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Uranium miner Cameco Corp. has raised its consolidated revenue outlook for 2023 as demand for nuclear power grows in the transition away from fossil fuels, even as the company reported a 14 per cent drop in revenue in its second quarter.
The Saskatoon-based company on Aug. 2 said it expects to sell higher volumes of uranium this year, and also reported higher long-term contracting numbers.
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Cameco said that as of June 30, its long-term commitments require an average annual delivery of 28 million pounds of uranium over the next five years as opposed to the 26 million pounds reported at the end of March. The company also said it hopes to deliver between 31 million and 33 million pounds of uranium this year, a boost from previous expectations of 29 to 31 million.
Overall, Cameco increased its revenue outlook for the year to $2.4 billion to $2.5 billion from $2.2 billion to $2.4 billion.
“The significant momentum seen in the nuclear energy industry and the heightened supply risk caused by geopolitical developments are translating into increased opportunities for Cameco,” Tim Gitzel, the company’s chief executive, said in a statement.
“We expect industry long-term contracting volumes in 2023 to exceed those in each of the last 10 years. We believe this is a good indication that a new long-term contracting cycle is underway.”
Cameco’s positive outlook is a welcome change for the uranium sector, which has endured a tough decade following the Fukushima nuclear disaster in Japan in 2011 that put a chill on nuclear energy demand globally.
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Overall, the sector appears to be benefiting from a transition to clean energy as countries across the globe race to meet climate goals. Prime Minister Justin Trudeau’s government, for instance, expects nuclear energy to play a critical role in lowering Canada’s emissions.
Still, despite the positive outlook, Cameco reported a 14 per cent drop in revenue in its second quarter, down $482 million from $558 million a year ago. The company said the result reflects “normal quarterly variations in contract deliveries” and was expected.
Gross profit increased by 18 per cent to $110 million from $93 million in the same quarter last year, due to a higher market price for uranium.
The company also reported unrealized losses on its U.S. dollar cash balances, “reflected in the $44 million or reported foreign exchange losses for the quarter,” it said. This contributed to lower net earnings of $14 million, compared to $84 million last year.
“The unrealized losses in the quarter were primarily due to higher-than-normal U.S. dollar cash balances, being held for the pending acquisition of Westinghouse (Electric Co. LLC), and a strengthened Canadian dollar relative to at the end of the first quarter,” the company said.
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Cameco agreed to acquire Westinghouse Electric, one of the world’s largest nuclear services companies, with Brookfield Renewable Partners LP for US$7.9 billion in October last year.
On Aug. 2, Britain’s competition regulator, Competition and Markets Authority, said it is investigating Cameco and Brookfield over the deal to acquire Westinghouse.
At a conference call, Cameco’s CEO said the investigation is a “pretty normal practice.” The companies still anticipate closing the deal by the end of this year.
“We have a team of many working on it,” Gitzel said.
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Cameco’s chief financial officer Grant Isaac said on the analyst call that the uranium industry’s outlook is better than it was a few years ago, but still falls short of a level that would encourage the company to seriously invest in expansion projects.
“The market is constructive right now,” Isaac said. “It has to be more constructive (for) us to grow that base of production.”
At 11:20 a.m., shares of Cameco were trading at $42.72, down $3.16 or 6.8 per cent on the Toronto Stock Exchange. The company’s 52-week share price ranges from $28.60 to $46.43. It has a market cap of about $18.5 billion.
• Email: nkarim@postmedia.com | Twitter: naimonthefield
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