SFL Corporation Ltd. Q4 FY2025 earnings call

• Announced 88th consecutive dividend.
• Fourth quarter revenues were $176 million with EBITDA equivalent cash flow of $109 million. Over twelve months, EBITDA was $450 million.
• Took decisive steps to strengthen charter backlog with long-term agreements and deployed high-quality assets.
• Made significant investments in efficiency upgrades across the fleet.
• Completed transactions with Suezmax tankers, including selling two vessels with strong profits and releasing charters on two others with compensation.
• Offshore rig Linus performing well on long-term contract; Hercules rig warm stacked in Norway.
• Charter backlog stands at $3.7 billion, with two-thirds contracted to investment-grade counterparties.
• Solid liquidity position with cash and cash equivalents of $151 million and undrawn credit facilities of $46 million at quarter-end.

Shipping Segment: Charter revenue for the quarter was $176 million. The container fleet contributed approximately $81 million (including profit share related to fuel savings on seven large container vessels). The car carrier fleet generated around $26 million, up from $23 million in the prior quarter as all vessels were fully back in service. The tanker fleet had charter hire of approximately $42 million, down from $44 million in the previous quarter due to a scheduled drydocking. The dry bulk segment had two Camsimax vessels remaining, generating approximately $2.7 million in revenue. Energy Assets Segment: Revenue was approximately $23 million, mainly from the Linus rig on a long-term contract with ConocoPhillips.

Revenue contribution percentages: Container fleet ~46% of charter revenue, car carrier ~15%, tanker ~24%, dry bulk ~1.5%, energy assets ~13%.

• Optimistic about securing new employment for the Hercules offshore rig.
• Market analysts predict a very strong tanker market in the next few quarters with spillover effect on Suezmax market from VLCC segment.
• Newbuildings capital expenditures of ~$850 million expected to be funded through pre and post-delivery financing with strong lender interest.

• Conditions in shipping, offshore, and credit markets could materially affect results.
• Volatility in profit and loss statement due to US GAAP accounting for charter hire from vessels in the spot market on a load-to-discharge basis.

Q: How are you thinking about Suezmax vessels given strong crude tanker spot market and interest in multi-year charters?

A: The market segment is interesting. Sold older vessels with strong returns. Remaining Korean-built vessels are attractive for long-term charters. Market has moved upward sharply, with strong charter rate expectations.

Q: How is the dividend thought about for the next twelve months and growth in containership market?

A: Board doesn't guide dividends, but focuses on long-term sustainable cash flows. Look for balanced capital deployment. Containership market is considered, but disciplined in deals.

Q: Remind on previous charter rates for terminated Suezmax contracts and fixtures in spot market?

A: Previous charter rates for Chinese-built vessels were ~$27,000 per day. Spot market for modern Suezmax tanker one-year TC guided in high forties to over $60,000 per day based on index.

Q: Status of remaining dry bulk vessels and interest in dry bulk new builds?

A: Two remaining Panamaxes are not non-core, still look at opportunities in dry bulk with risk-adjusted return consideration.

Q: Status of the Hercules rig?

A: Remained warm stacked since November 2024, looking for employment with signs of more opportunities due to industry consolidation.

Q: Long-term evolution of contract revenue mix and container new build orders?

A: Not specifically focused on one segment, look to position as logistics partner for industrial-focused partners. Container new builds are for long-term time charters to investment-grade counterparties.

Q: Most optimistic segment for future growth?

A: No single favorite segment, look across board including container, car carrier, tanker, dry bulk, chemical carrier segments.

Q: Status of SFL Composer?

A: Vessel hit by another container vessel, damage repairs covered by insurance, back in service.

Q: Size of new rig financing facility for Hercules?

A: New financing facility for Hercules is $100 million.