Belships

Earnings Release • May 12, 2022

Belships ASA: Report 1st quarter 2022

Belships ASA: Report 1st quarter 2022

RECORD QUARTER - EXTRAORDINARY DIVIDEND AND POSITIVE MARKET OUTLOOK

HIGHLIGHTS

*  Operating income of USD 229.5m (USD 76.4m)

*  EBITDA of USD 60.5m (USD 14.7m) including USD 22.6m from Lighthouse

Navigation

*  Net result of USD 59.5m (USD 16.5m)

*  Declared ordinary dividend of USD 26.2m (NOK 1.00 per share)

*  Declared extraordinary dividend of USD 32.7m (NOK 1.25 per share)

*  TCE of USD 25 466 gross per day for owned fleet

*  Secured long term lease agreements for four vessels at competitive terms

*  90 per cent of ship days in Q2 are booked at about USD 24 700 gross per

day. 70 per cent of ship days in the next four quarters are booked at about

USD 24 000 gross per day.

*  Modern fleet of 29 vessels with an average age of 3.5 years and daily cash

breakeven for 2022 of about USD 10 000 per vessel

Subsequent events

Belships has entered into agreements for the acquisition of two modern 64 000

dwt Ultramax bulk carriers built at Japanese shipyards in 2019 and 2020. The

vessels are financed through time charter lease agreements for a fixed period of

about 5 years with options to extend for a further 2 years. Cash breakeven for

each vessel will be about USD 11 200 per day. Belships will pay a total of USD

12.0m as down payment upon delivery of the vessels. The agreements come with

options to repurchase the vessels significantly below current market levels.

There are no obligations to purchase the vessels at the end of the agreements.

The agreements are conditional upon certain steps to be completed by the parties

involved. Delivery of the vessels is expected within Q2 2022.

The vessels come with charter employment attached as follows:

About 2.5 years period time charter at a gross rate of USD 21 000 per day. The

Charterer has an option for two additional years at USD 21 000 and USD 22 000

per day.

About 6 months remaining period of a legacy time charter contract at a gross

rate of USD 13 600 per day.

Belships has declared an option to purchase the Ultramax bulk carrier BELNIPPON

(2018). The strike price is significantly below current market levels.

Conclusion is expected within Q3 2022.

Financial results commentary

Belships reports a net result of USD 59.5m for Q1 2022, compared to a net result

of USD 16.5m for Q1 2021. The increase in net result is mainly caused by the

improved freight market and Belships' increased fleet. EBITDA contribution from

Lighthouse Navigation was USD 22.6m in Q1 2022 compared to USD 3.5m in Q1

2021. The increase in EBITDA from Lighthouse Navigation is due to the expansion

of the companies and increased margins from freight trading. Net freight revenue

for owned vessels was USD 54.3m in Q1 2022 compared to USD 23.2m in Q1 2021. The

increase in net freight revenue is driven by an increase in TCE on owned vessels

from 12 802 in Q1 2021 to 25 466 in Q1 2022 and an increase in vessel days of

about 20 per cent.

Ship operating expenses were USD 13.4m in Q1 2022 compared to USD 10.8m in Q1

2021. The increase is due to growth in active days of about 20 per cent,

stemming from fleet expansion. Ship operating expenses include non-recurring

takeover costs for vessels delivered in the quarter of USD 0.4m, and Covid-19

related crewing expenses of USD 1.4m.

Fleet status

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

USD 25 466 gross per day versus BSI index of USD 25 155 gross per day for the

same period. The inherent lag in our business means that when the spot markets

fall, our outperformance will tend to be higher. Conversely, when the market

rises, our performance will tend to lag on a short-term basis. It is also

affected by a certain number of period time charter contracts which contribute

to our contract coverage for 2022-2023.

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

Contract coverage   90% 75% 69% 52% 40% 29%

TCE rate (USD/day)    24 758  23 486   23 617  23 716  23 432  23 260

BELTIGER was drydocked in the quarter, the remaining fleet sailed without

significant off-hire with a total of 2 243 on-hire vessel days.

Ultramax newbuildings BELYAMATO and BELMONDO are expected to be delivered from

Imabari Shipbuilding, Japan in November 2022 and January 2023.

Transactions

Belships entered into agreements to sell and lease back BELLIGHT and BELFOREST

on bareboat charters for 10 and 11.5 years, respectively. The lease agreements

have fixed rates for the entire period with an average cost of capital of about

4.4 per cent. Delivery occurred in Q1 2022 and net cash effect was about USD

14.0m in total.

Belships agreed to a new USD 116m loan facility with drawdown in Q1 2022.

Proceeds from the facility were used to repay all outstanding amounts under the

existing credit facility with two vessels being left unencumbered. The new loan

has a reduced margin of 225 basis points and a loan-to-value ratio of 55 per

cent, with the first instalment in 2023 and final maturity in 2027. Lenders for

the new loan facility are DNB Bank and Sparebank 1 SR-Bank.

Belships entered into agreement to sell and lease back BELYAMATO. The bareboat

charter is for 10 years. The lease agreement has a fixed rate for the entire

period with an average cost of capital of 4.6 per cent. Belships paid a sum of

USD 4.0m as down payment upon signing the agreement.

Belships entered into agreement to sell and lease back BELMONDO, an Ultramax

newbuilding which is scheduled for delivery in January 2023. The bareboat

charter is for 10 years and comes with options to repurchase the vessel at below

current market levels. There is no obligation to purchase the vessel at the end

of the agreement. The rate is fixed for the entire period with an average cost

of capital of 4.6 per cent. Belships has paid a sum of USD 4.5m as down payment

upon signing the agreement. The agreement is conditional upon certain steps to

be completed by the parties involved. Conclusion is expected within Q2 2022.

Belships' fleet has increased and improved with only modest cash investments,

signalling the competitive advantage Belships has in sourcing ship finance. 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 has delivered another strong result with EBITDA of USD

22.6m, continuing the performance from previous quarters. FFA gains of USD 3.5m

bring the EBIT result to USD 25.6m.

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 recently 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.

Financial and corporate matters

At the end of the quarter, cash and cash equivalents totalled USD 161.2m, whilst

interest bearing bank debt amounted to USD 114.5m.

Net leasing liability at the end of the quarter was USD 347.3m. Leasing

liabilities have been calculated under the assumption that all purchase options

to acquire Ultramax bulk carriers on bareboat charters will be exercised. 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 10.2 (USD

1.17), corresponding to a book equity ratio of 34 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 first quarter 2022 the Board declared an

ordinary dividend payment of USD 26.2m (NOK 1.00 per share) equivalent to about

55 per cent of net result adjusted for non-controlling interests.

Furthermore, the Board declared an extraordinary dividend payment of USD 32.7m

(NOK 1.25 per share) bringing the total dividend payments to USD 58.9m (NOK

2.25 per share).

Market highlights

In the first quarter, the Baltic Supramax Index (BSI-58) averaged USD 25 155 per

day - the highest start to a year since 2008. The first quarter is usually the

weakest period, due to factors like the Chinese New Year and seasonally lower

grain and iron ore shipments. In January, Indonesia implemented a coal export

ban which lowered export volumes for some weeks. However, as these temporary and

seasonal characteristics passed, the market regained strength and the BSI-58

climbed to USD 30 000 per day.

Total Supramax shipment volumes ended at 237 million tons in Q1 2022, slightly

down from 243 million tons in Q4 2021. However, considering the abovementioned

seasonal factors, the decline was negligible. In April, shipment volumes

rebounded, with 92 million tons shipped boding well for an upward trend into the

second quarter.

There were considerable variations in the demand growth for each commodity group

in Q1 2022. Breakbulk and other minor bulks grew by 7 and 9 per cent, year on

year, whereas coal and iron ore dropped by 22 and 52 per cent, respectively. The

strong growth in minor bulk commodities reflect high rates of global industrial

production, whereas the drop in coal was due to Indonesia's export ban, and the

drop in iron ore was due to lower demand from China as restrictive policies on

steel output remained in place. The freight markets continue to underline the

advantages of the versatile Supra/Ultramax segments compared to the rest of the

dry bulk market.

Port congestion persisted throughout the quarter and the Chinese government's

policy to fight the COVID-19 pandemic gives reason to expect that reduced vessel

sailing efficiency will continue to support a tight market balance.

Changes in trade patterns stemming from sanctioned Russian commodities is likely

to support ton-mile growth in the Supra/Ultramax segment. Average sailing

distances for European coal imports may see an increase as Russian coal will be

replaced by US, Colombian, South African, Indonesian and Australian coal. The

secondary effect of this is that Russian coal exported from Baltic, Black Sea

and Murmansk will have to be shipped to Asia. Such changes will probably be seen

for other commodities as well, like steel products and possibly also grains.

According to Fearnleys, 28 vessels were delivered in the first quarter, up from

21 vessels in the fourth quarter. 101 vessels remain on schedule for delivery

this year. However, given the pace of deliveries year-to-date and considering

that there are often order cancellations, slippage or even incorrectly reported

orders, that number is likely too high.

Relatively low newbuilding activity continued as the lack of conviction and

alternatives for fuel and propulsion systems appear to restrain demand for

ordering. Also, available delivery positions with shipyards appear to remain

distant, from the very end of 2024 or later. Year-to-date, 24 vessels have been

placed for order according to Fearnleys. For comparison, there were 112 vessels

placed for order last year.

Newbuilding prices steadily edge upwards as increased input costs as well as

full orderbooks for container and gas vessels dictate the position with

shipyards. Second-hand values have increased since the New Year, however current

values still appear low in comparison with earnings.

Outlook

The Baltic Exchange Supramax index YTD 2022 has averaged about USD 26 000 per

day with Ultramaxes earning an additional premium.

The sentiment in the Supra/Ultramax market remains strong and is expected to

continue in the near term. Freight Forward Agreements (FFA) for Supramax

currently indicate a market average of about USD 29 000 for the remaining part

of the year, which is an increase of 10 per cent from our previous report.

The supply side as observed from the number of deliveries and the publicly

quoted orderbook for our segment is historically low. On the back of stable

demand, we remain optimistic in terms of market prospects.

The purpose of growth has been to increase profitability and the value and

attractiveness of owning our shares. We are focused on capital discipline and

returning capital to shareholders. A competitive return for our shareholders is

to be obtained through 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 111.9m (NOK 4.10 per

share) to shareholders.

Belships is well positioned to capitalise on a strong dry bulk market with a

modern fleet of 29 Supra/Ultramax bulk carriers with an average age of 3.5 years

and daily cash breakeven for 2022 of about USD 10 000 per vessel.

Lighthouse Navigation continues to deliver strong results and has had a good

start to the second quarter. 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.

12 May 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