:: Annual Report 2008 ::

Contents 04

Report of the Board of Directors to the Shareholders

Board of Directors, Audit Committee and Executive Committee

Management Structure

Key Figures

Achievements and Milestones

Vision, Mission and Core Values

Report of the Executive Committee

Quality is not an abstract, but a Concrete Concept

Building Value… Through Business Solutions and Partnerships

Building Value… With Respect and Trust

Building Value… With Compassion and Opportunity

Summary of Major Developments and Recognitions in 2008

Corporate Governance Update

Industrial Outlook

Risk and Risk Management

Report of the Board of Directors’ Responsibilities for Financial Statements

Report of the Audit Committee

Consolidated Financial Statements

Report of Certiﬁed Public Accountant Balance Sheets Income Statements Statements of Changes in Shareholders’ Equity Statements of Cash Flows Notes to Consolidated Financial Statements

Management Discussion and Analysis

Related Party Transactions

Dividend Allocation Over Past Three Years

Supplemental Information

Customer Service Center and Distribution Centers

Summary of Speciﬁed Items Per Form 56-2

Building Value... with Excellent Quality and Innovation

Siam City Cement Public Company Limited Annual Report 2008

Report of the Board of Directors to the Shareholders In 2008 the world economy experienced a crisis

to preempt the market decline and the looming

from ﬁnancial turbulence unprecedent in the

economic debacle. Continuing from earlier quarters

era of globalization and unparalleled during the

of the year, the management intensiﬁed painful

past 80 years, causing several well known global

cost reduction measures to mitigate the anticipated

ﬁnancial institutions to begin their journey toward

impact of lower demand coupled with higher average

a capital meltdown. The crisis originated from the

costs of energy. As a result of these saving measures,

collapse of US housing market and also pushed

the year 2008 ended with respectable results.

manufacturing industry to the brink. Thailand was even more unfortunate to additionally experience

Consistent with the past, the Board of Directors

serious political strife which drove away capital

fully recognizes the importance of shareholders’

market investors, discouraged foreign direct

return and places emphasis on the need to

investment and demoralized the tourist industry.

faithfully compensate shareholders for their loyal

The pillar of Thai economy, the export sector, wilted

investment participation. In this connection the

under these stormy developments registering

Board of Directors wishes to propose the payment

negative growth in the ﬁnal quarter of the year.

of a full-year dividend of 11.00 baht per share. As an interim dividend of 6.50 baht per share was paid on

Under the deteriorating political and uncertain

September 5, 2008, and, subject to the shareholders

economic environment, Siam City Cement’s

approval, a ﬁnal dividend of 4.50 baht per share will

performance remained resilient reﬂecting the grit

be paid on May 7, 2009.

and determination of its management to confront head-on these difﬁcult business conditions. Strong

With the installation of the new Thai Government

actions and decisive decisions were taken early

at the very end of 2008, Siam City Cement is looking

Mr. Prabhol Buranasiri

Mr. Paul Heinz Hugentobler

Mr. Veraphan Teepsuwan

Mr. Philippe Arto Effective January 1, 2009

Mr. Thaveepol Kongseri

Mr. Chachchon Ratanarak

Report of the Board of Directors to the Shareholders

forward to the year 2009 with the hope of seeing

The Board of Directors would like to take this

the missing equation falling in place. Thai political

opportunity to thank the shareholders, customers,

stability will help restore conďŹ dence in both the

suppliers, employees and all stakeholders for their

foreign and local business communities and allow

conďŹ dence and for their support.

Thai entrepreneurship to drive consumption, trade, and tourism. The Thai economy will hopefully survive the global crisis and return to a solid foundation. At the micro level, while monitoring the birth of mega projects and the revival of housing and

Veraphan Teepsuwan

construction industries, your company will focus

Chairman

on improving product margins by reducing costs through various means. Attention will be focused on a higher usage of alternative fuels and by creating more value with its customers through new products and more efďŹ cient supply chain management. Your company will continue to place emphasis on Occupational Health and Safety, the protection of the environment, its partnership with the communities and the development of its employees so as to sustain its long term combined corporate and social agenda.

Mr. Chet Raktakanishta

Ms. Chantana Sukumanont

Mr. Urs Wolfgang Bieri Resigned May 2, 2008

Mr. Vanchai Tosomboon

Mr. Prakob Visitkitjakarn

Mr. Harald Link

Mr. Marcel Smit Resigned December 31, 2008

Siam City Cement Public Company Limited Annual Report 2008

Board of Directors, Audit Committee and Executive Committee Board of Directors Non-Executive Directors

Mr. Veraphan Teepsuwan

Chairman

Mr. Paul Heinz Hugentobler

Vice Chairman

Mr. Chachchon Ratanarak

Director

Mr. Thaveepol Kongseri

Director

Mr. Urs Wolfgang Bieri

Director (Resigned May 2, 2008)

Mr. Prakob Visitkitjakarn

Independent Director

Mr. Chet Raktakanishta

Independent Director

Mr. Harald Link

Independent Director

Mr. Prabhol Buranasiri

Independent Director

Executive Directors

Ms. Chantana Sukumanont

Director

Mr. Vanchai Tosomboon

Director

Mr. Marcel Smit

Managing Director (Resigned December 31, 2008)

Mr. Philippe Arto

Managing Director (Effective January 1, 2009)

Management Structure Audit Committee

Board of Directors

Corporate Governance

Mr. Marcel Smit Managing Director, Chairman of the Executive Committee

Mr. Philippe Arto Managing Director, Chairman of the Executive Committee

(Resigned December 31, 2008)

(Effective January 1, 2009)

Ms. Chantana Sukumanont Director, Deputy Chairman of the Executive Committee Marketing and Sales

Board of Directors, Audit Committee and Executive Committee and Management Structure

Audit Committee

Mr. Prakob Visitkitjakarn

Chairman

Mr. Harald Link

Member

Mr. Chet Raktakanishta

Member

Executive Committee

Mr. Marcel Smit

Chairman of the Executive Committee (Resigned December 31, 2008)

Mr. Philippe Arto

Chairman of the Executive Committee (Effective January 1, 2009)

Ms. Chantana Sukumanont

Deputy Chairman of the Executive Committee (Marketing and Sales)

Mr. Vanchai Tosomboon

Executive Vice President (Saraburi Operations)

Mr. Rungrote Soonthorn

Senior Vice President (Human Resources and Management Development)

Mr. Andreas Leutenegger

Senior Vice President (Finance and Controlling)

Mr. Nopporn Thepsithar

Senior Vice President (Logistics and Exports)

Mr. Vanchai Tosomboon Director, Executive Vice President Saraburi Operations

Mr. Rungrote Soonthorn Senior Vice President Human Resources and Management Development

Mr. Andreas Leutenegger Senior Vice President Finance and Controlling

Mr. Nopporn Thepsithar Senior Vice President Logistics and Exports

Siam City Cement Public Company Limited Annual Report 2008

Key Figures 2008

2007

2006

2005

Clinker production capacity

12.3

Cement production capacity

14.5

Million tons

Million Baht

Net sales

21,305

22,800

23,647

22,380

Operating EBITDA

5,054

5,211

6,059

6,307

EBITDA

5,461

5,506

6,344

6,613

Operating proﬁt

4,176

4,396

5,320

Net proﬁt after minority interests

3,173

3,230

3,914

Cash ﬂow from operating activities

3,099

4,000

4,328

Investments in property, plant and equipment - net Total assets Net ﬁnancial debt Total shareholders’ equity

5,567

1,729

1,028

1,177

23,503

21,503

20,834

2,534

771

4,073 4,232 1,021

21,029 (1,793)

16,803

15,845

15,890

15,880

Operating EBITDA

24%

23%

26%

28%

EBITDA

26%

24%

27%

30%

Operating proﬁt

20%

19%

22%

Margin (%)

25% 2

18%

Net proﬁt after minority interests

15%

14%

17%

Cash ﬂow from operating activities

15%

18%

13.79

14.05

16.57

14.00

14.00 2

82%

19%

Financial Ratios

Earnings per share (Baht) Gross dividend per share (Baht)

11.00

84%

17.15 14.00

Dividend payout ratio on net proﬁt (%)

80%

100%

Gearing (%)

16%

(11%)

Total liabilities to total assets (%)

33%

26%

24%

20%

Group

2,876

3,056

2,927

2,866

Cement

2,039

2,254

2,243

2,163

Owned Personnel

1 2

Proposed by the Board of Directors. Restated due to changes in accounting policies (TAS 44, 45). More details disclosed in notes to ﬁnancial statements.

Key Figures, Achievements and Milestones

Achievements and Milestones Supporting Thailand’s development for more than 30 years by offering innovative solutions in cement products.

1969

–

The Company was established in 1969 as Siam City Cement Company Limited

1972

–

Siam City Cement begins producing cement

1977

–

Listed on the Stock Exchange of Thailand

1981

–

Imported bunker oil kiln fuel replaced with domestic lignite

1989

–

Introduction of 1st waste heat recovery system in Southeast Asia

1993

–

Changed its status to a public company and its name to Siam City Cement Public Company Limited

1996

–

Annual production capacity exceeds 12 million tons

1997

–

Awarded ISO 9002 Certiﬁcation

1998

–

Awarded ISO 14001 Certiﬁcation

–

Holcim became shareholder in Siam City Cement

–

Introduction of Alternative Fuels and Raw Materials (AFR) programme

–

Debt restructuring and reﬁnancing completed

–

Launch of webSALES initiative

–

Awarded the 2000 Best Practices on Corporate Governance

–

Awarded the Audit Committee of the Year 2000

–

Awarded TIS 18001 Certiﬁcation

–

Government approval for commercial use of AFR

–

Launch of INSEE (Eagle) family of cement products

–

Inauguration of AFR blending plant

–

Siam City Cement long-term debt reduced to zero

–

Launch of INSEE TONG, Thailand’s 1st premium masonry cement

1999 2000

2001 2002

2003

–

Voted Best Company in Thailand and Best Asian Company in the Construction Sector in Euromoney Asian company survey

2005 2006

–

Repositioning corporate and products under the “As I Wish” branding campaign

–

Introducing “INSEE Mortar Max”: a ready-to-use dry mortar

–

OH&S 12 Golden Rules launched to reinforce OH&S performance

–

INSEE Concrete Franchise

–

Start-up aggregates business for Siam City Concrete

–

Certiﬁcates from Department of Industrial Works, Ministry of Industry on pleasant and environmental friendly plant in honour of HM the King’s 60th years accession to the Throne

2007

–

Certiﬁcate for supporting The Water Resources Department’s Checkdam Project from the Prime Minister

–

Awarded for Outstanding Workplace 2007 (Excellent Labor Relations and Labor Welfare) from the Ministry of Labor

–

Certiﬁcation of European standard (EN 197-1) and French standard (NF 002) for INSEE Fah cement (OPC-5)

2008

–

Awarded for Outstanding Workplace 2008 (Excellent Labor Relations and Labor Welfare) from the Ministry of Labor for the second consecutive year

–

Certiﬁed Standard for Corporate Social Responsibility: CSR-DIW from the Department of Industrial Works

–

The quarry certiﬁed for Best Mining Practices by the Ministry of Natural Resources and Environment

Siam City Cement Public Company Limited Annual Report 2008

Vision, Mission and Core Values Corporate Vision

To provide foundations for society’s future

Corporate Mission

To increase value to all stakeholders by providing the best cement, aggregates, and related product solutions, achieving above-industry proﬁtability through quality, service and innovation

Core Values

Commitment to our customers, delivering quality, service and innovation Consistent and sound ﬁnancial performance Socially responsible, a good citizen An open, respectful and collaborative environment with opportunities for personal development

Corporate Fundamental Goals To be preferred… …by customers

To provide the best solutions on cement, aggregates, and related products …by community

To be socially responsible and environmentally conscious within communities and Thai society …by business partners

To collaborate with all stakeholders to grow business opportunities together …by employees

To provide competitive compensation, beneﬁts and career development opportunities with respect and recognition in a trusted and transparent working environment

Vision, Mission and Core Values

Motto:

At Siam City Cement, We Deliver.

Siam City Cement Public Company Limited Annual Report 2008

Report of the Executive Committee In a particularly difficult year of shrinking

technical support teams are mobilized to continue

demand, peaking energy prices and emerging

to bring value to our customers through excellence

world crisis, Siam City Cement has managed to

in product quality and services.

maintain its margins. The company was successful in growing further In 2008, the global community was faced with

its ready-mix and aggregates businesses. Siam

what has been described as a ﬁnancial tsunami

City Cement could also make progress in the

that quickly impacted the entire world. Thailand

implementation of its energy strategy, with

was not spared from this widespread crisis as, from

the ﬁnalization of the Geocycle alternative fuel

the middle of the year onward, the construction

production platform and with the launch of a waste

industry began to slide rapidly downward along

heat recovery project, which will allow us to generate

with most industries.

electricity from the two largest kilns of the company.

As a direct consequence the cement industry was

Pursuing its long-term strategy, Siam City Cement

immediately affected to a considerable extent.

strives to be a leader in Occupational Health

To further complicate the business landscape, the

and Safety and in environment. In 2008, Siam

country’s lengthy political uncertainties eroded the

City Cement has further improved its OH&S

conﬁdence in all sectors – manufacturers, service

performance. The company has also achieved an

providers and consumers.

exceptional distinction in Thailand’s industrial sector by being one of the ﬁrst few companies to be

The unfavorable political situation adversely

awarded CSR-DIW, the standard for Corporate Social

affected the implementation of major infrastructure

Responsibility, by the Department of Industrial

projects, leading to only one project, the Red

Works, Ministry of Industry.

Line mass transit system extension, awarded to contractors. The real estate sector also slowed

In addition, Siam City Cement has applied for

down considerably as consumers decided to delay

the certiﬁcation for Carbon Label issued by the

big expenditures during the time of uncertainties.

Thailand Environment Institute and applicable to our cement products. It is expected that Siam City

Overall, cement consumption in Thailand decreased

Cement will be among the ﬁrst few Thai companies

by 10% and Siam City Cement, maintaining its

to be issued with the Carbon Label within the

market share, lost volume for its cement sales by

ﬁrst quarter of 2009 – a testament to our concern

the same amount. Selling prices were successfully

for the environment and our commitment to the

increased during most of the year, to reﬂect the

betterment of the Thai society.

huge inﬂation of energy cost which had a major impact on cement production costs.

Overall, despite difﬁcult conditions leading to a 7% decrease in net sales versus 2007, the company

Anticipating that the crisis will extend into 2009,

was able to achieve Earnings Before Interest and Tax

Siam City Cement has taken appropriate measures

(EBIT) of 4,583 million baht, 2 percent lower than

to proactively preserve proﬁtability and cash ﬂow

2007, and a Net Proﬁt of 3,173 million baht,

generation, by initiating immediate cost reduction

2 percent lower than 2007. Remarkably, the

programs and by reducing capital expenditures

company was able to improve its net proﬁt margin

to the most critical projects. At the same time,

to 15% from 14% in the previous year.

the sales force, the logistic organization and the

Outlook 2009:

performance and improved service to its customers,

There is no doubt that 2009 will be a challenging

while keeping its dedication to social responsibility

year for all sectors of the economy in Thailand.

and sustainable development.

Although the political situation is expected to stabilize, the global ďŹ nancial crisis will likely manifest its full-blown impact. However, Siam City Cement Public Company Limited intends to seize the opportunity of the crisis to

Philippe Arto

accelerate its transformation for stronger operating

Chairman of the Executive Committee

Siam City Cement Public Company Limited Annual Report 2008

Quality is not an abstract, but a Concrete Concept At Siam City Cement Public Company Limited,

From “Sustainable Development” to

quality of both products and services has never

“Green Marketing”

been compromised. Research is conducted with

From the macro principle “sustainable development”,

continuity to ensure that new products and services

which governs operations at the corporate level,

will be launched to provide better solutions to our

comes the micro concept, “green marketing”, a

customers, while existing ones will be improved to

working philosophy that guides our marketing

enhance value. To ensure suitability for applications,

practices. The satisfaction of our customers’

and to assist customers in their usage of our products,

demands must not come at the expense of the

a fully-equipped mobile lab ﬂeet capable of providing

surrounding environment. At Siam City Cement,

a variety of both standardized and tailor-made

the environmental concerns are integrated into all

services has been initiated. This leads to increased

areas of our marketing activities. Our production

accessibility to our services on site enhancing the

process is designed to be as much pollution-free

capability of Siam City Cement to completely fulﬁll its

as possible. Attempts have been successfully made

objective of being a solution provider.

to switch to alternative sources of energy, such as ﬂy ash and blast furnace slag, to reduce carbon

INSEE Concrete represents our pride in product and

dioxide emissions from the cement clinker. Recently,

service quality. The production process employs

packages have been redesigned to include more

state of the art technology and is standardized so

application information and warning signs.

that the optimally mixed concrete is always the ﬁnal output, regardless of the mixing location.

To maintain our customer centricity, the alignment

Nevertheless, the accompanying logistical services

of our strategic plans and Siam City Cement

are customized to make sure that the product

value chain has been implemented. The plans

arrives at the customers in the right condition, at

will be analyzed to determine their values to our

the right place, and at the right time. To further

customers, and those with minimal, or without,

add conﬁdence and trust, regular plant inspections

added values will be discarded.

are performed by our professionally trained engineers from our Customer Technical Services.

Fairness is our best policy when dealing with the

The combination of state of the art production and

stakeholders. In face of economic hardship, we do

quality control processes and ﬂexible service crews

realize that our “price” is our customers’ “cost”.

that respond quickly to the diverse demands of

Reasonable price, which will make our strategic

the customers makes our brand the one—and only

partners and us survive, is an ultimate goal when

one—that can be relied on.

it comes to pricing. In the competitive arena, fair competition is upheld since it will guarantee the

INSEE Concrete Franchise is another big stride to

best deal to our customers. Last but not least,

treat our valued customers as strategic partners.

operational transparency appears on the top list. To

Upgraded services and certain privileges are offered.

buoy customers’ trust, the ﬁnancial results of our

Once customers join the network, their operations

performance are made accessible to the general public.

will be handled the same way Siam City Cement takes care of its own operations.

At Siam City Cement, all customer-related issues are critical. We will continue to serve diverse customers

In terms of quality, excellence may sound

with multiple application demands. In the mind

exaggerated and too subjective. However, with the

of our customers, Siam City Cement is and will

existing capacity of our physical resources and the

always be a modern specialist who provides reliable

capability of our human resources, we can proudly

solutions in the most time-efﬁcient manner.

guarantee product and service quality that is second to none.

Chantana Sukumanont

Director, Deputy Chairman of the Executive Committee Marketing and Sales

Building Value... with Excellence In Products and Services

Siam City Cement Public Company Limited Annual Report 2008

Building Value… Through Business Solutions and Partnerships “Siam City Cement is a partner of Yongsawad”

staff that we are all a big family and to call me

Khun Sunpetch Slisatakorn, the managing director

“Hia” (elder brother) and call my big sister “Jeh”

of Yongsawad Group, one of Thailand’s most

(elder sister). It does not matter how big or small

inﬂuential traders in construction materials, has

Yongsawad is. What is important is every one of us

enjoyed a very close relationship with Siam City

loves one another and cares about each other. That

Cement Public Company Limited for over 30 years.

alone can lead to unity and ultimately the success of the organization.”

From humble beginnings as a small “Yong Nguan Huad” general store in 1923, until becoming the

Almost 30 years of being a member of

widely known “Yongsawad” in 2008, the business

the INSEE family

has greatly beneﬁted from Khun Sunpetch’s

“In the past 10 years, INSEE Cement has developed

commercial experience and keen business acumen.

tremendously in its management system and being the leader in innovative technologies. It was one

Yongsawad’s history and success story

of the ﬁrst Thai companies to apply the webSALES

“Yongsawad has its origin in being a Chinese family

system, among other things. When I experience all

business. My grandparents made a living as coolies

these excellent systems, I would then try to apply

carrying bags of rice. Then it was my father who

them to my own business. These include customer

founded a small general store and began selling

relationship management, marketing, advertising

cement and other building materials in 1967. I was

and data compilation. We also cooperate in the

born a year prior to that. I studied commerce at

analysis of important data.

Phra Nakorn Commercial College and completed my Bachelor Degree in Business Management at

“Being an INSEE customer, we have complete

Rajamangala Institute.

freedom to run our business. We manage our own stocks. But at the same time, we can always consult

“While I was still in college, in my spare time I was

with the INSEE management on any problem,

also helping in the family business as we did not

as well as being provided with regular training

have any workers. I started to work full time after

support. As fellow members of the family, we are

my graduation in 1986 and launched Yongsawad

not only looking at the returns on business, we

Construction Company Limited in 1988.

also look at how compatible we are and how we, together, can add special value to this relationship.

“Our business philosophy revolves around quality

It is this mutual care and respect—being good

service. I learned the concept of treating customers

partners—that leads us towards our shared

as valued relatives from INSEE. I also treat my

successes and growth.”

employees as members of the family. I told all my

Sunpetch Slisatakorn

Managing Director, Yongsawad Group

Prasart Makthuam

Tabkwang environmental committee leader Mitraparb Ruamchai community leader

Building Value With Respect And Trust

Building Value… With Respect and Trust “When the management directly interacts with the

they would provide cement. Not only that, they

community, any problems can be solved”

also provide vocational training and mobile medical

Khun Prasart Makthuam, a native of Samut

units, or even excursion trips for the communities,”

Songkhram Province, spent 50 years as a cement

he said, adding that one good and effective example

plant worker. Today he is enjoying his role as

is the setting up of the Fund for the Development of

a respected community leader being ofﬁcially

Tabkwang Community and Environment.

recognized as Tabkwang environmental committee leader and Mitraparb Ruamchai community leader

The members of the communities are empowered

in Saraburi Province, where the cement plants of

to decide what they want to use the fund for.

Siam City Cement Public Company Limited are

“We have a tri-partite committee comprising the

located.

communities, the municipality and Siam City Cement. Any problems that the municipality can not

It is not easy to look after the well-being of all his

tackle, the Company will consider to implement. I

constituents in 31 communities, but Khun Prasart

am very happy that this is the ﬁrst company to set

can carry out his duties efﬁciently. The community

up a fund to help support our communities. There is

leader gives one good example for his capability—the

a crucial interaction between the municipality and

presence of his “big neighbor”—Siam City Cement.

the cement plant. This clearly shows that when the management directly interacts with the community,

“I was elected as Mitraparb Ruamchai community

any problems can be solved,” Khun Prasart said proudly.

leader in 2004 and as Tabkwang environmental committee leader looking after 31 communities.

He added that, “Other projects may not be very

My job is to see to the needs of everyone under

effective, but Siam City Cement’s community fund

my jurisdiction and make sure that he or she is

is right on target. I must admit that the Company

content and happy. Some of our problems, such as

is the ﬁrst cement plant to initiate this kind of

the unpaved roads, need to be addressed. When

program resulting in the visible and concrete

the communities came under the control of the

progress of our community.

municipality, I would petition the municipality to have the roads paved. And not just roads, but

In empowering the members of the community

also issues regarding electricity, tap water and

to decide their own path of development, it

other kinds of public utility as well,” Khun Prasart

leads to the sustainable development that

explained.

Siam City Cement envisions as the solid foundation for a happy community.

Siam City Cement and the Fund for the Development of Tabkwang Community and Environment

“Siam City Cement helps support a lot of our needs in Tabkwang. They look after temples, schools and the people. At temples they often organize merit-making ceremonies. At schools they provide supplies, build toilets, drainage ditches and water puriﬁers. When construction works are called for

Siam City Cement Public Company Limited Annual Report 2008

Building Value… With Compassion and Opportunity Khun Wera Khongprayoon, Unit Head of Repair

we are given the opportunity to develop ourselves

Section at the Siam City Cement plant at Saraburi,

in accordance with our own abilities. At Siam City

has been with the company since 1985.

Cement, we have instructors and speakers both internally and externally. We are given extensive

Outwardly, you can hardly tell that this energetic,

lectures on procedures and safety before doing any

jovial man is missing his left arm.

new tasks,” Khun Wera explained.

“I remember I started work here on November 25,

24 Years at Siam City Cement

1985. Then on April 23, 1987. I lost my left arm in an

Khun Wera never loses his commitment and

accident and had to be hospitalized for about four

determination despite his physical handicap.

months. The company took very good care of me

In addition, he recognizes the importance of

with compassion and providing all beneﬁts from the

utilizing all his inner strength for the good of the

social security provisions,” Khun Wera said.

organization.

For many others, an accident such as the one

“My limitation is only in the opportunity that the

happened to Khun Wera would likely prompt a move

company is giving me. I am not overly ambitious.

to a new environment. But for Khun Wera, Siam City

I just want to do the best I can and hope that the

Cement is still top-of-mind for the past 23 years.

society will give me the chance to prove myself so that people like me will not become a burden to

“One Siam City Cement culture is that since

everybody else,” he said, adding, “For my family and

the beginning, the bosses always look after

loved ones, my determination and my achievement

their subordinates. We are never left to fend for

are my only gift to them.”

ourselves. If there is a position we are capable of,

Wera Khongprayoon

Unit Head, Repair Section, Siam City Cement Plant 2, Saraburi Operations

Siam City Cement Public Company Limited Annual Report 2008

Summary of Major Developments and Recognitions in 2008 Customers:

Recognitions:

Developments:

Human Resources and Management Development

Marketing and Sales

1. Awarded for Outstanding Workplace 2008

1. INSEE Brand successfully strengthened to

(Excellent Labor Relations and Labor Welfare)

achieve recognition as one of the top cement

from the Ministry of Labor for the second

brands in Thailand.

consecutive year.

2. Put into operation small Ready-Mix Concrete

Occupational Health & Safety

trucks, with vibrant designs, in response to

1. OHSAS18001:2007 certiﬁed at Geocycle

increasing retail demand.

2. OHSAS18001:2007 certiﬁed at CONWOOD

3. Continued to expand INSEE Concrete Franchise to broaden the network of our strategic partners. 4. Expanded INSEE Concrete Product Manufacturer Franchise to cover more product lines, to provide solutions and boost product standard. 5. Developed and implemented the Customer Information System, Siam City Cement’s complete customer database—a major step toward customer-centricity. 6. Increased the percentage of sales through webSALES by 10% Y-O-Y to 76%. 7. Implemented “Compact Mobile Plant Project” aimed at construction projects with limited spaces that require big quantity of concrete.

Society and Communities: Developments: Corporate Social Responsibility and Community Relations

1. Accelerated the “80 Years, 880 Check Dams for His Majesty the King” project to complete 1,550 check dams in 2008 after 1,050 dams were built in 2007. 2. Consolidated educational and vocational support projects to increase efﬁciency and impact. 3. Contributed to Tabkwang Health Security System to support the public health service. 4. Established Tabkwang Community and Environment Development Fund for social and cultural development, education support and

Employees:

environment preservation.

Developments:

Recognitions:

Human Resources and Management Development

Corporate Social Responsibility and

1. Continued employee volunteer program in the check dam project for the second consecutive year. 2. Implemented “Individual Performance Upgrade Project” to improve employee performance management system. 3. Continued to run the Assessment Center for the third consecutive year. Over 90 leaders in the group company have been assessed. Occupational Health & Safety

1. Implemented three Fatality Prevention Elements (FPEs): Vehicle and trafﬁc safety, working at height, and isolation and lockout in the Siam City Cement Group. 2. Conducted annual OH&S Road in across the Siam City Cement Group.

Community Relations

1. Certiﬁed standard for Corporate Social Responsibility: “CSR-DIW” by the Department of Industrial Works, Ministry of Industries, as a precursor to the ISO26000 (CSR). 2. Nominated as one of the top eight companies to receive CSR award in a program organized by the Thailand Management Association and Sasin Institute. 3. Given award for Student Research Support by Her Royal Highness Princess Soamsawali. 4. Given award for Forest Rehabilitation Support by the Royal Forestry Department.

Summary of Major Developments and Recognitions in 2008

Business partners and suppliers:

2. Geocycle began operation as one of the world’s

Developments:

most modern Alternative Fuels preparation

Logistics and Exports

plants in August, 2008, using the latest

1. Implemented Integrated Supply & Demand

technology and world class environmental

Planning through a cross-function team

management systems which cover the entire

(Marketing & Sales, Production, and Logistics)

range of pre-processing activities.

to better adapt to the market situation. 2. Implemented “Supply Chain Capability

3. Implemented the new management system for Quarry Scheduling Optimization (QSO) for

Building” program to align with the supply

better efﬁciency in raw material management

chain management concept and improved

at the quarry.

employees’ and transporters’ knowledge. 3. Implemented loading capacity & efﬁciency

4. Implemented the Prompt Gamma Neutron Activation Analysis (PGNAA) at the quarry to

improvement project at Packing Plant 1 to

better utilize raw materials in the cement

reduce packing cost and improve reliability and

production process.

speed of cement dispatching. 4. Centralized dispatching management process into an “In-Plant Logistics Scheduling/Control”

Recognitions: Saraburi Operations

1. The quarry certiﬁed for Best Mining Practices

function and implemented a pilot radio-

from the provincial ofﬁce of Ministry of Natural

frequency identiﬁcation (RFID) project at Plant 3.

Resources and Environment.

Finance & Controlling

1. Enhanced the automated system to ensure

Shareholders:

most efﬁcient, accurate and complete

Developments:

payments and reporting.

Rights of Shareholders

2. Implemented the Sustainability Development Review to ensure long-term effectiveness and development of world-class procurement activities. 3. Continued to expand the scope of Contractor Management and Services Sourcing Program to logistic supply chain and transportation with

1. The Company invited its shareholders to propose agenda for the 2009 Annual General Meeting. 2. Board of Directors appointed a Company Secretary, under the updated SEC Act. Finance and Controlling

1. Further strengthened and embedded the

the target to achieve higher efﬁciency but also

Internal Control System for increased reliability

total cost of ownership reductions.

of ﬁnancial reporting, better awareness

4. Implemented the cost reduction program to achieve significant and immediate cost benefits compared to financial year 2007.

of ﬁnancial risks and improved reporting processes. Recognitions: Rights of Shareholders

Manufacturing Operations:

1. The Company was rated “Very Good” for the

Developments:

quality and contents of its Annual General

Saraburi Operations

Meeting held in 2008, from the AGM

1. EcoSiam renamed “Geocycle”, a waste management brand of Holcim with access to world’s best practices.

Assessment 2008 project.

Siam City Cement Public Company Limited Annual Report 2008

Corporate Governance Update In the year 2008, Siam City Cement Public Company

own investment beneﬁts. In 2009 the Company

Limited pressed on with our commitment to good

will begin implementing the ‘silent period’ policy

Corporate Governance by launching a number of

for trading in company’s securities to make such

industry-leading initiatives and programs, and

protection more concrete.

organized a number of activities in all the crucial areas relevant to the achievement of top-of-class Corporate Governance compliance.

• The company does not have a nominating committee. Potential directors are selected from a ﬁeld of qualiﬁed and experienced professionals. The election of each director is made by majority

Detailed in the following are descriptions of the

votes of shareholders. Notably, most shareholders

initiatives and actions that were taken throughout

of the Company are minority shareholders

the course of the year:

(i.e., only eight shareholders hold more than 1 percent of Company’s shares each, from total

CSR-DIW

3,632 shareholders at the 15th AGM). Therefore,

Siam City Cement in 2008 became one of the ﬁrst

when a director wins the election by 98 percent,

few Thai companies to be awarded CSR-DIW—

that reﬂects upon the support of minority

Corporate Social Responsibility certiﬁcation issued

shareholders.

by the Industry Ministry’s Department of Industrial Works as a prelude to the ISO26000—Corporate

Roles of stakeholders

Social Responsibility certiﬁcation expected to be

• The Company places top priority on the persons

launched within the next few years. This certiﬁcation

and groups of persons who institute our

emphasizes the responsibility of an industrial

stakeholders. These are the persons who may be

manufacturer towards the impact on society and the

impacted by our business operations both directly

environment that arises from its decision-making,

and indirectly. Thus, based on our completed

manufacturing and other ancillary processes so as to

Reputation Survey, we re-evaluated and re-

align with the sustainable development of the society

identiﬁed the 12 Siam City Cement stakeholder

as a whole.

groups. These are employees, community, customers, suppliers, government ofﬁcials,

Rights of shareholders &

shareholders/investors, local administration

equitable treatment of shareholders

ofﬁcers, the media, NGOs, educational

• The Company promotes the quick and efﬁcient

institutions, competitors and the general public.

dissemination of information to shareholders.

The re-identiﬁcation of our stakeholders will allow

The shareholders may also access records of the

us to more effectively assist and support them.

Company’s notiﬁcations retroactively for two years. • As the shareholding structure comprises of more

• Likewise, as the Company is acutely aware of the importance of preserving our environment, we

than one major shareholder, hence no particular

have opened several lines of communications

shareholder has absolute influence over the

for stakeholders to report to us any possible

Company’s management. In addition, the

environmental issues. These communication

number of independent directors is more than

channels are: email: envi.info@sccc.co.th, PO Box

one-third of the Board, providing an ideal balance

number 11 Tab Kwang, intranet and information

and allowing minority shareholders to cast their

boxes in the communities.

votes freely. • In order to protect the interest of shareholders,

• We made it our mission to instill awareness of “customer-centricity” in all employees—not just

the Company enforces the Code of Conduct

those in the sales functions—so they will be

as a vehicle to prohibit the management and

better equipped to provide optimum services for

employees to use insider information for their

both internal and external applications.

Corporate Governance Update

Disclosure and transparency

Internal Audit

• The Company initiated the formation of tri-partite

• The Internal Auditors performed risk assessments

meetings (government administration—local and provincial, the community and Siam City

to mitigate operational and ﬁnancial risks. • Also completed were audits to ensure the adequate

Cement) were held on a regular basis to discuss

control measures and to ensure compliance with

issues affecting the community, such as the

regulatory requirements and laws.

commissioning of our AFR (alternative fuel and raw materials) platform and the WHR (waste

Occupational Health and Safety

heat recovery) projects, to facilitate sustainable

• Throughout the year, the OH&S team carried out

development within our close-knit community. • To reiterate importance of our core value, we announced policy on the management of quality, environment, occupational health & safety and social responsibility to ensure full compliance on

FPE (Fatality Prevention Elements) gap analysis for all relevant business units within the Siam City Cement Group. • The team also performed the Holcim OH&S pyramid audit for the CONWOOD business unit.

every issue. In addition, the Company joined CSR Sharing Program to promote social responsibility

Information Technology

among those in the industry sector.

• For 2008, the IT team implemented “IT Security Rules for Siam City Cement Employees” for IT

Responsibilities of the Board of Directors

users in the company. These IT security rules

• The Company has completed the editing of our

had to be fully understood, acknowledged

Audit Committee Charter to be fully aligned with

and followed strictly by all relevant employees

new regulations of The Stock Exchange of Thailand

through online IT training.

and the Securities and Exchange Commission. • Annual internal audit extended to cover group companies such as Siam City Concrete and CONWOOD. • The Legal Committee was set up to prepare legal

• Prohibition of unauthorized software downloads and hardware installations on all company computers without proper authorization. • Our external auditors have audited and found that general control over information system

documents, communication on legal issues and

of the company and its subsidiaries is efﬁcient,

the compliance check list.

reliable and sufﬁcient.

Internal Control

• Continuity of online Conflict of Interests Declaration with employees of the whole group— twice within the year. • Established the Compliance Platform which contains legal requirements and checklists for all functions. • Implemented legal audit activity to cover all operation sites of the group, including RMX plants, to increase compliance awareness of operators. • Further strengthened and embedded the Internal Control System for increased reliability of financial reporting, better awareness of financial risks and improved reporting processes.

Siam City Cement Public Company Limited Annual Report 2008

Industrial Outlook Domestic

energy costs. Cement prices had also been adjusted

The year 2008 marked a very challenging time

along with the increased cost of production. To

for the Thai cement industry as the country

cope with this economic downturn, leading cement

encountered an economic slowdown as a result

manufacturers made efforts to adjust structurally

of several overseas and domestic factors. The

and administratively over the course of last year.

local political instability affected investors’ and consumers’ conﬁdence and led to the postponement

Export

of many government mega-projects. Rapid changes

The decline in domestic cement demand has

in energy prices and the global economic slowdown

affected the whole industry since late 2006, so

adversely impacted the ﬁnancial market and

cement manufacturers focused more on exports

international trade around the world.

to keep production running at optimum capacity. Thailand’s cement export volume in 2008 was

The country’s domestic demand decreased by 11

approximately 15.7 million tons, a 14 percent

percent in comparison with 2007, and at the same

decrease over the previous year due to lower

time, the cost of production increased due to high

demand and increased idle capacity worldwide.

Industrial Outlook

A shrinking demand in construction and an

permits by project (permits for land development)

oversupply of cement in many countries will further

in the ﬁrst nine months of 2008 decreased by 25

increase competition in the export market next

percent Y-O-Y nationwide. There was also an excess

year. This will unavoidably result in a decline in the

supply of housing units in 2008 by approximately

country’s cement export volume and the 2009 year-

500,000 units – 300,000 units of new houses and

end export ﬁgure could drop from 15.2 million tons

200,000 units of second-hand houses.

to around 13 million tons. The outlook can be signiﬁcantly inﬂuenced Business Forecast for the Cement Industry in 2009

by the capability of the new Government to

Looking ahead, it is expected that domestic cement

restore investors’ conﬁdence and accelerate the

demand will continue to drop at a relatively high rate

investments in public infrastructure in order to

of 10-15 percent from 2008 due to the impact of

stimulate economic growth and construction

domestic economic slowdown which is likely to lead

demand, but it also depends to a large extend on

to slower real estate and construction investment.

the international economic situation.

As a matter of fact, the number of land allotment

Risk and Risk Management The Executive Committee of Siam City Cement

Risks

Public Company (SCCC) established the Business

The worldwide economic recession, the volatile

Risk Management unit to study and understand

prices of petroleum and coal in 2008 and the

the possible risks related to the Company on a

ďŹ&#x201A;uctuation of currency exchange rate, have been

5-year horizon. This business unit then reports to

identiďŹ ed as risks that can have a substantial

the Executive Committee on possible risk factors

impact on the performance of the Company in the

and recommends solutions on how to manage

near future:

these risks. In this way, the company is well aware of the possible risks and makes sure these risks are managed properly.

Risk and Risk Management

1. The risk of slowdown in world and domestic economy

3. The risk of currency exchange rate ﬂuctuation vis-à-vis the Thai Baht and the U.S. Dollar

The sub-prime crisis which has led to worldwide

A strong Thai Baht against the U.S. Dollar, especially

economic recession vastly affected the global

in the ﬁrst half of 2008, resulted in lower export

as well as domestic demand. Resulting from the

revenues in Thai Baht. However, this impact has

political turmoil, the domestic economy has been

been mitigated partly by the coal import in U.S.

heavily affected also. Consumers have lost their

Dollar. In addition, the Company partially hedges

conﬁdence, the investment atmosphere has been

the difference between the export and import

eroded. Therefore, the Company has constantly and

currency exposure.

consistently monitored the situation and adjusted the strategies to mitigate the impact.

2. The risk of volatile petroleum and coal prices Higher prices of petroleum products and coal have an impact on costs of energy, transportation and paper. Therefore, the Company has invested in alternative fuels, entered into long-term contracts with key coal suppliers, utilized CNG instead of diesel and gasoline for transportation, and launched a new Waste Heat Recovery (WHR) project.

Siam City Cement Public Company Limited Annual Report 2008

Report of the Board of Directors’ Responsibilities for Financial Statements The consolidated financial statements of the Company and its subsidiaries and the separate financial statements of the Company have been prepared in accordance with generally accepted accounting principles in Thailand, in compliance with Accountancy Act B.E. 2543. The Company has chosen with careful consideration its accounting policies, which are proper to business operations, and has always strictly adhered to these policies. All material information has been sufficiently disclosed in the notes to the financial statements. The Board of Directors of the Company is held accountable for correctness and completeness of the aforementioned financial statements, including financial data as shown in the annual report. The Board has also adopted an effective internal control which makes reasonably assure that the financial data and report are accurate, complete and adequate to protect assets and prevent possible wrongdoing or other irregularities in the operations of the Company. The Audit Committee, consisting of three independent directors performing its duties in compliance with the SET guidelines on Best Practice Guidelines for Audit Committee, assists the Board of Directors by overseeing internal and external audit matters on its behalf, and operates under a written charter adopted by the Committee and the Board of Directors. The report of the Audit Committee and the report of the certified external authorized auditors appear in this annual report.

Veraphan Teepsuwan

Philippe Paul Alexandre Arto

Chairman

Managing Director

Report of the Board of Directors’ Responsibilities for Financial Statements, Report of Audit Committee

Report of the Audit Committee To the Shareholders of Siam City Cement Public Company Limited

We are pleased to present our report for the financial year ended 31 December 2008. The Audit Committee is comprised solely of independent directors and operates under a written charter adopted by the Committee and the Board of Directors. In 2008, the Audit Committee held four ordinary meetings. The Committee discussed with the Company’s external auditors their plans for audits during the year and discussed the results of their examinations and evaluations of the Company’s internal controls, and the quality of financial reporting. The Management reported to the Committee that the Company’s quarterly and annual consolidated financial statements were prepared in accordance with generally accepted accounting principles. The Committee has reviewed and discussed the consolidated financial statements and the separate financial statements of Siam City Cement Public Company Limited, including the disclosure of connected transactions and transactions of conflicts of interest, with management and the external auditor. Based on the reviews and discussions, the Committee reported to the Board of Directors that the audited consolidated financial statements for the years ended 31 December 2008 and 2007 have been prepared in compliance with generally accepted accounting principles, and reflect the financial performance of the Company and its subsidiaries. The Committee reviewed the internal auditor’s plans to assess internal controls in selected areas of the Company’s operations for 2008. The Committee also reviewed the results of these assessments with the internal auditors and management. Where improvements are required to internal controls, the Committee was satisfied that management is taking appropriate remedial action. The Committee also reviewed and approved the internal audit plan for year 2009 and the budget to support the plan, which were both prepared in cooperation with Group Internal Audit. Whilst reviewing the quarterly and annual financial statements for 2008, and the above mentioned assessments performed by the external and internal auditors, the Committee did not note non-compliance of the Company’s activities with the Securities and Exchange Act and with rules and regulations of the Stock Exchange of Thailand. The Committee recommends to the Board of Directors and the Annual General Meeting, the retention of Ms. Saifon Inkaew, Ms. Ratana Jala and Ms. Kamontip Lertwitworatep of Ernst & Young Office Limited as the Company’s external auditors for 2009 and the proposed remuneration. January 30, 2009 For and on behalf of the Audit Committee Siam City Cement Public Company Limited Prakob Visitkitjakarn Chairman of the Audit Committee

Consolidated Financial Statements

Report of Certiﬁed Public Accountant

Report of Certiﬁed Public Accountant To the Shareholders of Siam City Cement Public Company Limited

I have audited the accompanying consolidated balance sheets of Siam City Cement Public Company Limited and its subsidiaries as at 31 December 2008 and 2007, the related consolidated statements of income, changes in shareholders’ equity and cash flows for the years then ended, and the separate financial statements of Siam City Cement Public Company Limited for the same periods. These financial statements are the responsibility of the Company’s management as to their correctness and the completeness of the presentation. My responsibility is to express an opinion on these financial statements based on my audits. I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statements presentation. I believe that my audits provide a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Siam City Cement Public Company Limited and its subsidiaries and of Siam City Cement Public Company Limited as at 31 December 2008 and 2007, and the results of their operations and cash flows for the years then ended, in accordance with generally accepted accounting principles.

Saifon Inkaew Certiﬁed Public Accountant (Thailand) No. 4434 Ernst & Young Ofﬁce Limited Bangkok: 19 February 2009

Siam City Cement Public Company Limited Annual Report 2008

Balance Sheets Siam City Cement Public Company Limited and its subsidiaries As at 31 December 2008 and 2007

(Unit: Baht) Consolidated ďŹ nancial statements

Separate ďŹ nancial statements

Note

2008

2007

2008

2007

6, 7

1,108,496,630

503,148,104

826,407,539

352,466,266

Assets Current assets Cash and cash equivalents Trade accounts receivable Subsidiaries and related companies

234,676,521

454,815,719

793,535,976

881,740,237

2,401,309,014

2,292,241,183

1,478,885,398

1,432,658,077

Inventories - net

1,900,107,796

1,578,588,098

1,675,292,256

1,385,470,191

Other debtors - subsidiary and related companies

7,777,450

2,317,370

273,547,272

211,251,571

140,327,200

Other companies - net

7, 8

Advance payments to suppliers Related company Other companies

65,716,445

31,971,203

48,827,939

30,997,926

Other current assets

125,443,451

113,297,189

88,877,563

88,939,831

5,983,854,507

4,976,378,866

5,325,701,143

4,383,524,099

Total current assets Non-current assets Investments in subsidiary companies - net

711,757,897

700,149,097

Investment in associated company

1,081,546,228

927,515,316

483,426,543

Other investment - related company

368,119,260

Long-term loans to subsidiaries - net

7, 14

2,126,893,493

1,832,033,107

Property, plant and equipment - net

13,423,563,380

12,518,609,059

11,388,225,590

10,522,371,689

Assets not used in operations - net

328,880,128

824,975,079

304,052,025

800,144,466

Intangible assets - net

1,189,002,293

915,821,520

1,021,295,376

731,080,195

852,179,119

678,024,671

660,077,426

558,754,539

276,051,311

293,658,610

149,664,425

154,691,428

Total non-current assets

17,519,341,719

16,526,723,515

16,845,392,775

15,782,651,064

Total assets

23,503,196,226

21,503,102,381

22,171,093,918

20,166,175,163

Other non-current assets Deferred income tax Others

The accompanying notes are an integral part of the ďŹ nancial statements.

Balance Sheets

Balance sheets (continued)

(Unit: Baht) Consolidated ﬁnancial statements

Separate ﬁnancial statements

Note

2008

2007

2008

2007

7, 19

3,429,819,571

1,008,388,487

3,400,000,000

1,000,000,000

Liabilities and shareholders’ equity Current liabilities Short-term loans from ﬁnancial institutions Trade accounts payable Subsidiaries and related companies

7, 20

146,540,722

270,898,309

253,091,007

329,336,577

1,110,122,962

1,245,084,629

770,903,770

934,086,505

7, 21

52,000,000

54,000,000

35,013,948

32,876,946

35,013,948

32,876,946

Accrued rebate

479,664,820

228,181,228

475,564,307

223,332,734

Accrued electricity

125,831,495

238,054,479

117,385,242

226,851,784

Corporate income tax payable

636,852,762

579,513,192

616,615,369

550,428,948

Other accrued expenses

457,632,269

799,648,268

394,437,380

733,594,823

Other companies Current portion of long-term loans Current portion of long-term liabilities for concession Other current liabilities

Advances from customers

34,030,597

19,244,873

32,338,528

14,263,389

116,098,935

35,389,933

93,896,236

24,667,514

6,623,608,081

4,511,280,344

6,189,245,787

4,069,439,220

7, 21

160,000,000

212,000,000

Others Total current liabilities Non-current liabilities Long-term loans - net of current portion Other non-current liabilities Long-term liabilities for concession net of current portion

212,319,191

247,333,140

212,319,191

247,333,140

Provident fund

519,144,664

513,608,411

451,182,397

452,615,128

Reserve for employee retirement beneﬁt plan

142,762,983

128,589,131

132,322,148

117,119,030

Total non-current liabilities

1,034,226,838

1,101,530,682

795,823,736

817,067,298

Total liabilities

7,657,834,919

5,612,811,026

6,985,069,523

4,886,506,518

The accompanying notes are an integral part of the ﬁnancial statements.

Siam City Cement Public Company Limited Annual Report 2008

Balance sheets (continued)

(Unit: Baht) Consolidated ﬁnancial statements Note

Separate ﬁnancial statements

2008

2007

2008

2007

2,875,000,000

2,375,000,000

10,106,266,730

(1,029,582)

61,136

300,000,000

1,710,643,745

3,061,608,260

3,108,794,195

2,404,757,665

2,498,401,915

17,552,489,153

17,600,765,806

16,896,668,140

16,990,312,390

(1,710,643,745)

15,841,845,408

15,890,122,061

15,186,024,395

15,279,668,645

Shareholders’ equity Share capital Registered 287,500,000 ordinary shares of Baht 10 each Issued and fully paid up 237,500,000 ordinary shares of Baht 10 each Share premium Translation adjustment Retained earnings Appropriated - statutory reserve - treasury stock reserve Unappropriated Equity attributable to the Company’s shareholders Less: Treasury stock

Equity attributable to the Company’s shareholders - net Minority interests - equity attributable to 3,515,899

169,294

Total shareholders’ equity

minority shareholders of subsidiaries

15,845,361,307

15,890,291,355

15,186,024,395

15,279,668,645

Total liabilities and shareholders’ equity

23,503,196,226

21,503,102,381

22,171,093,918

20,166,175,163

The accompanying notes are an integral part of the ﬁnancial statements.

Income Statements

Income Statements Siam City Cement Public Company Limited and its subsidiaries For the years ended 31 December 2008 and 2007

(Unit: Baht) Consolidated ﬁnancial statements Note

Separate ﬁnancial statements

2008

2007

2008

2007

21,304,822,857

22,800,424,169

18,207,720,518

20,045,278,327

Revenues Net sales Dividend income

118,086,990

81,873,646

134,624,124

115,367,298

277,665,186

242,499,849

21,439,446,981

22,915,791,467

18,603,472,694

20,369,651,822

11,602,883,781

12,420,014,739

9,465,297,559

10,542,617,512

Selling and distribution expenses

4,343,011,536

4,863,779,954

3,534,347,455

4,126,348,437

Administrative expenses

1,182,635,529

1,104,388,843

1,066,349,448

1,019,205,319

17,128,530,846

18,388,183,536

14,065,994,462

15,688,171,268

4,310,916,135

4,527,607,931

4,537,478,232

4,681,480,554

(167,014,973)

(117,423,465)

(143,555,620)

(87,305,381)

272,117,902

179,105,486

4,416,019,064

4,589,289,952

4,393,922,612

4,594,175,173

(1,243,501,995)

(1,359,024,836)

(1,267,704,436)

(1,365,685,044)

3,172,517,069

3,230,265,116

3,126,218,176

3,228,490,129

3,172,676,491

3,230,479,554

3,126,218,176

3,228,490,129

(159,422)

(214,438)

3,172,517,069

3,230,265,116

13.79

14.05

13.59

14.04

230,000,000

Other income Total revenues Expenses Production cost of goods sold

Total expenses

Income before ﬁnancial expenses and corporate income tax Financial expenses Share of income from investment in associated company accounted for under equity method Income before corporate income tax Corporate income tax Net income for the year Net income attributable to: Equity holders of the parent Minority interests of the subsidiaries

Basic earnings per share

Net income attributable to equity holders of the parent Weighted average number of ordinary shares - net (shares)

The accompanying notes are an integral part of the ﬁnancial statements.

Siam City Cement Public Company Limited Annual Report 2008

Statements of Changes in Shareholders’ Equity Siam City Cement Public Company Limited and its subsidiaries For the years ended 31 December 2008 and 2007 (Unit: Baht)

Consolidated ﬁnancial statements Equity attributable to the Company’s shareholders Retained earnings Issued and

Share premium

fully paid up Note

Balance as at 31 December 2006

Translation

Appropriated

adjustment

share capital

2,500,000,000

Statutory

Treasury stock

reserve

300,000,000

Unappropriated

4,696,067,693

Treasury stock

Total equity atributable to the Company’s shareholders - net

2,973,254,867 (4,696,067,693)

15,879,547,177

Minority interests— equity attributable to minority shareholders of subsidiaries 372,480

Total

10,106,266,730

25,580

15,879,919,657

35,556

11,252

46,808

3,230,479,554

(214,438)

3,230,265,116

125,000,000

2,985,423,948

- (3,219,940,226)

(3,219,940,226)

Income (expenses) for the year recognised directly in equity: - Foreign currency translation Net income for the year Treasury stock cancellation

(125,000,000)

- (2,985,423,948)

Dividend paid

Balance as at 31 December 2007

2,375,000,000 10,106,266,730

61,136

300,000,000

1,710,643,745

3,108,794,195 (1,710,643,745)

15,890,122,061

169,294

15,890,291,355

Balance as at 31 December 2007

2,375,000,000

10,106,266,730

61,136

300,000,000

1,710,643,745

3,108,794,195 (1,710,643,745)

15,890,122,061

169,294

15,890,291,355

(1,090,718)

(363,573)

(1,454,291)

2,375,000,000 10,106,266,730

(1,029,582)

300,000,000

Income (expenses) for the year recognised directly in equity: - Foreign currency translation

3,869,600

3,172,676,491

(159,422)

3,172,517,069

- (3,219,862,426)

(3,219,862,426)

3,061,608,260 (1,710,643,745)

15,841,845,408

3,515,899

15,845,361,307

Increase in minority interest from capital increase of subsidiary Net income for the year Dividend paid Balance as at 31 December 2008

The accompanying notes are an integral part of the ﬁnancial statements.

1,710,643,745

Statements of Changes in Shareholders’ Equity

Statement of Changes in Shareholders’ Equity (continued)

(Unit: Baht)

Separate ﬁnancial statements Retained earnings Issued and

Share premium

fully paid up Note Balance as at 31 December 2006

Statutory

share capital

Unappropriated

Treasury stock

4,696,067,693

Total

Treasury stock

reserve

2,500,000,000

Net income for the year

Appropriated reserve

10,106,266,730 300,000,000

2,364,852,012

(4,696,067,693)

15,271,118,742

3,228,490,129

Treasury stock cancellation

(125,000,000)

(2,985,423,948)

125,000,000

2,985,423,948

Dividend paid

(3,219,940,226)

2,498,401,915

(1,710,643,745)

15,279,668,645

Balance as at 31 December 2007

2,375,000,000

10,106,266,730 300,000,000

1,710,643,745

Balance as at 31 December 2007

2,375,000,000

10,106,266,730 300,000,000

Net income for the year Dividend paid Balance as at 31 December 2008

1,710,643,745

2,498,401,915

(1,710,643,745)

3,126,218,176

(3,219,862,426)

10,106,266,730 300,000,000

1,710,643,745

2,404,757,665

(1,710,643,745)

15,186,024,395

2,375,000,000

The accompanying notes are an integral part of the ﬁnancial statements.

Siam City Cement Public Company Limited Annual Report 2008

Statement of Cash Flows Siam City Cement Public Company Limited and its subsidiaries For the years ended 31 December 2008 and 2007

(Unit: Baht) Consolidated ﬁnancial statements

Separate ﬁnancial statements

2008

2007

2008

2007

4,416,019,064

4,589,289,952

4,393,922,612

4,594,175,173

(272,117,902)

(179,105,486)

(118,086,990)

(81,873,646)

59,155,817

141,628,194

52,799,759

40,225,413

878,079,144

814,796,873

689,755,268

651,840,824

15,491,900

(56,335,795)

long-term loans to subsidiary

27,139,614

27,492,326

Loss on disposals of ﬁxed assets

216,514,072

84,659,644

216,156,999

82,481,847

75,826,705

60,217,408

65,690,343

51,105,534

Cash ﬂows from operating activities Net income before tax Adjustments to reconcile net income before tax to net cash provided by (paid from) operating activities: Share of income from investment in associated company accounted for under equity method Dividend received from associated company Allowance for doubtful accounts and obsolete inventories Depreciation and amortisation Increase in allowance for impairment of property, plant and equipment Reversal of allowance for loss on impairment of assets not used in operation Allowance for doubtful accounts of

Provident fund and employee retirement beneﬁt expenses Unrealised gain on exchange

(16,256,376)

(9,616,234)

(15,892,804)

(9,699,197)

Interest expenses

152,993,377

102,193,119

131,899,634

72,075,035

5,469,370,006

5,604,063,470

5,402,540,540

5,427,823,309

74,345,744

(294,160,634)

19,094,215

(148,513,720)

(338,570,237)

68,764,047

(305,444,380)

154,514,827

(5,460,080)

5,303,091

(73,904,500)

(50,523,542)

(175,523,791)

28,028,119

(156,315,220)

29,085,297

Trade accounts payable

(259,500,895)

187,750,241

(239,609,944)

140,446,155

Accrued expenses and other current liabilities

(111,250,741)

158,733,184

(114,124,961)

148,901,187

(56,116,600)

(37,607,496)

(51,919,956)

(36,375,499)

4,597,293,406

5,720,874,022

4,480,315,794

5,665,358,014

(137,985,587)

(103,984,080)

(115,845,388)

(72,075,035)

(1,360,316,873)

(1,616,844,479)

(1,302,840,902)

(1,573,624,385)

3,098,990,946

4,000,045,463

3,061,629,504

4,019,658,594

Income before changes in operating assets and liabilities Decrease (increase) in operating assets: Trade accounts receivable Inventories Other debtors - subsidiary and related companies Other current assets Increase (decrease) in operating liabilities:

Provident fund and reserve for employee retirement beneﬁt plan Cash from operating activities Cash paid for interest expenses Cash paid for corporate income tax Net cash from operating activities

The accompanying notes are an integral part of the ﬁnancial statements.

Statement of Cash Flows

Statement of Cash Flows (continued)

(Unit: Baht) Consolidated ﬁnancial statements Note

2008

Separate ﬁnancial statements

2007

2008

2007

Cash flows from investing activities Proceeds from disposals of fixed assets Purchase of fixed assets

377,541,766

220,646,143

377,167,934

393,244,758

(2,108,204,977)

(1,601,734,333)

(1,899,410,605)

(1,441,528,954)

Increase in long-term loan to subsidiary Increase in intangible assets

(322,000,000)

(576,400,000)

(16,260,745)

(44,011,772)

(13,936,834)

(13,377,510)

17,723,953

(105,044,151)

5,143,657

(5,804,514)

Decrease (increase) in other non-current assets Dividend received Net cash used in investing activities

118,086,990

81,873,646

118,086,990

81,873,646

(1,611,113,013)

(1,448,270,467)

(1,734,948,858)

(1,561,992,574)

2,425,300,684

564,844,020

2,400,000,000

600,000,000

(3,219,862,426)

(3,219,940,226)

(3,219,862,426)

(3,219,940,226)

(54,000,000)

(73,000,000)

Cash flows from financing activities Increase in short-term loans from financial institutions Dividend paid Repayment of long-term loans Payment of long-term liabilities for concession Net cash used in financing activities

(32,876,947)

(30,870,372)

(32,876,947)

(30,870,372)

(881,438,689)

(2,758,966,578)

(852,739,373)

(2,650,810,598)

Increase (decrease) in translation adjustments Net increase (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year

(1,090,718)

35,556

605,348,526

(207,156,026)

473,941,273

(193,144,578)

503,148,104

710,304,130

352,466,266

545,610,844

1,108,496,630

503,148,104

826,407,539

352,466,266

311,515,664

527,749,700

311,515,664

363,578,700

Supplemental disclosures of cash ﬂows information: Non-cash related transactions: Transferred property, plant and equipment to intangible assets

The accompanying notes are an integral part of the ﬁnancial statements.

Siam City Cement Public Company Limited Annual Report 2008

Notes to Consolidated Financial Statements Siam City Cement Public Company Limited and its subsidiaries For the years ended 31 December 2008 and 2007

General information 1.1

Corporate information Siam City Cement Public Company Limited (“the Company”) was incorporated as a limited company under Thai laws and registered the change of the status of the Company to a public limited company under the Public Limited Company Act on 5 November 1993. The Company operates in Thailand and its principal activity is manufacturing of cement with the registered address at 199, 7th - 12th Floor, Column Tower, Ratchadapisek Road, Klongtoey, Bangkok and its factory address is at 99 Moo 9 and 219 Moo 5, Mitraparp Road Km. 129 - 131, Tabkwang, Kaengkhoi, Saraburi.

1.2

Economic crisis The financial crisis experienced by the United States of America over the past year has had far reaching adverse effect on the global economy as evidenced by sharp falls in share prices worldwide, tight squeeze on credit including interbank lending, failures of large financial institutions and reduced consumer confidence. The crisis has affected substantially business and financial plans of Thailand enterprises and asset value. Despite efforts made by governments of many countries to contain the crisis, it remains uncertain as to when the global economy will return to its normalcy. These financial statements have been prepared on the bases of facts currently known to the Company, and on estimates and assumptions currently considered appropriate. However, they could be adversely affected by an array of future events.

Basis of preparation 2.1

The financial statements in Thai language have been prepared in accordance with accounting standards enunciated under the Accounting Profession Act B.E. 2547, except for the early adoption of Accounting Standard No. 56 “Accounting for Income Tax” which is in line with International Accounting Standard (IAS) No. 12 “Income Taxes” (revised 1996), and the adoption of International Accounting Standard (IAS) No. 19 “Employee Benefits” and International Accounting Standard (IAS) No. 39 “Financial Instruments: Recognition and Measurement”. The presentation of the financial statements has been made in compliance with the stipulations of the Notification of the Department of Business Development dated 14 September 2001, issued under the Accounting Act B.E. 2543. The financial statements in Thai language are the official statutory financial statements of the Company. The financial statements in English language have been translated from the official statutory financial statements. The financial statements have been prepared on a historical cost basis except where otherwise disclosed in the accounting policies.

2.2

Basis of consolidation a) The consolidated ﬁnancial statements include the ﬁnancial statements of Siam City Cement Public Company Limited (“the Company”) and the following subsidiary companies (“the subsidiaries”): Company’s name

Country of incorporation

Registered capital

Percentage of shareholding by the Company

2008 Million Baht

2007 Million Baht

2008 Percent

2007 Percent

Nature of business

Siam City Concrete Co., Ltd.

Thailand

400

99.99

Ready-mixed concrete and aggregates

Eagle Cement Holdings Co., Ltd.

Thailand

700

99.99

Holding

300

Conwood Co., Ltd. Khmer Cement Industry Co., Ltd.

Thailand Cambodia

USD 0.405 mil. USD 0.005 mil.

99.99

Construction material

75.00

Cement trading

Notes to Consolidated Financial Statements

b) Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Company obtains control, and continue to be consolidated until the date that such control ceases. c) The financial statements of the subsidiaries are prepared for the same reporting period as the parent company, using consistent significant accounting policies. d) The financial statements of overseas subsidiary company are translated into Thai Baht at the closing average exchange rate as to assets and liabilities, and at monthly average exchange rate as to revenues and expenses. The resultant differences have been shown under the caption of “Translation adjustment” in shareholders’ equity. e) Material balances and transactions between the Company and its subsidiaries have been eliminated from the consolidated financial statements. f) Minority interests represent the portion of profit or loss and net assets that is not held by the Group and are presented separately in the consolidated income statement and within equity in the consolidated balance sheet, separately from parent shareholders’ equity. 2.3

The separate ﬁnancial statements, which present investments in subsidiaries and associate presented under the cost method, have been prepared solely for the beneﬁt of the public.

3. Adoption of new accounting standards 3.1

Accounting standards which are effective for the current year The Federation of Accounting Professions (FAP) has issued Notiﬁcations No. 38/2550 and 62/2550 regarding accounting standards. The notiﬁcations mandate the use of the following new accounting standards. TAS 25 (revised 2007) TAS 29 (revised 2007) TAS 31 (revised 2007) TAS 33 (revised 2007) TAS 35 (revised 2007) TAS 39 (revised 2007) TAS 41 (revised 2007) TAS 43 (revised 2007) TAS 49 (revised 2007) TAS 51

Cash Flow Statements Leases Inventories Borrowing Costs Presentation of Financial Statements Accounting Policies, Changes in Accounting Estimates and Errors Interim Financial Reporting Business Combinations Construction Contracts Intangible Assets

These accounting standards become effective for the financial statements for fiscal year beginning on or after 1 January 2008. The management has assessed the effect of these revised accounting standards and believes that they do not have any significant impact on the financial statements for the current year. 3.2

Accounting standards which are not effective for the current year The Federation of Accounting Professions (FAP) has issued Notiﬁcation No. 86/2551 regarding accounting standards. The notiﬁcation mandates the use of the following new accounting standards. TAS 36 (revised 2007) TAS 54 (revised 2007)

Impairment of Assets Non-Current Assets Held for Sale and Discontinued Operations

These accounting standards will become effective for the financial statements for fiscal year beginning on or after 1 January 2009. The management has assessed the effect of these revised accounting standards and believes that they will not have any significant impact on the financial statements for the year in which they are initially applied.

Signiﬁcant accounting policies 4.1

Revenue recognition a) Sales of goods Sales of goods are recognised when the signiﬁcant risks and rewards of ownership of the goods have passed to the buyer. Sales are the invoiced value, excluding value added tax, of goods supplied after deducting goods returns, discounts and allowances.

Siam City Cement Public Company Limited Annual Report 2008

b) Interest income Interest income is recognised on an accrual basis based on the effective interest rate. c) Dividends Dividends are recognised when the right to receive the dividends is established. 4.2

Cash and cash equivalents Cash and cash equivalents consist of cash in hand, cash at bank, and all highly liquid investments with an original maturity of three months or less and not subject to withdrawal restrictions.

4.3

Trade accounts receivable and allowance for doubtful accounts Trade accounts receivable are stated at the net realisable value. Allowance for doubtful accounts is provided for the estimated losses that may be incurred in collection of receivables. The allowance is generally based on collection experiences and analysis of debtor aging.

4.4

Inventories Inventories are valued at lower of cost (on an average method and first-in first-out basis) and net realisable value. Cost of finished goods and work in process comprises all production costs and attributable factory overhead. Raw materials and store supplies are charged to production costs whenever consumed. Allowance for diminution in value of inventories and obsolete inventories is made for obsolete or deteriorated inventories.

4.5

Investments in shares Investments in associated company are accounted for in the consolidated ﬁnancial statements using the equity method. Investments in subsidiary and associated companies are accounted for in the separate ﬁnancial statements using the cost method. Other investments in related company of a subsidiary company are accounted for using the cost method. Allowance for impairment loss will be made when the net realisable value is lower than the cost of investments.

4.6

Property, plant and equipment and depreciation Land is stated at cost less allowance for impairment (if any). Mineral reserves are stated at cost less accumulated depreciation, which are depreciated based on the physical unit-of-production method over their estimated commercial lives. Building and equipment are stated at cost less accumulated depreciation and allowance for loss on impairment of asset (if any). Depreciation of plant and equipment is calculated by reference to their costs on a straight-line basis over the estimated useful lives as follows: Building and structures Machinery and equipment Furniture, ﬁxtures and ofﬁce equipment Motor vehicles

5 - 30 5 - 30 3-5 5

years years years years

No depreciation is provided on land and construction in progress. Depreciation is included in determining income. 4.7

Intangible assets and amortisation Intangible assets are stated at cost less accumulated amortisation. Amortisation of intangible assets, except mining concession of aggregate business, is calculated by reference to cost on a straight - line basis over the expected future period of economic beneﬁt of each type of intangible asset, as follows: Mining concession Computer software

20 -25 3

years years

Mining concession of aggregate business is amortised based on the physical unit-of-production method over their estimated commercial lives. The amortisation is included in determining income.

Notes to Consolidated Financial Statements

4.8

Treasury stock Treasury stock is stated at cost and presented as a reduction from shareholders’ equity. Gains on disposal of treasury stock are determined by reference to its carrying amount and are taken to premium on treasury stock, losses on disposal of treasury stock are determined by reference to its carrying amount and are taken to premium on treasury stock and retained earnings, consecutively.

4.9

Related party transactions Related parties comprise enterprises and individuals that control, or are controlled by the Company, whether directly or indirectly, or which are under common control with the Company.

They also include associated companies and individuals which directly or indirectly own a voting interest in the Company that gives them significant influence over the Company, and key management personnel, directors and officers with authority in the planning and direction of the Company’s operations. 4.10 Operating lease Leases not transferring a significant portion of the risks and rewards of ownership to the lessee are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statements over the period of the lease. When an operating lease is terminated before the lease period has expired, any payment required to be made to the lessor by way of penalty is recognised as an expense in the period in which termination takes place. 4.11 Foreign currencies Foreign currency transactions are translated into Baht at the rates ruling at the transaction dates. Assets and liabilities denominated in foreign currencies outstanding at the balance sheet date are translated into Baht at the rates ruling on the balance sheet date. Gains and losses on exchange are included in determining income. 4.12 Impairment of assets The Company assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or when annual impairment testing for an asset is required, the Company estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of an asset’s fair value less costs to sell and its value in use. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. In determining fair value less costs to sell, an appropriate valuation model is used. These calculations are corroborated by valuation model, based on information available, reflects the amount that the Company could obtain at the balance sheet date, from the disposal of the asset in an arm’s length transaction between knowledgeable, willing parties, after deducting the costs of disposal. Impairment losses are recognised in the income statement. However, for property previously revalued and the revaluation was taken to equity, the impairment is also recognised in equity up to the amount of any previous revaluation. For assets other than goodwill, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Company estimates the asset’s recoverable amount. An impairment loss recognised in prior periods for an asset other than goodwill shall be reversed. 4.13 Employee benefits Employee benefits - Defined contribution plans The Company and its employees have jointly established a provident fund. The fund is monthly contributed to by employees and by the Company. The Company’s contributions are recognised as expenses when incurred. Employee benefits - Defined benefit plans The Company has provided a retirement benefit plan which includes a resignation plan and a long service award for employees. The obligation and costs of pension benefits are determined using the projected unit credit method. A professionally qualified independent actuary values the fund’s liability and certain obligations on regular basis. The projected unit credit method considers each period of service as giving rise to an additional unit of benefit entitlement and

Siam City Cement Public Company Limited Annual Report 2008

measures each unit separately to build up the final obligation. Past service costs are recognised on a straight-line basis over the average period until the amended benefits become vested. Gains or losses on the curtailment or settlement of pension benefits are recognised when the curtailment or settlement occurs. Actuarial gains or losses are recognised immediately to the income statement. The pension obligations are measured at the present value of estimated future cash flows using a discount rate that is similar to the interest rate on high quality corporate bonds. 4.14 Provisions Provisions are recognised when the Company has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. 4.15 Corporate Income Tax a) Current tax The Company and subsidiary companies in Thailand calculate corporate income tax in accordance with the basis regulated in the Revenue Code. Overseas subsidiary company calculates corporate income tax in accordance with tax rate regulated in tax law of that country. b) Deferred Tax Deferred income tax is calculated based on temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying amounts, by using the enacted tax rate at the balance sheet date. The Company recognises deferred tax liabilities for taxable temporary differences and recognises deferred tax assets for deductible temporary differences and tax losses carried forward. The Company recognises deferred tax assets to the extent that it is probable that future taxable profit will be available against which such deductible temporary differences and tax losses carried forward can be utilised. At each balance sheet date, the Company reviews and reduces the carrying amount of deferred tax assets to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. 4.16 Financial instruments Financial instruments presented in the balance sheets consist of cash and cash equivalents, accounts receivable, accounts payable and loans. The accounting policy is separately disclosed in the related notes. Accounting for derivative financial instruments and hedging activities Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. The method of recognising the resulting gain or loss is dependent on the nature of the item being hedged. On the date a derivative contract is entered into, the Company designates certain derivatives as either 1) a hedge of the fair value of a recognised asset or liability (fair value hedge) or 2) a hedge of a particular risk associated with a recognised asset or liability, such as future interest payments on floating rate debt (cash flow hedge) or 3) a hedge of a foreign currency risk of a firm commitment (cash flow hedge) Changes in the fair value of derivatives that are designated and qualify as fair value hedges and that are highly effective are recorded in the income statement, along with any changes in the fair value of the hedged asset or liability that is attributable to the hedged risk.

Notes to Consolidated Financial Statements

Changes in the fair value of derivatives that are designated and qualify as cash flow hedges and that are highly effective are recognised in equity. Where the firm commitment results in the recognition of an asset or a liability, the gains or losses previously deferred in equity are transferred from equity and included in the initial measurement of the non-financial asset or liability. Otherwise, amounts deferred in equity are transferred to the income statement and classified as revenue or expense in the same periods during which the cash flows, such as interest payments, or hedged firm commitments, affect the income statement. Certain derivative transactions, while providing effective economic hedges under the Company’s risk management policies, may not qualify for hedge accounting under the specific rules in IAS 39. Changes in the fair value of any derivative instruments that do not qualify for hedge accounting under IAS 39 are recognised immediately in the income statement. When a hedging instrument is sold, or when a hedge no longer meets the criteria for hedge accounting under IAS 39, any cumulative gain or loss existing in equity at that time remains in equity until the committed transaction occurs. However, if a committed transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement. In the case of a fair value hedge, however, the adjustment to the carrying amount of the hedged item is amortised to net profit or loss from the moment it ceases to be adjusted for in changes to fair value, with it being fully amortised by maturity date. The Company documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. This process includes linking all derivatives designated as hedges to specific assets and liabilities or to specific firm commitments. The Company also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.

Use of accounting estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions in certain circumstances, affecting amounts reported in these financial statements and related notes. These estimates are based on management’s best knowledge of current events and actions that the Company may undertake in the future. However, actual results could differ from those estimates. Critical accounting estimates and assumptions Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that may have a risk of causing an adjustment to the carrying amounts of assets within the next financial year relate primarily to allowance for doubtful accounts, allowance for impairment of assets not used in operation, deferred tax assets and defined benefit plans at the balance sheet date. The cost of defined benefit pension plans and other post-employment benefits is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, future salary increases, mortality rates and future pension increases. Due to the long-term nature of these plans, such estimates are subject to significant uncertainty (note 24). All other estimates mentioned above are further detailed in the corresponding disclosures. Litigation The Company has contingent liabilities as a result of litigation. The Company’s management has used judgment to assess the results of the litigation and believes that the provision made would be sufficient. However, actual results could differ from the estimates.

Siam City Cement Public Company Limited Annual Report 2008

Cash and cash equivalents As at 31 December 2008 and 2007, cash and cash equivalents consist of the following: (Unit: Baht) Consolidated ﬁnancial statements Cash in hand and at banks

2008

2007

2008

2007

1,108,243,414

502,903,069

826,406,453

352,465,202

253,216

245,035

1,086

1,064

1,108,496,630

503,148,104

826,407,539

352,466,266

541,927,783

248,684,430

356,738,695

199,349,600

Short-term investments in ﬁxed deposits Cash and cash equivalents Of which to related ﬁnancial institution Bank of Ayudhaya Public Co., Ltd.

Separate ﬁnancial statements

Related party transactions During the years, the Company and its subsidiaries had business transactions with related parties, which have been concluded on commercial terms and bases agreed upon in the ordinary course of business between the Company and those companies. Below is a summary of signiﬁcant transactions. (Unit: Thousand Baht) Consolidated ﬁnancial statements 2008

Separate ﬁnancial statements

2007

Transfer pricing policy

2008

2007

1,441,546

1,473,618

Transactions with subsidiary companies (eliminated from the consolidated ﬁnancial statements) Sales of goods

Market price

Sales of assets

723

172,957

Cost plus margin

Purchases of goods

181,101

191,698

Market price

Other income (expense)

20,289

28,280

Interest income

141,403

113,857

Cost plus margin

Purchases of goods

653,047

1,292,448

653,047

1,292,448

Service fee expenses

192,272

3,153,324

3,667,911

3,153,324

3,667,911

Market price

483,562

Market price

MLR with reference to the rate quoted by ﬁnancial institutions

Transactions with associated company Market price Negotiated agreement

Transactions with related companies Sales of goods Purchases of goods Other income (expense)

1,800

14,832

1,800

14,832

Service fee expenses

190,716

144,817

135,249

144,817

Negotiated agreement

Selling and administrative expenses

280,844

201,346

232,964

199,156

Cost plus margin

Interest income Interest expenses

Cost plus margin

3,598

6,434

2,540

4,829

Market interest rate

81,772

41,002

65,108

17,840

Market interest rate

The outstanding balance of the above transactions as at the end of year have been separately shown in the balance sheets.

Notes to Consolidated Financial Statements

Directors’ and management’s remuneration In 2008 the Company and its subsidiaries paid to their directors and management the remuneration totaling Baht 107 million (2007: Baht 103 million) and for the separate ﬁnancial statements totaling Baht 107 million (2007: Baht 103 million).

Trade accounts receivables - subsidiaries and related companies As at 31 December 2008 and 2007, the outstanding balance of trade accounts receivable - subsidiaries and related companies is as follows: (Unit: Baht) Consolidated ﬁnancial statements 2008 Siam City Concrete Co., Ltd.

2007 -

Khmer Cement Industry Co., Ltd.

Separate ﬁnancial statements 2008

2007

357,574,864

305,779,855

176,843,690

92,539,662

Other subsidiaries and related companies

234,676,521

454,815,719

259,117,422

483,420,720

Total

234,676,521

454,815,719

793,535,976

881,740,237

Most of the above trade accounts receivable - subsidiaries and related companies are current. Management believes that these trade accounts receivable - subsidiaries and related companies are collectible in full. Thus no allowance for doubtful accounts has been provided.

Trade accounts receivable - other companies The outstanding balance of trade accounts receivable - other companies as at 31 December 2008 and 2007 are aged, based on due date, as follows: (Unit: Baht) Consolidated ﬁnancial statements

Separate ﬁnancial statements

2008

2007

2008

2007

2,175,265,555

2,068,843,261

1,407,949,242

1,354,280,686

Over 30 days to 60 days

40,053,848

57,344,882

5,151,162

27,019,055

Over 60 days to 90 days

43,369,937

53,776,305

1,117,254

28,073,811

Current to 30 days

Over 90 days

504,701,772

435,939,239

281,962,017

212,289,038

Total

2,763,391,112

2,615,903,687

1,696,179,675

1,621,662,590

Less: Allowance for doubtful accounts

(362,082,098)

(323,662,504)

(217,294,277)

(189,004,513)

2,401,309,014

2,292,241,183

1,478,885,398

1,432,658,077

Trade accounts receivable other companies, net

The Company and its subsidiaries provided allowance for doubtful accounts of Baht 362 million and Baht 324 million in the consolidated ﬁnancial statements, and Baht 217 million and Baht 189 million in the separate ﬁnancial statements as at 31 December 2008 and 2007, respectively. Management believes that such allowances are adequate to absorb possible losses on doubtful accounts.

Siam City Cement Public Company Limited Annual Report 2008

10.

Inventories (Unit: Baht) Consolidated ﬁnancial statements Allowance for diminution in value of inventory Cost

Allowance for obsolete inventories

2008

2007

Finished goods

379,966,562

425,149,449

Work in process

68,436,889

99,129,495

Raw materials

158,813,623

120,557,995

Store supplies

1,346,097,534

977,705,147

(79,511,751)

26,304,939

18,507,224

1,979,619,547

1,641,049,310

(79,511,751)

Goods in transit Total

2008

Inventories - net

2007

2008

2007

379,966,562

425,149,449

68,436,889

99,129,495

158,813,623

120,557,995

(62,461,212)

1,266,585,783

915,243,935

26,304,939

18,507,224

(62,461,212)

1,900,107,796

1,578,588,098

(Unit: Baht) Separate ﬁnancial statements Allowance for diminution in value of inventory Cost Finished goods

2008

Inventories - net

2008

2007

2008

2007

285,665,433

363,276,234

2007 -

285,665,433

363,276,234

Work in process

41,825,210

38,798,510

41,825,210

38,798,510

Raw materials

92,744,379

89,219,973

92,744,379

89,219,973

Store supplies

1,303,346,578

934,640,216

(74,594,282)

(58,971,966)

1,228,752,296

875,668,250

Goods in transit Total

11.

Allowance for obsolete inventories

26,304,938

18,507,224

26,304,938

18,507,224

1,749,886,538

1,444,442,157

(74,594,282)

(58,971,966)

1,675,292,256

1,385,470,191

Investments in subsidiary companies Separate ﬁnancial statements Company’s name

Type of business

Type of relation

Percentage of shareholding

(Unit: Baht)

Investment value under cost method

Dividend received for the year ended 31 December

2008

2007

2008

2007

2008

2007

(Baht)

Siam City Concrete Co., Ltd.

Ready-mixed concrete and aggregates

Direct

99.99

399,999,400

Eagle Cement Holdings Co., Ltd

Holding

Direct

99.99

699,999,300

Construction material

Direct

99.99

300,000,000

Cement trading

Direct

75.00

11,758,497

149,697

Total investments in subsidiary companies

1,411,757,197

1,400,148,397

Less: Allowance for diminution in value of investments

(699,999,300)

711,757,897

700,149,097

Conwood Co., Ltd. Khmer Cement Industry Co., Ltd.

Investments in subsidiary companies - net

Notes to Consolidated Financial Statements

According to the joint venture agreement, Khmer Cement Industry Company Limited (herein after called “KCI”) was incorporated under the laws of Cambodia with a registered capital of USD 1.5 million consisting of 1.5 million shares with a par value of USD 1 per share. The Company holds a 75 percent interest and so will contribute USD 1.125 million. However, as at 31 December 2008, the registered capital was equivalent to USD 405,000. The capital will be increased from time to time when the business of the company requires. KCI commenced its operation on 1 April 2005.

12.

Investments in associated company 12.1 Detail of associated company:

Company’s name

Lanna Resources Public Co., Ltd.

Type of business

Country of incorporation

Coal Mining

Thailand

Type of relation

Percentage of shareholding

Direct

Consolidated ﬁnancial statements

Separate ﬁnancial statements

Carrying amount based on equity method

Cost

2008

2007

2008

2007

2008

2007

(Baht)

44.99

1,081,546,228

927,515,316

483,426,543

(Unit: Baht)

Company’s name

Lanna Resources Public Co., Ltd.

Consolidated ﬁnancial statements

Separate ﬁnancial statements

Share of income from investments in associated company during the year

Dividend received during the year

2008

2007

2008

2007

272,117,902

179,105,486

118,086,990

81,873,646

12.2 As at 31 December 2008, the fair value of investment in the above associated company was Baht 976 million (2007: Baht 2,850 million) which was based on the closing price as quoted on the Stock Exchange of Thailand. 12.3 Summarised ﬁnancial information of associated company: (Unit: Million Baht) Company’s name

Lanna Resources Public Co., Ltd.

Paid-up capital as at 31 December

Total assets as at 31 December

Total liabilities as at 31 December

Total revenues for the year ended 31 December

Net income for the year ended 31 December

2008

2007

2008

2007

2008

2007

2008

2007

2008

2007

350

3,878

3,355

1,366

1,089

7,484

6,045

628

379

Siam City Cement Public Company Limited Annual Report 2008

13.

Other investment - related company As at 31 December 2008 and 2007, investment in ordinary shares of a related company, which is accounted for under the cost method, is as follows: Consolidated ﬁnancial statements Company’s name

Holcim (Bangladesh) Co., Ltd.

14.

Type of business

Cement

Country of incorporation

Bangladesh

Type of relation

Indirect

Paid up share capital

Percentage of shareholding

Cost value

Dividend received

2008

2007

2008

2007

2008

2007

2008

2007

(Million Taka)

(Baht)

120

10.42

368,119,260

Long-term loans to subsidiaries During the year, movements of long-term loans to subsidiaries were as follows: (Unit: Baht) Separate ﬁnancial statements Balance as at 31 December 2007 Eagle Cement Holdings Co., Ltd. - The principal of the loan is repayable as a lump sum on 28 June 2010 The loan bears interest at the Minimum Lending Rate (MLR), payable semi-annually commencing in June 2003.

During the year Increase

Balance as at 31 December 2008

Decrease

369,119,260

Siam City Concrete Co., Ltd. - The principal of loan is repayable semi-annually installments of varying amounts. The loan bears interest at Minimum Lending Rate (MLR) minus 1% per annum payable quarterly commencing in March 2005.

1,621,700,000

322,000,000

1,943,700,000

Total

1,990,819,260

322,000,000

2,312,819,260

Less: Allowance for doubtful debt

(158,786,153)

(27,139,614)

(185,925,767)

Net

1,832,033,107

294,860,386

2,126,893,493

Notes to Consolidated Financial Statements

15.

Property, plant and equipment (Unit: Baht) Consolidated ďŹ nancial statements Land and mineral reserve

Building and structures

Machinery and equipment

Furniture, ďŹ xtures and ofďŹ ce equipment

Motor vehicles

Construction in process

Total

1,638,125,566

6,678,198,197

23,042,215,333

1,246,520,097

10,987,413

180,185,403

621,769,446

122,397,202

1,321,515,411

1,974,993,152

35,901,567,756

131,791,661

2,084,376,704

3,151,507,829

Cost: 31 December 2007 Purchases and transfer in Disposals and transfer out 31 December 2008

(15,699,755)

(158,584,706)

(527,089,543)

(63,960,478)

(10,602,382)

(1,356,280,300)

(2,132,217,164)

1,633,413,224

6,699,798,894

23,136,895,236

1,304,956,821

1,442,704,690

2,703,089,556

36,920,858,421

Accumulated depreciation: 31 December 2007

10,768,232

3,723,140,725

17,557,418,866

883,666,881

1,182,237,766

23,357,232,470

Depreciation for the year

14,566,240

185,492,581

481,263,151

95,200,095

26,111,479

802,633,546

Disposals and transfer in/out

(142,373,442)

(489,203,878)

(63,605,818)

(8,605,964)

(703,789,102)

25,334,472

3,766,259,864

17,549,478,139

915,261,158

1,199,743,281

23,456,076,914

31 December 2007

25,481,053

245,174

25,726,227

Increase during the year

15,053,554

438,346

15,491,900

31 December 2008

25,481,053

15,298,728

438,346

41,218,127

31 December 2007

1,627,357,334

2,929,576,419

5,484,551,293

362,853,216

139,277,645

1,974,993,152

12,518,609,059

31 December 2008

1,608,078,752

2,908,057,977

5,572,118,369

389,257,317

242,961,409

2,703,089,556

13,423,563,380

31 December 2008 Allowance for impairment:

Net book value:

Depreciation for the year: 2007 (Baht 591 million included in manufacturing cost, and the remaining balance included in selling and distribution expenses and administrative expenses)

747,287,032

2008 (Baht 639 million included in manufacturing cost, and the remaining balance included in selling and distribution expenses and administrative expenses)

802,633,546

Siam City Cement Public Company Limited Annual Report 2008

(Unit: Baht) Separate ﬁnancial statements Land and mineral reserve

Building and structures

Machinery and equipment

Furniture, ﬁxtures and ofﬁce equipment

Motor vehicles

Construction in process

Total

1,116,890,010

6,046,792,607

21,539,664,870

1,140,766,393

1,269,550,276

1,901,280,615

33,014,944,771

98,643,571

582,737,510

118,177,763

81,795,182

1,892,899,311

2,774,253,337

Cost: 31 December 2007 Purchases and transfer in Disposals and transfer out

(15,699,755)

(154,879,929)

(513,985,325)

(63,877,023)

(7,694,567)

(1,187,729,798)

(1,943,866,397)

1,101,190,255

5,990,556,249

21,608,417,055

1,195,067,133

1,343,650,891

2,606,450,128

33,845,331,711

31 December 2007

252,422

3,578,917,599

16,948,890,207

798,523,863

1,165,988,991

22,492,573,082

Depreciation for the year

600,707

157,164,570

375,841,242

83,927,441

16,136,538

633,670,498

(139,330,709)

(476,884,905)

(63,257,723)

(5,156,022)

(684,629,359)

853,129

3,596,751,460

16,847,846,544

819,193,581

1,176,969,507

22,441,614,221

31 December 2007

Increase during the year

15,053,554

438,346

15,491,900

31 December 2008

15,053,554

438,346

15,491,900

31 December 2007

1,116,637,588

2,467,875,008

4,590,774,663

342,242,530

103,561,285

1,901,280,615

10,522,371,689

31 December 2008

1,100,337,126

2,393,804,789

4,745,516,957

375,435,206

166,681,384

2,606,450,128

11,388,225,590

31 December 2008 Accumulated depreciation:

Disposals and transfer in/out 31 December 2008 Allowance for impairment:

Net book value:

Depreciation for the year: 2007 (Baht 446 million included in manufacturing cost, and the remaining balance included in selling and distribution expenses and administrative expenses)

597,027,387

2008 (Baht 477 million included in manufacturing cost, and the remaining balance included in selling and distribution expenses and administrative expenses)

633,670,498

A portion of subsidiary company’s land, construction thereon and machinery with a total net book value as at 31 December 2008 of Baht 232 million is mortgaged as collateral for long-term loans from ﬁnancial institutions as mentioned in Note 21. As at 31 December 2008 and 2007, certain plant and equipment items have been fully depreciated but are still in use. The original cost of those assets amounted to Baht 7,577 million and Baht 7,923 million (Separate ﬁnancial statements: Baht 7,129 million and Baht 7,519 million), respectively.

Notes to Consolidated Financial Statements

16.

Assets not used in operations (Unit: Baht) Consolidated ﬁnancial statements Land

Building and structures

Machinery and equipment

Furniture, ﬁxtures and ofﬁce equipment

Motor vehicles

Total

Cost: 31 December 2007 Disposals and transfer out 31 December 2008

647,379,452

801,831,148

43,577,086

16,088,693

507,800

1,509,384,179

(292,357,472)

(446,456,085)

(270,500)

(5,566,085)

(744,650,142)

355,021,980

355,375,063

43,306,586

10,522,608

507,800

764,734,037

362,087,833

34,828,483

16,088,591

507,800

413,512,707

Accumulated depreciation: 31 December 2007 Depreciation for the year

19,907,053

942,885

20,849,962

Disposals and transfer out

(207,338,614)

(164,659)

(5,566,085)

(213,069,358)

31 December 2008

174,656,272

35,606,709

10,522,530

507,800

221,293,311

160,448,611

110,447,782

270,896,393

(3,328,591)

(53,007,204)

(56,335,795)

157,120,020

57,440,578

214,560,598

31 December 2007

486,930,841

329,295,533

8,748,603

102

824,975,079

31 December 2008

197,901,960

123,278,213

7,699,877

328,880,128

Allowance for impairment: 31 December 2007 Decrease during the year 31 December 2008 Net book value:

Depreciation for the year: 2007 (included in administrative expenses)

30,739,164

2008 (included in administrative expenses)

20,849,962

(Unit: Baht) Separate ﬁnancial statements Land

Building and structures

Machinery and equipment

Furniture, ﬁxtures and ofﬁce equipment

Motor vehicles

Total

Cost: 31 December 2007

610,561,256

798,761,200

40,177,404

16,049,466

507,800

1,466,057,126

(292,357,472)

(446,456,085)

(270,500)

(5,566,085)

(744,650,142)

318,203,784

352,305,115

39,906,904

10,483,381

507,800

721,406,984

31 December 2007

359,018,189

31,440,814

16,049,464

507,800

407,016,267

Depreciation for the year

19,906,748

940,705

20,847,453

Disposals and transfer out

(207,338,615)

(164,659)

(5,566,085)

(213,069,359)

31 December 2008

171,586,322

32,216,860

10,483,379

507,800

214,794,361

148,448,611

110,447,782

258,896,393

Disposals and transfer out 31 December 2008 Accumulated depreciation:

Allowance for impairment: 31 December 2007 Decrease during the year

(3,328,591)

(53,007,204)

(56,335,795)

145,120,020

57,440,578

202,560,598

31 December 2007

462,112,645

329,295,229

8,736,590

800,144,466

31 December 2008

173,083,764

123,278,215

7,690,044

304,052,025

31 December 2008 Net book value:

Depreciation for the year: 2007 (included in administrative expenses)

30,726,502

2008 (included in administrative expenses)

20,847,453

Siam City Cement Public Company Limited Annual Report 2008

During 2008, the Company had reversed allowance for impairment of assets not used in operations of Baht 56 million. Such amount has been shown as a part of “Administrative expenses” in the income statements for the year. Management believes that such assets are saleable in the future at prices not less than their carrying value.

17.

Intangible assets (Unit: Baht)

Consolidated ﬁnancial statements Mining concession

Computer software

Other intangible assets

Total

Cost 31 December 2007

880,797,778

53,502,932

248,618,358

1,182,919,068

Additions and transfer in

314,141,866

177,974

13,456,569

327,776,409

1,194,939,644

53,680,906

262,074,927

1,510,695,477

108,537,796

34,268,807

124,290,945

267,097,548

23,363,201

7,443,244

23,789,191

54,595,636

131,900,997

41,712,051

148,080,136

321,693,184

31 December 2007

772,259,982

19,234,125

124,327,413

915,821,520

31 December 2008

1,063,038,647

11,968,855

113,994,791

1,189,002,293

2007

21,543,202

2,570,260

12,657,215

36,770,677

2008

23,363,201

7,443,244

23,789,191

54,595,636

31 December 2008 Accumulated amortisation 31 December 2007 Amortisation during the year 31 December 2008 Net book value

Amortisation for the year

(Unit: Baht)

Separate ﬁnancial statements Mining concession

Computer software

Other intangible assets

Total

Cost 31 December 2007

716,626,778

31,765,369

219,162,281

967,554,428

Additions and transfer in

314,141,865

120,000

11,190,633

325,452,498

1,030,768,643

31,885,369

230,352,914

1,293,006,926

107,249,872

14,857,237

114,367,124

236,474,233

21,570,603

6,038,412

7,628,302

35,237,317

128,820,475

20,895,649

121,995,426

271,711,550

31 December 2007

609,376,906

16,908,132

104,795,157

731,080,195

31 December 2008

901,948,168

10,989,720

108,357,488

1,021,295,376

2007

20,255,278

1,098,263

2,733,393

24,086,934

2008

21,570,603

6,038,412

7,628,302

35,237,317

31 December 2008 Accumulated amortisation 31 December 2007 Amortisation during the year 31 December 2008 Net book value

Amortisation for the year

Amortisation for the years ended 31 December 2008 and 2007 amounted to Baht 44 million and Baht 29 million (Separate ﬁnancial statements: Baht 25 million and Baht 17 million), respectively was included in manufacturing costs and the remaining Baht 11 million and Baht 8 million (Separate ﬁnancial statements: Baht 10 million and Baht 7 million), respectively was included in selling and distribution expenses and administrative expenses.

Notes to Consolidated Financial Statements

18.

Corporate income tax/deferred income tax Corporate income tax for the years 2008 and 2007 was summarised below: (Unit: Baht)

Consolidated ﬁnancial statements

Separate ﬁnancial statements

2008

2007

2008

2007

Current income tax

1,417,656,443

1,439,790,713

1,369,027,323

1,388,726,866

Increase in deferred tax assets

(174,154,448)

(80,765,877)

(101,322,887)

(23,041,822)

Corporate income tax recognised in income statements

1,243,501,995

1,359,024,836

1,267,704,436

1,365,685,044

Deferred income tax in the balance sheets as at 31 December 2008 and 2007 consisted of the following: (Unit: Baht)

Consolidated ﬁnancial statements 2008

2007

Balance - beginning of year

678,024,671

Add: Current year temporary difference

186,407,616

Separate ﬁnancial statements 2008

2007

597,258,794

558,754,539

535,712,717

82,325,027

113,576,055

24,600,972

Deferred income tax calculated on temporary differences:

19.

Less: Utilised during the year

(12,253,168)

(1,559,150)

(12,253,168)

(1,559,150)

Balance - end of year

852,179,119

678,024,671

660,077,426

558,754,539

Short-term loans from ﬁnancial institutions (Unit: Baht)

Consolidated ﬁnancial statements 2008

Separate ﬁnancial statements

2007

2008

2007

2,400,000,000

1,000,000,000

2,400,000,000

1,000,000,000

1,029,819,571

8,388,487

1,000,000,000

3,429,819,571

1,008,388,487

3,400,000,000

1,000,000,000

Short-term loan from related financial institution - Bank of Ayudhya Public Co., Ltd. Short-term loan from other financial institutions Total short-term loans from financial institutions

Movements in short-term loans from related ﬁnancial institution - Bank of Ayudhya Public Co., Ltd. during the year ended 31 December 2008 are summarised below. (Unit: Baht)

Balance as at 31 December 2007

Consolidated ﬁnancial statements

Separate ﬁnancial statements

1,000,000,000

Add: Increase during the year

1,400,000,000

Balance as at 31 December 2008

2,400,000,000

Siam City Cement Public Company Limited Annual Report 2008

As at 31 December 2008, the Company and its subsidiary had obtained short-term loans of Baht 3,430 million in the consolidated ﬁnancial statements and Baht 3,400 million in the separate ﬁnancial statements from commercial banks carrying interest at the rate of 4.4 to 6.2 percent per annum. These loans are due for repayment within 2009.

20.

Trade accounts payable- subsidiaries and related companies As at 31 December 2008 and 2007, the balances of trade accounts payable - subsidiaries and related companies are as follows: (Unit: Baht) Consolidated ﬁnancial statements 2008

Separate ﬁnancial statements 2008

2007

Siam City Concrete Co., Ltd.

71,361,770

53,163,026

Khmer Cement Industry Co., Ltd.

35,824,448

5,658,778

Lanna Resources Public Co., Ltd.

42,019,161

206,324,817

42,019,161

206,324,817

Holcim Group Support Ltd.

37,690,894

52,324,071

37,690,894

52,324,071

PT.Lanna Harita Indonesia

65,724,211

Other related companies

1,106,456

12,249,421

470,523

11,865,885

146,540,722

270,898,309

253,091,007

329,336,577

Total

21.

2007

Long-term loans (Unit: Baht) Consolidated ﬁnancial statements 2008

2007

Separate ﬁnancial statements 2008

2007

Loans from related ﬁnancial institution Bank of Ayudhya Public Co., Ltd., repayable in 15 semi-annual installments of varying amounts, commencing in October 2005, and carrying interest at MLR.

212,000,000

266,000,000

Less: Portion due within one year

(52,000,000)

(54,000,000)

Net

160,000,000

212,000,000

Movements in long-term loans from related ﬁnancial institution - Bank of Ayudhya Public Co., Ltd. during the year ended 31 December 2008 are summarised below. (Unit: Baht) Consolidated ﬁnancial statements

Separate ﬁnancial statements

Balance as at 31 December 2007

266,000,000

Less: Repayment during the year

(54,000,000)

Balance as at 31 December 2008

212,000,000

These long-term loans of certain subsidiary is collateralized by a portion of the subsidiary’s land, construction thereon and machinery as mentioned in Note 15. The loan agreements have certain restrictive covenants pertaining to performance, dividend payments, maintenance of certain ﬁnancial ratios in the ﬁnancial statements and the percentage of shares held by the major shareholder.

Notes to Consolidated Financial Statements

22.

Long-term liabilities for concession (Unit: Baht) Consolidated ﬁnancial statements

Long-term liabilities for concession

Separate ﬁnancial statements

2008

2007

2008

2007

247,333,139

280,210,086

247,333,139

280,210,086

Less: Portion due within one year

(35,013,948)

(32,876,946)

(35,013,948)

(32,876,946)

Net

212,319,191

247,333,140

212,319,191

247,333,140

The Company entered into various agreements to pay for in 2005 renewed mining concession which are payable in 8 equal, annual installments commencing in 2007 and carrying interest at the rate of 6.5 percent per annum, to Department of Primary Industries and Mines, the Ministry of Industry.

23.

Provident fund The Company, its subsidiaries and their permanent employees have jointly established provident funds and registered a provident fund scheme under the Provident Fund Act B.E. 2530, whereby the Company and its subsidiaries contribute to the funds as follows: Fund 1 A contributory, unfunded provident fund for the employees of the Company and a subsidiary company. Employees who have completed at least 5 years of service are entitled to full beneﬁts, while employees leaving before completing 5 years of service do not receive the contributions made by the Company and the subsidiary company. Under the regulations of the fund, members are required to pay, and the Company and such subsidiary company accrue, monthly contributions to the fund at 5% of the members’ basic salaries. Fund 2 On 1 January 1989, the Company established another contributory, unfunded provident fund for employees who have completed at least 5 years of service with the Company. The Company accrues amounts matching the employees’ contribution, but the percentage of contribution by each party varies according to the length of service with the Company. The Company had closed this fund in 2007. Fund 3 The Company, its subsidiaries and their permanent employees have jointly registered a provident fund scheme under Provident Fund Act B.E. 2530. Such fund is monthly contributed to by both the employees and the Company and its subsidiaries at rates of 5 - 10 percent of the employees’ basic salaries. The fund is managed by Ayudhya Fund Management Company Limited. During the year, the Company and its subsidiaries contributed Baht 56 million (2007: Baht 59 million) and the Company only contributed Baht 50 million (2007: Baht 55 million) to the fund.

24.

Reserve for employee retirement benefit plan The Company and a subsidiary company have provided a retirement benefit plan for their employees who have completed one year or three years of continuous service with the Company and or such subsidiary company. Under the plan, employees are entitled to receive, upon retirement, early retirement benefits which were accrued according to the best estimation of the management and measured at the present value of estimated future cash flows using a discount rate that is similar to the interest rate on high quality corporate bonds. A professionally qualified independent actuary values the fund’s liabilities and certain obligations on regular basis. As at 31 December 2008, the amount provided in the accounts of the Company and such subsidiary company amounted to Baht 132 million and Baht 11 million (2007: Baht 117 million and Baht 11 million), respectively.

25.

Statutory reserve Pursuant to Section 116 of the Public Limited Companies Act B.E. 2535, the Company is required to set aside a statutory reserve at least 5 percent of its net income after deducting accumulated deﬁcit brought forward (if any), until the reserve reaches 10 percent of the registered capital. The statutory reserve is not available for dividend distribution. The Company’s statutory reserve has reached 10 percent of the registered share capital.

Siam City Cement Public Company Limited Annual Report 2008

26.

Treasury stock Consolidated ﬁnancial statements Number of treasury shares (shares) Average price per share (Baht)

Separate ﬁnancial statements

2008

2007

2008

2007

7,500,000

228.09

By the resolution of the meeting of the Company’s Board of Directors held on 11 December 2003, the Company approved to repurchase its shares in order to manage its excess cash, under the share repurchase scheme, with the investment not to exceed Baht 3,200 million or in term of shares repurchased not to exceed 12.5 million shares, equivalent to 5% of the total issued and paid-up shares of the Company. The period for the repurchase of the shares was from 26 December 2003 to 11 June 2004 and the resale period is from 11 December 2004 to 11 June 2007 (6 months after the completion date of the share repurchase and not later than 3 years from this time). In the event that the Company does not or is unable to dispose of all repurchased shares within the set period, when the due date has passed the Company is to reduce its paidup capital by writing-off the remaining unsold repurchased shares. On 14 February 2005, the Securities and Exchange Commission of Thailand (SEC) imposed an ofﬁcial requirement for all listed companies to follow the Judicial Council deliberated the issue of treasury share schemes under Section 66/1(2) of the Public Limited Companies Act B.E. 2535, that the cost of treasury shares as acquired by a public limited company should not exceed its unappropriated retained earnings. The Council also suggested that the relevant authorities should require public limited companies to set aside within appropriated retained earnings a separate reserve account in an amount equal to the cost of the treasury shares. The reserve shall remain outstanding until either the shares are sold or paid-up capital is reduced by cancellation of any remaining unsold shares. The Annual General Meeting of Shareholders held on 28 April 2005 approved the allocation of Baht 2,985.4 million from the unappropriated retained earnings as of 1 January 2005 to reserve for treasury shares according to SEC requirement. On 28 June 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% of the total issued and paid-up shares of the Company. The period for the repurchase of the shares was from 14 July 2006 to 20 December 2006 and the resale period is from 21 June 2007 to 20 December 2009 (6 months after the completion date of the share repurchase and not later than 3 years from this time). In the event that the Company does not or is unable to dispose of all repurchased shares within the set period, when the due date has passed the Company is to reduce its paid-up capital by cancellation of any remaining unsold shares. The Annual General Meeting of Shareholders held on 14 March 2007 approved the additional allocation of Baht 1,710.6 million from the unappropriated retained earnings as of 31 December 2006 to reserve for treasury shares according to SEC requirement. On 3 May 2007, the meeting of the Company’s Board of Directors passed a resolution to approve the reduction in paid-up share capital by cancelling the 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 2,985.4 million to unappropriated retained earnings.

27.

Mutual separation expenses In November 2007, the Company has decided to temporary reduce the cement production capacity effective from 1 January 2008 and internal reorganize the Company and its subsidiary structure. The Company offered an early retirement scheme amounted to Baht 154 million (Separate financial statements: Baht 146 million), in the income statements for the year ended 31 December 2007, which was included in manufacturing costs of Baht 139 million (Separate financial statements: Baht 136 million) and in selling and distribution expenses and administrative expenses of Baht 15 million (Separate financial statements: Baht 10 million).

Notes to Consolidated Financial Statements

28.

Expenses by nature Signiﬁcant expenses by nature are as follows: (Unit: Baht) Consolidated ﬁnancial statements

Separate ﬁnancial statements

2008

2007

2008

2007

1,710,561,485

2,010,540,631

1,424,367,053

1,689,793,163

107,229,015

102,917,981

107,229,015

102,917,981

Salary, wages and other employee beneﬁts Directors’ and management’s remuneration Depreciation and amortisation Raw materials and supplies used

878,079,144

814,796,873

689,755,268

651,840,824

5,265,506,464

5,342,898,929

4,744,671,100

4,759,642,134

Change in inventories of ﬁnished goods and work in process

29.

131,930,236

57,545,847

55,513,740

107,987,558

Other production expenses

5,361,092,392

6,158,415,938

4,139,866,523

5,144,861,570

Other expenses

3,674,132,110

3,901,067,337

2,904,591,763

3,231,128,038

Total expenses

17,128,530,846

18,388,183,536

14,065,994,462

15,688,171,268

Earnings per share Earnings per share as presented in the income statements is the basic earnings per share which is determined by dividing the net income for the year by the weighted average number of ordinary shares in issue during the year. No disclosure of diluted earnings per share for the year is required as the Company has no potential ordinary shares.

30.

Dividends The Annual General Meeting of Shareholders held on 14 March 2007 approved to pay a ﬁnal dividend of Baht 7.5 per share out of 2006 income, or a total sum of Baht 1,725 million. Thus, including the interim dividend of Baht 6.5 per share, the total dividend payment out of 2006 income amounted to Baht 14.0 per share. On 9 August 2007, the Board of Directors approved the payment of an interim dividend from the Company’s income during the period of January to June 2007 of Baht 6.5 per share, or a total sum of Baht 1,495 million. The interim dividend was paid on 9 September 2007. The Annual General Meeting of Shareholders held on 10 April 2008 approved to pay a ﬁnal dividend of Baht 7.5 per share out of 2007 income, or a total sum of Baht 1,725 million. Thus, including the interim dividend of Baht 6.5 per share, the total dividend payment out of 2007 income amounted to Baht 14.0 per share. On 7 August 2008, the Board of Directors approved the payment of an interim dividend from the Company’s income during the period of January to June 2008 of Baht 6.5 per share, or a total sum of Baht 1,495 million. The interim dividend was paid on 5 September 2008.

31.

Bank guarantees As at 31 December 2008, there were outstanding bank guarantees of approximately Baht 67 million (Separate ﬁnancial statements: Baht 49 million) issued by banks on behalf of the Company and its subsidiaries in respect of certain performance bonds as required in the normal course of their businesses.

Siam City Cement Public Company Limited Annual Report 2008

32.

Commitments 32.1 As at 31 December 2008, the Company and its subsidiaries have significant outstanding commitments as follows: 32.1.1 The Company extended the general assistance agreement with a related company for another 1 year beginning from 1 January 2009 to 31 December 2009. The Company committed to pay a fee on the basis and at the rate as stipulated in the agreement. 32.1.2 The Company entered into an agreement with a related company in respect of the Company’s computer system for a period of 3 years which is extendable under the terms specified in the agreement. The Company committed to pay the monthly fee of Baht 7.6 million. 32.1.3 The Company and its subsidiaries entered into various agreements with local companies in respect of the lease of land, office building space, motor vehicles and other services for periods ranging from 3 years to 30 years. As at 31 December 2008, the Company and its subsidiaries have outstanding commitments payable in the future as follows: (Unit: Million Baht) Payable within

Consolidated ﬁnancial statements

Separate ﬁnancial statements

Less than 1 year

170

114

1 to 5 years

220

More than 5 years Total

417

204

32.1.4 The Company and its subsidiaries have commitments in respect of raw materials and fuel purchases, logistic services, lease of equipment, sales contracts as required in the normal course of their businesses. 32.1.5 The Company entered into agreements with third parties to acquire land and raw material resources. Subject to certain conditions, the Company will purchase assets at the price as specified in the agreements. 32.1.6 A subsidiary company entered into a technology license agreement with an overseas company for a period of 10 years, commencing 6 March 2002 to 5 March 2012 after this period the agreement is automatically renewed for a 1 year period. The subsidiary committed to pay licensing fee on the basis and at the rate as stipulated under the agreement. 32.1.7 The Company and its subsidiaries had outstanding capital expenditure and construction commitments of Baht 1,699 million (Separate financial statements: Baht 1,688 million). 32.2 As at 31 December 2008, the associated company had the following significant commitments. The associated company had entered into several lease agreements in respect of the lease of land, office building space, motor vehicles, and other services. Future minimum rentals payable under these leases and services agreements as at 31 December 2008 amount to approximately Baht 22.7 million (2007: Baht 22.9 million).

33.

Financial instruments 33.1 Financial risk management The Company and its subsidiaries’s financial instruments, as defined under Thai accounting standard No. 48 “Financial Instruments: Disclosure and Presentations”, principally comprise cash and cash equivalents, trade accounts receivable, loans and short-term and long-term loans. The financial risks associated with these financial instruments and how they are managed is described below.

Notes to Consolidated Financial Statements

Interest rate risk The Company and its subsidiaries’s exposure to interest rate risk relates primarily to their cash at banks, short-term loans and long-term borrowings. However, since most of the Company’s financial assets and liabilities bear floating interest rates or fixed interest rates which are close to the market rate, the interest rate risk is expected to be minimal. The details of long-term loan to subsidiaries and short-term and long-term loans from financial institutions are set out in Note 14, 19 and 21. Foreign currency risk The Company has a foreign currency risk in respect of the purchase/ sales transactions. The Company manages its exposure to foreign currency risk by balancing net position of receipt and payment of the foreign currency transactions in each period. The Company seeks to reduce this risk by entering into forward exchange contracts when it considers appropriate. Generally, the forward contracts mature within one year. As at 31 December 2008, outstanding balances of the Company and its subsidiaries’s financial assets and liabilities denominated in foreign currencies are as follows: (Unit: Million) Consolidated financial statements Foreign currency

Financial assets

Financial liabilities

Separate ﬁnancial statements Financial assets

Financial liabilities

Average exchange rate as at 31 December 2008 (Baht per foreign currency unit)

US dollar

34.9438

As at 31 December 2008, there was no outstanding foreign exchange contract. Credit risk The Company and its subsidiaries are exposed to credit risk primarily with respect to trade accounts receivable. The Company and its subsidiaries manage the risk by adopting appropriate credit control policies and procedures and therefore does not expect to incur material ﬁnancial losses. In addition, the Company and its subsidiaries do not have high concentration of credit risk since it has a variety of customer base and large number of customers. The maximum exposure to credit risk is limited to the carrying amounts of trade accounts receivables as stated in the balance sheets.

33.2 Fair values of financial instruments Since the majority of the Company and its subsidiaries’s financial assets and liabilities are short-term in nature or bear floating interest rates, their fair value is not expected to be materially different from the amounts presented in the balance sheets. A fair value is the amount for which an asset can be exchanged or a liability settled between knowledgeable, willing parties in an arm’s length transaction. The fair value is determined by reference to the market price of the financial instrument or by using an appropriate valuation technique, depending on the nature of the instrument.

Siam City Cement Public Company Limited Annual Report 2008

34.

Capital management The primary objectives of the Company and its subsidiaries’ ﬁnancial management are to maintain their ability to continue as a going concern and to maintain an appropriate capital structure.

35.

Financial information by segment (Unit: Million Baht) Consolidated ﬁnancial statements for the years ended 31 December Cement

Concrete and aggregates

Others

Elimination

Total

2008

2007

2008

2007

2008

2007

2008

2007

2008

2007

17,201

18,849

3,361

3,188

743

763

21,305

22,800

Revenue from external customers Inter-segment revenues

1,025

1,128

237

119

(1,262)

(1,248)

Total revenues

18,226

19,977

3,598

3,307

743

764

(1,262)

(1,248)

21,305

22,800

8,932

9,491

477

577

294

312

9,703

10,380

135

115

(4,343)

(4,864)

(1,183)

(1,104)

(167)

(117)

Segment gross proﬁt Unallocated income and expenses: Other income Selling and distribution expenses Administrative expenses Financial expenses Share of income from investment in associated company Corporate income tax Net income

272

179

(1,244)

(1,359)

3,173

3,230

(Unit: Million Baht) Consolidated ﬁnancial statements as at 31 December Cement

Concrete and aggregates

Others

Elimination

Total

2008

2007

2008

2007

2008

2007

2008

2007

11,437

10,546

1,351

1,307

636

666

2008

2007

Property, plant and 13,424

12,519

Unallocated assets

equipment - net

10,079

8,984

Total assets

23,503

21,503

Notes to Consolidated Financial Statements

36.

Reclassification Certain amounts in the financial statements for the year ended 31 December 2007 have been reclassified to conform to the current year’s classification but with no effect to previously reported net income or shareholders’ equity. The reclassifications are as follows: (Unit: Baht) For the year ended 31 December 2007 Consolidated financial statements Reclassification Production cost of goods sold Selling and distribution expenses and administrative expenses

37.

Previously reported

Separate ﬁnancial statements Reclassiﬁcation

Previously reported

12,420,014,739

16,372,605,252

10,542,617,512

14,007,049,969

5,968,168,797

2,030,808,630

5,145,553,756

1,696,351,645

Approval of ﬁnancial statements These ﬁnancial statements were authorised for issuance by the Company’s Board of Directors on 19 February 2009.

Siam City Cement Public Company Limited Annual Report 2008

Management Discussion and Analysis (MD&A) Analysis of Financial Performance (Unit: Million THB) January - December Net sales - Group Net sales - Cement business Net sales - Concrete and aggregates business Sale of other business Elimination (Inter company’s sales) Net proﬁt Operating EBITDA Operating EBITDA margin (%) Operating proﬁt

2008

2007

+/-

21,305

22,800

-7%

18,226

19,977

-9%

3,598

3,307

743

764

-3%

-1,262

-1,248

-1%

3,173

3,230

-2%

5,054

5,211

-3%

24%

23%

4,176

4,396

-5%

Net sales Group: For ﬁnancial year 2008, consolidated net sales declined by THB 1,495 million or 7 percent to THB 21,305 million. The cement business marked lower net sales of THB 1,751 million, or 9 percent to THB 18,226 million. The ready-mix concrete and aggregates business showed a positive net sales development of THB 291 million, or plus 9 percent to THB 3,598 million. Net sales generated from other business amounted to THB 743 million, a decrease of THB 21 million from 2007, or 3 percent.

Cement business: Thailand was not spared the impact of the widespread crisis as, from the middle of the year onward, the construction industry began its perceptible downward slide along with most industries. Thus the cement industry was also affected to a considerable extent. To further complicate the business landscape, the country’s lengthy political uncertainties eroded the confidence in all sectors – manufacturers, service providers and consumers. Along with the loss of confidence, the unfavorable political situation adversely affected the implementation of major infrastructure projects. The real estate sector also slowed down considerably as consumers decided to delay big expenditures during the time of uncertainties. Thus Thailand’s cement market in year 2008 declined by around 10 percent to 24.8 million tons from 27.7 million tons in year 2007. As the Company foresaw the severity of this crisis and its impact on the construction industry very early, the Company took drastic measures to proactively take control of our long-term profitability and eventually mothballed two clinker production lines (kilns) effective January 1, 2008. This measure reduced the Company clinker production capacity by 2.5 million tons. On the export side, the total volume fell by 14 percent to 15.6 million tons from 18.2 in year 2007. And as a result of the mothballed 2 kiln lines, the Company’s export volume dropped by 36 percent to 3.9 million tons from 6.2 million tons in year 2007. Vietnam remained the Company’s biggest export market for clinker, followed by the Middle East. Singapore is the largest destination for export cement. Export prices for cement and clinker were significantly higher in USD terms as a result of surging commodity prices and thus production costs. As a result, net sales of the cement segment dropped by 9 percent to THB 18,226 million from 19,977 in year 2007.

Management Discussion and Analysis (MD&A)

Concrete and aggregates business: In year 2008, the Company sold 2.2 million cubic meters of ready-mix concrete. This was an increase over the 2.1 million cubic meters sold in 2007. Overall, selling prices were not much different from the previous year and still on a low level mainly due to a highly competitive market situation. The aggregates business commenced its limestone and sand operations in year 2007 and was able to signiﬁcantly raise total volume sold of rock and sand.

Other business: In 2008, net sales generated from other business slightly decreased by 3 percent from previous year due to the drop in demand and consumers’ conﬁdence.

Net Profit The Company effectively run a lean but efficient operation in year 2008. In order to maintain its performance and profitability, the Company raised selling prices along with the surging commodity and energy cost, further improved internal efficiency in raw material and energy consumption and tightly controlled fixed costs. As a result, costs and expenses for year 2008 amounted to THB 17,129 million, a decline of THB 1,259 million, or 7 percent from THB 18,388 million in 2007. Net profit of the Company and its subsidiaries declined by THB 57 million, or 2 percent, to THB 3,173 million in year 2008. Total production cost of goods sold of THB 11,603 million for year 2008 were THB 817 million lower than the THB 12,420 million recorded in year 2007 mainly due to less demand for our products and services. The Company was able to compensate surging commodity and energy prices with higher efficiency and cost reductions. Selling and distribution expenses were reported at THB 4,343 million, an improvement of THB 521 million, or 11 percent, from THB 4,864 million in the previous year, and was mainly a matter of less delivered cement and clinker volumes and through effective cost controls and lower energy and transportation costs. Administrative expenses were reported at THB 1,183 million, THB 79 million or 7 percent higher from THB 1,104 million in year 2007. The ratio of administrative expenses to net sales for year 2008 was 5.5 percent, slightly higher than the 4.8 percent in year 2007 due to lower total net revenues. Financial expenses for year 2008 amounted to THB 167 million, an increase of THB 50 million from THB 117 million in 2007 and a result of higher interests paid for the Company’s drawdown of additional short-term loans. Other income of total THB 135 million resulted mainly from foreign exchange gains as a result of the Baht versus USD depreciation. For year 2008, operating EBITDA amounted to THB 5,054 million, a decline of THB 157 million or 3 percent from THB 5,211 million in year 2007.

Siam City Cement Public Company Limited Annual Report 2008

Analysis of Cash Flows (Unit: Million THB) January - December Cash ﬂow from operating activities

2008

2007

+/-

3,099

4,000

-23%

Capital expenditure on property, plant and equipment to maintain productive capacity and to secure competitiveness Free cash ﬂow Expansion investments Decrease (increase) in other investing activities

-1,069

-818

-31%

2,030

3,182

-36%

-658

-454

-45%

116

-176

166%

Dividend paid

-3,220

Financing requirement

-1,732

-668

-159%

2,337

461

407%

Increase in ﬁnancing liabilities Translation adjustments Increase (decrease) in cash and cash equivalents

-1

605

-207

392%

Cash flow from operating activities Consolidated cash flow from operating activities for year 2008 was THB 3,099 million, a decline of THB 901 million from THB 4,000 million in 2007. Lower revenues and higher year-end inventory of clinker, solid fuel and kraft paper negatively impacted the cash flow generation. However, there was no stock loss or write down on all inventories held at year-end and all these materials on stock will be used in first quarter 2009 and thus its related cash flow will be realized at the same time.

Cash ﬂow used for investing activities Consolidated cash ﬂow used for investing activities in year 2008 was net THB 1,611 million, an additional THB 163 million from THB 1,448 million in the previous year. Capital expenditures were made for the Company’s ongoing construction of a new preparation platform for alternative fuels and raw materials, a new mortar production plant, new investments for two new waste heat recovery plants and expansions in ready-mix concrete and aggregates.

Cash flow from financing activities The Annual General Meeting of Shareholders approved to pay a final dividend of THB 7.50 for year 2007 and the Board of Directors approved an interim dividend of THB 6.50 for first half year 2008. Therefore, the Company used THB 3,220 million for dividend payments and, as a balance, eventually drawdown additional financing liabilities of THB 2,337 million.

Management Discussion and Analysis (MD&A)

Analysis of Financial Position (Unit: Million THB) As of December 31 2008 Total Assets

2007

+/-

23,503

100%

21,503

100%

Current assets

5,984

25%

4,976

23%

20%

Investment in associated company

1,082

928

17%

Property, plant and equipment - net

13,424

57%

12,519

58%

329

825

-60%

2,684

11%

2,255

10%

19%

7,658

33%

5,613

26%

36%

6,624

28%

4,511

21%

47%

Assets not used in operations - net Other non-current assets Total Liabilities Current liabilities Long-term liabilities - net of current portion

372

459

-19%

Other non-current liabilities

662

643

15,845

67%

15,890

74%

-0%

Total Shareholders’ Equity

Total Assets Consolidated total assets as of December 31, 2008, were THB 23,503 million, additional THB 2,000 million from THB 21,503 million in 2007. Current assets were THB 5,984 million compared to THB 4,976 million in 2007 as a result of higher cash and cash equivalents, trade accounts receivables and inventories. Trade accounts receivables accounted for 44 percent and 55 percent of current assets, or equal to an average collection periods of 45 days and 42 days at year-end in 2008 and 2007, respectively. Total inventory represented 32 percent of current assets in both ﬁnancial years. Total property, plant and equipment - net stood at THB 13,424 million—THB 905 million higher than in the previous year, mainly due to aforementioned ongoing investments in the construction of a new preparation platform for alternative fuels and raw materials, a new mortar production plant, two new waste heat recovery plants and expansions in ready-mix concrete and aggregates. During the course of the year, the Company sold several assets not used in operations and thus reduced its book value to THB 329 million. Consolidated other non-current assets as of December 31, 2008 rose by THB 429 million to THB 2,684 million from THB 2,255 million in 2007 mainly due to additional intangible assets from acquired aggregates mining rights and concessions.

Total Liabilities As at December 31, 2008, the Company and its subsidiaries reported total liabilities of THB 7,658 million, a growth of THB 2,045 million from THB 5,613 million in 2007. This is mainly due to the additional drawdown of short-term loans from ﬁnancial institutions in the amount of THB 2,425 million. At year-end 2008 and 2007, consolidated trade accounts payable amounted to THB 1,257 million and THB 1,516 million, respectively, representing 19 percent and 34 percent of current liabilities.

Shareholders’ Equity As at December 31, 2008, and December 31, 2007, total shareholders’ equity was THB 15,845 million and THB 15,890 million, respectively (based on 237.5 million paid-up shares).

Siam City Cement Public Company Limited Annual Report 2008

Related Party Transactions Related parties comprise enterprises and individuals that control, or are controlled by the Company, whether directly or indirectly, or which are under common control with the Company. They also include associated companies and individuals which directly or indirectly own a voting interest in the Company that gives them significant influence over the Company, and key management personnel, directors and officers with authority in the planning and direction of the Company’s operations. During the years, the Company and its subsidiaries had business transactions with related parties, which have been concluded on commercial terms and bases agreed upon in the ordinary course of businesses between the Company and those companies. Information on related party transactions is specified in Note 7 of the Notes to Consolidated Financial Statements for the years ended December 31, 2008 and 2007.

Criteria for having related-party transactions Where it is necessary for the Company to have a transaction with a related party, the Company will consider business necessity and arm’s length as main criteria for decision-making. For example, product selling and purchasing is based on market price. A mark-up is included in the cost of a service fee for services rendered. All of these is to ensure beneﬁts to the Company.

Sound approval mechanism and procedure The Company has complied with the rules of the Stock Exchange of Thailand regarding information disclosure and practices for listed companies in connected transactions. The Audit Committee also reviewed the connected transactions of the Company.

Related Party Transactions, Divindend Allocation Over Past Three Years

Dividend Allocation Over the Past Three Years The Board of Directors aims at optimizing wealth of its Shareholders, both through dividend payments and share value, without compromising on internal growth and commitment to sustainable development. Over the past three years dividend payments have been in the range of 11–14 Baht per share. The Company’s reserve has reached 10 percent of its registered capital. The Board of Directors always ensures that there are enough proﬁts to make interim payments and ﬁnal dividend allocations. During 2006-2008, Siam City Cement allocated dividends as follows:

For ﬁscal year 2008, total dividend is 11 Baht per share - The Board of Directors approved payment of interim dividend on August 7, 2008 of 6.50 Baht per share. - The Board of Directors proposes the Shareholders to approve payment of dividend for the second half of 2008 on April 10, 2009 for 4.50 Baht per share.

For ﬁscal year 2007, total dividend was 14 Baht per share - The Board of Directors approved payment of interim dividend on August 9, 2007 of 6.50 Baht per share. - The Shareholders approved payment of dividend for the second half of 2007 on April 10, 2008 for 7.50 Baht per share.

For ﬁscal year 2006, total dividend was 14 Baht per share - The Board of Directors approved payment of interim dividend on August 10, 2006 of 6.50 Baht per share. - The Shareholders approved payment of dividend for the second half of 2006 on March 14, 2007 of 7.50 Baht per share.

Siam City Cement Public Company Limited Annual Report 2008

Supplemental Information 1.

General Information 1.1

1.2

Siam City Cement Public Company Limited, Registration No. 0107536001346 (Formerly Registration No. was Bor Mor Jor 208) Type of business:

Cement manufacturing and distribution

Head ofﬁce:

Column Tower, 7th – 12th Floors, 199 Ratchadapisek Road, Klongtoey, Bangkok 10110, Thailand

Factory:

99 Moo 9 (Plant 1 & 3), and 219 Moo 5 (Plant 2 & Mortar Plant), Mitraparp Road, Km. 129 – 131 Tabkwang Subdistrict Kaengkhoi District, Saraburi 18260, Thailand 301 Moo 5 ( AFR Platform), Mitraparp Road, Km. 133, Tabkwang Subdistrict, Kaengkhoi District, Saraburi 18260, Thailand

Telephone:

+ 66 2 797 7000

Fax:

+ 66 2 797 7001 to 2

Website:

www.siamcitycement.com

Issued and paid-up shares:

237,500,000 ordinary shares with the par value of 10 baht per share. Among them, 7.5 million shares were bought back by the Company and presently hold in treasury. (For more information, please refer to Note No. 26 of Notes to Consolidated Financial Statements on page 62)

The companies where 10% or more of the issued and outstanding shares of their capital stock are held by the Company, as of December 31, 2008.

Name

Location of Head Ofﬁce

Type of Business / Product

Registered Capital (million baht)

Number of Issued & Paid-up % Direct Ordinary Shares Shareholding

Siam City Concrete Company Limited

Bangkok1

Industrial Operation / Ready-mix Concrete and Aggregates

400

4,000,000

99.99

Conwood Company Limited

Bangkok2

Industrial Operation / Construction Material

300

3,000,000

99.99

Eagle Cement Holdings Company Limited

Bangkok3

Share Holding Company

700

7,000,000

99.99

Lanna Resources Public Company Limited

Bangkok4

Industrial Operation / Coal Production and Distribution

350

35,000,000

44.99

Khmer Cement Industry Company Limited*

Phnom Penh Cambodia5

Cement Trading

appox. 14 (1,620 million riel)

500

75.00

Remarks:

* Regarding Khmer Cement Industry Company Limited, according to the joint venture agreement, its registered capital is ﬁxed at USD 1.5 million. However, at the time of its incorporation, the registered capital was at the equivalent of USD 5,300. The capital will be increased from time to time as the business of the company requires and in the year 2008, the registered capital was at the equivalent of USD 405,000 (or 1,620 million riel) 1. 2. 3. 4. 5.

Column Tower, 7th – 12th Floor, 199 Ratchadapisek Road, Klongtoey, Bangkok 10110, Thailand Tel. +66 2 797 7555 Fax. +66 2 797 7005 Column Tower, 7th – 12th Floor, 199 Ratchadapisek Road, Klongtoey, Bangkok 10110, Thailand Tel. +66 2 797 7444 Fax. +66 2 797 7004 Column Tower, 7th – 12th Floor, 199 Ratchadapisek Road, Klongtoey, Bangkok 10110, Thailand Tel. +66 2 797 7000 Fax. +66 2 663 1628 Mahathun Plaza Bldg., 9th Floor, 888/99 Ploenchit Road, Bangkok 10330, Thailand Tel. + 66 2 253 8080 Fax. +66 2 253 5014 House No. 9, corner street 75 & 80, Sangkat Shrah Chak, Khan Daun Penh, Phnom Penh, Combodia Tel. +855 23 430 902-3 Fax. +855 23 430 897

Supplemental Information

1.3

Share Registrar:

Thailand Securities Depository Company Limited 62 The Stock Exchange of Thailand Building Rachadapisek Road, Klongtoey, Bangkok 10110, Thailand Tel. +66 2 229 2800 Fax.+66 2 359 1259 Call Center. +66 2 229 2888

Auditors:

Mrs. Saifon Inkaew, Certiﬁed Public Accountant (Thailand) No.4434 Ernst & Young Ofﬁce Limited Lake Ratchada Building, 33rd Floor, 193/136-137 Rachadapisek Road, Klongtoey, Bangkok 10110, Thailand Tel.+66 2 264 0773 Fax. +66 2 264 0789-90

The Company’s Businesses 2.1 2.2 2.3

Other references

The Company manufactures and sells cement primarily to the domestic market catering to market demand. The Company may export its product to overseas in the event of oversupply. Siam City Concrete Company Limited is the only subsidiary that generates over 10% of the consolidated revenue. See Notes to the Consolidated Financial Statements, Note 35 on page 66. Change/Important developments in business operations and management during the year 2008. See the Report of the Executive Committee on page 12, and Summary of Major Developments and Recognitions in 2008 on pages 24-25.

Shareholding and Management Structures 3.1

The top 10 major shareholders as of August 22, 2008 are the following:

No.

Shareholders

Number of Shares Held

Percentage (%)

Sunrise Equity Company Limited

80,065,840

33.712

Thai Roc-Cem Company Limited

77,628,433

32.686

CLEARSTREAM NOMINEES LTD.

8,350,200

3.516

JPMSSPL

7,051,100

2.969

NORTRUST NOMINEES LTD.

5,627,800

2.370

THAI NDVR Company Limited

2,654,052

1.117

HSBC (Singapore) Nominees PTE LTD.

2,411,693

1.015

Vayupak Mutual Fund I by MFC Asset Management Public Company Limited

2,254,000

0.949

Vayupak Mutual Fund I by Krungthai Asset Management Public Company Limited

2,254,000

0.949

Mrs. Sasithorn Ratanarak

2,085,040

0.878

Siam City Cement Public Company Limited Annual Report 2008

3.2

Members of the Board of Directors as of December 31, 2008 and their recent experience are as follows: Name / Position

Age (Years)

Education

Work Experience

Duration

Position

Organization/Company/ Business Type

Non-Executive Directors 1

Mr. Veraphan Teepsuwan

Chairman of the Board of Director2

Master Degree: MBA, Northeastern University, USA

1) Listed Company November 2006–Present

Chairman

Siam City Cement Public Company Limited/ Cement Producer

Chairman

Bank of Ayudhya Public Company Limited/ Commercial Bank

2003–Present

Vice Chairman

Eastern Star Real Estate Public Company Limited/ Real Estate

1999–Present

Chairman

Ayudhya Insurance Public Company Limited/ General Insurance

1995–Present

Chairman

Ayudhya Allianz C.P.Life Public Company Limited/ Life Insurance

Bachelor Degree: Economic, January Boston 2007–Present University, USA

2) Non Listed Company 1983–Present

Director

Bangkok Broadcasting & T.V. Co., Ltd/ Television Broadcasting

1990–2005

Chairman

Royal Porcelain Public Company Limited/ Ceramic Tableware Manufacturer

1999–2004

Chairman

Ayudhya Securities Public Company Limited/ Securities

1994–2004

Chairman

Ayudhya Investment and Trust Public Company Limited/ Financial

Company’s Shareholding ratio1:

0.002%

Family Relationship Among Executives:

Nil

Total attendance at Board Meetings in 2008:

6/6

Training Experience:

Thai Institute of Directors (IOD)’s Course(s) - The Role of Chairman Program (RCP) Class 18/2008

Supplemental Information

Name / Position

Age Education (Years)

Work Experience

Duration 2

Mr. Paul Heinz Hugentobler

Vice Chairman of the Board of Directors2

Certiﬁcate: International Senior 2001–Present Management Program, Harvard Business School, 1999–2000 USA 2002–Present Lic.oec.HSG, Graduate School of Economic and 2000–Present Business of St.Gallen, Switzerland

Bachelor Degree: B.Sc. in Civil Engineering, Swiss Federal Institute of Technology, Zurich

Member of the Executive Committee Director

Director

1998–Present

Director

3/6

Bachelor Degree: B.Sc. Economics (Honors), Royal November Holloway 2006–Present College, University of London, England

Siam City Cement Public Company Limited/ Cement Producer Siam City Cement Public Company Limited/ Cement Producer Holcim Limited/ Cement Producer Lanna Resources Public Company Limited/ Coal Production & Distribution 2) Non Listed Company

1998–Present

Total attendance at Board Meetings in 2008:

Director

Managing Director

Director

Nil

Vice Chairman

2001–Present

0.023%

Organization/Company/ Business Type 1) Listed Company

Director

Family Relationship Among Executives:

Position

2004–Present

Company’s Shareholding ratio1:

Mr. Chachchon Ratanarak

Holcim Participation Company Limited/ Holdings Company Holcim Services (Asia) Company Limited/ Service Thai Roc-Cem Company Limited/ Holdings Company Holcim Capital (Thailand) Company Limited/ Trading Company

1) Listed Company Director

Siam City Cement Public Company Limited/ Cement Producer 2) Non Listed Company

June 2005– Present

Director

April 2006– Present

Chairman & CEO

Company’s Shareholding ratio1:

0.449%

Family Relationship Among Executives:

Nil

Total attendance at Board Meetings in 2008:

6/6

Prima Vest Asset Management Company Limited/ Investment Management Tonson Property Company Limited/ Real Property Development

Siam City Cement Public Company Limited Annual Report 2008

Name / Position

Age (Years)

Education

Work Experience

Duration 4

Mr. Thaveepol Kongseri

Director2

Bachelor Degree: Mechanical Engineering, March 2007– Shizuoka Present University, Japan

Position

Organization/Company/ Business Type 1) Listed Company

Director

Present

Director

1994–2003

Director

Siam City Cement Public Company Limited/ Cement Producer Eastern Star Real Estate Public Company Limited/ Real Estate Ayudhya Allianz C.P. Life Public Company Limited/ Life Insurance 2) Non Listed Company

1979–Present

Executive Director

Present

Director

Present

Director

Present

Director

2004

Director and Independent Director

Company’s Shareholding ratio1:

0.007%

Family Relationship Among Executives:

Nil

Super Asset Company Limited/ Real Property Sunrise Equity Company Limited/ Investment Advisor Koakeaw Country Club Company Limited/ Golf Course Siam Phurimongkol Company Limited/ Real Estate Royal Porcelain Public Company Limited/ Ceramic Tableware Manufacturer

Total attendance at Board Meetings in 2008:

5/6

Training Experience:

Thai Institute of Directors (IOD)’s Course(s) - Director Accreditation Program (DAP), 2005

Mr. Urs Wolfgang Bieri

Director2 (Resigned May 2, 2008)

Lic.oec.HSG, University of St. Gallen, Switzerland

Listed Company 1998–May 2008 Director

Siam City Cement Public Company Limited/ Cement Producer

2002–December Deputy Chairman 2004 of the Executive Committee

Holcim Ltd. / Cement Producer

Company’s Shareholding ratio1:

Nil

Family Relationship Among Executives:

Nil

Total attendance at Board Meetings in 2008:

1/6

Supplemental Information

Name / Position

Age (Years)

Education

Work Experience

Duration 6

Mr. Prakob Visitkitjakarn

Director2, Chairman of the Audit Committee (Independent Director)

Master Degree: MBA-Finance, Indiana University, 1999–Present USA Bachelor Degree: Finance(Honors), 2008–Present Indiana University, USA 1999–2007

Position

Organization/Company/ Business Type 1) Listed Company

Director, Chairman of the Audit Committee Chairman of the Audit Committee Member of the Audit Committee

1993–Present

Independent Director

1986–1995, 1997–2002

Executive Vice President

Siam City Cement Public Company Limited/ Cement Producer Sri Trang Agro Industry Public Company Limited/ Agribusiness Sri Trang Agro Industry Public Company Limited/ Agribusiness Sri Trang Agro Industry Public Company Limited/ Agribusiness Bank of Ayudhya Public Company Limited/ Commercial Bank 2) Non Listed Company

2006–Present

Director

2006–2008

Independent Director and Member of the Audit Committee

Lease IT Company Limited/ Leasing Ayudhya Auto Lease Public Company Limited/ Auto Leasing

Company’s Shareholding ratio1:

Nil

Family Relationship Among Executives:

Nil

Total attendance at Board Meetings in 2008:

6/6

Total attendance at Audit Committee Meeting in 2008:

12/12

Training Experience:

Thai Institute of Directors (IOD)’s Course(s) - The Role of Chairman Program (RCP) Class 5/2001 - Director Certiﬁcation Program (DCP) Class 33/2003

Siam City Cement Public Company Limited Annual Report 2008

Name / Position

Age (Years)

Education

Work Experience

Duration 7

Mr. Chet Raktakanishta

Director2 Member of the Audit Committee (Independent Director)

Bachelor Degree: Management, Brigham Young 1999–Present University, USA

Organization/Company/ Business Type Listed Company

Director, Member of the Audit Committee

Siam City Cement Public Company Limited/ Cement Producer

April 2007– Present

Director

Bank of Ayudhya Public Company Limited/ Commercial Bank

2003–Present

Audit Committee and Chairman of Nomination and Remuneration Committee Director and Member of Nomination and Remuneration Committee

Media of Medias Public Company Limited / Media & Publishing

1994–Present

Position

Company’s Shareholding ratio1:

Nil

Family Relationship Among Executives:

Nil

Total attendance at Board Meetings in 2008:

5/6

Ayudhya Insurance Public Company Limited/ General Insurance

Total attendance at Audit Committee Meeting in 2008:

12/12

Training Experience:

Thai Institute of Directors (IOD)’s Course(s) - DCP refresher Course Class 3/2006 - Director Financial, 2005 - Audit Committee Program (ACP), 2005 - Financial for Non-Finance Director (FN), 2003 - Directors Certiﬁcate Program (DCP), 2003

Mr. Harald Link

Director2 Member of the Audit Committee (Independent Director)

Master Degree: Lic.oec.HSG, University of St. Gallen, Switzerland

1) Listed Company 1998–2008

Director, Member of the Audit Committee

Siam City Cement Public Company Limited/ Cement Producer

2000–Present

Director

True Corporation Public Company Limited/ Telecommunication 2) Non Listed Company

1987–Present

Managing Partner

B.Grimm & Co., Registered Ordinary Partnership/ Investment Advisory Services

Company’s Shareholding ratio1:

Nil

Family Relationship Among Executives:

Nil

Total attendance at Board Meetings in 2008:

3/6

Total attendance at Audit Committee Meeting in 2008:

1/12

Training Experience:

Course on Good Corporate Governance at St. Gallen, Switzerland

Supplemental Information

Name / Position

Age (Years)

Education

Work Experience

Duration 9

Mr. Prabhol Buranasiri

Bachelor Degree: Engineering EE, Worcester Polytechnic Institute, Mass, USA

Director2 (Independent Director)

Organization/Company/ Business Type

Position

Listed Company 2007–Present

Director

Siam City Cement Public Company Limited/ Cement Producer

2002–Present

Management Consultant

Thai-German Ceramic Industry Public Company Limited/ Property & Construction

1996–2001

General Manager and Managing DirectorMarketing

Thai-German Ceramic Industry Public Company Limited/ Property & Construction

Company’s Shareholding ratio1:

Nil

Family Relationship Among Executives:

Nil

Total attendance at Board Meetings in 2008:

6/6

Training Experience:

Thai Institute of Directors (IOD)’s Course(s) - Director Accreditation Program (DAP)

Executive Directors 10

Ms. Chantana Sukumanont

Director3

Certiﬁcate: Advanced Management November Program, 2006–Present Harvard Business School, USA June 2004– Present Diploma in Business Studies, The Center for Economic and Political Studies, UK

1998–June 2004

1) Listed Company Deputy Chairman of the Executive Committee

Siam City Cement Public Company Limited/ Cement Producer

Director, Executive Vice President (Marketing and Sales) Senior Vice President (Marketing and Sales)

Siam City Cement Public Company Limited/ Cement Producer Siam City Cement Public Company Limited/ Cement Producer 2) Non Listed Company

1995–1997

Managing Director

Jalaprathan Cement Public Company Limited / Cement Producer

Company’s Shareholding ratio1:

Nil

Family Relationship Among Executives:

Nil

Total attendance at Board Meetings in 2008:

5/6

Training Experience:

Thai Institute of Directors (IOD)’s Course(s) - Director Accreditation Program (DAP)

Siam City Cement Public Company Limited Annual Report 2008

Name / Position

Age Education (Years)

Work Experience

Duration 11

Mr. Vanchai Tosomboon

Director3

Master Degree: MBA, Asian Institute of Management

Position

Organization/Company/ Business Type 1) Listed Company

June 2004– Present

Director, Executive Vice President (Saraburi Operations)

Siam City Cement Public Company Limited/ Cement Producer

1999–Present

Executive Vice President (Subsidiaries) Director

1999–2004

Managing Director

Siam City Cement Public Company Limited/ Cement Producer Lanna Resources Public Company Limited/ Coal Production & Distribution Diamond Rooﬁng Tiles Public Company Limited/ Construction Materials

Bachelor Degree: Law, 1999–June Thammasat 2004 University

2) Non Listed Company 2005–Present

Director

2004–2005

Chairman of the Executive Committee

1999–2004

Managing Director

1999–2005

Chairman

Company’s Shareholding ratio1:

0.009%

Family Relationship Among Executives:

Nil

Royal Porcelain Public Company Limited/ Ceramic Tableware Manufacturer Royal Porcelain Public Company Limited/ Ceramic Tableware Manufacturer Royal Porcelain Public Company Limited/ Ceramic Tableware Manufacturer Karat Faucet Company Limited/ Bathroom Fittings and Accessories

Total attendance at Board Meetings in 2008:

6/6

Training Experience:

Thai Institute of Directors (IOD)’s Course(s) - Director Accreditation Program (DAP), 2004 - Director Certiﬁcate Program (DCP), 2001

Supplemental Information

Name / Position

Age Education (Years)

Work Experience

Duration 12

Mr. Marcel Smit

Managing Director3 (Resigned Dec 31, 2008)

Certiﬁcate: Advanced Management March 2007– Program, December 2008 Harvard Business School, USA 1995–2006 Top Management Programs at INSEAD, France and IMD, Switzerland 1987–1994 Master Degree: Postacademic “MBA” Program, Technical University Delft, The Netherlands Bachelor Degree: Construction Engineer, HTS, The Netherlands

Company’s Shareholding ratio1:

Nil

Family Relationship Among Executives:

Nil

Total attendance at Board Meetings in 2008:

6/6

Position

Organization/Company/ Business Type 1) Listed Company

Managing Director, Chairman of the Executive Committee

Siam City Cement Public Company Limited/ Cement Producer

Senior Vice President and Regional Manager Asia Paciﬁc

Sika AG, Switzerland/ Specialty Chemicals

2) Non Listed Company Managing Director

Sika B.V., the Netherlands/ Specialty Chemicals

Siam City Cement Public Company Limited Annual Report 2008

Name / Position

Age Education (Years)

Work Experience

Duration 13

Mr. Philippe Arto

Managing Director3 (Since January 1, 2009)

Master Degree: Public Administration, January Harvard Kennedy 2009–Present School, Boston, USA Bachelor Degree: 2003–2008 Science and Engineering, Ecole Polytechnique, Paris 2002–2003 Civil Engineering, Ecole Nationale 1999–2001 Des Ponts Et Chaussees, Paris

Company’s Shareholding ratio1:

Nil

Family Relationship Among Executives:

Nil

Total attendance at Board Meetings in 2008:

1/6

Remarks :

Position

Organization/Company/ Business Type 1) Listed Company

Managing Director, Chairman of the Executive Committee

Siam City Cement Public Company Limited/ Cement Producer

President and Chief Executive Ofﬁcer

St. Lawrence Cement, Holcim Group, Canada/ Cement Producer 2) Non Listed Company

Managing Director

General Manager French Market

Queensland Cement Limited, Holcim Group, Australia/ Cement Producer Obourg-Origny, Holcim Group, French-Benelux/ Cement Producer

1. The equity interest of the members of the Board of Directors are the information as of 22 August, 2008, which are inclusive of the equity interest of their respective spouses and minor children (if any) and shown in percentage of the total issued and outstanding shares amounting 230 million shares. 2. Non-executive director 3. Executive director, who is also an employee of the Company

Supplemental Information

3.3

Executive Committee Members of the Executive Committee are nominated by the Board of Directors. Its duties are to organize, carry out and supervise the business operations so as to achieve the target set by the Board of Directors. The following are information about the members of the Executive Committee as of December 31, 2008: Name / Position

Age Education (Years)

Work Experience

Duration 1

Mr. Marcel Smit

Chairman of the Executive Committee (Resigned Dec 31, 2008)

Position

Certiﬁcate: Advanced Management March 2007– Managing Director, Program, December 2008 Chairman of the Harvard Business Executive Committee School, USA Top Management Programs at INSEAD, France and IMD, Switzerland

1995–2006

Senior Vice President and Regional Manager Asia Paciﬁc

Organization/Company/ Business Type 1) Listed Company Siam City Cement Public Company Limited/ Cement Producer Sika AG, Switzerland/ Specialty Chemicals

2) Non Listed Company 1987–1994

Managing Director

Sika B.V., the Netherlands/ Specialty Chemicals

Master Degree: Postacademic “MBA” Program, Technical University Delft, The Netherlands Bachelor Degree: Construction Engineers, HTS, The Netherlands Company’s Shareholding ratio1:

Nil

Family Relationship Among Executives:

Nil

Total attendance at Executive Committee Meetings in 2008: 23/23

Remark:

1. The equity interest of the members of the Executive Committee are the information as of August 22, 2008, which are inclusive of the equity interest of their respective spouses and minor children (if any) and shown in percentage of the total issued and outstanding shares amounting 230 million shares.

Siam City Cement Public Company Limited Annual Report 2008

Name / Position

Age (Years)

Education

Work Experience

Duration 2

Mr. Philippe Arto

Chairman of the Executive Committee (Since January 1, 2009)

Company’s Shareholding ratio1:

Nil

Family Relationship Among Executives:

Nil

Total attendance at Executive Committee Meetings in 2008:

0/23

Ms. Chantana Sukumanont

Deputy Chairman of the Executive Committee

Certiﬁcate: Advanced Management November Program, 2006–Present Harvard Business School, USA June 2004– Present Diploma in Business Studies, The Center for Economic and Political Studies, UK

1998–June 2004

Position

Organization/Company/ Business Type 1) Listed Company

Managing Director, Chairman of the Executive Committee

Siam City Cement Public Company Limited/ Cement Producer

President and Chief Executive Ofﬁcer

St. Lawrence Cement, Holcim Group, Canada/ Cement Producer 2) Non Listed Company

Managing Director

General Manager French Market

Queensland Cement Limited, Holcim Group, Australia/ Cement Producer Obourg-Origny, Holcim Group, French-Benelux/ Cement Producer

1) Listed Company Deputy Chairman of the Executive Committee

Siam City Cement Public Company Limited/Cement Producer

Director, Executive Vice President (Marketing and Sales) Senior Vice President (Marketing and Sales)

Siam City Cement Public Company Limited/Cement Producer Siam City Cement Public Company Limited/Cement Producer 2) Non Listed Company

1995–1997

Company’s Shareholding ratio1:

Nil

Family Relationship Among Executives:

Nil

Managing Director

Jalaprathan Cement Public Company Limited / Cement Producer

Total attendance at Executive Committee Meetings in 2008:

21/23

Training Experience:

Thai Institute of Directors (IOD)’s Course(s) - Director Accreditation Program (DAP)

Supplemental Information

Name / Position

Age Education (Years)

Work Experience

Duration 4

Mr. Vanchai Tosomboon

Executive Vice President (Saraburi Operations)

Master Degree: MBA, Asian Institute of Management

Position

Organization/Company/ Business Type 1) Listed Company

June 2004– Present

Bachelor Degree: 1999–June Law, 2004 Thammasat University 1999–Present

1999–2004

Director, Executive Vice President (Saraburi Operations)

Siam City Cement Public Company Limited/ Cement Producer

Executive Vice President (Subsidiaries) Director

Siam City Cement Public Company Limited/ Cement Producer Lanna Resources Public Company Limited/ Coal Production & Distribution Diamond Rooﬁng Tiles Public Company Limited/ Construction Materials

Managing Director

2) Non Listed Company 2005–Present

Director

2004–2005

Chairman of the Executive Committee

1999–2004

Managing Director

1999–2005

Chairman

Company’s Shareholding ratio1:

0.009%

Family Relationship Among Executives:

Nil

Total attendance at Executive Committee Meetings in 2008:

21/23

Training Experience:

Thai Institute of Directors (IOD)’s Course(s) - Director Accreditation Program (DAP), 2004 - Director Certiﬁcate Program (DCP), 2001

Siam City Cement Public Company Limited Annual Report 2008

Name / Position

Age Education (Years)

Work Experience

Duration 5

Mr. Andreas Leutenegger

Senior Vice President (Finance and Controlling)

Advanced Management Program, September Harvard 2004 – Present Business School, USA Swiss Certiﬁed Public Accountant Lic.oec.HSG University of St.Gallen, Switzerland

January 1999 – August 2004

Position

Organization/Company/ Business Type 1) Listed Company

Senior Vice President (Finance and Controlling)

Siam City Cement Public Company Limited/ Cement Producer

Assistant Vice President Corporate reporting

Holcim Limited/ Cement Producer

2) Non Listed Company November 1994 Auditor – December 1998

KPMG / Audit and Advisory Services

Company’s Shareholding ratio1:

Nil

Family Relationship Among Executives:

Nil

Total attendance at Executive Committee Meetings in 2008:

21/23

Training Experience:

-Responsible for corporate governance report for Holcim Ltd. Annual Report 2002 -Seminar on Corporate Governance, by Stock Exchange of Switzerland -Seminar on Corporate Governance, by Swiss Institute of Chartered Accountants

Mr. Rungrote Soonthorn

Senior Vice President (Human Resources and Management Development)

Master Degree: Comparative Law (M.C.L) University of Miami, USA

1) Listed Company September 2003 – Present

Senior Vice President (Human Resources and Management Development)

Siam City Cement Public Company Limited/ Cement Producer

2) Non Listed Company 1996 – August 2003

General Manager Human Resources

Auto Alliance (Thailand) Company Limited / Automobile Industry

Company’s Shareholding ratio1:

Nil

Family Relationship Among Executives:

Nil

Total attendance at Executive Committee Meetings in 2008:

21/23

Training Experience:

Directors’ Duties, Liabilities & Roles in Corporate Governance, August 2007, by Asia Business Forum (Thailand) Company Limited

Supplemental Information

Name / Position

Age Education (Years)

Work Experience

Duration 7

Mr. Nopporn Thepsithar

Senior Vice President (Logistics and Exports)

Bachelor’s Degree in Electrical Engineering, Chulalongkorn University

Position

Organization/Company/ Business Type 1) Listed Company

January 2004– Present

Senior Vice President Siam City Cement Public (Logistics and Exports) Company Limited/ Cement Producer

2002– Logistics Manager December 2003

Siam City Cement Public Company Limited/ Cement Producer 2) Non Listed Company

3.4

2000–2001

Executive Director

1999–2000

Operations Division Manager

Company’s Shareholding ratio1:

Nil

Family Relationship Among Executives:

Nil

TCC Holding Company Limited / Holdings Company SCT Company Limited / Import-Export Company

Total attendance at Executive Committee Meetings in 2008:

19/23

Training Experience:

Thai Institute of Directors (IOD)’s Course(s) - Audit Committee Program (ACP) - Director Accreditation Program (DAP) - Director Certiﬁcate Program (DCP) Good Governance, Mini MBA Course for INSEE Logistics

Directors of Subsidiary Company as of December 31,2008 Siam City Concrete Company Limited is the only subsidiary that generates over 10% of the Company’s consolidated revenue, as of 31 December 2008. Director

Siam City Concrete Company Limited

Mr. Marcel Smith

Chairman

Mr. Paul Heinz Hugentobler

Director

Ms. Chantana Sukumanont

Director

Mr. Siva Mahasandana

Managing Director

Remuneration of the Board of Directors and Executives paid in 2008 4.1

Remuneration in Cash Remuneration in Cash for 15 Board members was 14.530 million baht, included meeting per diem and bonus paid in 2008 (During this year, 2 directors resigned). Remuneration for 6 members of the Company’s Executive Committee was 92.699 million baht, included salary and bonus paid in 2008

4.2

Other Remunerations Contribution to Provident Fund for its executives was 1.957 million baht. Company cars are provided to the members of the Executive Committee.

Auditor’s Fee In 2008 Ernst & Young Ofﬁce Limited received from the Company and its subsidiaries audit fees of 4.036 million baht and 1.065 million baht for non-audit services.

Siam City Cement Public Company Limited Annual Report 2008

Customer Service Center and Distribution Centers Customer Service Center Customer Service Center is the sub-division of Group CRM Department, Siam City Cement Public Company Limited launched on September 2001 with an objective to be the one-stop Center that provides the superior service to customers. With the integration of Customer Sales Support and Customer Care units, we ensure that customers of the highest efﬁciency of services. In order to enhance the superior service standard and response to customer’s demands at the highest level, we have cooperated with Siam City Concrete since October 2007 in providing a one stop customer service center. The Customer Service Center handles the customers’ ordering and responds to customers’ requests, inquiries and complaints. The Center offers 24 hours and 7 days a week service to guarantee customer’s satisfaction. All of the activities we provide to customers will be recorded in CRM (Customer Relationship Management) system to follow up and to ensure all customers’ requests are handled punctually. As we are now in a dynamic business environment, we also analyze the data from the CRM database to continuously improve our service standard. Location Head Ofﬁce Saraburi Plant Contact

Column Tower, 7th Fl., 199 Ratchadapisek Road, Klongtoey, Bangkok 10110, Thailand Customer Service Building 99 Moo 9, Mitraparp Road, Km. 129 – 131, Tabkwang Subdistrict, Kaengkhoi District, Saraburi 18260, Thailand Tel: 1-800-77-5555 (Free) or +66 2 797 7777 Fax: 1-800-33-5555 (Free) or +66 2 797 7788 Email: wecare@sccc.co.th

Distribution Centers Siam City Cement distributes cement from Saraburi Plants to its customer nationwide in two methods: 1. Delivery from Saraburi Plants directly to dealers or their requested destinations 2. Delivery to four regional distribution Centers

Description

Lampang Warehouse 208 Moo 2, Lampang - Chiangmai Road, Pong Yang Kok Subdistrict, Hang Chat District, Lampang 52190, Thailand Warehouse and distribution Center of bulk cement for northern customers

Address Description

Udon Thani Warehouse 1 Railway Station Road, Mark Kaeng Subdistrict, Muang District, Udon Thani 41000, Thailand Warehouse and distribution Center of bagged cement for upper northeastern customers

Address

Address Description

Address: Description

Ubon Ratchathani Warehouse 23 Kong Tang Road, Varinchamrap Subdistrict, Varinchamrap District, Ubon Ratchathani 34190, Thailand Warehouse and distribution Center of bagged cement for lower northeastern customers Surat Thani Terminal 13/29 Surat Thani - Pak Nam Road, Bang Kung Subdistrict, Muang District, Surat Thani 84000, Thailand Warehouse and distribution Center of bulk and bagged cement, including Bag packing facility

Customer Service Center and Distribution Centers

Summary of speciﬁed item per Form 56-2

Summary of Specified Items Per Form 56-2 Compared in accordance with Form of Annual Report for a security- issuing company (Form 56-2) issued under SEC notification Ref. Kor Jor 40/2540 regarding principles, conditions and methods in presentation of financial data and operation results of a company which issues securities

Required Items in Guideline for 56-2

Item in this Annual Report

General Information

Supplemental Information

Key Figures

1.1

Company information and outstanding shares

1.2

Investment in other company for more than 10% of that company’ s equity

1.3

Other reference

Financial Summary

Page

Key data from ﬁnancial statements during the most recent 3 years

Nature of Business

3.1

Nature of business operation of company and subsidiaries, and Supplemental Information distribution policy

3.2

Income structure

Notes to Consolidated Financial Statements No.35

3.3

Major development in last year, and trend of industrial and competition situation

Report of the Executive Committee, Quality Is Not an Abstract But a Concrete Concept, Summary of Major Developments and Recognitions in 2008, and Industrial Outlook

12 14 24

Risk and Risk Management

Supplemental Information

74 06 26 74

Risk Factors

Shareholding and Management Structure

5.1

Shareholders

5.2

Management

5.2.1

Management structure

Management Structure, Corporate Governance Update And Supplemental Information

5.2.2

Nomination of directors and executives

Corporate Governance Update

5.2.3

Remuneration to directors and executives

5.2.4

Compliance of SET’s CG Principles

Supplemental Information and Notes to Consolidated Financial Statements No. 7 Corporate Governance Update

89 50 26

5.2.5

Rules on insider information

Corporate Governance Update

5.2.6

Internal control opinion of Audit Committee

Corporate Governance Update And Report of the Audit Committee

26 33

5.3

Dividend Policy

Dividend Allocation Over Past Three Years

Related Party Transaction

Related Party Transactions and Notes to Consolidated Financial Statements No. 7

72 50

Management Discussion and Analysis

Financial Statements

8.1

Audited consolidated ﬁnancial statements

Report of Certiﬁed Public Accountant

8.2

Auditors’ fee

Supplemental Information