3.1 Type of Product

Our company manufactures various grades of Carbon Black which is
basically consisting of elemental carbon in the form of colloidal
particles. The main process for obtaining furnace carbon black is by
controlled combustion and thermal decomposition of hydro-carbon oils
under controlled conditions. The hydro-carbons used are highly aromatic
oils such as FCC bottoms, creosote oils or any other oil which are
highly aromatic.

Carbon black provides tensile strength and abrasion resistance to
automobile tyres and it is very important for achieving long life of
tyres.

There are three kinds of Carbon black :

1. Channel Black

2. Furnace Black

3. Thermal Black

The commonly used product is the Furnace Black kind.

Carbon black is divided into different grades with respect to its
application :

1. Hard Carbon Black is used for the production of outer tyres and is
further divided into different grades

2. Soft Carbon Black is used for the inner tyres and it also has
different grades

The above grades of carbon black are manufactured according to ASTM
specifications which are commonly used by most producers of carbon black
in the world.

Currently company is focusing on mechanical rubber goods (MRG) sector to
expand customer base and increase market share. The company is also
focusing on manufacturing customized grades, improve productivity and
quality.

Privileges and Restriction on Business 

The Board of Investment (BOI) has promoted the business of our company
including capacity expansions. The major privileges included corporate
tax exemption, duty reduction on import of machinery and exemption of
income tax on dividends paid.

For Line # 5 expansions Project

The Company has received promotional privileges form the Board of
Investment (BOI) for the manufacture of carbon black, pursuant to the
investment promotion certificate No. 1768(2)/2548 issued on 31 August
2005. Subject to certain imposed conditions, the privileges include
exemption from corporate income tax for periods of 3 years for the
manufacture of carbon black and 8 years for the manufacture of
electricity and steam, commencing as from the date the promoted
operations commenced generating revenues.

The tax exemption period for the manufacture of carbon black has
subsequently been extended from 3 years to 5 years. The Company has
submitted complete details to the BOI to meet the criteria for such
extension and has just received the approval from BOI for 2 years
additional tax benefits.

On 24 April 2009, the Company received additional promotional privileges
from the Board of Investment (BOI) for the manufacture of steam from the
new machines. The privileges were effective from the date when the
promoted operation commenced generating revenues (September 2008).

For Line # 6 expansions Project

The company was granted promotional privileges for manufacture from
carbon black pursuant to investment promotion certificate No.
1503(2)/2542 by the Board of investment on 8 December 2008, Subject to
certain conditions which the company will comply, the privileges include
exemption from corporate income tax on profits from the promoted
activities for the period of 3 years from the manufacture of carbon
black commencing as from the date of the promoted operations commenced
generating revenues. The company is expected to commence operations by
end of Q2’ 2010.

The company also was granted promotional privileges for the manufacture
from electricity and steam pursuant to investment promotion certificate
No. 1502(2)/2542 by the Board of investment on 18 November 2008, Subject
to certain conditions which the company will comply,, the privileges
include exemption from corporate income tax on profits from the promoted
activities for the period of 8 years from the date of the promoted
operations commenced generating revenues. The company is expected to
commence operations by end of Q2’ 2010.

Our business is not subject to any kind of restrictions imposed by any
government agencies locally on internationally.

3.2 Marketing & Competition

3.2.1 Marketing activities

In 2009, The company continues to retain major share in domestic market as against Thai Tokai Carbon Product Co., Ltd.and Bridgestone Carbon Black (Thailand) Co.,Ltd. Also, Thai carbon black also sold 3% of total sales of special carbon black for MRG segment in both domestic and export market. This market is new dimension all together and we will continue to focus to have competitive advantage. This MRG segment was totally controlled by Japanese carbon black producers, where Thai carbon black started entering in this segment. 

Type of Revenue

Unit : Million Baht

+-------+---------+---------+---------+---------+---------+---------+
|       | 2009    |         | 2008    |         | 2007    |         |
+-------+---------+---------+---------+---------+---------+---------+
|       | Amount  | %       | Amount  | %       | Amount  | %       |
+-------+---------+---------+---------+---------+---------+---------+
| Local | 3,230   | 59      | 4,946   | 55      | 3,655   | 54      |
+-------+---------+---------+---------+---------+---------+---------+
| E     | 2,253   | 41      | 4,086   | 45      | 3,147   | 46      |
| xport |         |         |         |         |         |         |
+-------+---------+---------+---------+---------+---------+---------+
| Total | 5,483   | 100     | 9,032   | 100     | 6,802   | 100     |
+-------+---------+---------+---------+---------+---------+---------+

Due to drop in export sales to Japan, company focused strongly in the
domestic market to have better sales revenue.

Type of customer & relationship

Our major customers are International tyre manufacturers like
Bridgestone, Michelin, Goodyear, Yokohama and Toyo Tire, etc. in various
countries. Other important customers in domestic market include Otani
Tyre, Inoue Rubber, Camel industry , Vee Tyre & Rubber, Deestone etc.

% Sales (quantity) to the first top ten customers in the past 3 years

  ----------------------- --------------- --------------- ---------------
                          2009            2008            2007

  % Sales to top-ten      70%             72%             72%
  customers                                               
  ----------------------- --------------- --------------- ---------------

Customers sold more than 30%

We do not have any individual customer to whom we sold more than 30% of
our sales volume for three consecutive years.

Pricing Policy

Our pricing are governed by the market conditions and is based on the
worldwide price trends of Carbon Black, its raw material, “Carbon Black
Feed Stock Oil” and import duty structure. Our prices in the world
market are competitive. We also have formula based pricing with our
major customers where the prices are linked with raw material prices.

Distribution Channels

Most of our sales are to the end users and only 3-5% is through agents
in various countries. At present we have only 5 sales agents in the
specific countries to sell our product.

Purchaser and Supplier Bargaining Power

The major raw material for Carbon Black is Carbon Black Feed Stock Oil
(CBFO) which is a special grade of oil. Due to a large quantity of CBFO
imported by the company and other carbon black producing companies of
Aditya Birla Group, the company has strong bargaining power and deriving
benefits out of the combined negotiation for purchase of raw material.
Also as there are 5-7 major raw material suppliers in the world, the
company has the benefit of competitive environment in raw material
purchasing

3.2.2. Industry Structure

There are five major tyre producers in Thailand and three Carbon Black
producers in Thailand which are Thai Carbon Black Public Company
Limited, Thai Tokai Carbon Product Co.,Ltd., and Bridgestone Carbon
Black (Thailand) Co.,Ltd.

Number and Size of the Competitors

In the international market, three largest competitors producing Carbon
Black in the world:

1.  Cabot – USA

2.  Evonik – Germany

3.  Columbian Chemicals-USA

These producers have plants at different locations.

In the local market, there are three producers of Carbon Black :

1.  Thai Carbon Black Public Company Limited with the production
    capacity of approx 220,000 MT/ year.

2.  Thai Tokai Carbon Product Co., Ltd. with the production capacity of
    approx 120,000 MT/ year.

3.  Bridgestone Carbon Black (Thailand) Co.,Ltd with the production
    capacity of approx 40,000 MT/ year. (Mostly produces for captive
    consumption for their overseas tire plants)

Local Market Share for the year 2009 (approximately in term of sales
volume)

  ----------------------------------- -----------------------------------
  Company                             Market Share (%)

  1. Thai Carbon Black Public Company 42
  Limited                             

  2. Thai Tokai Carbon Product Co.,   31
  Ltd.                                

  3. Bridgestone Carbon Black         6
  (Thailand) Co.,Ltd                  

  4.Imports                           21
  ----------------------------------- -----------------------------------

Competitive Environment

Thai Carbon Black is one of the largest producers of Carbon Black in the
world. Its product is well accepted and established in the international
market. Presently, company exports approx. 41% of its production and
able to meet all customer requirements by developing new grades as per
customer specifications and as well as their delivery needs.

Key Success Factors

1)  Excellent quality product

2)  Major Quality Accreditions : ISO/TS 16949, ISO 14001, , IQRS Level
    7, TPM Special award, TPM Consistency award, TPM Excellence award,
    Deming Prize, Prime Minister’s Productivity award, OHSAS18001,
    Thailand Quality Class award , ISO/ISE-17025, being recognized as
    nominated company “Best Performance” in the industry category by SET
    in 2006

3)  Low cost production

4)  Well established brand image

5)  Product quality approved by all major tyre producers worldwide.

6)  Highly energy efficient

7)  Excellent customer services

8)  Just In Time delivery to major customers

9)  Well established and strong presence in Asia-Pacific region.

10) Highly efficient production facilities.

11) Joint Venture in China to meet demand of Chinese market.

12) Highly motivated and dedicated workforce and management team

13) Resilient leadership team

14) Multi skilling of employees

15) Leadership development at middle & flimon management level

Opportunity

1)  Potential for MRG segment / non tire segment

2)  Possibility of export growth in the Asia region and in Thailand.

3)  Economic recovery in Asian region will help improve sales volume

4)  Expansion of existing plant (already under implementation) – to
    commission by end June’ 2010

5)  New Tire Plants in Thailand and expansion of tire plants in the
    region.

6)  More penetration in non tyre segment

Threats

1)  Partial product substitute may be developed in long term period

2)  Change in Carbon Black manufacturing technology if any

3)  Stringent pollution control norms

4)  Trade barriers in some countries

5)  Further strengthening of local currency will dampen export and
    growth of export based Auto industries

6)  Capacity expansion by other producer of Carbon Black in Thailand

7)  Volatility in crude oil and raw material prices

8)  Lower demand due to recession in Auto Industry & slow economic
    recovery

Impact of External Factors

1)  Volatility in Thai Baht exchange rate

2)  Volatility in price of crude oil and related products (e.g. CBFO)

3)  Country’s economic stability

4)  Government regulations on pollution

5)  Any new financial / economic crisis globally

6)  Recession in Auto industry

Competitive Environment

Thai Carbon Black is one of the largest producers of Carbon Black in the
world. Due to its excellent quality and customer services together with
its low cost production, Thai Carbon Black is competitively placed in
the world market. In addition, due to the company’s capability to
develop Carbon Black grades as per the customer’s requirement, it is
able to meet customer requirements in the MRG segment, which gives
better competitive advantages.

Competitive trend

Due to the current global economic situation going forward 2010 will
witness economic recovery the pace of which will be show to moderate. In
2010, the Thai Economy is expected to grow by 3-4%. Auto industry is
also expected to grow by 5%. Overall 2010 will be a good year for
Thailand.

Thai Carbon Black is fully dependent on Auto industry and since auto
industry will recover in the same level of 2008, TCB will expect to
operate 100% efficiency and with the addition of new line 6 in 2010, we
will further increase sale in South East Asia region to maximize our
efficiency. Our focus will be to optimize the production processes,
strictly monitor and control all costs, closely monitor market
conditions, emphasize on non-tire sector and to improve customer
satisfaction.

3.3 Production 

3.3.1 Production and Capacity

Our factory is located at Angthong province. It has 5 production lines
with approx capacity of 215,000-220,000 metric ton per year.

In year 2007, Company decided to expand its production capacity by
another 75,000-80,000 MT/year approximately. The progress on expansion
project was slowed down during the year 2009. With the sign of economic
recovery starting Q3’2009, the progress on expansion project has picked
up and it is expected to commence production by end of Q2’2010. After
expansion our capacity will be approx 300,000 Mt/year which will be one
of largest in the world at single location.

The details of capacity, actual production, capacity utilization, the
percentage change in actual production, maximum and actual number of
work shift etc are as follows :

  -------------------------- -------------- -------------- --------------
                             2009           2008           2007

  Production Capacity        185,000        185,000        185,000
  (MT/Year)                                                

  Actual Production          160,911        204,888        220,700
  (MT/Year)                                                

  Capacity Utilization (%)   87%            111            119

  Increase in Actual         (21.46)%       (7.16)%        3.62%
  Production (%)                                           

  Maximum Work Shift         3              3              3
  (Shift/Day)                                              

  Actual Work Shift          3              3              3
  (Shift/Day) *                                            
  -------------------------- -------------- -------------- --------------

* Except for few days of planned maintenance in 1 of the 5 production
lines at a time

Raw Material and Suppliers :

Our company uses following raw materials :

1. Carbon Black Feedstock Oil

2. Fuel Oil

The important raw material used for carbon black production is Carbon
Black Feedstock oil which accounts for 95-98% of total raw material
cost. Carbon black feedstock oil is imported mostly from USA. Fuel oil
and Kerosene oil accounts for 2-5% of raw material cost and is purchased
from local suppliers in Thailand.

This raw material is F.C.C. bottoms which is most commonly used in
Carbon Black production. Other types of oils which can be used for
Carbon Black production include Anthracene Oil, Creosote Oil and
Ethylene Bottoms. However, these oils are not available in big
quantities and not economical also. Therefore, there are no economical
substitute to F.C.C. bottoms at present.

Effect of Change in Technology on the Raw Material Usage

We do not foresee any change in carbon black manufacturing technology on
large scale. Therefore, no impact is foreseen on present raw material
usage.

Change in Prices During the Past 5 Years

The price of raw material “Carbon Black Feedstock Oil” is closely
related to fuel oil. The average raw material price have witnessed high
volatility and have recorded highest ever raw material prices and also
one of the lowest raw material prices due to high volatility in the
international oil market

The proportion of the amount of raw material from local VS. import in
the past 3 years

  ---------------------------- -------------- -------------- --------------
                               2009           2008           2007

  Local                        2%             5              4

  Import                       98%            95             96

  Total                        100%           100%           100%
  ---------------------------- -------------- -------------- --------------

The company have 3-4 local suppliers and 2-3 overseas suppliers. Out of
2-3 overseas suppliers for imported raw materials, one of them has
supplied more than 30% for the last three consecutive years.

The relationship with the suppliers above are in the ordinary course of
business and under normal commercial terms and conditions of all of the
companies concerned. In case of loosing any of the major supplier, the
company is able to purchase raw material from other suppliers since
there are 2-3 major suppliers in the competitive market.

3.2.2 Production Process & Environmental Control

Source of Production Technology

There were many processes to manufacture Carbon black but M/S.Phillip
Petroleum Co., U.S.A. is the one who developed first time the Oil
furnace Black method on continuous basis.

In the Oil Furnace method - the feed stock oil is injected in the
reactors along with Fuel oil (which keeps & maintains the high temp. in
the reactor) and an excess of Preheated Air. The combined heat from all
this heat starts the THERMAL CRACKING of Feed stock oil and decomposes
into Carbon, Hydrogen and other gases. When the reaction has reached its
desired point, it is stopped by quenching with water. Partially cooled
gases are passed through AIR PREHEATERS and Oil preheater to recover the
SENSIBLE HEATS.

The Carbon black is filtered in specially chemical treated FIBRE GLASS
FILTER BAGS at a temp. of 300oC from the gas. The light fluffy black
from Bag Filter is passed through pulverisers and pneumatically conveyed
to Mixer where the density increases by pelleting with water and other
chemicals, then it is dried and packed.

Adequacy of Machinery and Manufacturing Staffs

The company has 5 production lines in which different grades of Carbon
Black can be manufactured. The major equipment includes Reactors, Air
Preheaters, Oil Preheaters, Bag Filters, Purge Gas Filters, Palletizers,
Mixers, Dryers, Boilers, Turbo Generators, PCB’s, PABs, Packing Plant,
Demin water Plant, Storage Tank, Silos etc. All our production
facilities are modern and continuously upgraded to new standards. We
keep all critical imported spare parts for major machines.

Therefore, we are fully prepared to meet any unforeseen breakdowns in
any of the major machines. In addition, the company has the production
staffs of 196 persons who can service the full production capacity.The
company keeps on replacing the important equipments on completion of
life to have the plant in good conditions all the time and to produce
quality grads of carbon black

Possibility of New Technology Substitution

We do not foresee any change in the technology for manufacturing of
Carbon Black in the near future.

Ability, Necessity, and Expenses to adjust the machines for competition

We are capable of manufacturing major grades of Carbon Black and have
also developed new grades to meet the global customer requirements and
have the facilities to meet the new requirements of our customers. For
this reason, we do not need to make any expenses to change the
production facilities.

Environment control

Carbon Black production process is a closed system process and is not
generating any waste at any stage of production. However, there are
wastes generated at various areas such as de-mineralization plant where
boiler feed water is generated, boiler blow down, TG cooling water
plant, plant and equipment cleaning, flue gas from stacks, and waste
resulted from routine testing of carbon black with chemicals.

As mentioned in the carbon black production process, recovery of carbon
black from raw material is achieved through bag filter where smoke
containing carbon black and gases are separated. Carbon black powder is
then palletized by mixing with water and dried in rotary dryer.
Approximately 55% of carbon black, by weight, is recovered from raw
material (carbon black feedstock oil).

Changes during the year

Currently the company has achieved zero water discharge from the plant
through recycle and re use of all the water. During the year, company
has already received EIA approval for line 6 expansion project for
Carbon Black production.

Pollution Control Practices

Environmental control standards for Air Emission, Waste Water and
Hazardous Waste as regulated by law have been followed strictly at TCB
in compliance with ISO 14001 Standards.

Pollution Prevention Practices

In normal operating conditions, no carbon black dust can leak out from
the system, except in extreme emergency due to machines breakdown, total
blackout, etc., smoke containing carbon black might be vented to the
atmosphere for safeguarding the machines and for safety purpose.
However, the company has taken measures to prevent the environmental
pollution as follows:-

- Reactor Vent Scrubbers have been installed in all the reactors to
arrest carbon black dust during venting of gases to atmosphere in
emergency.

- Filter bags have been installed in all the Silos Ventilation Ports to
prevent the black from polluting the atmosphere during normal operating
condition.

- To prevent carried-over of oil to the settling ponds, four numbers of
oil separating pits, have been provided at various locations at the
plant to ensure that the oil and grease value at the settling ponds will
not exceed the standard control limits.

Waste Gas Heat Recovery

TCB has a very efficient waste gas heat recovery system. Waste gases
(mixture of hydrocarbon gases such as hydrogen, carbon-monoxide,
methane, acetylene, etc.), by products obtained in the carbon black
production process, are used as fuel in the waste gas boilers for
generating high-pressure steam. The steam from boilers is then fed to
turbo-generators for generating electricity for internal demand and for
its allies. At present, the available waste gases with very high
calorific value can generate substantial amount of steam to meet the
requirements of process as well as for generating electricity. After
meeting TCB’s captive requirements, balance power is exported.

Extra steam generation is obtained from reactors’ boilers and quench
boiler . Part of this steam and the steam exhausted from
turbo-generators is used internally, and the balance is also exported.

With excellent heat recovery system and no waste gases is vented out to
atmosphere, TCB not only eliminates gas pollution problem but also
reduces the use of fuel oil which can save huge amount of money through
import of oil. At the same time it is also earning from steam and power,
which has greatly helped in reducing production cost and improve it’s
competitiveness.

ISO 14001 Team

The company has set up Steering Committee / Management Review Committee
on ISO 14001 chaired by the CEO with departmental and sectional heads as
members since the implementation of Environmental Management System in
June 1996. The role of the committee is to monitor and review the
effectiveness of the system, and give guidance for corrective and
preventive measures against actual and potential environmental related
issues.

Monitoring System

Monitoring of wastewater from de-minerization plant is done at
neutralization pit where the pH value of water is controlled between 6.0
to 8.5 through an automatic online pH monitoring and controlling system.
While effluent water pH value is also monitored continuously through an
online pH meter which is connected to control room DCS system to ensure
effective monitoring and timely actions are taken whenever the pH value
of the effluent is out of the control limits.

For air emission, the company is testing boilers and dryers stacks
emission level for SOx and NOx once a month, and every three months the
same are tested by licensed third party to monitor and ensure that the
standard air emission level is not violated. Our pollution norms are
much better than statutory norms.

The company has over the years identified hundreds of environmental
aspects through various functions and activities, and has set up
improvement programs to monitor the progress and effectiveness of the
same. Improvement programs against aspects such as “Oil leakage &
spillage at oil unloading area”, “Water pollution due to oil spillage
from oil tanker", “Air & Soil pollution due to Carbon Black dispatch by
sub-contractor”, “Effluent water reduction”, “Waste management at
reactor area”, etc., are few examples of TCB successful monitoring
programs on the identified environmental aspects.

TCB has upgraded and integrated its Environment Management Systems by
adopting advanced systems like OHSAS 18001 (Occupational Health and
Safety Assessment Series 18001) and developed its unique EOHS System
(Environment, Occupational Health and Safety Systems) which has been
internalized and marching ahead towards the goal of “Zero Pollution”,
“Zero Waste”, “Zero Accident” Status.