Dabur India Q1 net profit flat on high input costs
2 min read 05 Aug 2022, 12:17 AM ISTNet profit rose to ₹441.06 cr in the June quarter from ₹438.3 cr in the previous year
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Dabur India Ltd said its June quarter profit was little changed from a year earlier as a rise in raw material prices eroded profitability.
Net profit rose 0.6% to ₹441.06 crore in the three months ended 30 June from ₹438.3 crore in the year-ago period, the company said on Thursday. Operating revenue rose 8.1% to ₹2,822 crore in the three months ended 30 June from ₹2,612 crore in the year earlier.
The Real fruit juice and Vatika shampoo maker reported 5% volume growth in its India packaged consumer goods business.
“Our brands continued to grow significantly ahead of the market, gaining market shares across all key categories. Despite the macro-economic headwinds, we remained focused on rolling our consumer-centric innovation that expanded our total addressable market, and reported strong, sustainable, profitable growth, said Mohit Malhotra, chief executive of Dabur India Ltd.
The demand environment remained stressed because of heavy inflation, which saw consumers switch to affordable smaller packs of branded consumer goods, Malhotra said.
Fast-moving consumer goods sales volume fell 4% in the June quarter for the industry, according to recent estimates from market researcher NielsenIQ.
High prices of crude-based packaging material led to the company’s gross margins contracting by 224 basis points. One basis point is 0.01%. Overhead spending also rose by 160 basis points due to high fuel prices.
The company saw 9-10% inflation in the quarter across all buckets of commodities, namely hydrocarbons, packaging material, edible oils and speciality chemicals. However, Dabur took a 5% direct price increase and a 1% surrogate price hike via grammage reduction in low-unit packs, Malhotra told analysts during a post-earnings call. This partially offset the impact of inflation, he added.
“Dabur has been continuing the strategy of growth through new product launches, innovations and foraying into newer categories. Though growth in the health supplement business (covid tailwind) has tapered down in the last few quarters, the jump in the beverage category has more than compensated for the dip in health supplement sales. Given that the major part of the company’s raw material is herbs and agri products, margin impact on Dabur is the least among FMCG companies," analysts at ICICI Securities said.
Malhotra said inflation would likely persist well into the September quarter. “In the second quarter, we will see margin compression, but in the third and fourth quarters, we should see softening of inflation," he added.
Dabur’s healthcare product sales declined 21% from the year ago, as demand for pandemic-related products, such as supplements, including Tulsi and turmeric drops, and hand sanitisers, reduced with fewer covid cases. Its foods and beverages business reported strong growth, led by a 51% jump in the beverages business. The foods business reported 36% growth during the quarter. Home care gained 52%, while the skin and salon business rose 11.4%. Despite the consumption slowdown and dip in overall demand, Dabur gained market share across 98% of its portfolio, the company said.
“Both the rural and urban demand growth was on a par for Dabur. Rural demand for Dabur was driven by the ahead-of-the-curve investments in expanding our rural footprint to over 91,500 villages in the June quarter, up from 89,800 in March. Urban growth was driven by new-age channels like modern trade, which grew 42% during the quarter," Malhotra said. In 4-5 years, the company plans to grow sales of its Hommade brand fivefold to ₹500 crore.
