Uranium miner Cameco looks abroad for new customers as Q1 profits fall 93%

Cameco (TSX:CCO) said it’s looking to expand its global customer base to India, China and beyond as it reported a 93 per cent drop in first-quarter earnings Wednesday.

The Saskatoon-based company, which is one of the world’s largest uranium producers, said the drop in profits compared with a year ago was due to lower uranium prices, as well as lower sales and higher costs at its power generation business.

But, it said a recently inked deal on nuclear co-operation between the federal government and India has left it encouraged that there will be plenty of countries clamouring for uranium supply over the next decade.

“This is important since it will allow us to take advantage of the large market opportunity India represents for the nuclear industry, and will allow us to deliver Canadian uranium there,” chief executive Tim Gitzel told investors during a conference call.

He said India currently has 20 operating reactors, with seven under construction. The county is also aiming to add an additional seven more by 2022, representing a “huge amount of growth” for the uranium industry.

“But India is just one of the growth drivers in the nuclear industry. Countries like China, Russia, South Korea and United Arab Emirates are also pursuing rapid development and expansion of their nuclear programs,” Gitzel said.

For example, China has 28 reactors under construction, with six more planned to come online this year.

To meet this demand, the company is working to increase its annual uranium production by 35 per cent, from 23.3 million pounds this year to 36 million pounds by 2018.

It anticipates that global uranium consumption will grow by three per cent from 170 million pounds this year, to 220 million pounds by 2012.

“We believe that going forward, our production will be needed more than ever,” said Gitzel.

Cameco earned $9 million or two cents per share for the quarter ended March 31, down from $129 million or 33 cents per share a year ago.

Revenue was $444 million, down from $466 million from 2012.

Excluding charges for derivatives, Cameco said it earned $27 million or seven cents per share, down from $121 million or 31 cents per share a year ago.

The earnings came in below expectations from analysts polled by Thomson Reuters. The consensus estimates was net income of $29.1 million, or eight cents per share, and revenue of $456.3 million.

Gitzel said the results were consistent with expectations, which included low deliveries from their uranium segment and low revenue from Bruce Power.

“I can report that we are on track to deliver on our sales, revenue and production guidance for the year,” he said.

Cameco said it sold 5.1 million pounds of uranium in the quarter, down from 8.2 million pounds a year ago, while the average realized price was $31.90 per pound, down from $31.99.

Production totalled 5.9 million pounds of uranium in the quarter, up from 4.8 million a year ago.

Meanwhile, total electricity revenue in the quarter fell 14 per cent compared with a year ago due to lower output and a lower realized price.

Desjardins analyst John Hughes noted the results were a “slight negative” for the company due to the lower sales volumes.

“However, we are encouraged by the unchanged sales guidance of 32 million pounds for 2013,” Hughes wrote in a report to clients.

Also Wednesday, chief financial officer Grant Isaac said the company remains confident it will be able to recover a $27-million payment made in the fourth quarter to the Canada Revenue Agency, in relation to a long-standing tax dispute.

The payment was made after CRA reassessed the company for years between 2003 to 2007, over its use of an offshore subsidiary.

A trial could begin in the fall of 2014, with a court decision coming down as early as 2015.

Cameco is one of the world’s largest uranium producers with mines, mills and conversion plants in Canada, the United States and abroad.

It also owns a stake in the Bruce Power nuclear power station in a partnership with TransCanada Corp., Borealis Infrastructure, the Power Workers’ Union and the Society of Energy Professionals.

Shares in Cameco dipped nine cents to $19.55 on the Toronto Stock Exchange Wednesday.