BUSINESS
02/10/2012 07:08 EST | Updated 04/11/2012 05:12 EDT

Cameco fourth-quarter profits rise 29 per cent, capping off challenging year

Uranium giant Cameco Corp. said Friday its profits for the last three months of 2011 rose by 29 per cent, capping off what it described as a difficult year for the nuclear power industry.

The disaster at Japan's Fukushima Daiichi nuclear power plant nearly a year ago continues to cast uncertainty on global uranium demand, and Cameco said it expects to see up to a five per cent drop in revenue this year compared to 2011.

Despite the fallout from that disaster, the Saskatoon-based miner (TSX:CCO) reported net income of $265 million during the fourth quarter, up from $206 million a year earlier.

That amounted to 67 cents per share, beating the average analyst estimate of 42 cents per share, according to Thomson Reuters, and topping the 52 cents per share it earned a year earlier.

Cameco's quarterly revenue jumped 45 per cent to $977 million from $673 million.

On a conference call with analysts, Cameco CEO Tim Gitzel called 2011 " a year of global economic, political and environmental challenges."

"In addition, the nuclear industry has felt the effects of the events in Japan in the way of new build slowdowns and lower uranium prices," he said.

"But it was also a year of record performance for Cameco. For us, it has been business as usual and in some ways even a little better than usual."

Cameco said its uranium business benefited from higher prices and an increase in sales volumes, which was offset by lower earnings from Cameco's nuclear power business in Ontario.

In March 2011, an earthquake and tsunami caused the Fukushima Daiichi plant's cooling systems to fail and radioactive material to be released. The incident prompted Germany, which represents five per cent of global nuclear generation capacity, to abandon that source of power and other countries to slow their expansion plans.

Japan itself, which represents 12 per cent of worldwide nuclear generating capacity, only has three reactors operating, and it's unclear what the future holds for its fleet of reactors.

For 2012, Cameco expects consolidated revenue to be zero to five per cent lower than it was in 2011 due to lower sales volumes in the fuel services business and lower uranium prices. That should be partially offset by higher volumes in its electricity business.

While the Japan crisis reduced demand for new nuclear power plants in the near-term, Cameco has said it is sticking to its target to double uranium production to 40 million pounds by 2018.

"It's important to pursue this goal now so that we're ready when the market begins to demand further supply and the market fundamentals indicate that it will," said Gitzel.

"Energy demand continues to grow around the world and countries are taking a diversified approach to energy growth, with an emphasis on energy security and clean energy, which means that nuclear continues to be a key component of the energy mix."

Cameco is one of the world's largest uranium producers. It has mines, mills and conversion plants in Canada, the United States and abroad and produces fuel that runs nuclear power plants around the world.

The company is also a partner in the Bruce Power generating station in southwestern Ontario, the biggest nuclear power plant in North America.

Last summer it launched a hostile takeover bid for junior uranium developer Hathor Exploration Ltd. but the bid was spurned and Hathor eventually struck a friendly deal with global miner Rio Tinto.

The asset both Cameco and Rio Tinto wanted was Hathor's Roughrider uranium deposit in northern Saskatchewan.

Cameco shares dropped eight cents to $23.28 in mid-day trading on the Toronto Stock Exchange.