Belships

Quarterly Report • Aug 22, 2024

Belships ASA: Report 2nd quarter 2024

Belships ASA: Report 2nd quarter 2024

STEADY COURSE - SOLID RESULTS AND CONTINUED DIVIDEND

HIGHLIGHTS

* EBITDA of USD 29.3m including USD 2.9m from operating business

* Net result of USD 18.9m

* Declared dividend of NOK 0.55 per share

* Sold two debt-free Supramax vessels (2016-built) for a total of USD 56.6m

* Declared purchase option for BELMAR (2021-built) for a price of USD 25.5m

* Acquired 2024-built Ultramax bulk carrier for USD 41m to be delivered in Q1

2025

* Expanded newbuilding program with two new leased vessels in 2027 and 2028

* Extended and amended bank financing on improved terms - new maturity Q2 2029

* TCE of USD 16 982 gross per day for owned fleet

* 83 per cent of ship days in Q3 2024 are fixed at USD 16 800 gross per day

* 41 per cent of ship days in the next four quarters are fixed at USD 16 650

gross per day

* Cash breakeven for 2024 of about USD 10 900 per day per vessel

* Uniform fleet of 41x Ultramax vessels including 12x newbuildings to be

delivered 2024-2028

Financial results commentary

Belships reports a net result of USD 18.9m for the quarter compared to USD

15.7m in the previous quarter. The higher net result is primarily caused by a

realised book gain following the reorganisation of the operating business.

Time charter equivalent earnings (TCE) in the quarter were USD 16 982 gross per

vessel per day. In comparison, the Baltic Supramax Index (BSI-58) averaged USD

15 005 gross per day.

Ship operating expenses amounted to USD 5 148 per vessel per day during the

quarter compared to USD 5 512 per vessel per day in the previous quarter. The

lower operating expenses is primarily due to lower maintenance expenditure than

normal during the quarter and timing differences.

Transactions

Belships entered into agreements for the sale of Supramax vessels BELFRIEND

(2016) and BELTIDE (2016), for a price of USD 28.3m per vessel. BELFRIEND and

BELTIDE were delivered to their new owners in August and the Company will

realise a gain of approximately USD 6m in Q3 2024. The vessels were debt free,

therefore total cash proceeds to the company was USD 56.6m.

The purchase option for BELMAR (2021) has been declared and closing will take

place in Q4 2024. The purchase price is USD 25.5m and is significantly below

current market value. The acquisition will be financed from the company's

available cash.

Belships has agreed to acquire a 64 000 dwt Japanese-built Ultramax (2024-

built). The purchase price is USD 41.0m and the vessel will be delivered within

Q1 2025. The intention is to utilise our available Accordian Tranche which

implies financing for 60 per cent of the purchase price and the remaining will

be financed from the company's available cash.

Belships has expanded its newbuilding program with two new 64 000 dwt Ultramax

bulk carriers which will be delivered in 2027 and 2028. The vessels are leased

on similar terms as previously announced transactions, and Belships is not

required to make any down payments for these vessels.

Following the reorganisation of our operating business announced in the previous

quarter, USD 10m cash as part consideration was received in July and will

therefore be recorded in Q3 2024. A further cash consideration of USD 4m will be

received within Q2 2025.

Belships amended a USD 90m Term Loan Facility for six vessels, which is the only

senior secured bank loan in the company today. The Loan Facility has an interest

rate of SOFR+195 bps which is 55 bps lower than the previous facility. The loan

matures in April 2029 and the first instalment is due in 2025. Furthermore, a

new undrawn Accordion Tranche of USD 100m has been made available.

Fleet status

In May, one of our vessels was involved in a collision, without human injury,

and the incident caused the vessel to be off-hire for about 50 days. The vessel

has been repaired and has returned to service. The financial loss for the

company was limited to about USD 0.5m as this was an insured event.

The remaining fleet sailed without significant off-hire with a total of 2 673

on-hire vessel days in the quarter.

Since December last year, Belships vessels have not transited the Red Sea, and

none of our vessels have been involved in any related incidents.

Contract coverage   Q3 2024 Q4 2024 Q1 2025 Q2 2025

Fixed-rate contracts   83% 45% 29% 8%

Average fixed-rate (USD/day)   16 800 16 250 16 400 16 250

Index-linked contracts   16% 35% 31% 22%

Open/Uncontracted   1% 20% 40% 70%

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100% 100% 100% 100%

Belships currently has 11 vessels chartered out on floating index-linked

contracts on varying durations, at an average premium of 117 per cent to the

Baltic Supramax Index (BSI-58). Belships has the option to convert any part of

the remaining period to a fixed rate based on the prevailing FFA curve from time

to time.

Cash breakeven for 2024 is expected to be about USD 10 900 per vessel per day.

This includes OPEX, interest and amortisation, G&A and drydocking expenditures.

Newbuildings

12x Japanese design 64 000 dwt Ultramax bulk carriers

BELGRACE          expected delivery Q3 2024

BELFORTUNE    expected delivery Q4 2025

BELFOX               expected delivery Q4 2025

BELFUTURE       expected delivery Q2 2026

BELAVANTI         expected delivery Q4 2026

BELTEMPO         expected delivery Q4 2026

BELROSSO         expected delivery Q1 2027

BELSTAR             expected delivery Q3 2027

BELVICTORY      expected delivery Q4 2027

BELNOR              expected delivery Q1 2028

BELOCEAN         expected delivery Q2 2028

BELFRIEND        expected delivery Q3 2028

All vessels are leased on time charter for a period of 7 to 10 years from

delivery, with purchase options around current market levels. There is no

obligation to purchase any of the vessels. Cash breakeven for the vessels upon

delivery is about USD 14 300 per day on average. Belships is not using any

equity, therefore this newbuilding program will not have any impact on cash and

dividend capacity during the construction period.

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

quality and lowest fuel consumption available in the market today and will

contribute to further reduce Belships' carbon emissions on an intensity-basis.

Operating business

Following the reorganisation of our operating business announced in the previous

quarter, USD 10m cash as part consideration was received in July and will

therefore be recorded in Q3 2024. A further cash consideration of USD 4m will be

received within Q2 2025.

Furthermore, Lighthouse Navigation AS has changed its name to Norwegian Bulk

Carriers AS. The company focuses on dry bulk operating in the Atlantic region

and Belships ASA owns 67 per cent with the remaining shares held by leading

employees.

Norwegian Bulk Carriers recorded an EBITDA of USD 2.9m for the quarter and

continues to contribute to Belships profitability and dividend capacity.

The average EBITDA per quarter in the last five years for Norwegian Bulk

Carriers has been USD 2.7m.

Sustainability

Belships aims for high standards in corporate governance and is well placed to

deliver emission cuts in line with industry ambitions for 2030. Belships

publishes a sustainability report on an annual basis (ESG Report) reflecting our

commitment to transparency and efforts to meet investor and stakeholder

expectations.

Belships was ranked in the top quartile in the Webber Research Report: 2023 ESG

Scorecard, which aims to identify where each company ranks against its listed

peers within the shipping industry.

Belships' vessels are compliant with the new emission regulations from IMO

without additional investments signalling the competitive advantage of owning a

modern fleet.

Financial and corporate matters

At the end of the quarter, cash and cash equivalents totalled USD 92.2m, whilst

interest bearing bank debt amounted to USD 89.2m.

Leasing liabilities at the end of the quarter amounted to USD 447.4m, details on

a per vessel basis can be found in disclosure 4 to the financial statement.

All leased vessels are calculated with the assumption that purchase options to

acquire the vessels will be exercised. However, Belships has no obligation to

acquire any of the leased vessels.

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

contracts and all purchase options are denominated in USD.

At the end of the quarter, book value per share amounted to NOK 11.9 (USD

1.12), corresponding to a book equity ratio of 33 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 Q2 2024 the Board declared a dividend payment

of NOK 0.55 per share (USD 13.2m in total) equivalent to 70 per cent of the net

result.

This brings the total dividends paid out since Q2 2021 to NOK 9.85 per share.

Market highlights

In the second quarter, the Baltic Supramax Index (BSI-58) averaged USD 15 005

per day - up from USD 12 961 per day in the preceding quarter. The Baltic

Ultramax Index (BSI-63) averaged USD 17 065 per day in the second quarter, up

from USD 15 268 per day in the preceding quarter.

Asset values continued to rise in the second quarter. According to Fearnleys

assessments, a 5-year-old Japanese-built Ultramax rose from USD 34.0m to USD

35.0m, and values have increased for all vintages. This development has

continued into the third quarter.

According to Fearnleys, preliminary estimates for Q2 2024 shipment volumes were

an all-time high of 291 million tonnes, up from 270 million tonnes in Q1 2024.

Comparing with the same quarter last year, all commodity groups were higher,

with iron ore shipments growing the most at a strong 13.5 per cent. Shipments of

the other major commodity groups show a growth of between 2.5 and 4.1 per cent.

Port congestion, as measured by the average waiting time in port for ships to

discharge, remained at similar levels to the first quarter. However, waiting

time in port for ships to load continued to drop, as did the average sea voyage

duration. The total average voyage duration therefore reduced somewhat compared

to first quarter levels, partly offsetting the strong growth in shipment

volumes. Average vessel speeds remained relatively low however this seems to

follow a trend over the past several years of decreasing normal sailing speeds.

46 Supra/Ultramax vessels were delivered in the second quarter of 2024, compared

to 36 vessels in the previous quarter, according to Fearnleys. 70 vessels remain

to be delivered in 2024. The number of ships delivered per quarter compares to

an existing fleet of Supra/Ultramax vessels on the water today of about 4 100 in

total. Fleet growth has been around 3.5 per cent since May 2023. According to

Fearnleys, this rate of fleet growth will be maintained through 2024. The

orderbook for dry bulk remains close to all-time lows at about 8.5 per cent

compared to the existing fleet.

Relatively low newbuilding activity for dry bulk continues as higher prices as

well as full orderbooks and continued high demand for other vessel segments

dictate the position with shipyards. Lack of conviction and alternatives for

fuel and propulsion systems also appear to restrain new orders to some extent.

Available delivery positions with reputable shipyards appear increasingly

distant, with some new orders being reported in 2027, and 2028. A potential lead

time of four years for a bulk carrier is unprecedented.

Outlook

The Baltic Exchange Supramax index is currently at about USD 14 250, which

translates into about USD 16 500 for Ultramax bulk carriers in the spot market.

The FFA market (Forward Freight Agreements) currently indicates a market average

of around USD 17 500 for an Ultramax bulk carrier for the remaining part of

2024. Ship values have continued to increase, and demand is particularly strong

for modern and economical vessels.

Belships has fixed-rate contract coverage for 83 per cent of ship days in Q3

2024 at about USD 16 800 per day, and 41 per cent of ship days in the next four

quarters at about USD 16 650 per day. All period contracts are fixed with highly

reputable and recognised charterers.

The recent declaration of the purchase option for BELMAR signals the significant

value inherent in our leased vessels, which including newbuildings on order,

count 32x in total. At the time of writing, we expect to declare all purchase

options within expiry of each lease agreement.

Belships financing has been secured for many years ahead, and most of the debt

is with fixed interest rates significantly below current market levels. Belships

is therefore able to combine meaningful leverage with a low cash breakeven of

USD 10 900 per day per vessel in 2024.

With 12 Ultramax newbuildings under construction for delivery between 2024 and

2028, Belships will be taking over new vessels whilst the orderbook and the rate

of supply growth approaches the lowest levels in 30 years. We believe the best

way for Belships to approach the green shift is to own and operate the most

efficient vessels currently available, with a financing structure that gives

unparalleled optionality and flexibility.

We are focused on financial discipline and returning capital to our

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.

Based on Belships' current contract coverage and market expectations, we expect

to generate free cash flow and continue to pay quarterly dividends.

22 August 2024

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