It seems to me that there are other companies that still increasing their capacity for PET film production but I found that the ROA of PTL is only < 6% and our company is a cost leader. I wonder why this business is still drawing investment for new plant?

Could you please tell me about the competition situation in Thin-film PET business? I am an outsider and do not understand about this capacity expansion at all.

The capacity expansion referred to above is from 3 lines, only 2 of which will commence operations by this year. The 3rd one will be completed next year and will be a thick film line and not have any impact on the thin film supply. The demand-supply balance expected to improve by the end of 2007/early 2008 may get postponed by a few months due to this capacity addition. However, no such adverse impact in terms of excess supply being generated is expected, as there is a healthy demand growth as well. The year 2006 recorded an overall growth in PET film demand of more than 8% over 2005, particularly in the Packaging, Electrical and Industrial segments where the growth over 2005 is more than 11%. Expansions are undertaken by existing players in order to attain larger size and hence economy of scale. Being cost effective is very important in order to compete with other producers in the industry.

As far as the ROA is concerned, PTL ROA has been about 12% in 2005-06. It has dropped this year (2006-07) on account of decline in profitability due to cyclical downtrend in PET film prices, increase in raw material costs and strong appreciation of Baht against the USD.

Kindly refer to the 2 graphs attached herewith. One explains how the spread between the raw material and PET films, especially over the last few years, has moved in a band. But the demand-supply balance of PET films which could vary across regions could impact margins as producers cannot significantly increase prices if the supply is in excess of demand. Global demand-supply for Thin PET film is illustrated in the graph attached herewith.