Tesco meat supplier, Hilton Food Group, has suffered a hit to profit margins off the back of consumer downtrading in red meat.

Hilton posted a 9.4% year-on-year increase in turnover across the group’s European operations, to £543m, in the 28 weeks to 15 July.

Operating profit was up marginally by 0.5%, to £13.3m, but operating profit margin fell to 2.4% this year, compared to 2.7% in the corresponding period last year. The dip reflected “consumer downtrading in a challenging economic environment,” the company said in a statement. Excluding the impact of adverse exchange rate movements, operating profit would have been 2.5%, the company said.

In a note on the results, Shore Capital analyst Darren Shirley wrote: “The primary driver of activity was the relatively new operation in Denmark, with revenues and volumes in Hilton’s established markets (the UK, the Netherlands and Sweden) we believe under pressure from the tough economic conditions.” Shore gave a ‘sell’ recommendation (from hold) off the back of the results. 

Hilton would not reveal specific UK figures but chief executive Robert Watson told The Grocer the group was “very confident” in achieving UK growth in the long term. “It is a very challenging economic environment – we are faced with rising raw material costs so we have to make sure we continually adjust the offer.”

Watson forecast full-year results would be similar to those for the first half.  

The results came as the first half of a full year’s trading from the company’s newly operational Danish facility was included in the accounts. Volumes grew 10.3% during the period, compared to last year.

Hilton said consumer downtrading had manifested itself in a 2% increase in mince (including products such as burgers which use mince).