Net earnings and revenue
Net earnings
Our net earnings were $450 million ($1.14 per share diluted) compared to $516 million ($1.31 per share diluted) in 2010 mainly due to:
- lower earnings from our electricity business due to higher costs, lower realized prices and a decline in sales volumes
- higher taxes due to an increase in the provision related to our transfer pricing dispute with the Canadian Revenue Agency (CRA)
- lower earnings from our fuel services business as a result of an increase in the cost of sales, partially offset by an increase in sales volumes
- losses on foreign exchange derivatives, compared to gains in 2010
- higher earnings from our uranium business due to higher realized prices, and an increase in sales volumes, partially offset by an increase in the cost of sales
Three-year trend
Our net earnings normally trend with revenue, but in recent years have been significantly influenced by unusual items.
In 2010, our net earnings were $583 million lower than in 2009 primarily due to us selling our interest in Centerra and recording an after tax gain of $374 million in 2009. We also recorded an after tax profit of $189 million on foreign exchange derivatives in 2009 compared to an after tax profit of $19 million in 2010.
Adjusted net earnings (non-IFRS/GAAP measure)
Adjusted net earnings is a measure that does not have a standardized meaning or a consistent basis of calculation under IFRS (non-IFRS measure). We use this measure as a more meaningful way to compare our financial performance from period to period. We believe that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate our performance. Adjusted net earnings is our net earnings attributable to equity holders, adjusted to better reflect the underlying financial performance for the reporting period. The adjusted earnings measure reflects the matching of the net benefits of our hedging program with the inflows of foreign currencies in the applicable reporting period and adjusted for earnings from discontinued operations. We also used this measure prior to adoption of IFRS (non-GAAP measure).
Adjusted net earnings is non-standard supplemental information and should not be considered in isolation or as a substitute for financial information prepared according to accounting standards. Other companies may calculate this measure differently so you may not be able to make a direct comparison to similar measures presented by other companies.
To facilitate a better understanding of these measures, the table below reconciles adjusted net earnings with our net earnings for the years ended 2011 and 2010 as reported in our financial statements.
| ($ millions) | 2011 | 2010 | Canadian GAAP 2009 |
|---|---|---|---|
|
|||
| Net earnings | 450 | 516 | 1,099 |
| Adjustments | |||
| Earnings from discontinued operations (after tax) | – | – | (382) |
| Adjustments on derivatives1 (pre-tax) | 80 | (26) | (257) |
| Income taxes on adjustments to derivatives | (21) | 7 | 68 |
| Adjusted net earnings | 509 | 497 | 528 |
The table below shows what contributed to the change in adjusted net earnings for 2011.
| ($ millions) | ||
|---|---|---|
| Adjusted net earnings – 2010 | 497 | |
| Change in gross profit by segment (we calculate gross profit by deducting from revenue the cost of products and services sold, and depreciation and amortization (D&A), net of hedging benefits) |
||
| Uranium | Higher sales volume | 58 |
| Higher realized prices ($US) | 182 | |
| Foreign exchange impact on realized prices | (71) | |
| Higher costs | (68) | |
| Hedging benefits | 20 | |
| change – uranium | 121 | |
| Fuel services | Higher sales volume | 5 |
| Lower realized prices ($Cdn) | (3) | |
| Higher costs | (13) | |
| Hedging benefits | 3 | |
| change – fuel services | (8) | |
| Electricity | Lower sales volume | (8) |
| Lower realized prices ($Cdn) | (30) | |
| Higher costs | (46) | |
| change – electricity | (84) | |
| Other changes | ||
| Cigar lake remediation | 12 | |
| Income taxes | (36) | |
| Other | 7 | |
| Adjusted net earnings – 2011 | 509 | |
Three-year trend
Our adjusted net earnings have been relatively stable over the past three years.
The 6% decrease from 2009 to 2010 resulted from:
- lower profits from our electricity business, relating to a lower realized selling price
- higher exploration expenses
- higher income taxes
- partially offset by improved profits in the uranium business, relating to the lower cost of sales
The 2% increase from 2010 to 2011 resulted from:
- higher earnings from our uranium business due to higher realized prices, and an increase in sales volumes, partially offset by:
- an increase in the cost of sales
- lower earnings from our electricity business due to higher costs, lower realized prices and lower sales volumes
- lower earnings from our fuel services business resulting from higher costs, partially offset by higher sales volumes
- higher income taxes
Revenue
The table below shows what contributed to the change in revenue this year.
| ($ millions) | |
|---|---|
| Revenue – 2010 | 2,124 |
| Uranium | |
| Higher sales volume | 147 |
| Higher realized prices ($Cdn) | 111 |
| Fuel services | |
| Higher sales volume | 21 |
| Lower realized prices ($Cdn) | (3) |
| Electricity | |
| Lower output | (19) |
| Lower realized prices ($Cdn) | (31) |
| Other | 34 |
| Revenue – 2011 | 2,384 |
See Financial results by segment for more detailed discussion.
Three-year trend
In 2010, revenue declined by 8% to $2.1 billion largely due to reduced sales volumes in the uranium business and a lower realized price in electricity. The decline in sales volumes was matched with an increase in inventories.
In 2011, revenue increased by 12% to a record $2.4 billion, due to higher sales volumes and record realized prices in our uranium business.
| 2011 | 2010 | 2009 | change from 2010 to 2011 |
||
|---|---|---|---|---|---|
| (1) Average realized foreign exchange rate ($US/$Cdn): 2011 – $1.00, 2010 – $1.05 and 2009 – $1.18. | |||||
| Uranium1 | $US/lb | 49.17 | 43.63 | 38.25 | 13% |
| $Cdn/lb | 49.18 | 45.81 | 45.12 | 7% | |
| Fuel services | $Cdn/kgU | 16.71 | 16.86 | 17.84 | (1)% |
| Electricity | $Cdn/MWh | 54 | 58 | 64 | (7)% |
Outlook for 2012
We expect consolidated revenue to be 0% to 5% lower in 2012 due to:
- lower sales volumes in the fuel services business
- decrease in realized prices in the uranium business
- partially offset by higher volumes in the electricity business
Our customers choose when in the year to receive deliveries of uranium and fuel services products, so our quarterly delivery patterns, and therefore our sales volumes and revenue, can vary significantly. We expect that deliveries this year will be evenly distributed across the quarters. However, not all delivery notices have been received to date, which could alter the delivery pattern.