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Ship Finance International Limited3Q 2012 ResultsNovember 29, 2012                                     1
FORWARD LOOKING STATEMENTSThis presentation contains forward looking statements. These statements are based upon various a...
3Q 2012 Highlights• Net income of $35 million ($ 0.44/share) for the quarter    » Aggregate charter revenue of $179 millio...
Recent developments• Renewal of fleet continuing  » 1991-built OBOs Front Climber and Front Driver delivered to new owners...
Cash sweep and profit share• $10.2m net cash sweep from two separate asset pools     » 22 VLCCs, Suezmaxes and OBOs (acqui...
Frontline vessels and financial exposure   Vessels on charter to FRO                                      Financial levera...
$5.4 billion charter backlog                                                                    (1)                  Chart...
Historically attractive asset prices• Downward pressure on asset values in most shipping segments last 12 months       »  ...
Contributions from projects last 12 months(1)• Large performing fleet with significant cash flow    » $614m EBITDA-equival...
SFL operational performance• Pro-forma illustration of cash flow (1)    » Not as accounted for under US GAAP    » Used as ...
Profit & LossINCOME STATEMENT                        Three months ended        Full year(in thousands of $                ...
Balance SheetBALANCE SHEET                                                Sep, 30      Jun, 30    Dec 31, 2011(in thousand...
Liquidity and Financing• $67 million in cash and cash equivalents• $40 million in available for sale securities• $3.1 bill...
Fully financed newbuilding program                             Remaining newbuilding program only 5% of Enterprise Value(1...
Covenant Compliance   Free cash                                           > $25m               $67m   Working capital(1)  ...
Summary• Declared third quarter dividend of $0.39 per share    » 10% dividend yield(1)• $0.78 per share cash payment to sh...
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Ship Finance Int Q3 2012 results presentation

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  1. 1. Ship Finance International Limited3Q 2012 ResultsNovember 29, 2012 1
  2. 2. FORWARD LOOKING STATEMENTSThis presentation contains forward looking statements. These statements are based upon various assumptions, many of which arebased, in turn, upon further assumptions, including Ship Finance managements examination of historical operating trends, datacontained in the Company’s records and other data available from third parties. Although Ship Finance believes that theseassumptions were reasonable when made, because assumptions are inherently subject to significant uncertainties and contingencieswhich are difficult or impossible to predict and are beyond its control, Ship Finance cannot give assurance that it will achieve oraccomplish these expectations, beliefs or intentions.Important factors that, in our view, could cause actual results to differ materially from those discussed in the forward-lookingstatements include the strength of world economies, fluctuations in currencies and interest rates, general market conditions includingfluctuations in charter hire rates and vessel values, changes in demand in the markets in which we operate, changes in demandresulting from changes in OPECs petroleum production levels and world wide oil consumption and storage, developments regardingthe technologies relating to oil exploration, changes in market demand in countries which import commodities and finished goods andchanges in the amount and location of the production of those commodities and finished goods, increased inspection procedures andmore restrictive import and export controls, changes in our operating expenses, including bunker prices, dry-docking and insurancecosts, performance of our charterers and other counterparties with whom we deal, timely delivery of vessels under construction withinthe contracted price, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability frompending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due toaccidents or political events, and other important factors described from time to time in the reports filed by the Company with theSecurities and Exchange Commission. 2
  3. 3. 3Q 2012 Highlights• Net income of $35 million ($ 0.44/share) for the quarter » Aggregate charter revenue of $179 million ($2.26/share)(2) » Including $10 million cash sweep relating to Frontline vessels » EBITDA(3) of $145 million ($1.83/share)• Declared a third quarter dividend of $0.39 per share » 10% dividend yield(1)• Declared an additional accelerated fourth quarter dividend of $0.39 per share » Total cash dividend payment of $0.78 per share in December 2012 OFFSHORE TANKERS DRY BULK CONTAINER Charter revenue 52% 30% 10% 8% 3Q-121) Announced quarterly cash dividend, annualized / SFL share price $[15.43 (November 28, 2012)2) Charter revenues includes total charter hire from all vessels and rigs, including assets in 100% owned subsidiaries classified as ‘Investment in associates’ and accrued cash sweep income. The numbers include cash sweep accrual in Frontline Shipping Limited only, as there was no accrued cash sweep in Frontline Shipping II Limited for the nine months ended September 30, 2012.3) EBITDA is a non- GAAP measure and includes assets in 100% owned subsidiaries classified as Investment in associates. For more details please see 3Q-12 press release Appendix 1: Reconciliation of Net Income to EBITDA. 3
  4. 4. Recent developments• Renewal of fleet continuing » 1991-built OBOs Front Climber and Front Driver delivered to new owners in October and November 2012, respectively » Net proceeds to SFL of approximately $18.5 million, after compensation from Frontline » Expected aggregate book gain of approximately $4.4 million in 4Q 2012 » Only two older OBOs remaining in the fleet• $194 million equity and bonds raised subsequent to quarter-end » $89 million raised in a public offering of 6 million new shares » $105 million raised through issuance of 5-year senior unsecured notes • NOK denominated, but all payments swapped to USD with a fixed interest rate of 6.06% p.a.• Acquired two modern car carriers in combination with 5-year charters » Built 2005 and 2006 in Japan » 6,500 ceu capacity » 5-year time charter to an investment-grade logistics company in Asia » $85 million increase in charter backlog 4
  5. 5. Cash sweep and profit share• $10.2m net cash sweep from two separate asset pools » 22 VLCCs, Suezmaxes and OBOs (acquired in 2004): $13.0m accumulated in 3Q-12 » 5 VLCCs at higher rates (acquired in 2005): Negative adjustment of $2.8m• $40.1 million cash sweep accumulated year-to-date » 100% from 22 vessels acquired in 2004 » Full year cash sweep payable in March 2013 VLCC earnings(1) and cash sweep range $100,000 $90,000 $80,000 25% profit split $70,000 above old base $60,000 rates $50,000 $40,000 $30,000 Up to 5 x VLCCs - Cash sweep range(2) $0.17/share $20,000 20 x VLCC/Suezmax/OBO: Cash sweep range(3) per quarter $10,000 $0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 20121) Average earnings for modern VLCC (Clarksons, Research Sercices, quarterly average)2) Average cash sweep range for 5 x VLCCs acquired in 20053) Average cash sweep range for 12x VLCCs, 6 x Suezmaxes and 2x OBOs acquired in 2004 (after the recently announced sales of two OBOs) 5
  6. 6. Frontline vessels and financial exposure Vessels on charter to FRO Financial leverage on FRO vessels• 47 vessels initially in 2004 • Significant reduction in leverage last 4 years• The fleet is reduced to 25 vessels by • From $1,250m to $490m(1) = 60% reduction selling the oldest tonnage in loan amount• Further fleet reductions expected • Loan amortization continues (>$70m/yr)• Weighted average age of ~10 years • Next refinancing: ~$222m in 2015 Number of vessels to FRO Financing relating to FRO vessels 50 $1400m $1200m 40 $1000m 30 $800m $600m 20 $400m 10 $200m - $0m 2004 2005 2006 2007 2008 2009 2010 2011 2012e 2004 2005 2006 2007 2008 2009 2010 2011 2012e (2) Single Hull Suezmax/OBO - DH VLCC - DH Scrap @ $410/ldt Loan.1) Estimated loan amount at year-end 20122) Source: Clarkson Research Services 6
  7. 7. $5.4 billion charter backlog (1) Charterers by Mkt. Cap Remaining Charter Term(1) > $5bn < $5bn > 10 yrs 5–10 yrs 44% 39% 66% 32% 0–5 yrs 2% Private 17%1) Fixed charter backlog as of September 30, 2012, adjusted for subsequent acquisitions and sales, excluding future cash sweep/profit share, net of any seller’s credit and assuming certain call options are not exercised 7
  8. 8. Historically attractive asset prices• Downward pressure on asset values in most shipping segments last 12 months » General uncertainty in the world economy » Significant deliveries impacting supply/demand ratio » Shipyards need to fill up production capacity » Many ship owners have limited access to capital• Increased focus on efficient vessel designs » Significant fuel savings compared to older tonnage » ‘Value gap’ between newbuildings and secondhand vessels Tanker (1) Container (1) Orders and yard capacity(2) 70160140 60120 50100 4080 3060 204020 10 0 0 98 99 00 01 02 03 04 05 06 07 08 09 10 11 98 99 00 01 02 03 04 05 06 07 08 09 10 11 NB VLCC 5yr VLCC NB 3,500teu 5yr 3,600teu 1) Source: Clarkson Research Services 2) Source: RS Platou markets 8
  9. 9. Contributions from projects last 12 months(1)• Large performing fleet with significant cash flow » $614m EBITDA-equivalent last twelve months » $133m net cash-flow from projects after interest and debt amortization $ mill. 800 40 133 600 137 400 707 344 200 133 0 Fixed-rate Cash OPEX + Net Loan Net revenues (2) sweep G&A interest amort.(3) contribution1) Not as accounted per US GAAP – used as an internal guideline to assess the Company’s core business.2) Fixed charter revenues and return on financial investments3) Ordinary installments relating to the Company’s projects. Excluding $156 million prepayment relating to vessels on charter to Frontline in 2011, and prepayments when vessels are sold 9
  10. 10. SFL operational performance• Pro-forma illustration of cash flow (1) » Not as accounted for under US GAAP » Used as an internal guideline to assess the Companys performance » Excluding extraordinary and non-cash items and profit share 3Q 2012 2Q 2012 $ mill. $/share $ mill. $/share Fixed charter hire VLCC 30.4 0.38 30.4 0.38 Suezmax 10.2 0.13 10.2 0.13 Chemical Tankers 1.5 0.02 1.4 0.02 Container 14.6 0.18 17.0 0.21 Dry bulk incl. OBOs 15.6 0.20 17.6 0.22 Offshore 93.9 1.19 92.3 1.17 Sum fixed charter hire 166.2 2.10 168.9 2.13 Vessel operation expenses and G&A (35.9) (0.45) (34.0) (0.43) Financial investments 1.9 0.02 1.9 0.02 Accumulated cash sweep/profit share(2) 13.0 0.16 13.5 0.17 EBITDA including accumulated cash sweep 145.2 1.83 150.3 1.901) Including cash flow in subsidiaries accounted for as ‘investment in associate’2) The numbers include cash sweep accrual in Frontline Shipping Limited only, as there was no accrued cash sweep in Frontline Shipping II Limited for the nine months ended September 30, 2012. 10
  11. 11. Profit & LossINCOME STATEMENT Three months ended Full year(in thousands of $ Sep, 30 Jun, 30 2011except per share data) 2012 2012 (audited)Charter revenues - operating lease 31,476 34,215 120,024 Accumulated cash sweep fromCharter revenues - finance lease 47,263 47,856 380,518Revenues classified as Repayment of Frontlineinvestment in finance leases (14,612) (14,754) (205,910)Profit share income - - 482Cash sweep income 10,162 16,312 -Total operating revenues 74,289 83,629 295,114 Gain on sale of OBO Front RiderGain / (loss) on sale of assets andtermination of charters 1,923 21,704 8,468Vessel operating expenses (25,364) (23,142) (81,063)Administrative expenses (2,133) (2,272) (9,885)Depreciation (13,583) (13,533) (49,929)Total operating expenses (41,080) (38,947) (140,877)Operating income 35,132 66,386 162,705Results in associate 10,669 11,219 50,902Interest income from associates andlong term investments 5,661 5,653 21,851Interest income, other 1,198 1,137 1,550Interest expense (22,067) (21,635) (96,247)Amortisation of deferred charges (1,500) (1,415) (7,131)Gain on sale of associate - - 4,064Other financial items (710) 9 (2,111)Impairment adjustment to investment - (463) -Mark to Market of Derivatives 6,176 335 (4,408)Taxes - - -Net income 34,559 61,226 131,175 Subsequent to quarter end, SFLBasic earnings per share ($) 0.44 0.77 1.66 issued 6 million new sharesWeighted average number of shares 79,225,000 79,225,000 79,125,000 79,225,000 79,225,000 79,125,000 11Common shares outstanding
  12. 12. Balance SheetBALANCE SHEET Sep, 30 Jun, 30 Dec 31, 2011(in thousands of $) 2012 2012 (audited)ASSETSShort termCash and cash equivalents 66,818 100,788 94,915Available for sale securities 40,359 39,664 23,324Amount due from related parties 41,195 30,451 9,775 Includes $40.1 million inOther current assets 72,988 73,562 64,749 accumulated cash sweep from FrontlineLong termNewbuildings and vessel deposits 73,780 61,965 123,750Vessels and equipment, net 960,400 973,982 896,830Investment in finance leases 1,116,191 1,135,736 1,159,900Investment in associate 219,907 203,588 169,838Amount due from related parties- Long term 235,163 248,775 274,184Deferred charges 22,943 24,327 25,723Other long-term assets 52,259 51,252 53,140Total assets 2,902,003 2,944,090 2,896,128LIABILITIES AND STOCKHOLDERS’ EQUITYShort termShort term and current portion of long terminterest bearing debt 220,051 209,378 150,342Other current liabilities 20,622 18,315 19,385Amount due to related parties 7,495 6,704 4,421Long termLong term interest bearing debt 1,630,480 1,689,905 1,760,122Other long term liabilities 113,975 112,327 104,767 Equity ratio of 35%, including deferred equity of $156.9Stockholders’ equity 909,380 907,461 857,091 millionTotal liabilities and stockholders’ equity 2,902,003 2,944,090 2,896,128 12
  13. 13. Liquidity and Financing• $67 million in cash and cash equivalents• $40 million in available for sale securities• $3.1 billion gross interest-bearing debt at 3Q12 » $1.4 billion bank loans - fully consolidated » $1.3 billion bank loans in ‘Investment in associate’ » $0.5 billion senior unsecured notes – fully consolidated » Significant scheduled loan repayments• Raised $194 million in equity and senior unsecured bonds subsequent to quarter-end• Demonstrated premium access to the bank market » $53 million financing on newly acquired car carriers 13
  14. 14. Fully financed newbuilding program Remaining newbuilding program only 5% of Enterprise Value(1) $ mill. 200 150 Enterprise 100 179 Value(1): $4.4bn 50 34 0 4Q 2012 2013 Committed financing Remaining ship yard installments• Six newbuildings representing $213 million remaining gross investments• Committed undrawn bank debt of $192 million = $21m net capex• All newbuildings have medium- to long-term charters attached1) Enterprise Value defined as sum of market capitalization at November 28, 2012 and net interest-bearing debt at September 30, 2012, including all 100% owned subsidiaries 14
  15. 15. Covenant Compliance Free cash > $25m $67m Working capital(1) >0 $193m Book equity ratio(2) > 20% 35% Minimum Value Clauses (where applicable) In compliance Ship Finance has never experienced any violations of bank covenants, despite the volatility in the shipping and offshore markets1) Excluding short-term portion of long-term debt2) Including $156.9 million of deferred equity 15
  16. 16. Summary• Declared third quarter dividend of $0.39 per share » 10% dividend yield(1)• $0.78 per share cash payment to shareholders in December, including accelerated fourth quarter dividend• Reported net income of $35 million ($0.44/share) in the third quarter• EBITDA(2) equivalent cash flow of $145 million ($1.83/share) including associated companies• Premium access to capital - have raised equity, bonds and bank financing recently• Focus on investment opportunities with vessel values at historic low levels in many segments1) Announced quarterly cash dividend, annualized / SFL share price $15.43 (November 28, 2012)2) EBITDA is a non- GAAP measure and includes assets in 100% owned subsidiaries classified as Investment in associates. For more details please see 3Q-12 press release Appendix 1: Reconciliation of Net Income to EBITDA. 16
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