Belships ASA: Report 4th quarter 2023
STRONG RESULTS, IMPROVED OUTLOOK
HIGHLIGHTS
- EBITDA of USD 40.8m including USD 9.6m from Lighthouse
Navigation
- Net result of USD 22.6m
- Declared dividend of NOK 0.60 per share
- TCE of USD 18 449 gross per day for owned fleet – 30 per cent
outperformance of BSI58
- Prepaid USD 13.2m of bank debt – increasing the number of debt
free vessels
- 81 per cent of ship days in Q1 2024 are fixed at USD 17 000
gross per day
- 42 per cent of ship days in the next four quarters are fixed at
USD 16 700 gross per day
- Cash breakeven for 2024 of about USD 10 900 per day per
vessel
- The newest Supra/Ultramax fleet with 38 ships including eight
newbuildings
Subsequent events
In January, Belships made a further debt repayment of USD 13.5m,
increasing the number of unencumbered vessels to four.
Belships has entered into agreements to charter out three
Ultramax vessels on index-linked contracts for periods of minimum
one year each. The vessels will earn a premium of between 116-120
per cent of the Baltic Supramax Index. The vessels will be
delivered in February-March, after they have completed existing
fixed-rate contracts. This brings the total number of vessels on
floating index-linked contracts to nine and is considered
attractive due to an improved market outlook.
Financial results commentary
Belships reports a net result of USD 22.6m for Q4 2023 compared to
USD 15.3m in Q3 2023. The improved net result is caused by strong
contract coverage, and increased contributions from the vessels on
index-linked contracts. Lighthouse Navigation delivered another
solid quarter with an EBITDA contribution of USD 9.6m.
Time charter equivalent earnings (TCE) in the quarter was USD 18
449 gross per vessel per day. In comparison, the Baltic Supramax
Index (BSI-58) averaged USD 14 159 gross per day. The
outperformance is due to a high number of fixed period time charter
contracts at levels above current market rates.
Ship operating expenses amounted to USD 5 403 per vessel per day
in Q4 2023 in line with USD 5 300 per vessel per day guided in
estimated cash breakeven for 2023. Full year operating expenses
amounted to USD 5 239 per vessel per day.
Fleet status
The fleet sailed without significant off-hire with a total of 2 743
on-hire vessel days in Q4 2023.
Since December, Belships vessels have not transited the Red Sea,
and none of our vessels have been involved in any related
incidents.
Contract coverage |
|
Q1
2024 |
Q2
2024 |
Q3
2024 |
Q4
2024 |
|
|
|
|
|
|
Fixed-rate contracts |
|
81% |
42% |
28% |
21% |
Average fixed-rate (USD/day) |
|
17 000 |
16 300 |
16 500 |
16 000 |
|
|
|
|
|
|
Open/Index-linked contracts |
|
19% |
58% |
72% |
79% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100% |
100% |
100% |
100% |
Belships currently has nine vessels chartered out on floating
index-linked contracts on varying durations, at an average premium
of 116 per cent to the Baltic Supramax Index (BSI-58). Belships has
the option to convert any part of the remaining period to a fixed
rate based on the prevailing FFA curve from time to time.
Cash breakeven for 2024 is expected to be about USD 10 900 per
vessel per day. This includes OPEX of USD 5 300, interest and
amortisation of USD 4 850, G&A of USD 450 and drydocking
expenses of USD 300 per vessel per day.
Newbuildings
8x Ultramax bulk carriers under construction at Japanese
shipyards:
BELGRACE expected delivery Q4
2024
BELFORTUNE expected delivery Q4 2025
BELFOX
expected delivery Q4 2025-Q1 2026
BELFUTURE expected delivery Q1
2026
BELAVANTI expected
delivery H2 2026
BELROSSO expected
delivery H2 2026
BELTEMPO expected
delivery H1 2027
BELVICTORY expected delivery Q2-Q3
2027
The vessels are leased on time charter for a period of 7 to 10
years from date of delivery with purchase options around current
market levels during the charter. Belships is not required to make
any downpayment for these transactions. Therefore, this will not
impact cash and dividend capacity during construction. Cash
breakeven for the vessels upon delivery is about USD 14 200 per day
on average.
Belships has no obligation to acquire any of the leased
vessels.
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 further reduce Belships’ carbon
emissions on an intensity-basis.
Lighthouse Navigation
Lighthouse Navigation recorded an EBITDA of USD 9.6m for the
quarter and continues to contribute to Belships profitability and
dividend capacity. Lighthouse Navigation demonstrated good
risk management with limited forward exposure and was able to take
advantage of the improved market conditions observed in the
quarter.
The average EBITDA per quarter in the last five years has been
USD 8.2m.
Sustainability
Belships aims for high standards in corporate governance and is
well placed to deliver emission cuts in line with industry
ambitions for 2030. Belships publishes a sustainability report on
an annual basis (ESG Report) reflecting our commitment to
transparency and efforts to meet investor and stakeholder
expectations.
Belships was ranked in the top quartile in the Webber Research
Report: 2023 ESG Scorecard, which aims to identify where each
company ranks against its listed peers within the shipping
industry.
Belships’ vessels are compliant with the new emission
regulations from IMO without additional investments signalling the
competitive advantage of owning a modern fleet.
Financial and corporate matters
At the end of the quarter, cash and cash equivalents totalled USD
128.3m, whilst interest bearing bank debt amounted to USD 103.4m,
after having prepaid USD 13.2m in Q4.
An additional amount of USD 13.5m was prepaid in January.
Belships now has four unencumbered vessels.
Leasing liabilities at the end of the quarter amounted to USD
461.0m.
The lease liability calculation for BELFUJI was changed to
reflect the assumption that the purchase option will be exercised
during the lease. All leased vessels have now been calculated with
the assumption that purchase options to acquire the vessels will be
exercised.
Belships has no 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
12.3 (USD 1.21), corresponding to a book equity ratio of 33 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 Q4 2023
the Board declared a dividend payment of NOK
0.60 per share (USD 14.5m in total) equivalent to about 80 per cent
of the net result adjusted for minority interests.
This brings the total dividends paid out since Q2 2021 to NOK
8.70 per share, which is 132 per cent of the share price from the
time of the merger between Belships and the Lighthouse Group in
December 2018. Total declared dividends amount to USD 224.3m.
Market highlights
In the fourth quarter, the Baltic Supramax Index (BSI-58) averaged
USD 14 159 per day – significantly up from USD 10 028 per day in
the preceding quarter. The Baltic Ultramax Index (BSI-63) averaged
USD 16 189 per day in the fourth quarter, up from USD 11 837 per
day in the third quarter. The market peaked in December when the
Supramax index reached USD 17 213 per day, which translated into
almost USD 20 000 per day for Ultramax vessels.
Asset values followed suit and rose gradually in the fourth
quarter. By the end of the year values were back to about the same
levels as at the start of the year. Even though long-term interest
rates rose during 2023, they receded in the fourth quarter, and we
would opine that this contributed to rising ship values. Ship
values have continued to rise in 2024, especially for modern
vessels which continue to be markedly higher in demand than less
economical older ships.
According to Fearnleys, preliminary estimates for Q4 2023
shipment volumes were 283 million tonnes, an all-time high, after
the previous record of 279 million tonnes in the preceding quarter.
The highest growth (quarter-on-quarter) was seen in iron ore (67
per cent), coal (9 per cent) and steel products (10.6 per
cent). Minor bulks (-11 per cent), grains (-7 per cent) and
fertilizers (-3 per cent) contributed negatively. We continue to
observe a variation in growth figures of each commodity type from
one quarter to another, however, total shipment volumes were up 1.2
per cent quarter on quarter, and total demand appeared robust
throughout 2023.
Port congestion, as measured by the average waiting time in port
for ships to discharge, continued at close to the same levels as in
the third quarter. However, waiting time in port for ships to load
increased somewhat due to delays in South America caused by low
inland water levels. Reduced capacity in the Panama Canal also
reduced efficiency, causing longer sailing distances for vessel
operating in and out of the Atlantic Ocean. This effect has
continued into 2024, and further inefficiencies are added from
vessels avoiding transits through the Red Sea and the Suez Canal.
As we have highlighted before, changes in port congestion, voyage
duration and/or vessel speeds affect the overall vessel efficiency
in the dry bulk market on a short-term basis more than a change in
the number of newbuildings in the orderbook.
33 Supra/Ultramax vessels were delivered in Q4 2023, compared to
32 vessels in the previous quarter, according to Fearnleys. At the
time of writing this report, 16 new vessels have been delivered in
2024, with about 160 scheduled for delivery this year. However,
actual deliveries are likely to be slightly lower due to slippage
or cancellations. Fleet growth has been around 3.5 per cent since
May 2023. According to Fearnleys, this rate of fleet growth will be
maintained through 2024. The number of ships delivered per quarter
compares to an existing fleet of Supra/Ultramax vessels on the
water today of about 4 100 in total. The orderbook for dry bulk
remains close to all-time lows at about 8 per cent.
Relatively low newbuilding activity for dry bulk continues as
the lack of conviction and alternatives for fuel and propulsion
systems appear to restrain new orders. Higher input costs as well
as full orderbooks and continued high demand for other vessel
segments dictate the position with shipyards.
Available delivery positions with reputable shipyards appear
increasingly distant, with some new orders being reported in 2027,
and even 2028. A potential lead time of four years for a bulk
carrier is unprecedented.
Outlook
The Baltic Exchange Supramax index is currently about USD 12 000,
with Ultramax bulk carriers earning about USD 14 000 in the spot
market. The FFA market (Forward Freight Agreements) has improved
and currently indicates a market average of around USD 17 000 for
an Ultramax bulk carrier for Q2-Q4 2024. This is a significant
improvement in sentiment, and if it materialises; we would expect a
meaningful increase in ship values to follow.
Lighthouse Navigation continues to deliver good results, and
posted consecutive profits every quarter in 2023, which displays
good risk management and execution skills. Activity has been
positive so far in the first quarter of 2024 and we expect
continued profitability contributing to Belships’ dividend
capacity.
Belships has contract coverage ensuring significantly higher
profitability than the current spot market. 81 per cent of ship
days in Q1 2024 are covered at about USD 17 000 per day, and 42 per
cent of ship days in 2024 are covered at about USD 16 700 per
day.
Furthermore, we now have nine vessels chartered out on floating
rate, index-linked contracts. This is because we believe the rates
and market sentiment has a good probability of improving during the
next year, and Belships has the right to convert to fixed rate
during the charter period. 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 significantly below
current market levels. Belships is therefore able to combine
meaningful leverage with a low cash breakeven of USD 10 900 per day
per vessel in 2024.
With eight Ultramax newbuildings under construction for delivery
between 2024 and 2027, Belships will be taking over new vessels
whilst the orderbook and the rate of supply growth approaches the
lowest levels in 30 years. Since they are all leased without
Belships investing any cash, this will not affect our dividend
capacity before delivery. We believe the best way for Belships to
approach the green shift is to own and operate the most efficient
vessels currently available, with a financing structure which gives
us unparalleled optionality and flexibility.
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 and market
expectations, we expect to generate free cash flow and continue to
pay quarterly dividends.
19 February 2024
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
- Belships ASA - Report Q4 2023
- Belships Company Presentation Q4 2023
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