SFL Corporation Ltd. Q4 2024 Preliminary Results Summary
Business Context and Reporting Period
This Form 6-K filing, dated February 13, 2025, reports preliminary financial results for SFL Corporation Ltd. for the quarter ended December 31, 2024. SFL operates as a maritime infrastructure company owning and operating a diversified fleet of vessels and drilling rigs, primarily under long-term charters to investment-grade end users.
Key Financial Metrics
- Revenue: Total U.S. GAAP operating revenues were $229.1 million. Gross charter hire received was $231.7 million, including $2.6 million in profit share.
- Profitability: Net income was $20.2 million ($0.15 per share). Adjusted EBITDA was $124.0 million from consolidated subsidiaries and $7.9 million from associated companies.
- Cash Flow: Net cash provided by operating activities was $101.8 million. Net cash used in investing activities was $116.1 million, primarily due to vessel purchases and newbuild deposits.
- Liquidity: Cash and cash equivalents totaled $134.6 million, with an additional $45 million in undrawn credit lines, totaling approximately $180 million in available liquidity.
- Debt: Total interest-bearing debt (short and long term) was approximately $2.84 billion ($689 million short-term + $2.15 billion long-term).
- Dividend: The Board declared a quarterly cash dividend of $0.27 per share, marking the 84th consecutive quarterly dividend.
Material Changes vs. Prior Period
- Revenue Decline: Operating revenues decreased to $229.1 million from $255.3 million in Q3 2024. This decrease is partly due to accounting treatment excluding $9.9 million of charter hire classified as repayment of investment in sales-type leases.
- Net Income Volatility: Net income dropped to $20.2 million from $44.5 million in Q3 2024. This was impacted by non-recurring items, including a $5.4 million gain on the sale of the vessel "Green Ace" and negative mark-to-market effects on swaps ($2.0 million) and equity investments ($0.5 million).
- Asset Portfolio: The company sold the container vessel "Green Ace" for $10.8 million. Subsequent to quarter-end, the company agreed to sell the sister vessel "Asian Ace" for $9.5 million.
Guidance, Outlook, and Risks
- Charter Backlog: As of December 31, 2024, the fixed-rate charter backlog was approximately $4.3 billion with a weighted remaining term of 6.7 years. Approximately 67% of this backlog is with investment-grade customers.
- Strategic Growth: The company has five 16,800 teu LNG dual-fuel container vessels under construction (delivery 2028) with pre-committed 10-year charters adding $1.2 billion to the backlog.
- Financing Activity: Post-quarter-end, SFL issued a $150 million senior unsecured bond maturing in 2030 with a 7.75% coupon. Golden Ocean exercised purchase options on eight capesize bulkers for $112 million, expected to yield ~$50 million net cash proceeds in Q3 2025.
- Legal Contingencies: SFL won a ruling in February 2025 ordering Seadrill to pay approximately $48 million in compensation regarding the rig "Hercules." This ruling is subject to appeal by March 5, 2025. A separate case regarding capital spares is scheduled to commence later in 2025.
- Outlook Risks: Management notes that newbuild yard prices have increased 30-40% recently. Risks include cyclical market conditions, fluctuations in charter rates, vessel values, and potential disruptions from geopolitical instability or environmental regulations.
Investor Verification Checklist
- Verify the final status of the $48 million Seadrill compensation ruling and any potential impact from the March 5, 2025 appeal deadline.
- Confirm the timing and net proceeds of the Golden Ocean vessel sales ($112 million aggregate) and the subsequent "Asian Ace" sale.
- Monitor the execution of the $150 million bond issuance and the allocation of proceeds toward new investments.
- Track the progress and cost adherence of the five LNG dual-fuel container vessels under construction, given the noted 30-40% increase in yard prices.
- Review the impact of the $9.9 million charter hire excluded from GAAP revenue on future earnings visibility.