Active Energy Group Plc, the London Stock Exchange AIM-quoted international supplier of timberland management and development services, industrial wood fibre, and Biomass coal replacement fuels, is pleased to announce that its AEG WoodFibre division has secured two significant new supply contracts for 2016, and that it is investing in a new softwood production line to augment its recently-upgraded hardwood processing facilities.
New Hardwood and Softwood Wood Fibre Supply Contracts:
Under the two 2016 supply contracts, signed on 15 January 2016 with Yildiz Entegre, the leading MDF manufacturer in Turkey, AEG WoodFibre has agreed to deliver up to 300,000 metric tonnes of its proven hardwood wood fibre product, as well as up to another 200,000 metric tonnes of its new softwood wood fibre offering. These significant contracts are expected to generate revenues of over US$50 million in FY 2016. Additional off-take supply negotiations with other Turkish MDF manufacturers are ongoing, and the Group expects to announce further contract wins over the coming months.
New Softwood Wood Fibre Production Line:
MDF, the material of choice for carpentry, cabinet-making and other joinery applications, is produced from a combination of hardwood and softwood wood fibre. To date, AEG WoodFibre has only provided the hardwood raw material required by its customers. Following the difficult mid-year trading, which impacted on its overall 2015 performance and delayed the planned investment in new facilities, AEG WoodFibre has now returned to profitable operations and recorded an excellent performance in Q4:2015, for the first time delivering three bulk cargo loads in a single month at good margins.
In light of this, the Board has approved an investment of US$0.75 million to purchase the equipment to manufacture softwood wood fibre from Pine logs. The new softwood production line, which is planned to be operational by Q2:2016, will substantially increase AEG WoodFibre’s manufacturing capacity and broaden its market offering, making it the only supplier in the Black Sea region to supply both of the key raw materials for MDF manufacturing from a single facility. Commenting on this excellent start to 2016, Richard Spinks, CEO of Active Energy Group Plc, said: “The success of AEG’s operational and executive team over the past three years in transforming the Group’s Ukrainian wood fibre business is confirmed by these significant new supply contracts.”
“The entire MDF industry now recognises that AEG WoodFibre is a leading force in the European wood fibre supply market that can be relied upon to consistently deliver bulk volumes of high-quality feedstock; demonstrated by our clients’ willingness to support the expansion of our manufacturing facilities to include softwood production.”
“We are extremely proud of securing these new supply contracts with one of AEG WoodFibre’s largest clients, which both confirms our increasingly strong market presence and our position as the largest supplier of processed wood products from Ukraine. Credit is due to our COO Matteo Girlanda and his entire team for all their efforts.”
“AEG WoodFibre’s performance in Q4:2015 proved that we have now established the right structure across all our operations, which is enabling us to achieve both the volumes and the margins that we had planned. Demand for wood fibre continues to exceed supply, and regional developments provide a strong indication that this will continue. Expanding our wood fibre product range to include softwood is further evidence of our commitment to the long-term development of this vibrant and continually-expanding area of the Group’s business.”
“Allied to the increases in gross margins and the reduction in overheads across the business, and the progress in our AEG TimberLands and AEG CoalSwitch divisions – further news of which is expected to be announced in the near future – the Board of Active Energy Group is confident that 2016 will be the first profitable year for the company.”