Weak Uranium Outlook Causes Cameco Corporation to Scrap Its Aggressive Guidance

Uranium producer Cameco Corporation (NYSE: CCJ  ) announced its fourth-quarter and full-year results late Friday night after the market closed and has a conference call scheduled for today at 1 p.m. The company reported earnings of C$64 million or C$0.16 per share. This was up from C$41 million, or C$0.10 per share in last year's fourth quarter. The company took lower writedowns in the quarter from the previous year.

Cameco produced a record amount of uranium in the fourth quarter as production was up 15% over last year's fourth quarter. However, sales volumes slipped 12% on the quarter mainly due to the normal quarterly variance in the company's delivery schedule. Overall, Cameco saw the company's revenue increase 15% to C$977 million on the quarter.

In addition to its financial results, the company also announced a major change in its future outlook. Because the current uncertainty in the uranium market has lasted longer than the company expected, it's moving away from its production target of 36 million pounds by 2018. While the company has an extensive portfolio of assets that could boost production in the future, given the weak current outlook it's not going to push its production growth as aggressively as before.

In its press release, the company said that "a fixed production target is no longer appropriate; ... we have decided the prudent action is to eliminate our previous 2018 supply target of 36 million pounds. This will allow us increased flexibility in order to deliver the best value through this period of uncertainty, while at the same time retaining the ability to benefit when more certainty returns to the market environment, as we expect it will. Today, our strategy is to profitably produce at a pace aligned with market signals to increase long-term shareholder value."

Looking ahead to this year, the company is slightly boosting its production from the 23.6 million pounds it produced in 2013 to a range of 23.8  million to 24.3 million pounds. Meanwhile, sales will be in a range of 31 million to -33 million pounds this year, meaning sales could end up being less than the 32.8 million pounds the company sold in 2013. However, higher realized uranium prices should equate to a 0%-5% increase in the company's revenue year-over-year. 

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 10, 2014, at 2:24 PM, U3O8Fool wrote:

    What is a astute change in company policy - now that all the major pieces for future production increases are in place (Cigar Lake, etc.) - and which in one stroke signals a further consolidation on their core business, reduction of near term development costs, and moves obligations for long term development to the court of long term contract commitments where they belong is not fully conveyed with the adjective "weak".

    The market has been uncertain and that uncertainty may continue in the short term, but the number of positive indicators for mid term demand growth has put the worst case market fears following the Fukushima incident firmly in the rear view mirror, as the voters of Tokyo confirmed last night with the election of the pro-nuclear restart gubernatorial candidate.

  • Report this Comment On February 17, 2014, at 11:57 AM, U3O8Fool wrote:

    Japan's Liberal Democratic Party has indicated the country's new Basic Energy Plan will be released by the end of March. It has stated (in it's approval of TEPCO's financial restructuring plan approved last month) that restarting reactors by July in time for the summer season and peak electricity demand is one of the objectives.

    Now reports are emerging that not only will restart of the reactors be announced, but that the plan will outline that nuclear energy will continue to be relied upon for base load generation capacity :

    http://the-japan-news.com/news/article/0001022634

    This should not be too surprising given that the current and predicted trade deficits, and significantly increased green house gas emission target revisions that the government is facing since the shutdown of nuclear generation are nothing less than shocking. Japan's commitment to the CO2 emission reductions of the Kyoto protocol and the era of steady, predictable trade surpluses are now looking like distant memories.

  • Report this Comment On February 17, 2014, at 8:37 PM, U3O8Fool wrote:

    A press release from the Japan Atomic Industrial Forum (JAIF) quotes a speech given by Prime Minister Shinzo Abe to the budget committee of the lower house of the Japanese Parliament indicating that nuclear power will form base load generating capacity in the soon to be released new Basic Energy Plan.

    http://www.jaif.or.jp/english/news_images/pdf/ENGNEWS01_1392...

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