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
 
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