SFL (NYSE:SFL) reported second-quarter revenue of approximately $201 million and adjusted EBITDA of $130 million, up 20% from the prior quarter, as higher spot tanker earnings contributed to results. Net income was $34 million, or $0.25 per share, compared with $26 million, or $0.20 per share, in the first quarter.
The company declared a quarterly cash dividend of $0.22 per share, marking its 90th consecutive dividend payment. Chief Executive Officer Ole Hjertaker said SFL has paid more than $3 billion in cumulative dividends and more than $32 per share since 2004.
Charter backlog rises to $3.8 billion
SFL’s charter backlog increased to approximately $3.8 billion from $3.7 billion at the end of the first quarter. About 65% of contracted revenue is with investment-grade counterparties, according to Chief Operating Officer Trym Sjølie.
The company’s fleet portfolio comprises 61 maritime assets, including vessels, rigs and contracted newbuildings. The portfolio includes 30 container ships, 16 tankers, 11 car carriers, two dry bulk vessels and two drilling rigs.
Container vessels represent nearly 70% of contracted revenue, while car carriers account for roughly 15%, energy assets about 10%, and tankers the remaining share. The weighted average remaining charter term was 7.1 years for container ships, 5.9 years for car carriers and 3.5 years for tankers.
Fleet utilization remained high across shipping segments during the quarter:
- Container vessels: 99.3%
- Car carriers: 100%
- Tankers: 99.8%
- Dry bulk vessels: 99.4%
The energy segment had 50% utilization, reflecting operations by the Linus drilling rig and the warm-stacked Hercules rig, which is being prepared for a Canadian contract expected to begin contributing revenue in the first half of 2027.
Car carrier expansion adds contracted revenue
SFL expanded its car carrier business during the quarter through new charter agreements and orders for four 7,000-CEU LNG dual-fuel car carriers scheduled for delivery in 2029. The aggregate shipyard cost is approximately $360 million, with most payments due closer to delivery.
Two of the newbuildings have been chartered to a major Asia-based car manufacturer on five-year contracts with five-year extension options. The initial fixed period adds approximately $150 million to backlog and could rise to $300 million if the options are exercised. The other two vessels remain open for charter, although management said it is in discussions regarding employment.
SFL also agreed to new three-year charter contracts for its older SFL Conductor and SFL Composer car carriers following the expiration of their existing Volkswagen charters. The contracts add approximately $83 million to backlog and are with a customer linked to a leading Asian liner company, management said.
Combined, the car carrier transactions added approximately $233 million in firm backlog during the quarter. SFL’s total car carrier backlog stood at $578 million, with a weighted average firm charter duration of 5.9 years.
In response to analyst questions, Sjølie said management sees continued growth in Chinese vehicle-export volumes and expects a growing supply-demand gap for car carriers from 2029 and 2030 onward, despite recent vessel ordering. He also said the company selected LNG dual-fuel propulsion because it believes LNG is currently the most available and technically practical lower-emission fuel option for the segment.
Spot tanker market drives quarterly improvement
Tankers generated approximately $62 million in gross charter hire during the second quarter, up from about $46 million in the first quarter. The increase was primarily driven by SFL’s two Suezmax crude tankers operating in the spot market.
The Suezmax vessels earned an average spot time-charter equivalent rate of approximately $133,000 per day per vessel in the second quarter, up from approximately $54,000 per day in the first quarter. Hjertaker said the vessels had previously operated on a long-term charter at roughly $30,000 per day through December.
For the third quarter to date, SFL had covered 63% of the Suezmax vessels’ available days at an average charter rate of about $93,000 per day. Management cautioned that reported spot revenue depends on trading activity, ballast days and the company’s load-to-discharge revenue recognition policy under U.S. GAAP.
The company’s two Handymax product tankers operating in the short-term market earned average daily spot TCE of approximately $16,100 per vessel, compared with $10,700 in the first quarter.
Liquidity, financing and capital expenditures
At quarter-end, SFL had approximately $113 million in cash and cash equivalents and another $160 million available through undrawn credit facilities, for total available liquidity exceeding $270 million. Its book equity ratio was approximately 29%.
During April, SFL completed a $75 million tap issue of its 2030 senior unsecured bonds at 103.5, implying a yield of approximately 6.8%. The company used a portion of the proceeds and balance-sheet cash to redeem its $150 million bond due in May 2026 at maturity.
SFL raised $63 million through its at-the-market equity and dividend reinvestment programs during the quarter, followed by another $37 million after quarter-end. Hjertaker said the company issued a total of 8.8 million shares during the second and third quarters and had no plans to issue additional shares in the foreseeable future.
The company has approximately $1.2 billion in remaining capital expenditures tied to five container vessels and four car carrier newbuildings. Seven of those nine newbuildings have long-term charters in place.
About SFL (NYSE:SFL)
Ship Finance International Limited (NYSE: SFL) is an independent owner of modern, large-size ocean-going vessels that provides finance and leasing services to the global shipping industry. The company’s fleet encompasses a diversified mix of crude oil tankers, product and chemical tankers, liquefied natural gas (LNG) carriers, dry bulk carriers, container vessels and floating production storage and offloading (FPSO) units. By structuring long-term charter agreements and bareboat leases with major oil companies, commodity traders and offshore operators, Ship Finance International seeks to deliver stable cash flows and risk-adjusted returns for its shareholders.
In its core business, Ship Finance International acquires or finances vessels through forward sales agreements and then charters them out under fixed-rate contracts, typically ranging from five to 20 years in duration.
