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.

Type of Customer

Nearly 95% of our product is used by automobile tyre and rubber
industry. Small quantity of the product is used in producing plastics,
paints, ink and technical rubber goods. Our company supplies the product
to major tyre manufacturers in Thailand and abroad.

Type of Product

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.

During the year the company has developed 1 new grade.

The product of Thai Carbon Black Public Co.,ltd has been accepted by the
Thai Industrial Standards Institute (TISI)

Type of Revenue

 Million Baht

+----------+-----------+------+-----------+------+-----------+-------+
|          | 2005      |      | 2004      |      | 2003      |       |
+----------+-----------+------+-----------+------+-----------+-------+
|          | Amount    | %    | Amount    | %    | Amount    | %     |
+----------+-----------+------+-----------+------+-----------+-------+
| Local    | 2,434     | 53   | 1,897     | 54   | 1,632     | 51    |
+----------+-----------+------+-----------+------+-----------+-------+
| Export   | 2,183     | 47   | 1,603     | 46   | 1,587     | 49    |
+----------+-----------+------+-----------+------+-----------+-------+
| Total    | 4,617     | 100  | 3,500     | 100  | 3,219     | 100   |
+----------+-----------+------+-----------+------+-----------+-------+

Production 

Production and Capacity

Our factory is located at Angthong province. It has 5 production lines
with capacity of 140,000 metric ton per year. During the 4^(th) quarter
of 2005 the company has commissioned its expansion project with
approximate production capacity of 45,000 to 50,000 Mt/year.

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 :

  -------------------------- -------------- -------------- --------------
                             2005           2004           2003

  Production Capacity        185,000        140,000        140,000
  (MT/Year)                                                

  Actual Production          178,289        160,924        158,954
  (MT/Year)                                                

  Capacity Utilization (%)   96             115            114

  Increase in Actual         10.8%          1.2%           (0.45%)
  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 one of the four
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 94-95% of total raw material
cost. Carbon black feedstock oil is imported mostly from USA. Fuel oil
and Kerosene oil accounts for 5-6% 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 gone up approx
by 25% during the year due to very high crude oil price world wide

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

  ---------------------------- -------------- -------------- --------------
                               2005           2004           2003

  Local                        7              5              8%

  Import                       93             95             92%

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

The company has 3-4 local suppliers and 5-7 overseas suppliers. Out of
5-7 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 the major supplier, the company
is able to purchase raw material from other suppliers since there are
5-7 major suppliers in the competitive market.

Process and Production Technology 

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 300^(o)C 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 four 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 93 persons who can service the full production capacity

The company keep 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.

Marketing

Competitive Strategies

We are producing highest quality grades of Carbon Black for our
customers in worldwide operation. All our different grades are widely
accepted in the world market. Our company obtained important quality
awards under ISO/TS 16949 : 2002, ISO 14001, re-certified QS 9000,
OHSAS-18001 and ISO/ISE 17025 certification system etc. Due to high
quality of our product, our company is able to supply Carbon Black to
three largest tyre companies in the world namely Bridgestone, Michelin
and Goodyear in various countries including Japan, South East Asia,
China, Europe, India and Taiwan as well as in Thailand, where our
product is being used by all leading manufacturers of tires and rubber
products.

Due to the excellent quality of the products with prompt and efficient
services to its customers, Thai Carbon Black is very well and
competitively placed in the world market.

Our company has also received Deming prize for Total Quality Management,
TPM consistency award for Total Productive Maintenance and Prime
Minister’s award for outstanding productivity and these awards confirms
about company’s commitment for Total Quality Management and give
competitive advantage for marketing of its products

The company has won many prestigious international and national awards
for its excellent performance like Best Employer in Thailand, 5^(th)
Best Employer in Asia, Best performance award in the industry category
by Stock Exchange of Thailand, Outstanding Company for Labor
Relationship and Welfare Management by Labor Ministry, etc and these
awards are testimony to company’s excellent management systems which
helped the company to achieve competitive edge to market its products
efficiently and to serve its customer better.

During the year the company has continued its journey of performance
excellence in all sphere of activities and have won following major
awards.

-   Prime minister’s Award for Best Welfare Management for 3^(rd)
    consecutive year

-   Coveted “TPM Special category Award” from Japan Institute of plant
    maintenance (JIPM) for its highly efficient maintenance systems.

-   One of world’s best 200 small companies under a billion for the
    4^(th) time by “Forbes Magazine”

Strength and Weakness

Strengths

1)  Excellent quality

2)  Competitive pricing

3)  Prompt and efficient services

4)  International quality approval from major world producers

5)  Technical service to customers

6)  Low cost of production

7)  Highly energy efficient

8)  Major quality accreditions: ISO/TS16949: 2002, ISO14001, QS9000,
    IQRS level 7, TPM Excellence award, TPM special award, Deming Prize,
    Prime Minister’s Productivity award, OHSAS 18001 Thailand Quality
    Class Award, ISO/IEC 17025

9)  Well established brand image

10) Well established export market

11) Just in Time (JIT) deliveries to major customer

12) Export to growing market China

Weakness

1)  Very far from European / American customers

2)  Far off location of raw material source

Pricing Policy

Our pricing is governed by the market conditions and is based on the
world wide price trend of Carbon Black and its raw material, “Carbon
Black Feed Stock Oil” import duty structure. Our prices in the world
market are very competitive due to excellent quality with prompt and
efficient customer service.

Distribution Channels

Most of our sales is direct 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.

Type of Customers

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 Siam
Tyre Phrtpradaeng and Siam Tyre Industry, Otani Tyre, Inoue Rubber, ,
Camel industry , Vee Tyre & Rubber, Inoue Rubbers and Hwa Fong Rubber
etc.

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

  ----------------------- --------------- --------------- ---------------
                          2005            2004            2003

  % Sales to top-ten      63%             64%             73%
  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.

Privileges and Restriction on Business

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

The company was granted promotional privileges for its expansion project
under the Investment Promotion Act B.E. 2520 pursuant to investment
promotion certificate No. 1768(2)/2548 by the Board of investment on 31
August 2005, for the manufacture from carbon black, electricity and
steam. Subject to certain imposed conditions, 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 and 8 years for the manufacture of electricity and steam
commencing as from the date of first earning operation income.

As a listed company on Stock Exchange, the company will have reduced
rate of corporate tax at 25% (normal rate being 30%) for a period of 5
year for profit of first 300 million Baht for the accounting period
starting from 1^(st) January 2002.

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

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.

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, SET Best Performance
    award in the industry category

3)  Low cost of production

4)  Well established brand image

5)  Quality approved by all major tyre producers

6)  Highly energy efficient

7)  Excellent customer services

8)  Just In Time delivery to major customers

9)  Well established and well spread export market

10) Highly efficient production facilities

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

Opportunity

1)  Low cost of production

2)  Development of specialty product

3)  Possibility of export growth in the region and Thailand

4)  Higher economic growth in Thailand and in the region

5)  Expansion of existing plant (already under implementation)

6)  New Tire Plants in Thailand and expansion of tire plants

Threats

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

2)  Change in Carbon Black manufacturing technology

3)  Stringent pollution control norms

4)  Trade barriers in some countries

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

6)  New Carbon Black Manufacturer in Thailand

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

Impact of External Factors

1)  Volatility in Thai Baht exchange rate

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

3)  Country’s economic stability

4)  Government regulations on pollution

5)  Impact of sudden spread of epidemic like, Bird Flue etc.

6)  High Shipping freights world wide

7)  Impact of terrorism and Middle East tensions

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, the company exports approx. 45% of its production and
is able to meet all customer requirements by developing new grades as
per customer specifications and as per their delivery needs

Number and Size of The Competitors

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

1.  Cabot – USA

2.  Degussa – Germany

3.  Columbian – 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 205,000 MT/ year.

2.  Thai Tokai Carbon Product Co.,Ltd. with the production capacity of
    84,000 MT/ year.

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

Local Market Share for the year 2005 (approximately in term of sales
volume)

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

  1. Thai Carbon Black Public Company 54
  Limited                             

  2. Thai Tokai Carbon Product Co.,   46
  Ltd.                                
  ----------------------------------- -----------------------------------

Competitive Status

Thai Carbon Black is one of the largest producer 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 important customer requirements, which give the company
better competitive advantages.

Due to company’s strong competitive position in the world market, better
operations and growth of auto industry in Thailand and worldwide, the
company has expanded its production capacity by approx.45,000 MT to
cater the increased demand of carbon black.

Entry of New Competitors

Board of Investment had approved new Carbon Black plant in Thailand
namely Bridgestone Carbon Black (Thailand) Co.,Ltd in 2004 and it has
already started production and the company understand it will be
manufacturing certain specialties grades for specific requirements for
their overseas tire manufacturing plants and it will not affect
company’s competitive position both in domestic and international
market.

Product Substitute

Silica is being developed as a product substitute. However, it will be a
long time before Silica can fully replace Carbon Black in the tyre.
Also, the cost of production of Silica will be much higher than Carbon
Black. At present, there is no major threat to Carbon Black industry.

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.

Environment control & care

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).

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.