Result 4th quarter 2003 – Preliminary results 2003

Belships fourth quarter operating income was USD 18,980,000 (fourth quarter 2002: USD 7,839,000). The company’s operating result totalled USD 4,189,000 (USD -1,080,000). The operating income and operating result were affected by a strong dry bulk market.
Based on the expected, future pre-tax profit, a tax benefit of USD 5,447,000 was recognised as income in the fourth quarter so that approximately 2/3 of the company’s total deferred tax benefit has been capitalised.
The post-tax result for the fourth quarter was USD 9,468,000 (USD -1,067,000). The corresponding results for the year were USD -645,000 (USD -4,742,000). The minority share of the result totalled USD -3,939,000 (USD -2,104,000) and is entirely related to the stake in Gibson Gas Tankers. Accordingly Belships’ share of the reported annual result totalled USD 3,294,000.
The quarter’s accounts were drawn up in accordance with the standard for interim reports. The same accounting principles were used for the annual accounts for 2002.
The product carrier business generated an operating result of USD 133,000 (USD 229,000) in the fourth quarter.
The gas carrier business generated an operating result of USD 740,000 (USD -837,000) in the same period. The improvement is primarily due to the fact that, because of previous write downs, there was no depreciation posted for the quarter.
The dry bulk business generated an operating result for the fourth quarter of USD 4,107,000 (USD 74,000). The positive results of Elkem Chartering (EC) have already been reported. M/S Belnor and M/S Belisland and our capesize cooperation with Bocimar have also provided satisfactory contributions.
The ship management business generated an operating result of USD -295,000 (USD -46,000).
The market for handysize product carriers improved during the quarter and the demand for second hand ships rose substantially. Belships decided to sell M/T Belgrace and our engagement in this sector is therefore currently over, apart from our commercial operating responsibility for M/S Belguardian and M/S Belgreeting. The timing for entering and leaving this market is critical and the Board is optimistic about an interesting product carrier market over the next 3-4 years. A long-term time charter with the option to purchase was therefore entered into with a Japanese shipping company for a 48,000 dwt product carrier which is to be delivered at the end of 2006.
The dry bulk market reached new heights towards the end of the year. The main driving force was the increased demand from China, but there is also significant waiting time in many ports due to a lack of land-based infrastructure. As both M/S Belnor and M/S Belisland are on fixed time charters, it is primarily through our 50 per cent ownership in Elkem Chartering (EC), the operating company, that Belships has enjoyed the record high dry bulk market. The strong market however made it possible to extend the time charter coverage for M/S Belisland to five years from delivery in the summer of 2003, and their contribution to results will be about USD 900,000 per year for the period. Our capesize cooperation with Bocimar contributed USD 700,000 in the fourth quarter.
Elkem Chartering (EC) is involved in the handymax segment through long term, time charters for three modern ships. M/S Legend Phoenix has relet for the entire fixed period at a rate which will contribute to Belships’ results by just under USD 1 million per year. M/S Belpareil which EC took delivery of at the beginning of 2003 is relet until the first quarter of 2005 and will give a results contribution to Belships of around USD 2 million in 2004. M/S Pax Phoenix will continue to sail in a pool operated by French interests until the end of 2004.
EC’s other main activity is a handysize operation primarily based in the Atlantic. As this business has had a considerably greater number of ships than the underlying cargo obligations the company was able to benefit from the high rates.
From time to time it is possible to use the arbitrage opportunities in other segments, and in this context EC took in a panmax ship for a period of two years, which has contributed significantly to EC’s results.
The Board decided to terminate the company’s involvement in the gas segment. Belships reached an agreement with Gibson Gas Tankers’ other shareholder, to take over our interest free of charge. This is reflected in the fourth quarter accounts.
At the end of the fourth quarter the group’s cash position was USD 10.0 million compared with USD 8.3 million at the end of the previous quarter. Mortgage debt was reduced from USD 45.1 million to USD 18.6 million, primarily due to the winding up of the involvement in the gas segment. The equity ratio as at 31 December was 44.8 per cent.
The sale of M/T Belgrace will give a profit of approximately USD 0.5 million in the first quarter and give Belships a net liquidity contribution of approximately USD 4 million. The market value of M/S Belnor is higher than the book value.
Considering the cyclical nature of the dry bulk market and the current high rates, our aim is to secure satisfactory earnings over time. In addition to the above mentioned transactions efforts are being made to obtain further long term employment.
Earnings in EC will benefit from the strong dry bulk market and will include a contribution from arbitrage operations totalling approximately USD 0.8 million (Belships share) for each of the coming quarters.
Our capesize cooperation with Bocimar will give a positive contribution in the coming quarters.
Oslo, 17th February 2004