Belships ASA : Report 2nd quarter 2015

· Operating income of USD 5.6 m (Q1: USD 5.0 m)
· EBITDA of USD 2.7 m (USD 2.2 m)
· Net result of USD -4.0 m (USD -2.0 m)
· Impairment of the fleet included with USD -5.3 m (USD 0.0 m)
· All vessels operating normally – modern fleet – average age 5.1 years
· Contract coverage 100% for delivered vessels – USD 88 million fixed charter backlog
· Belforest fixed to Cargill for a period of 10-14 months
Second quarter 2015 results
Belships operating income in 2nd quarter 2015 was USD 5,594,000 (Q1 2015: USD 5,013,000), while EBITDA amounted to USD 2,734,000 (USD 2,213,000). The increase in operating income and EBITDA is mainly related to M/S Belnor, which was in drydock in 1st quarter. The Group’s operating result amounted to USD -3,640,000 (USD -1,037,000), while total comprehensive income for 2nd quarter 2015 was USD -4,007,000 (USD -1,986,000). Comprehensive income for the first six months of 2015 was USD -5,993,000 (2H 2014: USD -2,299,000). The increased loss is mainly explained by impairment of the fleet.
Impairment tests of the company’s assets were performed in accordance with IAS 36. The ships, newbuildings and charterparties are valued based on observable market values. Based on these valuations and assumptions, book value of the fleet has been reduced by USD 5.3 million in the 2nd quarter, in addition to ordinary depreciation of USD 1.0 million.
Fleet status
M/S Belstar, M/S Belnor and M/S Belocean 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. Net time charter rate is USD 16,000 per day, which is a favorable rate in the present market. 
The ships have sailed without significant off-hire, and operating expenses for 2nd quarter 2015 are close to budget. Technical management is handled by Belships Management (Singapore), with a total fleet of 20 ships under technical management.
Newbuilding program
Belships’ newbuilding program with Imabari Shipbuilding in Japan includes 2 x 61.000 dwt eco-design Ultramax bulk carriers for delivery in September 2015 and March 2016. In addition Belships has signed a long-term lease agreement incl. purchase option for a slightly larger sister vessel with delivery 1st quarter 2017.  
The newbuilding for delivery in September will be named M/S Belforest, and is fixed to Cargill for a period of 10-14 months. This c/p will generate an EBITDA of USD 1.15 million over the average period. 
Financial and corporate matters
As per 30 June the Group’s cash totaled USD 6.9 million compared to USD 6.1 million as per 31 March 2015. 
The mortgage debt balance as per 30 June was USD 43.7 million and was reduced by USD 1.3 million during the quarter. Remaining newbuilding commitment amounts to USD 39.6 million. Belships has established a loan facility covering 70% of the lower of contract price and market value at the time of delivery. 70% of contract price equals remaining newbuilding commitment. In addition Belships has established a long-term loan facility of SGD 2 million, secured by the lease agreement for our Singapore office. 
In August 2011 Belships entered into an interest rate swap agreement with 2 years forward start at 2.2% with a remaining duration of 3 years covering USD 15 million, reducing by USD 5 million per year. Another interest swap agreement with forward start was entered into in June 2015 at a rate of 1.9% and with a duration of 5 years covering USD 20 million, reducing by USD 2 million per year. Hedging the Group’s interest exposure is considered on an ongoing basis. The long-term interest rate is at a historical low level. Belships expects only a modest increase in the interest rate level for the coming 3-5 years. The hedging level of interest rate exposure is currently around 45%.    
At the end of the 2nd quarter of 2015, the book value per share amounted to NOK 9.90 (USD 1.26), while the equity ratio was 54.7%. 
Market highlights
The Capesize-index ended the second quarter at USD 9,468 per day, whereas the Panamax-index ended at USD 6,734 per day. The Supramax-index ended the quarter at USD 7,479 per day. As per today the Cape index stands at USD 13,790/day, Panamax-index at USD 8,410/day and Supramax-index at USD 9,460/day. 
The dry bulk market is moving up again, after a prolonged period with rates and values close to historical low levels. The Capesize rates have been lifted from barely covering operating expenses to a level offering return on investment. There is strengthened buying interest for modern second hand tonnage, and the values are picking up. 
International iron ore prices are still very low, and the likely effect for shipping is that China will import more of its iron ore, helping to absorb some of the tonnage overcapacity. Inventory level of iron ore in China was depleted during first quarter, so the current restocking of iron ore could mostly explain the rebound in Capesize rates.  
According to Bloomberg, the Chinese government is planning a new stimulus package to fund construction projects which will help the slowdown in Chinese economy. Such stimulus relating to construction spending is positive for dry bulk as it will lift demand for steel and iron ore. 
Belships is concentrating 100% on the dry bulk market, with 3 x 58,000 dwt Supramax in service and 3 x Ultramax newbuildings under construction by Imabari Shipbuilding in Japan for delivery from September 2015 until 1st quarter 2017. Our ambition is to further increase the fleet of high quality dry bulk carriers in tandem with a growing customer base.
The supply side is quickly adjusting to lower demand and during first half 2015 approx. 18 million dwt of dry bulk tonnage has been scrapped, mainly Capesize and Handysize. 
Ship values fell to historical low levels during the second quarter and are now strengthening again following the rate increase. 
Belships vessels are chartered out long-term on a fixed rate to a reputable counterpart, and short term market fluctuations will therefore not affect the Group’s cash flow. The charter parties represent a future nominal gross hire of USD 88 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, 21 August 2015

Questions should be directed to:
Ulrich Müller, CEO
+47 22 52 76 15

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