Centrus Energy (NYSE:LEU) Corp. (NYSE American:LEU), a key player in the nuclear fuel sector, announced today that it has received notification from its primary low enriched uranium (LEU) supplier, TENEX, Joint Stock Company, of a recent decree by the Russian government.
The decree, effective from November 14, 2024, revokes TENEX's general license to export LEU to the United States or any U.S.-registered entities until December 31, 2025.
This development requires TENEX to secure specific export licenses from Russian authorities for each LEU shipment due to Centrus. While TENEX has communicated its intent to obtain these licenses promptly to fulfill its delivery commitments, there is no guarantee that the Russian government will grant them or do so in a timely fashion.
The inability of TENEX to obtain the necessary export licenses may significantly impact Centrus' ability to meet its delivery obligations to its customers. This situation could lead to a material adverse effect on Centrus' business operations and its competitive standing in the industry.
Centrus is actively engaging with its customers to address potential disruptions to pending orders and is exploring options to mitigate any negative consequences. The company has made it clear that the situation with TENEX may pose risks to its future performance.
In addition, Centrus reported that on November 5, 2024, an amendment was made to the High-Assay, Low-Enriched Uranium (HALEU) Demonstration Cascade Completion and HALEU Production contract. This amendment extends Phase 2 of the contract until June 30, 2025, and includes an additional $24 million in funding.
The full details of the amendment will be included in the next Annual Report on Form 10-K that Centrus will file with the Securities and Exchange Commission. This report is based on a press release statement.
In other recent news, Centrus Energy has been making significant strides in its financial and operational development. The company recently secured an extension to its contract with the U.S. Department of Energy, extending the performance period until June 30, 2025, and receiving approximately $24 million in additional funding. This extension allows Centrus to continue its work on the High-Assay, Low-Enriched Uranium (HALEU) project.
On the financial front, Centrus Energy priced a private offering of $350 million in 2.25% Convertible Senior Notes due 2030, expecting net proceeds to be approximately $337.9 million. This figure could increase to $388.7 million if the additional notes are fully purchased. In terms of earnings, the company reported a Q3 2024 revenue of $57.7 million and a gross profit of $8.9 million, despite a net loss of $5 million.
Centrus Energy also secured a waiver from the U.S. Department of Energy, allowing the importation of low enriched uranium from Russia for processing and reexport to its foreign customers in 2025. However, decisions on deliveries scheduled for 2026 and 2027 have been deferred.
These recent developments underscore the company's strategic initiatives, which include restoring U.S. uranium enrichment capabilities, optimizing its cost structure, and focusing on growth, especially the expansion of its Piketon, Ohio facility.
Analysts from various firms have noted the company's current High-Assay Low-Enriched Uranium contract is due to expire in November 2024, with an unclear extension timeline.
Despite this uncertainty, Centrus Energy remains committed to its growth strategy and is well-positioned to secure a share of the $3.4 billion allocated by Congress for domestic nuclear fuel production.
InvestingPro Insights
Centrus Energy Corp.'s recent challenges with its Russian supplier and the evolving regulatory landscape are reflected in its recent market performance. According to InvestingPro data, the company has experienced a significant 23.4% drop in its stock price over the past week, and a 28.84% decline over the last month. These short-term setbacks, however, are set against a backdrop of strong longer-term performance, with a 50.53% price return over the past six months and a 33.59% return over the last year.
Despite the current geopolitical hurdles, Centrus Energy's financials show resilience. The company reported revenue of $394 million in the last twelve months as of Q3 2024, with a healthy revenue growth of 14.94% over the same period. Moreover, Centrus maintains a strong profitability profile, with a gross profit margin of 25.25% and an operating income margin of 19.75%.
InvestingPro Tips highlight that Centrus Energy operates with a moderate level of debt and its liquid assets exceed short-term obligations, which could provide some financial flexibility as it navigates the current challenges. Additionally, analysts predict the company will remain profitable this year, which aligns with the reported strong financial metrics.
For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips for Centrus Energy, providing deeper insights into the company's financial health and market position.
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