Hilton poised for more growth after Danish deal
The forecast came as the UK-based meat packers unveiled plans to spend €22m on a new processing plant after signing a long-term deal to supply packaged meat to retailer Coop Danmark. The company is the country’s leading retailer with a market share of 38 per cent.
Analyst Nicholas Ceron of Numis Securities Ltd said he expected sales from the venture to reach around £90m by the end of 2012. The move also increased the likelihood of further geographical expansion since the Danish outfit is part of a wider group with stores throughout Scandinavia, he added.
“The Coop Danmark is part of a wider retail group which operates in Finland, Norway and Sweden,” said Ceron. “We believe that over time Hilton could expand into some of these countries based on its successful relationship with Coop Danmark. Further expansion elsewhere remains an opportunity.”
Analysts Panmure Gordon said Hilton had “significant growth potential from geographic expansion”. The Danish announcement followed on from supply in Latvia and Lithuania this year and continued strong growth opportunities in Central Europe, said the company’s Graham Jones.
Hilton CEO Robert Watson confirmed the company was looking to enlarge its market share.
“Our ability to enter a new territory with a new customer demonstrates the flexibility and versatility of the Hilton business model,” he said. “We continue to look at further opportunities for geographic expansion.”
Danish deal
Under the terms of the deal announced last Friday, Hilton said it will provide meat for about 1,200 Coop Danmark’s stores from a newly constructed state-of-the-art facility to be located next to retail firm’s distribution centre at Aarhus, in the Jutland region of Denmark.
Products supplied from the plant will include mince, sliced, added value and other pork, beef, lamb and veal products. The business is expected to create around 220 jobs. Work on the plant will start early next year, with production and supply expected to come on stream in 2011. Hilton will be supplying products across Coop Danmark’s range of outlets including the convenience, discount, supermarket and hypermarket stores.
Hilton said it would lease the building from a third party but would be investing €22m to fund the remaining capital expenditure during construction and in the following two years of production.
The company said the plant would have a capacity “in the mid range of other existing Hilton facilities”. It is estimated that start-up volumes in the first year will be below full capacity but this would increase in subsequent years as full roll-out was achieved.
