UPDATE 3-Cameco profit drops; cuts industry outlook
* Cameco production up, but sales fall in quarter
* Sees sales heavily weighted to second half 2011
* Revises supply-demand outlook in wake of Fukushima (Adds CEO comment, detail)
By Julie Gordon
TORONTO, Aug 4 (Reuters) - Cameco Corp (CCO.TO), Canada's largest uranium producer, reported a 23 percent drop in quarterly profit on Thursday as sales volumes fell, and it lowered its industry outlook in the wake of Japan's nuclear disaster.
Cameco revised its supply-demand outlook to also take into account Germany's decision to move away from nuclear power generation in the aftermath of the earthquake and tsunami disaster at the Fukushima Daiichi nuclear plant, and the current state of Japan's reactor fleet.
The company said it now sees global uranium demand in 2011 at 175 million pounds, compared with a previous estimate of 180 million pounds. It forecasts world uranium demand in 2020 at 225 million pounds, down from an earlier estimate of 230 million pounds.
Despite this, Cameco, which plans to double its production to 40 million pounds a year by 2018, said it still sees a significant deficit in supply over the next 10 years.
"The German nuclear phase-out has not proven contagious," said Chief Executive Tim Gitzel in a call with analysts.
"We continue to anticipate growth in demand, as we remain confident that the nuclear fuel business is growing, albeit with a pause for reflection and review in some countries."
Gitzel noted that previously non-nuclear countries like Saudi Arabia have announced plans to build reactors, and that China alone has some 27 reactors in construction.
Cameco forecasts 85 net new reactors by 2020.
"It is clear that the world's fastest growing economies are not backing away from their plans to greatly increase nuclear power capacity as part of their energy mix," said Gitzel.
The company's net income slipped in the second quarter to C$54 million, or 14 Canadian cents a share, from a year-earlier profit of C$70 million, or 18 Canadian cents, as uranium sales fell 31 percent.
Excluding items, earnings came in at 18 Canadian cents a share, in line with the average estimate by analysts, according to Thomson Reuters I/B/E/S.
Revenue fell 22 percent to C$426 million from C$546 million in the year-ago period.
"As we anticipated, this quarter's financial results were lower due to variability in the timing of uranium deliveries," Gitzel said in a release earlier in the day.
"We expect our sales will be heavily weighted to the second half of the year and anticipate stronger results in the third and fourth quarters."
The Saskatoon, Saskatchewan-based company produced 5.7 million pounds of uranium in the quarter, compared with 4.9 million pounds in 2010. It sold 5.8 million pounds, versus 8.4 million pounds a year ago.
The average realized price per pound of uranium rose 11 percent to $45.65.
Cameco, which produces uranium in North America and Kazakhstan, has sold 11.9 million pounds so far this year and stuck with its 2011 sales forecast of 31 million to 33 million pounds.
The company saw a 48 percent boost in production at its McArthur River and Key Lake operation. At Key Lake, Cameco plans to start up new oxygen, acid and steam plants this year.
It said that development at the Cigar Lake mine in northern Saskatchewan is progressing well and that the project remains on track for initial production in mid-2013.
($1=$0.97 Canadian) (Reporting by Julie Gordon; editing by Rob Wilson)
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