2.  Associated Risks

Risk and Risk Management

The Executive Committee of Siam City Cement Public Company (SCCC) is
aware of its responsibilities in good corporate governance in order to
maximize shareholders wealth. The Business Risk Management unit under
the Strategic Business Planning works on analysing possible risks
related to the Company on a 5-year horizon. This unit then reports to
the Executive Committee on possible risk factors and recommends
solutions on how to manage these risks. In this way, the company is well
aware of the possible risks and makes sure these risks are managed
properly.

2009 Risk

The lower cement consumption, fierce competition in the market, and high
energy cost have been identified as risks that may have substantial
impact on the performance of the company:

1.  Less cement consumption

  Due to the global economic crisis and domestic political instability
  that has weakened investors’ and consumers’ confidences, SCCC domestic
  cement demand experienced dwindled demand due mainly to slowdown in
  construction investments of residential and government projects.
  Therefore, an export push for cement and clinker was one important
  mitigation that has assisted to reduce the risk, to maintain the
  production at cost efficient level and to increase business
  opportunity for future market.

2. Fierce competition

  The Thai cement industry was affected by lower demand that led to more
  intense competition, especially pressure on pricing in Ready-Mixed
  concrete (RMX) business due largely to delays of government mega
  projects.

  In order to increase business advantage, we have launched initiatives,
  products and innovation to cope with the competition as follows;

-   Slag cement (Slag is a by-product of iron refinery) is increasingly
    being used in the manufacture of blended Portland cement. Due to its
    high durability and strength, slag cement can be used in both
    general construction and high-compressive projects such as ports and
    offshore platforms.

-   “INSEE Ngarn Lor” is conceived through relentless research and
    development to be particularly suitable for dry cast concrete
    applications. The quality of INSEE Ngarn Lor conforms to ASTM C 1157
    type GU (Hydraulic Cement for General Construction) standard.

-   In order to promote INSEE brand and enhance sales channels for
    customers, SCCC initiated Baan U Sabai house (low cost housing) with
    the concept of green and energy saving by bundling sales of SCCC
    products, other construction materials from selected dealers and
    labor from certified contractors

-   INSEE InterLock Block is an SCCC innovative CPM product. A patent
    was registered in Jun’09. Its key features are using much thinner
    cement in the laying process, thus reducing the overall amount of
    cement used. In addition the laying work is faster as the blocks
    have fins that assist in vertical and horizontal alignment. As a
    result total construction cost decreases due to lower cement usage,
    and reduced labor cost from shorter construction time.

  3. High energy cost

  The unit cost of traditional fuel was higher than budgeted. Hence, the
  company has implemented measures and projects such as Waste Heat
  Recover (electricity generation), Alternative Fuels & Raw Materials,
  diversified fuel types, fuel mix optimization and overall operational
  efficiency improvement in order to minimize and optimize energy cost.