Net Earnings & Revenue

Our net earnings attributed to equity holders (net earnings) were $318 million ($0.81 per share diluted) compared to $253 million ($0.64 per share diluted) in 2012, mainly due to:

• the impact of a one-time $168 million write-down of our investment in the Kintyre project in 2012
• higher earnings from our fuel services business as a result of an increase in sales volumes and realized prices
• lower exploration expenditures due to decreased activity at our Kintyre project in Australia
• higher tax recoveries due to a decline in pre-tax earnings in Canada. See Income Taxes for details.

partially offset by:

• lower earnings from our electricity business due to lower generation, a lower average realized price and higher costs
• a $70 million write-down of our Talvivaara asset due to their weakened financial position and pending corporate restructuring
• higher losses on foreign exchange derivatives due to the weakening of the Canadian dollar

Three-year trend

Our net earnings normally trend with revenue, but, in recent years, have been significantly influenced by unusual items.

In 2012, our net earnings were $197 million lower than in 2011 primarily due to the write-down of our investment in the Kintyre project, and lower earnings from our uranium business as a result of lower realized prices and an increase in the cost of product sold, which was partially offset by higher earnings from our electricity business and lower taxes in that year.

Impairment charge on non-producing assets

During the fourth quarter of 2013, we recognized a $70 million impairment charge relating to our agreement with Talvivaara Mining Company Plc. to purchase uranium produced at the Sotkamo nickel-zinc mine in Finland. The impairment charge represents the full amount of our investment, which was used to cover construction costs, with the amount to be repaid through deliveries of uranium concentrate. The amount of the charge was determined as the excess of the carrying value over the fair value, less costs to sell. Due to Talvivaara’s weak financial position and application to the Finnish government to undergo a corporate restructuring, as an unsecured creditor, we determined the fair value less costs to sell to be nil, and as such, recognized an impairment charge for the full amount of the asset.

Non-IFRS measures

Adjusted net earnings

Adjusted net earnings is a measure that does not have a standardized meaning or a consistent basis of calculation under IFRS (non-IFRS measure). We use this measure as a more meaningful way to compare our financial performance from period to period. We believe that, in addition to conventional measures prepared in accordance with IFRS, certain investors use this information to evaluate our performance. Adjusted net earnings is our net earnings attributable to equity holders, adjusted to better reflect the underlying financial performance for the reporting period. The adjusted earnings measure reflects the matching of the net benefits of our hedging program with the inflows of foreign currencies in the applicable reporting period, and adjusted for impairment charges on non-producing properties, NUKEM inventory write-down, loss on exploration properties, and income taxes on adjustments.

Adjusted net earnings is non-standard supplemental information and should not be considered in isolation or as a substitute for financial information prepared according to accounting standards. Other companies may calculate this measure differently, so you may not be able to make a direct comparison to similar measures presented by other companies.

To facilitate a better understanding of these measures, the table below reconciles adjusted net earnings with our net earnings for the years ended 2013, 2012 and 2011, as reported in our financial statements.

The table below shows what contributed to the change in adjusted net earnings for 2013.

Three-year trend

Our adjusted net earnings declined from 2011 to 2012, but increased in 2013.

The 15% decrease from 2011 to 2012 resulted from:

• lower earnings from our uranium business due to lower realized prices and an increase in our unit costs
• higher charges for administration and exploration

partially offset by:

• higher earnings from our electricity business mainly due to lower costs and higher sales volumes
• lower income taxes

The 3% increase from 2012 to 2013 resulted from:

• addition of gross profit from NUKEM
• lower exploration costs due to a decrease in activity at our Kintyre project in Australia
• lower income taxes

partially offset by:

• lower earnings from our electricity business due to lower generation, a lower average realized price and higher costs

Revenue

The table below shows what contributed to the change in revenue this year.

See 2013 Financial results by segment for more detailed discussion.

Three-year trend

In 2012, revenue declined by 21% compared to 2011 mainly due to the exclusion of revenue from our interest in BPLP in 2012. For 2012, a revision was made to account for BPLP using equity accounting; however, the 2011 results have not been revised. Further contributing to the decline was a lower realized price for uranium, which was $1.46 per pound lower than the average realized price of $49.18 per pound in 2011.

In 2013, revenue increased by 29% compared to 2012 due to the addition of NUKEM, as well as a higher realized price for uranium.

Average realized prices

Outlook for 2014

We expect consolidated revenue to be up to 5% higher in 2014 due to an increase in realized prices in our uranium business.

In our uranium and fuel services segments, our customers choose when in the year to receive deliveries, so our quarterly delivery patterns and, therefore, our sales volumes and revenue, can vary significantly. We expect that uranium deliveries in the first quarter of 2014 will be slightly higher than the first quarter of 2013, with about 20% of the year’s deliveries scheduled for the first three months. We expect uranium deliveries for the balance of 2014 to be more heavily weighted (~60%) to the second half of the year. However, not all delivery notices have been received to date, which could alter the delivery pattern. Typically, we receive notices six months in advance of the requested delivery date.