Report 4th quarter 2008

Belships’ operating income in the 4th quarter of 2008 was USD 15,135,000 (4th quarter 2007: 19,444,000. The company’s operating result was USD 120,000 (USD 24,866,000). The operating result for the period was include with a paid compensation of USD 2.25 million relating to the cancellation of a time charter. The reduction in operating income was largely due to a general downturn in the rates for handysize bulk. The operating profit for the 4th quarter in 2007 included a profit from the sale of the M/S Belnor, which amounted to USD 22.6 million. The result after tax in the 4th quarter amounted to USD -2,483,000 (USD 18,830,000). Tax debited in the 4th quarter was primarily related to financial income from the operations subject to shipping tax. This income was realised through the significant strengthening of the USD that we saw during the period.
Profit after tax in the 4th quarter was USD 10,882,000 (USD 30,825,000).
The accounts for the 4th quarter have been prepared in accordance with IAS 34 Interim Financial Reporting. A statement on the accounting policies applied by the Group in preparing the accounts appears in the 2007 annual accounts. The annual and interim accounts have been prepared in conformity with the International Financial Reporting Standards (IFRS).
Rates in the dry-bulk were in a free-fall during the fourth quarter, reaching a level where many owners of large bulkers chose to anchor up their vessels rather than entering into loss-making transactions.
The reason for this development is a combination of the global financial crisis that stopped commercial credits and the draw-down of iron ore stocks in China.
The results for Elkem Chartering handysize operations were satisfactory, but as mentioned above, it was decided to enter into an agreement on the early return of a chartered vessel in return for a compensation of USD 2.25 million. This amount was expensed in the 4th quarter.
The supramax vessel Legend Phoenix continued on its charter, while the outgoing charter on the Pax Phoenix was renegotiated and extended at a considerably lower rate.
Belships’ own tonnage, the M/S Belisland and the M/T Belaia, continued on their respective time charters.
At 31 December, the Group’s liquid reserves totalled USD 47.6 million, against 47.0 million at 30 September. As scheduled, no payments were made on the newbuildings during the period. Of the total contractual obligations of USD 195.8 million, USD 47.3 has been paid.
At the end of the 4th quarter, the company had debts amounting to USD 20.0 million, relating to a bridging loan for the newbuildings. In addition to this, Belships has a debenture loan of NOK 100 million (USD 16.1 million). This loan has been hedged against currency risks, and the unrealised gain from this amounted to USD 1.9 million at 31 December. This amount was booked under Long-term liabilities.
The Board of Directors will propose to the General Meeting to pass a dividends for 2008.
Due to the general decline in rates over the past six months, the company carried out impairment tests for the company’s assets in conformity with IAS 36.
The newbuilding contracts were assessed on the basis of observable market values for corresponding contracts today and the time charters concluded, which, based on a discretionary assessment of counterparty risk, were discounted by 12-15%. Based on these internal valuations, we assume that as per today, there is no need to write off the value of any of the 5 newbuilding contracts as at 31 December 2008.
At the end of the 4th quarter, book value per share was NOK 15.72, while the book equity ratio was 53.7%.
Rates in the dry-bulk market have moved upwards since the turn of the year. We are now seeing a levelling off. Keeping in mind the pronounced setback in the world economy, combined with substantial deliveries of newbuildings, the upturn will in all probability be temporary.
We expect that a considerable part of the newbuildings ordered will be cancelled and that many older ships will be scrapped. Nevertheless, the coming years may be difficult, with low rates and reduced ship values.
For Belships, the greatest challenge will be to secure satisfactory, long-term financing of the newbuilding contracts. Securing long-term financing must be seen in light of the fact that long-term charter contracts have been concluded for the vessels at satisfactory rates.  
Oslo, 24 February 2009
The Board of Directors of BELSHIPS ASA