Cameco Corp. (TSX: CCO) reported its third-quarter 2024 earnings, showing notable growth in revenue and production volumes but a sharp decline in profitability despite favorable long-term market trends. The miner’s revenue reached $721 million, up 25% from $575 million in the same quarter last year, and a marked improvement over the $687 million reported in Q2 2024.
This increase was driven by higher sales volumes and stronger realized uranium prices. Year-to-date, the company’s revenue totaled $1.953 billion, up 12% from $1.744 billion over the same period in 2023, underscoring a general upward trend despite challenges in individual performance metrics.
However, Cameco’s profitability metrics paint a more nuanced picture. Q3 2024 net earnings were a mere $7 million, a steep 95% drop from $148 million in Q3 2023. Similarly, adjusted net earnings, which exclude one-off impacts like Westinghouse purchase accounting adjustments and unrealized losses on derivatives, reached a $3 million loss, a significant decline from the $137 million in adjusted net earnings reported in the same quarter last year.
By comparison, Q2 2024 net earnings were $10 million, signaling an ongoing trend of earnings compression as Cameco faces acquisition and integration expenses related to Westinghouse.
Gross profit also reflects these pressures, increasing 13% year-over-year to $171 million but a decline from the $186 million gross profit reported in Q2 2024. The year-over-year increase was largely driven by a higher volume of uranium sales and elevated market prices, with the average realized price for uranium rising by 14% in USD terms to $60.18 per pound.
Production growth remains a strong suit for Cameco, with Q3 uranium output reaching 4.3 million pounds, a 43% increase over Q3 2023’s 3.0 million pounds, driven by stable production rates at Key Lake and McArthur River. Year-to-date production of 17.3 million pounds shows a 45% gain from last year’s 11.9 million pounds. This improved production trajectory aligns with Cameco’s updated annual outlook, which now anticipates up to 37.0 million pounds of uranium.
However, while production has expanded, unit costs have also risen, impacting the company’s ability to translate higher volumes directly into increased profitability. Cash costs per pound of uranium produced were $52.93 in Q3, compared to $42.21 per pound in the same period last year, a 25% jump that reflects higher input costs and challenges in scaling cost efficiency with rising production volumes. By contrast, Q2 2024 production costs per pound were $48.35, indicating an accelerating cost trend.
The acquisition of Westinghouse, Cameco’s largest investment to date, continues to weigh on results. Westinghouse, a critical player in the nuclear supply chain, reported a net loss of $57 million (Cameco’s share) for Q3, widening from a $47 million loss in Q2 2024. Adjusted EBITDA from Westinghouse was $122 million, essentially flat from the $121 million in Q2.
The company’s cash and equivalents stood at $197 million as of September 30, 2024, alongside $1.3 billion in total debt. While liquidity remains strong with an additional $1.0 billion undrawn credit facility, Cameco’s debt repayments, including a $100 million reduction on its term loan for the Westinghouse acquisition, have been necessary to manage leverage levels.
The dividend increase to $0.16 per share for 2024, a 33% rise from $0.12 last year, reflects confidence in Cameco’s cash flow generation potential. Yet, the decision to target dividend growth to reach $0.24 by 2026, effectively doubling the 2023 dividend, raises questions given current earnings constraints and ongoing integration costs from Westinghouse.
Looking forward, Cameco has raised its revenue expectations for 2024, now anticipating between $3.01 billion and $3.16 billion in consolidated revenue, up from prior guidance of $2.85 billion to $3.0 billion. This revision was supported by the updated average realized uranium price estimate of $77.80 per pound, driven by a strong US dollar and ongoing demand growth in the nuclear energy sector.
Cameco last traded at $71.50 on the TSX.
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