Cameco Reports Q1 Results: 2024 Outlook Remains Solid; Financial Discipline and Strong Cash Position Result in Focused Debt Reduction; Operationally, Segments Performing to Plan; Attributes of Baseload Nuclear Power Attracting Tech Sector Investment

SASKATOON, Saskatchewan–(BUSINESS WIRE)–$CCJ #cameco–Cameco (TSX: CCO; NYSE: CCJ) today reported its consolidated financial and operating results for the first quarter ended March 31, 2024, in accordance with International Financial Reporting Standards (IFRS).

“In the first quarter operational performance was strong across our uranium, fuel services and Westinghouse segments. Financial results are in line with the 2024 outlook we provided, which has not changed, and are as expected, reflecting normal quarterly variability and the required purchase accounting and other non-operational acquisition-related costs for Westinghouse,” said Tim Gitzel, Cameco’s president and CEO.

“Our strategy continues to demonstrate the benefits of aligning our operational, marketing, and financially focused decisions in a market where we are seeing sustained, positive momentum for nuclear energy like never before. We remain in the enviable position of having what we believe are the world’s premier, tier-one assets operating in stable geopolitical regions, along with our investments across the fuel cycle and reactor life cycle. That includes our investment in Westinghouse, where we are seeing its long-term business prospects continue to improve. With our position as a proven, reliable supplier operating across the nuclear fuel cycle, our customers recognize our deep understanding of how nuclear fuel markets work, and global policymakers are turning to us as thought leaders in the industry.

“Operationally, production results in the first quarter were strong and are on track with our 2024 plans, with production rates and total production costs in our uranium segment continuing to reflect the transition back to our tier-one cost structure. In the market, we continued to be selective in committing our unencumbered, tier-one, in-ground uranium inventory and UF₆ conversion capacity, building on a contract portfolio that spans more than a decade by successfully layering in additional long-term contracts, increasing our annual commitments to an average of about 28 million pounds per year from 2024 through 2028. Every contract we add reflects the sentiment and dynamics in the market at the time it is negotiated, allowing us to capture greater upside and creating value over the lifetime of the contract. From a risk-managed financial perspective, our resulting expectation of strong cash flow generation is guiding our conservative capital allocation priorities in 2024, with focused debt reduction and prudent refinancing plans.

“Full-cycle support for nuclear energy and the required uranium fuel continues to grow, with increasing public support, positive policy decisions, and market-based solutions underpinning the positive fundamentals and durable long-term demand story for nuclear. The inaugural Nuclear Energy Summit took place in Brussels in March, with representatives from 32 countries joining forces to back supportive measures in areas including financing, regulatory cooperation, technological innovation, and workforce training, enabling the expansion of nuclear power to help address climate change and boost energy security.

“The benefits of nuclear energy as a critical tool in the fight against climate change and the advantage nuclear provides in the context of energy security are not only being recognized and highlighted by governments around the world, but by energy-intensive industries that are advancing faster than policymakers to effectively transition to energy sources that provide clean, constant and reliable power. An increase in public support from tech sector leaders and announcements like the recent acquisition of a 960 MW data centre campus by Amazon Web Services, with a related long-term agreement to secure reliable power from Talen’s Energy Corporation’s Susquehanna nuclear power plant, are indicative of that industrial focus.

“The geopolitical events that have been amplifying global supply chain and transportation risks are continuing to have a significant impact on nuclear fuel customer procurement strategies. Utilities are adjusting their supply chains to ensure reliable supply, with increasing competition to secure long-term contracts for uranium products and services. We expect that Cameco and Westinghouse, as proven producers of uranium products and services and having demonstrated strong and sustainable performance, can be expected to benefit from the significant tailwinds associated with having licensed and permitted operations in geopolitically stable jurisdictions.

“We are a responsible, commercial supplier with a strong balance sheet, long-lived, tier-one assets, and a proven operating track record. We are invested across the nuclear fuel cycle and believe we have the right strategy to achieve our vision of ‘energizing a clean-air world’ and do so in a manner that reflects our values. Embedded in our decisions is a commitment to address the risks and opportunities that we believe will make our business sustainable over the long term.”

• 2024 outlook remains solid: We are tracking well towards achieving the 2024 outlook provided in our 2023 annual MD&A. We continue to expect strong cash flow generation, with estimated consolidated revenue of between about $2.9 billion and $3.0 billion. We maintain the outlook for our share of Westinghouse’s 2024 adjusted EBITDA of between $445 million and $510 million. See Outlook for 2024 in our first quarter MD&A for more information. Adjusted EBITDA attributable to Westinghouse is a non-IFRS measure, see Non-IFRS measures below.
• Q1 net losses of $7 million; adjusted net earnings of $56 million; adjusted EBITDA $345 million: Results are driven by normal quarterly variations in contract deliveries in our uranium and fuel services segments, and the addition of Westinghouse. Performance in our core uranium segment was strong with net earnings up by 34% and adjusted EBITDA up by 16% compared to the same period in 2023 largely due to an increase of 27% in the Canadian dollar average realized price partially offset by the expected lower deliveries and higher cost of sales. See Financial results by segment – Uranium in our first quarter MD&A for more information. However, as indicated in our 2023 annual MD&A, Westinghouse is expected to generate a net loss of between $170 million and $230 million in 2024 due to the impact of the purchase accounting, which requires the revaluation of Westinghouse’s inventory and other assets at the time of acquisition, and the expensing of some non-operating acquisition-related transition costs. Of the expected net loss for Westinghouse in 2024, $123 million was incurred in the first quarter due to normal variability in the timing of its customer requirements and delivery and outage schedules. Westinghouse’s first quarter is typically its weakest, with stronger expected performance in the second half of the year, and higher expected cash flows in the fourth quarter. We do not believe the impact of the revaluation of Westinghouse’s inventory and assets, or the non-operating acquisition-related transition costs reflect its underlying performance for the reporting period, therefore, we use adjusted EBITDA as a performance measure for Westinghouse, which was $77 million for the first quarter. See Our earnings from Westinghouse in our first quarter MD&A for more information. Adjusted net earnings and adjusted EBITDA are non-IFRS measures, see Non-IFRS measures below.
• Strong production performance in the uranium segment: In our uranium segment we produced 5.8 million pounds (our share) during the quarter, an increase from the 4.5 million pounds (our share) of production in the same period of 2023. As a result of increased production, the unit cash cost of production was $19.52 per pound, a 16% reduction compared to the same period in 2023. The unit cost of sales was up 15% primarily due to the impact of higher cost purchases on the inventory value, including Inkai purchases. The cash impact of higher cost Inkai purchases on average unit cost of sales is partially offset by the dividends we receive from Joint Venture Inkai (JV Inkai). With our mining operations performing well and Key Lake running at planned production rates, we continue to expect 18 million pounds of production (100% basis) at each of McArthur River/Key Lake and Cigar Lake operations in 2024. See Our operations – uranium production overview in our first quarter MD&A for more information. We continue to plan our production to align with our contract portfolio and customer needs, as well as evaluate the optimal mix of production, inventory and purchases in order to retain the flexibility to deliver long-term value. Cash cost per pound is a non-IFRS measure, see Non-IFRS measures below.
• Disciplined long-term contracting continues, maintaining exposure to higher prices: As of March 31, 2024, we had commitments requiring delivery of an average of about 28 million pounds per year from 2024 through 2028, with commitment levels in 2024 and 2025 higher than the average and in 2026 through 2028 lower than the average. As the market further improves, we expect to continue to layer in volumes capturing greater upside using market-related pricing mechanisms. We also have contracts in our uranium and fuel services segments that span more than a 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.
• Maintaining financial discipline and balanced liquidity to execute on strategy:
  • Strong balance sheet: As of March 31, 2024, we had $323 million in cash and cash equivalents and $1.5 billion in total debt. In addition, we have a $1.0 billion undrawn credit facility which matures October 1, 2027. With improving prices under our long-term contract portfolio, the progress we are making in our uranium segment towards the return to our tier-one cost structure, and an expected increase in our UF₆ conversion production, we expect to see strong cash flow generation in 2024.
  • Focused debt reduction: Thanks to our risk-managed financial discipline, and strong cash position, in the first quarter we prioritized the reduction of the $600 million (US) floating-rate term loan used to finance the Westinghouse acquisition, repaying $200 million (US) of the principal. We plan to continue to prioritize repayment of the remaining $400 million (US) outstanding principal on the term loan while balancing our liquidity and cash position.
  • Prudent refinancing plans: Consistent with the conservative financial management we have demonstrated and our 2024 capital allocation priorities, in the second quarter, we expect to refinance the $500 million senior unsecured debenture we have maturing on June 24, 2024, prior to maturity or when it comes due.
• Received dividends from JV Inkai in April: Following the quarter end, we received a cash dividend of $129 million (US), net of withholdings, from JV Inkai based on its 2023 financial performance. From a cash flow perspective, we expect to realize the benefit from JV Inkai’s 2024 financial performance in 2025 once the dividend for 2024 is declared and paid.
• JV Inkai shipments: The second shipment containing the remainder of our share of Inkai’s 2023 production arrived in February 2024. 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 delays to our expected Inkai deliveries this year if transportation using this shipping route takes longer than anticipated. Inkai production was 1.6 million pounds (100% basis) for the quarter, compared to 1.9 million pounds (100% basis) in the same period last year. Presently, JV Inkai is experiencing procurement and supply chain issues, most notably, related to the availability of sulfuric acid. JV Inkai’s current production target for 2024 is 8.3 million pounds of U₃O₈ (100% basis). However, this target is tentative and contingent upon receipt of sufficient volumes of sulfuric acid. Our allocation of the planned production from JV Inkai is currently under discussion. To mitigate the risk of transportation delays or production shortfalls, we have inventory, long-term purchase agreements and loan arrangements in place we can draw on.

Consolidated financial results

The financial information presented for the three months ended March 31, 2023, and March 31, 2024, is unaudited.

Selected segment highlights

The table below shows the costs of produced and purchased uranium incurred in the reporting periods (see Non-IFRS measures below). These costs do not include care and maintenance costs, selling costs such as royalties, transportation and commissions, nor do they reflect the impact of opening inventories on our reported cost of sales.

Non-IFRS measures

The non-IFRS measures referenced in this document are supplemental measures, which are used as indicators of our financial performance. Management believes that these non-IFRS measures provide useful information to investors, securities analysts, lenders and other interested parties in assessing our operational performance and our ability to generate cash flows to meet our cash requirements. These measures are not recognized measures under IFRS, do not have standardized meanings, and are therefore unlikely to be comparable to similarly-titled measures presented by other companies. Accordingly, these measures should not be considered in isolation or as a substitute for the financial information reported under IFRS. The following are the non-IFRS measures used in this document.

ADJUSTED NET EARNINGS

Adjusted net earnings is our net earnings attributable to equity holders, adjusted for non-operating or non-cash items such as gains and losses on derivatives and adjustments to reclamation provisions flowing through other operating expenses that we believe do not reflect the underlying financial performance for the reporting period. Other items may also be adjusted from time to time. We also adjust this measure for certain of the items that our equity-accounted investees make in arriving at other non-IFRS measures. 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 2023 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 2023 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 our 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 10 of our interim financial statements for more information. This amount has been excluded from our ANE measure.

As a result of the change in ownership of Westinghouse when it was acquired by Cameco and Brookfield, Westinghouse’s inventories at the acquisition date were revalued based on the market price at that date. As these quantities are sold, Westinghouse’s cost of products and services sold reflect these market values, regardless of Westinghouse’s historic costs. Our share of these costs is included in earnings from equity-accounted investees and recorded in cost of products and services sold in the investee information (see note 7 to the financial statements). Since this expense is non-cash, outside of the normal course of business and only occurred due to the change in ownership, we have excluded our share from our ANE measure.

Westinghouse has also expensed some non-operating acquisition-related transition costs that the acquiring parties agreed to pay for, which resulted in a reduction in the purchase price paid. Our share of these costs is included in earnings from equity-accounted investees and recorded in other expenses in the investee information (see note 7 to the financial statements). Since this expense is outside of the normal course of business and only occurred due to the change in ownership, we have excluded our share from our ANE measure.

To facilitate a better understanding of these measures, the table below reconciles adjusted net earnings with our net earnings for the first quarter of 2024 and compares it to the same period in 2023.

The following table shows the drivers of the change in adjusted net earnings (non-IFRS measure, see above) in the first quarter of 2024 compared to the same period in 2023.

EBITDA

EBITDA is defined as net earnings attributable to equity holders, adjusted for the costs related to the impact of the company’s capital and tax structure including depreciation and amortization, finance income, finance costs (including accretion) and income taxes.

ADJUSTED EBITDA

Adjusted EBITDA is defined as EBITDA adjusted for the impact of certain costs or benefits incurred in the period which are either not indicative of the underlying business performance or that impact the ability to assess the operating performance of the business. These adjustments include the amounts noted in the ANE definition.

In calculating adjusted EBITDA, we also adjust for items included in the results of our equity-accounted investees that are not adjustments to arrive at our ANE measure. These items are reported as part of other expenses within the investee financial information and are not representative of the underlying operations. These include gains/losses on undesignated hedges, transaction, integration and restructuring costs related to acquisitions and gains/losses on disposition of a business.

The company may realize similar gains or incur similar expenditures in the future.

ADJUSTED EBITDA MARGIN

Adjusted EBITDA margin is defined as adjusted EBITDA divided by revenue for the appropriate period.

EBITDA, adjusted EBITDA and adjusted EBITDA margin are non-IFRS measures which allow us and other users to assess results of operations from a management perspective without regard for our capital structure. To facilitate a better understanding of these measures, the table below reconciles earnings before income taxes with EBITDA and adjusted EBITDA for the first quarter of 2024 and 2023.

For the quarter ended March 31, 2024:

Contacts

Investor inquiries:
Cory Kos

306-716-6782

cory_kos@cameco.com

Media inquiries:
Veronica Baker

306-385-5541

veronica_baker@cameco.com

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