Report 2nd quarter 2010

Belships’ operating income in the 2nd quarter of 2010 was USD 9,243,000 (2nd quarter 2009: USD 13,247,000).  The company’s operating profit was USD 602,000 (USD -5,000).
This reduction in operating income is due to reduced activity in Elkem Chartering’s handysize operations.
The overall result for the 2nd quarter of 2010 was USD -1,129,000 (USD 309,000).
The accounts for the 2nd quarter of 2010 have been prepared in accordance with IAS 34, Interim Financial Reporting, and are consistent with the principles applied in the annual accounts.  The interim accounts have been prepared in conformity with the International Financial Reporting Standards (IFRS).


The period saw a continuing, slight improvement in economic activity and in world trade. The dry-bulk market was still marked by historically high rates. As we have grown accustomed to in recent years, this reflects a high growth-rate in China. The large vessels depend on China upholding a high level of imports of iron ore, particularly now that we are going through a period with a record-high fleet increase.
 Activities in Elkem Chartering were marked by caution due to great uncertainty about market developments. As expected, the result was a small but positive contribution, on a par with the first quarter.
In May Belships received its second newbuilding from the Dayang yard in China. The vessel was named M/S Belnor and was simultaneously delivered on its long-term charter. Operations have so far been without problems.
The M/S Belstar continued on its charter, and previous operational problems seem to have been solved.
The M/T Belaia continued on its charter without any significant interruptions.


Financial position and other matters
At 30 June, the Group’s liquid reserves totalled USD 20.2 million, against USD 25.1 million at 31 March 2010.
Of the total contractual obligation of USD 38.1 million for the newbuilding, with anticipated delivery in the 1st quarter of 2011, USD 15.2 million has been paid and USD 22.0 million has been secured by long-term loan financing. Belships has a bond loan of NOK 104.2 million (USD 17.7 million). This loan has been hedged against USD.
The company has carried out impairment tests for its assets in conformity with IAS 36. The vessels and the remaining newbuilding contract were assessed on the basis of observable market values and charters concluded which, based on a discretionary assessment of counterparty risk, were discounted by 12%. Based on these internal valuations, there is currently no need for any write-down.
At the end of the 2nd quarter, book value per share amounted to NOK 14.05, while the book equity ratio was 43.8%.


Prospects in the dry-bulk market are subject to great uncertainty. There are signs that the growth in China will slow down somewhat. Combined with heavy delivery of newbuildings, this lead to a weaker market in the beginning of the 3rd quarter. This applied primarily to the larger vessels, but the rates also dropped for the smaller ships.
With respect to Elkem Chartering, we still expect small, but positive contributions throughout the second half year.
Belships’ own-controlled tonnage will continue on their charters and will therefore not be affected by short-term fluctuations in the chartering market.




Oslo, 12 August 2010