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Belships ASA : Report 1st quarter 2021

·12-min read


• Operating income of USD 76.4 million (USD 31.7m)
• EBITDA of USD 14.7m (USD 4.9m)
• Net result of USD 16.5m (USD 0.2m)
• Net TCE per ship of USD 12 162 per day versus BSI index of USD 16 140 net per day
• EBITDA of USD 3.7m from management companies proving continued strong performance
• Private placement successfully completed
• Entered into agreement to acquire 4xUltramax newbuilding resales with delivery 2H 2021 financed through bareboat agreements with average cash breakeven of USD 10 800 per day
• Acquired a 2017-built bulk carrier for USD 21.75m in a cash and shares transaction
• Two vessels fixed for 1 year time charter at USD 21 250 and USD 22 000 gross per day
• 31 per cent of available ship days in the next four quarters are booked at about USD 16 200 net per day
• Introduction of dividend policy
• Modern fleet of 26 vessels with an average age of 5 years and average cash breakeven of about USD 10 500 per day

Fleet status
Time charter earnings per ship in the quarter were recorded at USD 12 162 net per day versus BSI index of USD 16 140 net per day for the same period. The inherent lag in our business means that when the spot markets fall, our outperformance will tend to be higher. Conversely, when the market rises rapidly our performance will tend to lag on a short-term basis.

Approximately 88 per cent of available ship days in Q2 are booked at about USD 16 300 net per day. Approximately 31 per cent of available ship days in the next four quarters are booked at about USD 16 200 net per day.

BELFOREST and BELNIPPON has been fixed for time charter contracts to a global agricultural corporation for about 1 year duration at a rate of USD 21 250 and USD 22 000 gross per day. The contracts will commence by the end of May and June 2021, respectively.

Belships currently does not have any cargo contracts or active hedging instruments. Forward Freight Agreements (FFA) are measured at fair value at the end of each reporting period. Net loss from realised positions amounting to USD 6.7m in the quarter have been included in other gains and losses. At the end of the quarter all positions have been realised and Belships has no further exposure.

BELOCEAN was drydocked in the quarter. The remaining fleet sailed without significant off-hire in the quarter with a total of 1 903 on-hire days. Three vessels in the fleet are scheduled for drydocking during Q2-Q4 2021.

BELFORT and BELORIENT were delivered to its new owners in March and April 2021. Net cash flow upon delivery was approximately USD 1.0m after repayment of outstanding loans.

BELFAST, an Ultramax newbuilding of 64 000 dwt was delivered in January 2021 from Imabari Shipyard in Japan. A second Ultramax newbuilding of 64 000 dwt to be named BELMAR is expected to be delivered by the end of Q3 2021.

In February, Belships entered into an agreement for the acquisition of two newbuilding resales of
61 000 dwt to be named BELTRADER and BELGUARDIAN. Delivery is expected during Q3 2021. The vessels will be financed through 10-year bareboat charters. The estimated cash breakeven for the vessels upon delivery is about USD 10 700 per day including operational expenses. Belships has paid USD 2.6m per vessel after signing contracts in Q2 2021. The agreements come with purchase options below current market values and can be exercised after the fourth year until the end of the charters. There are no obligations to purchase the vessels.

In March, Belships entered into an agreement for the acquisition of a newbuilding resale of 61 000 dwt to be named BELKNIGHT. Delivery is expectred during Q4 2021. The vessel will be financed through a 7-year bareboat charter. The estimated cash breakeven for the vessel upon delivery is about USD 10,900 per day including operational expenses. Belships has paid as sum of USD 2.9m after signing contract in Q2 2021. The agreement comes with purchase options below current market values and can be exercised after the third year until the end of the charter. There are no obligations to purchase the vessel.

In April, Belships entered into an agreement for the acquisition of a 2017-built Ultramax to be named BELTIGER. Delivery of the vessel is expected within Q2 2021 whilst an existing time charter party at a marginally cash-positive rate will follow the vessel and is expected to run until the end of October 2021. The purchase price is USD 21.75m, of which 80 per cent will be paid in cash. The remaining consideration will be settled through an issue of 4,988,000 new Belships shares to the seller of the vessel. The agreed share price in the transaction is NOK 7.50 per share. The vessel is intended to be financed with bank financing for approximately 60 per cent of the purchase price. The estimated cash breakeven for the vessel upon delivery is about USD 9 500 per day including operational expenses.
In May, Belships entered into agreement for the acquisition of a newbuilding resale of 61 000 dwt financed through a bareboat agreement for 10 years. The vessel will be named BELFORCE and delivery is expected during Q4 2021. The estimated cash breakeven for the vessel upon delivery is about USD 10 900 per day including operational expenses. Belships has paid a sum of USD 3.0m upon signing contract in Q2 2021. The agreement comes with purchase options below current market values and can be exercised after the third year until the end of the charter. There are no obligations to purchase the vessel.

Belships’ fleet continues to increase and improve with only modest cash investments, signalling the competitive advantage Belships has in sourcing ship finance. The Japanese-designed Ultramax bulk carriers entering the fleet represent the highest quality and lowest fuel consumption available in the market today.

Technical and commercial platforms
Lighthouse Navigation expanded its commercial platform in 2020 and now have offices in Bangkok, Oslo, Singapore and Melbourne. The aim of this expansion is to further enhance the vessels earning capability and to generate profits around cargo trading opportunities in the market. The fleet under technical and crewing management has doubled in the last two years. We are now seeing the impact of this growth with another strong quarter from these platforms combined showing an EBITDA of USD 3.7m. We expect that the results will fluctuate, however we do expect that these platforms will continue to be positive on an annual basis.

Belships aims for the highest standards in corporate governance and is well placed to deliver emission cuts in line with industry ambitions for 2030. Belships published a comprehensive sustainability report in 2020 (ESG Report) reflecting our ongoing commitment to transparency and meeting investor and stakeholder expectations.

Covid-19 has greatly impacted seafarers, and we have signed the Neptune declaration on Seafarer Wellbeing and Crew Change to join forces with more than 600 shipping companies to influence governments and policy makers to adopt relief measures for our essential workers.

Financial and corporate matters
At the end of the quarter, cash and cash equivalents was USD 51.6m, while mortgage debt was USD 134.9m. The group’s mortgage debt comprises two loan facilities, both with a margin of 275 basis points above LIBOR and maturity in Q2 2024.

Belships ASA successfully completed a private placement 9 March 2021 raising a total of USD 16 million (NOK 140 million) through the allocation of 20 million shares at a subscription price of NOK 7.00 per share. Through the completion of this Private Placement, the company has significantly expanded its shareholder base and increased the liquidity of the Belships share.
Net leasing obligation at the end of the quarter was USD 161.8m. Leasing liabilities have been calculated under the assumption that Belships will exercise its options to acquire all seven Ultramax bulk carriers on bareboat charter, whereas we have assumed that the company will not exercise the purchase options on time-chartered vessels BELNIPPON and BELFUJI. Belships has no contractual obligation to acquire any of its leased vessels.

The Company has recognised USD 19.8m in deferred tax assets previously not recognized. The deferred tax assets were recognised by the Company after concluding it is likely that the company will have sufficient profit in subsequent periods to utilise the deferred tax assets after the significant improvements seen in the freight market during Q1 2021.

At the end of the quarter, book value per share amounted to NOK 6.83 (USD 0.80), corresponding to a book equity ratio of 35 per cent.

Dividend policy
Belships ASA aims to distribute quarterly cash dividends targeting about 50 per cent of net result adjusted for non-recurring items.
Commencement and first payout expected to occur after second quarter 2021.
Other surplus cash flow may be used for accelerated amortization of debt, share buy-backs or vessel acquisitions considered to be accretive to shareholders’ value.
Belships believes this approach will create value for shareholders and has the flexibility to manage the company and support the continued growth.

Market highlights
In the first quarter, we observed a strong improvement in the spot rates with the Baltic Supramax 58 index averaging USD 16 140 net per day, up from USD 10 211 net per day in the preceding quarter and the highest Q1 average in the index history. The second quarter has continued even stronger, with the Baltic Supramax 58 index averaging over USD 20 000 per day – the highest since 2010.
Total Supramax shipment volumes ended at 257 million tons in Q1, actually a fraction below the total of 262 million tons in Q4. However, in March alone a record high 93.5 million tons were shipped, beating the previous high of 89.5 million tons set in December last year. In April, another shipment volume record was set at 96.5 million tons. Demand growth is spread across nearly all commodities and all regions on the back of the global boom in manufacturing. Coal shipment volumes were 57 million tons in the first quarter, notably down from 65 million tons in the fourth quarter of last year. As the macroeconomic backdrop continues to be supportive, shipment volumes could make record highs later this year if one assumes that lockdowns in Asia will be lifted completely.
According to Fearnleys, vessel deliveries dropped to 27 in the first quarter, in line with the 28 in the fourth quarter of 2020. Without assuming any slippage or cancellation, the orderbook for the rest of this year indicates 32 vessels during the second quarter, 27 during the third quarter and 18 during the fourth quarter. Number of new vessels is on track to be the lowest since 2007, when 86 vessels were delivered. However, in relative terms, it is approaching the lowest level in several decades.
The publicly quoted orderbook indicates fleet growth will drop towards 2 per cent this year and in 2022 it may drop to less than 1 per cent, according to Clarksons. There will be changes to this outlook for fleet growth as the amount of newbuilding orders being placed over the next 12 months are uncertain and it is also normal that 10-20 per cent of the orderbook ends up being cancelled, deferred or simply incorrect. However, we expect low newbuilding activity as the lack of conviction and alternatives for fuel and propulsion systems will continue to restrain ordering activity in the near term. Importantly, demand for newbuildings in other segments than dry cargo is absorbing the majority of shipbuilding capacity for 2022-2023 leading to increased prices despite the low number of newbuildings for segment in dry bulk. Therefore, current values for modern secondhand bulk carriers still represent a considerable discount to newbuilding prices. We expect this will continue to support a rise in second hand values and restrain the interest for newbuilding contracts.

The Baltic exchange Supramax index YTD 2021 has averaged USD 17 500 net per day. There has been a remarkable development over the past few months. Freight Forward Agreements (FFA) currently indicate a market for Supramax and Ultramax of about USD 20 000 and 22 350 per day for the remaining part of the year. A cold winter season sparked energy demand, followed by a wider rally in commodity markets resulting in increased cargo volumes in all regions. The Baltic index in June is currently expected to surpass USD 26 000 per day.

As we mentioned in previous reports, the supply side has passed the peak of deliveries and the publicly quoted orderbook for our segment now stands below 5 per cent – which is historically low.
Even with increased bunker prices the average sailing speed has increased confirming an improved rate of vessel utilisation. We remain optimistic in terms of market prospects, and with the worst of the pandemic hopefully behind us we are seeing solid demand fundamentals which is supporting a strong dry cargo market. At the time of writing Belships has most of the fleet open for the remaining part of 2021 and onwards.

We will continue to pursue opportunities for further growth whilst being selective and disciplined in the use of our capital. The purpose of the growth has been to increase profitability and the value and attractiveness of owning our shares. A competitive return for our shareholders is to be obtained through growth in the value of the company’s shares and the payment of dividends, as measured by the total return. Based on current market expectations, we expect to generate significant free cash flow and aim to pay a quarterly dividend starting with the second quarter 2021 as announced with our new dividend policy.

Belships has a uniform and modern fleet of 26 Supramax/Ultramax bulk carriers well positioned to capitalise on a strong dry bulk market. We are focused on maintaining a solid balance sheet and liquidity position. Our strategy is to continue developing Belships as an owner and operator of geared bulk carriers, through quality of operations and accretive growth opportunities.

26 May 2021


For further information, please contact Lars Christian Skarsgård, Belships CEO, phone +47 977 68 061 or e-mail

This stock exchange announcement was published by Edwin Johansen, Accounting Manager in Belships ASA on 26 May 2021 at 07:00 CET.

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


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