PARIS—Anglo-French Channel tunnel operator Eurotunnel said on Tuesday it had finally turned the corner with its first ever profit last year, having freed itself from the shackles of high debt costs.
"The year 2007 proves that the new Eurotunnel group has broken with its past," the company said in a statement.
The company, which completed a thorough restructuring of its debt, made a pro forma net profit of 1 million euros (794,000 pounds) for the 12 months to December 31, 2007, excluding a 3.32 billion euro exceptional profit thanks to its capital overhaul.
The group's stock was up five percent at 11.86 euros at 8:26 a.m. British time, after a seven per cent decline so far this year.
Eurotunnel remained mired in crisis talks with its creditors until last year. It had built up debts to unmanageable levels, exacerbated by lower-than-expected traffic and revenues.
Part of the problem was that when it dug the tunnel in the late 1980s and early 1990s, it could not foresee the ruthless competition it would face from low-cost airlines some years later while the lack of a high-speed rail link in Britain capped passenger streams.
"Now that we finally have the high-speed link in Britain, we are getting the passenger numbers we should have had 15 years ago," chairman and chief executive Jacques Gounon told reporters.
He said traffic in the first quarter had been very good but he declined to give much detail before April 15, when train operator Eurostar will publish its results.
Eurotunnel said it had seen solid trading in the first three months of 2008 with sales up 15 percent at constant exchange rates at 187.6 million euros.
"The exceptional level of activity in the first quarter of 2008 confirms our rapid progression," it said in a statement.
Earnings before interest, tax, depreciation and amortisation (EBITDA) reached 439 million euros, up 12 per cent year-on-year and 50 million euros more than expected by the market, it said.
Gounon said the company could beat its 2010 EBITDA forecast of 500.5 million euros. "The first quarter gives me a lot of confidence that we can beat our forecast for 2010," he said.
In February, Eurotunnel announced an early repayment of some of its debt and issued 800 million euros in subordinated deferred equity securities underwritten by Goldman Sachs.
In the end, an infrastructure fund of Goldman obtained most of the paper by investing some 600 million euros which would give the U.S. investment bank a stake of some 13 per cent in Eurotunnel in 2011, unless it sells earlier.
Gounon said he could unveil details of a second stage in the capital increase before the annual general meeting of June, and added he hoped other infrastructure funds would invest in the firm. He confirmed the company planned to pay a dividend for 2008 next year.
Gounon said Eurotunnel was now buying 90 per cent of its power in France, against 50 percent earlier, because of more advantageous prices.
The original Eurotunnel company was founded in 1986 and started operating the tunnel in 1994. As part of a debt restructuring package approved by the Paris commercial court in 2007, a new Groupe Eurotunnel (GET) was created.
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