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Economic woes hit Hilton profits

By Carina Perkins , 13-Sep-2012

Meat processor Hilton Food Group has reported flat profits for the first half of 2012, with strong sales offset by consumer downtrading and adverse exchange rates.

Sales volumes increased by 10.3% in the first 28 weeks to July 2012, but the company said this was offset in value terms by the “continuing impact of higher raw material meat prices on consumer demand”, with consumers trading down to cheaper cuts.

Higher meat prices helped drive an 9.4% increase in turnover, which rose from £496.2m to £543.0m, but adverse exchange rates and the aforementioned downtrading meant operating profit increased by just 0.5% to £13.3m in the 28 weeks to 2012, up £0.1m from the £13.2m earned in the same period last year.

The company said that an increase in the average euro to sterling exchange rate, from 1.15 last year to 1.22 in the first half of 2012, along with reductions in the relative values of the Swedish krona, Danish krone and the Polish zloty, “negatively impacted operating profit growth by £0.6m”.

Robert Watson, chief executive of Hilton Food Group, said he was pleased with the company’s performance. “I am pleased to report that, despite the adverse effect of exchange rate movements, an economic environment across Europe that has remained both challenging and uncertain, and continued high raw material meat prices, our performance over the first 28 weeks of 2012 has remained steady. We have achieved further growth in volumes and turnover, while continuing to actively support our customers’ growth in very competitive markets,” he said.

Future challenges

In its interim report, the company recognised that it was dependent on a small number of powerful customers and had little control over factors affecting consumer spending power. Additionally, it pointed out that future success would be dependent on securing a stable meat supply base, and that sales could be hit by disease outbreaks and feed contamination.

However, it said it was confident that, while it might not grow in 2012, it would at least match the profits made in 2011.

“Hilton has continued to deliver volume and turnover growth against an uncertain economic backdrop. In such an environment, consumers’ drive for value is likely to continue, but Hilton, with modern, well-invested facilities, a broad geographic customer spread and flexible procurement capabilities, continues to remain well-positioned to cope with these challenges,” said the report.

“Against this challenging background, with pressures on consumer expenditure, high meat prices and consumer downtrading expected to continue, the group is likely to deliver levels of profitability in 2012 similar to those achieved in 2011.”

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