BEL - Report 4th Quarter 2004

Belships generated operating income of USD 18,646,000 (2003: USD 18,980,000) and an operating result of USD 1,990,000 (USD 4,849,000) in the fourth quarter, and an operating result of USD 14,361,000 (USD -3,990,000) for 2004 as a whole. The improvement in the group's operating result for the year was due to the strong dry bulk market not having had its full impact on earnings until the fourth quarter of 2003, and to the loss-making gas tanker business having been sold in 2003. The decrease in the operating result for the fourth quarter was due largely to the displacement of income in connection with dry docking and some increase in operating expenses.
The group recorded a pre-tax result of USD 2,706,000 (USD 4,735,000) in the fourth quarter, and USD 14,579,000 (USD -5,249,000) for the year as a whole.
Capitalised tax assets were reversed by USD 1,700,000 in the fourth quarter due to these positive results.
The dry bulk market as reflected by the Baltic Dry Index hit new record highs in the fourth quarter, but rates fell back significantly towards the end of the quarter. This reflects the fine balance between supply and demand, which means that even minor variations in factors like port congestion can have a major impact on rates in the spot market.
Activity in the Handysize segment served by Elkem Chartering (EC) was also high in the fourth quarter. Work has been under way for some time on obtaining rather more long-term access to tonnage in the Handysize segment. As a result, EC has now entered into an agreement with Japanese interests on the charter of a 28,000 dwt newbuild for a period of five years with extension options on EC's side. The vessel is due to be delivered in 2007.
As mentioned in the last interim report, the M/S Anangel Express spent a part of the quarter in dry dock.
The Handymax vessels M/S Pax Phoenix, M/S Pax Legend and M/S Belpareil continued on their time charters and contributed strong results.
The M/S Belnor continued on her charter, which runs until summer 2005. As previously announced, the vessel will then embark on a new charter running for three years.
The M/S Belisland continued on her time charter.
The product tanker which Belships is due to have delivered on a long-term charter in 2006-07 at a rate of just over USD 12,500/day has been sub-chartered for five years at a rate which will contribute net earnings of around USD 800,000/year.
Belships' capital and financial position were strengthened during the fourth quarter.
The group had cash of USD 29.5 million at the end of the year, against USD 24.8 million on 30 September. Mortgage debt amounted to USD 16.4 million. Shareholders' equity (adjusted for proposed payment of dividend) was equivalent to NOK 3.14 per share and 22.5% of assets.
The market value of the M/S Belnor is substantially higher than her book value.
With effect from 2005 Belships will apply the IASB's International Financial Reporting Standards (IFRS) when preparing its group accounts. The implementation of IFRS will not result in significant changes beyond those indicated in the 2003 annual report.  In light of good results and liquidity, payment of a dividend of NOK 4.- per share will be recommended at the annual general meeting.
Dry bulk rates have shown considerable volatility at the beginning of 2005.
Around 20 million dwt is due to be delivered both this year and next. Since no significant tonnage has yet been sold for scrap, the market are dependent on continued growth in China to absorb this tonnage growth.
All of the Handymax vessels and the M/S Anangel Express will continue on their charters during the first quarter.
We anticipate continued good contributions from the Handysize business at Elkem Chartering.
Oslo, 15 February 2005

4th Quarter 2004