2Q/2011 2Q/2010 1Q/2011

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1 (Revised) PTT Chemical Public Company Limited Management's Discussion and Analysis Financial Result for the second quarter of Executive Summary In the second quarter of 2011, PTT Chemical Public Company Limited ( the Company or PTTCH ) and its subsidiaries reported net profit of Baht 6,432 million, up 180% from the same period of last year, or Baht 4.24 per share. The operating results of the Company and its subsidiaries are shown below: 2Q/2011 2Q/2010 1Q/2011 Y-o-Y Change Q-o-Q Change (Unit: Million Baht) Sales 38,192 23,993 35,373 59% 10% EBITDA 9,148 4,222 8, % 4% Net Profit 6,432 2,299 6, % 4% Basic EPS (Baht) % 4% In 2Q/2011, crude oil price (Dubai) was 111 USD/barrel, up from 78 USD/barrel in the same period of last year due to an improving demand from global economic recovery. As a result, naphtha (MOPS) rose to 997 USD/ton or up 40% from the same period last year. A rise in selling price of naphtha, a major feedstock for production, also pushed overall product prices to rise. In this quarter, Ethylene price was 1,683 USD/ton, HDPE was 1,389 USD/ton, LLDPE was 1,380 USD/ton, LDPE was 1,683 USD/ton, and MEG was 1,300 USD/ton which increased from the same period last year of 19%, 17%, 12%, 22%, and 26% respectively. In 2Q2011, the Company s sales volumes increased from higher production. This was due to a start up of commercial operation of 4 new plants: PTTPE cracker, HDPE units (Expansion of olefins l1 and BPE 2) and PTTPE s LDPE plant, which started commercial operation on December 1, 2010, January 1, 2011, and February 1, 2011 respectively.

2 2. Industry Overview In 2Q/2011, global economic was improving from the same period of last year, which led to higher demand and price of crude oil and petrochemical products. However, when compared PE price in this quarter to the previous quarter, it showed that the PE prices declined. HDPE price was up only 1% while LLDPE and LDPE price declined by 3%. This was due to a slower demand in China from destocking activity, particularly at the end of the quater. In addition, as the Chinese government has enforced tighten monetary and energy saving policies to slow down their economy, the buyers consequently delayed purchasing orders and production. MEG price was up 4% in 2Q/2011. This was due to a missing supply from Taiwanese producer (Formosa), which its ethylene plants were on fire and consequently caused its 4 MEG production units to be shut, total MEG capacity was 1.9 million ton per year. In 3Q/2011, should crude price remains in the range of USD/barrel and the concerns of European debts seem to loosen, overall product prices are expected to remain in the same range of that of 2Q/2011, and might be able to slightly improve regarding higher demand of plastic resins consumption for the year-end holiday seasons. Product price, feed stock price and product to feed margins Unit : $/MT NAPHTHA (MOPS) ETHYLENE PROPYLENE HDPE LLDPE LDPE MEG HDPE - Naphtha LLDPE- Naphtha LDPE- Naptha MEG Ethylene 1Q ,266 1,176 1,319 1,399 1,494 1, Q ,088 1,138 1,187 1,227 1,383 1, Q ,063 1,120 1,150 1, Q ,047 1,153 1,271 1,349 1,604 1, ,076 1,132 1,224 1,281 1, Q ,238 1,379 1,372 1,423 1,731 1, Q ,291 1,487 1,389 1,380 1,683 1, Source: CMAI

3 3. Production Efficiencies Details of 2Q/2011 production volumes compared to the same period of last year are as follows: 2Q/2011 2Q/2010 Up (down) Utilization Rate 2Q/2011 Olefins 612, ,087 47% 85% HDPE 205, ,075 94% 103% LLDPE 59,612 55,567 7% 60% LDPE 61,244 n.a. n.a. 82% MEG 47,041 82,039 (43%) 48% Unit: Tons 3.1 Olefins production volumes were 612,408 tons, up 47% due to a commercial operation of PTTPE s cracker on 1 December HDPE production volumes were 205,437 tons, up 94% due to a commercial operation of an expansion HDPE unit of olefins plant I1 (capacity 50,000 tons per year) and BPE 2 (capacity 250,000 tons per year) on 1 January In addition, in 2Q/2010 HDPE plant of BPE1 was shut down for maintenance for 30 days (1-30 of June). 3.3 LLDPE production volumes was 59,612 tons, up 7% due to a commercial operation of PTTPE s cracker, which resulted in higher ethylene received for LLDPE production. However, LLDPE plant was shut down (Turnaround) for 29 days (May 23 June 20). As a result, production volumes slightly increased in 2Q/ LDPE production volumes were 61,244 tons, wholly increased from the same period of last year due to a commercial operation of LDPE on 1 February MEG production volumes of TOCGC were 47,041 tons, down 43%. This was due mainly to the turnaround shutdown of TOCGC for 43 days (June 1-July 13) while there was no shutdown in 2Q/2010. In addition, the start commercial operation of TEA on 1 January 2011 has caused TOCGC to allocate some EO to TEA for EA production instead of producing MEG.

4 4. Products Sales Details of 2Q/2011 sales volumes compared to the same period of last year are as follows: Unit: Tons 2Q/2011 2Q/2010 Up (Down) Olefins* 239, ,110 26% HDPE 203,046 96, % LLDPE 61,171 39,097 56% LDPE 50,331 n.a. n.a. MEG 54,425 82,599 (34%) *External sales only 4.1 Olefins sales volumes were 239,367 tons, up from 190,110 tons or up 26%, due to higher production volumes resulted from a commercial operation of PTTPE s cracker. 4.2 HDPE sales volumes (Olefins plant I-1+BPE+BPE 2) were 203,046 tons, up from 96,864 tons or up 110%, due to higher production volumes resulted from commercial operation of HDPE of Olefins plant I1 and BPE LLDPE sales volumes of PTTPE were 61,171 tons, up from 39,097 or up 56%, due to higher production from higher ethylene received from PTTPE s cracker. 4.4 LDPE sales volumes of PTTPE were 50,331 tons, wholly increased from the same period of last year due to production increase from a commercial operation of LDPE on 1 February MEG sales volumes of TOCGC were 54,425 tons, down from 82,599 tons or down 34%, due to lower production, resulted from the shutdown of TOCGC operation for 43 days.

5 5. Financial Results Unit: Baht Million 2Q/2011 2Q/2010 1Q/2011 % YOY % QoQ Change Change Sales Revenues 38,192 23,993 35,373 59% 8% Feedstock Cost (23,735) (15,846) (22,049) 50% 8% Gross Margin 14,457 8,147 13,324 77% 9% Processing Cost (4,587) (3,264) (3,902) 41% 18% Other Revenues % 21% SG&A Expenses (1,620) (1,324) (1,353) 22% 20% EBITDA 9,148 4,222 8, % 4% Depreciation and Amortization (1,791) (1,284) (1,849) 40% (3%) EBIT 7,357 2,938 6, % 6% Financing Expenses (Interest Expense-Income) (479) (515) (513) (7%) (7%) FX and Derivative Gain(Loss) (310) (48) (107) 546% 189% Share of profit of associates % 123% Profit attributable to Non-controlling interest (143) (89) (118) 61% 21% Corporate Tax (564) (375) (301) 50% 87% Net Profits 6,432 2,299 6, % 4% Earnings Per Share (Baht/Share) % 4% Comparing 2Q/2011 and 2Q/2010 operating results In 2Q/2011, the Company reported significantly improving operating results when compared to the same period last year. This was due mainly to the commercial operation of PTTPE s cracker in 1 December 2010, HDPE units of Olefins plant I1 (expansion) and BPE 2 in 1 January 2011, and LDPE unit of PTTPE in 1 February As a result, production volumes, sales volumes, sales revenues, feedstock, and processing cost significantly rose. Details are as follow: Sales revenues were reported at Baht 38,192 million, up 59% due to an increase in the Company s core products sales revenues as follow: - Olefins sales revenues were up Baht 2,931 million, or up 45% due to a 26% rise in olefins sales volumes to 239,367 tons. Olefins price also rose 25%, from 1,113 USD/ton to 1,389 USD/ton resulted from higher crude oil prices. However, the average exchange rate of Thai Baht to USD in 2Q/2011 strengthened from Baht 32.35/USD in 2Q/2010 to Baht 30.27/USD in this quarter, which led to a rise in olefins price of only 17% when converted to Baht currency.

6 - HDPE sales revenues were up Baht 8,030 million or up 140% due to a 110% rise in sales volumes to 203,046 tons. HDPE price also rose 17% to 1,389 USD/ton, in accordance with an increase in crude oil and naphtha price. (Cost-Push Effect). However, when considered the strengthening of Thai Baht against USD currency, the average selling price of HDPE would have increased 9%. In addition HDPE unit of BPE 1 was shut down for 30 days in 2Q/2010. This resulted in significant increase in HDPE sales revenues in this quarter. - LLDPE sales revenues were up Baht 927 million or up 55%. This was due to a 56% rise in LLDPE sales volumes to 61,171 tons and the 12% rise in average selling price of LLDPE to 1,380 USD/ton. However, when considered the strengthening of foreign exchange, the price of LLDPE rose only 5%. - LDPE sales revenues solely increased from the same period of last year due to a commercial operation of LDPE plant in on 1 February 2011, while LDPE selling price in 2Q/2011 was 1,683 USD/ton. - EO and MEG sales revenues were down Baht 313 million or down 12% due to a 34% decrease in sales volumes to 54,425 tons. This was due mainly to TOCGC s plant shutdown for turnaround for 30 days in this quarter even though MEG price rose 26% to 1,300 USD/ton or rose 18% when converted to Thai Baht. Feedstock cost was Baht 23,735 million, up 50% due mainly to higher feedstock used from the Company s new production units, which have started commercial operation since December SEA average selling price of naphtha, a feedstock benchmark, also increased, in accordance with higher crude oil price, to 977 USD/ton, or up 40% from the same period of last year. Processing cost also rose 41% to Baht 4,587 from higher production of new production units. The Company also reported higher expenses and incomes in 2Q/2001 as follows: SG&A Expenses rose 22% or Baht to 1,620 million from: - Employee expenses such as training and seminars expenses, compensations and bonuses. In 2Q/2011 The Company recorded average bonus payable higher than that of the same period of last year due to improving performance.

7 - Consultant expenses (Professional Fees). Since the beginning of 2011, the Company has employed consultants and advisors to study the feasibility of the merger of the Company and PTT Aromatics and Refinery Public Company Limited (PTTAR), and the possibilities of future investments to comply with the Company s strategy and growth. - Computers and new software expenses in order to help improving the Company s working process and efficiency. - An effect of new accounting policy No. 19, employee compensation, which led to an increase in higher SG&A of approximately Baht 14 million. Depreciations and Amortization increased 40% to Baht 1,791 million due to a realization of depreciation of new production units, which have started commercial operation since December In addition, the effect of new accounting policy No. 16: Property, Plant and Equipment also caused depreciation and amortization to be higher. Under old accounting policy, only major assets (plants) needed to be assessed for depreciation while under new accounting policy, all assets needed to be assessed for depreciation. In 2Q/2011 the Company has engaged in Forward Contract of USD 180 million, when concluded with the Company s existing exposures of USD 842 million (Bond + Cross Currency Swap + Forward Contract), the Company s USD exposures were USD 1,022 million. When Baht currency was depreciated in this quarter, it had caused the Company to have unrealized FX loss of Baht 310 million. The Company recorded share of profit of associates of Baht 571 million, up 47% due to a rise in associates net profit, particularly from PTT Phenol Co., Ltd, and Vinythai Public Company Limited.

8 Comparing 2Q/2011 and 1Q/2011 operating results In 2Q2011, the Company s operating results were up only 4% from 1Q/2011 due mainly to an increase in sales volumes. Products selling prices; however, slightly changed from that of the previous quarter. Details of operating results can be summarized as follows: The Company reported sales revenues of Baht 38,192 million, up 8%. This was due mainly to a 25% rise in olefins sales volumes, 2% rise in HDPE sales volumes and 33% rise in LDPE sales volumes to 239,367 tons, 203,406 tons, and 50,331 tons respectively. Sales volumes of LLDPE and MEG; however, declined 21% and 25%, to 61,171 tons and 54,425 tons respectively. This was a result of lower production volumes from a maintenance shutdown of LLDPE plant for 29 days and MEG for 30 days. The Company recorded feedstock cost of Baht 23,735 million, up 8% due mainly to a rise in feedstock consumption while feedstock price, naphtha rose 8% to 977 USD/ton in this quarter. Processing cost also rose 18% to Baht 4,587 million due to a rise utilities expenses, maintenance, chemical substances and catalysts. The Company reported SG&A expenses of Baht 1,620 million, up 20%. This was due mainly to an increase in employee expenses such as training & seminar expenses and transportation and traveling expenses to seek for new investment, consultants & professional fees, and new software installation expenses. Depreciations and amortization decreased 3% to Baht 1,791 million. This was due to an adoption of new accounting policy No. 16: Property, Plant and Equipment, which led to higher than usual depreciation in 1Q/2011. In 2Q/2011 the Company has engaged in Forward Contract of USD 180 million, when concluded with the Company s existing exposures of USD 842 million (Bond + Cross Currency Swap + Forward Contract), the Company s USD exposures were USD 1,022 million. When Baht currency was depreciated in this quarter, it had caused the Company to have unrealized FX loss of Baht 310 million. The Company recorded share of profit of associates of Baht 571 million, up 123% due to a rise in associates net profit, particularly from PTT Phenol Co., Ltd, and Vinythai Public Company Limited.

9 6. Statement of financial positions Assets As of June 30, 2011, the Company recorded total assets of Baht 180,929 million, up Baht 12,868 million or 7% from end of This was due mainly to an increase in cash and cash equivalent of Baht 6,442 million from an increase in cash flow from operation, an increase in account receivables of Baht 1,819 million from higher sales, and a rise in inventory of Baht 4,218 million from commercial operation of new cracker, HDPE unit, and LDPE unit, which led to higher inventories of olefins and plastic resins. Liabilities As of June 30, 2011, the Company recorded total liabilities of Baht 63,065 million, up Baht 2,381 million or 4% from end of This was due mainly to an increase in short-term loans from financial institutions of Baht 809 million by Emery Oleochemicals (M) Sdn Bhd, which was used for its working capital, an increase in account payables of Baht 552 million from a rise in feedstock purchase due to higher production, an increase in payable to contractors of Baht 513 million due to the completion of the project (ESP and LLDPE), and an increase in income tax payable of Baht 664 million due to higher profits. Shareholders' Equity As of June 30, 2011, the Company recorded total shareholders equity of Baht 117,864 million, up Baht 10,487 million or 10% from end of This was due mainly to 6-month net profit ended June 30, 2011 of Baht 12,872 million (including Non-controlling interest), a rise in issued and paid-up share capital of Baht 32 million from 3.2 million shares of employees exercised warrants (ESOP), and a rise in currency translation change of PTTCH Inter and Emery of Baht 334 million. The Company; however, recorded dividend payout of Baht 2,930 million. 7. Statement of Cash Flow As end of June 30, 2011, the Company had cash flows from operations of Baht 13,700 million while cash flows used for investments were recorded at Baht 3,690 million, mainly from investments in subsidiaries and associates (Myriant and ERCA). This resulted in cash flows before financing activities (Free Cash Flow) of Baht 10,010 million. The Company also recorded cash flow used for financing activities of Baht 3,500 million, mainly for loan repayment and dividend payment. This resulted in an increase in cash and cash equivalent of Baht 6,510 million. When concluded with beginning cash on hand of Baht 14,838 million and cash flows from an effect of exchange rate changes on balance held in foreign currencies of Baht 68 million, the Company s ending cash and cash equivalent as end of 2Q/2011 was Baht 21,280 million.

10 8. Important Financial Ratios 2Q/2011 2Q/2010 1Q/2011 Current Ratio EBITDA to revenues 19.99% 19.92% 18.23% Net Profits to revenues 13.68% 11.13% 11.80% Return on total assets 10.12% 6.59% 7.76% Return on equity 15.66% 10.50% 12.15% Interest Bearing Debt to equity Net debt to equity Net debt to EBITDA Note: Current ratio = Current assets divided by current liabilities EBITDA to revenue = EBITDA divided by total revenue (exclude (Last 4 quarters) profits/ (losses) from exchange rates and equity in net income of subsidiaries & associated companies) Net profit on revenue = Net profit divided by total revenue (exclude (Last 4 quarters) profits/ (losses) from exchange rates and equity in net income of subsidiaries & associated companies) Return on total assets = Net profit (last 4 quarters) divided by average total assets Return on equity = Net profit (last 4 quarters) divided by average total shareholder s equity Interest Bearing Debt to equity = Interest Barring Debt divided by shareholder s equity Net Debt to equity = Interest Barring Debt net from cash and cash equivalent and current investments divided by shareholder s equity Net Debt to EBITDA = Interest Barring Debt net from cash and cash equivalent and current investments divided by EBITDA (last 4 quarters)