Flex Lng ((FLNG)) has held its Q4 earnings call. Read on for the main highlights of the call.
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The latest earnings call for Flex LNG showcased a mixed sentiment. While the company reported strong financial performance and stable revenues, it faces challenges such as declining freight rates, geopolitical uncertainties, and regulatory pressures. Despite these hurdles, Flex LNG’s strategic backlog and financial stability are expected to help it navigate near-term challenges, with long-term success reliant on market recovery and regulatory adaptation.
Stable Revenue and Earnings
Flex LNG reported Q4 2024 revenues of $89.5 million, aligning with its guidance. The net income was bolstered by derivative income of $20.1 million, leading to an adjusted net income of $30.8 million. The earnings per share stood at $0.84, or $0.57 on an adjusted basis, reflecting the company’s ability to maintain stable financial performance.
Long-Term Charter Extensions
The company secured significant long-term charter extensions, notably for its ships Flex Resolute and Flex Courageous, extending until 2032 with options to 2039. Additionally, a new 15-year charter for Flex Constellation has been established, commencing in Q1 or Q2 2026 and lasting until 2041, ensuring long-term revenue stability.
Strong Cash Position and Dividends
Flex LNG holds a robust cash balance of $437 million and has declared a dividend of $0.75 per share, culminating in a total dividend of $3 for 2024. This implies a running yield of about 12%, highlighting the company’s solid financial footing and commitment to returning value to shareholders.
Operational Efficiency
The company achieved an impressive 99.7% technical uptime and reported zero lost time injuries in 2024, underscoring its strong operational performance and adherence to high safety standards.
Slump in Freight Rates
Freight rates have plummeted to around $10,000 per day, rendering operations uneconomical for older tonnage. This decline is attributed to shifts in trading patterns and increased ship availability, posing a challenge to profitability.
Challenges in European and Asian Markets
European imports have decreased in 2024, while geopolitical tensions and potential tariffs on U.S. LNG from China introduce uncertainties in Asian markets. These challenges require strategic navigation as they affect demand and trading conditions.
Environmental and Regulatory Challenges
New EU ETS and FuelEU Maritime regulations are imposing additional costs and operational complexities, particularly impacting older vessels. Flex LNG must adapt to these environmental mandates to maintain operational efficiency and compliance.
Forward-Looking Guidance
In its forward-looking guidance, Flex LNG anticipates time charter equivalent earnings for 2025 to be in the mid-$70,000 range, with projected revenues between $340 million and $360 million and an EBITDA forecast of $250 million to $270 million. Despite market challenges, the company remains optimistic due to its extensive contract coverage extending to 2032 and beyond. Plans to delist from the Oslo exchange aim to streamline compliance costs, reinforcing their strategic focus.
In conclusion, Flex LNG’s earnings call reflects a balanced sentiment, with strong financial performance and strategic long-term planning against a backdrop of market and regulatory challenges. The company’s robust cash position and dividend policy underscore its resilience, while its forward-looking guidance and strategic adaptability position it for future success.
