Belships

Quarterly Report • Nov 9, 2023

Belships ASA: Report 3rd quarter 2023

Belships ASA: Report 3rd quarter 2023

SOLID RESULTS IN CHALLENGING MARKETS, FURTHER GROWTH IN THE PIPELINE

HIGHLIGHTS

* EBITDA of USD 33.0m

* Net result of USD 15.3m

* Declared dividend of NOK 0.45 per share

* TCE of USD 17 905 gross per day for owned fleet - 78 per cent outperformance

of market

* Added 2x Ultramax newbuildings with delivery 2026-27, zero cash invested

* Prepaid USD 13.2m of bank debt - two debt free vessels in the fleet

* 87 per cent of ship days in Q4 2023 are fixed at USD 17 800 gross per day

* 42 per cent of ship days in the next four quarters are fixed at USD 17 800

gross per day

* Cash breakeven for 2024 is expected to remain unchanged at USD 10 900 per

day

* The newest Supra/Ultramax fleet with 38 ships including eight newbuildings

Financial results commentary

Belships reports a net result of USD 15.3m for Q3 2023. Profitable contract

coverage and a positive contribution from Lighthouse Navigation ensured a strong

result in a weak market.

Time charter equivalent earnings (TCE) in the quarter was USD 17 905 gross per

vessel per day. In comparison, the Baltic Supramax Index (BSI-58) averaged USD

10 028 gross per day. The strong outperformance is due to a high number of fixed

period time charter contracts at levels significantly above current market

rates.

Ship operating expenses amounted to USD 5 102 per vessel per day in Q3 2023

compared to USD 5 300 per vessel per day as guided in the estimated cash

breakeven for 2023. Despite inflationary pressures, the reduction has been

achieved through strong operational performance and no serious incidents in the

quarter.

Fleet status

One vessel was drydocked in the quarter. The remaining fleet sailed without

significant off-hire with a total of 2 759 on-hire vessel days in Q3 2023.

Contract coverage   Q4 2023 Q1 2024 Q2 2024 Q3 2024

Fixed-rate contracts   87% 50% 17% 13%

Average fixed-rate (USD/day)   17 800 17 800 17 600 17 300

Index-linked contracts   10% 17% 13% 3%

Open   3% 33% 70% 84%

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100% 100% 100% 100%

Belships currently has five vessels chartered out on floating index-linked

contracts on varying durations, at an average premium of 116 per cent to the

Baltic Supramax Index (BSI-58). Belships has the option to convert any part of

the remaining period to a fixed rate based on the prevailing FFA curve from time

to time.

Estimated cash breakeven for 2023 is USD 10 900 per vessel per day. This

includes OPEX of USD 5 300, interest and amortisation of USD 4 850, G&A of USD

450 and drydocking expenses of USD 300 per vessel per day.

Cash breakeven for 2024 is expected to remain unchanged at USD 10 900 per day.

Transactions

In August, BELVEDERE was delivered to its new owner. Net cash after repayment of

outstanding loan was USD 10.0m and the book gain was USD 0.3m, in accordance

with the previously announced sale of the vessel.

In September, Belships entered into agreement for two Ultramax bulk carriers for

delivery 2H 2026 and Q2-Q3 2027, bringing the total number of newbuildings to

eight. The vessels are leased on similar terms as previously announced

transactions, and Belships is not required to make any down payments for these

vessels.

Newbuildings

64 000 dwt Ultramax bulk carriers under construction at Japanese shipyards:

NEWBUILD 1 expected delivery Q4 2024

NEWBUILD 2 expected delivery Q4 2025

NEWBUILD 3 expected delivery Q4 2025-Q1 2026

NEWBUILD 4 expected delivery Q1 2026

NEWBUILD 5 expected delivery H2 2026

NEWBUILD 6 expected delivery H2 2026 (new)

NEWBUILD 7 expected delivery H1 2027

NEWBUILD 8 expected delivery Q2-Q3 2027 (new)

The vessels are leased on time charter for a period of 7 to 10 years from date

of delivery with purchase options around current market levels during the

charter. Belships is not required to make any downpayment for these

transactions. Therefore, this will not impact cash and dividend capacity during

construction. Cash breakeven for the vessels upon delivery is about USD 14 200

per day on average.

The Japanese-designed bulk carriers entering the fleet represent the highest

quality and lowest fuel consumption available in the market today and will

contribute to further reduce Belships' carbon emissions on an intensity-basis.

Lighthouse Navigation

Lighthouse Navigation recorded an EBITDA of USD 2.6m for the quarter and

contributed to Belships dividend capacity despite weak market conditions. The

dry bulk operating business continues to demonstrate good risk management with

limited forward exposure.

The average EBITDA per quarter in the last five years has been USD 7.7m.

Sustainability

Belships aims for high standards in corporate governance and is well placed to

deliver emission cuts in line with industry ambitions for 2030. Belships

publishes a sustainability report on an annual basis (ESG Report) reflecting our

commitment to transparency and efforts to meet investor and stakeholder

expectations.

In July, Belships was ranked in the top quartile in the Webber Research Report:

2023 ESG Scorecard, which aims to identify where each company ranks against its

listed peers within the shipping industry.

Belships' vessels are compliant with the new emission regulations from IMO

without additional investments signalling the competitive advantage of owning a

modern fleet.

Financial and corporate matters

At the end of the quarter, cash and cash equivalents totalled USD 138.9m, whilst

interest bearing bank debt amounted to USD 115.5m. Belships prepaid USD 13.2m of

outstanding bank debt in the quarter and now have two unencumbered vessels in

the fleet.

Leasing liabilities at the end of the quarter amounted to USD 449.9m. These

liabilities have been calculated with the assumption that all purchase options

to acquire Ultramax bulk carriers on bareboat and time-charter lease agreements

will be exercised, except BELFUJI. Belships has no contractual obligation to

acquire any of the leased vessels.

All lease agreements have fixed interest rates for the entire duration of the

contracts and all purchase options are denominated in USD.

At the end of the quarter, book value per share amounted to NOK 12.5 (USD

1.18), corresponding to a book equity ratio of 32 per cent. Value-adjusted

equity is significantly higher.

Dividend policy

Belships ASA aims to distribute quarterly cash dividends targeting about 50 per

cent of net result adjusted for non-recurring items. Other surplus cash flow may

be used for accelerated amortisation of debt, share buy-backs or vessel

acquisitions considered to be accretive to shareholders' value.

Dividend payment

Based on the financial result in Q3 2023 the Board declared a dividend payment

of NOK 0.45 per share (USD 10.3m in total) equivalent to about 68 per cent of

the net result adjusted for minority interests.

This brings the total dividends paid out since Q2 2021 to NOK 8.10 per share,

which is 123 per cent of the share price from the time of the merger between

Belships and the Lighthouse Group in December 2018. Total declared dividends

amount to USD 209.8m.

Market highlights

In the third quarter, the Baltic Supramax Index (BSI-58) averaged USD 10 028 per

day - slightly down from USD 10 763 in the preceding quarter. The market

development was rather volatile as rates recovered from very low levels of USD

7 500 in June and peaked at above USD 14 000 end of quarter. Ultramax vessels

typically earn a premium of about 15 per cent to the standard Baltic Supramax

Index (BSI-58).

Asset values were stable during the quarter, however, in September values

started to increase again and this trend continued into the fourth quarter.

Still, asset values are lower now compared to the start of the year. New and

modern vessels continue to be markedly higher in demand than less economical

older ships.

According to Fearnleys, preliminary estimates for Q3 2023 shipment volumes were

282 million tonnes, an all-time high again, after 275 million tonnes in the

preceding quarter. The highest growth (quarter-on-quarter) was seen in minor

bulks (7 per cent), coal (7 per cent) and grains (4 per cent).  Iron Ore (-15

per cent), breakbulk cargoes (-11 per cent) and steel products (-7 per cent)

contributed negatively. Fertilizer shipments were up slightly in volume, by two

per cent. Importantly, overall volumes continue to grow and show that the demand

side is stable and resilient despite the turmoil in financial markets and

concerns over inflation and interest rates.

Port congestion, as measured by the average waiting time in port for ships to

discharge, continued to reduce during the third quarter. Coupled with shorter,

albeit marginal, average voyage durations - this contributed to slightly less

favourable supply-side fundamentals. Average sailing speeds remain relatively

unchanged. Current levels of port congestion are now at pre-Covid normalised

levels. As we have highlighted before, changes in port congestion, voyage

duration and/or vessel speeds affect the overall vessel efficiency in the dry

bulk market on a short-term basis more than a change in the number of

newbuildings in the orderbook.

39 Supra/Ultramax vessels were delivered in Q3 2023, compared to 33 vessels in

the previous quarter, according to Fearnleys. In October, only seven vessels

were delivered, and 19 remain on schedule to be delivered before year-end.

Year-on-year, the fleet grew by 3.5 per cent in the third quarter, about the

same rate as in the second quarter. According to Fearnleys, fleet growth is

likely to remain around this level for the next year. The number of ships

delivered per quarter compares to an existing fleet of Supra/Ultramax vessels on

the water today of about 4 100 in total. With an orderbook-to-fleet of about

7-8 per cent, we are approaching the lowest rate of supply growth in 30 years.

Relatively low newbuilding activity for dry bulk continues as the lack of

conviction and alternatives for fuel and propulsion systems appear to restrain

new orders. Higher input costs as well as full orderbooks and continued high

demand for other vessel segments dictate the position with shipyards. Available

delivery positions with reputable shipyards remain distant, at least two and a

half years ahead. For the premier Japanese shipyards, available delivery

positions are even later - more than 3 years from now.

Outlook

The Baltic Exchange Supramax index is currently about USD 12 000, with Ultramax

bulk carriers earning an additional premium of about 15 per cent.

Lighthouse Navigation continues to deliver good results. They have reduced

positions ahead of an expected slower end-of-year period in the markets. We

expect continued profitability contributing to Belships' dividend capacity.

Belships has contract coverage ensuring significantly higher profitability than

current market levels with a majority of the fleet on fixed-rate period time

charter contracts with varying durations. 87 per cent of ship days in Q4 2023

are covered at about USD 17 800 per day, and 50 per cent of ship days in Q1

2024 covered at about USD 17 800 per day.

Furthermore, we have five vessels chartered out on floating index-rate

contracts. This is because we believe the rates and market sentiment has a good

probability of improving during the next year, and Belships has the right to

convert to fixed rate during the charter period. All period contracts are fixed

with highly reputable and recognised charterers in the dry bulk market.

Belships financing has been secured for many years ahead, and most of the debt

is with fixed interest rates significantly below current market levels. Belships

is therefore able to retain a very low cash breakeven and we expect it to remain

unchanged in 2024.

With eight Ultramax newbuildings under construction for delivery between 2024

and 2027, Belships will be taking over new vessels whilst the orderbook and the

rate of supply growth approaches the lowest levels in 30 years. Since they are

all leased without Belships investing any cash, this will not affect our

dividend capacity before delivery. We believe the best way for Belships to

approach the green shift is to own and operate the most efficient vessels

currently available, with a financing structure which gives us unparalleled

optionality and flexibility.

We are focused on financial discipline and returning capital to our

shareholders. A competitive return for our shareholders is to be obtained

through an increase in the value of the company's shares and the payment of

dividends, as measured by the total return.

Based on Belships' current contract coverage, we expect to generate free cash

flow and continue to pay quarterly dividends.

9 November 2023

THE BOARD OF BELSHIPS ASA

For further information, please contact Lars Christian Skarsgård, Belships CEO,

phone +47 977 68 061 or e-mail LCS@belships.no

This information is subject to the disclosure requirements pursuant to Section

5-12 the Norwegian Securities Trading Act