Second-quarter revenue fell 7% to $814mn, largely reflecting an 18% drop in uranium sales volumes due partly to delivery timing. Stronger contracted prices helped offset the decline.
Underlying cash profit (EBITDA) fell 42% to $391mn, with all divisions lower and the steepest decline at Westinghouse, which benefited last year from a Czech nuclear reactor project.
Free cash flow fell sharply to $25mn driven by lower profitability. Net cash was $116mn.
Despite unexpected maintenance outages, production guidance for Uranium and Fuel Services production remains broadly flat, while stronger pricing lifted revenue guidance.
Westinghouse profit expectations are unchanged, but investment plans are ramping up and the business has formally started the IPO process.
Cameco’s shares rose 4.0% in early trading.
Currency: Canadian Dollars
Our view
Cameco’s second quarter results were on the underwhelming side, reflecting softer uranium volumes and a lower contribution from joint venture Westinghouse. The latter highlights how Westinghouse’s current scale leaves it dependent on a small number of large projects.
With a pipeline of 91 potential AP1000 reactors, the growth opportunity is clear. If Westinghouse executes, that should support smoother revenue over time, and markets welcomed the IPO filing. But converting that pipeline into earnings will take time, with planning hurdles and long construction periods making the financial impact hard to predict.
With production guidance intact and uranium pricing improving, the core business looks on course for a stronger second half. However, Cameco takes a long-term view of the Uranium market, meaning it’s not rushing to extract all of its reserves at once. Rather, it prefers long-term contracts that anticipate sustained demand growth and a widening supply shortfall.
The investment case for nuclear energy is improving, with this year’s oil price shock strengthening the energy-security argument. But sentiment could reverse, with political risk still high and support dependent on confidence in safety, reputation and financial viability.
It has several assets in attractive jurisdictions, which should help it match demand as fuel requirements ramp up from a robust global pipeline of new reactors. We remain optimistic about the multi-year growth opportunity, supported by Cameco’s broad footprint across the nuclear fuel value chain, but it means the immediate scope for higher uranium sales is limited.
However, we see Westinghouse as an emerging source of future earnings for Cameco, underpinned by a US$80bn framework with the US government to deploy new reactors. The starting gun has also been fired on a potential separate IPO of Westinghouse. The deal sets out a target valuation of at least $30bn, nearly seven times the price paid by the joint-venture partners in 2023. But there are several steps to clear, and the market will ultimately decide what Westinghouse is worth.
The balance sheet is strong, and 2025 cash flows are much improved, though Westinghouse receipts are expected to fall in 2026. That’s supported a modest dividend increase, but shareholder payouts are never a given.
As it stands, Cameco looks well-placed to capitalise on the nuclear renaissance, though sentiment is likely to remain sensitive to the Westinghouse IPO process. The valuation already reflects strong growth, but if the company delivers market forecasts for underlying earnings to more than double by 2028, we see some upside. That looks achievable, but investors should be comfortable with its relatively high levels of execution risk.
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
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.