Cameco's results for 2017 are better than expected, but mixed forecasts restrain optimism.

Altynay IbraimovaFebruary 13, 2018

The Company's revenue decreased by 11% to $2157mn in 2017, mainly due to a decrease in revenues from the sale of uranium (-8% yoy), fuel services (-2% yoy) and revenues in the NUKEM segment (-18 % yoy). Low uranium prices continue to exert major pressure on the revenue decline.

Meanwhile, the Company managed to cut its cost by 13% to $ 1,721mn due to lower costs for uranium production (-7% yoy) and fuel costs (-3% yoy).

The Company's operating loss narrowed to $128mn due to optimization of administrative expenses (-21% yoy) and exploration costs (-30% yoy).

Nevertheless, due to the negative exchange rate difference and a low recovery of income tax, the Company's net loss for 2017 increased more than threefold and amounted to $205mn.

In addition, the Company confirmed its weak forecasts for production at McArthur / Key Lake, due to which the production in 2018 will show a decrease, which, on the other hand, will be able to support prices for uranium due to a reduction in supply in the market.

Fig. 1. Selected indicators

 

 

 

 

 

unit

2016

2017

yoy

Uranium

 

 

 

 

Production volume

mn lbs

27

23.8

-12%

Sales volume

mn lbs

31.5

33.6

7%

Average realized price

$Cdn/lb

54.46

46.8

-14%

Revenue

$mn

1 718

1 574

-8%

 

 

 

 

 

Fuel services

 

 

 

 

Production volume

mn kgU

8.4

7.9

-6%

Sales volume

mn kgU

12.7

11.5

-9%

Average realized price

$Cdn/kgU

25.37

27.2

7%

Revenue

$mn

321

313

-2%

 

 

 

 

 

NUKEM

 

 

 

 

Sales volume

mn lbs

7.1

10

41%

Average realized price

$Cdn/lbs

47.9

32.25

-33%

Revenue

$mn

391

321

-18%

Source: Company data, Halyk Finance estimates

 

 

 

Our view

We estimate Cameco's operating results for 2017 as neutral. The annual results are in line with the outlook that Company provided in the third quarter.

Financial results, in turn, exceeded our expectations, mainly due to the higher average price of uranium sales, which exceeded our expected price by 43%, resulting in the Company's revenue of $2157mn instead of the expected $1707mn (+ 26%).

Given the Company's expectations for 2018 and the change in the forecast prices for uranium, we see the need to revise our Buy recommendation with12M TP CAD14.39/share.