15th Sep 2022 16:03
(Alliance News) - Hilton Food Group PLC on Thursday said annual profit is expected below forecasts, as it felt the pressure of rising costs and consumer belt tightening, but analysts at Shore Capital assured the firm remained a "medium to long term winner" in the UK consumer arena.
In the 28 weeks to July 17, the food packaging business said pretax profit declined by 9.7% year-on-year to GBP19.6 million from GBP21.7 million a year earlier.
Hilton Food's operating margin weakened to 2.0% from 2.3% due to raw material price inflation, while its total administrative expenses rose by 11% to GBP139.0 million from GBP123.4 million.
Chief Executive Philip Heffer admitted the company had "not been immune" from the impact of heightened inflation but nonetheless looked to the future with confidence.
"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," Heffer said.
Nonetheless, the company said expects full-year profit to be below expectations due to cost-of-living pressures on consumers, combined with New Zealand start-up costs and rising interest rates.
Hilton Foods did not specify these expectations, however.
Russ Mould, investment director at AJ Bell, said Hilton Foods was joining a "gang of companies" issuing profit warnings, which was adding to a "barrage of bleak news" for investors to digest.
"Hilton Foods 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," he said.
Analysts at Shore Capital remained confident in the longer-term outlook for Hilton Foods, despite lowering its full-year forecasts for the firm.
"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," it said.
"It will no doubt take time for investor confidence to fully return in our Hilton Food forecasts given the ongoing headwinds and lack of visibility in some areas of the future. However, we remain committed in our view that Hilton Foods will be a medium to long term winner in the UK consumer arena and beyond."
"We would take a very serious strategic view as to an opportunity to invest in an outstanding growth company that should flourish once external pressures [ease], which it is working through and mitigating," Shore Capital concluded.
Shares in Hilton Foods were down 28% at 675.00 pence on Thursday afternoon in London.
By Heather Rydings; [email protected]
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