Fourth Quarter Results by Segment
Uranium
| Three months ended December 31 |
|||
|---|---|---|---|
| Highlights | 2012 | 2011 | Change |
| Production volume (million lbs) | 6.5 | 6.6 | (2)% |
| Sales volume (million lbs) | 14.4 | 13.8 | 4% |
| Average spot price ($US/lb) | 42.46 | 51.79 | (18)% |
| Average long-term price ($US/lb) | 58.50 | 62.50 | (6)% |
| Average realized price | |||
| ($US/lb) | 49.97 | 52.09 | (4)% |
| ($Cdn/lb) | 49.37 | 53.08 | (7)% |
| Average unit cost of sales ($Cdn/lb) (including D&A) | 32.88 | 30.29 | 9% |
| Revenue ($ millions) | 709 | 731 | (3)% |
| Gross profit ($ millions) | 237 | 314 | (25)% |
| Gross profit (%) | 33 | 43 | (23)% |
Production volumes for the quarter decreased by 2% year over year. See Uranium – production overview for more information.
Uranium revenues were down 3% due to a 7% decrease in the Canadian dollar average realized price, partially offset by a 4% increase in sales volumes.
Our realized prices this quarter were lower than the fourth quarter of 2011 mainly due to lower US dollar prices under market related contracts. In the fourth quarter of 2012, the uranium spot price averaged $42.46 (US), 18% lower than the $51.79 (US) in the fourth quarter of 2011.
Total cost of sales (including D&A) increased by 13% ($472 million compared to $417 million in 2011). This was mainly the result of the following:
- the 4% increase in sales volumes
- the 11% increase in average unit costs for produced uranium due to an increase in non-cash costs
- a 75% increase in the average unit costs for purchased uranium due to increased purchases at spot prices. In the fourth quarter of 2011, most of our purchases were under long-term contracts at more favourable fixed prices.
- lower royalty charges due to the lower realized price and reduced deliveries of Saskatchewan-produced material. In 2012, total royalty charges were $52 million compared to $61 million in 2011.
The net effect was a $77 million decrease in gross profit for the quarter.
The following table shows the costs of produced and purchased uranium incurred in the reporting periods (non-IFRS measures see below). These costs do not include selling costs such as royalties, transportation and commissions, nor do they reflect the impact of opening inventories on our reported cost of sales.
| Three months ended December 31 |
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|---|---|---|---|
| ($Cdn/lb) | 2012 | 2011 | Change |
| Produced | |||
| Cash cost | 17.01 | 17.44 | (2)% |
| Non-cash cost | 8.41 | 5.52 | 52% |
| Total production cost | 25.42 | 22.96 | 11% |
| Quantity produced (million lbs) | 6.5 | 6.6 | (2)% |
| Purchased | |||
| Cash cost | 32.94 | 18.86 | 75% |
| Quantity purchased (million lbs) | 2.8 | 2.3 | 22% |
| Totals | |||
| Produced and purchased costs | 27.69 | 21.90 | 26% |
| Quantities produced and purchased (million lbs) | 9.3 | 8.9 | 4% |
Cash cost per pound, non-cash cost per pound and total cost per pound for produced and purchased uranium presented in the above table are non-IFRS measures. These measures do not have a standardized meaning or a consistent basis of calculation under IFRS. We use these measures in our assessment of the performance of our uranium business. We believe that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate our performance and ability to generate cash flow.
These measures are non-standard supplemental information and should not be considered in isolation or as a substitute for measures of performance prepared according to accounting standards. These measures are not necessarily indicative of operating profit or cash flow from operations as determined under IFRS. Other companies may calculate these measures 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 following table presents a reconciliation of these measures to our unit cost of sales for the fourth quarters of 2012 and 2011.
Cash And Total Cost Per Pound Reconciliation
| Three months ended December 31 | ||
|---|---|---|
| ($ millions) | 2012 | 2011 |
| Cost of product sold | 390.7 | 336.8 |
| Add / (subtract) | ||
| Royalties | (51.7) | (61.3) |
| Standby charges | (7.7) | (6.0) |
| Other selling costs | (3.3) | (2.8) |
| Change in inventories | (125.2) | (108.2) |
| Cash operating costs (a) | 202.8 | 158.5 |
| Add / (subtract) | ||
| Depreciation and amortization | 81.3 | 80.1 |
| Change in inventories | (26.6) | (43.7) |
| Total operating costs (b) | 257.5 | 194.9 |
| Uranium produced & purchased (millions lbs) (c) | 9.3 | 8.9 |
| Cash costs per pound (a ÷ c) | 21.81 | 17.81 |
| Total costs per pound (b ÷ c) | 27.69 | 21.90 |
Fuel services
(includes results for UF6, UO2 and fuel fabrication)
| Three Months Ended December 31 | |||
|---|---|---|---|
| Highlights | 2012 | 2011 | Change |
| Production volume (million kgU) | 3.3 | 3.1 | 6% |
| Sales volume (million kgU) | 5.9 | 7.2 | (18)% |
| Realized price ($Cdn/kgU) | 16.70 | 14.67 | 14% |
| Average unit cost of sales ($Cdn/kgU) (including D&A) | 13.44 | 11.18 | 20% |
| Revenue ($ millions) | 99 | 106 | (7)% |
| Gross profit ($ millions) | 19 | 25 | (24)% |
| Gross profit (%) | 19 | 24 | (21)% |
Total revenue decreased by 7% due to an 18% decrease in sales volumes, offset by a 14% increase in realized price.
The total cost of products and services sold (including D&A) decreased by 2% ($79 million compared to $81 million in the fourth quarter of 2011) due to the decrease in sales volumes, offset by an increase in the average unit cost of sales. When compared to 2011, the average unit cost of sales was 20% higher due to the mix of fuel services products sold and to higher cost recoveries being recorded in 2011.
The net effect was a $6 million decrease in gross profit.
Electricity
BPLP (100% – not prorated to reflect our 31.6% interest)
| Three Months Ended December 31 | |||
|---|---|---|---|
| Highlights ($ millions except where indicated) |
2012 | 2011 | Change |
|
|||
| Output - terawatt hours (TWh) | 7.2 | 6.2 | 16% |
| Capacity factor (the amount of electricity the plants actually produced for sale as a percentage of the amount they were capable of producing) |
100% | 86% | 16% |
| Realized price ($/MWh) | 54 | 531 | 2% |
| Average Ontario electricity spot price ($/MWh) | 24 | 27 | (11)% |
| Revenue | 392 | 338 | 16% |
| Operating costs (net of cost recoveries) | 221 | 271 | (18)% |
| Cash costs | 165 | 220 | (25)% |
| Non-cash costs | 56 | 51 | 10% |
| Income before interest and finance charges | 171 | 67 | 155% |
| Interest and finance charges | 6 | 7 | (13)% |
| Cash from operations | 101 | 114 | (11)% |
| Capital expenditures | 54 | 84 | (36)% |
| Distributions | 140 | 65 | 115% |
| Capital calls | 14 | 10 | 40% |
| Operating costs ($/MWh) | 31 | 421 | (26)% |
Our Earnings From BPLP
| Three Months Ended December 31 |
|||
|---|---|---|---|
| Highlights ($ millions except where indicated) |
2012 | 2011 | Change |
| BPLP’s earnings before taxes (100%) | 165 | 60 | 175% |
| Cameco’s share of pre-tax earnings before adjustments (31.6%) | 52 | 19 | 174% |
| Proprietary adjustments | (2) | (2) | - |
| Earnings before taxes from BPLP | 50 | 17 | 194% |
Total electricity revenue increased 16% due to higher output and slightly higher realized price. Realized prices reflect spot sales, revenue recognized under BPLP’s agreement with the OPA, and financial contract revenue. BPLP recognized revenue of $198 million this quarter under its agreement with the OPA, compared to $147 million in the fourth quarter of 2011. The equivalent of about 58% of BPLP’s output was sold under financial contracts this quarter, compared to 66% in the fourth quarter of 2011. From time to time BPLP enters the market to lock in gains under these contracts. Gains on BPLP’s contracting activity in the fourth quarter of 2012 were similar to 2011.
The capacity factor was 100% this quarter, up from 86% in the fourth quarter of 2011. There were no outage days in the fourth quarter this year compared to a planned outage in 2011.
Operating costs were $221 million compared to $271 million in 2011 due to lower supplemental lease payments and lower maintenance costs incurred as a result of no outages in the fourth quarter.
The result was a 194% increase in our share of earnings before taxes.
BPLP distributed $140 million to the partners in the fourth quarter. Our share was $44 million. BPLP capital calls to the partners in the fourth quarter were $14 million. Our share was $4 million. The partners have agreed that BPLP will distribute excess cash monthly, and will make separate cash calls for major capital projects.