PRE – MARKETING STUDY

BOARD MARKETS OVERVIEW

FOR PT J.S.I.

And

PT MADUBARU
 INTRODUCTION

In recent years, particularly during 2006 the “Rest of the World” growth
(meaning areas of the world excluding Europe and North America) in
particleboard capacity was 8.9%, considerably outstripping other Regions to
gain 2,105,000 m 3.

Total estimated output of “Rest of the World” in 2005 was 23,485,000 m 3

while at the end of 2006 it reached 25,590,000 m 3 (see Table 1– source
Wood Based Panels International).

Table 1.

REST OF THE WORLD PARTICLE BOARD CAPAC ITY 2005 2006

China 6,050,000 7,240,000

North East Asia 2,838,000 2,932,000
South East Asia 5,660,000 6,031,000
South America 4,371,000 4,821,000
Australasia 1,113,000 1,113,000
Africa 1,458,000 1,458,000
Other Asia 1,995,000 1,995,000

TOTAL 23,485,000 25,590,000

Following the 8.9% growth in 2006, 2007 will be another strong year of new
mill building for the ROW, amounting to over 2 Million m 3.

The expected new projects are spread around the regions with Non EU, Africa
and South East Asia seeing the biggest gains (see Table 2 – source Wood
Based Panels International):

Table 2.

WORLD PARTICLE BOARD CAPACITY PROJECTIONS 2007 2008

USA 8,569,000 8,569,000

Canada 3,554,000 3,624,000
Mexico 877,000 877,000
EU 15 32,015,000 32,684,000
Non EU 19,214,000 21,762,000
China 7,590,000 7,590,000
North East Asia 2,932,000 3,517,000
South East Asia 6,659,000 6,659,000
South America 4,953,000 4,953,000
Australasia 1,113,000 1,113,000
Africa 2,158,000 2,158,000
Other Asia 2,205,000 2,205,000

TOTAL 91,839,000 95,711,000

The above figures do not take into account the growing number of plants
being opened, especially in the ROW region, making use of agri and/or wood
WASTE raw materials.

JSI/MADUBARU FACTS AND FIGURES

The order for one EPS installation with four lines will give a total nominal
output of approximately 325,000 m 3 of finished board, or 260,000 m 3 NETT
at 80% efficiency by the beginning of 2010.

This is a significant amount of NEW Urea Formaldehyde (UF) free

particleboard/MDF product, entirely eco -friendly and adaptable to many
applications, including Furniture, Panelling, Construction, etc.

Production costs will be considerably lower than those within the

conventional industry (UF based) with, therefore, the possibility to enter the
markets with a new product at very competitive margins, despite being a
superior product, still giving more than acceptable returns.

Once established during a ramp up period from 2009 till the end of 2010, the
JSI/MADUBARU EPS board will guarantee above average prices, thus further
increasing the operating margins.

The low cost of production means that it is highly unlikely that large scale
manufacturers could afford to compete on price, even as a temporary market
distorting competitive tactic.

Market sectors in which JSI/MADUBARU EPS boards can compete

aggressively on quality and price include:

- Particleboard
- Medium Density Fibreboard (MDF)

The finished board size for EPS panels is 49” x 97” (nominally 4ft x 8ft) or
2465mm x 1245mm (nominally 2440 x 1220) with a typical average density
650-750 Kg/m 3 (based on 18mm thick panels).

EPS boards have been subjected to rigorous testing over a period of 30 years
in Europe’s leading specialist laboratory: Wilhelm Klaudit z Institute in
Braunschweig, Germany.
MARKETS AND PRICES

World market prices show that price per m 3 are:

Table 3.

2003 Particle Board US$ 225 per m 3

2003 MDF US$ 274 per m 3

2004 Particle Board US$ 247 per m 3
2004 MDF US$ 314 per m 3
2005 Particle Board US$ 272 per m 3
2005 MDF US$ 345 per m 3
2006 Particle Board US$ 295 per m 3
2006 MDF US$ 373 per m 3

1. As PMDI board is a homogeneously structured product, with very

similar performance to MDF, it is considered prudent to align its
ultimate market selling price at a level of US$ 320, this being a figure
marginally higher than Particle Board despite its far superior
performance parameters.

2. Allowing for the introduction of a new product into the market, a

cautious approach has been adopted in gradually arriving at the above
selling price over a period of two years (starting end 2009), not
allowing for any inflation or market price increases.

3. This would entail target prices of:

- US$ 285 (Year 1)
- US$ 300 (Year 2)
- US$ 320 (Year 3 onwards)

4. After deduction of sales & marketing (i.e.: discount to Trading Co.)

and shipping costs, at a total estimated US$100 per m 3 (for shipments
to EU or USA), the above selling prices will provide a factory gate
margin for JSI/MADUBARU of up to 31% over production costs, even
higher for export to Asian or Middle East markets, thanks to
geographical proximity of end markets.
TRADING PROJECTIONS

Taking into consideration all previous sections (Please see Tables 1 to 3), a
theoretical summary of the annual Actual Production capa city could be as
follows:

Table 4 – Actual Annual Production

Total actual output volume per year (m 3) 260,000

A detailed analysis follows with the overall production schedule.

Table 5 – Manufacturing Cost

Total output volume per year (m3) 260,000

Cost per m 3 ($) 120.00

Table 6 – Selling Price

JSI/MADUBARU Optimum Price($) per m3 (see .1 of previous 320.00

section)

Table 7 – Trading Projections

Year 1 Year 2 Year 3 onwd.
M3 of Boards Sold (a) 9,000 100,000 260,000
Selling Price per m 3 $ (b) 285.00 300.00 320.00
TOTAL REVENUE $ (a x b) (c) 2,565,000 30,000,000 83,200,000
Less Manufacturing cost $ (a x $120) (1,080,000) (12,000,000) (31,200,000)
Less S&M and Shipping ($100m3) (900,000) (10,000,000) (26,000,000)
GROSS MARGIN $ 585,000 8,000,000 26,000,000
GROSS MARGIN % of Revenue 23% 27% 31%

PLEASE NOTE ALL ABOVE PROJECTIONS ARE ESTIMATES AND

DO NOT TAKE INTO ACCOUNT FUTURE ACTUAL MARKET
CHANGES AND CONDITIONS.