Belships ASA – Report 1st quarter 2020

Commercial outperformance in challenging times

• Operating income of USD 33.6 million (Q1 2019: USD 31.1m)
• EBITDA of USD 4.9m (USD 10.1m)
• Net result of USD 0.2m (USD 2.5m)
• Net TCE earnings per ship of USD 8 636 per day versus BSI index of USD 6 232 net per day
• Outperformance of Baltic Supramax market index of 39 per cent
• 40 per cent of remaining ship days in 2020 are booked at USD 8 500 net per day
• 1 215 days, equivalent to 20 per cent of remaining ship days in 2020, have been hedged with FFA at USD 9 900 per day
• Average cash breakeven per vessel about USD 9 500 per day for next 12 months
• Commercial platform set to expand with establishment of Oslo office
• Taken delivery of newbuilds BELFUJI, BELMOIRA and BELAJA
• Modern fleet of 23 vessels with an average age of 5 years including newbuildings

Fleet status
Time charter earnings per ship in the quarter were recorded at USD 8 636 net per day versus BSI index of USD 6 232 net per day for the same period, representing a 39 per cent premium to market indices. Outperformance of the BSI index is due to the optimised portfolio of period charter coverage and outsized spot earnings achieved by our subsidiary Lighthouse Navigation.

Belships took delivery of two Ultramax newbuildings from Shin Kurushima shipyard during the quarter. The vessels were delivered in January and February and named BELMOIRA and BELAJA, respectively. The vessels are chartered in on bareboat charter for seven years with purchase options after the fourth year.

In January, the Company took delivery of Ultramax newbuilding BELFUJI from Imabari shipyard. The vessel is chartered in on time charter for eight years with purchase options after the fourth year.

PACIFIC LIGHT delivered in March to its charterer for the agreed bareboat and subsequent sale and a book gain of USD 2.5m was recorded in the quarter.

BELPAREIL was drydocked in February. The remaining fleet sailed without significant off-hire in the quarter.

Vessel transactions
As announced in December, Belships agreed to acquire a modern secondhand Ultramax bulk carrier from Japanese Owners for a price of USD 24.5m. The 63 000 dwt vessel was built in 2017 by Imabari shipyard and will be named BELHAVEN. Delivery is expected during the end of May, having passed its intermediate drydocking survey. The payment for the vessel will be settled by issuing new shares equivalent to 50 per cent of the purchase price at a subscription price of NOK 7.15 per share (USD/NOK 9.31), and the remaining in cash upon delivery. The vessel will utilise 60 per cent financing of the purchase price, hence, the transaction will have a positive cash effect of about USD 2.45 million.

These transactions signal the competitive advantage Belships has in sourcing ship finance. Belships’ fleet continues to increase and improve with only modest cash investments. Taking into consideration nine acquisitions and two divested vessels over the past 12 months the net cash effect is about USD 3m. The Japanese Ultramax bulk carriers entering the fleet represent the highest quality and lowest fuel consumption available in the market today.

Financial and corporate matters
At the end of the quarter, cash and cash equivalents was USD 34.8m. Mortgage debt was USD 129.6m, while net lease obligation was USD 143.5m.

The fleet will be cash positive at a day rate of about USD 9 500 for the coming 12 months. The rate includes dry docking and finance cash flows.

At the end of the quarter, book value per share amounted to NOK 7.74 (USD 0.74), while equity ratio was 35 per cent.

During January, Belships hedged its spot exposure by selling FFA contracts maturing from Q2 2020 to Q1 2021. The result in the quarter includes unrealised gain of USD 2.9m. About one third of the contracts were realised after the quarter. The FFA portfolio comprises 1 215 days of coverage at an average rate of USD 9 900 per day at the time of this report.

Market highlights
The outbreak of Coronavirus (COVID-19) has spread to most countries in the world and caused massive disruptions in terms of productivity, demand and unemployment. Economic growth has in many cases imploded leading to record high fiscal stimulus and quantitative relief measures from central banks and governments in an attempt to mitigate the consequences.

The adoption and implementation of low sulphur regulations (IMO 2020) proved to be much less of an availability issue than many predicted. Bunker markets have normalised quickly and the famously touted ‘spread’ narrowed to insignificant levels about USD 75 per tonne, measured as the average of the 20 main bunkering ports. We have no scrubbers installed in our fleet and we do not expect to change our position on this.
Our benchmark index BSI 58 averaged USD 6 232 net per day in the quarter – the lowest since 2016. Markets improved in February following the end of Chinese New Year holidays, however, towards the end of the quarter rates trended negative and have since sustained at very low levels.
It is important to note that volumes carried on Supramax and Ultramax vessels in the first quarter continued to increase compared to previous years. This highlights the fact that also the supply side needs to adjust. Recycling of older tonnage has been virtually non-existent since India imposed travel restrictions and neither Pakistan, Bangladesh nor China were active. At the time of this report, the publicly quoted Supramax and Ultramax order book is about 6 per cent of the total fleet – the lowest in almost 20 years.

Our markets remain affected from the Corona virus outbreak as both spot and period charter rates are significantly lower than usual. The second quarter has therefore come off to a historically weak start. Prospects remain highly uncertain, though we share the optimism that the virus will eventually be defeated, and that shipping and trade will rebound. Very few newbuildings are being contracted adding optimism for a tighter market as the orderbook becomes historically low. Importantly, one third of the registered order book is scheduled for delivery by the end of July which points towards fleet growth peaking soon.
Freight Forward Agreements (FFA) currently indicate a market for Supramaxes and Ultramaxes of around USD 8 500 and 9 500 per day within the end of the year. Belships has a uniform and modern fleet of 23 Supramax/Ultramax bulk carriers with a significant share of the fleet contractually covered for the rest of 2020. We are focused on maintaining a solid balance sheet and liquidity position. Our strategy is to continue developing Belships as a fully integrated owner and operator of geared bulk carriers, through quality of operations and target accretive growth opportunities.

15 May 2020

For further information, please contact Lars Christian Skarsgård, Belships CEO, phone +47 977 68 061 or e-mail

This information is subject to the disclosure requirements pursuant to Section 5-12 the Norwegian Securities Trading Act