SFL Corporation’s Earnings Call: Balancing Growth and Challenges

Sfl Corporation Limited ((SFL)) has held its Q4 earnings call. Read on for the main highlights of the call.

SFL Corporation Limited’s Recent Earnings Call Reveals Mixed Sentiments

The latest earnings call for SFL Corporation Limited reflected a mix of optimism and caution. On the positive side, the company showcased strong financial metrics, including strategic investments in vessel deliveries and backlog growth. However, challenges such as rig utilization issues and a decline in operating revenue balanced the outlook. Successful financing efforts and favorable legal rulings also contributed to the overall sentiment.

Increased EBITDA and Strong Backlog

SFL reported an impressive EBITDA equivalent of $581 million over the last 12 months, with a net income of $20 million in the fourth quarter. The company’s fixed-rate backlog is valued at approximately $4.3 billion, with a substantial portion tied to investment-grade customers, reflecting strong future revenue potential.

Dividend Yield and Vessel Deliveries

The company declared a quarterly dividend of $0.27 per share, yielding around 10%. Highlighting its commitment to expansion, SFL took delivery of nine new vessels in 2024, including dual-fuel chemical carriers, underscoring its strategic focus on fleet modernization.

Successful Financing Efforts

SFL successfully raised $1.3 billion in financing, which includes $220 million through senior unsecured bonds. In addition, a $150 million senior unsecured bond loan was secured in the Nordic market, post year-end, reflecting robust investor confidence and financial stability.

Seadrill Dispute Ruling

In a significant legal development, Seadrill was ordered to compensate SFL with approximately $48 million. Although this ruling is subject to appeal, it represents a potential financial gain for the company.

Hercules Rig Utilization Issues

The Hercules rig faced a utilization rate of only 67% due to idle periods, leading to its current status of being warm stacked. The future contracts for this rig remain uncertain, posing a challenge for SFL’s operational strategy.

Decreased Profit Share Contributions

Profit share contributions were notably low in the fourth quarter, amounting to only $1.8 million. This decline was attributed to reduced fuel cost spreads, impacting overall profitability.

Decline in Operating Revenue

Operating revenue for the fourth quarter fell to approximately $229 million, a drop from $255 million in the previous quarter, according to U.S. GAAP. This decline highlights the operational challenges faced by SFL in maintaining revenue growth.

Forward-Looking Guidance

Looking ahead, SFL’s guidance underscored several key metrics, including a $581 million EBITDA equivalent for the past year and a fixed-rate backlog of $4.3 billion. The company continues to offer a 10% dividend yield and has raised $1.3 billion in financing, indicating a focus on maintaining financial health and expansion. Fleet utilization remained high at 98.3%, although challenges with the Hercules rig persist.

In summary, SFL Corporation Limited’s earnings call presented a balanced outlook with strong financial achievements tempered by operational challenges. The company’s strategic investments and successful financing efforts offer a promising future, while issues such as rig utilization and declining revenues necessitate ongoing attention. Investors will be keenly watching SFL’s next moves in addressing these challenges while capitalizing on growth opportunities.