Yahoo Finance Cameco Corporation (NYSE:CCJ) Q1 2024 Earnings Call Transcript
Cameco Corporation (NYSE:CCJ) Q1 2024 Earnings Call Transcript April 30, 2024
Cameco Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Thank you for standing by. This is the conference operator. Welcome to the Cameco Corporation First Quarter 2024 Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. Following the introductory remarks, there will be an opportunity to ask questions. [Operator Instructions] I would now like to turn the conference over to Rachelle Girard, Vice President, Investor Relations. Please go ahead.
Rachelle Girard: Thank you, operator. Good morning, everyone. Welcome to Cameco's first quarter conference call. I would like to acknowledge that we are speaking from our corporate office, which is on Treaty 6 territory, the traditional territory of Cree people and the homeland of the Métis. With us today are Tim Gitzel, President and CEO, joining the call today from Washington, D.C.; Grant Isaac, Executive VP and CFO; Heidi Shockey, Senior VP and Deputy CFO; Brian Reilly, Senior VP and Chief Operating Officer; Sean Quinn, Senior VP, Chief Legal Officer and Corporate Secretary; and Dominic Kieran, Global Managing Director of Cameco UK Limited. I'm going to hand it over to Tim in just a moment to briefly discuss the momentum that continues to build behind nuclear energy and how the continued execution of our strategy and transition back to our Tier 1 cost structure has positioned us to benefit from the tailwinds.
After, we will open it up for your questions. Today's call will be approximately 1 hour, concluding at 9:00 a.m. Eastern Time. As always, our goal is to be open and transparent with our communications. However, we do want to respect everyone's time and conclude the call on time. Therefore, should we not have time to get to your questions during this call or if you have detailed questions about our quarterly financial results. We will be happy to follow up with you after the call. There are a few ways you can contact us with additional questions. You can reach out to the contacts provided in our news release. You can submit a question through the contact tab on our website or you can use the Ask a Question form at the bottom of the webcast screen, and we will be happy to follow up after this call.
If you join the conference call through our website event page, there are slides available, which will be displayed during the call. In addition, for your reference, our quarterly investor handout is available for download in a PDF file on our website at cameco.com. Today's 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 and 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 that actual results could differ materially. You should not place undue reliance on forward-looking statements. Actual results may differ materially from these forward-looking statements, and we do not undertake any obligation to update any forward-looking statements we make today, except as required by law.
Please refer to our most recent annual information form and MD&A for more information about the factors that could cause these different results and the assumptions we have made. With that, I will turn it over to Tim.
Tim Gitzel: Well, thank you, Rachelle, and good morning, everyone. We appreciate you taking the time to join today's call. As Rachelle mentioned, I'm joining the call remotely from Washington, D.C., where this afternoon, I'll be attending the Energy Transition Metals Summit hosted by the Northern Miner. In the days to come, we will also be meeting with some of the key policymakers here at D.C. to discuss current and future industry fundamentals. And importantly, we'll talk about how we're going to translate to significant government and public support with the expansion of nuclear power generation into meaningful actions that generate tangible results to the benefit of the entire planet. As Cameco and as an industry, we are ready to respond to the global need for carbon-free, reliable and secure nuclear energy for decades to come.
We've said it several times over the years and it's worth repeating. Our invitation to symposiums and high level discussions now taking place around the world is a testament to Cameco's deep understanding of how the nuclear fuel market works and acknowledgment of the strong relationships we've established over several decades of experience. Let me tie together a few key themes today before we get to your questions. First, nuclear is being recognized by governments, power suppliers and industrial power consumers as a carbon-free energy source that is key to Net Zero and energy security. On that basis, Cameco, along with our investments in Westinghouse and Global Laser Enrichment is key to the nuclear industry and therefore key to the path to Net Zero.
And within that broad positive demand context and in the face of uncertain supply, our strategy and experience provides us with unmatched leverage to add significant long-term value, while ensuring strong downside protection. And our results so far in 2024 remain on track for delivering that value and establishing that protection. So thinking back to this time last year, we were highlighting 18 months of growing momentum and interest in the nuclear space and in Cameco. And I can absolutely say that now 12 months later, the interest and positive outlook have only improved. I would even qualify that further and say it has improved significantly. First, it's improved based on the impact of the global emphasis on clean energy. We believe nuclear power is essential for the ongoing clean energy transition.
If the world is going to meet its Net Zero targets, we need carbon-free baseload and dispatchable power that can be located where it's needed and is always available and consistently reliable. I don't need to tell you that nuclear is one of, if not the only energy source that meets all of those requirements. And we don't just need a bit of it, we need a lot of it. From a sustainability and scientific perspective, both the international community and large power consuming industries are calling for a tripling of nuclear energy from where it is today. And if we are to follow that path, it means a very significant increase in the number of new builds on the horizon, translating into significant value across the fuel cycle and reactor life cycle.
Next, the outlook has improved based on today's focus on secure energy. Nations must ensure that their critical energy infrastructure and fuel supplies are not excessively reliant on risky jurisdictions, unreliable partners and unstable actors and again, nuclear checks those boxes. Fuel supplies and services for nuclear energy are sourced from multiple safe jurisdictions and suppliers in the Western world, and the nature of the fuel itself allows for long-term inventories and storage. So not only can you keep years of reloads behind a reactor, but that reactor can provide carbon-free and reliable energy for months without refueling, giving governments and utilities a runway to adapt should circumstances change. And finally, keeping both clean energy and energy security in mind, the outlook is more positive in the context of the current debate around AI, data centers and the considerable energy needs that are coming with the rapid evolution of technology.
I recently read that using generative AI to provide search results in the same way we use Google requires a ten-fold increase in power requirements, 10 times. And gone are the days of rolling out new technology without worrying about future potential runway environmental impacts. Companies driving the technology forward are doing so while keeping carbon footprint and 24/7 reliability top of mind. And again, nuclear is the clear winner. You don't even have to take my word for it. We're seeing both industrial power users and tech sector experts voicing support for nuclear energy. With some now taking action and signing agreements to ensure their facilities can access zero carbon and reliable nuclear energy now and into the future. Clean and secure electrons are on the critical path for the generative AI development, putting nuclear and chemical on the critical path to the digital revolution and strategic reindustrialization.
So grouping all that together, it is clear that we need to deploy zero carbon, global and secure energy production to move the world forward and the world is now acknowledging the benefits of nuclear. I attended the inaugural Nuclear Energy Summit a couple of months ago, which took place in Brussels with Presidents and Prime Ministers from 32 countries. The goal was to join forces to back supportive measures in areas, including financing, regulatory cooperation, technological innovation and workforce training, enabling the expansion of nuclear power to help boost energy security, address climate change and meet our collective Net Zero targets. Because, as I said, without nuclear, there is no Net Zero. Without nuclear, there is no global and secure energy.
And without nuclear, the next generation of energy-intensive technologies could result in increasingly detrimental environmental impact. Nuclear is key to addressing those challenges, and that's where Cameco comes in, playing a key role in current and future power generation. We believe that at Cameco, we have the right strategy, the right people and the right assets to deliver long-term value along with our investments in Westinghouse and Global Laser Enrichment, we expect to benefit significantly from the tailwinds. From the front end of the fuel cycle and through the reactor life cycle, from fuel supply to plant services to new build and advanced reactors. We've never been in a better position with licensed and permitted brownfield assets in safe, sovereign jurisdictions and the capacity to grow to meet our commitments.
So the future looks bright. Turning briefly to the quarter. Our first quarter performance was as expected, highlighting the benefits of aligning our operational, marketing and financially focused strategy in a market where we are seeing that persistent positive momentum for nuclear energy like never before. The run rate at our operations is on pace to meet our annual production guidance. Operationally, our production results in the first quarter were strong and on track with our 2024 plans with production rates and total production costs in our Uranium segment continuing to reflect the transition back to our Tier 1 cost structure. In fact, we didn't change our 2024 operational or financial guidance metrics in any of our business segments after the first quarter.
However, we can't overlook the geopolitical events that have been amplifying global supply chain and transportation risks. Those risks have continued to have a significant impact on nuclear fuel procurement strategies and the fuel cycle, especially in terms of transportation, which is not getting any easier. It's an elevated risk that we have a team focused on each and every day. And as it evolves, our stakeholders can be confident that, as always, Cameco will be transparent with our related disclosure. In the market, we continue to be selective in committing our unencumbered Tier 1 in-ground uranium inventory and UF6 conversion capacity. We don't focus on the small irrelevant spot market. But on high quality term demand where the majority of uranium fuel and services are secured.
In Q1, we successfully layered in additional long-term contracts increasing our annual commitments to an average of about 28 million pounds per year from 2024 through 2028. Every contract we have reflects the sentiment and dynamics in the market at the time it is negotiated. So in today's market, that allows us to take those price peaks and carry them into the future, creating value for years to come while maintaining significant downside protection for when the cycle turns. From a risk-managed financial perspective, our strong balance sheet and the expectation of strong cash flow generation tied to our contracting strategy guides our conservative capital allocation priorities. In 2024, that includes focused debt reduction and prudent refinancing plans.
As for our Westinghouse segment, results for the first quarter were as we expected, as guided in Q4. And we continue to expect our share of adjusted EBITDA from Westinghouse this year to be between $445 million and $510 million. It was and is a great investment where the prospects continue to improve and where we still anticipate EBITDA growth at a compound annual growth rate of 6% to 10% over the next five years. So I'll stop there. Thank you for your interest today, and we are happy to take your questions.
See also
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