Belships

Earnings Release • May 26, 2021

Belships ASA : Report 1st quarter 2021

Belships ASA : Report 1st quarter 2021

IMPROVED MARKET OUTLOOK AND INTRODUCTION OF DIVIDEND POLICY

HIGHLIGHTS

? Operating income of USD 76.4 million (USD 31.7m)

? EBITDA of USD 14.7m (USD 4.9m)

? Net result of USD 16.5m (USD 0.2m)

? Net TCE per ship of USD 12 162 per day versus BSI index of USD 16 140 net per

day

? EBITDA of USD 3.7m from management companies proving continued strong

performance

? Private placement successfully completed

? Entered into agreement to acquire 4xUltramax newbuilding resales with delivery

2H 2021 financed through bareboat agreements with average cash breakeven of USD

10 800 per day

? Acquired a 2017-built bulk carrier for USD 21.75m in a cash and shares

transaction

? Two vessels fixed for 1 year time charter at USD 21 250 and USD 22 000 gross

per day

? 31 per cent of available ship days in the next four quarters are booked at

about USD 16 200 net per day

? Introduction of dividend policy

? Modern fleet of 26 vessels with an average age of 5 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 12 162 net

per day versus BSI index of USD 16 140 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 rapidly

our performance will tend to lag on a short-term basis.

Approximately 88 per cent of available ship days in Q2 are booked at about USD

16 300 net per day. Approximately 31 per cent of available ship days in the next

four quarters are booked at about USD 16 200 net per day.

BELFOREST and BELNIPPON has been fixed for time charter contracts to a global

agricultural corporation for about 1 year duration at a rate of USD 21 250 and

USD 22 000 gross per day. The contracts will commence by the end of May and June

2021, respectively.

Belships currently does not have any cargo contracts or active hedging

instruments. Forward Freight Agreements (FFA) are measured at fair value at the

end of each reporting period. Net loss from realised positions amounting to USD

6.7m in the quarter have been included in other gains and losses. At the end of

the quarter all positions have been realised and Belships has no further

exposure.

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

significant off-hire in the quarter with a total of 1 903 on-hire days. Three

vessels in the fleet are scheduled for drydocking during Q2-Q4 2021.

BELFORT and BELORIENT were delivered to its new owners in March and April 2021.

Net cash flow upon delivery was approximately USD 1.0m after repayment of

outstanding loans.

BELFAST, an Ultramax newbuilding of 64 000 dwt was delivered in January 2021

from Imabari Shipyard in Japan. A second Ultramax newbuilding of 64 000 dwt to

be named BELMAR is expected to be delivered by the end of Q3 2021.

Transactions

In February, Belships entered into an agreement for the acquisition of two

newbuilding resales of

61 000 dwt to be named BELTRADER and BELGUARDIAN. Delivery is expected during Q3

2021. The vessels will be financed through 10-year bareboat charters. The

estimated cash breakeven for the vessels upon delivery is about USD 10 700 per

day including operational expenses. Belships has paid USD 2.6m per vessel after

signing contracts in Q2 2021. The agreements come with purchase options below

current market values and can be exercised after the fourth year until the end

of the charters. There are no obligations to purchase the vessels.

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

newbuilding resale of 61 000 dwt to be named BELKNIGHT. Delivery is expectred

during Q4 2021. The vessel will be financed through a 7-year bareboat charter.

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

per day including operational expenses. Belships has paid as sum of USD 2.9m

after signing contract in Q2 2021. The agreement comes with purchase options

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

Ultramax to be named BELTIGER. Delivery of the vessel is expected within Q2

2021 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 is USD 21.75m, of which 80 per cent will be paid in cash. The

remaining consideration will be settled through an issue of 4,988,000 new

Belships shares to the seller of the vessel. The agreed share price in the

transaction is NOK 7.50 per share. The vessel is intended to be financed with

bank financing for approximately 60 per cent of the purchase price. The

estimated cash breakeven for the vessel upon delivery is about USD 9 500 per day

including operational expenses.

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

resale of 61 000 dwt financed through a bareboat agreement for 10 years. The

vessel will be named BELFORCE and delivery is expected during Q4 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 contract in Q2 2021. The agreement comes with purchase options 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.

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.

Technical and commercial platforms

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. The fleet under technical and crewing

management has doubled in the last two years. We are now seeing the impact of

this growth with another strong quarter from these platforms combined showing an

EBITDA of USD 3.7m. We expect that the results will fluctuate, however we do

expect that these platforms will continue to be positive on an annual basis.

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 51.6m, while

mortgage debt was USD 134.9m. The group's mortgage debt comprises two loan

facilities, both with a margin of 275 basis points above LIBOR and maturity in

Q2 2024.

Belships ASA successfully completed a private placement 9 March 2021 raising a

total of USD 16 million (NOK 140 million) through the allocation of 20 million

shares at a subscription price of NOK 7.00 per share. Through the completion of

this Private Placement, the company has significantly expanded its shareholder

base and increased the liquidity of the Belships share.

Net leasing obligation at the end of the quarter was USD 161.8m. Leasing

liabilities have been calculated under the assumption that Belships will

exercise its options to acquire all seven 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.

The Company has recognised USD 19.8m in deferred tax assets previously not

recognized. The deferred tax assets were recognised by the Company after

concluding it is likely that the company will have sufficient profit in

subsequent periods to utilise the deferred tax assets after the significant

improvements seen in the freight market during Q1 2021.

At the end of the quarter, book value per share amounted to NOK 6.83 (USD

0.80), corresponding to a book equity ratio of 35 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.

Commencement and first payout expected to occur after second quarter 2021.

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.

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Market highlights

In the first quarter, we observed a strong improvement in the spot rates with

the Baltic Supramax 58 index averaging USD 16 140 net per day, up from USD

10 211 net per day in the preceding quarter and the highest Q1 average in the

index history. The second quarter has continued even stronger, with the Baltic

Supramax 58 index averaging over USD 20 000 per day - the highest since 2010.

Total Supramax shipment volumes ended at 257 million tons in Q1, actually a

fraction below the total of 262 million tons in Q4. However, in March alone a

record high 93.5 million tons were shipped, beating the previous high of 89.5

million tons set in December last year. In April, another shipment volume record

was set at 96.5 million tons. Demand growth is spread across nearly all

commodities and all regions on the back of the global boom in manufacturing.

Coal shipment volumes were 57 million tons in the first quarter, notably down

from 65 million tons in the fourth quarter of last year. As the macroeconomic

backdrop continues to be supportive, shipment volumes could make record highs

later this year if one assumes that lockdowns in Asia will be lifted completely.

According to Fearnleys, vessel deliveries dropped to 27 in the first quarter, in

line with the 28 in the fourth quarter of 2020. Without assuming any slippage or

cancellation, the orderbook for the rest of this year indicates 32 vessels

during the second quarter, 27 during the third quarter and 18 during the fourth

quarter. 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 towards 2 per

cent this year and in 2022 it may drop to less than 1 per cent, 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 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. Importantly, demand for

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

shipbuilding capacity for 2022-2023 leading to increased prices despite the low

number of newbuildings for segment in dry bulk. Therefore, current values for

modern secondhand bulk carriers still represent a considerable discount to

newbuilding prices. We expect this will continue to support a rise in second

hand values and restrain the interest for newbuilding contracts.

Outlook

The Baltic exchange Supramax index YTD 2021 has averaged USD 17 500 net per day.

There has been a remarkable development over the past few months. Freight

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

of about USD 20 000 and 22 350 per day for the remaining part of the year. A

cold winter season sparked energy demand, followed by a wider rally in commodity

markets resulting in increased cargo volumes in all regions. The Baltic index in

June is currently expected to surpass USD 26 000 per day.

As we mentioned in previous reports, the supply side has passed the peak of

deliveries and the publicly quoted orderbook for our segment now stands below 5

per cent - which is historically low.

Even with increased bunker prices the average sailing speed has increased

confirming an improved rate of vessel utilisation. We remain optimistic in terms

of market prospects, and with the worst of the pandemic hopefully behind us we

are seeing solid demand fundamentals which is supporting a strong dry cargo

market. At the time of writing Belships has most of the fleet open for the

remaining part of 2021 and onwards.

We will continue to pursue opportunities for further growth whilst being

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

has been to increase profitability and the value and attractiveness of owning

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

growth 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 starting

with the second quarter 2021 as announced with our new dividend policy.

Belships has a uniform and modern fleet of 26 Supramax/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.

26 May 2021

THE BOARD OF BELSHIPS ASA

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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 26 May 2021 at 07:00 CET.

This information is subject to the disclosure requirements pursuant to Section

5-12 the Norwegian Securities Trading Act