2.  Associated Risks

The company’s risk and opportunity assessment, aimed at proactively
developing preventive measures, is classified according to the three key
dimensions of sustainable development, consisting of economic growth,
environmental protection and social responsibility.

Economic Risks

-   Energy costs

For the cement industry, fuel and electricity costs account for over 75%
of the total production cost. A long-term increasing trend in lignite
and coal price is foreseen, mainly driven by the limitations of local
lignite resources, increasing difficulties to license local lignite
reserves and restrictions (taxes, quotas, qualities) developing on
Indonesian coal. Electricity cost is likely to go up in accordance with
the cost pass-through policy of the Electricity Generating Authority of
Thailand (EGAT).

To sustain energy availability and competitiveness in the long term, a
long-term energy strategy has been implemented, covering operational
optimization and sourcing management with key initiatives as follows:

-   Cement separate grinding station that can increase productivity of
    cement per ton clinker by 20% and reduce energy content in cement;

-   The installation of high-momentum burners that allow to maximize the
    utilization of lower-heat value fuels;

-   Waste Heat Recovery (WHR) systems to convert the waste heat of the
    kilns into power supplying the plants;

-   Alternative Fuels replacing traditional sources of thermal energy
    such as coal and lignite, with the ambition to reach a 20%
    substitution rate by 2016

-   Fluctuations in foreign exchange rates

The company has a moderate risk exposure to fluctuations in foreign
exchange rates, because of the relative balance between the revenues of
its export business and its expenditures in foreign currency for the
import of raw materials, fuel and parts & supplies. The limited
remaining net exposure is mitigated through financial hedging.

-   Growing in construction segment (opportunity)

To continue to ensure adequate supply of products and services to its
customers in a growing market, the company set up a working team to
assess the company’s resources availability in the next 10 years,
particularly in-plant facilities, logistics, raw materials supply, as
well as energy reserves.

This analysis has confirmed the capability of the company to support the
growth of its activities, with an investment plan upgrading a number of
equipment, which will be rolled-out in the next 5 years.

Environmental Risks

The company aims at minimizing the actual or potential impact of cement
production on the environment. Therefore, key performance indicators and
objectives related to the environment have been set as follows:

-   Zero Waste to Landfill (ZWL): ZWL is the target of SCCC group. In
    2012 SCCC, Geocycle, Aggregates and Conwood met the target.
    Ready-Mixed Concrete reduced waste to landfill by 25 percent and
    plans to meet the ZWL target by 2015.

-   CO2 emissions: the objective is 12 percent reduction from 2007 to
    2020 (750 to 660 Kg/t). In 2012, the company reduced further its CO2
    emissions at 680 Kg per ton of cement produced, a 9 percent
    reduction from the 2007 reference.

-   Dust: in 2012, the company performed impressively on dust control.
    Our cement production process reduced dust emissions to 47 mg/m3,
    well below Thai emission limits and below the worldwide average of
    global cement manufacturers.

-   NOx and SOx: in 2012, the company effectively reduced NOx releases
    to 962 g/t cem mat and SOx emissions to 52 g/t cem mat in 2012,
    significantly below local regulation limits.

Social Risks

Siam City Cement, which has co-existed for more than 40 years with the
Saraburi community, believes in authentic and harmonious relationships
with its neighbors. Over the years, the company has consistently created
and launched CSR activities, in Saraburi or in other needy areas of
Thailand, with a spirit of caring and friendship, targeting specifically
education, infrastructure and environment, with the engagement of local
leaders.

-   Sustainable Living:

The most visible example of SCCC’s success story on sustainable
development is the the construction and dedication of the “INSEE Green
Village”. The village is a showcase of SCCC’s desire to provide low-cost
flood-safe homes for low income people in rural areas. The big flood of
2011 inundated a huge area in Central Thailand including Ayutthaya
Province where poor 20-family Ban Klong Sai Village is located. The
homes in this village were almost entirely destroyed. SCCC endeavored to
entirely rebuild the village in a sustainable manner with eco-friendly
SCCC-produced products, complete with efficient waste management system
and self-sufficient food (vegetable) source. The project was officially
dedicated and the villagers moved in in July 2012.

SCCC has conceived and built the Green Park by INSEE, on a company’s
property in Saraburi. This creation is an innovative mix of green
constructions and technologies in a park managed with the local
community. The construction is almost completed and the Green Park by
INSEE will be ready for its grand opening early in 2013.

-   Sustainable Education:

The “INSEE Green School” project entered in its 3^(rd) successful year,
adding 12 new developments. For this initiative, SCCC is assessing the
needs of remotely located poor schools on Thailand’s border areas and
then constructing buildings for these schools in accordance with their
specific needs. The sustainable aspect of this project involved
volunteer architects from the Association of Siamese Architects (ASA) to
design the buildings. vocational college students to build the schools –
gaining first-hand the experience in actual constructions of buildings
before they graduated -- and business partners involved in the logistics
of transporting the materials to remote locations. So far, more than
1,000 young poor students along the border areas benefited from this
project, with 24 schools rehabilitated or expanded since 2010.