Rising meat costs took their toll on Hilton Food, the meat processor which ranks supermarket giant Tesco as one of its biggest customers.
Turnover rose by 9 per cent in the six months to £543m, but operating profits at £13.3m were up less than 1 per cent on last year.
The shares, which were first listed in 2007 and in August hit a five-year high of 310p, fell 5 per cent to 282.5p as Robert Watson, chief executive, outlined the impact of “continued high raw material meat prices” and “an economic environment across Europe which has remained both challenging and uncertain”.
Hilton sells meat to supermarkets in 12 countries and three-quarters of revenues come from outside the UK.
It buys meat carcasses and then processes and packages them up for sale at a handful of big supermarket groups such as Ahold in Europe, Tesco in the UK and Coop in Denmark.
Mr Watson underlined the effects on prices of high demand for meat, particularly in emerging markets, even as supply dwindles.
Increasing numbers of livestock farmers, squeezed between rising input costs and retailers unwilling to lift prices, are quitting or cutting back their businesses.
Hilton on Tuesday reported a 10 per cent rise in sales volumes in the six months to mid-July, including trading from a new meat packing plant in Denmark.
But the company was hit by consumers buying cheaper cuts of meat such as meatballs and hamburgers.
This, combined with the expense of starting up the Danish plant and negative currency movements, thinned operating margins to 2.4 per cent against 2.7 per cent a year ago.
Pre-tax profits and earnings per share were flat at £12.5m and 12.6p.
The group said that profitability was likely to be “similar” to 2011, prompting analysts at Panmure Gordon to shave earnings forecasts for the year by 8.5 per cent to 24.3p, and Numis to downgrade pre-tax profits for 2012 from £26.2m to £24.2m.
Cash generation helped to reduce debt by 40 per cent from close to £25m this time last year to £15m, and the group is proposing to lift dividends from 3.1p last year to 3.4p.
Mr Watson added that debt, which was about £50m when the group floated, would continue to fall and the group might even be cash positive by next year.
Meanwhile, the group would continue to look at expanding geographically and through developing and extending its product range, particularly higher margin products
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