Belships

Earnings Release • Apr 28, 2016

Belships ASA : Report 1st quarter 2016

Belships ASA : Report 1st quarter 2016

HIGHLIGHTS

·             Operating income of USD 6.0 m (Q4 2015: USD 5.9 m)

·             EBITDA of USD 2.5 m (USD 2.2 m)

·             Net result of USD -16.5 m (USD -20.0 m)

·             Impairment of the fleet included with USD -13.8 m (USD -19.9 m)

·             All vessels operating normally - modern fleet - average age 4

years

·             Contract coverage 100% for delivered vessels - USD 75 million

fixed charter

·             Belocean fixed for 10-15 months to Cargill

·             Belisland delivered 15 March and fixed to Canpotex for a period of

5 years

First quarter 2016 results

Belships operating income in 1st quarter 2016 was USD 6.0 million (Q4 2015: USD

5.9 million), while EBITDA amounted to USD 2.5 million (USD 2.2 million). The

Group's operating result amounted to USD -14.9 million (USD -19.1 million),

while total comprehensive income for 1st quarter 2016 was USD -16.5 million (USD

-20.0 million). Operating result is negatively impacted with a loss amounting to

USD 2.3 million relating to the sale and leaseback on M/S Belisland and a

provision for an unfavourable timecharter contract.

Impairment tests of the company's assets were performed in accordance with IAS

36. The ships 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 13.8 million in the 1st quarter, in addition to ordinary

depreciation of USD 1.3 million.

Fleet status

M/S Belstar, M/S Belnor and M/S Belocean have (until mid February) 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. M/S Belforest was delivered to

Cargill ex yard in September for a 10-14 month period at charter rate of around

USD 8,000 per day. M/S Belisland was delivered to Canpotex ex yard on 15 March

and entered the 5 years c/p at USD 17,300 per day at the expense of M/S Belocean

being redelivered. In February M/S Belocean was fixed to Cargill for 10-15 month

period at a charter rate of around USD 4,000 per day.

All ships have sailed without significant off-hire, and operating expenses for

1st quarter 2016 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' remaining newbuilding program with Imabari Shipbuilding in Japan

includes one 63.000 dwt eco-design Ultramax bulk carrier on a long-term lease

agreement incl. purchase option. In March it was agreed to delay the delivery

from Q1 2017 until January 2018.

Financial and corporate matters

As per 31 March the Group's cash totaled USD 11.4 million compared to USD 8.0

million as per 31 December 2015.

The mortgage debt balance as per 31 March was USD 40.0 million. Net lease

obligation as at 31 March was USD 45.9 mill. In addition Belships has a long-

term loan facility of SGD 2 million, secured by the lease agreement for our

Singapore office.

The ship values dropped significantly during the quarter. In order to avoid

breach of loan covenants, Belships received an adjusted waiver from ship

mortgage lender in March 2016. Main revised terms in the waiver period until 1

January 2017 are as follows: No minimum value requirement, minimum free cash USD

3,5 million, restricted cash deposit USD 4,0 million, and on-demand guarantee

from main shareholder of USD 5 million.

Hedging the Group's interest exposure is considered on an ongoing basis. The

hedging level of interest rate exposure is currently around 85% (leases

excluded). The long-term interest rate is still at a historical low level.

At the end of the 1st quarter of 2016, the book value per share amounted to NOK

3.25 (USD 0.39), while the equity ratio was 16.5%. Added value related to the

long-term charterparty for M/S Belocean amounting to USD 12.6 million is not

included in the balance sheet. Value adjusted equity is assessed to be 25% (NOK

5.46 per share).

Market highlights

The Capesize-index ended the first quarter at USD 2,518 per day, whereas the

Panamax-index ended at USD 4,008 per day. The Supramax-index ended the quarter

at USD 4,981 per day. As per today the Cape index stands at USD 9,170 per day,

Panamax-index at USD 5,618 per day and Supramax-index at USD 5,987 per day.

In Q1 2016 China's import of iron ore ended at 242m tons, which is all-time

high. At the same time the scrapping activity has been record high, with 15m dwt

being recycled. This has pushed market values and freight rates up for all

sizes, despite the high number of new ships traditionally delivered during Q1.

International iron ore prices have increased to approx USD 60/ton as a result of

the growing demand from China. It is still believed that China will be forced to

shut down loss-making domestic production and import more of its iron ore,

helping to absorb some of the tonnage overcapacity. This will be of vital

importance for the Capesize segment. The smaller sized vessels could benefit

from a growing Chinese exports of steel products and imports of minor bulks like

bauxite, fertilizer, soya beans and grains.

Strategy

Belships is concentrating 100% on the dry bulk market, with 5 x

Supramax/Ultramax in service. In addition we will take delivery of a 63,000 dwt

Ultramax from Imabari Shipbuilding in January 2018 for long term lease incl.

purchase option.

Outlook

Seasonally adjusted, iron ore imports to China is expected to reach more than

1bn tons, as Q1 is typically weaker due to low construction activity. This

translates into a ton-mile demand growth of approx 2%.

New vessel ordering is now down to almost zero and the high scrapping activity

continues, although, presumably, at a slower pace than during Q1. Many analysts

believe the scrapping this year will end around 50m dwt, which, if so, will

balance out the expected deliveries of new vessels during 2016.  A possible

scenario is therefore zero-growth for the supply side.

Belships vessels are chartered out on fixed rates to reputable counterparts,

representing a future nominal gross hire of USD 75 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, 28 April 2016

THE BOARD OF BELSHIPS ASA

Questions should be directed to:

Ulrich Müller, CEO

+47 22 52 76 15

This information is subject to the disclosure requirements pursuant to section

5-12 of the Norwegian Securities Trading Act.

[HUG#2007819]