Sfl Corporation Limited ((SFL)) has held its Q2 earnings call. Read on for the main highlights of the call.
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SFL Corporation Limited’s recent earnings call presented a balanced perspective on the company’s current standing, highlighting both strengths and challenges. The sentiment was neutral, with strong points such as a robust charter backlog, advancements in fleet technology, and high fleet utilization being counterbalanced by challenges like the impact of an idle rig, high dry docking costs, and a dividend reduction.
Strong Charter Backlog and Customer Base
SFL’s charter backlog stands at an impressive $4.2 billion, with about two-thirds of this contracted with customers holding investment-grade ratings. This provides the company with unique cash flow visibility and resilience amidst current market volatility.
Advancements in Fleet Technology
The company has made significant strides in fleet technology, with 11 vessels now capable of operating on LNG fuel. This includes five new builds under construction, which enhances their operational efficiency and positions them well for future demands.
New 5-Year Charters with Maersk
SFL has secured new 5-year charters for three 9,500 TEU container vessels with Maersk, adding $225 million to the backlog starting in 2026. This agreement underscores the company’s strong relationships with major industry players.
High Utilization Rates
The overall fleet utilization was reported at 98.1% in Q2, with an impressive 99.9% when adjusted for unscheduled technical off-hire. This indicates high operational efficiency and effective management of their fleet.
Dividend Yield
The declared dividend of $0.20 per share represents a yield of approximately 9%, reflecting the company’s commitment to returning value to shareholders despite current challenges.
Idle Drilling Rig Impacting Financials
The idle status of the Hercules drilling rig has impacted near-term financial results due to market turmoil and oil price volatility, presenting a significant challenge for the company.
High Dry Docking Costs
The quarter saw higher dry docking costs of approximately $16.5 million, compared to a normalized average of $5 million, affecting the company’s financial performance.
Dividend Reduction
The dividend was adjusted to $0.20 per share due to the idle status of the Hercules rig and recent asset divestments, which have reduced near-term cash flow generation.
Reduced Revenue from Vessel Sales
Recent sales of vessels, including 57,000 deadweight dry bulk vessels, have increased available capital but have also reduced near-term revenue, impacting the company’s financial outlook.
Increased Operating Expenses
Operating and G&A expenses increased to approximately $83 million from $78 million in the previous quarter, reflecting higher operational costs.
Forward-Looking Guidance
During the SFL Second Quarter 2025 Conference Call, the company announced a dividend of $0.20 per share, marking the 86th consecutive dividend. SFL reported revenues of $194 million for the quarter and an EBITDA equivalent cash flow of $112 million. The charter backlog was emphasized at $4.2 billion, with a focus on fleet renewal strategy and operational efficiency improvements. Despite the idle Hercules drilling rig, SFL maintains a strong liquidity position with over $300 million in available liquidity.
In summary, SFL Corporation Limited’s earnings call presented a neutral sentiment, balancing strong operational achievements with significant financial challenges. The company’s robust charter backlog, advancements in fleet technology, and high utilization rates are promising, yet the impact of the idle Hercules rig and increased costs pose challenges moving forward.