SFL Corporation Ltd (NYSE:SFL) Q1 2020 Earnings Conference Call - Final Transcript

May 20, 2020 • 10:00 am ET

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SFL Corporation Ltd (NYSE:SFL) Q1 2020 Earnings Conference Call - Final Transcript

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Presentation
Operator
Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Q1 2020 [Phonetic] SFL Corporation Earnings Conference Call. [Operator Instructions].

And I would now like to hand the conference over to your speaker today, Ole Hjertaker. Thank you. Please go ahead.

Executive
Ole B. Hjertaker

Thank you, and welcome all to SFL's First Quarter Conference Call. I will start the call by briefly going through the highlights of the quarter, and following that our CFO, Aksel Olesen, will take us through the financials, and the call will be concluded by opening up for questions.

Before we begin our presentation, I would like to note that this conference call will contain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Words such as expects, anticipates, intends, estimates or similar expressions are intended to identify these forward-looking statements. These statements are based on our current plans and expectations and involve risks and uncertainties that could cause future activities and results of operations to be materially different from those set forth in the forward-looking statements. Important factors that could cause actual results to differ include conditions in the shipping, offshore and credit markets. And for further information, please refer to SFL's reports and filings with the Securities and Exchange Commission.

While our business has so far not been materially impacted by the general market disruption caused by COVID-19 pandemic, the Board believes it is appropriate to review the dividend payout level for SFL, with a focus on maintaining a strong balance sheet and investment capacity over the next few quarters in a setting with more expected market volatility.

The announced dividend of $0.25 per share represents a dividend yield of around 10% based on closing price yesterday, and this is our 65th quarter with dividends. The reported income was negative, but this was after some large non-cash accounting impairments on assets and swaps. The underlying business was robust, and these impairments did not have any impact on distributable cash flow from our assets. Over the years, we have paid nearly $27 per share in dividends or $2.3 billion in total, and we have a significant fixed rate charter backlog supporting continued dividend capacity going forward. The total charter revenues increased to $161 million in the first quarter, with nearly 90% of this from vessels on long-term charters, and only around 10% from vessels employed in -- on short-term charters and in the spot market. And all customers are current on their charter payments, so we have good cash flow visibility into the second quarter.

The EBITDA equivalent cash flow in the quarter was approximately $120 million, and last 12 months, the EBITDA equivalent has been approximately $481 million. With a very large proportion of long-term charters and the fact that all customers are current with charter payments, the underlying business remained robust and cash position was $217 million, which was up from the previous quarter. And we have added to the charter backlog recently, as a combination of asset acquisitions