Paladin chief commits to the future, but what of the company’s?

Uranium producer and explorer Paladin Energy (ASX: PDN) has extended chief executive’s John Borschoff’s tenure by a further year until 31 December 2014. There’s an option for the agreement to be extended a further two years depending on performance. Executive salaries across the company have been reduced or frozen recently as it battles incredibly tough market conditions.

The company has also been in investors’ sights due to consistently disappointing past performance. In fact fellow Fool Tim McArthur highlighted in this excellent article how the Australian Shareholders Association (ASA) identified Paladin chairman Rick Crabb as under pressure himself. The ASA pointed to US$1.3 billion of accumulated losses over the past 19 years and no dividend payment since 1994.

The share price has been in freefall as the company faced a perfect storm of tumbling uranium prices, substantial asset impairments and a global inclination to move away from nuclear as a power source. In fact the company’s recent problems can be traced directly back to the earthquake and subsequent Fukushima nuclear crisis that struck Japan in March 2011.

The company posted a full-year loss of US$474 million in August and has embarked on a significant cost-cutting plan to try and save $60 million over two years. It continues to carry significant balance sheet debt and needs to see a uranium price recovery sooner rather than later.

Foolish takeaway

Persistent uranium price weakening represents a threat — not just to companies like Paladin but to worldwide production of uranium in general. The nuclear economies have taken a hit post-Fukushima as nation-states reconsider the strengths and weaknesses of nuclear power. If the uranium price fall proves a long-term trend rather than short-term reactio,n companies like Paladin face some gale-force headwinds.

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Motley Fool contributor Tom Richardson does not own shares in any of the companies mentioned in this article. 

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