12. Financial Statements and Operating Results

    12. Financial Statements

  (A) Report of Independent Auditor and Opinions

  Report of independent auditor certified by Ernst & Young Office
  Limited of the Company and its subsidiaries for the years ended
  December 31, 2007, 2006 and 2005 to the consolidated financial
  statement and the separate financial statements was expressed an
  unqualified opinion on the financial position and the results of
  operations and cash flow for the year then ended in accordance with
  generally accepted accounting principles.

  (B) Financial Statements

-   Consolidated Balance Sheet

-   Consolidated Statements of Earnings

-   Consolidated Statements of Cash Flows

-   Consolidated Financial Ratios

  On 1 January 2007, the Company changed its accounting policy for
  recording investment in subsidiary and associated companies in the
  separate financial statements from the equity method to the cost
  method, in compliance with Accounting Standard No. 44 (revised 2007)
  regarding “Consolidated Financial Statements and Separate Financial
  Statements”, under which investments in subsidiaries, jointly
  controlled entities and associates are to be presented in the separate
  financial statements under the cost method.

  In this regard, the Company has restated the previous year's financial
  statements for comparative purposes. In consequence to the change in
  this accounting policy, the Company reversed the deferred tax
  liability in both separate financial statements and consolidated
  financial statements.

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12.2 Managements Discussion and Analysis
Analysis of Financial Performance

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Net sales

Group:

Past year’s net sales for the group declined by Baht 847 million, or 4
percent to Baht 22,800 million. The cement business marked lower net
sales of Baht 1,175 million, or 6 percent to Baht 19,977 million. The
concrete and aggregates business showed a positive net sales development
of Baht 497 million, or 18 percent to Baht 3,307 million. Net sales
generated from other business amounted to Baht 764 million, an increase
of Baht 34 million from 2006, or 5 percent.

Cement business:

The company’s cement sales volume in year 2007 was 14.0 million tons, 4
percent higher than in 2006. Higher market competition resulted in lower
average prices and, as a result, net sales dropped to Baht 19,977
million in 2007.

The domestic sales volume in 2007 declined by 4 percent mainly due to
the construction slowdown, especially in the public sector. In terms of
domestic sales price, there was intense price competition during the
3^(rd) quarter of 2007. However, a successful price increase at end of
November pushed the price level up close to the beginning of the year
2007.

Of the total cement sales volume in 2007, export cement and clinker
volume grew 17 percent compared to 2006. Export sales volume, including
sales to bordering countries, reached 6 million tons in 2007. Vietnam
remains the company’s biggest export market for clinker, followed by
Bangladesh and the Middle East. Singapore is the largest destination of
cement. Export sales price in 2007 was lower than in 2006 mainly due to
the impact of the Baht appreciation.

Concrete and aggregates business:

In year 2007, the company sold 2.1 million cubic meters of ready-mix
concrete. This was an increase over the 1.98 million cubic meters sold
in the previous year, but not as expected mainly due to lower volume
from mega projects. Prices were lower mainly due to a highly competitive
market with intense price competition which started in the second
quarter of 2007 and continued throughout the rest of the year.

Aggregates business commenced its limestone and sand operations in 2007.
The company volume sold reached 1.2 million tons in its first year of
operation.

Other business:

In 2007, the company achieved 5 percent growth with net sales of Baht
764 million for prime quality wood replacement construction materials.
The past year 2007 also saw the company’s successful market expansion
into Vietnam.

Net Profit

Effects of sales price pressure and increased prices of solid fuels,
which pushed up production and distribution cost, left its mark in the
operational results in the cement and ready-mix concrete business. The
net profit of the company and its subsidiaries declined Baht 684
million, or 18 percent to Baht 3,230 million in year 2007.

Despite an environment with higher energy and transportation cost, the
company improved its internal efficiency and input factor cost. As a
result, costs and expenses for year 2007 amounted to Baht 18,403
million, a slight rise of Baht 47 million, or 0.2 percent from Baht
18,356 million in 2006.

Total cost of sales of Baht 16,373 million for year 2007 showed a rise
of Baht 103 million from Baht 16,270 million in 2006, mainly due to
higher raw material cost. In November 2007, the Company decided to
temporarily reduce its clinker production capacity effective January 1,
2008, and eventually, realign the company and its subsidiary structure.
In this regard, the company offered an early retirement scheme of which
Baht 139 million were included in manufacturing cost.

Selling and administrative expenses were reported at Baht 2,031 million,
an improvement of Baht 25 million, or 1 percent, from Baht 2,056 million
in the previous year, and was mainly achieved through an effective cost
control. The ratio of selling and administrative expenses to net sales
for year 2007 was 8.9 percent, slightly higher than the 8.7 percent in
year 2006.

Interest expenses for year 2007 amounted to Baht 102 million, an
increase of Baht 20 million from Baht 82 million in 2006, or 24 percent,
which was mainly due to the Company’s drawdown of additional short-term
loans.

Other income of total Baht 115 million for year 2007 represented were
Baht 35 million, or 23 percent lower than the Baht 150 million in 2006,
resulting from a decline in interest income of Baht 50 million. Thanks
to the Baht appreciation, the company recorded a foreign exchange gain
on USD accounts payables amounting to Baht 29 million.

In year 2007, operating EBITDA amounted to Baht 5,211 million, a decline
of Baht 848 million from Baht 6,059 million in 2006, or 14 percent, due
to aforementioned reasons.

While the Company and its subsidiaries had recorded a loss on impairment
of assets not used in operation of Baht 30 million in year 2006, no
additional impairment was required for year 2007.

Analysis of Cash Flows

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Cash flow from operating activities

Consolidated cash flow from operating activities for year 2007 was Baht
4,000 million, a decline of Baht 328 million from Baht 4,328 million in
2006, or 8 percent. Lower net sales negatively impacted this cash flow.
However, thanks to improvements in net working capital, mainly in
inventory and accounts payable balances, a positive contribution of Baht
218 million were achieved. Cash flow margin declined to 17.5 percent
compared to 18.3 percent in year 2006.

Cash flow used for investing activities

Consolidated cash flow used for investment activities for year 2007 was
Baht 1,448 million, an additional Baht 261 million from Baht 1,187
million in year 2006, or 22 percent, mainly for investments in the new
preparation platform for alternative fuels and raw materials, a new
mortar production plant and additional aggregates and resources.

Cash flow from financing activities

The Annual General Meeting of Shareholders approved to pay a final
dividend of Baht 7.50 for year 2006 and the Board of Directors approved
an interim dividend of Baht 6.50 for year 2007. Therefore, the Company
used Baht 3,220 million of its free cash flow for dividend payments and,
as a balance, eventually drew down additional short-term loans of Baht
461 million.

In order to manage its excess cash, the Company repurchased in year 2006
7.5 million shares, or Baht 1,711 million, of its outstanding shares
under a second share repurchase scheme.

Analysis of Financial Position

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Total Assets

Consolidated total assets as of December 31, 2007, were Baht 21,503
million, an increase of Baht 668 million from Baht 20,835 million in
2006, or 3 percent. Current assets were Baht 4,976 million, a decline of
Baht 279 million from Baht 5,255 million in 2006, or 5 percent. Accounts
receivable accounted for the highest proportion of current assets,
representing 55 percent and 49 percent of current assets, or equal to an
average collection period of 40 days and 33 days at year ended 2007 and
2006, respectively. Inventory represented 32 percent of current assets
in both financial years.

Consolidated other non-current assets as of December 31, 2007, were Baht
2,255 million, a rise of Baht 722 million from Baht 1,533 million in
2006, or 47 percent, mainly from Baht 535 million higher intangible
assets from Baht 381 million in 2006, a balance of Baht 916 million as
of December 31, 2007. This was a result of newly acquired aggregates
mining rights and concessions.

Total Liabilities

As at December 31, 2007, the Company and its subsidiaries reported total
liabilities of Baht 5,613 million, a growth of Baht 658 million from
Baht 4,955 million in 2006, or 13 percent, mainly from the additional
draw down of short-term loans from financial institutions in the amount
of Baht 565 million.

At year end 2007 and 2006, consolidated trade accounts payable amounted
to Baht 1,516 million and Baht 1,328 million, respectively. This is
equal to an average payment period of 32 days and 29 days, respectively.

Shareholders’ Equity

As at December 31, 2007, and December 31, 2006, total shareholders’
equity was Baht 15,890 million (based on 237.5 million paid-up shares)
and Baht 15,880 million (based on 250 million paid-up shares),
respectively.

On 3 May, 2007, the meeting of the Company’s Board of Director passed a
resolution to approve the reduction in paid-up share capital by
cancellation of 12.5 million treasury shares with a par value of Baht 10
each unsold under the first share repurchase scheme, or by Baht 125
million, in order to comply with the Ministerial Regulation concerning
treasury stock under which the Company has to dispose all of its
repurchased shares within 3 years commencing from the date of share
repurchase completion (within 11 June, 2007). The Company registered the
reduction of its paid-up share capital from Baht 2,500 million (250
million shares with a par value of Baht 10 each) to Baht 2,375 million
(237.5 million shares with a par value of Baht 10 each) with the
Ministry of Commerce on 26 June, 2007. In addition, the Company reversed
the reserve for treasury shares of Baht 2,985 million to unappropriated
retained earnings.

On June 28, 2006, the meeting of the Company’s Board of Directors passed
a resolution to approve a second repurchase of shares by the Company in
order to manage its excess cash, under the share repurchase scheme, with
the investment not to exceed Baht 1,800 million or in term of shares
repurchased not to exceed 7.5 million shares, equivalent to 3 percent of
the total issued and paid-up shares of the Company. The Annual General
Meeting of Shareholders held on 14 March 2007 approved the additional
allocation of Baht 1,711 million from the unappropriated retained
earnings as of 31 December, 2006 to reserve for treasury shares
according to the Securities and Exchange Commission (SEC) requirement.

3.  Remuneration of the Auditors

In 2007 Ernst & Young Office Limited received from the Company and its
subsidiaries audit fees of Baht 4.1 million and no fee for non-audit
services.