UPDATE 1-Eurotunnel shares sink as profits disappoint

Mon Jul 23, 2012 4:41am EDT

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PARIS, July 23 (Reuters) - Eurotunnel reported flat first-half net profit of 5 million euros on Monday but the figure missed analyst expectations as the company struggled with rising operating costs, causing the stock to fall as much as 7 percent.

Eurotunnel is betting that increased traffic from the Olympic games in London and relatively strong growth from the British Queen's jubilee celebration in June will help the company lift full-year profits and combat the continent-wide economic slowdown.

The company said that full year results would be "strong," without providing further detail.

But analysts were unimpressed with the first-half profit figures, noting that the company struggled to control costs and that operating profit in particular disappointed.

Earnings before interest, tax, depreciation and amortization (EBITDA) rose 3 percent to 205 million euros for the half. Revenues for the period also rose 14 percent to 473 million euros.

"Business was good but profitability is a bit lacking," said Gregory Thibailt, an analyst at Natixis, adding that Ebitda had missed expectations.

Eurotunnel shares were down 6.5 percent at 0817 GMT, lagging a 1.6 percent drop in France's benchmark CAC40 index. Eurotunnel shares are up 19 percent so far this year.

Eurotunnel revenue rose on the back of higher traffic, in particular stronger truck traffic, as well as higher tariffs. The company also likely benefited from the bankruptcy of Channel sea line, SeaFrance.

However, the group's operating costs rose 20 percent, due to costs associated with Europorte, its rail freight business.

"The results are well below analyst expectations. The group still seems to be struggling with how to manage cost," said a trader who declined to be named.

(Reporting by Nina Sovich and Cyril Altmeyer; Editing by Christian Plumb)

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