- Cost-of-living crisis pressuring volumes
- House broker downgrades 2022 profits by 23%
- Claims ‘well-placed within a growing global market’
Shares in Hilton Food (HFG) plunged 31% to 665p after the meat, seafood and vegetarian products packer warned profits for the year will be below expectations as cash-strapped consumers feel the pinch from the cost-of-living crisis.
The international protein producer explained volumes are coming under pressure across its markets and also blamed rising interest rates and start-up costs for the earnings alert.
UNDER PRESSURE
While the geographically diversified group continues to grow volumes internationally, Hilton Food has ‘not been immune from the impact of macroeconomic headwinds’.
Volumes are coming under pressure with ‘the cost of living increasing and consumers becoming ever more cost-conscious. In our Seafood business these trends have been exacerbated with world events leading to unprecedented raw material price increases’, warned the company.
‘Given these factors, and combined with the impact of start-up costs and rising interest rates, the board now anticipates that profitability for the year will be below expectations’, bemoaned the FTSE 250 firm.
23% PBT DOWNGRADE
Shore Capital slashed its year-to-December 2022 pre-tax profit forecast by 23% to £62 million on today’s news, implying Hilton Food will serve up a disappointing decline from 2021’s £67.2 million taxable profits haul.
The house broker also downgraded its 2023 and 2024 estimates, though ‘at a more modest level reflecting management confidence in both cost recovery and the temporary nature of some headwinds’.
Shore Capital was also at pains to highlight the diversified nature of Hilton Food’s business: ‘Short term challenges notwithstanding, we see Hilton as a high-quality medium to long term growth business, with opportunities across geographies, proteins and a range of customers.’
The damaging warning accompanied mixed results for the half to 17 July 2022 from Hilton Food. While the company delivered 20.4% growth in revenues to £2 billion, underpinned by recent acquisitions and raw material cost recovery, pre-tax profits softened 3.9% to £34.4 million as the indebted company’s interest bill grew year-on-year.
Hilton Food also cut the interim dividend by 13.4% to 7.1p.
‘In the current macroeconomic environment, Hilton has not been immune from the impact of heightened inflation,’ conceded CEO Philip Heffer.
‘While we remain watchful of any near-term changes in consumer sentiment, we believe that our international scale, strong customer relationships, and diversified protein offer leaves us well-placed within a growing global market.’
THE EXPERT’S VIEW
Russ Mould, investment director at AJ Bell, commented: ‘Hilton Food is suffering from the cost-of-living crisis as consumers are watching every penny. That means higher prices for meat and seafood are becoming too much for many people to stomach, feeding into lower sales volumes for Hilton.
‘It has joined the gang of companies issuing profit warnings, adding up to a barrage of bleak news for investors to digest.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Steven Frazer) own shares in AJ Bell.
