Belships

Earnings Release • Nov 10, 2022

Belships ASA: Report 3rd quarter 2022

Belships ASA: Report 3rd quarter 2022

CONTRACT COVERAGE SECURES PROFITABILITY AND DIVIDEND OUTLOOK FOR 2023

HIGHLIGHTS

* Operating income of USD 151.8m (USD 205.3m)

* EBITDA of USD 56.4m (USD 57.1m) including USD 10.1m from Lighthouse

Navigation

* Net result of USD 49.8m (USD 35.2m)

* Declared dividend of USD 18.4m (NOK 0.75 per share)

* TCE of USD 24 155 gross per day for owned fleet

* 90 per cent of ship days in Q4 2022 are fixed at USD 22 900 gross per day

* 64 per cent of ship days in the next four quarters are fixed at USD 22 300

gross per day

* Modern fleet of 31 vessels with an average age below four years and daily

cash breakeven for 2023 of about USD 10 900 per vessel

Subsequent events

BELYAMATO, an Ultramax newbuilding of 64 000 dwt was delivered in November 2022

from Imabari Shipyard in Japan.

Financial results commentary

Belships reports a net result of USD 49.8m for Q3 2022, compared to a net result

of USD 35.2m for Q3 2021. The increase is mainly driven by fleet expansion and

the book gain from the sale of BELPAREIL of USD 10.0m.

Net freight revenue for owned vessels was USD 61.4m in Q3 2022 compared to USD

50.3m in Q3 2021. The increase in net freight revenue is driven by an increase

in vessel days, partially offset by a reduction in TCE from USD 26 714 in Q3

2021 to USD 24 155 in Q3 2022.

Ship operating expenses were USD 12.8m in Q3 2022 compared to USD 14.7m in Q3

2021. Despite an increase in vessel days, ship operating expenses have decreased

significantly. The reduction is due to less Covid-19 related crewing expenses

and vessel takeover costs.

Fleet status

Time charter equivalent (TCE) earnings per ship in the quarter was recorded at

USD 24 155 gross per day. The fleet sailed without significant off-hire in Q3

with a total of 2 677 on-hire vessel days.

The Baltic Supramax Index (BSI) averaged USD 19 728 gross per day in the third

quarter. Relative performance versus spot indices is affected by a high number

of fixed period time charter contracts that contribute to our coverage for 2023

at levels far above current market rates.

Several period time charter contracts have been entered into during the quarter

increasing contract coverage for 2023 to 50 per cent at highly profitable

levels.

Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024

Contract coverage   90% 70% 55% 43% 33% 17%

TCE rate (USD/day)   22 900 22 500 21 700 21 500 21 500 21 500

Estimated cash breakeven for 2023 is USD 10 900 per vessel per day. This amount

includes OPEX of USD 5 300, interest and instalments of USD 4 850 per day, G&A

of USD 450 and drydocking expenses of USD 300.

Ultramax newbuilding BELMONDO is expected to be delivered from Imabari

Shipbuilding, Japan in January 2023.

Transactions

BELVEDERE (2015) and BELAFONTE (2017), two modern Japanese Ultramax bulk

carriers, were delivered in July. Belships paid a total of USD 15.5m upon

delivery. The vessels are currently financed through lease agreements with

purchase options significantly below current market levels. Belships has

declared the purchase options for both vessels and will re-finance the vessels

under available bank financing substantially covering the amounts due for the

purchase options. The vessels are currently chartered out on time charter

contracts until Q1 2023 at USD 18 000 and USD 24 500 per day, respectively.

BELPAREIL (2015) was delivered to its new Owners in July. A book gain of USD

10.0m was realised. Total net cash flow after delivery of the vessel was

approximately USD 28.5m.

The Japanese-designed bulk carriers entering the fleet represent the highest

quality and lowest fuel consumption available in the market today.

Lighthouse Navigation

Lighthouse Navigation delivered another strong quarter with an EBITDA of USD

10.1m, which includes provisions for potential loss-making contracts of USD

4.6m based on the forward freight market at the end of the quarter.

This brings the year-to-date EBITDA to USD 42.1m and average EBITDA in the last

12 quarters to USD 9.6m.

Sustainability

Belships aims for the highest standards in corporate governance and is well

placed to deliver emission cuts in line with industry ambitions for 2030.

Belships published a comprehensive sustainability report for 2021 (ESG Report)

reflecting our ongoing commitment to transparency and meeting investor and

stakeholder expectations.

Belships is compliant with the upcoming emission regulations from IMO in 2023

(EEXI) without additional CAPEX signalling the competitive advantage of Belships

modern eco-fleet.

The new Norwegian Transparency Act entered into force 1 July 2022 and Belships

has taken the necessary steps to be compliant.

Financial and corporate matters

At the end of the quarter, cash and cash equivalents totalled USD 116.3m, whilst

interest bearing bank debt amounted to USD 123.6m.

Net leasing liability at the end of the quarter was USD 452.7m. Leasing

liabilities have been calculated under the assumption that all purchase options

to acquire Ultramax bulk carriers on bareboat and time-charters will be

exercised except BELFUJI.

All lease agreements have fixed interest rates for the entire duration of the

charters.

Belships have no contractual obligations to acquire any of its leased vessels.

At the end of the quarter, book value per share amounted to NOK 12.09 (USD

1.11), corresponding to a book equity ratio of 29 per cent. Value-adjusted

equity is significantly higher.

Dividend policy

Belships ASA aims to distribute quarterly cash dividends targeting about 50 per

cent of net result adjusted for non-recurring items. Other surplus cash flow may

be used for accelerated amortisation of debt, share buy-backs or vessel

acquisitions considered to be accretive to shareholders' value.

Dividend payment

Based on the financial result in the third quarter 2022 the Board declared a

dividend payment of USD 18.4m (NOK 0.75 per share) equivalent to about 50 per

cent of net result adjusted for net minority interests and the sale of

BELPAREIL.

This brings the total dividends paid out since the inception of the dividend

policy in Q2 2021 to USD 149.8m (NOK 5.6 per share).

Market highlights

In the third quarter, the Baltic Supramax Index (BSI-58) averaged USD 19 700 per

day - down from USD 28 900 in the second quarter. With this market correction,

asset values have decreased as well. As a general observation, prices have

dropped about 10 per cent compared to Q2 2022. According to ship brokers, values

for modern vessels appear to hold better than those of older vintages.

Supra/Ultramax vessels continue to represent the strongest segment within the

dry cargo market.

According to Fearnleys, total Supramax shipment volumes ended at 250 million

tons, unchanged from the previous quarter. This is, however, about 5 per cent

lower compared to last year, when 264 and 258 million tons were shipped in Q2

and Q3 2021, respectively.

Port congestion has reversed from earlier this year and is now close to pre-

Covid normalised levels. This increase in sailing efficiency has affected rates

negatively in the quarter markedly.

China has continued to fight the pandemic with severe lockdowns in major cities.

The war in Ukraine exposed energy and commodity shortages which has accelerated

inflation. Usual volumes of wheat, corn, fertilizers and steel products have

been prevented from moving out of the Black Sea or Northwestern Russian ports.

In sum, fears of demand destruction from high commodity prices and rising

interest rates have subdued near term GDP forecasts.

According to Clarksons, 72 Supra/Ultramax vessels have been delivered year-to-

date, which totals 4.91m dwt. With less than two months left of the year, this

compares to about 7.0m dwt delivered in all of 2021, evidencing the falling rate

of newbuilding supply. 24 vessels remain on schedule for delivery this year and

103 for next year. However, given the pace of deliveries year-to-date and

considering that there are often order cancellations, slippage or even

incorrectly reported orders, the numbers may be lower. Fleet growth has been the

lowest on record in the last 20 years. With an orderbook of around 7 per cent,

we are soon approaching the lowest rate of supply growth in 30 years.

Low newbuilding activity for dry bulk continues as the lack of conviction and

alternatives for fuel and propulsion systems appear to restrain demand for

ordering. Relatively high newbuilding prices persist as higher input costs as

well as full orderbooks for container and gas vessels dictate the position with

shipyards. Also, available delivery positions with shipyards remain distant, at

least two years ahead. Lower second-hand vessel values appear attractive in

comparison with the cost of a newbuilding lending support to rather buy existing

ships on the water.

Outlook

The sentiment in dry bulk markets softened significantly in Q3 2022, however

spot market rates for Supra/Ultramax are still profitable. The Baltic Exchange

Supramax spot index is currently about USD 14 000. Forward Freight Agreements

(FFA) currently indicate a market average of about USD 13 500 for the remaining

part of the year, with Ultramax bulk carriers earning an additional premium.

Belships has contract coverage ensuring higher profitability than current market

levels. 90 per cent of ship days in Q4 2022 are covered at about USD 22 900 per

day, and 64 per cent of ship days in the next four quarters are fixed at about

USD 22 300 per day. All period contracts are fixed with highly reputable and

recognised charterers in the dry bulk market. Belships financing has been

secured for many years, and most of the debt is with fixed interest rates.

Lighthouse Navigation continues to deliver good results and is expected to

continue contributing to Belships' dividend capacity.

Looking ahead, towards 2023 and 2024, the supply side as observed from the

number of deliveries and the publicly quoted orderbook for dry bulk is

historically low. We therefore remain very optimistic in terms of medium to long

term market prospects.

We are focused on capital discipline and returning capital to shareholders. A

competitive return for our shareholders is to be obtained through an increase in

the value of the company's shares and the payment of dividends, as measured by

the total return. Since we announced a new dividend policy in Q2 2021, we have

returned a total of USD 149.8m (NOK 5.6 per share) to shareholders.

Belships owns a modern fleet of 31 Supra/Ultramax bulk carriers with an average

age below four years and daily cash breakeven for 2023 of about USD 10 900 per

vessel. Based on Belships' current contract coverage, we expect to generate

significant free cash flow and continue to pay quarterly dividends as announced

with our dividend policy.

10 November 2022

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