Belships has fixed out three more ultramaxes in expectation of an upturn in the spot market in the year ahead.
The charters came to light as the Oslo-listed bulker owner reported stellar fourth-quarter results that exceeded market expectations.
It said the new contracts are for a minimum of one year and have been fixed at a premium of between 116% and 120% of the Baltic Supramax Index (BSI).
“This brings the total number of vessels on floating index-linked contracts to nine and is considered attractive due to an improved market outlook,” Belships said in its fourth-quarter report.
The company reported a net profit before tax of $22.6m for the three-month period, equivalent to $0.09 in earnings per share, which comfortably beat analysts’ estimates (see box). This is down from $34.2m a year ago, when earnings per share totalled $0.14 per share.
Belships said the results were due to “strong contract coverage and increased contributions from the vessels on index-linked contracts”.
It said it had a high number of period time charter contracts that had been fixed at levels above prevailing market rates during the fourth quarter.
That said, net freight revenue shrank to $108.9m from $153.4m year on year.
Lighthouse Navigation, the operating arm of Belships, contributed $9.6m to Belships’ $40.8m in Ebitda.
Belships has declared a dividend of NOK 60 ($0.05) per share for the fourth quarter, which will be paid in two instalments in February and March.
“Based on Belships’ current contract coverage and market expectations, we expect to generate free cash flow and continue to pay quarterly dividends,” the company said.
It had free cash resources of $128.3m available for future investment at the end of 2023, down from $139.9m at the end of 2022.
It paid down $13.5m in debt during January, which has increased the number of its unencumbered vessels to four.
Its 30 ultramaxes earned an average gross time charter equivalent rate of $18,449 per day during the fourth quarter, compared with $22,359 per day in the same period of 2022.
The BSI, which is based on 58,000-dwt supramaxes, averaged a gross daily rate of $14,159 during the final three months of last year.
Belships said the contract coverage it has in place will ensure “significantly higher profitability” than the current spot market.
Some 81% of ship days this quarter have been covered at about $17,000 per day, and 42% this year so far have been covered at about $16,700 per day.
Nine vessels have been chartered out on floating rate, index-linked contracts, including the three fixed this quarter.
“This is because we believe the rates and market sentiment have a good probability of improving during the next year, and Belships has the right to convert to a fixed rate during the charter period,” the shipowner said.
“All period contracts are fixed with highly reputable and recognised charterers in the dry bulk market.”
Its daily cash breakeven rate is $10,900 per vessel for this year.
Belships also confirmed that none of its vessels have transited the Red Sea since December and none of its ships have been involved in any related incidents.
The company is awaiting delivery of eight ultramaxes from Japanese shipyards, which it will lease for seven to 10 years.
The first delivery is expected in the final quarter of this year and the last vessel is scheduled to arrive in mid-2027.
‘Outstanding performance’
Analyst Mindaugas Cekanavicius from Norne called the fourth-quarter result “amazing” and pointed to the improved market outlook and new contracts signed by the shipowner.
“Both the Lighthouse Navigation and the shipping segment beat our Ebitda expectations significantly and the results from top to bottom were outstanding in this environment,” he said in a note on Monday morning.
“With three index-linked contracts the company improved the percentage of contract-covered vessels and, following the dry bulk supply/demand situation and FFA [freight forward agreements] indications, it might seem that the dip in dry bulk segment is over already.”
Cekanavicius said Norne will increase its estimates and will “very likely” reiterate its “buy” rating for stock.
Fearnley Securities described the results as “solid” and said the high level of forward coverage for this year should mean Belships can generate at least 10% yields in the coming quarters.
