ii view: Hilton Food hails early year sales growth

A diversity of product offerings and an attractive forecast dividend yield. We assess prospects.

AGM trading update from 2 January to 22 May

ii round-up:

Food processing and packing company Hilton Food Group (LSE:HFG) today flagged early year trading in line with management estimates, with sales gaining compared to the same time last year.  

Higher sales from early January to now follow both increases in raw materials prices and a full year of ownership of its speciality smoked salmon Foppen business acquired in March 2022.

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Shares in the FTSE 250 company rose marginally in UK trading having come into this latest news up by just over a third year-to-date. That compares to a gain of close to a fifth for Mr Kipling and Ambrosia brand owner Premier Foods (LSE:PFD) and a gain of just over 2% for the FTSE index itself in 2023.

Hilton processes and packages foods from meat and fish to vegetarian meals using automated facilities including robotics across 13 markets in Europe and Asia Pacific.

A turnaround plan for its UK Seafood business remains on track to deliver on management’s cost saving and performance improvement targets, while European trading is benefiting from strong demand across its Scandinavian markets. 

Elsewhere, strong volume and revenue growth had been seen across all three of its facilities in Australia and at its plant in New Zealand. 

Accompanying management outlook comments pointed to expected medium-term growth given both recent acquisitions and potential wider geographic expansion with existing and new customers. 

First-half results to 16 July are scheduled for 7 September. 

ii view:

Headquartered in Huntington, Hilton employs over 7,000 people at processing plants run to supply partners such as supermarkets or in joint ventures in local markets. Asia Pacific generated its biggest slug of sales during 2022 at just over two-fifths, followed by the UK at just under a third and the Netherlands at just over a tenth. Previous acquisitions have included Fairfax Meadow, the UK’s biggest butcher to the hospitality industry and Dalco, a Dutch vegetarian and vegan company. 

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For investors, a required and ongoing turnaround at its underperforming UK seafood business cannot be forgotten. Food input prices remain elevated given higher energy costs across areas like farming and fishing, a cost-of-living crisis for consumers globally is pressuring volumes generally, while execution risks such as a previous fire at its Belgium plant remain a constant. 

More favourably, a new pending CEO may inject renewed vigour back into the company’s strategy. Food arguably provides some defensiveness as consumers must eat no matter what the economic backdrop, while diversity in both its product offering and geographical region exist.  

On balance, and while room for caution persists following two profit warnings last year, the business has clearly worked hard at fixing areas that needed attention. That's reflected in an improving share price and a reasonable dividend.

Positives: 

• Geographical diversity
• Attractive dividend yield (not guaranteed)

Negatives:

• Uncertain economic outlook
• Elevated costs

The average rating of stock market analysts:

Buy