development.                                |
|                    |                                                 |
|                    | -   Competitive production costs.               |
|                    |                                                 |
|                    | -   Good distribution network: exclusive dealer |
|                    |     network.                                    |
+--------------------+-------------------------------------------------+
| Major Business     | -   Maintain market leadership by developing    |
| Policy             |     products and services that highest respond  |
|                    |     to customer needs.                          |
|                    |                                                 |
|                    | -   Extend exports, especially ceramic tiles.   |
|                    |                                                 |
|                    | -   Continuously develop organization and       |
|                    |     employees.                                  |
+--------------------+-------------------------------------------------+
| Business           | -   Develop innovative idea in developing a     |
| Development Policy |     product, production and working process.    |
|                    |                                                 |
|                    | -   Build growth by adding related new products |
|                    |     and services.                               |
|                    |                                                 |
|                    | -   Enhance a strong leadership of building     |
|                    |     products in ASEAN by expanding production   |
|                    |     bases to Vietnam, Laos, and Cambodia.       |
|                    |                                                 |
|                    | -   Encourage new product usage and develop new |
|                    |     market for ceramic tiles and concrete       |
|                    |     paving blocks.                              |
+--------------------+-------------------------------------------------+

Distribution Business 

Cementhai Distribution Co., Ltd. was established in accordance to the
Group’s restructuring plan in 1998 as a holding company for local and
overseas trading, selling and distribution, for building materials and
home improvement products. Core companies are:

-   Cementhai Sales and Marketing Co., Ltd.: Domestic distribution.

-   Cementhai Logistics Co., Ltd.: Distribution and Intra-Regional
    logistics services including transportation and warehouse
    management.

-   SCT Co., Ltd.: International trading.

In addition, The Company indirectly invests in port business through
Thai Prosperity Terminal Co., Ltd.

The Net Sales of the Distribution Business in 2006 is Baht 81,700
million, Baht 78,000 million in 2005 and Baht 68,600 million in 2004.
Over 50,000 product items from the Group and external companies are
presented. Non-group products will be added to increase the assortment
in the future.

Vision

Our commitment is to provide the most responsive distribution and
trading services to satisfy building, home improvement, and industrial
needs in ASEAN by 2011.

+---------------------+------------------------------------------------+
| Key Information     |                                                |
+=====================+================================================+
| Main Products       | Group products and external products sale via  |
|                     | Cementhai Home Mart and domestic and overseas  |
|                     | distribution network                           |
+---------------------+------------------------------------------------+
| Strengths           | -   Distribution network through dealers and   |
|                     |     company-owned outlets throughout the       |
|                     |     country.                                   |
|                     |                                                |
|                     | -   Modern, accurate, and fast transportation  |
|                     |     network and warehouse management.          |
|                     |                                                |
|                     | -   21 foreign branches all over the world.    |
|                     |                                                |
|                     | -   Well-accepted products.                    |
+---------------------+------------------------------------------------+
| Major Business      | -   Strengthen existing businesses whereas     |
| Policy              |     creating continuous growth for new         |
|                     |     potential businesses.                      |
+---------------------+------------------------------------------------+
| Business            | -   Strengthen logistics business for both     |
| Development Policy  |     domestic and overseas.                     |
|                     |                                                |
|                     | -   Develop both domestic and overseas         |
|                     |     channels of distribution.                  |
|                     |                                                |
|                     | -   Improve key fundamentals in distribution   |
|                     |     business.                                  |
|                     |                                                |
|                     | -   IT development                             |
|                     |                                                |
|                     | -   Organization development                   |
|                     |                                                |
|                     | -   Effective management system                |
|                     |                                                |
|                     | -   Synergy and benchmarking                   |
+---------------------+------------------------------------------------+

Cementhai Holding

CHC oversees investments in various businesses which are categorized as
SCG’s non-core businesses while aiming to achieve strong cash generation
through dividend. These joint-venture companies are businesses in
automotive accessories and equipments, agricultural machinery, steel and
electrical industry. CHC provides support and cooperation with major
partners in order for the joint venture companies to reduce cost and
expenses, develop new products, expand the market as well as improve
customer service with the ultimate objectives in both operating
performance and cash generation.

Cementhai Property

Cementhai Property (2001) Public Company Limited (Cementhai Property),
formerly named Siam Tyre Public Company Limited, was established on
October 9, 1962 and became a public company on February 7, 1994. On
December 13, 2001, the company’s name was changed from Siam Tyre Public
Company Limited to be Cementhai Property (2001) Public Company Limited
becoming a holding company to oversee the industrial land business of
Siam Cement Group, consisting of SIL Industrial Land Co.,Ltd. (SIL) and
Rayong Industrial Land Co.,Ltd. (RIL). On April 29, 2005, the company
has been allied with Hemaraj Development Public Company Limited.

Cementhai Property aims to create more value to all stakeholders by
being a solution provider for industrial estate customers as well as
looks for opportunity to continue maximizing the business’ value in the
future.

Revenue Structure for 2006

[]

  Notes: Financial figures classified according to business unit before
  inter-group adjustments.

  * Equity income (loss) from associates by equity method.

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