Cool Company Ltd ((CLCO)) has held its Q4 earnings call. Read on for the main highlights of the call.
The recent earnings call of Cool Company Ltd presented a mixed outlook, reflecting both optimism and caution. The company showcased solid financial performance and a strong backlog, yet acknowledged significant challenges in the current market environment and rate conditions. While Cool Company Ltd is in a robust financial position to withstand market softness, the decision to suspend dividends signals a cautious approach due to ongoing low rates.
Revenue and EBITDA Growth
The company reported a revenue increase to $84.6 million for the quarter, primarily driven by fewer drydock days. Additionally, adjusted EBITDA saw a modest rise to $55.3 million, indicating a stable financial performance amidst market challenges.
Strong Backlog
Cool Company Ltd boasts a strong backlog of $1.7 billion, with over $1 billion being firm. This substantial backlog provides a solid foundation for future revenue, ensuring the company has a steady stream of business moving forward.
High Utilization Rates
The fleet achieved a 92% utilization rate in Q4, with expectations to exceed this in Q1 2025. This high utilization rate reflects the company’s operational efficiency and ability to maximize its fleet’s potential.
Robust Financial Position
With cash and cash equivalents standing at approximately $165 million and no debt maturities until mid-2029, Cool Company Ltd maintains a strong balance sheet. This financial flexibility allows the company to navigate current market conditions effectively.
Market Conditions and Rates
The chartering market is currently challenging, with rates below breakeven and the winter market effectively non-existent. These conditions pose significant hurdles for the company as it navigates the current economic landscape.
Dividend Suspension
In response to the low rate environment, Cool Company Ltd decided not to declare a dividend. This decision aims to maintain financial flexibility and prepare for potential growth opportunities in the future.
Spot Market Challenges
The spot market is described as depressed, with significant bid-ask spreads and few long-term deals being made. This challenging environment impacts the company’s ability to secure favorable contracts.
Pressure from LNG Prices
High LNG prices in Europe have resulted in lower demand from price-sensitive markets, negatively impacting shipping rates. This pressure from LNG prices adds another layer of complexity to the company’s market challenges.
Forward-Looking Guidance
CEO Richard Tyrrell provided forward-looking guidance, highlighting a slight increase in revenue and adjusted EBITDA, supported by fewer drydock days. Despite a robust backlog, challenges in the spot market with rates below economic breakeven were noted. The company decided not to declare a dividend, opting for financial flexibility and potential growth opportunities. With a fleet utilization rate of 92% in Q4 and anticipated improvement in Q1 2025, Cool Company Ltd is well-positioned to weather current market conditions and capitalize on future opportunities.
In summary, Cool Company Ltd’s earnings call reflected a balanced perspective, acknowledging both strengths and challenges. The company’s solid financial performance and strong backlog provide a foundation for future growth, while market conditions and rate challenges necessitate a cautious approach. The decision to suspend dividends underscores the company’s focus on maintaining financial flexibility in a challenging economic environment.