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LONDON (Alliance News) - Active Energy Group PLC Tuesday said its pretax loss widened in the first half of 2015 despite revenue growing.
The company supplies industrial wood chips for the production of MDF wood, generates power from biomass, and provides biomass-to-energy fuel products and forestry and natural resource development services.
Active Energy reported a USD2.1 million pretax loss in the first six months of 2015, widening from the USD1.8 million loss a year earlier, despite revenue rising to USD12.0 million from USD10.8 million.
The wider loss was the result of higher administrative costs, share-based payments, finance costs, and a wider loss at its Canadian joint venture. Finance costs rose the most in the period because of Active's continued reliance on high-cost debt for working capital introduced in 2014.
However, Active Energy said the USD369,000 loss from its Canadian joint venture is expected to reverse on the successful commencement of operations.
Gross profit nearly doubled in the half to USD1.2 million from only USD618,000 a year ago, as a result of the ongoing focus on sales of high-margin wood fibre to the Turkish MDF manufacturing sector.
The company's Ukrainian operation, which supplies processed wood fibre to Turkish MDF manufacturers, delivered another strong performance. Shipping volume of 103,733 tonnes in the period was up 70% over the same period in 2014, when it shipped 61,185 tonnes.
"Demand for the group's products remains higher than the group is currently able to supply, with further large orders received since the start of the year for both hardwood and softwood material, including from Yildiz Entegre, a long-standing customer and one of the leading MDF manufacturers in Turkey," said the company.
The reason it is struggling to meet demand is due to equipment failures in the second quarter and due to delays to the commissioning of a new stationary hardwood and softwood processing equipment at the Yuzhny Port facility.
"At the time of writing, installation and commissioning of new stationary high-volume handling and processing equipment at the Group's Yuzhny Port facility, which will facilitate a four-fold increase in its wood chip production capacity, has been proceeding according to a slightly delayed timeline and is expected to lead to production beginning in October 2015," Active Energy said.
"Although these issues have since been resolved and the board still expects overall volumes to be significantly more than the 154,103 tonnes achieved in 2014, they will...inevitably impact volumes and results for the full year," it said.
The new softwood wood chip production line is expected to come online in the first quarter of 2016, which will allow the company to expand its product offering and enter a new market sector to meet the significant demand from both its existing and prospective Turkish MDF manufacturing customers.
At its Biomass for Energy division, which generates power by burning wood chips, activity has been limited due to the low margins and pressure on cash reserves. It is only considering generating power on an ad-hoc basis when opportunities arise going forward.
"Given its strategic focus on higher-value Biomass for Energy fuel solutions and systems, AEG currently has no plans to actively seek new contracts to supply wood chip as fuel feedstock to the power generation industry, but will continue to maintain a watching brief for profitable commercial opportunities as and when they arise," it said.
At its Biomass for Energy Fuel Systems and Process division, Active Energy continued to actively explore different options for a coal replacement Biomass for Energy fuel solution, which was followed by the signing of a new joint venture - AEG CoalSwitch Limited - with Biomass Energy Enhancements LLC.
The process enables any plant- or wood-based matter, including forestry waste and industrial residues, to be converted into valuable high-energy fuel that can be utilised within coal-fired power stations without requiring plant owners to invest in costly retrofitting or reconstruction.
Active Energy is intending to have a market-ready product - a de-mountable system capable of high volume production of clean energy 'coal switch' biomass fuel by mid-2016.
The joint venture, in which Active Energy has been granted a 51% equity interest, will hold the global intellectual property rights for the process, and intends to commercialise it via an innovative 'build-own-operate-toll' business model, which will complement the group's other business activities.
At the Forestry and Natural Resources Development Service division, which is Active Energy's Canadian joint venture, the company has faced delays due to an Alberta government inquiry into its Métis partner's handling of their participation in the joint venture.
Active Energy shares were down 4.2% to 5.70 pence per share on Tuesday.
By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance
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