Belships

Investor Presentation • Nov 15, 2019

Belships ASA – Q3 update

15 November 2019

Important information

This presentation has been prepared by Belships ASA (the "Company") exclusively for information purposes. This presentation is confidential and may not be copied, distributed, reproduced, published or passed on, directly or indirectly, in whole or in part, or disclosed by any recipient, to any other person (whether within or outside such person's organisation or firm) or published in whole or in part, by any medium or in any form for any purpose or under any circumstances.

The information in this presentation speaks as of 15 November 2019 and the Company assumes no obligation to amend, correct or update the information in this presentation. None of the Company or any of their respective directors, officers, employees, agents, affiliates, advisors or any person acting on their behalf, shall have any liability whatsoever, whether direct or indirect, in contract, tort or otherwise) for any loss whatsoever arising from any use of this presentation, or otherwise arising in connection with this presentation.

The contents of this presentation shall not be construed as legal, business or tax advice, and the furnishing of this presentation should not be considered as the giving of investment advice by the Company or any of its directors, officers, agents, employees or advisers. Prospective investors should consult its own legal, business or tax advisor as to legal, business or tax advice.

This presentation contains certain forward-looking statements relating to the business, financial performance and results of the Company and/or the industry in which it operates. Forward-looking statements concern future circumstances and results and other statements that are not historical facts, sometimes identified by the words "believes", expects", "predicts", "intends", "projects", "plans", "estimates", "aims", "foresees", "anticipates", "targets", and similar expressions. The forward-looking statements contained in this presentation, including assumptions, opinions and views of the Company or cited from third party sources are solely opinions and forecasts which are subject to risks, uncertainties and other factors that may cause actual events to differ materially from any anticipated development. None of the Company or subsidiaries or any such person's directors, officers or employees provides any assurance that the assumptions underlying such forward-looking statements are free from errors nor does any of them accept any responsibility for the future accuracy of the opinions expressed in this presentation or the actual occurrence of the forecasted developments.

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Key investment highlights

Agenda

Q3 highlights	5
Company introduction – Why Belships?	7
Market snapshot	16
Conclusion – What next?	23
Appendix	26

Belships ASA – Q3 highlights

Continued profitability and growth Key performance indicators

• Operating income of USD 31.7 million (Q3 2018: USD 27.5m)
• EBITDA of USD 8.1m (USD 6.7m)
• Net result of USD 0.3m (USD 4.0m) impacted by one-off costs
• Net TCE (Time charter equivalent) per ship of USD 11,118 per day versus net BSI index of USD 11,886 per day
• About 65% of ship days in Q4 have been booked at about USD 12,783 net per day
• Average cash breakeven per vessel about USD 9,000 per day for next 12 months
• Reported EBITDA includes operating expenses of USD 1.3m arising from the service element embedded in long-term time charter lease agreements classified as financial leases
• Increased 2020 bunkers hedge from 24,000mt to 36,000mt
• Three bareboat charter agreements with purchase options concluded in the quarter
• One bareboat charter agreement with purchase options concluded in October
• Agreed bareboat charter and subsequent sale of the oldest vessel in the fleet in October
• Modern fleet with an average age of 6 years including newbuildings

Average TCE Q3 USD 11,118/day

BSI index USD 11,886/day net

Average TCE YTD USD 10,877/day

BSI index USD 9,170/day net

Net Result Q3 USD 0.3m

EBITDA Q3 USD 8.1m

Agenda

Q3 highlights	5
Company introduction – Why Belships?	7
Market snapshot	16
Conclusion – What next?	23
Appendix	26

Fully integrated owner and operator of geared dry bulk vessels

Shipowning1	Lighthouse Navigation2	Belships Management
14x Ultramax 9x Supramax
Pure play on the dry bulk market, with attractive portfolio of spot market exposure and charter backlog	Commercial Operations delivering outsized spot market performance and operating profits	Complete in-house technical management and crewing platform delivering cost control and operating profits

Three profitable business segments enhancing knowhow and earnings

¹⁾ Including long term TC and BB charters with purchase options

²⁾ Owned 50.01% by Belships ASA, remaining 49.99% owned by leading employees

Creating the best in-class listed dry bulk company

Recent activity post merger – Pushing the growth agenda

Market capitalization growth from USD 30m to of USD 165m

Three vessel acquisitions financed by ship/shares structures

Vessel	Transaction details		Purchase price and funding (USDm)			Liquidity impact (USDm)
	 Supramax - 58,700 dwt  2008 built at Tsuneishi HI (Cebu)  Ship-for-shares transaction  Acquired from Wenaas Shipping  60% LTV raised under accordion tranche	13.0	6.5	7.8	1.3	+ 1.3
Belcargo	 Announced 2nd April 2019	Price	Shares	Debt	Cash
Bellight (Sofie Victory)	 Ultramax - 63,000 dwt  2016 built at New Times  Attractive existing financing  Charter to ED&F until March 2021  Acquisition of all shares in Sofie Victory AS from EGD (80%) and Blossom Shipmanagement (20%) Announced 10th  April 2019	24.2 Price	14.0 2.0 Current Cash debt	1.3 WC	8.7 0.7 Shares Cash	- 0.7
Belfri	 Supramax - 55,866 dwt  2007 built at Kawasaki HI  Ship-for-shares transaction  Acquired from Prospero Marine Ltd (Kulukundis)  60% LTV raised under accordion tranche  Announced 30th April 2019	12.0 Price	6.0 Shares	7.2 Debt	1.2 Cash	+ 1.2
3 ship for share transactions in 2019	~26m shares issued at 8 new high quality NOK 7.0 per share shareholders			60% LTV		USD 1.8m cash freed up

Four bareboat charters with purchase options proving ability to create exposure with industry low cost of capital

Vessel	Transaction details	Structure	Cash	break even Loan to value
Newbuild - TBN	 Ultramax – 64,000 dwt  2021 built in Japan  10 year Bareboat charter  Announced July 2019	 Zero upfront equity Purchase options from end of 4th  year, at around today's market values1	~USD per day	11,250 100%
Newbuild - TBN Belmoira	 Ultramax – 61,000 dwt  2020 built in Japan  7 year Bareboat charter  Announced August 2019	 USD 3 mill paid upfront Purchase options from end of 4th  year, below today's market values1	~USD 11,000 per day	90%
Newbuild -TBN	 Ultramax – 61,000 dwt  2020 built in Japan  7 year Bareboat charter  Announced October 2019	 USD 3 mill paid upfront Purchase options from end of 4th  year, below today's market values1	~USD 11,000 per day	90%
Newbuild - Belray	 Ultramax – 61,000 dwt  2019 built in Japan  7 year Bareboat charter  Announced August 2019	 USD 3 mill paid upfront Purchase options from end of 4th  year, below today's market values1	~USD 11,000 per day	90%
Four brand new Japanese Ultramaxes	Flexible and unique exposure	92% LTV => 5.50% CoC	Enhancing return on Equity	Total cash investment of USD 9.0m

1) Basis valuations given by shipbrokers

Modern uniform fleet of 23 vessels with average age of 6 years

	Vessel	Built	DWT	Yard	Ownership
x a m a Ultr x 4 1	NEWBUILDING	2021	64,000	Japan	BB-in1
	NEWBUILDING	2020	61,000	Shin Kurushima	BB-in2
	BELMOIRA (NEWBUILDING)	2020	61,000	Shin Kurushima	BB-in2
	BELFUJI (NEWBUILDING)	2020	63,000	Imabari	TC-in3
	BELRAY (NEWBUILDING)	2019	61,000	Shin Kurushima	BB-in4
	BELNIPPON	2018	63,000	Imabari	TC-in5
	BELISLAND	2016	61,000	Imabari	BB-in6
	BELFOREST	2015	61,000	Imabari	BB-in7
	BELINDA	2016	63,000	Hantong	Owned
	BELMONT	2016	63,000	Hantong	Owned
	BELATLANTIC	2016	63,000	Hantong	Owned
	SOFIE VICTORY	2016	63,000	New Times	Owned
	BELPAREIL	2015	63,000	Hantong	Owned
	BELSOUTH	2015	63,000	Hantong	Owned

Ultramax vessels					Supramax vessels
	Vessel	Built	DWT	Yard	Ownership		Vessel	Built	DWT	Yard	Ownership
	NEWBUILDING	2021	64,000	Japan	BB-in1	x a m a pr u S x 9	BELOCEAN	2011	58,000	Dayang	Owned
	NEWBUILDING	2020	61,000	Shin Kurushima	BB-in2		BELNOR	2010	58,000	Dayang	Owned
	BELMOIRA (NEWBUILDING)	2020	61,000	Shin Kurushima	BB-in2		BELSTAR	2009	58,000	Dayang	Owned
	BELFUJI (NEWBUILDING)	2020	63,000	Imabari	TC-in3		BELCARGO	2008	58,000	Tsuneishi	Owned
	BELRAY (NEWBUILDING)	2019	61,000	Shin Kurushima	BB-in4		BELFRI	2007	55,000	Kawasaki	Owned
x a	BELNIPPON	2018	63,000	Imabari	TC-in5		BELORIENT	2008	50,000	PT Pal	Owned
m a	BELISLAND	2016	61,000	Imabari	BB-in6		BELFORT	2008	50,000	PT Pal	Owned
Ultr x 4 1	BELFOREST	2015	61,000	Imabari	BB-in7		PACIFIC LIGHT	2007	50,000	PT Pal	Owned
	BELINDA	2016	63,000	Hantong	Owned		BELEAST1	2006	50,000	PT Pal	Owned

1) To enter into two year bareboat charter to Marti Shipping & Ship Management. The vessel will be sold to the charterers as part the agreement.

1) Delivery 2H 2021 ten years bareboat charter with purchase options after fourth year.

2) Delivery Q1 2020 for seven years bareboat charter with purchase options after fourth year.

3) Delivery Q1 2020 for eight years time charter with purchase options after fourth year.

4) Delivered in October 2019 seven years bareboat with purchase options after fourth year.

5) Eight years time charter with purchase options after fourth year.

6) Fifteen years bareboat charter with purchase options after fifth year.

7) Twelve years bareboat charter with purchase options after third year.

There are no purchase obligations on any of the lease agreements.

Supramax/Ultramax segment – superior risk/reward

Outperformance of the BSI index due to optimized portfolio of period charter coverage and outsized spot earnings

Agenda

Q3 highlights	5
Company introduction – Why Belships?	7
Market snapshot	16
Conclusion – What next?	23
Appendix	28

Market snapshot

• The year of trade wars and iron ore supply disruption, however the dry bulk freight markets reacted sharply when the latter was resolved
• Rates doubled in two months, back to start on year-end import fears
• Continued high steel production combined with below average Chinese port inventories
• Economic growth projections stabilised, recession fears reduced
• Chinese stimulus and interest rate cuts; resulting in highest credit growth rate since 2014
• Tonne-mile dry bulk demand growth expected to accelerate 3+% in 2020
• IMO 2020 leading to lower fleet efficiency, scrubber retrofitting 2019, slow steaming 2020?
• Low orderbook and low ordering activity supply side to gradually work in favour of higher freight markets

Chinese port inventories below average – growing steel production

Vessels out of service for scrubber installations will continue to aid utilisation – cost of retrofitting underestimated

Belships' IMO 2020 considerations

IMO 2020				Belships' strategy
Scrubber	Compliant fuel	LNG/LPG propulsion	Belships are proactive and remain agile
 Continue using HSFO  Fuel availability  Costly investment	 No off-hire  No investment  Bet on price	 Significant reduction in CO2 , NOX and SOX  Significant investment  Fuel availability		Hedge the spread
 Increased bunker consumption  Operational risk	differential between VLSFO and HSFO			No offhire in market upturn
 Technical risk				Reduced operational and technical risk
Key implications Slow steaming Increased offhire during installation process Trigger scrapping of older vessels

Key commodities exhibit strong and stable demand growth

Low orderbook – lowest fleet growth since 2001-2003

Agenda

Q3 highlights	5
Company introduction – Why Belships?	7
Market snapshot	16
Conclusion – What next?	23
Appendix	28

Strong cash flow to equity under most market conditions

Cash break even next twelve months ~USD 9,000/day

Cash break even open days Q4 2019 ~USD 7,000/day

Near-term strategic priorities

Agenda

Q3 highlights	5
Company introduction – Why Belships?	7
Market snapshot	16
Conclusion – What next?	23
Appendix	26

CONSOLIDATED STATEMENT OF INCOME	Q3	Q3	YTD Q3	YTD Q3
USD 1 000	2019	2018	2019	2018	2018
Gross freight revenue	33 822	34 884	105 125	89 588	127 735
Voyage expenses	-4 430	-8 885	-20 235	-23 698	-34 246
Net freight revenue	29 392	25 999	84 890	65 890	93 489
Management fees	2 308	1 084	7 456	3 244	4 865
Operating income	31 700	27 083	92 346	69 134	98 354
Share of result from j/v and assoc. comp.	658	357	1 900	982	2 012
T/C hire expenses	-11 231	-16 087	-35 867	-40 752	-56 466
Ship operating expenses	-9 166	-3 951	-21 606	-11 578	-16 094
Operating expenses ship management	-1 023	0	-2 910	0	-420
General and administrative expenses	-2 839	-1 003	-7 682	-4 091	-7 837
Operating expenses	-23 601	-20 684	-66 165	-55 439	-78 805
EBITDA	8 099	6 399	26 181	13 695	19 549
Depreciation and amortisation	-4 445	-919	-13 702	-5 122	-7 813
Purchase bargain gain	0	0	0	0	12 849
Operating result (EBIT)	3 654	5 480	12 479	8 573	24 585
Interest income	71	8	184	20	56
Interest expenses	-2 436	-1 379	-7 705	-3 488	-4 754
Other financial items	-250	262	-738	-90	-351
Currency gains/( -losses)	-491	6	-679	-17	-94
Net financial items	-3 106	-1 103	-8 938	-3 575	-5 143
Result before taxes	548	4 377	3 541	4 998	19 442
Taxes	-199	0	-513	-18	-247
Net result	349	4 377	3 028	4 980	19 195
Hereof majority interests	-387	3 776	2 244	4 432	18 169
Hereof non -controlling interests	736	601	784	548	1 026
Earnings per share	0.00	0.07	0.02	0.07	0.20
Diluted earnings per share	0.00	0.07	0.02	0.07	0.20

The quarterly figures are not audited

CONSOLIDATED STATEMENT OF FINANCIAL POSITION	30 Sep	31 Dec
USD 1 000	2019	2018
NON -CURRENT ASSETS
Intangible assets	6 650	8 536
Ships	285 181	230 425
Prepayment of ships	6 000	0
Property, Plant, and Equipment	3 892	4 210
Investments in j/v and assoc. companies	3 496	1 939
Other non -current assets	0	343
Total non -current assets	305 219	245 453
CURRENT ASSETS
Inventories	2 232	4 230
Current receivables	17 675	11 897
Cash and cash equivalents	43 736	32 034
Total current assets	63 643	48 161
Total assets	368 862	293 614
EQUITY AND LIABILITIES
Equity
Paid -in capital	126 704	96 870
Retained earnings	25 228	23 738
Non -controlling interests	3 893	3 174
Total equity	155 825	123 782
Non -current liabilities
Mortgage debt	121 767	94 513
Lease liability	50 514	38 653
Other non -current liabilities	2 317	3 446
Total non -current liabilities	174 598	136 612
Current liabilities
Mortgage debt	15 414	12 500
Lease liability	4 375	2 119
Other current liabilities	18 650	18 601
Total current liabilities	38 439	33 220
Total equity and liabilities	368 862	293 614

Experienced management and Board of Directors with aligned incentives with shareholders

0.44m shares 5.0m options

133m shares

75k shares

17m shares

Management

Lars Christian Skarsgård, CEO

Lars Christian Skarsgård has served as CEO of Belships ASA since 13 March, 2019. Mr. Skarsgård has wide ranging shipping experience from sailing as a deck crew, shipbroking to ship owning and management. Before joining Belships ASA, he served as Director and Global head of S&P with Fearnleys AS. BA Economics from Liverpool University.

Osvald Fossholm, CFO

35k shares 66k options

Osvald Fossholm has served as Belships CFO since 1993. He graduated from BI Norwegian Business School in 1985 as an accountant, and is also a certified public accountant from the Norwegian School of Economics and Business Administration. He worked at Arthur Andersen & Co from 1985 to 1990, and became financial manager of Belships in 1990.

Board of Directors

Peter Frølich, Chairman of the Board

• Lawyer with vast financial and board member experience

• Currently involved in i.a. Fana Sparebank, Fjord Line AS and Kredittforeningen for Sparebanker

Frode Teigen, Board member

• Majority owner and acting board member in Belships ASA , Egersund Group AS, Fjord Line AS and Nordic Halibut AS through Kontrari AS and Kontrazi AS

• Held various management positions in Thoresen Thai in addition to being one

• of the largest shareholders exit in 2005

Sverre J. Tidemand, Board member

• Owner Sonata AS
• Managing director of Belships from 1979 to May 2011 and previously chairman of the board

Carl Erik Steen, Board member

• Extensive experience in ship finance
• Currently Chairman of the BoD in Euronav and board member in several companies i.a. Bertel O. Steen Holding AS and Wilh. Wilhelmsen Holding ASA

Sissel Grefsrud, Board member

• Director of ABN Amro Bank's Energy & Transportation division.
• Previously executive in the Songa Group and First Olsen Tankers Ltd.

Jorunn Seglem, Board member

50k shares

7.5k shares

• CEO and board member Knutsen Ballast Water AS • Board member Knutsen Nyk Offshore Tankers AS

Birthe Cecilie Lepsøe, Board member

• Partner, Vest Corporate Advisors AS
• Board member in several companies, i.a. Inventura Group AS, Smedvig AS and Sparebank 1 SR-Bank ASA

50k shares