Belships

Earnings Release • Nov 11, 2020

Belships ASA - Report 3rd quarter 2020

Belships ASA - Report 3rd quarter 2020

MARKET REBOUND - POSITIONING FOR 2021

HIGHLIGHTS

* Operating income of USD 43.3 million (Q3 2019: USD 31.7m)

* EBITDA of USD 5.9m (USD 8.1m)

* Net result of USD -4.2m (USD 0.3m)

* Net TCE per ship of USD 9 067 per day versus BSI index of USD 9 435 net per

day

* 75 per cent of remaining ship days in 2020 are booked at USD 9 000 net per

day

* All financing secured till May 2024 onwards after refinancing of SOFIE

VICTORY

* Imabari newbuilding delivery amended from Q4 2020 to Q1 2021

* Belships regarded as leading within corporate governance by Danske Bank and

on course for delivering emission cuts in line with industry ambitions for

2030

* Commercial platform expanded - Lighthouse Navigation

* Modern fleet of 23 vessels with an average age of 5 years including

newbuildings

Fleet status

Time charter earnings per ship in the quarter were recorded at USD 9 067 net per

day versus BSI index of USD 9 435 net per day for the same period. Average net

TCE per ship in the last twelve months amounted to USD 9 263 versus BSI index of

USD 7 783 net per day for the same period, representing an outperformance of the

BSI index of 19 per cent.

Our long-term outperformance of the BSI index is due to the portfolio of period

charter coverage and outsized spot earnings earned by our subsidiary Lighthouse

Navigation. The inherent lag in our business means that when the spot markets

fall, our outperformance will tend to be higher. Oppositely, when the markets

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

Approximately 30 per cent of remaining ship days in the next four quarters are

booked at about USD 10 000 net per day. About 75 per cent of available days in

Q4 have been booked at about USD 9 000 net per day.

BELINDA and BELNIPPON (time-chartered vessel) were drydocked in the quarter. The

remaining fleet sailed without significant off-hire in the quarter.

BELFAST, an Ultramax newbuilding of 64 000 dwt currently under construction has

been amended to deliver January/February 2021 instead of December 2020.

Belships' fleet modernisation is set to continue with the delivery of

newbuildings BELFAST and BELMAR scheduled for delivery during 2021. Belships'

fleet continues to increase and improve with only modest cash investments,

signalling the competitive advantage Belships has in sourcing ship finance.

Taking into consideration the recent nine acquisitions and two divested vessels

at a net cash effect of about USD 3m. The Japanese Ultramax bulk carriers

entering the fleet represent the highest quality and lowest fuel consumption

available in the market today.

Commercial platform

Lighthouse Navigation has expanded its commercial platform with new offices

established in Singapore, Melbourne and most recently Oslo. 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 expect this part of

our business to expand further during 2021.

Sustainability

Belships is regarded as a market leader in corporate governance. Belships is

also well placed and on course to deliver emission cuts in line with industry

ambitions for 2030. A new carbon footprint study and review has been initiated

with leading classification society DNVGL with the aim to monitor performance

and identify areas for improvement. With continued fleet modernisation we expect

to produce positive results.

Financial and corporate matters

At the end of the quarter, cash and cash equivalents was USD 35.5m, while

mortgage debt was USD 142.7m. During the quarter, the loan agreement related to

the vessel SOFIE VICTORY was amended in order to prolong the maturity and reduce

the loan margin. The group's mortgage debt now comprises two loan facilities,

both with a margin of 275 basis points above LIBOR and maturity in Q2 2024.

Net leasing obligation at the end of the quarter was USD 143.9m. 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.

At the end of the quarter, book value per share amounted to NOK 6.21 (USD

0.65), corresponding to an equity ratio of 32 per cent.

Market highlights

In the third quarter we observed a significant improvement in the spot rates

with the Baltic Supramax 58 index averaging USD 9 435 net per day. This is

compared to an average of USD 5 210 net per day in the second quarter evidencing

a strong rebound since the outbreak of COVID-19.

As some economies began to reopen, demand rebounded from historical lows, with

September being the first month showing positive year-on-year growth since the

COVID-19 outbreak. Total Supramax shipment volumes came in at 261.3 million

metric tons for the quarter, which marked a 9.6 per cent increase from 238.5

million metric tons in Q2. Of the main commodity groups, minor bulks and iron

ore made the strongest recovery, growing by about 14 per cent. Seasonal grain

shipments also increased markedly by 11 per cent, whereas steels grew by 2.2 per

cent.

According to Fearnleys, new vessel deliveries dropped to 26 in Q3 from 43 in the

previous quarter, which marked the lowest number of deliveries last two years.

The orderbook delivery schedule for next year predict deliveries will be 25 per

cent lower than this year, with 115 vessels scheduled for 2021 against 150

vessels this year. In 2022, just 28 vessels are currently scheduled for

delivery, which would be the lowest number of deliveries since 2000. In relative

terms, we are heading towards the lowest rate of supply growth in almost 30

years. The publicly quoted orderbook indicates fleet growth will drop to about

2 per cent by the end of next year (from currently 4.5 per cent) and in 2022 it

will drop further to about 0.5 per cent. There will be changes to this outlook

for fleet growth as the amount of newbuilding orders being placed over the next

6-9 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 very few newbuilding orders as lack of conviction for fuel and propulsion

systems will restrain ordering activity in the near term.

Outlook

The Baltic exchange Supramax index in October averaged USD 10 202 net per day.

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

Ultramax of about USD 9 400 and 10 400 per day for the remaining part of the

year. The softer sentiment in the market during the recent weeks can to some

extent be attributed to weak demand outside China, reduced iron ore and coal

demand towards the end of the year coupled with usual seasonal slowdown

approaching in January and February.

As we mentioned in our previous report, whilst total volumes shipped has

rebounded, the supply side has needed to adjust in order to sustain a recovery

in rates. The publicly quoted orderbook for our segment now stands at 5 per cent

- historically low - and we expect this to lay the foundation for a potentially

strong market in 2021. Furthermore, the average sailing speeds have increased

which will help the fleet reach higher utilisation levels in a stronger market.

We are therefore more optimistic in terms of market prospects, with the main

downside risks to our outlook being short term potential lockdowns and year-end

import reductions. Belships has a significant part of the fleet contractually

covered for the next two quarters.

Belships has a uniform and modern fleet of 23 Supramax/Ultramax bulk carriers

whereof nine of our vessels are financed with purchase option agreements. This

creates substantial upside and flexibility to capitalise on a potential recovery

towards historical averages for vessel values in the future. 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 target accretive growth opportunities.

11 November 2020

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

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This information is subject to the disclosure requirements pursuant to Section

5-12 the Norwegian Securities Trading Act