MDF Wood Chip Division Trading Update

13 July 2015

Active Energy Group Plc
("Active Energy Group" or the "Group" or the "Company" or "AEG")

MDF Wood Chip Division Trading Update
 

Active Energy Group Plc (AIM: AEG.L), the London Stock Exchange AIM-quoted international supplier of industrial wood chip for MDF manufacturing and Biomass for Energy (BFE) power generation, global forestry and natural resources development services, and Biomass for Energy (BFE) fuel solutions and systems announces an update on trading at its Ukraine-based MDF wood chip division.

Hardwood Wood Chip:

As previously announced, AEG has invested in a significant expansion of its hardwood wood chip facilities at Yuzhny Port, with the purchase of new handling equipment and a high-volume stationary wood chipper capable of quadrupling its existing production capacity.  The new equipment is currently being installed, but the Board now understands that it will only be fully operational in late- August 2015. 

This will inevitably result in a reduction in forecast hardwood wood chip volumes for 2015, but the Board still expects overall volumes for the year to be more than double the 154,103 tonnes achieved in 2014 (2013: 68,293 tonnes).

Softwood Wood Chip:

In January 2015 the Group announced that it was expanding its product range to include Pine-based softwood wood chip, with the installation of an entire new production line, to include log loaders, wheel loaders, a log debarker, and a high-volume stationary wood chipper. 

Delays in ordering the necessary equipment and a longer than anticipated lead-time for installation and commissioning have meant that the line will now be operational in October 2015.

This is expected to result in a reduction of 100,000 tonnes in forecast softwood wood chip volumes for 2015, which are now expected to be 50,000 tonnes.

Financial Implications:

As a result of the foregoing, AEG anticipates reduced wood chip volumes from its Ukraine facility, and is forecasting total production for FY2015 of approximately 400,000 tonnes.  However, revenues for this well-established and profitable area of the Group's business are still expected to be more than double the US$17.395 million achieved in 2014.

Operating margins are expected to improve during the remainder of the year, which will partially offset the impact of the reduction in total production volumes. 

Richard Spinks, CEO of Active Energy Group, commented:  "2015 is already proving to be a step change year for the Group's Ukrainian MDF wood chip division, building upon the outstanding success it achieved in 2014."

"Our considerable investment in new equipment for our well-established hardwood product offering and an entirely new production facility for softwood wood chip will enable us to establish a firm foundation for the future to satisfy the continually-growing demand from our Turkish MDF manufacturing customer base."

"Although the timing of these facilities upgrades has been delayed due to circumstances beyond our control, the Board and I remain very confident that we will end 2015 with more than twice the production volumes achieved in 2014 - at improved margins due to the efficiencies we have implemented - and we anticipate that 2016 will show a further substantial growth in volumes, in line with our long-term business strategy."

"Last week's announcement of the new Ukrainian law banning unprocessed wood exports will likely further strengthen our position as the country's leading exporter of processed timber products, and may well present new supply, logistics and shipping opportunities for AEG, which my co-directors and I are already investigating."

- ENDS -
 

NOTES TO EDITORS & CONTACT INFORMATION

ABOUT ACTIVE ENERGY GROUP PLC:

Active Energy Group Plc is a London Stock Exchange AIM-quoted company (AIM: AEG.L).  Headquartered in the UK, it is a fast-expanding international business, which has experienced exceptionally strong growth and diversification into complementary industry sectors since the current management team assumed responsibility in mid-2012.

The Group has considerable expertise across the entire timber industry supply chain - from forest to finished product. 

Its four specialist business divisions, which reflect its knowledge and experience and which work together to maximise commercial opportunities, focus on providing products and services to specific global market sectors:

·   Forestry & Natural Resources Development and Management

·   Wood Chip for Medium-Density Fibreboard (MDF) Manufacturing

·   Wood Chip for Biomass for Energy (BFE) Power Generation

·   Second Generation Biomass for Energy (BFE) Fuel Solutions and Systems

Active Energy Group Plc operates from four international locations:

·   Ukraine, where it is the largest producer and exporter of wood chip for MDF manufacturing.

·   Canada, where it has entered into a landmark joint venture - KAQUO Forestry & Natural Resources Development Corporation - with several indigenous Métis Settlements to commercialise in excess of 250,000 hectares of their lands, containing valuable forests and natural resources, including oil and gas reserves.

·   Spain, from where it sources finished wood chip for export to international customers.

·   United Kingdom, where it operates a research & development facility for new BFE fuel technologies.

Ukraine and Canada, with their large forestry reserves and comprehensive road, rail and sea transport links, are ideal locations from which to source raw timber and manufacture wood chip and fuel pellets for supply to MDF producers and Biomass power plants.

In addition to its existing activities, the Group is actively developing innovative Biomass fuel solutions, converting waste wood and industrial/agricultural by-products into feedstock for clean energy power generation as a direct replacement for coal.

A highly experienced and dedicated management team leads Active Energy Group Plc, each of whom possesses a proven track record in the industries and regions in which it operates and from which its revenues are generated. 

The Company has grown significantly in recent years, and has established a firm foundation, excellent reputation and international customer base upon which to build for the future.

ENQUIRIES: