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Urenco records first-half net loss, qualifies Brexit impact

Urenco has today reported a net loss of €8.5 million ($9.6 million) as a result of adverse exchange rate movements and significant weakening of pound sterling in its financial results for the half year ending 30 June 2016. The net loss compares with a net gain in the same period of 2015 of €166 million.

But the uranium enrichment and nuclear fuel cycle services provider said its financial results overall "reflect strong operational performance supported by a long established order book". Revenues were broadly in line with H1 2015 at €589.2 million and its order book extends to 2030 with a value of about €15.8 billion.

Commenting on the half-year results, Thomas Haeberle, chief executive of Urenco Group, said: "Urenco has delivered a strong operating performance in the first half of 2016 utilising the enrichment capacity that has been built over the past decade. Whilst underlying operational performance remained robust, currency movements, especially weakening of pound sterling had a significant adverse impact on our net result."

Uncertainty of Brexit

There has been no immediate impact on the group's day-to-day operations as a consequence of the UK EU referendum result, Urenco said. But 'Brexit' "has created increased political and economic uncertainty", it added.

"It is too early to assess the long-term impact of the UK EU exit on global economic conditions, any implications on the uranium enrichment market and our three European based enrichment facilities," Urenco said. "Having just completed the refinancing of our €750 million medium-term revolving credit facility, we do not anticipate needing to access the debt markets in the near future. Given the backdrop of increased financial market uncertainty this leaves us in a strong funding position."

It added that further weakening of sterling against the euro and the US dollar, before hedging, is "moderately favourable" to the group in cash flow terms as it sells in euros and US dollars and has in part a sterling cost base.

"We will continue to monitor and respond to market conditions created by the UK EU referendum result to reduce any potential impacts on our operations, customers and employees," it said.

Global market

Haeberle said the global enrichment market "remains challenging" - with high levels of oversupply and inventory, resulting in continued pricing pressures - which Urenco expects to continue for the foreseeable future.

He added that most of the capital investment in Urenco's major projects - capacity expansion in New Mexico and construction of the Capenhurst Tails Management Facility (TMF) deconversion plant - has already been incurred.

"Our focus remains on efficiency and maximising future opportunities and delivering against our long established order book," he said.

The group's "commitment to responsible uranium stewardship is evidenced by our investment in the TMF at our UK site," he said, adding that the TMF is expected to start commercial operations next year.

Financial results

Revenue for the six months to 30 June 2016 was €589.2 million - up from €586.6 million - reflecting slightly lower separative work unit (SWU) sales offset by higher uranium related sales. Overall, the phasing of revenue between the first half and second half of 2016 "is expected to show seasonality broadly similar to that in prior years, with a larger proportion in the second half".

Earnings before interest, taxes, depreciation, and amortization (EBITDA) for the first half of this year decreased by about 4% to €321.8 million year on year. This was due to a "change in the mix" between SWU sales and lower margin uranium related sales, and an increase in provisions associated with the operational optimisation of the group's facilities, to produce higher volumes of low assay feed.

Net finance costs were €175.2 million, compared to net finance income in the same period of 2015 of €6.6 million. The most significant drivers of this movement, Urenco said, are the financing charges of €83.6 million which "arise on the retranslation of certain unhedged loan balances in a period of significant exchange rate volatility". In addition, losses associated with ineffective cash flow hedges were incurred of €15.0 million.

There was a tax credit of €4.4 million compared to a tax charge in the previous first-half year of €33.5 million. The tax credit predominately reflects the net loss in the period and the impact of foreign exchange non-taxable gains and non-deductible losses.

The group invested €207.0 million in the first six months, down from €280.6 million in H1 2015, of which around 60% was associated with the TMF in the UK, and the remainder spread across Urenco's enrichment facilities.

Cash generated from operating activities was €452.0 million, up from €423.9 million, reflecting "broadly flat revenue and favourable movements in working capital". Net cash flow from operating activities was €383.4 million compared with €340.4 million in H1 2015.

The Urenco Group operates uranium enrichment plants in Germany, the Netherlands, the USA and the UK. Headquartered in Buckinghamshire and registered in the UK, it is one-third owned by the UK government, one-third by the Dutch government and the rest by German utilities EOn and RWE, with one-sixth each.

 ©2016 World Nuclear Association. First published at