Belships

Earnings Release • Aug 18, 2021

Belships ASA : Report 2nd quarter 2021

Belships ASA : Report 2nd quarter 2021

STRONG MARKET - RETURNING VALUE TO SHAREHOLDERS

HIGHLIGHTS

*  Operating income of USD 140.4m (USD 28.6m)

*  EBITDA of USD 36.0m (USD 1.9m) including USD 14.5m from Lighthouse

Navigation

*  Net result of USD 22.5m (USD -14.6m)

*  Declared dividend of USD 11.4m (NOK 0.40 per share)

*  Net TCE per ship of USD 18 031 per day

*  Entered into agreements to acquire five new Ultramax bulk carriers

*  Two oldest Supramax vessels sold

*  42 per cent of available ship days in the next four quarters are booked at

about USD 22 400 net per day. 80 per cent of available days in 2022 remain

open.

*  Modern fleet of 27 vessels with an average age of about 4 years and average

cash breakeven of about USD 10 500 per day

Fleet status

Time charter earnings per ship in the quarter were recorded at USD 18 031 net

per day versus BSI index of USD 24 261 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.

Approximately 87 per cent of available ship days in Q3 are booked at about USD

22 800 net per day. Approximately 42 per cent of available ship days in the next

four quarters are booked at about USD 22 400 net per day.

BELFUJI has been fixed for a time charter contract for about 22-24 months

duration at a gross rate of USD 24 000 per day. The contract commenced during

June 2021.

BELMOIRA has been fixed for a time charter contract for about 22-24 months

duration at a gross rate of USD 23 000 per day. The contract commenced during

June 2021.

BELRAY has been fixed for a time charter contract for about 22-24 months

duration at a gross rate of USD 22 000 per day. The contract commenced during

July 2021.

BELISLAND has been fixed for a time charter contract for about 22-24 months

duration at a gross rate of USD 22 000 per day. The contract commenced during

August 2021.

BELINDA has been fixed for a time charter contract for about 11-13 months

duration at a gross rate of USD 27 000 gross per day. The contract will commence

during August 2021.

BELISLAND was drydocked in the quarter. The remaining fleet sailed without

significant off-hire in the quarter with a total of 1 807 on-hire days. Two

vessels in the fleet are scheduled for drydocking  in Q3.

BELORIENT was delivered to its new owners in April 2021. Net cash flow upon

delivery was approximately USD 1.0m after repayment of outstanding loans.

Updated delivery schedule for Ultramax newbuildings:

BELTRADER and BELGUARDIAN were delivered in August 2021

BELKNIGHT is expected to deliver August 2021

BELFORCE is expected to deliver September 2021

BELMAR is expected to deliver September 2021

(New) BELTOKYO is expected Q4 2021

(New) BELYAMATO is expected Q4 2022

Transactions

In April, Belships entered into an agreement for the acquisition of a 2017-built

Ultramax to be named BELTIGER. The vessel was delivered in August whilst an

existing time charter party at a marginally cash-positive rate will follow the

vessel and is expected to run until the end of October 2021. The purchase price

was USD 21.75m, of which 80 per cent paid in cash and the remaining was settled

through an issue of new Belships shares. The estimated cash breakeven for the

vessel upon delivery is about USD 9 500 per day including operational expenses.

The vessel was delivered in August.

In May, Belships entered into an agreement for the acquisition of a newbuilding

Ultramax resale of 61 000 dwt financed through a bareboat agreement for 10

years. The vessel will be named BELFORCE and delivery is expected within

September 2021. The estimated cash breakeven for the vessel upon delivery is

about USD 10 900 per day including operational expenses. Belships has paid a sum

of USD 3.0m upon signing the contract in Q2 2021. The agreement comes with

purchase options significantly below current market values and can be exercised

after the third year until the end of the charter. There are no obligations to

purchase the vessel.

In June, Belships has entered into an agreement for the acquisition of an

Ultramax bulk carrier built in 2015 by a Japanese shipyard in a cash

transaction. Delivery of the vessel is expected within October 2021. The agreed

purchase price is JPY 2.52bn (about USD 22.9m). The vessel has subsequently been

sold and leased back on bareboat charter for 9.5 years with options to purchase

the vessel after the third year at significantly below current market levels.

The estimated cash breakeven for the vessel upon delivery is about USD 10 900

per day including operational expenses.

In June, Belships has exercised an option to purchase the Ultramax vessel

BELISLAND and subsequently entered into agreement to sell and lease back the

vessel on bareboat charter for 11 years with options to purchase the vessel

again after the third year at significantly below current market levels. The new

daily rate will reduce the vessels cash breakeven by about USD 1100 per day and

have a positive cash effect upon delivery of about USD 2.5 million. Delivery

into the new bareboat agreement is expected in September 2021.

In July, Belships entered into an agreement for the sale of BELFRI. Delivery of

the vessel is expected to occur within September and Belships will realize a

gain of approximately USD 4.6m. Net cash flow upon delivery will be

approximately USD 9.0m after repayment of outstanding loans.

Belships has recently entered into an agreement for the acquisition of a further

two 64 000 dwt Ultramax newbuilding resales under construction at a Japanese

shipyard. BELTOKYO is expected to be delivered Q4 2021 and BELYAMATO is expected

to be delivered Q4 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. Belships will pay a sum

of USD 4m upon signing the contract, expected to occur during Q3 2021. The

agreement comes with purchase options significantly below current market values

and can be exercised after the fourth year until the end of the charter. There

are no obligations to purchase the vessel. A similar financing arrangement is

expected to be arranged for BELYAMATO before delivery. The agreements are

conditional upon certain steps to be completed by the parties involved.

Conclusion is expected within Q3 2021.

Belships has recently entered into an agreement for the sale of BELCARGO.

Delivery of the vessel is expected to occur within 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. The agreements

are conditional upon certain steps to be completed by the parties involved.

Conclusion is expected within Q3 2021.

Belships' fleet continues to increase and improve 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 expanded its commercial platform in 2020 and now have

offices in Bangkok, Oslo, Singapore and Melbourne. The aim of this expansion is

to further enhance the vessels earning capability and to generate profits around

cargo trading opportunities in the market. We now see the impact of this growth

with a record quarter showing EBITDA of USD 14.5m.

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 63.4m, while

mortgage debt was USD 123.2m.

Net leasing obligation at the end of the quarter was USD 156.1m. 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 7.03 (USD

0.82), corresponding to a book equity ratio of 38 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 amortization 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 second quarter 2021 the Board declared a

dividend payment of USD 11.4m (NOK 0.40 per share) equivalent to about 50 per

cent of net result.

Market highlights

In the second quarter, we observed a further improvement in the spot rates with

the Baltic Supramax 58 index averaging USD 24 261 net per day, up from USD

16 140 net per day in the preceding quarter. The third quarter has continued

even stronger, with the Baltic Supramax 58 index averaging over USD 30 000 per

day - the highest since 2008.

Total Supramax shipment volumes ended at 268 million tons in Q2, up from 256

million tons in Q1 and a record high quarter. Close to 90 million tons were

shipped in each month, which is very high historically but still slightly below

the record of 93 million tons shipped in March. However, preliminary estimates

for shipments in July show another all-time record of 96 million tons.

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

global manufacturing boom continued through Q2. 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 on Supramaxes and Ultramaxes continues in the coming months,

shipments will end below both 2020 and 2019 levels. However, the macro backdrop

remains highly supportive, lockdowns in South East Asia are hopefully temporary,

and the Winter restocking season will also begin in a few months. 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.

According to Fearnleys, vessel deliveries dropped to 23 in the second quarter,

down from 27 in the first quarter, which marked the lowest number of deliveries

since the fourth quarter of 2018, when 14 vessels were delivered. Without

assuming any slippage or cancellation (which is usually between 10-20 per cent),

the vessel delivery schedule for the remainder of this year says 44 during the

third quarter, and 30 during the fourth quarter. This would take the full year

total to 133, which is lower than last year's 143. Next year, the delivery

schedule points to a further reduction in fleet growth, with only 109 vessels

scheduled for delivery. The number of new vessels is on track to be the lowest

since 2007, when 86 vessels were delivered. However, in relative terms, it is

approaching the lowest level in several decades.

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

then even further in 2023, according to Clarksons. 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 have increased considerably since before the

summer and appear strongly supported to increase further on the back of a very

strong freight market.

Outlook

The Baltic exchange Supramax index YTD 2021 has averaged USD 21 100 net per day.

There has been a remarkable development over the past months and is continuing

with strength. Freight Forward Agreements (FFA) currently indicate a market for

Supramax and Ultramax of about USD 33 000 and 35 000 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 has passed the peak of

deliveries and the publicly quoted orderbook for our segment is historically

low. On the back of a wide rally in commodities this year we remain optimistic

in terms of market prospects. For the next four quarters, Belships has secured

contract coverage for approximately 40 per cent of available ship days. At the

time of writing, Belships has 80 per cent of next year uncovered representing a

substantial exposure to a firm dry bulk market.

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 27 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.

18 August 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 18 August 2021 at 07:01 CET.

This information is subject to the disclosure requirements pursuant to Section

5-12 the Norwegian Securities Trading Act