Belships ASA – Report 2nd quarter 2019



  • Operating income of USD 29.6 million (Q2 2018: USD 21.6 m)
  • EBITDA of USD 8.0 m (USD 3.5 m)
  • Net result of USD 0.1 m (USD -0.1 m) impacted by one-off costs
  • All ships operating normally – modern fleet – average age 7 years
  • Efficient utilization and continued outperformance of spot market
  • Net TC earnings per ship of USD 10 996 per day versus net BSI index of USD 8 167 per day
  • Proposal of dividend payment in Q3 of NOK 0.05 per share
  • Private placement successfully completed
  • Cash breakeven about USD 7 000 per day for remaining open days next 12 months
  • 90% of ship days in Q3 have been booked at USD 11 250 net per day
  • All owned Vessels changed to Norwegian flag (NIS)
  • Three bareboat charter agreements with purchase options concluded in Q3

Fleet status
Net earnings per ship was recorded at USD 10 996 per day net versus BSI index of USD 8 167 per day net for the same period. This outperformance of the index is due to the optimized portfolio of period charter coverage and outsized spot earnings earned by our subsidiary Lighthouse Navigation.
Of the spot trading ships in the fleet, net earnings of USD 9 094 per day shows a premium in excess of 11% to the BSI spot index was achieved in the quarter.

M/V Belcargo (ex Viola) was taken over in May, M/V Sofie Victory in July and M/V Belfri (ex Sephora) in August.

All ships have sailed without significant off-hire. Belships Management (Singapore) will soon have the technical management for 21 vessels, and crewing management for 36 ships enhancing the earnings and contribute positively to the Belships’ EBITDA.

Vessel transactions
During July, Belships announced that it had entered into an agreement to bareboat charter a newbuilding resale for a period of up to 10 years. The vessel is a 64 000 dwt Ultramax bulk carrier and will be delivered from a Japanese shipyard in the second half of 2021. Belships has purchase options at around today’s market levels as from end of the fourth year and throughout the remaining charter period. This fully financed vessel calculates total cost of capital to about 5.5 per cent.

Furthermore, Belships has agreed 7 year bareboat charters for two 61,000 dwt Ultramax bulk carrier newbuildings. The vessels will be delivered by a Japanese shipyard during the fourth quarter of 2019 and first quarter of 2020. The estimated cash breakeven for the Vessels upon delivery is about USD 11,000 per day including operational expenses. Belships ASA will pay a sum of USD 3 mill per Vessel prior to delivery. The agreements come with purchase options below current market values and can be exercised as from the fourth year until the end of the charter.

We believe this strongly signals the competitive advantage Belships has in sourcing ship finance.

Newbuilding program – no outstanding capex
Belships’ newbuilding program has been expanded and now consists of four vessels, all Japanese eco-design Ultramax bulk carriers. One vessel will be delivered during Q4/2019, two vessels in Q1/2020 and the fourth during 2H/2021.

Financial and corporate matters
The Board proposes a dividend payment in Q3 of NOK 0.05 per share.

In Q2 Belships raised NOK 72.6 mill. (equivalent to approx. USD 8.3 mill.) through allocation of 10,372,187 shares. The book was composed of high quality private and institutional investors. In July additional 558,541 shares were allocated in a subsequent subscription. Through the completion of these transactions and the three ship for shares transactions concluded in Q1 and Q2, the company has successfully expanded its shareholder base and increased the tradeable free float of the Belships share.

As at 30 June the Belships cash totaled USD 47.4 million. The mortgage debt as per 30 June was USD 116.2 million, while net lease obligation was USD 64.9 million. In addition Belships has a long-term loan facility of SGD 2 million, secured by the lease agreement for our Singapore office. The company is in compliance with all covenants.

Refinancing of Belships mortgage debt is now completed and Belships liquidity position is solid. Remaining accordion facility is amounting to USD 15 mill.

The company will be cash positive (after opex, overhead and debt service) at a day rate of about USD 7 000 for the remaining open ship days in the coming 12 months.

The hedging level of interest rate exposure is currently around 60% including lease agreements not included in the balance sheet.

At the end of the Q2 2019, the book value per share amounted to NOK 6.55 (USD 0.77), while the equity ratio was 41.0 %.

With effect from 1 January 2019, Belships adopted IFRS 16 Leases. The new standard is following the modified retrospective approach, and does not require any restatement of comparative information. Lease liability reflecting future lease payments, right of use asset and interest expense on the lease liability are recognized and the right of use asset is depreciated. Straight-lining of deprecation and interest charges on the lease liability will result in a higher total charge to profit or loss in the initial periods, due to the unwinding of interest on the lease liability.

Market highlights 
The dry bulk market for Supramax/Ultramax bulk carriers improved from the first to the second quarter 2019. Measured by the BSI-58 index, earnings averaged USD 8 167 per day (net) – 7 per cent up from the previous quarter. The market reacted strongly as iron ore mines in Brazil started coming back into operation after the tailing dam accident in January. Despite continued turbulence and interference from ongoing trade wars and uncertainties in macroeconomic growth forecasts, the rates have increased significantly in the third quarter and is currently about USD 14 500 per day.

At the end of 2018, 148 Supramax/Ultramax newbuildings were scheduled for delivery in 2019. 22 vessels were added to the fleet during the second quarter whilst only one vessel was recycled. As of writing this report, only 58 vessels have been delivered. Based on recent years’ annual delivery profile we should not expect more than another 20-25 vessels entering service in 2019. In other words, a significant shortfall compared to the reported orderbook.

22 vessels of about 1.3 m dwt have been contracted so far this year. This is less than half the number contracted at this time in 2018 and points towards a historically very low fleet growth in the coming years. As the IMO 2020 Sulphur Cap coming into effect in a few months’ time, there is some potential for slow steaming depending on bunkers costs and eventually we expect to see more ships being recycled than at the current rate.

The latest round of stimulus packages in China is starting take effect. Interest rate cuts and other stimulus measures has resulted in surging Chinese credit growth this year. The growth rate is now the highest since 2014. Since 2010, China credit growth has been leading dry bulk markets by roughly one year. Barring further negative escalations of trade wars, we expect a continued positive market development in 2019 and 2020.

The Company will soon control a fleet of 22 dry bulk carriers and continues to enhance its earnings with a combination of charter backlog and spot exposure.

Belships’ strategy going forward is to grow as a fully integrated shipowner and operator of geared bulk carriers. Through the vessel acquisitions, financing and share issues, Belships has demonstrated its ability to deliver on this strategy. Belships expects that further transactions may be available, and intends to pursue such transactions where accretive.

Following the transactions already announced and the issuances of approximately 37 million shares, the company has increased the free float in the Belships share, as well as broadened the shareholder base. It is Belships’ intention to make further steps to increase the liquidity in the share.

Introducing dividends is an important part of developing Belships and returning capital to the shareholders on a regular basis is an important part of the company’s strategy.

30 August 2019


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