Belships

Earnings Release • Feb 21, 2020

Belships ASA - Report 4th quarter 2019

Belships ASA - Report 4th quarter 2019

CONTINUED SPOT PERFORMANCE AND GROWTH

HIGHLIGHTS

?             Operating income of USD 40.4 million (Q4 2018: USD 29.2m)

?             EBITDA of USD 7.4m (USD 5.9m)

?             Net result of USD 2.1m (USD 1.2m, excl. purchase bargain gain)

?             Net TCE earnings per ship of USD 11 992 per day versus BSI index

of USD 10 226 net per day

?             70% of total ship days in Q1 2020 have been booked at USD 9 625

net per day

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

12 months

?             Ship-for-shares acquisition of 2017-built 63 000 dwt Ultramax for

delivery in Q2 2020

?             Bareboat agreement with purchase options for 64 000 dwt Ultramax

for delivery 2H 2020

?             BELEAST delivered to its charterer in December for the agreed

bareboat and subsequent sale

?             Agreement for bareboat charter and subsequent sale of PACIFIC

LIGHT

?             Modern fleet with an average age of 5 years including newbuildings

?             Initiated carbon footprint fleet study

Fleet status

Time charter earnings per ship in the quarter were recorded at USD 11 992 net

per day versus BSI index of USD 10 226 net per day for the same period. Net

earnings per ship in the full year amounted to USD 11 201 versus BSI index of

USD 9 451 net per day for the same period, representing a 19% premium to market

indices. Outperformance of the BSI index is due to the optimized portfolio of

period charter coverage and outsized spot earnings achieved by our subsidiary

Lighthouse Navigation.

On 23 October Belships took delivery of Ultramax newbuilding BELRAY from Shin

Kurushima, Japan.

On 3 December BELEAST delivered to its charterer for the agreed bareboat and

subsequent sale.

Following a breakdown in September, PACIFIC LIGHT resumed operations after

repairs in October. The remaining fleet sailed without significant off-hire in

the quarter.

Belships has initiated a carbon footprint fleet study and engaged an independent

third party to verify results. Belships aims to continue improving fleet

efficiency and report in accordance with the Poseidon Principles.

Ultramax newbuildings BELFUJI (Imabari), BELMOIRA and BELAJA (Shin Kurushima)

have been delivered during Q1 2020.

Two newbuilding resales of 64 000 dwt eco-design Ultramax bulk carriers will be

delivered during the second half of 2020 and 2021. In addition, Belships will

take delivery of a 2017-built Japanese 63 000 dwt Ultramax during Q2 2020.

Vessel transactions

In October, Belships entered into an agreement with Marti Shipping & Ship

Management of Turkey for a bareboat charter and subsequent sale of BELEAST. The

50 000 dwt bulk carrier was built in 2006 and was the oldest ship in Belships

fleet. BELEAST was delivered in December as planned and Belships realised a gain

of USD 4.4m. The Charterer has an obligation to purchase the vessel within 24

months and the net cash flow during the period will be approximately USD 3.5m

after repayment of outstanding loans.

In October, Belships agreed a 7-year bareboat charter for a 61 000 dwt Ultramax

bulk carrier newbuilding from Shin Kurushima, Japan. The vessel was delivered in

February 2020 and named BELAJA. The estimated cash breakeven for the Vessel upon

delivery is about USD 11 000 per day including operational expenses. Belships

paid a sum of USD 3m prior to delivery. The agreement comes with purchase

options below current market values and can be exercised after the fourth year

until the end of the charter.

In December, Belships announced it had entered into agreement for a 10-year

bareboat charter of a 64 000 dwt Ultramax bulk carrier newbuilding. The vessel

will be delivered by Imabari Shipyard during second half of 2020. Estimated cash

breakeven for the vessel upon delivery is about

USD 10 750 per day including operational expenses. Belships will pay a sum of

USD 3m upon signing contract, expected to occur during March 2020. The agreement

comes with purchase options below current market values and can be exercised

after the fourth year until the end of the charter.

In December, acquisition was announced for 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. Conditional subjects have been lifted and the

agreements will be signed forthwith. Delivery is expected during the second

quarter of 2020, after 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,

and the remaining in cash upon delivery. The vessel is intended to utilise 60

per cent financing from the existing Accordion Tranche,

equivalent to approximately 60 per cent 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 9 acquisitions and 2 divested

vessels over the past 12 months the net cash effect is less than 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 44.4m. Mortgage

debt was USD 136.6m, while net lease obligation was USD 78.7m.

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, the book value per share amounted to NOK 6.46 (USD

0.74), while the equity ratio was 39.2 %.

In Q1 2020, Belships realized its fuel oil hedging contracts at an accumulative

gain of USD 0.2m. The position was closed at average spread of USD 219 per mt.

EBITDA in the quarter includes an unrealised loss on the same fuel oil hedging

contracts of USD 1.3m. The Q1 2020 effect will be zero. Gains and losses have

been included as part of other gains/losses.

The company has reclassified management fees of USD 2.2m to other income in the

quarter. The gains relate to management fees in Belships Management Singapore on

agreements which stem mainly from periods before 2019.

Market highlights

The market slowed down in the fourth quarter as the BSI58 index averaged USD

10 226 net per day, from USD 11 886 net per day in the third quarter, as supply

growth increased slightly whereas shipment volumes flattened.

Year-on-year fleet growth trended below 3.0 per cent from the middle of 2018 to

the middle of 2019, after which vessel deliveries increased and brought the

growth rate to over 4.0 per cent by the end of the year. Going forward, the rate

of vessel deliveries seen since the summer of roughly 1 million deadweight per

month is likely to be maintained the first four or five months of 2020, after

which it will drop to about half a million per month for the remainder of the

year. The orderbook schedule for 2021 currently shows a marginal 0.2-0.3 million

deadweight per month for the entire year, and new ordering activity remains very

low.

On the demand side, Q4 was hit by an 'import ban' of coal into China as well as

a nickel ore export ban from Indonesia. China still imported 17.6 mill tons in

December, however this was significantly down from the 21 mill tons they

imported in October and November, again a drop from the 25 mill tons they

imported from May to September. The nickel ore ban reduced monthly export

volumes by 15 mill tons in Q4, which is equivalent to 250 Supramax shipments.

Apart from the decline in Nickel Ore and Coal volumes, other commodities grew

modestly so total volumes ended up falling by close to 3.0 per cent in the

fourth quarter compared to the third quarter.

The transition towards IMO 2020 started to affect bunkers prices and

availability in the fourth quarter. Bunkers spreads in the spot market peaked in

December above USD 300 per mt as measured by the difference in fuel price

between 3.5 and 0.5 per cent sulphur content. However, both price and

availability has rapidly adjusted and during January the spreads moved to USD

200 per mt whilst the forward curve is pointing towards USD 170 and below.

The weak start to the markets in 2020 is primarily due to the negative economic

impacts stemming from shutdowns in connection with the Corona virus. At the time

of writing, preliminary data shows that the shutdowns have clearly affected

economic activity. Consumption of steel, coal, copper and oil among others have

dropped by 20-40 per cent according to various reports.

Going forward, the near-term outlook is clouded as much depends on when China

resumes normal activity. However, when they do, it is probable to have a

significant positive effect as pent-up demand will come in addition to volume

normalization. Positive prospects remain for the overall market balance. Fleet

growth is expected decrease significantly from the summer, and leading

indicators are pointing to increased economic growth as low interest rates and

energy prices have coincided with continued credit growth and other economic

stimulus. The soft spot market from December in to the first part of 2020 is

however different from previous down cycles, most clearly evidenced by the

strength and contango in Forward Freight Assessments for the coming months. It

is worth observing that forward rates today for standard Supramax vessels for

the rest of 2020 are trading at USD 10 000 average, where adjusting

conservatively for an Ultramax would put the figure at about USD 11 300.

Subsequent events

Belships has entered into an agreement with Marti Shipping & Ship Management of

Turkey for a bareboat charter and subsequent sale of PACIFIC LIGHT. The 50 000

dwt bulk carrier was built in 2007, and is currently the oldest ship in

Belships' fleet. PACIFIC LIGHT will commence its charter during March or April

of 2020. Belships will realize a gain of approximately USD 2.4m upon delivery.

The Charterer has an obligation to purchase the vessel within 24 months and the

net cash flow during the period will be approximately USD 1.8m after repayment

of outstanding loans.

In January, an instalment of USD 6m for the USD 110m fleet financing originally

due in Q3 2020 was prepaid. Next ordinary instalment in that facility is due in

Q2 2021. Belships fleet financing has a maturity date in 2024.

Outlook

The Company will soon control a modern fleet of 23 dry bulk carriers, including

newbuildings, and continues to enhance its earnings with a combination of

charter backlog and spot market performance. The Supramax and Ultramax segment

continues to display the most attractive risk/reward within the dry bulk market.

Belships' strategy going forward is to grow as a fully integrated shipowner and

operator of geared bulk carriers. Through the vessel acquisitions, financing and

share issues, Belships has demonstrated its ability to deliver on this strategy.

Belships expects that further transactions may be available and intends to

pursue such transactions where accretive.

Following the transactions already announced and the issuances of new shares,

the company continues to increase the free float in the Belships share, as well

as broaden the shareholder base. It is Belships' intention to make further steps

to increase the liquidity in the share.

Belships maintains focus on capital discipline with the aim of returning capital

to the shareholders as an important part of the company's strategy.

21 February 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