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Cameco Q3 Profit Rises; Backs FY09 Revenue Growth Outlook - Update

CCJ 110209

Canada-based nuclear energy company Cameco Corp. (CCJ,CCO.TO) on Monday reported a 27% increase in profit for the third quarter, helped by lower expenses and higher one-time gains. However, adjusted earnings per share for the quarter declined 18% from the year-ago period due to lower earnings at the company's uranium and gold businesses. For fiscal year 2009, the company maintained its outlook for consolidated revenue growth, but raised its outlook for nuclear electricity revenue and lowered its forecast for gold production.

Third-Quarter Results

The company's net earnings for the third quarter increased to C$172.12 million, or C$0.44 per share, from C$135.45 million, or C$0.39 per share, in the same period last year.

The results for the latest quarter include a loss on restructuring of the company's gold business of C$33 million and gains on financial instruments of C$101 million. The year-ago quarter's results include gain on restructuring of the gold business of C$2 million, stock option recovery of C$52 million, losses on financial instruments of C$26 million and writedown of investments of C$20 million.

On an adjusted basis, net earnings for the latest quarter declined to C$104 million, or C$0.26 per share, from C$127 million, or C$0.37 per share, in the year-ago quarter.

Revenue for the quarter was C$694.10 million, down 4.8% from C$729.90 million in the corresponding period a year ago.

Total expenses for the quarter declined to C$469.67 million from C$553.18 million in the previous-year quarter. Loss on sale of assets during the quarter was C$2.34 million, compared to gain on sale of assets of C$0.13 million a year ago.

Segmental Results


Cameco's revenue from the uranium business declined 17% to C$329 million from C$396 million in the year-ago period, due to a 15% decrease in reported sales volumes and a 2% decrease in the realized selling price in Canadian dollars. The decrease in the average realized price was related to lower realized prices under market-related and fixed-price contracts. Sales volumes for the quarter were 8.3 million pounds, down from 9.8 million pounds in the year-ago period, while average realized price declined to C$39.18 per pound from C$39.90 per pound a year ago.

Gross profit for the uranium business dropped to C$69 million from C$120 million a year ago. The company noted that the segment's profit for the quarter continued to be adversely affected by lower sales volumes and a higher unit cost of products and services sold.


Cameco owns approximately 49% of and has voting control over approximately 53% of Centerra Gold Inc.'s (CG.TO) shares. Centerra owns and operates two gold mines: Kumtor, which is located in the Kyrgyz Republic, and Boroo located in Mongolia.

Revenue from Cameco's gold business for the third quarter increased to C$176 million from C$143 million a year ago, aided by a 12% increase in the U.S. dollar selling price and a 3% increase in sales volume. Gross profit for the segment was flat with the year-ago period at C$40 million as the segment was impacted by lower gold production and higher operating costs during the quarter.

Gold production for the quarter declined to 166 thousand ounces from 186 thousand ounces a year ago, primarily due to lower production at the Boroo mine on account of an operational shutdown caused by a labor strike at the mine and the subsequent suspension of Boroo's main operating licenses.


In the electricity business, results were aided by an increase in the realized price, largely due to revenue recognized by Bruce Power Limited Partnership, or BPLP, under its agreement with the Ontario Power Authority, or OPA. Cameco owns 31.6% of BPLP. During the third quarter, Cameco's pre-tax earnings from BPLP increased to C$78 million from C$61 million in the year-ago period, primarily due to an increase in revenue, partially offset by higher operating costs.

Fuel Services

Fuel services revenue for the quarter declined to C$50 million from C$69 million in the same period last year due to a 24% decrease in reported sales volumes and a 3% decline in the average realized price for fuel services products. Sales volume for the quarter were 2.8 million kilograms of uranium, or KgU, down from 3.7 million KgU in the previous-year quarter. Gross profit for the segment was C$4 million, compared to gross loss of C$3 million a year ago, aided by by lower operating costs during the latest quarter.

Year-To-Date Results

For the first half of fiscal 2009, Cameco reported net earnings of C$500.96 million, or C$1.29 per share, up from C$419.18 million, or C$1.21 per share, in the year-ago period.

Adjusted net earnings for the nine-month period declined to C$334 million, or C$0.86 per share, from C$414 million, or C$1.19 per share, a year ago, due to lower earnings in the uranium and gold business, partially offset by higher results in the fuel services and electricity businesses.

Revenue for the year-to-date period rose 7% to C$2.08 billion from C$1.94 billion in the same period last year.

As at September 30, 2009, the company's total debt was C$.17 billion, representing a decrease of $141 million compared to December 31, 2008.


For fiscal year 2009, Cameco maintained its outlook for consolidated revenue to increase 5%-10% over 2008.

The company also said there were no material changes to its 2009 uranium outlook. While reporting its financial results for the second quarter in August, the company had projected 2009 uranium sales volumes to total 34 million-36 million pounds and uranium revenue for the year to increase by 5%-10% over 2008. The company said that consistent with prior disclosure, its unit cost of product and services sold is still expected to be 20%-25% higher when compared to 2008.

Cameco raised its outlook for full-year nuclear electricity revenue to increase 15%-20% over 2008, compared to the prior range of a 10%-15% increase. The increase in outlook is due to BPLP recognizing revenue under its agreement with OPA. In addition, BPLP has in place financial contracts that correspond to about 45% of planned generation over the remainder of the year.

However, Cameco noted that Centerra lowered its outlook for 2009 gold production to a range of 620 thousand-630 thousand ounces from the prior range of 680 thousand-730 thousand ounces, due to lower than expected production at Centerra's Kumtor gold mine.

Cameco raised its outlook for full-year fuel services production at Port Hope and SFL to a range of 11 million-13 million kgU, from the prior range of 8 million-12 million kgU. The increase in the company's estimate is related to the increased production expected at the Port Hope UF6 plant due to increased confidence in the supply of hydrofluoric acid, or HF.

Stock Quotes

In Monday's regular trading on the NYSE, CCJ is trading at US$27.54, up US$0.33 or 1.21% on a volume of 0.21 million shares. In the past 52 weeks, the stock has been trading in a range of US$11.78-US$32.17.

On the Toronto Stock Exchange, CCO.TO is trading at C$29.57, down C$0.59 or C$1.96% on a volume of 0.13 million shares. In the 52-week period, the stock has been trading in a range of C$15.15-C$33.43.

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