Report 2nd quarter 2009

RESULTS
Belships' operating income in the 2nd quarter of 2009 was USD 13,247,000 (2nd quarter 2008: USD 25,705,000). The company's operating result totalled USD -5,000 (USD 4,884,000). This reduction in operating income and operating profit is essentially due to the generally reduced rates and activity in Elkem Chartering's handysize operations.
In the 2nd quarter the company had a positive result of financial items, and result after tax was USD 309,000 (USD 4,477,000).
Result after tax for the first six months of the year was USD 1,734,000 (USD 8,342,000).
The accounts for the 2nd quarter of 2009 were prepared in accordance with IAS 34, Interim Financial Reporting. A statement on the accounting principles applied by the group in preparing the accounts appears in the 2008 annual accounts. The interim accounts have been prepared in conformity with the International Financial Reporting Standards (IFRS).
 
OPERATIONS
Strong Chinese demand for bulk goods, particularly iron ore, and a reduction in the number of newbuildings delivered resulted in higher rates in the dry bulk market in the 2nd quarter.
The rate level in the Atlantic was higher than in the Pacific. This had a negative effect on Elkem Chartering's earnings, which declined compared to the 1st quarter.
The handymax ships M/S Pax Phoenix and M/S Legend Phoenix continued their respective charters. The same applied to Belships' own tonnage, M/T Belaia and M/S Belisland.
Negotiations concerning long-term financing of the company's three newbuildings were concluded in the 2nd quarter with a satisfactory result.
The first newbuilding was named M/S Belstar and was delivered on 14 August.
Belships exercised its option to buy M/S Belisland, and at the same time an agreement was signed on sale of the ship to Greek buyers. The transactions are expected to provide a gain of USD 9 - 10 million, depending on the USD/YEN exchange rate. Delivery will take place in the course of the last six months of 2009.
 
FINANCIAL POSITION AND OTHER MATTERS
At 30 June, the Group's liquid reserves totalled USD 30.0 million, against USD 47.6 million at 31 December. As scheduled, USD 8.1 million was paid during the 2nd quarter on the first newbuilding. Of the total contractual obligation of USD 118.2 million, USD 48.0 million has been paid. At the end of the 2nd quarter the company had a debt of USD 20.0 million relating to bridge financing of newbuildings. This loan has now been repaid and replaced by a long-term mortgage loan of USD 22.0 million. In addition, Belships has a bond loan of NOK 100 million (USD 15.6 million). The loan has been hedged against currency risks  and the unrealised loss from this totalled USD 0.4 million at 30 June. The amount has been booked in the balance sheet under long-term liabilities.
Due to the general decline in the market over the past six months, the company carried out impairment tests for its assets in conformity with IAS 36. The remaining newbuilding contracts were assessed on the basis of observable values for corresponding contracts today and the time charters concluded, which, based on a discretionary assessment of counterparty risk, were discounted by 12%. Based on these internal valuations there is, as per today, no need for impairment.
At the end of the 2nd quarter, book value per share amounted to NOK 12, while the book equity ratio was 50.3%.
 
OUTLOOK
It seems that the authorities' measures to counteract the consequences of the financial crisis are taking effect. Financial growth is again particularly strong in China.
The high volume of iron ore import leads to stockpiling and a change in this will have a considerable impact on the rate level in the dry bulk market.
Elkem Chartering's portfolio of chartered tonnage is expected to be reduced considerably in the course of the second half of the year and the profit contribution will depend on market developments.
 
 
Oslo, 20 August, 2009
 
The Board of BELSHIPS ASA


Report 2nd quarter 2009