Cameco Corporation (CCJ) Q2 2025 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call reveals strong revenue growth and a solid financial position, with a 24% revenue increase and full loan repayment. Optimistic guidance includes a projected adjusted EBITDA of $355-$405 million and a positive uranium price trend. Despite Westinghouse's expected losses, improved EBITDA is anticipated. The Q&A highlights strategic supply discipline, repeatable IP windfalls, and manageable production risks. However, some uncertainties remain around new build projects and DOE funding. Overall, the positive financial performance and strategic outlook support a positive stock price movement.

Key Financial Performance

Westinghouse's adjusted EBITDA USD 525 million to USD 580 million, driven by a USD 170 million increase in our share of Westinghouse's second quarter revenue. The improvement was tied to Westinghouse's participation in a construction project for 2 nuclear reactors at the Dukovany power plant in the Czech Republic.

Uranium production Lower in Q2 2025 compared to Q2 2024 due to planned maintenance at the Key Lake mill. Unit cost of sales was higher. Production at McArthur River/Key Lake and Cigar Lake is expected to reach 18 million pounds each this year on a 100% basis.

JV Inkai production Target production volume of 8.3 million pounds on a 100% basis. Cameco's purchase allocation is 3.7 million pounds this year. Shipments are expected to begin in the second half of 2025.

Fuel services production Annual production outlook remains on track for between 13 million and 14 million kgU of combined fuel services products.

Financial position $716 million in cash and cash equivalents, $1 billion in total debt, and a $1 billion undrawn revolving credit facility.

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Operating Highlights

Westinghouse Investment: Cameco's 49% share of Westinghouse's adjusted EBITDA is expected to be between USD 525 million and USD 580 million for 2025, driven by a USD 170 million increase in revenue from Westinghouse's participation in a construction project for two nuclear reactors in the Czech Republic.

Global Nuclear Expansion: Significant announcements include 10 new reactors planned in the U.S., 4 SMR units in Ontario, 3 reactors in Poland, 2 in the Czech Republic, and additional interest in the U.K., Sweden, and Finland. These developments highlight a resurgence in nuclear energy globally.

Uranium Production: Cameco expects McArthur River/Key Lake and Cigar Lake to each produce 18 million pounds of uranium in 2025. JV Inkai in Kazakhstan is on track for 8.3 million pounds, with Cameco's share being 3.7 million pounds.

Fuel Services Division: Annual production outlook for UF6 conversion, UO2 conversion, and heavy water reactor fuel bundles remains on track for 13-14 million kgU of combined fuel services products.

Long-term Contracting Strategy: Cameco is focusing on long-term contracts to ensure supply security and align with uranium mining economics. This strategy avoids oversupply and supports future investments.

Leadership Changes: Grant Isaac will become President and COO, Heidi Shockey will be CFO, and other senior management roles will transition to ensure operational continuity and expertise retention.

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Risk or Challenges

Uranium Production Risks: The company's uranium production plan is contingent on several factors, including ground freezing and development in new mining areas, access to skilled labor, and timely commissioning of new equipment. Any disruptions in these areas could impact production targets.

JV Inkai Production Risks: The JV Inkai operation in Kazakhstan faces risks such as sulfuric acid availability, procurement and supply chain challenges, transportation issues, construction delays, and inflationary pressures on production costs.

Long-Term Contracting Challenges: Utilities are not contracting sufficient uranium to meet future demand, which could lead to supply shortages and market instability. This lack of long-term contracting also impacts the company's ability to plan and invest in future supply.

Geopolitical and Trade-Related Uncertainty: Ongoing geopolitical and trade-related developments introduce short-term uncertainty, which could affect the company's operations and market dynamics.

Inflationary Pressures: Inflationary pressures are impacting production costs, particularly in operations like JV Inkai.

Supply Chain and Transportation Risks: The company faces risks related to supply chain disruptions and transportation challenges, particularly for its operations in Kazakhstan.

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Guidance & Outlook

Revenue Expectations: Cameco has improved its overall 2025 expectations, with a notable increase in the expected annual average realized price driven by a rise in market prices. The company expects its 49% share of Westinghouse's adjusted EBITDA to be between USD 525 million and USD 580 million, reflecting a USD 170 million increase in its share of Westinghouse's second-quarter revenue.

Production Projections: Cameco expects McArthur River/Key Lake and Cigar Lake to each produce 18 million pounds of uranium in 2025 on a 100% basis. JV Inkai in Kazakhstan is on track for its target production volume of 8.3 million pounds on a 100% basis, with Cameco's purchase allocation being 3.7 million pounds. Shipments from JV Inkai are expected to begin in the second half of 2025. The fuel services division's annual production outlook remains on track for between 13 million and 14 million kgU of combined fuel services products.

Market Trends and Demand: Cameco anticipates a growing demand for uranium, with utilities needing to secure significant amounts of uranium to meet their fuel needs through 2045. The company expects a shift in procurement priorities towards uranium, driven by the necessity of long-term contracting to support supply investments. Cameco also notes that both spot and long-term contracting are down in the first half of 2025 compared to 2024, pushing more material into a period of significant uncovered demand and greater supply uncertainty.

Strategic Investments and Opportunities: Cameco highlights significant growth opportunities for Westinghouse, particularly tied to its participation in a construction project for two nuclear reactors at the Dukovany power plant in the Czech Republic. The company also sees potential positive impacts from recent nuclear project announcements on its core uranium and fuel services business.

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Shareholder Return Plan

The selected topic was not discussed during the call.

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Key Q&A

Q:Why hasn't the 5-year CAGR guidance for Westinghouse changed despite the improved global nuclear outlook?

A:The guidance remains conservative because many new build projects have not yet reached Final Investment Decision (FID). Once these projects hit FID, they will be included in the business plan, potentially increasing the growth outlook. Additionally, some projects may fall outside the 5-year window. The only underperforming part of the business is decommissioning, which has been rolled up due to the lack of reactor shutdowns.

Q:Is the USD 170 million IP windfall from the Koreans repeatable, and how should it be factored into estimates?

A:The windfall is tied to markets where the Koreans are leading new build opportunities. Similar structures are expected for other projects, such as the Czech Republic's Dukovany and Temelin sites, and potentially other markets the Koreans develop. This suggests the windfall could be repeatable in the coming years.

Q:What contributed to the strong EBITDA performance in the uranium segment, and what is the outlook for the second half of the year?

A:The strong performance was due to low-cost inventory and Cameco's strategic supply discipline, including not running Tier 1 assets at full production. The second half will see more purchases, as only 2 million of the planned 11-12 million pounds have been purchased year-to-date. Costs will balance out, aligning with the unit cost of sales outlook.

Q:What are the gating factors for nuclear new build projects to materialize into Cameco's official guidance?

A:Key factors include achieving FID for projects in regions like Poland, Bulgaria, and Slovenia, which have strong state support. In the U.S., new models like multi-utility and multi-investor approaches are being developed. Standardization and sequencing are critical for successful gigawatt-scale new builds.

Q:What risks are associated with meeting the 18 million pounds production guidance for McArthur River?

A:Risks include challenges in new mining areas, ensuring ground freezing, labor availability, and commissioning new equipment. Wildfires have also caused some disruptions, but the guidance has not been changed.

Q:What is the status of GLE's readiness and its potential for Department of Energy (DOE) funding?

A:GLE is progressing towards TRL6 readiness, which is critical for nuclear reliability. The DOE has not made decisions on funding mechanisms, but Cameco prefers direct support over the DOE acting as a buyer of last resort. GLE's focus remains on re-enriching DOE's depleted UF6 tails by 2030, with potential for other services if demand and funding align.

Q:How is Cameco managing its low inventory levels, and what is the strategy for sourcing uranium?

A:Cameco uses a mix of production, inventory, market purchases, and long-term contracts to meet commitments. The company remains a strategic buyer, taking advantage of low prices while maintaining flexibility through various sourcing options.

Q:What is the outlook for Westinghouse's growth range of 6% to 10%?

A:The lower bound reflects the core business, while the upper bound depends on new build projects reaching FID. The core business has potential upside, such as restarting the Springfields conversion service in the U.K.

Q:Does the nuclear industry have the capacity to meet the potential build pipeline, and what about Westinghouse's capacity?

A:The industry can meet the demand with a strong commitment to standardization and sequencing. Westinghouse is well-positioned to handle the demand, provided these principles are followed.

Q:What is the current state of uranium contracting, and what factors are influencing activity levels?

A:Contracting activity is low due to geopolitical uncertainties and delayed demand. Cameco remains disciplined, seeking contracts with floors starting at $70 and ceilings at $130. The company expects demand to accumulate, leading to stronger pricing power in the future.

Q:What is the confidence level in receiving Inkai deliveries in the second half of the year?

A:Confidence has increased as the Trans-Caspian corridor has become more predictable. However, alternative sourcing options are in place to mitigate any delays.

Q:What is the status of restarting the Springfields conversion service in the U.K.?

A:Restarting depends on closing the bid-ask spread, particularly on the duration of contracts. Utilities need to commit to longer-term contracts to justify the investment. Meanwhile, the shutdown benefits Port Hope's conversion operations.

Q:Review of Unclear Management Responses

A:Management avoided providing a direct answer on the potential DOE funding mechanisms for GLE, stating that the DOE has not made decisions yet. They also used vague language when discussing the timing and specifics of new nuclear build projects materializing into official guidance, citing general enthusiasm and evolving models without concrete details.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

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Cameco Corporation (CCJ) Q2 2025 Earnings Call Transcript

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