* Q3 adj profit C$0.26/shr vs analysts' estimate C$0.31
* Annual production forecast cut by Canada's top producer
* Sales forecast maintained; long-term outlook seen strong
* Revenue jumps 26 pct at C$527 mln
* Shares drop 7.5 percent to C$20.14 in Toronto
By Julie Gordon
Nov 7 Cameco Corp , Canada's top
uranium producer, reported lower-than-expected quarterly
earnings on Monday and cut its annual production forecast for
nuclear fuel, sending its shares tumbling.
With hiccups at both its Smith Ranch-Highland mine in
Wyoming and the Inkai mine in Kazahkstan, Cameco expects to
produce 21.7 million pounds of uranium, compared with an
earlier forecast of 21.9 million pounds.
The Saskatoon, Saskatchewan-based company also cut 6
percent from its full year forecast for UF6, a compound used to
make enriched uranium, citing unfavorable market conditions.
"There seems to be an excess of conversion (UF6) available
at the moment to the market, but how long that will last for is
difficult to say," said BMO Capital Market analyst Edward
Sterck. "It could be a very short-term situation."
He said the uranium industry as a whole is expected to
remain uncertain in the near term, as countries weigh their
options on nuclear project development.
Shares of Cameco dropped as much as 9 percent even though
Cameco maintained its full-year sales target of 31 to 33
million pounds of uranium this year.
On a conference call with investors, chief executive Tim
Gitzel said that he expects 2012 sales in the same range and
added that the long-term outlook for the material used to fuel
nuclear reactors is strong.
The construction of new reactors in China and other Asian
countries is expected to outweigh the loss of markets in Japan,
where reactors are being take offline in the wake of the
Fukushima reactor accident in March, and in Germany, where the
Japanese disaster led to a policy shift away from nuclear
"The strong, long-term fundamentals that we were seeing
previously have not gone away," said Gitzel. "In fact, we
continue to see a very strong and promising future growth
In the third quarter uranium sales volumes rose 29 percent
to 7.2 million pounds at an average realized price of $47.33 a
pound. That compared with 5.6 million pounds at $40.63 in the
Cameco said that it had deferred about 2.5 million pounds
of sales to the fourth quarter, with its nine-month uranium
sales at 19.1 million pounds.
To meet ts full-year sales target, Cameco would have to
complete almost 40 percent of sales in the fourth quarter, said
"I don't see any reason for this not to come through as
Cameco expects," he said. "But obviously this is still a risk
for the rest of the year."
ADJUSTED EARNINGS RISE
Cameco's third quarter operating profit rose on higher
uranium sales volumes and better realized prices, but fell
short of analysts expectations for the quarter.
Excluding one-time items, Cameco's earnings climbed ot
C$104 million, or 26 Canadian cents a share, from C$80 million,
or 20 Canadian cents, a year earlier.
Analysts, on average, had expected earnings of 31 Canadian
cents a share, according to Thomson Reuters I/B/E/S.
Net profit dropped to C$39 million, or 10 Canadian cents a
share, from C$98 million, or 25 Canadian cents, on losses on
foreign exchange derivatives and a weaker Canadian dollar.
Revenue rose 26 percent to C$527 million.
Shares fell 7.49 percent to C$20.14 on Monday afternoon on
the Toronto Stock Exchange.
Before the crippling nuclear disaster at the Fukushima
power plant in Japan, uranium was on a bull run as investors
eyed China's plans build dozens of reactors to meet the energy
needs of its growing urban population.
With numerous reactors under construction and others in the
planning stages, Cameco estimates that by 2020 China will have
60 to 70 gigawatts of nuclear capacity, compared with a current
capacity of about 12 gigawatts, sparking rising demand for
uranium over the next decade.
"The Chinese nuclear program is still going very strong,"
said Gitzel. "They have, I think, 14 nuclear units in operation
and another 26 or 27 under construction that they plan to have
in production by 2015, which is breathtaking for us on the
The company also sees rising demand from South Korea and
India, and is moving forward with a plan to boost uranium
production to 40 million pounds a year by 2018.
In the coming months Cameco said the uranium market will
remain unsteady, as speculation mounts that Japan and Germany
may sell stockpiled uranium back into spot market and on
worries that customers may defer more sales.