Hilton advances as cheap meat loses appeal

by Michael Kavanagh - 15/09/2010

"A switch among recession-hit consumers towards cheaper cuts of meat has been partly reversed according to Hilton Food Group, Europe’s biggest packer of red meat and a supplier to some of Europe’s leading supermarket groups."

The company, whose customers include Tesco and Ahold, said trading remained strong across markets in western and central Europe, amid signs that consumers had moderated their belt-tightening.

EDITOR’S CHOICE
Trade group asks for sweetener name change - Sep-15.Banana glut dents profits at Fyffes - Sep-03.Barilla sells German bakery chain - Aug-12.Battle over British Seafood intensifies - Jul-02.Deloitte raises concerns over British Seafood - Mar-04.British Seafood cracks as credit is withdrawn - Feb-24..Robert Watson, chief executive, said: “The effect of consumers trading down in relation to their meat purchases to mince and less expensive meat cuts, which was a key trend over the previous year, was not a material feature over the first 28 weeks of 2010.”

Instead, there had been “evidence of a degree of uptrading by consumers over the period in some countries”.

A resurgence in bacon, sausage and gammon sales in Ireland helped boost Hilton’s first-half turnover, which rose from £427m to £450m.

But an 11 per cent growth in volumes of meats sold was not matched by revenue increases, as the company continued its expansion into central Europe and the Baltic states, where prices are lower than in more mature European economies.

The Huntingdon-based company, whose origin lies in moves by Tesco to centralise its UK meat supply systems in the mid-1990s, now operates state-of-the-art meat packing facilities in the UK, Sweden, Ireland and Poland. It is investing in a new facility scheduled to open in Denmark next year to supply Coop Danmark, which boasts a 38 per cent share of the country’s grocery sales.

Pre-tax profits rose from £10.4m to £11.5m as strong cash flow reduced net borrowings from £21m to £16m, though borrowings are expected to rise as investment in the Danish plant continues.

An interim dividend of 2.8p (2.6p) is payable from earnings per share of 11.8p (10.6p). Last year’s full pay-out was 9.36p. Shares in Hilton rose 2½p to 285p.

● FT Comment

Analysts’ opinion of Hilton is fairly uniform with most holding it as a “buy”, but differences remain. The shares, up 52 per cent on the year, trade on a full-year price/earnings ratio of 13 times and enjoy a prospective dividend yield of nearly 4 per cent as it invests in diversification into new territories. What’s not to like? Panmure Gordon was among those maintaining a “buy” recommendation on Tuesday, predicting strong earnings growth in the next two years. Shore Capital, though, switched from “buy” to “hold” on unchanged forecasts, on the basis that the stock price was “up with events”. In spite of some long-term concerns on over-reliance on a few customers, Hilton continues to deliver the bacon.

More Details: http://www.ft.com/cms/s/0/c5195642-c019-11df-b77d-00144feab49a.html