SFL Corporation Ltd. - Q4 2023 Preliminary Results Summary
Business Context and Reporting Period
This Form 6-K filing, dated February 14, 2024, presents the preliminary unaudited financial results for SFL Corporation Ltd. for the quarter and full year ended December 31, 2023. SFL is a maritime infrastructure company owning a diversified fleet of vessels and drilling rigs, primarily employed on long-term time charters to industry-leading customers.
Key Financial Metrics
| Metric | Q4 2023 | Q3 2023 | Full Year 2023 |
|---|---|---|---|
| Total Operating Revenues | $209.6 million | $204.9 million | $752.3 million |
| Net Income (GAAP) | $31.4 million | $29.3 million | $83.9 million |
| Earnings Per Share (Basic) | $0.25 | $0.23 | $0.67 |
| Adjusted EBITDA (Consolidated) | $124.1 million | N/A | N/A |
| Adjusted EBITDA (Associates) | $7.9 million | N/A | N/A |
| Charter Hire Received | $209.5 million | N/A | N/A |
| Cash and Cash Equivalents | $165.5 million | $118.0 million | $165.5 million |
| Total Debt (Short & Long Term) | $2.15 billion | $2.07 billion | $2.20 billion |
Note: Total Debt includes interest-bearing debt and finance lease liabilities. Adjusted EBITDA is a non-GAAP measure representing cash receipts from operating activities before net interest and capital payments.
Material Changes vs. Prior Period
- Revenue Growth: Operating revenues increased by $4.7 million (2.3%) compared to Q3 2023, driven by higher charter hire and profit share income.
- Profitability: Net income rose by $2.1 million to $31.4 million, despite non-cash mark-to-market losses on derivatives ($5.1 million) and equity investments ($1.4 million).
- Offshore Segment: Offshore revenues declined to $44.9 million from $64.1 million in Q3, primarily due to the rig Hercules spending half the quarter in mobilization mode for a new contract in Namibia.
- Car Carrier Segment: The segment generated $22.1 million in charter hire following the delivery of the Wolfsburg LNG dual-fuel vessel, which commenced a 10-year charter to Volkswagen.
- Liquidity: Cash and cash equivalents increased by $47.5 million quarter-over-quarter to $165.5 million.
Guidance, Outlook, and Management Commentary
- Dividend: The Board declared an increased quarterly cash dividend of $0.26 per share, marking the 80th consecutive quarterly dividend.
- Charter Backlog: As of December 31, 2023, the fixed-rate charter backlog was approximately $3.2 billion with a weighted remaining term of 5.7 years.
- Outlook: Management expects to continue increasing charter revenues in 2024 with all car carrier newbuildings delivered. They anticipate significant value in the fleet beyond current backlog, citing recent charter extensions at higher rates.
- Capital Expenditure: Approximately $77 million in remaining capital commitments exist for two LNG dual-fuel car carriers under construction. A third vessel, Odin Highway, was delivered post-quarter end on a 10-year charter to K Line.
- Share Repurchase: The Company has $90 million remaining under its $100 million share repurchase program authorized until June 30, 2024.
- Risks: Forward-looking statements are subject to risks including global economic strength, currency fluctuations, cyclical shipping market conditions, and potential disruptions to shipping routes.
Investor Verification Checklist
- Verify the reconciliation of Adjusted EBITDA to Net Income to understand the impact of non-cash items and interest.
- Confirm the status and delivery timeline of the remaining LNG dual-fuel car carrier newbuildings.
- Review the specific terms of the Hercules drilling contract in Namibia and expected revenue recognition in Q1 2024.
- Assess the impact of the $30 million capital expenditure for the Linus rig's special periodic survey scheduled for Q2 2024.
- Monitor the utilization rates of the dry bulk fleet in the spot market, which contributed $7.3 million in net charter hire.