· Operating income of USD 6.6 m (Q3 2016: USD 6.4 m)
· EBITDA of USD 3.1 m (USD 2.6 m)
· Net result of USD 1.2 m (USD 0.3 m)
· All ships operating normally - modern fleet - average age 4.4 years
· Contract coverage 100% for delivered ships - around USD 63 million fixed charter
Fourth quarter 2016 results
Belships operating income in 4th quarter 2016 was USD 6.6 million (Q3 2016: USD 6.4 million), while EBITDA amounted to USD 3.1 million (USD 2.60 million). The Group's operating result amounted to USD 2.4 million (USD 1.5 million), while net result for 4th quarter 2016 was USD 1.2 million (USD 0.3 million). Net result for 2016 was USD -14.6 million (USD -30.2 million), explained by impairment of the fleet.
Impairment tests of the company's assets were performed in accordance with IAS 36. Based on an assessment of broker values and long-term charters, no impairment has been recorded in 4th quarter.
M/S Belstar, M/S Belnor and M/S Belisland have continued the long-term contracts to Canpotex of Canada. Canpotex is one of the world's largest exporters of potash, a fertilizer product imported in large volumes by countries such as China, India and Brazil. M/S Belocean and M/S Belforest are both on time charter to Cargill. The first open position will be for M/S Belocean in May 2017.
All ships have sailed without significant off-hire. Technical management is handled by Belships Management (Singapore), with a total fleet of 20 ships under technical management.
Belships' remaining newbuilding program with Imabari Shipbuilding in Japan includes one 63.000 dwt eco-design Ultramax bulk carrier on a long-term T/C-in agreement incl. purchase option for delivery in January 2018.
Financial and corporate matters
As per 31 December the Group's cash totaled USD 7.9 million compared to USD 8.4 million as per 30 September 2016.
The mortgage debt balance as per 31 December USD was 36.3 million. Net lease obligation as at 31 December was USD 44.6 million. In addition Belships has a long-term loan facility of SGD 2 million, secured by the lease agreement for our Singapore office. Net lease obligation and mortgage debt were reduced by USD 1.7 million in 4th quarter. In order to improve the Group's liquidity and financial flexiblity, Belships received an adjusted waiver from ship mortgage lender in November 2016. Main revised terms in the waiver period until 1 January 2018 are as follows: Minimum cash USD 5.0 million including restricted cash of USD 3.0 mill, minimum value 100% incl. restricted cash, minimum value adjusted equity of 20% and on-demand guarantee from main shareholder of USD 5 million. All the covenants were fulfilled as at 31 December 2016.
Hedging the Group's interest exposure on bank loan is considered on an ongoing basis. The hedging level of interest rate exposure is currently around 80%. The long-term interest rate is still at a historical low level.
At the end of the 4th quarter of 2016, the book value per share amounted to NOK 3.71 (USD 0.43), while the equity ratio was 19.1%. Added value related to the long-term charter party for M/S Belisland is not reflected in the balance sheet.
The Capesize-index ended the 4th quarter at USD 10,078 per day, whereas the Panamax-index ended at USD 6,826 per day. The Supramax-index ended the quarter at USD 9,445 per day. As per today the Cape index stands at USD 4,808 per day, Panamax-index at USD 7,563 per day and Supramax-index at USD 7,065 per day. The weakening spot market in February has been the norm the last couple of years following the Chinese New Year celebration.
In 2016 more than 400 dry cargo ships changed hands in transactions close to USD 4 bn. According to the Baltic S&P Assessment the latest valuation of a 5-year old Supramax is USD 14.1 m, which is an increase of about 40% since March 2016.
Growing demand from China has pushed up the international prices for both iron ore and coal. It is believed that China will continue to shut down loss-making and high pollution domestic production of iron ore and coal and import more, helping to absorb the tonnage overcapacity. The smaller sized ships like Supramax/Ultramax with cranes should benefit from growing Chinese exports of steel products and imports of minor bulks like bauxite, fertilizer, soya beans and grains.
Belships concentrates on the dry bulk market, with 5 x modern Supramax/Ultramax in service. In addition, a 63,000 dwt Ultramax is scheduled for delivery from Imabari Shipbuilding in January 2018 for long term lease incl. purchase option.
Iron ore import to China in 2017 is expected to grow only moderately from current level of about 1 bn tons, but the imported volumes of coal may surprise on the upside. Import of grain products to China is also expected to grow. The prognosis for the aggregate dry bulk market in 2017 is a growth in seaborne trade in the region of 2.0-2.5%.
Ordering of new ships is down to almost zero and the high scrapping activity continues, although at a slower pace than during Q1-Q2 in 2016. The scrapping activity this year may outbalance the expected deliveries of new ships adjusted for slippage, delays and cancellations. From troubled Chinese shipyards we expect non-deliveries of a significant number of dry bulkers. Fearnresearch believes that the tonnage supply during 2017-2020 may even shrink by 2% due to limited ordering activity in combination with high scrapping of older tonnage following IMO's new regulations for ballast water treatment systems and scrubbers gradually to be installed on all vessels.
Belships' ships are chartered out on fixed rates to reputable counterparts, representing a future nominal gross hire of around USD 63 million.
Focus will be to further develop Belships as an owner and operator of modern bulk carriers to reputable counterparts. Our ambition is to build a portfolio of quality ships and robust charter parties that will generate distributable cash flows.
Oslo, 14 February 2017
THE BOARD OF BELSHIPS ASA
Questions may be directed to:
CEO Ulrich Müller
Phone: +47 22 52 76 15
This information is subject to the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.