Euro Disney Posts Its First Profit, $35. 3 Million for Its Third Quarter

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Euro Disney Posts Its First Profit ,
$35.3 Million for Its Third Quarter

By Brian Coleman


The Wall Street Journal
Page A9
(Copyright (c) 1995, Dow Jones & Company, Inc.)

Euro Disney SCA rode its new Space Mountain ride to its first-ever quarterly net profit , and long-suffering investors saw a healthy rebound in their shares.

Euro Disney said it earned 170 million francs ($35.3 million) in its third quarter ended June 30, compared with a year-earlier net loss of 546 million francs ($113.4 million). Euro Disney , which is 39% owned by Walt Disney Co. of the U.S., attributed the turnaround to its new marketing strategy for Disneyland Paris, the introduction of the popular Space Mountain ride, and last year's financial restructuring.

The news sent Euro Disney shares soaring 8%, to 17.45 francs from 16.10 francs, in Paris trading yesterday. That followed a 6% leap on Monday as expectations of a profit cheered investors.

The results mark the first time Euro Disney has been in the black since the theme park on the outskirts of Paris opened in April 1992. And some analysts are now predicting a modest profit for the fiscal year ending Sept. 30, although the company itself remains guarded about the possibility.

"We see a chance of a profit in [fiscal] 1995," a company spokesman said, adding that Euro Disney is now ahead of its schedule of breaking even in its next fiscal year. "But a quarter does not make a year."

Euro Disney Chairman Philippe Bourguignon added, "There remains much to be done."

But Mr. Bourguignon said the company's marketing efforts "have gained momentum over the past several months." He pointed in particular to the introduction of the "Space Mountain" ride that mimicks a trip to the moon.

Euro Disney also has slashed prices both at the gate and within the theme park in an attempt to boost attendance and shed its image of being overpriced. The company said these efforts led to "a substantial increase" in attendance and hotel occupancy and to a 17% rise in operating revenue, to 1.36 billion francs for the quarter.

The fiscal third quarter 's results also included a gain of 84 million francs from the repurchase of debt. The company bought back 9.4% of its outstanding convertible bond issue, a transaction that Euro Disney said retired 372 million francs of debt altogether.

Analyst David Klein of NatWest Selliers in Paris said he is so confident in Euro Disney 's turnaround that he expects the company to report a net profit of about 50 million francs for this fiscal year. "If they just close their eyes and let the thing run it will make a profit ," he predicted.

But credit for the company's positive results also goes to last summer's financial restructuring. At that time, the debt-ridden Euro Disney struck a deal with its banks and its parent company, Walt Disney, to suspend the Paris company's debt and royalty payments.

Mr. Klein concedes that because those payments will eventually resume, Euro Disney 's long-term success will require the construction of a second theme park and further property development.

Analyst Nigel Reed of Paribas Capital Markets in London has even greater concern about Euro Disney 's long-term prospects. While he, too, predicts a profit for the current fiscal year, he notes that the tremendous revenue gains are being compared with last year's disasterous third quarter . The revenue growth that contributed so much to the current results "is not likely to continue for long," he believes.
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