Belships ASA : Report 3rd quarter 2014


·             Operating income of USD 5.3 m (USD 6.6 m)
·             EBITDA of USD 2.2 m (USD 2.4 m)
·             Net income of USD -2.6 m (USD -2.0 m)
·             Impairment of ship values included with USD 3.2 m (USD 2.7 m)
·             All vessels operating normally – modern fleet – average age 4.4 years
·             Contract coverage 100% for delivered vessels – USD 100 million fixed charter backlog
·             Newbuilding resale prices in Japan for Supramax around USD 31-32 million – comfortably above our contract price of USD 28.25 million. 


Third quarter 2014 results

Belships operating income in 3rd quarter 2014 was USD 5,292,000 (Q3 2013: USD 6,565,000), while EBITDA amounted to USD 2,168,000 (USD 2,390,000). The decrease in operating income is mainly related to M/T Belaia, which was redelivered in the beginning of March 2014. The company’s operating result amounted to USD -2,126,000 (USD -1,402,000), while total comprehensive income for 3rd quarter 2014 was USD -2,618,000 (USD -2,019,000). The decrease in operating result is explained by impairment of ship values.

Impairment tests for the company’s assets were performed in accordance with IAS 36. The ships and charter parties are valued based on observable market values. Based on these valuations and assumptions the ships’ book value has been adjusted by USD 3.2 million in the 3rd quarter, in addition to ordinary depreciation of USD 1.1 million.

The accounts for 3rd quarter of 2014 have been prepared in accordance with IAS 34 Interim Financial Reporting and are consistent with the principles applied in the annual accounts for 2013 and relevant changes to IFRS effective from 1 January 2014. The interim financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the EU.


Fleet status

M/S Belnor, M/S Belstar and M/S Belocean have continued the long-term contracts to Canpotex of Canada. Canpotex is one of the world’s biggest 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.

M/S Belstar was drydocked as planned in May, but otherwise all ships have sailed without significant off-hire. Operating expenses for 3rd quarter 2014 are close to budget. Technical management of our owned ships is handled by Belships Management (Singapore) with a 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 Supramax bulk carriers for delivery 4th quarter 2015 and 2nd quarter 2016. In addition we have signed a long-term lease agreement incl. purchase option for a slightly larger sister vessel with delivery 1st quarter 2017. 


Financial and corporate matters

30 September the Groups’ cash totalled USD 7.8 million compared to USD 11.1 million as per 30 June 2014.

The mortgage debt balance as at 30 September was USD 47.5 million and was reduced by USD 1.3 million during the quarter. Third instalment for the first newbuilding amounting to USD 2.8 million was paid in September. Remaining newbuilding commitment amounts to USD 42.4 million. Third payment for the second newbuilding is due for payment in March 2015. All payments in 2014 have been financed by the company’s surplus liquidity.

We have received indicative offers for post-delivery senior secured credit facility of the newbuilding program, and are in the process of evaluating these offers. 

In August 2011 Belships entered into an interest rate swap agreement with 2 years forward start at 2.2% with a remaining duration of 4 years covering USD 20 million, reducing by USD 5 million per year. Hedging the Group’s interest exposure is considered on an ongoing basis. The long-term interest rate has decreased significantly the recent weeks. We expect 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 24%.   

At the end of the 3rd quarter of 2014, the book value per share amounted to NOK 8.93, while the equity ratio was 55.9%.


Market highlights

The Capesize-index ended the third quarter at USD 12,560 per day, whereas the Panamax-index ended at USD 6,614 per day. The Supramax-index ended the quarter at USD 10,989 per day. As per today the Cape index stands at USD 16,110/day, Panamax-index at USD 8,971/day and Supramax-index at USD 9,412/day. The valuation of a 5 year old Supramax is USD 22 million according to the Baltic Exchange S&P assessment.

12 month T/C rates for Capesize is currently around USD 19,000/day, whereas Panamax and Supramax are offered around USD 10,000-10,500/day for the same period.

The predicted Q4 rally has not yet appeared. With freight rates so depressed, there is strong pressure on asset prices in all dry bulk sectors. Buyers turn their attention to Japanese tonnage, adding pressure to asset prices for Chinese built tonnage. Another factor is the recent strengthening of USD against JPY, leading to more sales candidates from Japanese owners.

Chinese steam coal imports have dropped sharply this year to an annualized pace of just 155 million tons, the lowest level in more than three years. Most of this decline has come from Indonesian supplies, hitting the Panamax segment in particular. The Chinese government has recently introduced a ban on dirty coal and will also impose a coal tax starting in December, as part of China’s environmentally friendly agenda.  Coal will still be important for China, where new technologies for cleaner burning is required to generate sufficient power, due to difficulties related to replacing coal as a power source.

Contrary to the development in China we have seen substantial rises for India’s coal imports, with potential for further growth to come. India’s imports are projected to reach close to 215 million tons in 2014, which would represent an annual increase of approx. 30 million tons.

Year to date Chinese iron ore imports are appox. 19% higher compared to last year, but the ton-mile growth is not as high since a significant part of Chinese iron ore import is being sourced from Australia, rather than Brazil. However, initial numbers indicate a ton-mile growth of 6-7% year-to-date, which is significantly higher than net supply growth. The hidden supply in vessel slow steaming will likely correlate with the bunker prices, which recently have dropped below USD 500/ton.  

With increased capacity of iron ore from Australia and Brazil, the international iron ore prices have dropped to USD 80/ton, down from USD 135/ton in January. China will be encouraged to continue the import rather than exploit their domestic resources with low FE content. 

China currently uses coal for about 65% of its energy and air pollution has now reached intolerable levels. The recent agreement between Russia and China on natural gas supplies is an indication that China is serious about reducing its reliance on coal, mainly in an effort to reduce air pollution.



Belships is concentrating 100% on the dry bulk market, with 3 x 58,000 dwt Supramax in service and 3 x Supramax newbuildings under construction by Imabari Shipbuilding in Japan for delivery from 4th quarter 2015 until 1st quarter 2017. The newbuildings will be actively marketed for long-term employment at a time closer to delivery, but we are in preliminary discussions with a few carefully selected charterers.



Many market observers are expecting a rebound in 2015, particularly within the Capesize sector. The main driver will be sharply increasing volumes of iron ore, coal and grain, particularly into China and India, in combination with a falling fleet growth. Even though the outlook for Panamax and Supramax is less favorable, these smaller sizes will also benefit from a rising utilization rate for Capesize.

There seems to be no demand problem in the dry bulk sector. Iron ore volume into China is expected to grow around 9.5% and 10% in 2014 and 2015, coal volume to grow between 4% and 5% and grain volume by around 8%. New ordering has more or less come to a complete stop for the time being.  Total seaborne dry bulk trade is expected to increase by 6% p.a. in 2014-15, whereas the fleet adjusted for demolition is expected to grow around 5.5% p.a. in the same period after many years of double digit growth. The dry bulk fleet capacity utilization should therefore improve, and a gradual rate increase may be expected.

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 company’s cash flow. The charter parties represent a future nominal gross hire of USD 100 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, 27 October 2014






Questions should be directed to:


Ulrich Müller, CEO

+47 22 52 76 15

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