Belships

Earnings Release • Nov 12, 2021

Belships ASA: Report 3rd quarter 2021

Belships ASA: Report 3rd quarter 2021

STRONG QUARTER - RETURNING VALUE TO SHAREHOLDERS

HIGHLIGHTS

?          Operating income of USD 205.3m (USD 43.3m)

?          EBITDA of USD 57.1m (USD 5.9m) including USD 23.3m from Lighthouse

Navigation

?          Net result of USD 35.2m (USD -4.2m)

?          Declared dividend of USD 16.0m (NOK 0.55 per share)

?          Net TCE of USD 25 378 per day for owned fleet

?          Entered into agreements to acquire two new Ultramax bulk carriers

?          77 per cent of ship days in Q4 are booked at about USD 29 000 net per

day. 42 percent of ship days in the next four quarters are booked at about USD

25 500 net per day

?          Modern fleet of 30 vessels with an average age of about 4 years and

cash breakeven of about USD 10 500 per day

Subsequent events

?          BELFRI (2007) was delivered to its new owners in October 2021. Net

cash flow upon delivery was approximately USD 9.0m after repayment of

outstanding loans.

?          Belships entered into an agreement for the acquisition of two bulk

carriers of 58 000 dwt built in 2016 by a Japanese shipyard to be named

BELFRIEND and BELTIDE upon delivery. The purchase price was USD 28.0m per

vessel, of which 60 per cent will be financed under a new bank loan facility.

Delivery is expected November-December 2021.

?          Belships entered into an agreement for the acquisition of a Japanese

Ultramax   newbuilding resale of 64 000 dwt to be named BELMONDO. Delivery is

expected January 2023.

?          BELCARGO (2008) was delivered to its new owners in November 2021. Net

cash flow upon delivery was approximately USD 11.0m after repayment of

outstanding loans.

?          BELHAVEN has been fixed for a time charter contract for about 22-24

months duration at a gross rate of USD 26 250 per day. The contract commenced

during October 2021.

?          Previously announced time charter contract on BELPAREIL for about

23-25 months duration at a gross rate of USD 25 500 per day has been cancelled

due to delays under current voyage.

?          BELSOUTH has been fixed for a time charter contract for about 23-25

months duration at a gross rate of USD 25 500 per day. The contract commenced

during November 2021.

?          BELHAWK, an Ultramax bulk carrier of 61 000 dwt built in 2015 was

delivered in November 2021 and has commenced a time charter contract for about

3-5 months at a gross rate of USD 35 000 per day.

Financial results commentary

Belships reports a net result of USD 35.2m for Q3 2021, compared to a net result

of USD -4.2m for Q3 2020. The increase in net result is mainly caused by the

improved freight market and Belships increased fleet during the last year.

EBITDA contribution from Lighthouse Navigation was USD 23.2m in Q3 2021 compared

to USD 0.9m in Q3 2020. The increase in EBITDA from Lighthouse Navigation is due

to the expansion of the companies in addition to rapidly improved freight

markets. Net freight revenue for owned vessels was USD 106.0m in Q3 2021

compared to USD 43.7m in Q3 2020. The increase in net freight revenue is driven

by an increase in TCE on owned vessels from 9 067 in Q3 2020 to 25 378 in Q3

2021 and an increase in active days of about 25 per cent.

Fleet status

Time charter equivalent per ship in the quarter were recorded at USD 25 378 net

per day versus BSI index of USD 32 478 net per day for the same period. The

inherent lag in our business means that when the spot markets fall, our

outperformance will tend to be higher. Conversely, when the market rises, our

performance will tend to lag on a short-term basis. It is also caused by a

certain number of vessels in the fleet performing period time charter contracts

which contributed to increase our contract coverage for 2022-2023.

Approximately 77 per cent of available ship days in Q4 are booked at about USD

29 000 net per day. Approximately 42 per cent of available ship days in the next

four quarters are booked at about USD 25 500 net per day.

BELATLANTIC and BELLIGHT were drydocked in the quarter. The remaining fleet

sailed without significant off-hire in the quarter with a total of 1 981 on-hire

days.

BELTIGER, BELTRADER, BELGUARDIAN and BELKNIGHT were delivered in August.

BELFORCE and BELMAR were delivered in September.

Updated delivery schedule for new vessels:

BELTIDE is expected mid-November 2021

BELFRIEND is expected beginning of December 2021

BELTOKYO is expected mid-December 2021

BELYAMATO is expected Q4 2022

BELMONDO is expected January 2023

Transactions

In July, Belships entered into an agreement for the sale of BELFRI (2007).

Delivery of the vessel occurred in October and Belships realised a gain of

approximately USD 4.6m. Net cash flow upon delivery was USD 9.0m after repayment

of outstanding loans.

In July, Belships entered into an agreement for the acquisition of two 64 000

dwt Ultramax newbuilding resales under construction at a Japanese shipyard.

BELTOKYO is expected to be delivered December 2021 and BELYAMATO is expected to

be delivered November 2022. BELTOKYO will be leased on a bareboat charter for a

period of 12 years. The estimated cash breakeven for the vessel upon delivery is

about USD 11 750 per day including operational expenses. The agreement comes

with purchase options and there are no obligations to purchase the vessel. A

similar financing arrangement is expected to be arranged for BELYAMATO before

delivery.

In August, Belships has entered into an agreement for the sale of BELCARGO

(2008). Delivery of the vessel occurred in November 2021 and Belships will

realise a gain of approximately USD 5.5m. Net cash flow upon delivery will be

approximately USD 11.0m after repayment of outstanding loans.

Belships' fleet has increased and improved with only modest cash investments,

signalling the competitive advantage Belships has in sourcing ship finance. The

Japanese-designed Ultramax bulk carriers entering the fleet represent the

highest quality and lowest fuel consumption available in the market today.

Lighthouse Navigation

Lighthouse Navigation has delivered another record quarter with EBITDA of USD

23.3m for the third quarter, bringing the year-to-date EBITDA up to USD 41.3m.

We expect to make provisions for potential loss-making contracts if the

reduction in forward freight assessments observed so far in the fourth quarter

continue towards the end of the year.

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 published a comprehensive sustainability report in 2020 (ESG Report)

reflecting our ongoing commitment to transparency and meeting investor and

stakeholder expectations.

Covid-19 has greatly impacted seafarers, and we have signed the Neptune

declaration on Seafarer Wellbeing and Crew Change to join forces with more than

600 shipping companies to influence governments and policy makers to adopt

relief measures for our essential workers.

Financial and corporate matters

At the end of the quarter, cash and cash equivalents was USD 106.5m, while

mortgage debt was USD 135.2m.

Net leasing liability at the end of the quarter was USD 281.4m. Leasing

liabilities have been calculated under the assumption that Belships will

exercise its options to acquire all Ultramax bulk carriers on bareboat charter,

whereas we have assumed that the company will not exercise the purchase options

on time-chartered vessels BELNIPPON and BELFUJI. Belships has no contractual

obligation to acquire any of its leased vessels.

At the end of the quarter, book value per share amounted to NOK 8.03 (USD

0.91), corresponding to a book equity ratio of 31 per cent.

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.

Belships believes this approach will create value for shareholders and has the

flexibility to manage the company and support the continued growth.

Dividend payment

Based on the financial result in the third quarter 2021 the Board declared a

dividend payment of USD 16.0m (NOK 0.55 per share) equivalent to about 64 per

cent of net result adjusted for non-controlling interests.

Market highlights

In the third quarter, we observed steady improvements in the spot rates with the

Baltic Supramax 58 index averaging USD 32 478 net per day, up from USD 25 406

net per day in the preceding quarter. The very strong sentiment continued into

the fourth quarter before peaking towards the end of October, whereafter the

spot rates have trended downwards significantly.

Total Supramax shipment volumes ended at 258 million tons in Q3, slightly down

from 266 million tons in Q2. About 85 million tons being shipped in each month

during the quarter, is still very high historically. Preliminary estimates for

shipments in October show all-time high shipments of 94 million tons.

Demand growth has been strong across almost all commodities and regions, as the

global manufacturing boom continued through Q3. Shipments of Iron Ore, Grains,

Fertilizers, Steels and Minor Bulks are all on track for all-time highs this

year, whereas Coal shipments are still lagging. If the year-to-date run rate of

Coal shipments continue in the coming months, shipments will end slightly below

both 2020 and 2019 levels. However, the winter restocking season is expected to

begin shortly and according to Fearnleys, this year could still end up being a

record year for coal shipments. It is also undeniable that the fleet

productivity is lower than usual as caused by the continued disruptions stemming

from the COVID-19 pandemic. Port waiting times, general congestion and many

vessels having to deviate and wait in order to manage crew changes is absorbing

vessel capacity. Nevertheless, global port congestion levels dropped from around

370 vessels at the start of October to around 300 vessels at the start of

November.

According to Fearnleys, 31 vessels were delivered in the third quarter, up from

23 in the second quarter. The vessel delivery schedule for the remainder of this

year says 24 during the fourth quarter, including the 19 already delivered. This

would take the full year total to 126, which is lower than last year's 143. Next

year, without assuming any slippage or cancellation, the order book indicates

only 131 scheduled for delivery.

The publicly quoted orderbook indicates fleet growth will drop next year and

then even further in 2023, also according to Clarksons Research. There will be

changes to this outlook for fleet growth as the amount of newbuilding orders

being placed over the next 12 months are uncertain and it is also normal that

10-20 per cent of the orderbook ends up being cancelled, deferred or simply

incorrect. However, we expect relatively low newbuilding activity as the lack of

conviction and alternatives for fuel and propulsion systems will continue to

restrain ordering activity in the near term. Most importantly, demand for

newbuildings in other segments than dry cargo is absorbing most of the

shipbuilding capacity for 2022-2023 and has led to strong increases in

newbuilding prices.

Prices for secondhand vessels increased considerably in the third quarter and

appeared strongly supported by freight market earnings. Current value estimates

for five-year old Japanese Ultramax bulk carriers trended up 20 per cent since

the start of the third quarter. Contract for a Japanese Ultramax for delivery in

2024 was reportedly concluded at USD 35m. Newbuilding prices in general

continued to increase due to increased steel prices and relatively high demand

from other shipping segments.

Outlook

The Baltic Exchange Supramax index YTD 2021 has averaged USD 25 500 net per day.

The strong market has continued into the fourth quarter, though spot rates, and

forward expectations, have been revised down from peak levels. Freight Forward

Agreements (FFA) currently indicate a market for Supramax and Ultramax of about

USD 25 000 and 27 000 per day for the remaining part of the year. FFA for next

year, 2022, is currently indicating an average of USD 20 000 per day for

Ultramax bulk carriers.

As we mentioned in previous reports, the supply side as observed from the number

of deliveries and the publicly quoted orderbook for our segment is historically

low. On the back of stable demand, we remain optimistic in terms of market

prospects. About 77 pct of available days in Q4 are booked at USD 29 000 net per

day. For the next four quarters, Belships has secured contract coverage for

about 43 per cent of available ship days at USD 25 500 net per day.

We will continue to pursue opportunities for further growth whilst being

selective and disciplined in the use of our capital. The purpose of growth is to

increase profitability and the value and attractiveness of owning our shares. A

competitive return for our shareholders is to be obtained through increase in

the value of the company's shares and the payment of dividends, as measured by

the total return. Based on current market expectations, we expect to generate

significant free cash flow and aim to pay a quarterly dividend as announced with

our dividend policy.

Belships has a uniform and modern fleet of 30 Supra/Ultramax bulk carriers well

positioned to capitalise on a strong dry bulk market. We are focused on

maintaining a solid balance sheet and liquidity position. Our strategy is to

continue developing Belships as an owner and operator of geared bulk carriers,

through quality of operations and accretive growth opportunities.

12 November 2021

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 stock exchange announcement was published by Edwin Johansen, Accounting

Manager in Belships ASA on 12 November 2021 at 07:00 CET.

This information is subject to the disclosure requirements pursuant to Section

5-12 the Norwegian Securities Trading Act