Belships ASA: Report 1st quarter 2023
CONTRACT COVERAGE SECURES OUTPERFORMANCE AND DIVIDEND
OUTLOOK
HIGHLIGHTS
- Operating income of USD 112.8m
- EBITDA of USD 43.7m including USD 8.2m from Lighthouse
Navigation
- Net result of USD 27.8m
- Declared dividend of NOK 0.70 per share
- TCE of USD 20 559 gross per day for owned fleet – 100 per cent
outperformance of market
- Acquisition of 4x Ultramax newbuildings 2024-2026
- 98 per cent of ship days in Q2 2023 are fixed at USD 19 000
gross per day
- 72 per cent of ship days in the next four quarters are fixed at
USD 18 600 gross per day
- Modern fleet of 35 vessels, including newbuildings, with cash
breakeven for 2023 of about USD 10 900 per vessel per day
Financial results commentaryBelships reports a
net result of USD 27.8m for Q1 2023, compared to a net result of
USD 59.5m for Q1 2022. The extraordinary result in Q1 2022 was
mainly caused by higher market rates and significant realised gains
on the sale of two vessels.
Despite lower market rates, net freight revenue was USD 51.4m,
largely unchanged from USD 54.3m in Q1 2022. This is due to fleet
growth in the period and significant contract coverage securing
stable earnings.
Ship operating expenses amounted to USD 14.3m in Q1 2023
compared to USD 13.4m in Q1 2022. Although operating a larger
fleet, the amount of non-recurring costs was lower in Q1 2023
compared to Q1 2022.
Fleet statusTime charter equivalent earnings
(TCE) per ship in the quarter was recorded at USD 20 559 gross per
day. The Baltic Supramax Index (BSI) averaged USD 10 170 gross per
day in Q1 2023. The strong outperformance is due to a high number
of fixed period time charter contracts at levels above current
market rates.
Four vessels were drydocked in the quarter. The remaining fleet
sailed without significant off-hire with a total of 2 678 on-hire
vessel days in Q1 2023.
Belships has continued to add new period time charter contracts
increasing the coverage for 2023 and 2024.
|
|
Q2
2023 |
Q3
2023 |
Q4
2023 |
Q1
2024 |
Q2
2024 |
Q3
2024 |
Contract coverage |
|
98% |
81% |
69% |
43% |
15% |
13% |
TCE rate (USD/day) |
|
19 000 |
18 600 |
18 400 |
18 100 |
17 700 |
17 300 |
Estimated cash breakeven for 2023 is USD 10 900 per vessel per
day. This includes OPEX of USD 5 300, interest and instalments of
USD 4 850, G&A of USD 450 and drydocking expenses of USD 300
per vessel per day.
Transactions BELMONDO, an Ultramax newbuilding
of 64 000 dwt was delivered in January 2023 from Imabari Shipyard
in Japan.
Belships entered into agreements for the acquisition of four new
64 000 Ultramax bulk carriers which are being constructed at
Japanese shipyards. Delivery of the vessels will be in 2024-2026.
The vessels are fully financed through time charter lease
agreements, each for a period of 7 up to 10 years, with purchase
options at current market levels during the charter. There is no
obligation to purchase the vessels and Belships is not required to
make any down payment for these transactions. Cash breakeven for
the vessels upon delivery will be about USD 14000 per day. The
Japanese-designed bulk carriers entering the fleet represent the
highest quality and lowest fuel consumption available in the market
today and will contribute to reducing Belships carbon emissions on
an intensity-basis.
Lighthouse NavigationLighthouse Navigation
delivered another good quarter with EBITDA of USD 8.2m bringing the
average EBITDA in the last 12 quarters to USD 11.4m.
SustainabilityBelships 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 2022 (ESG
Report) in April 2023 reflecting our commitment to transparency and
efforts to meet investor and stakeholder expectations.
Belships is compliant with the emission regulations from IMO in
2023 (EEXI) without additional CAPEX signalling the competitive
advantage of Belships modern fleet.
Financial and corporate matters At the end of
the quarter, cash and cash equivalents totalled USD 127.7m, whilst
interest bearing bank debt amounted to USD 145.0m. Belships
voluntarily prepaid USD 13.4m on outstanding bank debt during the
quarter.
Leasing liabilities at the end of the quarter amounted to USD
465.1m. These liabilities have been calculated with the assumption
that all purchase options to acquire Ultramax bulk carriers on
bareboat and time-charter lease agreements will be exercised except
BELFUJI. Belships has no contractual obligation to acquire any of
the leased vessels.
All lease agreements have fixed interest rates for the entire
duration of the contracts and all purchase options are denominated
in USD.
At the end of the quarter, book value per share amounted to NOK
12.23 (USD 1.17), corresponding to a book equity ratio of 30 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 first quarter 2023 the Board declared a
dividend payment of NOK 0.70 per share (USD 16.9m in total)
equivalent to about 73 per cent of the net result adjusted for
minority interests.
This brings the total dividends paid out since Q2 2021 to NOK
7.05 per share, which is more than 100 per cent of the share price
from the time of the merger between Belships and the Lighthouse
Group in 2018/2019. Total declared dividends amount to USD
185.2m.
Market highlightsIn the first quarter, the
Baltic Supramax Index (BSI-58) averaged USD 10 170 per day – down
from USD 14 800 in the preceding quarter. Despite falling earnings,
asset values were stable the first two months of the quarter before
starting to rise in March, breaking a hiatus of almost eight
months. Modern vessels continue to be in higher demand than older
less economical ships. The trend in increasing ship values has
accelerated in April and have increased by about 15 per cent
YTD.
According to Fearnleys, preliminary estimates for Q1 2023
shipment volumes were 260 million tonnes, compared to 256 million
tonnes shipped in Q4 2022. The highest growth was seen in iron ore
shipments, which grew by 80 per cent mainly due to increased
shipments of iron ore from India to China. Grains also contributed
positively, rising 9 per cent from the previous quarter due to
higher shipments from Australia and the US. Coal shipments grew by
2 per cent, driven by exports from Indonesia to China. Shipments of
minor bulks and breakbulk dropped by 7 per cent due to slowing
global economic growth and possibly influenced somewhat by a
correction in the container market. Agreements to allow grain
exports from Ukraine are running until mid-May whereafter an
extension is currently uncertain.
Port congestion continues to be relatively stable at pre-Covid
normalised levels. Average sailing speeds remain unchanged. As we
have highlighted before, changes in both congestion and speed can
affect the overall vessel efficiency in the dry bulk market.
36 Supra/Ultramax vessels were delivered in Q1 2023, up from 29
vessels the previous quarter. For the remainder of 2023, less than
100 are scheduled to be delivered. However, the actual number of
deliveries may be lower given that some orders are usually delayed
or incorrectly reported. Fleet growth has been at slightly below 3
per cent since Q2 2022 last year which is the lowest rate observed
in the last 20 years. According to Fearnleys, fleet growth is
likely to remain around this level for the remainder of this year
before dropping closer to 2 per cent next year. The number of ships
delivered compares to an existing fleet of Supra/Ultramax vessels
today of about 4 000. With a total orderbook of around 7 per cent,
we are approaching the lowest rate of supply growth in 30
years.
Relatively low newbuilding activity for dry bulk continues as
the lack of conviction and alternatives for fuel and propulsion
systems appear to restrain new ordering. Higher input costs as well
as full orderbooks for other vessel segments dictate the position
with shipyards. Available delivery positions with reputable
shipyards remain distant, at least two years ahead.
OutlookThe sentiment in dry bulk markets have
improved recently, and the Baltic Exchange Supramax spot index is
currently about USD 12 500. Period time charter rates are higher
than current spot market levels displaying expectations for a
rising market. The Forward Freight Agreements (FFA) currently
indicate a market average of about USD 14 500 for the remaining
part of the year, with Ultramax bulk carriers earning an additional
premium of about 15 per cent.
Belships has contract coverage ensuring higher profitability
than current market levels and has maintained the entire fleet on
period time charter contracts with varying durations. 98 per cent
of ship days in Q2 2023 are covered at about USD 19 000 per day,
and 72 per cent of ship days in the next four quarters are fixed at
about USD 18 600 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 ahead, and most
of the debt is with fixed interest rates below current market
level.
Lighthouse Navigation continues to deliver good results. We
expect continued profitability contributing to Belships’ dividend
capacity.
It is reasonable to anticipate improved freight markets based on
increased activity from China and that demand should continue to
improve compared to last year. However, the pace of this recovery
is uncertain, and we are comfortably positioned with highly
profitable contract coverage for the meantime.
Looking further ahead, the supply side as observed from the
number of deliveries and the publicly quoted orderbook for dry bulk
is historically low. We therefore remain optimistic in terms of
medium to long term market prospects.
We are focused on financial discipline and returning capital to
our 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. Based on Belships’ current contract coverage, we
expect to generate significant free cash flow and continue to pay
quarterly dividends.9 May 2023THE BOARD OF BELSHIPS ASAFor 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
- Belships ASA – Report Q1 2023
- Belships Company Presentation Q1 2023
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