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UPDATE - Active Energy's wood chip operation suffers growing pains

AEG said it is growing fast - just not as quickly as it had hoped.

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Active Energy exports wood chip from Ukraine.

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Timber specialist Active Energy Group (LON:AEG) revealed the growing pains of a fast expanding business – though it still expects revenues from its wood chip business to double this financial year.

Volumes from the hardwood chip operation are set to grow more than 100% on the 154,103 tonnes achieved in 2014, but still below forecast.

This is because a stationary chipper capable of quadrupling capacity at its facilities at Yuzhny Port, Ukraine, won’t be fully operational until late August.

Additionally, delays in ordering the equipment to handle increased throughput of softwood will result in a reduction output, which is now set to be 50,000 tonnes.

Total production for the current year is forecast to be around 400,000 tonnes, which should give revenues of “more than double” the US$17.4mln achieved in 2014.

AEG predicted profit margins would improve during the remainder of the year to partially offset the reduction in production.

Chief executive Richard Spinks told investors: "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."

The shares, up 90% in the year to date, fell 12% today to change hands for 5.82p each.

Quick facts: Active Energy Group PLC

Price: 0.535 GBX

LSE:AEG
Market: LSE
Market Cap: £8.23 m
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