Cameco (TSX: CCO; NYSE: CCJ) today reported its consolidated
financial and operating results for the second quarter ended June
30, 2023, in accordance with International Financial Reporting
Standards (IFRS).
“Our financial performance, which reflects the expected
quarterly variation in our contract deliveries this year, is
benefitting from our strategic decisions, with gross profit
improving as we transition to our tier-one run rate. 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. As a result,
for 2023, we have increased our consolidated revenue outlook, which
is primarily driven by higher expected average realized prices
under our contract portfolio and increased deliveries in our
uranium segment,” said Tim Gitzel, Cameco’s president and CEO.
“All over the world, government policies and corporate decisions
are being followed up with proposals, commitments, and actions to
support the nuclear fuel cycle and re-energize nuclear power as a
fundamental source of clean, secure and low-cost energy. We are
seeing improving market fundamentals with prices for uranium
rising, and UF6 conversion prices hitting new record-highs.
“With over 118 million pounds of long-term contracting industry
wide so far this year, we are happy to say that we believe there is
clear evidence that the broader uranium market is moving toward
replacement-rate contracting. Based on the rate of contracting seen
year-to-date, 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.
“The improving fundamentals are creating increased interest from
the investment community. In addition to seeing interest from our
traditional resource investors, Cameco is seeing interest from
energy investors, clean energy investors, infrastructure investors
and generalists. We believe this increased interest reflects the
recognition that Cameco is a proven reliable nuclear fuel supplier
that supplements tier-one mining assets with critical fuel service
capabilities, and it is an endorsement of our strategy to capture
full-cycle value.
“We continue to be disciplined in our production decisions,
selectively committing our unencumbered, in-ground uranium
inventory and UF6 conversion capacity under long-term contracts to
help maintain additional exposure to future improvements in the
market. If we took advantage of all our tier-one expansion
opportunities, our annual share of tier-one uranium supply could be
about 32 million pounds.
“We are a responsible, commercial supplier with a strong balance
sheet, long-lived, tier-one assets, and a proven operating track
record, and are returning to our tier-one cost structure. We are
invested across the nuclear fuel cycle, and are looking forward to
closing the Westinghouse acquisition with our partner Brookfield
Renewable Partners, which we expect will occur later this year. We
will continue to do what we said we would do, executing on our
strategy, and, consistent with our values, we will do so in a
manner we believe will make our business sustainable over the
long-term.”
- Q2 net earnings of $14 million; adjusted net losses of $3
million: Results reflect normal quarterly variations in
contract deliveries, which were expected to be lower than in the
second quarter of 2022. Despite lower deliveries and higher unit
costs in our uranium segment, gross profit improved due to a higher
average realized price as our market-related contracts benefitted
from increases in the uranium spot price relative to a year ago.
However, unrealized losses on our US dollar cash balances,
reflected in the $44 million of reported foreign exchange losses
for the quarter, contributed to lower net earnings and adjusted net
earnings compared to in the same period of 2022. We must treat our
foreign currency cash balances as though they are converted to
Canadian dollars at the exchange rate at the end of the quarter.
The unrealized losses in the quarter were primarily due to
higher-than-normal US dollar cash balances, being held for the
pending acquisition of Westinghouse, and a strengthened Canadian
dollar relative to at the end of the first quarter. We do not
adjust net earnings for these losses. Adjusted net earnings is a
non-IFRS measure, see below.
- Strong performance in the uranium and fuel services segments
and improving 2023 consolidated revenue outlook: Results for
the first six months of the year reflect the impact of higher sales
volumes and average realized prices in both the uranium and fuel
services segments under our long-term contract portfolio. In our
uranium segment we have delivered 15.2 million pounds, in line with
the delivery pattern disclosed in our annual MD&A, at an
average realized price 11% higher than in the same period last
year. In our fuel services segment, sales were 12% higher than in
the first six months of 2022 and at an average realized price 5%
higher. With improving market fundamentals, for 2023 we have
increased our consolidated revenue outlook to between $2.4 billion
and $2.5 billion (previously $2.2 billion and $2.4 billion), which
is primarily driven by higher expected average realized prices
under our contract portfolio and increased deliveries in our
uranium segment. In addition, we have updated our outlook for
direct administrative costs, uranium purchases and average unit
cost of sales. See Outlook for 2023 in our second quarter MD&A
for more information.
- Long-term contracting success continues while maintaining
exposure to higher prices: As of June 30, 2023, we had
long-term contracting commitments requiring annual delivery of an
average of 28 million pounds over the next five years compared to
26 million at the end of March due to the inclusion of volumes
under contracts previously accepted that are now finalized. We also
have contracts in our uranium and fuel services segments that span
more than decade, and in our uranium segment, many of those
contracts benefit from market-related pricing mechanisms. In
addition, we have a large and growing pipeline of business under
discussion, which we expect will help further build our long-term
contract portfolio.
- JV Inkai shipments: The first shipment of our share of
Inkai's 2023 production, which has been delayed, is expected to
begin transit in the third quarter. The geopolitical situation
continues to cause transportation risks in the region. We continue
to work closely with JV Inkai and our joint venture partner,
Kazatomprom, to receive our share of production via the
Trans-Caspian International Transport Route, which does not rely on
Russian rail lines or ports. We could experience further delays to
our expected Inkai deliveries this year if transportation using
this shipping route takes longer than anticipated. To mitigate the
risk of delays, we have inventory, long-term purchase agreements
and loan arrangements in place we can draw on. Depending on when we
receive the shipment of our share of Inkai’s production, our share
of earnings from this equity-accounted investee and the timing of
the receipt of our share of dividends from the joint venture may be
impacted.
- Canada Revenue Agency (CRA) tax dispute: In March, CRA
issued revised reassessments for the 2007 through 2013 tax years,
which resulted in a refund of $297 million of the $780 million in
cash and letters of credit held by CRA at the time. The refund
consisted of cash in the amount of $86 million and letters of
credit in the amount of $211 million, which were returned in the
second quarter. See Transfer pricing dispute in our second quarter
MD&A for more information.
- Strong balance sheet: As of June 30, 2023, we had $ 2.5
billion in cash and cash equivalents and short-term investments and
$1.0 billion in total debt. In addition, we have a $1.0 billion
undrawn credit facility which matures October 1, 2026.
Consolidated financial results
THREE MONTHS
SIX MONTHS
HIGHLIGHTS
ENDED JUNE 30
ENDED JUNE 30
($ MILLIONS EXCEPT WHERE INDICATED)
2023
2022
CHANGE
2023
2022
CHANGE
Revenue
482
558
(14)%
1,169
956
22%
Gross profit
110
93
18%
277
143
94%
Net earnings attributable to equity
holders
14
84
(83)%
133
124
7%
$ per common share (basic)
0.03
0.21
(86)%
0.31
0.31
-
$ per common share (diluted)
0.03
0.21
(86)%
0.31
0.31
-
Adjusted net earnings (losses) (non-IFRS,
see below)
(3)
72
>(100)%
112
89
26%
$ per common share (adjusted and
diluted)
(0.01)
0.18
>(100)%
0.26
0.22
18%
Cash provided by operations (after working
capital changes)
87
102
(15)%
302
274
10%
The financial information presented for the three months and six
months ended June 30, 2022 and June 30, 2023, is unaudited.
NET EARNINGS
The following table shows what contributed to the change in net
earnings (losses) and adjusted net earnings (non-IFRS measure, see
below) in the second quarter and first six months of 2023, compared
to the same periods in 2022.
THREE MONTHS
SIX MONTHS
ENDED JUNE 30
ENDED JUNE 30
($ MILLIONS)
IFRS
ADJUSTED
IFRS
ADJUSTED
Net earnings - 2022
84
72
124
89
Change in gross profit by segment
(We calculate gross profit by deducting
from revenue the cost of products and services sold, and
depreciation and amortization (D&A), net of hedging
benefits)
Uranium
Impact from sales volume changes
(15)
(15)
10
10
Higher realized prices ($US)
22
22
36
36
Foreign exchange impact on realized
prices
24
24
56
56
Lower (higher) costs
(13)
(13)
30
30
Change – uranium
18
18
132
132
Fuel services
Impact from sales volume changes
5
5
8
8
Higher realized prices ($Cdn)
2
2
10
10
Higher costs
(8)
(8)
(15)
(15)
Change – fuel services
(1)
(1)
3
3
Other changes
Higher administration expenditures
(33)
(33)
(39)
(39)
Higher exploration expenditures
(2)
(2)
(5)
(5)
Change in reclamation provisions
(29)
(2)
(47)
(3)
Lower earnings from equity-accounted
investee
(19)
(19)
(6)
(6)
Change in gains or losses on
derivatives
57
(9)
49
(12)
Change in foreign exchange gains or
losses
(65)
(65)
(63)
(63)
Higher finance income
27
27
53
53
Bargain purchase gain on CLJV ownership
interest increase
(23)
-
(23)
-
Change in income tax recovery or
expense
4
15
(34)
(26)
Other
(4)
(4)
(11)
(11)
Net earnings (losses) - 2023
14
(3)
133
112
Non-IFRS measures
ADJUSTED NET EARNINGS
Adjusted net earnings (ANE) is a measure that does not have a
standardized meaning or a consistent basis of calculation under
IFRS (non-IFRS measure). We use this measure as a meaningful way to
compare our financial performance from period to period. Adjusted
net earnings is our net earnings attributable to equity holders,
adjusted to reflect the underlying financial performance for the
reporting period. We believe that, in addition to conventional
measures prepared in accordance with IFRS, certain investors use
this information to evaluate our performance. Adjusted net earnings
is one of the targets that we measure to form the basis for a
portion of annual employee and executive compensation (see
Measuring our results in our 2022 annual MD&A).
In calculating ANE we adjust for derivatives. We do not use
hedge accounting under IFRS and, therefore, we are required to
report gains and losses on all hedging activity, both for contracts
that close in the period and those that remain outstanding at the
end of the period. For the contracts that remain outstanding, we
must treat them as though they were settled at the end of the
reporting period (mark-to-market). However, we do not believe the
gains and losses that we are required to report under IFRS
appropriately reflect the intent of our hedging activities, so we
make adjustments in calculating our ANE to better reflect the
impact of our hedging program in the applicable reporting period.
See Foreign exchange in our 2022 annual MD&A for more
information.
We also adjust for changes to our reclamation provisions that
flow directly through earnings. Every quarter we are required to
update the reclamation provisions for all operations based on new
cash flow estimates, discount and inflation rates. This normally
results in an adjustment to an asset retirement obligation asset in
addition to the provision balance. When the assets of an operation
have been written off due to an impairment, as is the case with our
Rabbit Lake and US ISR operations, the adjustment is recorded
directly to the statement of earnings as “other operating expense
(income)”. See note 9 of our interim financial statements for more
information. This amount has been excluded from our ANE
measure.
The bargain purchase gain that was recognized when we acquired
our pro-rata share of Idemitsu Canada Resources Ltd.’s 7.875%
participating interest in the Cigar Lake Joint Venture has also
been removed in calculating ANE since it is non-cash, non-operating
and outside of the normal course of our business. The gain was
recorded in the statement of earnings as part of “other income
(expense)”.
Adjusted net earnings is a non-IFRS financial measure and should
not be considered in isolation or as a substitute for financial
information prepared according to accounting standards. Other
companies may calculate this measure differently, so you may not be
able to make a direct comparison to similar measures presented by
other companies.
The following table reconciles adjusted net earnings with net
earnings for the second quarter and first six months of 2023 and
compares it to the same periods in 2022.
THREE MONTHS
SIX MONTHS
ENDED JUNE 30
ENDED JUNE 30
($ MILLIONS)
2023
2022
2023
2022
Net earnings attributable to equity
holders
14
84
133
124
Adjustments
Adjustments on derivatives
(35)
31
(41)
20
Adjustment to other operating expense
(income)
8
(19)
6
(38)
Adjustment to other income (expense)
-
(23)
-
(23)
Income taxes on adjustments
10
(1)
14
6
Adjusted net earnings (losses)
(3)
72
112
89
Selected segmented highlights
THREE MONTHS
SIX MONTHS
ENDED JUNE 30
ENDED JUNE 30
HIGHLIGHTS
2023
2022
CHANGE
2023
2022
CHANGE
Uranium
Production volume (million lbs)
4.4
2.8
57%
8.8
4.7
87%
Sales volume (million lbs)
5.5
7.6
(28)%
15.2
13.5
13%
Average realized price1
($US/lb)
49.41
46.30
7%
46.81
44.97
4%
($Cdn/lb)
67.05
58.74
14%
63.17
57.14
11%
Revenue ($ millions)
368
447
(18)%
963
770
25%
Gross profit ($ millions)
72
54
33%
210
78
>100%
Fuel services
Production volume (million kgU)
3.4
3.7
(8)%
7.6
7.8
(3)%
Sales volume (million kgU)
3.2
2.8
14%
5.6
5.0
12%
Average realized price 2
($Cdn/kgU)
35.63
35.09
2%
36.51
34.83
5%
Revenue ($ millions)
113
99
14%
206
175
18%
Gross profit ($ millions)
39
40
(3)%
70
67
4%
1 Uranium average realized price is
calculated as the revenue from sales of uranium concentrate,
transportation and storage fees divided by the volume of uranium
concentrates sold.
2 Fuel services average realized price is
calculated as revenue from the sale of conversion and fabrication
services, including fuel bundles and reactor components,
transportation and storage fees divided by the volumes sold.
Board of directors’ update
Cameco’s board of directors has appointed Chief Tammy
Cook-Searson and Dominique Minière as board members effective
September 1, 2023.
Cook-Searson currently serves as Chief of the Lac La Ronge
Indian Band and is the President of Kitsaki Management Limited
Partnership, the entity that manages the Band’s economic
development activities. She was the Band’s first female Chief when
she was elected in 2005. Prior to being elected Chief, Cook-Searson
had served on the Band’s council since 1997. She currently sits on
the boards of Prince Albert Grand Council, Federation of Sovereign
Indigenous Nations, Saskatoon Airport Authority, Saskatchewan
Indian Gaming Authority, and the Assembly of First Nations. She
holds a graduate diploma in management and is completing her Master
of Business Administration with Athabasca University. She also
holds honorary degrees from the University of Regina and the
Saskatchewan Indian Institute of Technologies. Cook-Searson will
serve on Cameco’s safety, health and environment committee and
technical committee upon her appointment as a director.
Minière is the retired Executive Vice President in charge of new
nuclear and international development of Ontario Power Generation.
Prior to that role, he served as Executive Vice President and Chief
Strategy Officer at Ontario Power Generation and as Chief Operating
Officer of Electricité de France. Minière serves on the boards of
Holtec International Inc., Ortec Group, a French services company
involved in services and engineering, and Engineering Planning and
Management, Inc. a US engineering company. He holds an engineering
degree from the Ecole des Mines de Paris. Minière will serve on
Cameco’s human resources and compensation committee, safety, health
and environment committee and technical committee upon his
appointment as a director.
Management's discussion and analysis (MD&A) and financial
statements
The second quarter MD&A and unaudited condensed consolidated
interim financial statements provide a detailed explanation of our
operating results for the three and six months ended June 30, 2023,
as compared to the same periods last year. This news release should
be read in conjunction with these documents, as well as our audited
consolidated financial statements and notes for the year ended
December 31, 2022, first quarter and annual MD&A, and our most
recent annual information form, all of which are available on our
website at cameco.com, on SEDAR+ at sedarplus.ca, and on EDGAR at
sec.gov/edgar.shtml.
Qualified persons
The technical and scientific information discussed in this
document for our material properties McArthur River/Key Lake, Cigar
Lake and Inkai was approved by the following individuals who are
qualified persons for the purposes of NI 43-101:
MCARTHUR RIVER/KEY LAKE
- Greg Murdock, general manager, McArthur River, Cameco
- Daley McIntyre, general manager, Key Lake, Cameco
CIGAR LAKE
- Lloyd Rowson, general manager, Cigar Lake, Cameco
INKAI
- Sergey Ivanov, deputy director general, technical services,
Cameco Kazakhstan LLP
Caution about forward-looking information
This news release includes statements and information about our
expectations for the future, which we refer to as forward-looking
information. Forward-looking information is based on our current
views, which can change significantly, and actual results and
events may be significantly different from what we currently
expect.
Examples of forward-looking information in this news release
include: our views regarding momentum in the nuclear industry and
heightened supply risk translating into increased opportunities for
Cameco; our expectations regarding higher average realized prices
under our contract portfolio and increased deliveries in our
uranium segment; our assessment that market fundamentals are
improving and that the uranium market is moving toward
replacement-rate contracting; our expectations regarding industry
long-term contracting volumes in 2023 and that a new long-term
contracting cycle is underway; our expectation that our production
decisions will help us maintain additional exposure to future
market improvements, and our potential share of tier-one uranium
supply; the expected timing of the closing of the Westinghouse
acquisition; our plans to continue executing on our strategy in a
manner to make our business sustainable over the long-term; our
consolidated revenue outlook for 2023 and the updating of our
outlook for direct administrative costs, uranium purchases and
average unit cost of sales; our expectation that our large and
growing pipeline of business will further build our long-term
contract portfolio; the expected timing for the first shipment of
our 2023 share of Inkai’s production to begin transit and the
possibility of further delays in expected Inkai deliveries this
year; that we have inventory, long-term purchase agreements and
loan arrangements in place that we can draw upon to mitigate the
risk of delay in Inkai deliveries; the addition of new board
members effective September 1, 2023 and the committees on which
they will serve; and the expected date for announcement of our 2023
third quarter results.
Material risks that could lead to different results include:
unexpected changes in uranium supply, demand, long-term
contracting, and prices; changes in consumer demand for nuclear
power and uranium as a result of changing societal views and
objectives regarding nuclear power, electrification and
decarbonization; the risk that our views regarding nuclear power,
its growth profile, and benefits, may prove to be incorrect; the
risk that we may not be able to achieve planned production levels
within the expected timeframes, or that the costs involved in doing
so exceed our expectations; the risk that the production levels at
Inkai may not be at expected levels or that it may not be able to
deliver its production; the risk that we may not be able to meet
sales commitments for any reason; the risk that the Westinghouse
acquisition may be delayed or may not be completed on the terms in
the acquisition agreement or at all; the risks to our business
associated with potential production disruptions, including those
related to global supply chain disruptions, global economic
uncertainty, political volatility, labour relations issues, and
operating risks; the risk that we may not be able to implement our
business objectives in a manner consistent with our environmental,
social, governance and other values; the risk that the strategy we
are pursuing may prove unsuccessful, or that we may not be able to
execute it successfully; the risk that our newly-appointed
directors may not begin to serve on our board or committees when
expected; and the risk that we may be delayed in announcing our
future financial results.
In presenting the forward-looking information, we have made
material assumptions which may prove incorrect about: uranium
demand, supply, consumption, long-term contracting, growth in the
demand for and global public acceptance of nuclear energy, and
prices; our production, purchases, sales, deliveries and costs; the
market conditions and other factors upon which we have based our
future plans and forecasts; our contract pipeline discussions; our
ability to mitigate adverse consequences of delays in the shipment
of our share of Inkai production; the success of our plans and
strategies, including planned production; the expected timing of
the closing of the Westinghouse acquisition; the absence of new and
adverse government regulations, policies or decisions; that there
will not be any significant adverse consequences to our business
resulting from production disruptions, including those relating to
supply disruptions, economic or political uncertainty and
volatility, labour relation issues, and operating risks; the
ability of our newly-appointed directors to begin service on our
board and committees when expected; and our ability to announce
future financial results when expected.
Please also review the discussion in our 2022 annual MD&A
and most recent annual information form for other material risks
that could cause actual results to differ significantly from our
current expectations, and other material assumptions we have made.
Forward-looking information is designed to help you understand
management’s current views of our near-term and longer-term
prospects, and it may not be appropriate for other purposes. We
will not necessarily update this information unless we are required
to by securities laws.
Conference call
We invite you to join our second quarter conference call on
Wednesday, August 2, 2023, at 8:00 a.m. Eastern.
The call will be open to all investors and the media. To join
the call, please dial (800) 319-4610 (Canada and US) or (604)
638-5340. An operator will put your call through. The slides and a
live webcast of the conference call will be available from a link
at cameco.com. See the link on our home page on the day of the
call.
A recorded version of the proceedings will be available:
- on our website, cameco.com, shortly after the call
- on post view until midnight, Eastern, September 2, 2023, by
calling (800) 319-6413 (Canada and US) or (604) 638-9010 (Passcode
0267)
2023 third quarter report release date
We plan to announce our 2023 third quarter results before
markets open on October 31, 2023.
Profile
Cameco is one of the largest global providers of the uranium
fuel needed to energize a clean-air world. Our competitive position
is based on our controlling ownership of the world’s largest
high-grade reserves and low-cost operations. Utilities around the
world rely on our nuclear fuel products to generate safe, reliable,
carbon-free nuclear power. Our shares trade on the Toronto and New
York stock exchanges. Our head office is in Saskatoon,
Saskatchewan.
As used in this news release, the terms we, us, our, the Company
and Cameco mean Cameco Corporation and its subsidiaries unless
otherwise indicated.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230801714645/en/
Investor inquiries: Rachelle Girard 306-956-6403
rachelle_girard@cameco.com Media inquiries: Veronica Baker
306-385-5541 veronica_baker@cameco.com
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