Cameco Corporation Q2 2010 Earnings Call Transcript

Cameco Corporation Q2 2010 Earnings Call Transcript
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Cameco Corporation (CCJ)

Q2 2010 Earnings Call Transcript

August 13, 2010 11:00 am ET

Executives

Bob Lillie – IR

Gerry Grandey – CEO

Kim Goheen – SVP & CFO

Tim Gitzel – President

George Assie – SVP, Marketing and Business Development

Bob Steane – SVP and COO

Analysts

Orest Wowkodaw – Canaccord Genuity

David Snow – Energy Equities, Inc.

Greg Barnes – TD Newcrest

Edward Sterck – BMO Capital Markets

Duncan McKeen – Macquarie Capital

Ben Elias – Sterne Agee

Borden Putnam – Mione Capital

Aleem Ladak – Desjardins Securities

Brian MacArthur – UBS

Cassandra Kyle – StarPhoenix

Presentation

Operator

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Good morning, ladies and gentlemen. Welcome Cameco Corporation’s second quarter results conference call. I would now like to turn the meeting over to Mr. Bob Lillie, Director, Investor Relations. Please go ahead, Mr. Lillie.

Bob Lillie

Thank you and good morning, everyone. Welcome to Cameco’s second quarter conference call to discuss the financial results. Thanks for joining us. With us today are five of Cameco’s senior executives. They are; Gerry Grandey, Chief Executive Officer; Tim Gitzel, President; Kim Goheen, Senior Vice President and CFO; George Assie, Senior Vice President, Marketing and Business Development and Bob Steane, Senior Vice President and Chief Operating Officer. Also, with us today is our colleague, Rachelle Girard, Manager, Investor Relations.

We’ll start with Gerry and Kim providing comments on the quarter’s business results, updates on our operations and development projects, as well as our plans to transition to international financial reporting standards next year. Then we’ll open it up for your questions.

This conference call is open to all members of the investment community, including the media. During the Q&A session, please limit yourself to two questions then return to the queue.

Please note that this conference call will include forward-looking information, which is based on a number of assumptions and actual results could differ materially. Please refer to our annual information form and the MD&A for more information about the factors that could cause these different results and the assumptions we have made. With that, I’ll turn it over to Gerry.

Gerry Grandey

Thank you Bob and let me add my welcome as well. I’ll have Bobby providing an overview today of our operations, the milestones as well that we see in implementing our growth strategy. But before I do that, I’m going to ask Kim to comment on Q2 results and provide some early observations on Cameco’s progress in adopting the new international financial reporting standards or IFRS. Kim?

Kim Goheen

Thank you, Gerry. Good morning. First of all, financial results we reported this morning are consistent with our earlier guidance for the year, where we expected deliveries to be strongest in the second and fourth quarters.

Adjusted net earnings for the quarter at $0.29 per share compares to $0.41 a year ago. However, as noted in the MD&A, we now expect uranium sales for all of the 2010 to be down between 10% and 15% compared to earlier guidance. This is a result of some customers deferring deliveries until 2011 plus a reduction into the spot market sakes we expected to make this year.

The balance of 2010 then, deliveries and revenue from uranium will be heavily weighted to Q4. Cash flow has remained strong over the first six months. In Cameco, a strong balance sheet helps to underpin our Double U strategy.

Going forward, our contract portfolio will continue to provide us with steady predictable revenues that will support our pay as we go approach to grow. One sign of how our contracting strategy is working can be found in the quarter just passed. Our realized prices in U.S. dollars per pound were up 2%, this despite the spot market remaining flat.

Moving to the progress we have made in adopting IFRS. We have provided an initial report on expected changes to our opening balances as we reach the halfway point of the transition year. Cameco and other Canadian based companies will begin reporting under IFRS in the first quarter of 2011. As part of the process we are preparing parallel financial statements for 2010 under IFRS. This will enable us to provide direct quarterly comparisons next year.

I encourage you to read this quarter’s MD&A in which we disclosed for the first time the well advanced quantification of our January 1, 2010 balances under IFRS. Some of those balances reflect changes the value of assets such as property, plants and equipment to come into play under the new accounting rules. For example, unlike under Canadian GAAP in the certain circumstances IFRS will require the reversal of impairment charges on assets previously written-down.

Further communication on our progress and moving forward with IFRS will be provided in subsequent quarters. As well we intend to provide specific investor communications later this year, including a new section on our Web site. What I like you to remember about IFRS is that it represents the change in the language of accounting. It will not impact our growth strategy, financial resources or our operations.

Now back to you Gerry.

Gerry Grandey

Thank you, Kim. Well as you know chemical has an ambitious target to doubling uranium production from the existing asset base by 2018. In Q2 there were two significant signposts on this journey.

One, of course, is a signing of our first long-term sales agreement with the Chinese utility. The second is more immediate and can be found in our production success at our various worldwide operations. These operational achievements are laying the groundwork today for even greater production success tomorrow.

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