· Operating income of USD 6.4 m (Q1 2016: USD 6.0 m)
· EBITDA of USD 3.0 m (USD 2.5 m)
· Net result of USD 0.4 m (USD -16.5 m)
· All vessels operating normally – modern fleet – average age 4 years
· Contract coverage 100% for delivered vessels – USD 74 million fixed charter
· Belforest c/p extended for 10-14 months to Cargill
Second quarter 2016 results
Belships operating income in 2nd quarter 2016 was USD 6.4 million (Q1 2016: USD 6.0 million), while EBITDA amounted to USD 3.0 million (USD 2.5 million). The Group’s operating result amounted to USD 2.1 million (USD -14.9 million), while total comprehensive income for 2nd quarter 2016 was USD 0.4 million (USD -16.5 million).
Impairment tests of the company’s assets were performed in accordance with IAS 36. The ships and charterparties are valued based on observable market values. Based on these valuations and assumptions, no adjustment has been made in the 2nd quarter.
M/S Belstar, M/S Belnor and M/S Belisland have continued the long-term contracts to Canpotex of Canada. Canpotex is one of the world’s largest exporters of potash, a fertilizer product imported in large volumes by countries such as China, India and Brazil. M/S Belocean has continued the c/p to Cargill. Cargill has extended the c/p with M/S Belforest for a 10-14 month period from 18 July at charter rate of around USD 6,000 per day.
All ships have sailed without significant off-hire, and operating expenses for 2nd quarter 2016 are below budget. Technical management is handled by Belships Management (Singapore), with a total fleet of 20 ships under technical management.
Belships’ remaining newbuilding program with Imabari Shipbuilding in Japan includes one 63.000 dwt eco-design Ultramax bulk carrier on a long-term lease agreement incl. purchase option for delivery in January 2018.
Financial and corporate matters
As per 30 June the Group’s cash totaled USD 8.6 million compared to USD 11.4 million as per 31 March 2016.
The mortgage debt balance as per 30 June was USD 38.8 million. Net lease obligation as at 30 June was USD 45.5 mill. In addition Belships has a long-term loan facility of SGD 2 million, secured by the lease agreement for our Singapore office. Net lease obligation and mortgage debt were reduced by USD 1.6 in 2nd quarter.
Hedging the Group’s interest exposure is considered on an ongoing basis. The hedging level of interest rate exposure is currently around 75% (leases excluded). The long-term interest rate is still at a historical low level.
At the end of the 2nd quarter of 2016, the book value per share amounted to NOK 3.34 (USD 0.40), while the equity ratio was 17.2%. Added value related to the long-term charterparty for M/S Belisland in excess of USD 10 million is not included in the balance sheet.
The Capesize-index ended the second quarter at USD 7,110 per day, whereas the Panamax-index ended at USD 5,296 per day. The Supramax-index ended the quarter at USD 6,477 per day. As per today the Cape index stands at USD 6,507 per day, Panamax-index at USD 5,767 per day and Supramax-index at USD 6,768 per day.
The current record-low second hand values have encouraged many buyers to act, and there is an increasing interest for modern tonnage. The second hand values according to the Baltic S&P Assessment have therefore increased steadily last few months, and the latest valuation of a 5-year old Supramax is USD 12.6 m.
International iron ore prices have increased to approximately USD 60/ton as a result of the growing demand from China. It is still believed that China will be forced to shut down loss-making domestic production and import more of its iron ore, helping to absorb some of the tonnage overcapacity. The smaller sized vessels like Supramax/Ultramax should benefit from a growing Chinese exports of steel products and imports of minor bulks like bauxite, fertilizer, soya beans and grains.
Belships is concentrating 100% on the dry bulk market, with 5 x Supramax/Ultramax in service. In addition we will take delivery of a 63,000 dwt Ultramax from Imabari Shipbuilding in January 2018 for long term lease incl. purchase option.
Seasonally adjusted, iron ore imports to China in 2016 is expected to reach more than 1bn tons, as first half is typically weaker due to low construction activity. This translates into a ton-mile demand growth of approx 2%.
New vessel ordering is now down to almost zero and the high scrapping activity continues, although, at a slower pace than during Q1. Many analysts believe the scrapping this year will end around 40m dwt, which, if so, will almost balance out the expected deliveries of new vessels during 2016 adjusted for slippage, delays and cancellations.
Belships vessels are chartered out on fixed rates to reputable counterparts, representing a future nominal gross hire of USD 74 million.
Focus will be to further develop Belships as an owner/operator of modern bulk carriers to reputable counterparts. Our ambition is to build a portfolio of quality vessels and robust charter parties that will generate distributable cash flows.
Oslo, 17 August 2016
THE BOARD OF BELSHIPS ASA
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