3. business operation OF EACH LINE OF PRODUCT

3.  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 Tong               Masonry cement, specially formulated for
                           plastering works

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

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

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

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

  INSEE Samut              Portland pozzolan cement - Sulfate and Choride
                           Resisting Cement

  INSEE Fah                Portland cement Type-5 - Sulfate Resisting
                           Cement

  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 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 Plastering-Special
  Blue                            Fine Mortar

  INSEE Mortar Max 15, Green-Gray Concrete Plastering Mortar

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

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

  INSEE Mortar Max 31, Brown-Red  Floor Leveling Mortar

  INSEE Mortar Max 42,            INSEE TileFix Silver-Tile Adhesive
  Black-Silver                    

  INSEE Mortar Max 43, Black-Gold INSEE TileFix Gold – Tile Adhesive
                                  (Premium)
  -----------------------------------------------------------------------

  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 produced clinker and cement to serve the demand both
  domestic and export. Currently, SCCC has three grey cement plants
  where located in the same location, Saraburi. With the market share of
  approximately 27 percent, SCCC is the second largest cement producer
  in the country.

  For the domestic sales, we extent the new channel by sales through
  WebSALES to the customer. Moreover, The Company has developed a new
  channel concept, called “INSEE SuperPro” to be an agents from
  traditional stores to a more modern look with systematic processes.
  Our customer 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
  Complaint Call Center. But The company also increased the number of
  Mobile Lab for mobile lab crew to increase our technical service
  supports.

  For the proportion of the Company’s sale in 2008, it comprises of
  domestics sales and export sales with following proportion 63% and 37%
  respectively. 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-mix concrete and aggregates

  SCCO is a Ready Mix Concrete supplier, under the name of “INSEE
  Concrete” brand for many type of construction projects using and
  “INSEE Aggregate” product, together with services that genuinely meet
  customers’ requirements, we firmly believe that we are ready to be the
  best concrete solution provider in the industry.

-   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). We use green technology from
  Switzerland to mix with Portland cement and cellulose-fiber by without
  asbestos that is medically proved that cause the pollution and poor
  health.

  Because of their wood-like property and lightness, CONWOOD products
  offer a wide range of applications in terms of construction and
  renovation. They can be easily used as construction materials such as
  ceilings, eaves, lathes. Flexible as wood and strong as concrete,
  CONWOOD products are now becoming the preferred choice of most
  architects.

  An alternative replacement of natural wood, these are flexible
  fibre-cement products with a wood-like property that not only offers
  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. Cement is the main raw material in making
  this product.

-   Geocycle (renamed from “EcoSiam” in 2008) a business unit handling
    total waste management services for manufacturing clients 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 projects in AFR development in Thailand, founding a business
  unit under the name EcoSiam to focus on AFR development. With Factory
  101 License granted by the Ministry of Industry, it allows us to
  handle both hazardous and non-hazardous waste materials.

  This business unit has been well developed until now it is equipped
  with experienced and knowledgeable employee together with one of the
  best and biggest facilities, beside its Geocycle networks which are
  regarded as leader in waste management at international level.

  Geocycle received BOI privilege for imported machine and now obtaining
  ISO/IEC 17025:2005 in order to provide more service to its customers,
  other than the already obtained certificate for the company’s
  laboratory.

2.  Market and Competition

  Domestics

  The year 2008 marked a very challenging time for the Thai cement
  industry as the country encountered an economic slowdown as a result
  of several overseas and domestic factors. The local political
  instability affected investors’ and consumers’ confidence and led to
  the postponement of many government mega-projects. Rapid changes in
  energy prices and the global economic slowdown adversely impacted the
  financial market and international trade around the world.

  The country’s domestic demand decreased averagely by 10 percent in
  comparison with 2007, and at the same time, the cost of production
  increased due to high energy cost. Cement prices had also been
  adjusted along with the increased cost of production. To cope with
  this economic downturn, leading cement manufacturers made efforts to
  adjust structurally and administratively over the course of last year.

  Export

  The decline in domestic cement demand has affected the whole industry
  since late 2006, so cement manufacturers focused more on exports to
  keep production running at optimum capacity. Thailand’s clinker export
  volume in 2008 was approximately 15.6 million tons, a 14 percent
  decrease over the previous year due to lower demand and increased idle
  capacity worldwide.

  A shrinking demand in construction and an oversupply of cement in many
  countries will further increase competition in the export market next
  year. This will unavoidably result in a decline in the country’s
  cement export volume and the 2009 year-end export figure could drop to
  around 13 million tons.

Business Forecast for the Cement Industry in 2008

  Looking ahead, it is expected that domestic cement demand will
  continue to drop at a relatively high rate at 10-15% from 2008 due to
  the impact of domestic economics slowdown which is likely to lead to
  slower real estate and construction investment.

  As a matter of fact, the number of land allotment permits by project
  (permits for land development) in the first nine months of 2008
  decreased by 25 percent Y-O-Y nationwide. There was also an excess
  supply of housing unit in 2008 by approximately 500,000 units-300,000
  units of new houses and 200,000 units of second-hand houses.

  The outlook can be significantly influenced by the capability of the
  new Government to restore investors’ confidence and accelerate the
  investments in public infrastructure in order to stimulate economic
  growth and construction demand, but it also depends to a large extend
  on the international economic situation.

  3.3 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 and cement production
capacity of 14.5 million tones per year.

As the Company foresaw the severity of the economic crisis, the Company
took drastic measures to proactively take control of our long-term
profitability and eventually mothballed 2 clinker production lines
(kilns) effective 1 January 2008. This measure reduced the Company
clinker production capacity by 2.5 million tons.

  Raw Materials and Raw Material Suppliers

  95% 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 5% is procured from outside sources, both domestically and
  overseas.

Alternative Fuels and Raw Materials (AFR)

  Since 2005, Geocycle a business unit of the Company responsible for
  the Alternative Fuels and Raw Materials (AFR), has provided total
  waste management service solutions to its customers in Thailand. This
  business unit adheres strictly to international environmental
  management standards, and uses the unique access to expertise and best
  practices in waste management within the Holcim network worldwide.

  In 2008, EcoSiam, a business unit of the Company was renamed to
  “Geocycle” a waste management brand of Holcim. Brand Geocycle is
  currently operating in more than 35 countries around the world, which
  provides access to best practices within this network.

  Since August 2008, Geocycle has been operating one of the world’s most
  modern Alternative Fuels Preparation Plants located next to our cement
  plant in Saraburi. This facility has been designed using the latest
  technology and world class environmental management systems, and will
  cover the entire range of pre-processing activities. The project has
  been granted a 106 License by Department of Industrial Works, and has
  obtained the investment promotion from Thailand’s Board of Investment
  (BOI). One of the significant improvements in 2008 was that Geocycle
  was accredited with ISO 9001:2000, ISO 14001:2004 and OHSAS 18001:2007
  to further ensure its high standard performance.

  In 2009, Geocycle is expected to be accredited with another
  international standard for laboratory, ISO17025, to re-affirm our
  laboratory capability. This will be the first waste laboratory in
  Thailand certifying with ISO 17025.

  Environmental Impact

  In doing the business, social responsibility is always taking into
  consideration. The Company believes in sustainable growth, which
  cannot be accomplished without social responsibility. The Company
  considers environment conservation as one of its most important
  responsibilities to the society. The following are activities that
  have been done by the Company in order to protect and conserve the
  environment:

-   Environment impact assessments have been performed to ensure that
    the activities, such as mining, will not inflict unacceptable
    adverse damage to the environment.

-   Reforestation and various rehabilitation activities have been done
    in the areas where the mining has been finished. The reforestation
    is included as part of the master mining plan of the Company.

-   Alternative fuels and raw materials, e.g. industrial wastes,
    agricultural wastes, have been used to replace of conventional fuels
    such as coal and lignite. This not only reduces production cost but
    also conserves natural resources.

-   Safety of employee and communities surrounding the plant has been
    place at the highest priority. The Company cares for safety in every
    step of operation whether within the Company’s premises or outside.

-   Waste control and disposal and pollution prevention are also placed
    as a high priority. For example, dust from kilns is controlled and
    reduced by highly efficient and state-of-the-art technology. The
    Company also provides the system to inspect, monitor and control
    dust dispersion to ensure the health and safety of its employees and
    communities.

  In 2008, the Company coordinated with local community and governmental
  authorities to establish the Fund for Development of community and
  environment in the areas of Tabkwang Subdistrict. The Company
  sponsored and participated with the fund management team in order to
  ensure that budget of the fund is used according to community’s actual
  needs.

  The following certifications prove the Company’s determination in
  maintaining its social responsibility, environment-friendly business
  and product quality:

-   Quality of Laboratory: SCCC

  ISO/IEC 17025

-   Quality Management System: SCCC and its subsidiaries

  ISO 9001; version 2000

-   Environmental Management System: SCCC and its subsidiaries

  ISO 14001

-   Occupational Health & Safety Management System: SCCC and its
    subsidiaries

  TIS/ OHSAS 18001

  The above certifications confirm that the Company is environmental law
  compliance.

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

  This project will be use the thermodynamic technology and 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)

  3.4 Work in Progress

  None.