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
    products. Its type is Insee Dang, Insee Fah and the high constraint
    cement, Insee Dum, and in the year 2002, the company launch the new
    product ‘Insee Tong’.

    The Company produced clinker and cement to serve the demand both
    domestic and export. For the domestic sales, we extent the new
    channel by sales through webSALES to the customer.

    Furthermore, the company has investment in subsidiaries and related
    company as following ;

-   Siam City Concrete Co., Ltd. Ready-mix concrete

-   Conwood Co., Ltd. Fiber cement products

-   Khmer Cement Industry Co., Ltd. Cement trading

-   Lanna Resources Public Co., Ltd. Coal mining

  3.2 Market Situation and Competition

Cement Industry 2006: Overview

  The increase in demand for cement consumption over the past five years
  was driven by a number of governmental projects, including the Mass
  Transit, Suvarnabhumi Airport and other infrastructure projects, both
  in city and provincial. These projects stimulated the housing
  construction in the surrounding areas. However, in 2006, both private
  and public investment declined and slowdown which decreased cement
  demand. The overall demand in 2006 was approximately 27.5 million
  tonnes, two percent lower than 2005. The major reasons for declining
  investment were:

  1. Delay in government mega projects

  2. High inflation and interest rates

  3. Increase in oil prices which resulted in higher production costs

  4. Decline in local and foreign investors as a result of political
  uncertainty

  5. Heavy flooding in many parts of Thailand which led to a stoppage in
  construction

  Additional to a decline in cement demand, the competition in the
  industry was also lifted to another level. In 2006, there was a new
  cement producer, with production capacity of around one million tons
  per annum. Consequently, the total annual industry production capacity
  increased from the previous year to approximately 56.3 million tonnes.

  With fierce competition, decline in demand and the entering of a new
  player, the industry has focused upon various issues as follows:

  1. Product: Continued product development and quality enhancement to
  satisfy each customer segment and needs.

  2. Price: Pricing remained very competitive despite the increase of
  production costs.

  3. Place: Continued modernisation of distribution with special
  emphasis on the ‘Modern Trade’ concept was the trend.

4.  Promotion: Wide spread advertisements through TV, radio and press is
    a

  common fashion of the industry. However there was no new significant
  trend.

  Export

  With a country total production capacity (No.1 in ASEAN), and slowdown
  in the domestic demand, Thai producers had to push ahead in the export
  market to better utilise installed capacity. The major export
  destinations were USA, ASEAN countries, Bangladesh and the UAE.

  3.3 Procurement of Raw Materials and Services

Production Capacity

The Company has 3 cement production plants, with total 6 production
lines and total clinker capacity of 12.3 million tonnes per year.

  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.

  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.

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

-   Quality of Laboratory:

  ISO/IEC 17025

-   Quality Management System:

  ISO 9001; version 2000

-   Environmental Management System:

  ISO 14001

-   Occupational Health & Safety Management System:

  TIS/ OHSAS 18001

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

  3.4 Work in Progress

  None.