CONTRACT COVERAGE SECURES PROFITABILITY AND DIVIDEND OUTLOOK FOR 2023
HIGHLIGHTS
* Operating income of USD 151.8m (USD 205.3m)
* EBITDA of USD 56.4m (USD 57.1m) including USD 10.1m from Lighthouse
Navigation
* Net result of USD 49.8m (USD 35.2m)
* Declared dividend of USD 18.4m (NOK 0.75 per share)
* TCE of USD 24 155 gross per day for owned fleet
* 90 per cent of ship days in Q4 2022 are fixed at USD 22 900 gross per day
* 64 per cent of ship days in the next four quarters are fixed at USD 22 300
gross per day
* Modern fleet of 31 vessels with an average age below four years and daily
cash breakeven for 2023 of about USD 10 900 per vessel
Subsequent events
BELYAMATO, an Ultramax newbuilding of 64 000 dwt was delivered in November 2022
from Imabari Shipyard in Japan.
Financial results commentary
Belships reports a net result of USD 49.8m for Q3 2022, compared to a net result
of USD 35.2m for Q3 2021. The increase is mainly driven by fleet expansion and
the book gain from the sale of BELPAREIL of USD 10.0m.
Net freight revenue for owned vessels was USD 61.4m in Q3 2022 compared to USD
50.3m in Q3 2021. The increase in net freight revenue is driven by an increase
in vessel days, partially offset by a reduction in TCE from USD 26 714 in Q3
2021 to USD 24 155 in Q3 2022.
Ship operating expenses were USD 12.8m in Q3 2022 compared to USD 14.7m in Q3
2021. Despite an increase in vessel days, ship operating expenses have decreased
significantly. The reduction is due to less Covid-19 related crewing expenses
and vessel takeover costs.
Fleet status
Time charter equivalent (TCE) earnings per ship in the quarter was recorded at
USD 24 155 gross per day. The fleet sailed without significant off-hire in Q3
with a total of 2 677 on-hire vessel days.
The Baltic Supramax Index (BSI) averaged USD 19 728 gross per day in the third
quarter. Relative performance versus spot indices is affected by a high number
of fixed period time charter contracts that contribute to our coverage for 2023
at levels far above current market rates.
Several period time charter contracts have been entered into during the quarter
increasing contract coverage for 2023 to 50 per cent at highly profitable
levels.
Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024
Contract coverage 90% 70% 55% 43% 33% 17%
TCE rate (USD/day) 22 900 22 500 21 700 21 500 21 500 21 500
Estimated cash breakeven for 2023 is USD 10 900 per vessel per day. This amount
includes OPEX of USD 5 300, interest and instalments of USD 4 850 per day, G&A
of USD 450 and drydocking expenses of USD 300.
Ultramax newbuilding BELMONDO is expected to be delivered from Imabari
Shipbuilding, Japan in January 2023.
Transactions
BELVEDERE (2015) and BELAFONTE (2017), two modern Japanese Ultramax bulk
carriers, were delivered in July. Belships paid a total of USD 15.5m upon
delivery. The vessels are currently financed through lease agreements with
purchase options significantly below current market levels. Belships has
declared the purchase options for both vessels and will re-finance the vessels
under available bank financing substantially covering the amounts due for the
purchase options. The vessels are currently chartered out on time charter
contracts until Q1 2023 at USD 18 000 and USD 24 500 per day, respectively.
BELPAREIL (2015) was delivered to its new Owners in July. A book gain of USD
10.0m was realised. Total net cash flow after delivery of the vessel was
approximately USD 28.5m.
The Japanese-designed bulk carriers entering the fleet represent the highest
quality and lowest fuel consumption available in the market today.
Lighthouse Navigation
Lighthouse Navigation delivered another strong quarter with an EBITDA of USD
10.1m, which includes provisions for potential loss-making contracts of USD
4.6m based on the forward freight market at the end of the quarter.
This brings the year-to-date EBITDA to USD 42.1m and average EBITDA in the last
12 quarters to USD 9.6m.
Sustainability
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 for 2021 (ESG Report)
reflecting our ongoing commitment to transparency and meeting investor and
stakeholder expectations.
Belships is compliant with the upcoming emission regulations from IMO in 2023
(EEXI) without additional CAPEX signalling the competitive advantage of Belships
modern eco-fleet.
The new Norwegian Transparency Act entered into force 1 July 2022 and Belships
has taken the necessary steps to be compliant.
Financial and corporate matters
At the end of the quarter, cash and cash equivalents totalled USD 116.3m, whilst
interest bearing bank debt amounted to USD 123.6m.
Net leasing liability at the end of the quarter was USD 452.7m. Leasing
liabilities have been calculated under the assumption that all purchase options
to acquire Ultramax bulk carriers on bareboat and time-charters will be
exercised except BELFUJI.
All lease agreements have fixed interest rates for the entire duration of the
charters.
Belships have no contractual obligations to acquire any of its leased vessels.
At the end of the quarter, book value per share amounted to NOK 12.09 (USD
1.11), corresponding to a book equity ratio of 29 per cent. Value-adjusted
equity is significantly higher.
Dividend policy
Belships ASA aims to distribute quarterly cash dividends targeting about 50 per
cent of net result adjusted for non-recurring items. Other surplus cash flow may
be used for accelerated amortisation of debt, share buy-backs or vessel
acquisitions considered to be accretive to shareholders' value.
Dividend payment
Based on the financial result in the third quarter 2022 the Board declared a
dividend payment of USD 18.4m (NOK 0.75 per share) equivalent to about 50 per
cent of net result adjusted for net minority interests and the sale of
BELPAREIL.
This brings the total dividends paid out since the inception of the dividend
policy in Q2 2021 to USD 149.8m (NOK 5.6 per share).
Market highlights
In the third quarter, the Baltic Supramax Index (BSI-58) averaged USD 19 700 per
day - down from USD 28 900 in the second quarter. With this market correction,
asset values have decreased as well. As a general observation, prices have
dropped about 10 per cent compared to Q2 2022. According to ship brokers, values
for modern vessels appear to hold better than those of older vintages.
Supra/Ultramax vessels continue to represent the strongest segment within the
dry cargo market.
According to Fearnleys, total Supramax shipment volumes ended at 250 million
tons, unchanged from the previous quarter. This is, however, about 5 per cent
lower compared to last year, when 264 and 258 million tons were shipped in Q2
and Q3 2021, respectively.
Port congestion has reversed from earlier this year and is now close to pre-
Covid normalised levels. This increase in sailing efficiency has affected rates
negatively in the quarter markedly.
China has continued to fight the pandemic with severe lockdowns in major cities.
The war in Ukraine exposed energy and commodity shortages which has accelerated
inflation. Usual volumes of wheat, corn, fertilizers and steel products have
been prevented from moving out of the Black Sea or Northwestern Russian ports.
In sum, fears of demand destruction from high commodity prices and rising
interest rates have subdued near term GDP forecasts.
According to Clarksons, 72 Supra/Ultramax vessels have been delivered year-to-
date, which totals 4.91m dwt. With less than two months left of the year, this
compares to about 7.0m dwt delivered in all of 2021, evidencing the falling rate
of newbuilding supply. 24 vessels remain on schedule for delivery this year and
103 for next year. However, given the pace of deliveries year-to-date and
considering that there are often order cancellations, slippage or even
incorrectly reported orders, the numbers may be lower. Fleet growth has been the
lowest on record in the last 20 years. With an orderbook of around 7 per cent,
we are soon approaching the lowest rate of supply growth in 30 years.
Low newbuilding activity for dry bulk continues as the lack of conviction and
alternatives for fuel and propulsion systems appear to restrain demand for
ordering. Relatively high newbuilding prices persist as higher input costs as
well as full orderbooks for container and gas vessels dictate the position with
shipyards. Also, available delivery positions with shipyards remain distant, at
least two years ahead. Lower second-hand vessel values appear attractive in
comparison with the cost of a newbuilding lending support to rather buy existing
ships on the water.
Outlook
The sentiment in dry bulk markets softened significantly in Q3 2022, however
spot market rates for Supra/Ultramax are still profitable. The Baltic Exchange
Supramax spot index is currently about USD 14 000. Forward Freight Agreements
(FFA) currently indicate a market average of about USD 13 500 for the remaining
part of the year, with Ultramax bulk carriers earning an additional premium.
Belships has contract coverage ensuring higher profitability than current market
levels. 90 per cent of ship days in Q4 2022 are covered at about USD 22 900 per
day, and 64 per cent of ship days in the next four quarters are fixed at about
USD 22 300 per day. All period contracts are fixed with highly reputable and
recognised charterers in the dry bulk market. Belships financing has been
secured for many years, and most of the debt is with fixed interest rates.
Lighthouse Navigation continues to deliver good results and is expected to
continue contributing to Belships' dividend capacity.
Looking ahead, towards 2023 and 2024, the supply side as observed from the
number of deliveries and the publicly quoted orderbook for dry bulk is
historically low. We therefore remain very optimistic in terms of medium to long
term market prospects.
We are focused on capital discipline and returning capital to shareholders. A
competitive return for our shareholders is to be obtained through an increase in
the value of the company's shares and the payment of dividends, as measured by
the total return. Since we announced a new dividend policy in Q2 2021, we have
returned a total of USD 149.8m (NOK 5.6 per share) to shareholders.
Belships owns a modern fleet of 31 Supra/Ultramax bulk carriers with an average
age below four years and daily cash breakeven for 2023 of about USD 10 900 per
vessel. Based on Belships' current contract coverage, we expect to generate
significant free cash flow and continue to pay quarterly dividends as announced
with our dividend policy.
10 November 2022
THE BOARD OF BELSHIPS ASA
For further information, please contact Lars Christian Skarsgård, Belships CEO,
phone +47 977 68 061 or e-mail LCS@belships.no
This information is subject to the disclosure requirements pursuant to Section
5-12 the Norwegian Securities Trading Act