StockMarketWire.com - Active Energy Group has warned that softwood chip production will be 100,000 tonnes less than forecast and is now expected to be 50,000 tonnes.

In January 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.

But it says 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.

AEG has also 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.

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).

AEG anticipates reduced wood chip volumes from its Ukraine facility, and is forecasting total production for FY2015 of approximately 400,000 tonnes. But it says revenues for this well-established and profitable area of the group's business are still expected to be more than double the US$17.395m 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.

Chief executive Richard Spinks said: "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."




At 8:00am: [LON:AEG] Active Energy Group share price was -0.64p at 5.95p



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