April 29, 2014 / 1:23 PM / 3 years ago

UPDATE 2-Higher Cameco earnings disappoint, shares slide

(Recasts with share activity, CEO and analyst comments)

By Rod Nickel

April 29 (Reuters) - Canadian uranium producer Cameco Corp reported a jump in quarterly earnings on Tuesday, but results missed expectations and shares slipped to a 2-1/2-month low.

The world’s third-largest uranium miner said it didn’t expect improvement anytime soon in the uranium sector’s challenging market conditions.

“Excess supply and discretionary demand for uranium products has resulted in further downward pressure on the uranium price,” Chief Executive Tim Gitzel said in a statement. “While we do not expect improvement in the near to medium term, the long-term outlook for the industry remains strong.”

Shares of the Saskatoon, Saskatchewan-based company lost 4.3 percent to C$23.09 in Toronto, losing more ground than fellow uranium producers. On the year, Cameco is up nearly five percent.

Uranium prices are hovering near their lowest since 2005 in a prolonged slump since an earthquake and tsunami struck Japan in March 2011, leading to the shutdown of nearly all reactors in the country. The disaster crimped Japanese demand for uranium and fueled fears about a backlash to nuclear power.

Earlier this year, optimism about Japan’s plan to re-start reactors lifted uranium shares.

“The results are OK, but I think the market is just focusing on negatives given the falling spot uranium price,” said BMO Capital Markets analyst Edward Sterck. “Cameco and the other uranium stocks have held up pretty well so far considering the declining uranium price and they may just be coming back into line.”

Production began during the quarter at Cigar Lake, Saskatchewan, the company’s newest mine, but Cameco said partner Areva SA has advised it that its mill at McClean Lake will not begin processing ore by the end of the second quarter.

For the first quarter, earnings jumped to C$131 million ($118.80 million), or 33 Canadian cents a share, from C$9 million, or 2 Canadian cents in the year-ago quarter, boosted by higher deliveries and the sale of its interest in Bruce Power Limited Partnership.

Revenue fell six percent to C$419 million.

Adjusted earnings, excluding the sale of Cameco’s interest in Bruce Power and other items, were C$36 million, or 9 Canadian cents a share, up from C$27 million, or 7 Canadian cents.

Analysts, on average, had expected adjusted earnings of 10 Canadian cents a share on revenue of C$472.77 million, according to Thomson Reuters I/B/E/S.

Cameco said on Jan. 31 it would sell its interest in Bruce Power, a partnership that operates one of the world’s largest nuclear generating facilities in Ontario, for C$450 million.

Cameco’s uranium sales surged 35 percent to 6.9 million pounds in the quarter, while its average realized uranium price slipped 4 percent to $46.60 per pound. In Canadian currency, however, Cameco’s average realized uranium price rose 5 percent to C$50.58, due to the weakening of the Canadian dollar.

Cameco reiterated its forecast for production of 23.8 to 24.3 million pounds of uranium in 2014, up modestly from 23.6 million pounds last year. Uranium sales should range from 31 million to 33 million pounds in 2014. It sold 32.8 million pounds last year.

Cameco raised its guidance for overall 2014 revenue to a year over year increase of five to 10 percent, from the previous forecast of up to five percent. ($1 = 1.1027 Canadian Dollars) (Reporting by Rod Nickel in Winnipeg, Manitoba; Editing by Bernadette Baum and Sofina Mirza-Reid)

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