ii view: Hilton Foods confident about 2024 results

Third-quarter trading update to 19 October

Chief executive Steve Murrells said:

"This has been a further period of progress for Hilton Foods. The strength of our quality products has continued to underpin our customer relationships as we target further international growth.

"In the final quarter of the year, we remain confident in delivering our full year in line with our expectations and I would like to thank all our teams around the world, who continue to deliver for our customer partners."

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ii round-up:

Food processing and packaging provider Hilton Food Group (LSE:HFG) today flagged trading that matched management expectations, with a strong financial position enabling investment in growth opportunities.

Strong first-half trading continued into the third quarter to mid-October and persisted across all three of Hilton’s geographical regions. 

Shares in the FTSE 250 company rose 0.5% in UK trading having come into this latest news up 18% year-to-date. That’s similar to food and beverage ingredient maker Tate & Lyle (LSE:TATE) and ahead of a near 5% gain for the FTSE 250 index in 2024.  

Hilton processes and packages foods from meat and fish to vegetarian meals using automated facilities and robotics across various markets in Europe and Asia Pacific, and for customers including Tesco (LSE:TSCO), Koninklijke Ahold Delhaize NV (EURONEXT:AD), and Woolworths in Australia. 

The group’s previously troubled UK & Irish seafoods business performed in line with management hopes, while core meat volumes and revenue continued to grow. 

In Europe, a recovery plan for the previously acquired Dutch vegetarian and vegan business, Dalco, remains ongoing, with core meats and convenience meals performing strongly.

Finally, in the Asia Pacific region, there's been a strong performance despite raw material price falls hindering revenues.  

A full-year trading update is scheduled for 9 January. 

ii view:

Established in the UK to package meat, Hilton has subsequently grown by establishing plants overseas, entering joint ventures and expanding its product range into fish and vegetables. Most of its packing plants are operated on a dedicated basis for customers. In 2023, Asia Pacific and largely Australia and New Zealand generated the biggest slug of revenue at 40%, followed by the UK at just over a third, the Netherlands 12%, and other parts of Europe such as Sweden and Ireland the balance. 

For investors, heightened costs such as those for energy and bank borrowings warrant consideration. Challenges for the vegetarian/vegan business persist. Execution risks such as the fire at its Belgium plant are a constant, while currency moves can affect reported numbers given a sizeable portion of sales are made overseas. 

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On the upside, diversity in both product offering and geographical region exist. Last year marked a 16th consecutive annual increase in product volumes. Potential major new customers such as Walmart Inc (NYSE:WMT) in Canada are being courted, while food arguably provides some defensiveness as consumers must eat no matter what the economic backdrop.

For now, and despite ongoing risks, a consensus analyst fair value estimate above £10.70 a share appears to offer grounds for continued longer-term optimism. 

Positives: 

• Geographical diversity
• Attractive dividend yield (not guaranteed)

Negatives:

• Uncertain economic outlook
• Elevated costs

The average rating of stock market analysts:

Buy