Belships

Quarterly Report • Aug 21, 2015

REPORT 2ND QUARTER 2015

21 August 2015

www.belships.com

HIGHLIGHTS

• Operating income of USD 5.6 m (Q1: USD 5.0 m)
• EBITDA of USD 2.7 m (USD 2.2 m)
• Net result of USD ‐4.0 m (USD ‐2.0 m)
• Impairment of the fleet included with USD ‐5.3 m (USD 0.0 m)
• All vessels operating normally modern fleet average age 5.1 years
• Contract coverage 100% for delivered vessels USD 88 million fixed charter backlog
• Belforest fixed to Cargill for a period of 10‐14 months

Second quarter 2015 results

Belships operating income in 2nd quarter 2015 was USD 5,594,000 (Q1 2015: USD 5,013,000), while EBITDA amounted to USD 2,734,000 (USD 2,213,000). The increase in operating income and EBITDA is mainly related to M/S Belnor, which was in drydock in 1st quarter. The Group's operating result amounted to USD ‐3,640,000 (USD ‐1,037,000), while total comprehensive income for 2nd quarter 2015 was USD ‐4,007,000 (USD ‐1,986,000). Comprehensive income for the first six months of 2015 was USD ‐5,993,000 (2H 2014: USD ‐2,299,000). The increased loss is mainly explained by impairment of the fleet.

Impairment tests of the company's assets were performed in accordance with IAS 36. The ships, newbuildings and charterparties are valued based on observable market values. Based on these valuations and assumptions, book value of the fleet has been reduced by USD 5.3 million in the 2nd quarter, in addition to ordinary depreciation of USD 1.0 million.

Fleet status

M/S Belstar, M/S Belnor and M/S Belocean have continued the long‐term contracts to Canpotex of Canada. Canpotex is one of the world's largest exporters of potash, a fertilizer product imported in large volumes by countries such as China, India and Brazil. Net time charter rate is USD 16,000 per day, which is a favorable rate in the present market.

The ships have sailed without significant off‐hire, and operating expenses for 2nd quarter 2015 are close to budget. Technical management is handled by Belships Management (Singapore), with a total fleet of 20 ships under technical management.

Newbuilding program

Belships' newbuilding program with Imabari Shipbuilding in Japan includes 2 x 61.000 dwt eco‐design Ultramax bulk carriers for delivery in September 2015 and March 2016. In addition Belships has signed a long‐term lease agreement incl. purchase option for a slightly larger sister vessel with delivery 1st quarter 2017.

The newbuilding for delivery in September will be named M/S Belforest, and is fixed to Cargill for a period of 10‐14 months. This c/p will generate an EBITDA of USD 1.15 million over the average period.

Financial and corporate matters

As per 30 June the Group's cash totaled USD 6.9 million compared to USD 6.1 million as per 31 March 2015.

The mortgage debt balance as per 30 June was USD 43.7 million and was reduced by USD 1.3 million during the quarter. Remaining newbuilding commitment amounts to USD 39.6 million. Belships has established a loan facility covering 70% of the lower of contract price and market value at the time of delivery. 70% of contract price equals remaining newbuilding commitment. In addition Belships has

established a long‐term loan facility of SGD 2 million, secured by the lease agreement for our Singapore office.

In August 2011 Belships entered into an interest rate swap agreement with 2 years forward start at 2.2% with a remaining duration of 3 years covering USD 15 million, reducing by USD 5 million per year. Another interest swap agreement with forward start was entered into in June 2015 at a rate of 1.9% and with a duration of 5 years covering USD 20 million, reducing by USD 2 million per year. Hedging the Group's interest exposure is considered on an ongoing basis. The long‐term interest rate is at a historical low level. Belships expects only a modest increase in the interest rate level for the coming 3‐5 years. The hedging level of interest rate exposure is currently around 45%.

At the end of the 2nd quarter of 2015, the book value per share amounted to NOK 9.90 (USD 1.26), while the equity ratio was 54.7%.

Market highlights

The Capesize‐index ended the second quarter at USD 9,468 per day, whereas the Panamax‐index ended at USD 6,734 per day. The Supramax‐index ended the quarter at USD 7,479 per day. As per today the Cape index stands at USD 13,790/day, Panamax‐index at USD 8,410/day and Supramax‐ index at USD 9,460/day.

The dry bulk market is moving up again, after a prolonged period with rates and values close to historical low levels. The Capesize rates have been lifted from barely covering operating expenses to a level offering return on investment. There is strengthened buying interest for modern second hand tonnage, and the values are picking up.

International iron ore prices are still very low, and the likely effect for shipping is that China will import more of its iron ore, helping to absorb some of the tonnage overcapacity. Inventory level of iron ore in China was depleted during first quarter, so the current restocking of iron ore could mostly explain the rebound in Capesize rates.

According to Bloomberg, the Chinese government is planning a new stimulus package to fund construction projects which will help the slowdown in Chinese economy. Such stimulus relating to construction spending is positive for dry bulk as it will lift demand for steel and iron ore.

Strategy

Belships is concentrating 100% on the dry bulk market, with 3 x 58,000 dwt Supramax in service and 3 x Ultramax newbuildings under construction by Imabari Shipbuilding in Japan for delivery from September 2015 until 1st quarter 2017. Our ambition is to further increase the fleet of high quality dry bulk carriers in tandem with a growing customer base.

Outlook

The supply side is quickly adjusting to lower demand and during first half 2015 approx. 18 million dwt of dry bulk tonnage has been scrapped, mainly Capesize and Handysize.

Ship values fell to historical low levels during the second quarter and are now strengthening again following the rate increase.

Belships vessels are chartered out long‐term on a fixed rate to a reputable counterpart, and short term market fluctuations will therefore not affect the Group's cash flow. The charter parties represent a future nominal gross hire of USD 88 million.

Focus will be to further develop Belships as an owner/operator of modern bulk carriers to reputable counterparts. Our ambition is to build a portfolio of quality vessels and robust charter parties that will generate distributable cash flows.

Oslo, 21 August 2015 THE BOARD OF BELSHIPS ASA

Sverre Jørgen Tidemand, Chairman

Christian Rytter Kjersti Ringdal Sissel Grefsrud Carl Erik Steen

Questions should be directed to: Ulrich Müller, CEO +47 22 52 76 15

RESPONSIBILITY STATEMENT

We confirm to the best of our knowledge that the condensed set of financial statements for the period 1 January to 30 June 2015 has been prepared in accordance with IAS 34 ‐ Interim Financial Reporting, and gives a true and fair view of the Company's assets, liabilities, financial position and result for the period. We also confirm to the best of our knowledge that the financial review includes a fair review of important events that have occurred during the first six months of the financial year and their impact on the financial statements, any major related parties transactions, and a description of the principal risks and uncertainties for the remaining six months of the financial year.

Oslo, 21 August 2015 THE BOARD OF BELSHIPS ASA

Sverre Jørgen Tidemand, Chairman

Christian Rytter Kjersti Ringdal Sissel Grefsrud Carl Erik Steen

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

	Q2 2015	Q1 2015	1H 2015	Q2 2014	Q1 2014	1H 2014	2014
USD 1 000	(unaudited)	(unaudited)	(unaudited)	(unaudited)	(unaudited) (unaudited)
Note Freight revenue	4 468	3 874	8 342	4 060	5 098	9 158	17 912
Management fees	1 126	1 139	2 265	1 164	981	2 145	4 167
Operating income 2	5 594	5 013	10 607	5 224	6 079	11 303	22 079
Time‐charter hire	0	0	0	0	‐804	‐804	‐804
Ship operating expenses	‐1 318	‐1 222	‐2 540	‐1 412	‐1 384	‐2 796	‐5 434
Operating expenses ship management	‐924	‐888	‐1 812	‐790	‐922	‐1 712	‐3 741
General and administrative expenses	‐618	‐690	‐1 308	‐1 258	‐848	‐2 106	‐3 540
Operating expenses	‐2 860	‐2 800	‐5 660	‐3 460	‐3 958	‐7 418	‐13 519
Operating result (EBITDA)	2 734	2 213	4 947	1 764	2 121	3 885	8 560
Depreciation and amortization	‐1 112	‐1 050	‐2 162	‐996	‐997	‐1 993	‐4 274
Impairment of the fleet	‐5 262	‐2 200	‐7 462	0	0	0	‐3 200
Operating result (EBIT)	‐3 640	‐1 037	‐4 677	768	1 124	1 892	1 086
Interest income	3	2	5	20	9	29	124
Interest expenses	‐439	‐441	‐880	‐499	‐499	‐998	‐1 961
Other financial items	52	‐285	‐233	70	‐355	‐285	‐277
Currency gains/(‐losses)	65	‐194	‐129	‐83	42	‐41	‐550
Net financial items	‐319	‐918	‐1 237	‐492	‐803	‐1 295	‐2 664
Result before taxes	‐3 959	‐1 955	‐5 914	276	321	597	‐1 578
Taxes	‐48	‐31	‐79	28	‐26	2	‐23
Net result	‐4 007	‐1 986	‐5 993	304	295	599	‐1 601
Hereof non‐controlling interests	3	33	36	38	7	45	80
Hereof majority interests	‐4 010	‐2 019	‐6 029	266	288	554	‐1 681
Other comprehensive income
Actuarial gain/(loss) on defined benefit plans	0	0	0	0	0	0	‐99
Total comprehensive income	‐4 007	‐1 986	‐5 993	304	295	599	‐1 700
Hereof non‐controlling interests	3	33	36	38	7	45	80
Hereof majority interests	‐4 010	‐2 019	‐6 029	266	288	554	‐1 780
Earnings per share (US cent)	‐8.52	‐4.24	‐12.75	0.64	0.63	1.26	‐3.42
Diluted earnings per share (US cent)	‐8.52	‐4.24	‐12.75	0.64	0.63	1.26	‐3.42

CONSOLIDATED BALANCE SHEETS

		30 Jun 2015	30 Jun 2014	31 Dec 2014
USD 1 000		(unaudited)	(unaudited)
ASSETS	Note
Fixed assets
Ships		83 396	94 366	88 920
Newbuilding instalments	3	13 950	11 300	14 125
Other fixed assets		2 198	2 615	2 345
Total fixed assets		99 544	108 281	105 390
Current assets
Trade debtors		102	222	44
Other receivables		1 458	1 117	967
Cash and cash equivalents		6 854	11 076	8 064
Total current assets		8 414	12 415	9 075
Total assets		107 958	120 696	114 465
EQUITY AND LIABILITIES
Equity
Paid‐in capital		43 583	43 605	43 563
Retained earnings		15 050	23 413	21 080
Non‐controlling interests		372	373	408
Total equity		59 005	67 391	65 051
Long‐term liabilities
Mortgage debt	4	38 209	43 071	40 651
Financial instruments		545	700	515
Pension obligations		972	1 494	1 138
Other long‐term liabilities		1 345	0	0
Total long‐term liabilities		41 071	45 265	42 304
Short‐term liabilities
Current portion of mortgage debt	4	5 000	5 000	5 000
Trade creditors		1 057	801	381
Other short‐term liabilities		1 825	2 239	1 729
Total short‐term liabilities		7 882	8 040	7 110
Total equity and liabilities		107 958	120 696	114 465

CONSOLIDATED CASH FLOW STATEMENTS

	1H 2015	1H 2014	2014
USD 1 000	(unaudited)	(unaudited)
Cash flow from operating activities
Net result before taxes	‐5 914	597	‐1 578
Adjustments to reconcile profit before tax to net cash flows:
Depreciations on fixed assets	2 162	1 993	4 274
Impairment of ships	7 462	0	3 200
Share‐based compensation expense	19	300	259
Difference between pension exps and paid pension premium	‐105	0	‐262
Net finance costs	1 237	1 295	2 664
Working capital adjustments:
Change in trade debitors and trade creditors	618	29	‐213
Change in other short‐term items	‐565	302	‐90
Interest received	5	29	124
Interest paid	‐880	‐998	‐1 961
Income tax paid	‐126	‐59	‐35
Net cash flow from operating activities	3 912	3 488	6 382
Cash flow from investing activities
Prepayment newbuilding contracts	‐2 825	‐5 650	‐8 475
Payment of other investments	‐1 051	‐878	‐898
Net cash flow from investing activities	‐3 876	‐6 528	‐9 373
Cash flow from financing activities
Repayment of long‐term debt	‐2 500	‐49 161	‐51 662
Proceeds from new loan	1 345	50 000	49 425
Payment of transaction costs related to new loan	0	‐575	0
Dividend paid to shareholders	0	‐393	‐393
Net cash flow from financing activities	‐1 155	‐129	‐2 630
Net change in cash and cash equivalents during the period	‐1 119	‐3 169	‐5 621
Cash and cash equivalents at 1 January	8 064	14 282	14 282
Change currency NOK deposits	‐91	‐37	‐597
Cash and cash equivalents at end of period	6 854	11 076	8 064

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

BELSHIPS ASA

USD 1 000

(Unaudited figures)		Paid‐in			Retained
	Share capital	Treasury shares	Share premium	Other paid‐in	v Other equity	Non‐ controlling	Total equity
As at 30 June 2015			reserves	equity		interests
Equity as at 31 December 2014	14 272	‐166	13 751	15 707	21 079	408	65 051
Net result for the period	0	0	0	0	‐6 029	36	‐5 993
Other comprehensive income	0	0	0	0	0	0	0
Total comprehensive income	0	0	0	0	‐6 029	36	‐5 993
Non‐controlling interest transactions	0	0	0	0	0	‐72	‐72
Share‐based payment expense	0	0	0	19	0	0	19
Equity as at 30 June 2015	14 272	‐166	13 751	15 726	15 050	372	59 005
As at 30 June 2014
Equity as at 31 December 2013	14 272	‐166	13 751	15 448	23 252	401	66 958
Net result for the period	0	0	0	0	554	45	599
Other comprehensive income	0	0	0	0	0	0	0
Total comprehensive income	0	0	0	0	554	45	599
Dividend to shareholders	0	0	0	0	‐393	0	‐393
Share‐based payment expense	0	0	0	300	0	0	300
Non‐controlling interest transactions	0	0	0	0	0	‐73	‐73
Equity as at 30 June 2014	14 272	‐166	13 751	15 748	0 23 413	373	67 391

KEY FINANCIAL FIGURES

		1H 2015	1H 2014	2014
EBITDA	USD 1000	4 947	3 885	8 560
Interest coverage ratio		‐4.86	1.57	0.37
Current ratio	%	106.75	154.42	127.64
Equity ratio	%	54.66	55.84	56.83
Earnings per share	US cent	‐12.75	1.26	‐3.42
Earnings per share	NOK	‐1.00	0.08	‐0.25
Equity per share	USD	1.26	1.44	1.39
Equity per share	NOK	9.90	8.86	10.33
Number of issued shares (excluding treasury shares)		46 804 000	46 804 000	46 804 000
Average number of issued shares (excl. treasury shares)		46 804 000	46 804 000	46 804 000

NOTES TO THE CONSOLIDATED ACCOUNTS

The figures are not audited

Note 1 Accounting principles

These interim financial statements have been prepared in accordance with International Accounting Standard (IAS) 34, "Interim Financial Reporting". They do not include all of the information required for full annual financial reporting, and should be read in conjunction with the consolidated financial statements of Belships for the year ended 31 December 2014.

This report was approved by the Board of Directors on 21 August 2015.

The accounting policies adopted are consistent with those followed in the preparation of the Company's and the Group's annual financial statements for the year ended 31 December 2014.

Note 2 Segment information

USD 1 000	January ‐ June 2015
	Dry cargo	Technical	Admini‐	Group	Total
		managm.	stration	transactions
Freight revenue	8 205	0	0	137	8 342
Management fees	0	2 363	274	‐372	2 265
Operating income	8 205	2 363	274	‐235	10 607
Ship operating expenses	‐2 773	0	0	233	‐2 540
Operating expenses ship management	0	‐1 812	0	0	‐1 812
General and administrative expenses	‐9	0	‐1 301	2	‐1 308
Operating expenses	‐2 782	‐1 812	‐1 301	235	‐5 660
Operating result (EBITDA)	5 423	551	‐1 027	0	4 947
Depreciation and amortization	‐2 113	‐20	‐29	0	‐2 162
Impairment of ships	‐7 462	0	0	0	‐7 462
Operating result (EBIT)	‐4 152	531	‐1 056	0	‐4 677
Interest income	0	3	2	0	5
Interest expenses	‐880	0	0	0	‐880
Other financial items	‐34	‐8	‐191	0	‐233
Currency gains/(‐losses)	‐6	‐44	‐79	0	‐129
Net financial items	‐920	‐49	‐268	0	‐1 237
Result before taxes	‐5 072	482	‐1 324	0	‐5 914
Taxes	0	‐79	0	0	‐79
Net result	‐5 072	403	‐1 324	0	‐5 993
Hereof non‐controlling interests	0	36	0	0	36
Hereof majority interests	‐5 072	367	‐1 324	0	‐6 029

Note 2 Segment information, continued

BELSHIPS ASA

USD 1 000	2015				2014
	Dry	Techn.	Admin/	Total	Dry	Product	Techn.	Admin/	Total
1Q	cargo	manag.	Grp.trs.		cargo	tank	manag.	Grp.trs.
Freight revenue	3 806	0	68	3 874	4 233	774	0	91	5 098
Management fees	0	1 177	‐38	1 139	0	0	1 016	‐35	981
Operating income	3 806	1 177	30	5 013	4 233	774	1 016	56	6 079
Time‐charter hire	0	0	0	0	0	‐804	0	0	‐804
Ship operating expenses	‐1 328	0	106	‐1 222	‐1 493	0	0	109	‐1 384
Operating expenses ship management	0	‐888	0	‐888	0	0	‐922	0	‐922
General and administrative expenses	‐2	0	‐688	‐690	‐11	‐10	0	‐827	‐848
Operating expenses	‐1 330	‐888	‐582	‐2 800	‐1 504	‐814	‐922	‐718	‐3 958
Operating result (EBITDA)	2 476	289	‐552	2 213	2 729	‐40	94	‐662	2 121
Depreciation and amortization	‐1 026	‐10	‐14	‐1 050	‐964	0	‐12	‐21	‐997
Impairment of non‐current assets	‐2 200	0	0	‐2 200	0	0	0	0	0
Operating result (EBIT)	‐750	279	‐566	‐1 037	1 765	‐40	82	‐683	1 124
2Q	Dry	Techn.	Admin/		Dry	Product	Techn.	Admin/
	cargo	manag.	Grp.trs.	Total	cargo	tank	manag.	Grp.trs.	Total
Freight revenue	4 399	0	69	4 468	3 992	0	0	68	4 060
Management fees	0	1 186	‐60	1 126	0	0	1 195	‐31	1 164
Operating income	4 399	1 186	9	5 594	3 992	0	1 195	37	5 224
Ship operating expenses	‐1 445	0	127	‐1 318	‐1 521	0	0	109	‐1 412
Operating expenses ship management	0	‐924	0	‐924	0	0	‐790	0	‐790
General and administrative expenses	‐7	0	‐611	‐618	‐93	0	0	‐1 165	‐1 258
Operating expenses	‐1 452	‐924	‐484	‐2 860	‐1 614	0	‐790	‐1 056	‐3 460
Operating result (EBITDA)	2 947	262	‐475	2 734	2 378	0	405	‐1 019	1 764
Depreciation and amortization	‐1 087	‐10	‐15	‐1 112	‐963	0	‐13	‐20	‐996
Impairment of non‐current assets	‐5 262	0	0	‐5 262	0	0	0	0	0
Operating result (EBIT)	‐3 402	252	‐490	‐3 640	1 415	0	392	‐1 039	768

Note 3 Newbuilding contracts

Belships ASA has placed order for two newbuilding contracts for fuel efficient Ultramax bulk carriers from Imabari Shipbuilding Co. Ltd. The ships will be delivered during 3rd quarter 2015 and first half of 2016. Total newbuilding cost amounts to USD 56.5 million.

Remaining instalments	%	USD mill. per ship	Scheduled due date Hull S‐K085	Scheduled due date Hull S‐K086
#4: Launching	10 %	2.83	Aug 2015	3 months before delivery
#5: Delivery	60 %	16.95	Sep 2015	Mar/Apr 2016
Total paid instalments (USDm)			8.48	8.48
Total remaining instalments (USDm)			19.78	19.78

Note 4 Mortgage debt

Mortgage debt as of 30 June 2015 was USD 43,8 million, of which USD 5.0 million is classified as current. Arrangement fee and other costs related to drawdown of the new loan is recorded as a reduction of debt in the balance sheet and amortized over the loan period in accordance with the amortized cost principle.

FLEET LIST

As at 30 June 2015
Ship		Ownership	Built year	Dwt	Employment	T/C‐rate (net USD/day)
Supramax
M/S Belstar	1	100 %	2009	58 018	T/C to 08/19	16 000
M/S Belnor	1	100 %	2010	58 018	T/C to 05/20	16 000
M/S Belocean	1	100 %	2011	58 018	T/C to 03/21	16 000
Ultramax
M/S Belforest	2	100 %	2015	61 000
Imabari newbuilding	2	100 %	2016	61 000
Imabari newbuilding	3	T/C	2017	63 000

1) In case of any sale, Belships has an option to cancel two of the three time charter parties after respectively 5 and 7 years from the ships were delivered.

2) Belships has signed an agreement with Canpotex Shipping Services Ltd to replace M/S Belnor or M/S Belocean with one of the newbuildings. The rate will be adjusted to USD 17,300/day net with effect from the date of delivery and until the expiry of the existing c/p period.

3) Delivery during 1st quarter of 2017 for long‐term lease with purchase option. Charter period is eight years with three annual renewal options. Purchase option may be exercised at the end of year 4 to JPY 3.01 billion, with an annual decrease of JPY 110 million.

CHARTER COVERAGE

Canpotex was established in 1972 by three Canadian potash producers: Agrium, Mosaic and PotashCorp. Canpotex manages transportation and has invested in 5,000 specialized railcars and two port terminals. Canpotex has supplied over 185 million mt of potash since 1974 to customers in countries like Australia, Brazil, China, India, Indonesia and Japan.

Founded in 1865, Cargill is the world's largest privately owned company. The company is an active producer and a supplier in industries as diverse as agriculture, oil, shipping and heavy industry. Cargill's ocean transportation business, headquartered in Geneva, operates one of the world's largest dry bulk charter fleets with over 550 vessels under their control at any one time, calling nearly 1,000 ports worldwide and shipping more than 220 million metric tons of dry bulk cargo each year.

20 LARGEST SHAREHOLDERS

As at 6 August 2015

Name	Number of shares	%
SONATA AS	28 856 030	60.94%
TIDSHIPS AS	6 201 058	13.10%
TIDEMAND SVERRE JØRGEN	2 891 462	6.11%
SKANDINAVISKA ENSKIL A/C CLIENTS ACCOUNT	987 419	2.09%
GEMSCO AS	537 058	1.13%
BELSHIPS ASA	498 000	1.05%
CARLINGS AS	400 000	0.84%
TIDINVEST II AS	315 414	0.67%
JENSSEN & CO A/S	302 816	0.64%
CHREM CAPITAL AS	270 000	0.57%
GRANADA MANAGEMENT A	260 000	0.55%
NAGATSUKA TORU	250 000	0.53%
KONTRARI AS	250 000	0.53%
SØLAND LIV	240 000	0.51%
STEEN CARL ERIK	207 203	0.44%
KIELLAND BERNHARD	200 000	0.42%
IMPORTER AS	191 401	0.40%
ASL HOLDING AS	175 000	0.37%
JSL AS	175 000	0.37%
SØLAND TORSTEIN c/o T. Søland Taktek	130 000	0.27%
OTHER SHAREHOLDERS	4 014 139	8.47%
Total outstanding shares	47 352 000	100.00%

Lilleakerveien 4, P.O.Box 23, Lilleaker, N‐0216 Oslo, Norway Tel: +47 22 52 76 00 chartering@belships.no www.belships.com Enterprise no: NO930776793MVA