Maintain volume growth guidance of 8-12% for FY14: Dabur

After Dabur India’s consolidated net profit rose by 25 percent year-on-year to Rs 186 crore, Lalit Malik says the ad spends of the company will be contained as per the guidance set out for FY14. He maintains the volume growth guidance of 8-12 percent for FY14 depending upon the seasonality factor and also the economic environment.

The fast moving consumer goods company expects steady growth in all categories for FY14, says Malik in an interview to CNBC-TV18.

“Our international business is contributing around 32 percent for the overall turnover. It has been growing very healthy for us including our international business division (IBD) which is growing by more than 16-17 percent,” he adds.

Below is the verbatim transcript of Lalit Malik's interview on CNBC-TV18

Q: Can you give us any kind of ballpark figure on what the ad spends would look like going ahead and what will be the impact on your margins as well?

A: Firstly, our ad spends have been inline with our previous year though in percentage, they are slightly higher for this quarter. This is primarily on account of phasing issues because we have launched some of the products this quarter. As a result, you see a little higher percentage of ad spends for this quarter. Annually, we should be within the annual range that we have indicated earlier.

Q: This time your volume growth has come in at an average of what the street was working with at around 9 percent. Where exactly has the volume growth emerged for Dabur this quarter and what guidance can we expect for the next three quarters?

A: As far as our food business is concerned, it has grown in India FMCG by 18.7 percent, on the homecare we have grown healthy at 25 percent and with regard to shampoo we have grown at around 22 percent. The major impact of the downward has been because of the commodity. As a result of it our total volume increase has been in the range of 9 percent for the India FMCG. Going forward, we maintain that we should be within the range of 8-12 percent for this year depending upon the seasonality factor and also the economic environment.

Q: Can you break the 8-10 percent growth into segment wise performance? Where do you expect to see maximum growth emerge from in the next couple of quarters?

A: We will have steady growth in almost all the categories though there are some seasonal impacts. For example, in glucose, which is more a summer drink, wherein if you look at Chyawanprash it would be more a winter kind of product.

On the other hand, there are other categories of juices that overall have been showing very healthy trend, home care products Odomos and Odonil continue to grow and expect them between 8-12 percent of range. We will have the category growth depending upon the demand that will come and on the categories that we see based on their climatic environment.

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Q: How did your international business do this quarter?

A: Our international business is contributing around 32 percent for the overall turnover. It has been growing very healthy for us including our international business division (IBD) which is growing by more than 16-17 percent. So, at an international level the growth has been very positive and we expect that to continue. On the US level, Namaste business, we see a positive trend emerging and there is a healthy growth on that. So, we do expect international business to grow over this remaining current financial year 2013-14.

Q: We have seen quite a bit of depreciation on the currency, what impact will that have on your food business margins because you do have the input cost going up? Do you expect any pressure on your food business margins because of the rupee depreciation?

A: As far as the food business is concerned, it is impacted on account of import and account of countervailing duty (CVD) which see some impact coming up over a period of time as the exchange will move around. However, we take our actions with regard to the hedging as well as with regard to the other benefit on exports that has a natural hedge. So, we see the impact getting mitigated to a greater extent, there would be some impact depending upon the exchange fluctuation on the food business going forward.

Q: What would your guidance be going into FY14 just for the domestic business? What would the growth be supplemented by, if you could give some colour in terms of the mix of the volume as well as the pricing growth that we can expect?

A: If we look at in terms of the mix categories it will depend upon different channels. Our rural business is growing pretty fast and at a steady pace. Our institution sales are growing and modern retail is also showing a healthy sign. Going forward, we expect growth to come from the rural sector as well as from the institutional sales.

Q: In FY13, you saw a decline in revenues for Namaste business and it was not such a good year for you, for your Namaste business particularly. When do you think you could see a revival? What could the growth trend look like for Namaste, will it get back to its high teens or will it take some time?

A: Last year, there had been some slowdown with regards to Namaste because of the restructuring of the workforce. Now, we have put all the corrective measures in place and we have our Dabur management also taking control of that.

Our South Africa business is also strengthening as a result of it and we see growth coming back on Namaste. It would be at a gradual pace and with regard to the double teen at the early teen we do see for this quarter the growth compared to last year. We do expect Namaste to gradually grow from hereon.

Q: Has there been any curtailment in discretionary expenditure that you have seen coming in for your products in particular or within the FMCG space as per your experience?

A: We do see some impact coming on the discretionary product at the higher category of our product categories. Overall, product categories that we cater to are more of the basic needs including the food as well as including the home care and other categories. So, we do expect at the top end of our product to have some discretionary spending being curtailed but at the base level or at the larger scale we expect growth to be consistent though we do not see a major jump coming from here for this financial year.