Report as at 31 August 1998

The first eight months of the year saw Belships ASA turnover of NOK 290.0 million (1997: NOK 376.9 million), an operating result of NOK -16.7 million (NOK 1.3 million) and a net result of NOK -89.8 million (NOK 107.7 million).
The company`s results for the period include the impact of unrealised currency losses on the company`s mortgage debt totalling NOK 52.7 million (NOK 95.4 million). The charge is attributable to the appreciation of the US dollar from NOK 7.33 on 31 December 1997 to NOK 7.83 on 31 August 1998.

The reduction in the company`s turnover is attributable to generally lower earnings for the company`s ships and a reduction in activity in the product tanker market.

Product tankers recorded an operating result of NOK 1.1 million (NOK 7.4 million), gas tankers an operating result of NOK -9.2 million (NOK 8.5 million), panmax/capesize dry bulk carriers an operating result of NOK -8.0 million (NOK -8.5 million), handymax dry bulk carriers an operating result of NOK 2.2 million (NOK -0.6 million) and ship management an operating result of NOK 3.2 million (0.8 million). Note that this year`s handymax figure is not comparable with last year`s figure, which included the company`s share of the NOK -9.8 million net result at Western Bulk Shipping ASA (WBS).

The product tanker market was affected by low rates and moderate activity during the second four months of the year. This reflects the large stocks of both petrol and intermediate distillates in the Atlantic Basin combined with lower consumption in Asia.

The gas tanker market was also weak with lower rates throughout the period.
The dry bulk carrier market performed as expected with a seasonal downturn. The Asian financial crisis resulted in increased exports into the Atlantic region, which in turn led to a reversal of the normal trading pattern. As a player in the panmax market, Belships Trading was badly affected by this change, leading to poor results.

As reported previously, discussions have been entered into with Wilh. Wilhelmsen ASA regarding the sale of the company`s shares in Western Bulk Shipping ASA in the amount of NOK 26.50 per share. However, Board of Directors of the buyer did not approve the sale and consequently Belships must continue the search for a satisfactory solution.

Recent weeks have seen a reduction in stocks of oil and oil products, largely due to a cut in oil production in the OPEC countries. So long as the decline in demand does not become too great on account of the financial difficulties in Asia, a better balance in oil stocks ought to bring about an improvement in the product tanker market towards the end of the year.

When it comes to the gas tanker market, we expect to see the usual seasonal upswing as winter approaches, but we do not anticipate any fundamental change in the overall market balance.

The large dry bulk carrier market has tightened in recent weeks. There are also signs of some improvement in handymax rates. This should mean that the disparity between supply and demand is not as great as many feared. However, the situation in Asia makes it unlikely that there will be a fundamental turnaround in the market in the immediate future.

Financial position and other information
Belships cash and financial position deteriorated during the first eight months of the year due to the company`s poor results and drops in tanker and bulk carrier values. The company recorded a negative cash flow of NOK 18.7 million during the period, with liquid assets dropping to NOK 43.4 million on 31 August.

In anticipation of a final clarification, the Board of Directors has resolved not to effect a write down on booked value on the shares in WBS. A write down from NOK 37.65 per share to NOK 26.50 would reduced the result with NOK 35.7 million. In early September, Belships sold off part of its share in the product tanker Belanja, thereby releasing about NOK 20 million in cash.

Oslo, 6 October 1998
The Board of Directors of BELSHIPS ASA

For more information, contact financial director Jo Eric von Koss on +47 22 52 76 00.

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