Ukraine Wood Chip Operations Trading Update

12 August 2015

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

Ukraine Wood Chip Operations Trading Update

Active Energy Group Plc (AIM: AEG.L), the London Stock Exchange AIM-quoted international supplier of wood fibre products 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 processing systems, provides a brief trading update on its Ukraine-based operations, which supply processed wood chip to Medium-Density Fibreboard (MDF) manufacturers in Turkey.

Production and shipping levels in the first six months of the year were broadly in line with management expectations, and at 103,733 tonnes showed a considerable uplift over the same period in 2014 (61,185 tonnes).  As a result, the Board anticipates that the Group's results for H1:2015, which are expected to be announced by mid-September, will also broadly be in line with its expectations.

However, market pressures and production issues - both now resolved - have affected the outlook for the second half of the year.  As reported on 10 July 2015, the Ukrainian parliament recently passed a law banning the export of unprocessed wood from the country effective from November 2015, which led to a surge in log demand in June and July, reflecting last-ditch buying efforts by log traders before the ban, which directly affects them, comes into effect. 

Allied to a further increase in demand for Ukrainian timber caused by the earlier Bulgarian government ban on log exports (which came into force in March 2015), this resulted in a short-term but significant increase in local timber market prices.  Although prices have now returned to pre-spike levels, these two factors will negatively impact upon trading margins in this area of the Group's business in the first two months of H2:2015.

Furthermore, as reported on 13 July 2015, the Group's new hardwood processing equipment and new softwood production line at its Yuzhny Port facility, both of which were originally scheduled to be operational by the start of H2:2015, have been delayed: the former to late-August, and the latter to early-October.  The existing equipment has not been operating at full capacity over the past six weeks due to mechanical breakdowns - which have now been rectified following major maintenance - but the result was significantly reduced production volumes in the period.

Whilst demand for hardwood and softwood wood chip from the Group's Turkish MDF manufacturing customers remains extremely high, the Board anticipates that the above factors may result in the Group's profits for the year ending 31 December 2015 being significantly below current market expectations.

Richard Spinks, CEO of Active Energy Group, commented:  "Whilst raw material market conditions and recent production issues will inevitably impact upon the profitability of the Group's Ukrainian operations in the second half of 2015, my co-Directors and I remain very optimistic about the long-term prospects for this area of AEG's business."

"Demand from the Turkish MDF manufacturing sector, which is the largest in Europe, continues to grow, and the Group has in the past three years established an excellent reputation for the quality, speed and cost-effectiveness of its Black Sea wood chip supply route.  Once our new production facilities are fully operational we will be in an even stronger position to satisfy our existing customers requirements and expand upon our already considerable market share. "

- 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 three specialist business divisions, which reflect its knowledge and experience and which work together to maximise commercial opportunities, are focussed on providing products and services to specific global market sectors:

·   Forestry & Natural Resources Development and Management

·   Wood Fibre Products for Medium-Density Fibreboard (MDF) Manufacturing and Biomass for Energy (BFE) Power Generation

·   Advanced Biomass for Energy (BFE) Fuel Solutions and Processing Systems

Active Energy Group Plc operates from five international locations:

·   Ukraine, where it is the largest producer and exporter of processed wood products for the Turkish MDF market.

·   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 industrial wood products for export to international customers.

·   United Kingdom and United States of America, from where it develops advanced 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 fibre products 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 'coal switch' replacement for traditional coal-burning power plants.

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.

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