Increased Volumes Boost Cameco's Revenue

Gross profit margin declines due to higher product and service costs.
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Driven by increased volumes in the uranium, fuel services, electricity and gold businesses,

Cameco

(CCJ) - Get Report

revenue for third-quarter fiscal 2008 surged 7% to C$728.90 million from C$681.07 million a year ago, partially offset by lower selling prices in the uranium business.

However, Cameco's gross profit margin declined 1,389 basis points to 43.46% from 57.35%, due to a 41.9% increase in the cost of products and services sold. Similarly, operating profit margin contracted 990 basis points to 32.5% from 42.4%. Interest expenses augmented 52.9% to C$19.82 million from C$12.96 million, while the interest coverage ratio declined to 11.95 from 22.29.

Segment-wise, uranium revenue decreased 3.3% year over year to C$395.82 million, due to a decrease in the average realized selling price as a result of lower prices under market-related contracts, but partially offset by a 36.1% increase in the sales volume. Fuel services revenue ascended 27.4% to C$68.63 million from C$53.88 million, helped by a 44.0% rise in the average realized price, partially offset by a 15.9% decline in reported sales volumes.

Electricity revenue surged 11.5% to C$127.89 million from C$114.67 a year ago, while revenue from the gold business grew 38.1% to C$143.18 million from C$103.67 million, The realized price for gold increased to $860 per ounce from $680 per ounce a year earlier due to higher spot prices.

Third-quarter 2007 included a $94.18 million charge-related to stock option plan amendment. Subsequently, net income for third-quarter 2008 increased 48.5% to C$135.45 million or C$0.39 per share from C$91.23 million or C$0.25 per share in third-quarter 2007. Excluding one-time items, adjusted net earnings plummeted 46% to C$142.00 million or C$0.41 per share from $263.00 million or $0.70 per share in the prior year's quarter.

During third-quarter 2008, the company's cash and cash equivalents decreased 63.1% to C$148.98 million and net operating cash flow dropped 75.7% to C$109.36 million. Return on assets improved 25 basis points to 7.47% from 7.22% in third-quarter 2007. Similarly, return on equity expanded 30 basis points to 14.31% from 14.01%.

Shareholders' equity increased 19.1% to C$3.36 billion at the end of the quarter, while total debt mounted 81.7% to C$1.26 billion from C$694.16 million. Consequently, the debt-to-equity ratio deteriorated to 0.38 from 0.25. Currently, the company has a quick ratio of 0.50, which shows its inability to cover any short-term cash needs.

During the quarter, the company completed a 70% acquisition in the Kintyre uranium exploration project in Western Australia for $346.50 million. Furthermore, Cameco and

Golden Dory Resources

entered into an agreement to jointly explore the Burin uranium project on the southern Burin Peninsula of Newfoundland. Cameco also formed a strategic alliance with

Govi High Power Exploration

(GoviEx) and acquired an 11% interest in the company for $28.00 million. Recently, Cameco announced a quarterly dividend of C$0.06 per share, payable on Jan. 15, 2009.

Looking forward, Cameco reiterated its consolidated revenue outlook to grow by 10% to 15% over 2007 and anticipates capital expenditure to be C$534.00 million.

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