Belships ASA : Report 3rd quarter 2011

Belships’ gross revenue during 3rd quarter 2011 amounted to USD 7,039,000 (3rd quarter 2010: USD 5,272,000), whereas EBITDA amounted to USD 2,445,000 (USD 2,007,000).  The operating result was USD 1,064,000 (USD 1,046,000), and the net result for 3rd quarter 2011 was USD 272,000 (USD 1,571,000). For the three quarters accumulated the net result ended on USD -1,019,000 (USD 2,782,000). The corresponding figure from last year includes a gain on sale of USD 3.2 million.
The accounts for the third quarter 2011 have been prepared in accordance with IAS 34 Interim reporting and are consistent with the principles applied in the annual accounts. The interim accounts have been prepared in accordance with International Financial Reporting Standards (IFRS).

The dry bulk freight market improved during 3rd quarter, particularly for the capesize segment. There is an uncertainty whether the growth in demand is attributable to seasonality, or whether the growth pace will sustain going forward. The large number of newbuildings will undoubtedly be difficult for the market to absorb, but the effect of increased growth should not be underestimated.

M/V Belnor, M/V Belstar and M/V Belocean (delivered in March 2011) are all fixed on 10-year charter parties to Canpotex of Canada. Canpotex is the world’s largest exporter of potash – a product suitable for direct fertilizer application – and imported in large quantities notably by China, India and Brazil. The net T/C-rate is USD 16,000 per day, which is a good rate in today’s market. M/T Belaia is fixed to J. Lauritzen AS in Denmark until March 2012. The net T/C-rate is USD 15,000 per day.
All vessels have been operating normally and very little offhire has been reported. Technical management of our owned tonnage is handled by Belships Management (Singapore) Pte Ltd. The operating costs are slightly above budget. For M/V Belocean this is caused by extraordinary costs in connection with the takeover in March.

Total cash and cash equivalents as per 30th September amounted to USD 14.9 million, up from USD 14.2 million as per 30th June 2011.
The long term mortgage debt amounted to USD 59.5 million as per 30th September and was reduced by USD 1.3 million during 3rd quarter. In August the company entered into a 5-year interest rate swap agreement of 2.2 %, exclusive of margin, starting two years from now. This swap agreement covers roughly 50% of the long term mortgage debt.
In October Belships bought NOK 3.7 million of the company’s own unsecured bond loan, bringing the own share up to 17.5 %. Outstanding bond loan to external lenders amounted to NOK 60.7 million and will be redeemed in 2012 and 2013. The bond loan is hedged for currency risk against USD.
The company has carried out impairment tests for the company’s assets in accordance with IAS 36. The ships are tested on the basis of observable market values and charter parties entered into. Based on these internal evaluations, there is currently no need for write-downs.
By the end of 3rd quarter 2011 the book value per share was NOK 12.69, and the book equity was 40.4 %.
Belships has an unresolved tax dispute arising from the sale of shares in Gibson Gas Tankers in 2004 of NOK 109 million and the right to for this tax loss to be carried forward. A resolution to this dispute is expected soon, but will have no effect on the accounts.

Baltic Dry Index has improved during the 3rd quarter, and the Supramax index is currently at USD 16,850 per day. Belships’ vessels are all chartered out long-term on fixed rates to a reputable counterpart, and short-term fluctuations in the freight market will therefore have no impact on the company’s revenues and cash flow.
Focus going forward will be to further develop Belships ASA as a tonnage provider of modern bulk carriers to good credit risk customers. The focus will be to expand the customer base and the fleet size with evenly spread charter parties giving a rolling residual value exposure. We believe there will be many interesting investment opportunities going forward.

Oslo, 27th October 2011