3. Business Operation of Each Line of Product

3.1 Products

    Cement

    The Company manufactures and sells various types of cement, under a
    number of associated trademark of INSEE, e.g. INSEE Dang, INSEE Fah,
    INSEE Dum, INSEE Tong. In 2004, the Company launched a product named
    ‘INSEE Poon Keaw’.

The Company produces cement to primarily serve the domestic market. The
excess supply, if any, is exported. Even during the time of declining
domestic demand, the Company may not be able to make a corresponding
reduction in the production because the Company needs to maintain the
suitable capacity utilisation and economy of scale.

The Company has been very successful in enhancing its sales via
Internet.

Ready-Mixed Concrete

To enhance its cement selling channel, the Company set up a wholly-owned
subsidiary, named Siam City Concrete Company Limited to operate
ready-mixed concrete business.

Others

  The Company, through two subsidiaries namely Karat Faucet Co., Ltd.
  and Conwood Co., Ltd., has diversified into other construction
  material business, i.e. faucets and wood substitute materials. The
  Company also has an equity interest in an energy company, named Lanna
  Resources Public Company Limited, that produces lignite a major fuel
  for cement production.

  3.2 Market Situation and Competition

1.  Cement

  Core business of the Company is the manufacturing and the distributing
  of cement and cement-related products and services. The Company
  operates nationwide and has a share of about 28 % of the market.
  Approximately 60% of the Company’s sales volume are generated through
  the network of wholesalers and major retailers, the rest of 40% is
  direct sales to the concrete manufacturers, ready-mixed concrete
  business operators and construction companies.

  Major products are “INSEE Dang” (mixed cement) and “INSEE Petch”
  (portland cement) which make up 92 % of the Company’s domestic sales
  volume. The premium products i.e. “INSEE Dum” (high early strength
  portland cement), “INSEE Keaw” (Portland Pozzolan Cement) and “INSEE
  Tong” make up 8 % of the Company’s domestic sales volume.

  In 2004, approximately 60% of domestic sales volume was bag-cement and
  40% was bulk-cement. The cement domestic demand was about 25.5 million
  tonnes, increasing from the year 2003 by 9%. The cement manufacturing
  industry of Thailand exported cement and clinker at approximately
  amount of 11 million tonnes in 2004 and the Company’s export volume
  share was about 29% thereof.

  The Company exported to South East Asia (72%), USA (15%), Africa (9%),
  South Asia (4%).

2.  Ready-mixed Concrete (RMC)

  In 2004, the overall RMC market growth was 21%, from 15.5 million m³
  to 18.8 million m³, compared to 2003, mainly driven by infrastructure
  construction works and steady demand from the residential construction
  sector. The Company operates its RMC business through Siam City
  Concrete Company Limited (“SCCO”), one of its wholly owned
  subsidiaries. SCCO’s sales volume in 2004 was up by 15.4% from 2003 to
  1.43 million m³. Competition in the market has been continually
  increased. SCCO’s retained approximately 7.6% share in the market.

  3.3 Procurement of Raw Materials and Services

Production Capacity

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

  ------------------------------------ -------------- ------ -------- ------
                                       Unit           2004   2003     2002

  Production Capacity for Clinker      Million Tonne  12.3   12.3     12.3

  Clinker Production Capacity          %              79     62.6     86.2
  Utilization                                                         

  Increase (decrease) of Production    %              24.7   (27.4)   19.1

  Available Workforce                  Shift          3      3        3

  Actual Workforce Used                Shift          3      3        3
  ------------------------------------ -------------- ------ -------- ------

  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 gyptsum. 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
  compliant.

  3.4 Work in Progress

  None.