Frontline (FRO) Q3 2023

Reported earlier today

  • Revenue of $377.1M
  • Profit of $107.7M
  • Adjusted profit of $80.8M
  • Declared div of 30c/sh

I expected the dividend was going to be lower than Q2 2023 payout (80c/sh). Just not that low. On the CC, FRO mgmt reiterated that they would not be selling additional shares to fund the addition of 24 VLCCs. While in some aspects this is admirable, the fact that a deal worth $2350M is funded mostly with debt should be a concern. I would suggest it actually challenges the return of dividend payouts to the H1 2023 levels (70c and 80c respectively). I mean, at this time, FRO have a lot more debt at 10%.

FRO mgmt also indicated that although 15 of the 24 VLCC deliver during Q4 2023, the actual revenue contribution will be minimum for Q4. But financing, depreciation, and crew costs start as soon as the vessels transfer.

Had trimmed my FRO position leading up to earnings. Now, I am glad I did so.

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Had not discovered this item until I read one of the entries in the proxy statement. I guess FRO management are thinking about multiple ways to address the leverage brought about by the 24 VLCCs. Slide 7 spells out two methods, and the proxy statement points to another option. I wonder how many shareholders have digested the data and considered their options?