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SFL Corporation: Results Surprisingly Strong For This Ship Lessor

Jun. 04, 2020 5:31 AM ETSFL Corporation Ltd. (SFL)9 Comments


  • SFL Corporation showed a slight amount of growth compared to the previous quarter, although the dividend cut was disheartening.
  • The shipping industry has been impacted much more by the COVID-19 pandemic than many others.
  • The company's business model is better designed to weather the condition than that of many other companies in the industry.
  • The majority of SFL Corporation's cash flow comes from solid, well-financed companies that should reduce counterparty risk in the current environment.
  • The company appears to easily be generating sufficient cash flows to cover its dividend at the new level.
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On Wednesday, May 20, 2020, ship leasing firm SFL Corporation (NYSE:SFL) announced its first-quarter 2020 earnings results. At first glance, these results were mixed, as the company failed to meet the expectations of its analysts in terms of bottom line earnings but it did manage to beat their expectations in terms of its top line revenues. In addition, the company was forced to cut its long-standing dividend, which undoubtedly disappointed many investors. A closer look at the actual earnings report does indeed reveal that there was a great deal to like here, although there were reasons to be disappointed too, as the COVID-19 pandemic has impacted shipping much more than some other sectors.

As my long-time readers are no doubt well aware, it is my usual practice to share the highlights from a company's earnings report before delving into an analysis of its earnings results. This is because these highlights provide a background for the remainder of the article and serve as a framework for the resultant analysis. Therefore, here are the highlights from SFL Corporation's first-quarter 2020 earnings results:

  • SFL Corporation brought in total operating revenues of $121.896 million in the first quarter of 2020. This represents a 1.68% increase over the $119.877 million that it brought in during the previous quarter.
  • The company reported an operating loss of $27.415 million in the most recent quarter. This compares very unfavorably to the $20.216 million operating profit that it reported in the last quarter of 2019.
  • SFL reduced its quarterly dividend by 28.57% to $0.25 per share.
  • The company increased its charter backlog by an appealing $230 million in the period.
  • SFL Corporation reported a net loss of $87.054 million in the first quarter of 2020. This compares very unfavorably to the $23.642 million net profit that it reported in the fourth quarter

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This article was written by

Power Hedge profile picture

Power Hedge has been covering both traditional and renewable energy since 2010. He targets primarily international companies of all sizes that hold a competitive advantage and pay dividends with strong yields.

He is the leader of the investing group Energy Profits in Dividends where he focuses on generating income through energy stocks and CEFs while managing risk through options. He also provides micro and macro-analysis of both domestic and international energy companie. Learn more.

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Comments (9)

$SDRL rallying 100% today. That might be because there is some inkling that lenders may be cooperating in terms of a restructuring. Not sure if that is good for $SFL which might be expected to fulfill their partial debt guarantee. Either way, there is a lot of volume so speculators are making their bets
"Another source of the impairment charge was an unrealized loss that the company had to take on its marketable securities. SFL Corporation owns a number of securities that it can sell quickly into the market just like some of its customers like Seadrill (SDRL)."

>>> sorry, i don't fully understand what you try to say here. Do you have any information on what kind of securities SFL holds? I was tempted to think they hold SDRL shares, but I am hoping they do not...

Thank you for the article :)
sts66 profile picture
They still own some FRO shares but their value went up, not down - have no idea what other stocks they may own, they don't disclose it - better not be SDRL stock!
ADS shipping....largest stockholder in the co.Big div...
Long SFL ... I have always been impressed by their management in calls. Straight shooters. ... still forfills a role in my portfolio.
As pure owners not being exposure to the spot market will have done SFL good the past few months - but time will come with the big liner boys will demand renegotiation on rates. the big 3 liners operators are already forcing feeders operators to lower fees. While slowly improving container volumes are down as much as 40% on some routes (ref. l;atest by Clarksons and Platou).

Dont like their spot exposure on the bulkers - the market has been rather depressed lately + on the containers MSC's payment performance the past 5 months has been horrendous averaging +35 days late on a revolting 30mill trade facility we grant them.

(disclosure - we distribute +$4bl worth of fuel to the world wide merchant fleet annually)
Macomber T profile picture
Sorry, you have a miss like this plus 100 million new shares, what will it take to drop like it should. Stock went the wrong direction, up from like 9 from 9.50 now 10. To 10.50 this doesn’t make sense, too much loose money out there. There is a time to sell and sfl earned a sell.
hooloovoo profile picture
They may or may not issue the shares. I assume they will only do it if liquidity requires it.
10 ml shares $100 ml $$$
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