Dabur India expects mid-single digit revenue dip due to floods, inventory issues

New Delhi: Dabur India is expected to post a mid-single-digit decline in consolidated revenue for the September quarter, largely due to heavy rains and floods across parts of India. 

Adverse weather conditions negatively impacted out-of-home consumption and led to excess inventory in kirana stores, the company said in its second-quarter earnings update on Tuesday.

“While demand trends were witnessing some improvement, heavy rain and floods across parts of the country impacted out-of-home consumption and consumer offtake during Q2FY25. Due to this, we saw some impact on our business especially in the beverage category,” the company said in its exchange filing.

Dabur India is yet to announce its quarterly earnings. Makers of fast moving consumer goods are set to announce their earnings starting later in October. The announcements will reveal whether consumers in rural and urban markets are spending more on consuming daily essentials.

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The maker of Dabur Chyawanprash and Dabur Honey also announced plans to correct distributor inventory in general trade channels which remains affected due to disproportionate growth in channels such as quick commerce and modern trade.

“During the last few weeks we have seen disproportionately higher growth in organized channels such as modern trade, e-commerce and quick commerce which has led to increase in inventory levels in the general trade (GT) impacting the distributor ROI (return on investment),” the company said.

The company plans to correct its distributor inventory and improve their return on investment. "This proactive step, while leading to a temporary decline in top-line, is essential for the long-term health and hygiene of our business.”

Because of this correction, the company is expected to post a mid-single-digit decline in consolidated revenue for the quarter.

“While this correction has happened in India business, the international business is expected to register double digit constant currency growth in the top-line. Badshah Masala business continued to perform well growing in double digits during the quarter,” the company added.

Analysts said the move will have a near-term impact on the Dabur stock. The company's shares today closed at ₹618.50, down 1.07% from the previous close on the National STock Exchange

“The company is likely to report a 5% decline in consolidated sales (weak beverage sales) in Q2FY25 with pressure on margins. This was due to pipeline correction in general trade due to impact due to heavy rains and from floods on demand,” said Abneesh Roy of Nuvama Institutional Equities.

Roy said pipeline correction and an expected strong winter in a La Nina year could help the company report better numbers in the third quarter.

Investments in advertising and promotions continued during the quarter, the company said in its update. 

“However, as a result of a lower primary sales, our profitability will be impacted during the quarter and the operating margin for the quarter is expected to decline in the range of mid to high teens due to deliberate and continued investment behind brands. This temporary corrective action is a necessary step to strengthen the GT channel and enhance efficiency,” it added.

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