4. Business Operation of Each Production

4.1 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 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 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
                   Resistance Cement

  INSEE Fah        Portland cement Type-5 - High sulfate resistance
                   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,          General Plastering Mortar
  Green-Red                     

  INSEE Mortar Max 12,          Fine Plastering Mortar
  Green-Pink                    

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

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

  INSEE Mortar Max 15,          Concrete Plastering Mortar
  Green-Gray                    

  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,          Floor Leveling Mortar
  Brown-Red                     

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

  INSEE Mortar Max 42,          INSEE TileFix Silver – High adhesion Tile
  Black-Silver                  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 produced clinker,cement and mortar to serve the demand
  both domestic and export. Currently, SCCC has three 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 2009, it comprises of
  domestics sales and export sales. 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 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.

-   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.

-   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 pioneer 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)

4.2 Market and Competition

Domestic

In 2009, Thai cement industry experienced the lowest domestic cement
consumption for the past 6 years at 24.2 million tons. (Ref: Bank of
Thailand) Consumption contracted by 2 percent from the previous year.
This contraction was due to the global economic crisis that extended
into the domestic economy, together with domestic political unrest, that
undermine both investors’ and consumers’ confidences to delay their
investments. Although, the government has released Economic Stimulus
Package 1 and 2 during the year, the benefits of boost construction
activity will largely occur in year 2010 and 2011.

2010 cement consumption is projected to increase 3-5% from 2009 as a
result of government’s injection under the Stimulus Package 2 worth THB
1.4 trillion. 50% of the budget is planned to be invest in water
resources, logistics and social well-being sectors, with approximately
THB 300 billion to be spent on construction related materials including
iron, steel, cement and gravel.

Investor confidence is likely to pick up due to the recovering economic
conditions and public transportation development projects such as the
extension of mass transit system and road construction to suburban areas
which will induce the development of real estate projects along the new
transportation routes.

Export

The global economic downturn continuing from 2008 caused contracted
demand in the first half of 2009. From the middle of 2009, however, the
recession had bottomed out and demand in key developing markets i.e.
Vietnam and Bangladesh, had started to rise. This reflected the increase
in volume in the second half, allowing Thailand’s 2009 export volume to
reach approximately 14.4 million tons, 8 % decline over the previous
year, yet bouncing up from a previous forecast of 13.8 million tons.

In 2010, despite the input of the government’s stimulus package, the
domestic cement market growth is projected at a modest level only,
causing cement manufacturers concentrate on exports in order to optimize
their production cost. A worldwide excess of cement is anticipated to
create increased competition whilst putting more pressure on selling
price. Notwithstanding, some upside is still seen in the emerging
markets e.g. Vietnam, Cambodia, Bangladesh. The trading pattern is also
anticipated to shift more toward this region. Consequently, we
anticipate some upward growth, with the national forecast for 2010
cement export at 16.2 million tons or 9 % increase approximately.

Business Forecast for the Cement Industry in 2010

Thai economy tends to improve in a range of 3.5 – 4.5 percent given a
strong momentum from the global economic recovery. In this respect, the
government direction of economic management in 2010 will focus primarily
on policy implementation to assure continue economic recovery in
parallel with maintaining economic stability, to foster a broad base
economic recovery, and to mitigate the negative impacts from global
economic and financial fluctuation.

Subsequently, the domestic cement demand will expectedly increase at a
moderate growth of 3% from 2009. The key issues of cement industry will
emphasize in some certain sectors.

The construction sector is expected to be expanded. Public construction
is likely to accelerate following implementation projects under stimulus
package 2. Likewise, an outlook of private construction tends to improve
especially in residential, commercial and industrial components.

The real estate sector is expected to be improved as a result of i)
higher private and consumer confidence toward economic recovery, ii)
slow adjustment on residential price, iii) relaxation of credit
approval, iv) increasing numbers of low- and medium-income dwellings, v)
new trends of consumer behaviors, which tend to have second
accommodations, and iv) solid mass transit plan.

The outlook can be significantly influenced by the capability of the
Government to resolve investment problems, reestablish investors’
confidence to prevent the bottlenecks that obstruct the investment
recovery, 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.

  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 and cement production
capacity of 14.5 million tones per year.

Raw Materials and Raw Material Suppliers

  92% 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 8% 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 used in cement production process. Wastes
  derived from both industrial and community sectors were such as
  electronic, food and beverage, paint and garment, power generation,
  rubber and leather, steel and metal manufacturing, automotive,
  furniture, petroleum, pharmaceutical and agriculture as well as sorted
  municipal solid waste.

  In 2009, Geocycle put focus on the effort to lift up the laboratory
  standard. Within this context, Geocycle is expected to be accredited
  with international standard for laboratory, ISO17025, in 2010 and to
  re-affirm our laboratory capability.

  Furthermore, Geocycle also realized the important of being customer
  centric organization. With this in mind, we had raised the waste
  transportation standard by increasing the ratio of trucks equipped
  with GPS in order to monitor and control of our trucks at all times.
  This will give an assurance to our customers that their reputation
  will always be protected from any illegal dump or non-compliance
  activities.

  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
  Company reapplied this concept with Kiln No.5 and 6 which are one of
  the biggest cement kilns in Asia. It is expected that the project will
  commence in 2010 and that the Company then can save electricity cost
  for approximately 500-600 million baht per annum.

  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.

  Green Products – The result of environmentally friendly processes

  Being “Green” seems to be the current trend, but at Siam City Cement.
  “Green” has been a natural way of life for a good number of years. The
  fact that we want to be environmentally friendly has been in our
  hearts, and various investments and projects have been undertaken
  towards that direction.

  Addressing climate change, Siam City Cement was among the first few
  Thai companies to obtain the Carbon Label, which stipulates that the
  manufacturing process must show a reduction in CO2 emissions by at
  least 20% over the past five years. So far, four of its cement
  products, INSEE Dang, INSEE Petch, INSEE Dum and INSEE Fah, have won
  this recognition.

  The Waste Heat Recovery by using heat recovered from cement production
  process to generate electricity would be able to replace up to 25
  percent of its electricity requirement – thus saving precious natural
  resources for the Company as well as for the national power grid.

  Siam City Cement Plc. is also active in the field of alternative fuels
  and raw materials through Geocycle, a world-class processing platform
  for waste preparation, allowing the recovery of materials, which would
  otherwise be sent to landfills, trash incinerators or illegal dumps,
  to be co-processed in cement kilns as fuel and raw materials in place
  of traditional natural materials, reducing dependency on fossil fuels
  and natural resources.

  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

-   CSR-DIW award which was initiated by the Department of Industrial
    Waste, by applying criteria of ISO 26000 as guideline

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

  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.

  4.4 Work in Progress

  None.