FINANCIAL PERFORMANCE
Belships recorded operating income of USD 14,594,000 (2003: USD 9,906,000) and an operating result of USD 4,702,000 (USD 756,000) in the first quarter. The 2004 operating result follows a USD 0.5 million capital gain on the sale of the M/T Belgrace, while the 2003 figure includes a USD 0.5 million capital gain on the sale of the shares in Belobo Shipping Ltd. The substantial improvement in the group’s operating result is due to a stronger dry bulk market and the fact that Gibson Gas Tankers was sold in 2003.
The post-tax result for the period was USD 3,564,000 (USD 410,000).
SEGMENTAL RESULTS
The product tanker business generated an operating result of USD 483,000 (USD 1,158,000) in the first quarter. Following the sale of M/T Belgrace, Belships no longer has any significant investment in this segment. Belships has, however, chartered a newbuilding with delivery at the end of 2006.
The dry bulk business generated an operating result of USD 4,417,000 (USD 486,000).
The ship management business generated an operating result of USD 38,000 (USD 107,000).
OPERATIONS
Dry bulk rates hit new record highs in the first quarter, but fell slightly towards the end of the period.
Demand from China in particular is strong, but there is a great deal to suggest the emergence of capacity problems on several fronts. The authorities have expressed concern over construction activity growing too rapidly, with the danger of an overheated economy. It remains to be seen whether they succeed in cooling the economy in a controlled fashion.
M/S Belnor and M/S Belisland continued on their charters without any particular operational problems.
The Capesize cooperation with Bocimar contributed USD 592,000 to the group’s result in the first quarter.
Elkem Chartering (EC) continued to step up its activity in the Handysize segment and, thanks to its market position, was able to further increase its earnings despite the high rates, leading to a very satisfactory contribution to the group’s result.
In the Handymax segment, EC has reached agreement with its French partner on ending the pool arrangement for the M/S Pax Phoenix from 1 April, after which the vessel will enter into a time charter until March 2007 at a rate which will contribute around USD 2.2 million to the group’s result annually.
FINANCIAL POSITION AND OTHER INFORMATION
The group’s financial position was strengthened during the first quarter through profitable operation and the sale of M/T Belgrace.
The group had cash of USD 17.4 million on 31 March, against USD 10.0 million at the end of 2003. Mortgage debt was reduced by USD 1.6 million during the period to USD 17.0 million on 31 March. Shareholders’ equity was equivalent to NOK 6.55 per share and 49.4% of assets at the end of the period.
The market value of M/S Belnor is substantially higher than her book value.
OUTLOOKS
If the Chinese authorities succeed in their efforts to curb growth in the economy, the upswing in the dry bulk market may have peaked.
The tight tonnage balance and limited influx of new tonnage in the short term will probably result in volatile rates in the immediate future.
To ensure satisfactory earnings in the longer term, the company has found it appropriate to exploit the market situation by securing long-term employment for its vessels in the Handymax and Panmax segments. With the exception of the M/S Belpareil and M/S Belnor, which are fixed on charters until mid-2005, the other vessels have been fixed on charters running for the remaining minimum period or until 2007/08.
We anticipate good results of EC’s handysize activities in 2004.
Oslo, 5 May 2004
The Board of BELSHIPS ASA