Release Date: September 04, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hilton Food Group PLC (FRA:FAG, Financial) reported strong volume growth of 3.2% and revenue of GBP1.94 billion, up 1% on a constant currency basis for the first half of 2024.
- Operating profit increased by 23% to GBP46.9 million, driven by strong performance in the UK seafood business and core meat categories.
- The company announced an interim dividend of 9.6p, an increase of 6.7% on the prior year, reflecting its progressive dividend policy.
- Hilton Food Group PLC (FRA:FAG) has secured a new global partnership deal with McDonald's for supplier auditing and product specification management, showcasing the value of its Foods Connected technology.
- The company has made significant progress in sustainability, saving 390 tonnes of plastic and eliminating 4 million cardboard cartons through packaging improvements.
Negative Points
- The vegan and vegetarian market remains challenging, with the company facing structural decline in this sector.
- Revenue in the APAC region was down 6.7% compared to the first half of last year, primarily due to significant deflation in beef and lamb prices.
- The company anticipates short-term dilution in return on capital employed (ROCE) as it invests in developing Hilton Foods Canada.
- The seafood business, while improving, still faces high inflation in whitefish prices, which could impact future volume growth.
- The company's balance sheet shows GBP137 million of net debt, although this is a slight reduction from the year-end position.
Q & A Highlights
Highlights from Hilton Food Group PLC (FRA:FAG) Earnings Call
Q: Can you comment on the outlook for consumer demand in the second half and any potential headwinds?
A: Steve Murrells, Group CEO: We expect a continuation of the positive trends seen in the first half, especially with the seasonal boost from Christmas. However, we recognize that we will be up against larger volumes in the second half.
Q: What are the key drivers behind the improvement in profitability in the seafood business?
A: Matt Osborne, CFO: The seafood business has benefited from stable demand and inflation in whitefish prices. Retailers are promoting seafood more, and we expect consumer demand to remain strong as prices stabilize.
Q: Can you provide more details on the Foods Connected contract with McDonald's?
A: Steve Murrells, Group CEO: The contract is significant for Foods Connected, focusing initially on meat specifications and expanding to fresh foods. This demonstrates the transferability of our tech outside our core business and supports our growth ambitions.
Q: What is the status of the insurance claim for the Belgium site, and what are your plans for the region?
A: Steve Murrells, Group CEO: We have completed the insurance claim and decided to continue servicing Belgium from our Dutch facility, which benefits from volume flows into our out-of-home business.
Q: How do you see the future of the vegan and vegetarian market, given its current structural decline?
A: Steve Murrells, Group CEO: The market is in structural decline, but we believe we can win by improving product quality and value. We aim to return to profitability by the end of 2025 through cost reductions and new business.
Q: Can you elaborate on the CapEx plans for the Walmart project in Canada?
A: Matt Osborne, CFO: We plan to spend around GBP10 million this year on ordering equipment. The majority of the spend will be split evenly over the next two years, focusing on building a state-of-the-art facility in Ontario.
Q: What are your priorities for CapEx, especially concerning labor costs?
A: Matt Osborne, CFO: We are focusing on automation to improve efficiency and yield. As labor becomes more expensive, investing in automation is crucial for maintaining our competitive edge.
Q: How has the product mix in the UK improved, and can these strategies be applied to other regions?
A: Steve Murrells, Group CEO: The UK has seen a significant trade-up into premium products, driven by Tesco's finest brand. We believe similar strategies can be successfully applied in Europe and Australia.
Q: What was the volume performance in UK seafood, and what are the future expectations?
A: Steve Murrells, Group CEO: UK seafood volumes were flat due to high salmon prices, but we expect an increase in the second half as prices stabilize. Whitefish prices remain high, impacting volume growth.
Q: What was the contribution to profits from the vegan/vegetarian segment in Europe?
A: Matt Osborne, CFO: The vegan/vegetarian segment made a low single-digit operating loss in the first half, slightly higher than last year. We have a plan to turn this around and aim for profitability by the end of 2025.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
