Belships

Earnings Release • Feb 22, 2023

Belships ASA: Report 4th quarter 2022

Belships ASA: Report 4th quarter 2022

CONTRACT COVERAGE SECURES PROFITABILITY AND DIVIDEND OUTLOOK

HIGHLIGHTS

* Operating income of USD 155.4m (USD 228.6m)

* EBITDA of USD 56.1m (USD 70.4m) including USD 18.0m from Lighthouse

Navigation

* Net result of USD 34.2m (USD 59.2m)

* Declared dividend of NOK 0.75 per share

* TCE of USD 22 359 gross per day for owned fleet

* 95 per cent of ship days in Q1 2023 are fixed at USD 20 300 gross per day

* 67 per cent of ship days in the next four quarters are fixed at USD 19 800

gross per day

* Modern fleet of 31 vessels with an average age of four years and daily cash

breakeven for 2023 of about USD 10 900 per vessel

Subsequent events

BELMONDO, an Ultramax newbuilding of 64 000 dwt was delivered in January 2023

from Imabari Shipyard in Japan.

Financial results commentary

Belships reports a net result of USD 34.2m for Q4 2022, compared to a net result

of USD 59.2m for Q4 2021. The reduction is mainly caused by a lower freight

market in Q4 2022, and significant realised gains on the sale of BELFRI,

BELCARGO and BELNOR in Q4 2021.

Net freight revenue for owned vessels was USD 55.7m in Q4 2022 compared to USD

64.7m in Q4 2021. The reduction in net freight revenue is driven by a reduction

in TCE from USD 30 489 in Q4 2021 to USD 22 359 in Q4 2022, partially offset by

an increase in the number of on-hire vessel days due to fleet growth.

Ship operating expenses amounted to USD 16.0m in Q4 2022 unchanged from USD

16.0m in Q4 2021. Increased vessel days in Q4 2022 due to fleet growth is offset

by non-recurring vessel costs incurred in Q4 2021.

Fleet status

Time charter equivalent (TCE) earnings per ship in the quarter was recorded at

USD 22 359 gross per day. BELFORTE, BELRAY and BELFUJI were drydocked in the

quarter. The remaining fleet sailed without significant off-hire with a total of

2 663 on-hire vessel days in Q4 2022.

The Baltic Supramax Index (BSI) averaged USD 14 800 gross per day in the fourth

quarter. Relative performance versus spot indices is affected by a high number

of fixed period time charter contracts that contribute to our coverage for 2023

at levels far above current market rates.

During the quarter Belships continued to add new period time charter contracts

increasing contract coverage for 2023 to 67 per cent at USD 19 800 gross per

day.

Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024

Contract coverage   95% 71% 57% 47% 25% 5%

TCE rate (USD/day)   20 300 19 700 19 400 19 200 19 700 21 100

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

includes OPEX of USD 5 300, interest and instalments of USD 4 850 per day, G&A

of USD 450 and drydocking expenses of USD 300.

Transactions

BELYAMATO, an Ultramax newbuilding of 64 000 dwt was delivered in November 2022

from Imabari Shipyard in Japan.

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

quality and lowest fuel consumption available in the market today.

Lighthouse Navigation

Lighthouse Navigation delivered another strong quarter with EBITDA of USD

18.0m. The result includes a reversal of provisions for potential loss-making

contracts of USD 7.9m.

This brings the annual EBITDA for 2022 to USD 60.0m and average EBITDA in the

last 12 quarters to USD 10.8m.

Sustainability

Belships aims for the highest standards in corporate governance and is well

placed to deliver emission cuts in line with industry ambitions for 2030.

Belships will publish a comprehensive sustainability report for 2022 (ESG

Report) in April 2023 reflecting our ongoing commitment to transparency and

meeting investor and stakeholder expectations.

Belships is compliant with the emission regulations from IMO in 2023 (EEXI)

without additional CAPEX signalling the competitive advantage of Belships modern

eco-fleet.

The new Norwegian Transparency Act entered into force 1 July 2022 and Belships

has taken the necessary steps to be compliant.

Financial and corporate matters

At the end of the quarter, cash and cash equivalents totalled USD 139.9m, whilst

interest bearing bank debt amounted to USD 141.8m.

Leasing liabilities at the end of the quarter amounted to USD 463.4m. Leasing

liabilities have been calculated with the assumption that all purchase options

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

be exercised except BELFUJI. Belships have no contractual obligations to acquire

any of the leased vessels.

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

contracts.

At the end of the quarter, book value per share amounted to NOK 11.51 (USD

1.17), corresponding to a book equity ratio of 30 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 the fourth quarter 2022 the Board declared a

dividend payment of NOK 0.75 per share (USD 18.5m) equivalent to about 70 per

cent of net result adjusted for net minority interests.

This brings the total dividends paid out since the inception of the dividend

policy in Q2 2021 to NOK 6.35 per share (USD 168.3m).

Market highlights

In the fourth quarter, the Baltic Supramax Index (BSI-58) averaged USD 14 800

per day - down from USD 19 400 in the third quarter. As a result of falling spot

market earnings, asset values corrected as well. According to Fearnleys, second

hand values in general dropped by about 20 per cent from June to December.

Values for modern vessels appear to hold better than those of older vintages.

According to Fearnleys, total Supra/Ultramax shipment volumes ended at 264

million tons, up from 250 million tons in the previous quarter.  Volumes shipped

during Q4 2022 were the highest for the year, and just shy of the record 266

million tons shipped during Q2 2021.

Demand improved probably due to the early signs of a recovery in China as well

as a general rebound in global economic growth after an overall weak 2022.

Shipments of breakbulk cargoes declined slightly due to the correction in the

container markets. Coal shipments increased to the highest level of the year and

was the biggest contributor to the general shipment volume increase in Q4 2022.

Other commodity groups like grains, fertilizers and steels were unchanged from

the third quarter.

Port congestion reversed to around pre-Covid normalised levels. Even though

bunker prices were lower, the average sailing speed also reduced somewhat. As we

have highlighted before, changes in both congestion and speed can significantly

affect the overall vessel efficiency in the dry bulk market. Congestion may

again increase, however, it could be offset by a slight increase in sailing

speed, hence on the balance this should be neutral in 2023.

China continued to fight the pandemic with severe lockdowns in major cities.

During Q4 2022 it became clear that a change in policy was underway and is now

unfolding in 2023. The war in Ukraine reduced usual volumes of wheat, corn,

fertilizers and steel products in 2022, and volumes from the Black Sea are

expected to rise this year.

According to Clarksons, 29 Supra/Ultramax vessels at a total of 1.8m deadweight

were delivered during the fourth quarter, about the same volume as in the

previous quarter. On a year-on-year basis, Supra/Ultramax fleet growth was below

three per cent through all of 2022, which is the lowest rate seen in the last

20 years. The number of new deliveries is expected to be slightly higher in Q1

2023 and then taper off thru the year, before dropping towards 1.5 per cent in

The number of ships delivered each quarter compares to an existing fleet of

Supra/Ultramax vessels today of about 3 900. With a total orderbook of around 7

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

Low newbuilding activity for dry bulk continues as the lack of conviction and

alternatives for fuel and propulsion systems appear to restrain new ordering.

Higher input costs as well as full orderbooks for container and gas vessels

dictate the position with shipyards. Available delivery positions with shipyards

remain distant, at least two years ahead.

Outlook

The sentiment in dry bulk markets continued to soften in January, and the Baltic

Exchange Supramax spot index is currently about USD 9 000. Even though spot

market rates have fallen drastically, both FFA and period rates are holding

steady and indicating that we have passed the bottom of the market. The Forward

Freight Agreements (FFA) currently indicate a market average of about USD

14 500 for the remaining part of the year, with Ultramax bulk carriers earning

an additional premium of about 15 per cent.

Belships has contract coverage ensuring higher profitability than current market

levels. 95 per cent of ship days in Q1 2023 are covered at about USD 20 300 per

day, and 67 per cent of ship days in the next four quarters are fixed at about

USD 19 800 per day. 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 secured with fixed

interest rates.

Lighthouse Navigation continues to deliver very good results. We expect lower

activity in Q1 2023 in line with seasonality in the dry bulk market. However, we

continue to see very good profitability and Lighthouse is expected to continue

contributing to Belships' dividend capacity.

With normal seasonality, it is likely that spot market rates will increase from

Q2 onwards, and towards second half of this year we expect a positive market

development based on increased activity from China reopening and some pent-up

demand effects after last year. However, the pace of this recovery is uncertain,

and we are comfortably positioned with highly profitable contract coverage for

the meantime.

Looking further ahead, the supply side as observed from the number of deliveries

and the publicly quoted orderbook for dry bulk is historically low. We therefore

remain more optimistic in terms of medium to long term market prospects.

We are focused on capital discipline and returning capital to 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. Since we announced a new dividend policy in Q2 2021, we have

returned a total of NOK 6.35 per share (USD 168.3m) to shareholders and at the

same time we have continued to deliver profitable growth and fleet expansion.

Belships owns a modern fleet of 31 Supra/Ultramax bulk carriers with an average

age of about four years and daily cash breakeven for 2023 of about USD 10 900

per vessel. Based on Belships' current contract coverage, we expect to generate

significant free cash flow and continue to pay quarterly dividends as announced

with our dividend policy.

22 February 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 (mailto:LCS@belships.no)

This information is subject to the disclosure requirements pursuant to Section

5-12 the Norwegian Securities Trading Act