Belships

Earnings Release • Aug 21, 2020

Belships ASA - Report 2nd quarter 2020

Belships ASA - Report 2nd quarter 2020

A CHALLENGING QUARTER - IMPROVING OUTLOOK AHEAD

HIGHLIGHTS

* Operating income of USD 28.6 million (Q2 2019: USD 29.6m)

* EBITDA of USD 1.9m (USD 8.0m)

* Net result of USD -14.6m (USD 0.1m). Net result includes non-cash impairment

of USD 4.9m total for the four oldest vessels in the fleet

* Net TCE earnings per ship of USD 6 927 per day versus BSI index of USD

5 210 net per day

* Realised FFA gains equivalent to USD 1 117 net per vessel day resulting in

total outperformance of the Baltic Supramax market index of 54 per cent

* 60 per cent of remaining ship days in 2020 are booked at USD 9 600 net per

day

* Taken delivery of BELHAVEN and issued shares

* 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 6 927 net per

day versus BSI index of USD 5 210 net per day for the same period. In addition,

FFA gains equivalent to USD 1 117 net per vessel day (USD 2.0m) were realised

resulting in a total outperformance of the Baltic Supramax market index of 54

per cent. Outperformance of the BSI index is due to the portfolio of period

charter coverage and outsized spot earnings achieved by our subsidiary

Lighthouse Navigation.

About 60 per cent of remaining ship days in 2020 are booked at USD 9 600 net per

day. About 90 per cent of available days in Q3 have been booked at about USD

9 000 net per day and about 40 per cent in Q4 are booked at about USD 11 000 net

per day.

BELSOUTH and BELNOR were drydocked in the quarter. BELFORT underwent repairs in

mid-April and resumed full operating at the end of the month.

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

Vessel transactions

In May, Belships took delivery of BELHAVEN, a 63 000 dwt Ultramax from Japanese

Owners. The vessel was built in 2017 by Imabari shipyard and delivered after

having passed its dry-docking survey. The purchase price of USD 24.5m was

settled by issuing new shares equivalent to 50 per cent at a subscription price

of NOK 7.15 per share (USD/NOK 9.31), and the remaining in cash. Belships

utilised 60 per cent financing of the purchase price, resulting in a positive

cash effect of about USD 2.45 million. BELHAVEN is currently fixed for about

11-13 months time charter at about USD 12 200 per day net.

The recent vessel transactions signal the competitive advantage Belships has in

sourcing ship finance. Belships' fleet continues to increase and improve with

only modest cash investments. Taking into consideration nine acquisitions and

two divested vessels over the past 12 months the net cash effect is about USD

3m. The Japanese Ultramax bulk carriers entering the fleet represent the highest

quality and lowest fuel consumption available in the market today.

Financial and corporate matters

At the end of the quarter, cash and cash equivalents was USD 34.4m. Mortgage

debt was USD 143.7m, while net lease obligation was USD 141.9m.

Belships recorded an impairment loss of USD 4.9m in the quarter. The impairment

relates to the four oldest vessels in the fleet.

During January and February, Belships hedged some of its spot exposure by

selling FFA contracts maturing from Q2 2020 to Q1 2021. A majority of the

contracts were realised in the second quarter, generating a cash effect of USD

2.0m. At the end of the quarter, the remaining FFA portfolio comprised 450 days

at an average rate of USD 9 400 per day.

As part of the consideration for BELHAVEN and based on the authorisation granted

by the Annual General Meeting on 14 May 2020, the Board of directors resolved to

increase the Company's share capital by the issuance of 15,950,699 new shares to

the sellers. Following the registration of the share capital increase with the

Norwegian Register of Business Enterprises, the Company's share capital was

increased to NOK 456,350,808, divided by 228,175,404 shares, each with a par

value of NOK 2.

At the end of the quarter, book value per share amounted to NOK 6.55 (USD

0.67), corresponding to an equity ratio of 34 per cent.

Market highlights

In the second quarter, the Baltic Supramax 58 index averaged USD 5 210 net per

day, with the market still reeling from the continued outbreak of COVID-19.

Demand was hampered by global lockdowns and a widespread and historic slump in

economic activity. On the supply side, scrapping virtually came to halt as

travel bans and restrictions hindered any meaningful recycling of older vessels,

so even though spot rates plummeted the net increase in the supply of vessels

came in above projections.

Falling fuel oil bunkers also contributed to increased sailing speeds and

ballasting in the quarter. In sum, the impact and consequences from COVID-19

eliminated the seasonal upturn usually experienced earlier in the second

quarter.

However, the market started showing signs of bottoming out during April and May,

and since then volumes have recovered as economies gradually reopened. In July,

total shipment volume was 92 million tons - a new all-time high. The volume

recovery was broad based and included all commodity sub-groups by varying

degrees.  Towards the end of June, the spot rates and short term FFA contracts

picked up traction and expectations for a healthier market post-summer were

evident.

Outlook

In July, we have observed a significant improvement in the spot rates, with

average rates in July climbing above USD 9 000 per day for the first time in

2020 and as per mid-August now stand at USD 10 500. Freight Forward Agreements

(FFA) currently indicate a market for Supramaxes and Ultramaxes of around USD

10 500 and 11 500 per day for the remaining part of the year.

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 by

5-7 per cent which will also help the fleet reach its true utilisation level in

a stronger market. Going forward we are therefore more optimistic in terms of

market prospects, with the main downside risks to our outlook being a potential

new round of lockdowns and year-end import reductions. Consequently, Belships

has a significant part of the fleet contractually covered for the next three

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 a fully integrated owner and operator of geared

bulk carriers, through quality of operations and target accretive growth

opportunities.

21 August 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

This information is subject to the disclosure requirements pursuant to Section

5-12 the Norwegian Securities Trading Act