SFL Corp's net results took a hit in the third quarter from a decision by Heung-A Shipping to leave purchase options on the table for a pair of container feederships.
But the leasing giant, part of the John Fredriksen empire, delivered earnings that met analysts' expectations as its charter revenue remained stable.
The New York-listed shipowner formerly known as Ship Finance International reported $3.82m in net income, down from $30m in the third quarter of 2018.
A major factor in the slump was a $25m impairment charge logged on the 1,700-teu Heung-A Green and Green Ace (both built 2015) after Heung-A decided not to exercise its purchase options on the ships. The options, which could still be exercised in 2020, were part of the South Korean container line's charters on the vessels.
But without such non-cash charges typically excluded by analysts, SFL's results were in line with expectations.
The Ole Hjertaker-led outfit, which owns a diversified fleet, reported Ebitda of $89.9m in the period. This came in within range of predictions at Arctic Securities and marked an increase on the $80m in Ebitda at the same time last year.
Revenue stays in-line
Revenue of nearly $112m was virtually unchanged from the third quarter of 2018. That was also in line with predictions at Arctic, which covers the company's bonds.
"With no new investments and flat dividends during the quarter, the report is credit neutral and should not impact bond prices in our view," said analyst Alexander Jost.
| Q3 2019 | Q3 2018 | |
| Operating revenue | $111,125,000 | $110,997,000 |
| Operating expenses | $91,346,000 | $68,769,000 |
| Adjusted Ebitda | $90,000,000 | $85,743,000 |
| Net income | $3,822,000 | $29,731,000 |
Looking forward, the Oslo-headquartered shipowner said it is focused on continuing to grow its fleet with assets on long-term charters.
“In an environment where traditional capital sources for the maritime industries remain constrained, we see many growth opportunities for SFL, and our strong liquidity position and constant focus on balance sheet management supports the continued growth in our asset base," said Hjertaker, SFL's chief executive.
