Cameco’s second quarter revenue grew by 47% to 877mn CAD (Canadian Dollars) reflecting volume growth in both the Uranium and Fuel services businesses. Cameco sold nearly twice as much Uranium as it produced with output curtailed by planned maintenance.
Underlying cash profit (EBITDA) was up 96% to 673mn CAD reflecting growth in the core business, and contract awards at the company’s joint venture Westinghouse for the construction of two nuclear reactors.
Free cash flow increased to 390mn CAD from 213mn CAD with net debt reducing by 401mn CAD year to date.
Full-year production guidance for Uranium and Fuel Services is unchanged but the average uranium price expectation for 2025 has been raised 3.5% to 87 CAD per pound.
Expectations for Cameco’s share of Westinghouse’s underlying cash profit have increased to 525-580mn CAD, a 45% upgrade at the midpoint.
The shares fell 3.6% on the day of the announcement.
Our view
By most standards Cameco delivered a knock-out set of second quarter results. However, expectations have been riding high. Production issues and lack of deal news at Westinghouse saw the shares slip a little on the day. Westinghouse’s contracts are lumpy by nature but there’s still an enormous opportunity to go for. On the production side management expects a recovery in the second half of this year.
Cameco provides uranium fuel to generate clean and reliable electricity around the globe. The company also offers nuclear fuel processing services and refinery services. Its Westinghouse joint venture manufactures fuel assemblies. It also provides end-to-end power station development and operation.
Attitudes towards nuclear energy show signs of shifting in Cameco’s favour. Policymakers are more proactively proposing nuclear as an important part of energy plans. In some cases, full-scale anti-nuclear stances are being reversed.
Geopolitical tensions and a desire to secure energy supply are some of the factors driving demand, but perhaps the bigger pushes are coming from the energy transition and the huge energy requirements needed to power the AI revolution. It’s not just the quest for clean energy that makes this an attractive market, but also a limited source of new uranium supply coming on stream at a time when demand is increasing.
Cameco has several approved and built assets in less volatile regions ready to fire up. Almost 90% of uranium consumption is in countries with little-to-no primary production and Cameco has controlling ownership of one of the world’s largest high-grade uranium reserves.
The balance sheet is currently strong and with operations ramping back up, cash flows have improved too. That’s paved the way for an improved dividend program, though no shareholder returns are assured.
Cameco is exposed to political risk. We think policymakers will remain on a more nuclear-friendly course, but sentiment could change. There’s also some risk from China/US tariffs, but nuclear fuel has so far been exempted, and buyers are limited in their options, so we think Cameco is well placed to navigate any challenges.
Ultimately, rising concern about energy supply and a re-evaluation of nuclear energy's role means we’re at an inflection point for uranium demand. Cameco is a well-placed name to capitalise on this, and high barriers to entry help keep competitors at bay. The market’s recognised the opportunity too, pushing the valuation relative to earnings to over two times the long-term average, increasing the risk of ups and downs.
Environmental, social and governance risk
Mining companies have high ESG risk. Emissions, effluents & waste and community relations are key risk drivers in this sector. Operational carbon emissions, resource use, health and safety, labour relations, and bribery and corruption are also contributors to ESG risk.
Cameco’s overall management of material ESG issues is strong.
There is board level responsibility for overseeing ESG issues, however, ESG reporting is not in accordance with leading reporting standards. Executive remuneration is explicitly linked to sustainability performance targets. Scope 1 and 2 emissions are disclosed and carbon intensity tracks below the industry average. There are also programmes in place to reduce own emissions, with targets and audits. Cameco has not been involved is any major community relations controversies.
Cameco key facts
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