Belships

Earnings Release • May 15, 2020

Belships ASA - Report 1st quarter 2020

Belships ASA - Report 1st quarter 2020

Commercial outperformance in challenging times

HIGHLIGHTS

? Operating income of USD 33.6 million (Q1 2019: USD 31.1m)

? EBITDA of USD 4.9m (USD 10.1m)

? Net result of USD 0.2m (USD 2.5m)

? Net TCE earnings per ship of USD 8 636 per day versus BSI index of USD 6 232

net per day

? Outperformance of Baltic Supramax market index of 39 per cent

? 40 per cent of remaining ship days in 2020 are booked at USD 8 500 net per day

? 1 215 days, equivalent to 20 per cent of remaining ship days in 2020, have

been hedged with FFA at USD 9 900 per day

? Average cash breakeven per vessel about USD 9 500 per day for next 12 months

? Commercial platform set to expand with establishment of Oslo office

? Taken delivery of newbuilds BELFUJI, BELMOIRA and BELAJA

? 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 8 636 net per

day versus BSI index of USD 6 232 net per day for the same period, representing

a 39 per cent premium to market indices. Outperformance of the BSI index is due

to the optimised portfolio of period charter coverage and outsized spot earnings

achieved by our subsidiary Lighthouse Navigation.

Belships took delivery of two Ultramax newbuildings from Shin Kurushima shipyard

during the quarter. The vessels were delivered in January and February and named

BELMOIRA and BELAJA, respectively. The vessels are chartered in on bareboat

charter for seven years with purchase options after the fourth year.

In January, the Company took delivery of Ultramax newbuilding BELFUJI from

Imabari shipyard. The vessel is chartered in on time charter for eight years

with purchase options after the fourth year.

PACIFIC LIGHT delivered in March to its charterer for the agreed bareboat and

subsequent sale and a book gain of USD 2.5m was recorded in the quarter.

BELPAREIL was drydocked in February. The remaining fleet sailed without

significant off-hire in the quarter.

Vessel transactions

As announced in December, Belships agreed to acquire a modern secondhand

Ultramax bulk carrier from Japanese Owners for a price of USD 24.5m. The 63 000

dwt vessel was built in 2017 by Imabari shipyard and will be named BELHAVEN.

Delivery is expected during the end of May, having passed its intermediate

drydocking survey. The payment for the vessel will be settled by issuing new

shares equivalent to 50 per cent of the purchase price at a subscription price

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

The vessel will utilise 60 per cent financing of the purchase price, hence, the

transaction will have a positive cash effect of about USD 2.45 million.

These 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 34.8m. Mortgage

debt was USD 129.6m, while net lease obligation was USD 143.5m.

The fleet will be cash positive at a day rate of about USD 9 500 for the coming

12 months. The rate includes dry docking and finance cash flows.

At the end of the quarter, book value per share amounted to NOK 7.74 (USD

0.74), while equity ratio was 35 per cent.

During January, Belships hedged its spot exposure by selling FFA contracts

maturing from Q2 2020 to Q1 2021. The result in the quarter includes unrealised

gain of USD 2.9m. About one third of the contracts were realised after the

quarter. The FFA portfolio comprises 1 215 days of coverage at an average rate

of USD 9 900 per day at the time of this report.

Market highlights

The outbreak of Coronavirus (COVID-19) has spread to most countries in the world

and caused massive disruptions in terms of productivity, demand and

unemployment. Economic growth has in many cases imploded leading to record high

fiscal stimulus and quantitative relief measures from central banks and

governments in an attempt to mitigate the consequences.

The adoption and implementation of low sulphur regulations (IMO 2020) proved to

be much less of an availability issue than many predicted. Bunker markets have

normalised quickly and the famously touted 'spread' narrowed to insignificant

levels about USD 75 per tonne, measured as the average of the 20 main bunkering

ports. We have no scrubbers installed in our fleet and we do not expect to

change our position on this.

Our benchmark index BSI 58 averaged USD 6 232 net per day in the quarter - the

lowest since 2016. Markets improved in February following the end of Chinese New

Year holidays, however, towards the end of the quarter rates trended negative

and have since sustained at very low levels.

It is important to note that volumes carried on Supramax and Ultramax vessels in

the first quarter continued to increase compared to previous years. This

highlights the fact that also the supply side needs to adjust. Recycling of

older tonnage has been virtually non-existent since India imposed travel

restrictions and neither Pakistan, Bangladesh nor China were active. At the time

of this report, the publicly quoted Supramax and Ultramax order book is about 6

per cent of the total fleet - the lowest in almost 20 years.

Outlook

Our markets remain affected from the Corona virus outbreak as both spot and

period charter rates are significantly lower than usual. The second quarter has

therefore come off to a historically weak start. Prospects remain highly

uncertain, though we share the optimism that the virus will eventually be

defeated, and that shipping and trade will rebound. Very few newbuildings are

being contracted adding optimism for a tighter market as the orderbook becomes

historically low. Importantly, one third of the registered order book is

scheduled for delivery by the end of July which points towards fleet growth

peaking soon.

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

Ultramaxes of around USD 8 500 and 9 500 per day within the end of the year.

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

with a significant share of the fleet contractually covered for the rest of

2020. 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.

15 May 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