Dabur India’s margins remain under pressure due to the price hike across commodities.
Surpassing analyst estimates, FMCG major Dabur India on August 3 reported a 28 percent surge in its net profit for first quarter (Q1FY22) ended June to Rs 437 crore as opposed to Rs 342 crore reported in the year-ago period. The company’s revenue for the period also witnessed a 32 percent climb year-on-year (YoY) and stood at Rs 2,612 crore. Last year in Q1, the company had reported consolidated revenue of Rs 1,980 crore.
Dabur India also registered a rise in its topline and bottmline, sequentially, when compared to the fourth quarter (Q4) of FY21. Its net profit in Q1FY22, grew 16 percent and revenue jumped 12 percent quarter-on-quarter (QoQ) as compared to the preceding quarter. It had reported a PAT of Rs 452 crore in Q4 and the revenue from operations stood at Rs 2,337 crore.
“The devastating second wave of COVID-19 had a huge impact on our lives and health and the operating environment has been extremely challenging. But since the lockdowns were more localised and staggered, the business impact was lower this time around,” said Mohit Malhotra, CEO, Dabur India, while addressing investors in a post earnings call.
According to Malhotra, despite high inflation witnessed during the quarter, the company’s operating margin reported a 32.5 percent growth, which marked a 10 basis points gain. “With continued focus on productivity and efficiency enhancement, we were able to counter very high inflation and protect our margins,” he added.
The Dabur results beat analyst estimates. A CNBC-TV18 poll of analysts had predicted the company would report a net profit of Rs 410 crore and a revenue of Rs 2,420 crore. EBITDA for the quarter came in at Rs 552 crore, above the CNBC-TV18 poll of Rs 495 crore.
The star performers
The food and beverage category was the top performer for the company during the quarter which reported over 80 percent surge. Malhotra informed the growth in the category came on the back of strong performance of Real Fruit Juices, especially, 1 litre packs, which are used for in-home consumption.
“The portfolio was further enhanced with the launches of carbonated variants under the brand, expanding the total addressable market of our beverage portfolio,” he said.
The company had also introduced products such as Dabur Cold-Pressed Sesame Oil, Dabur Ghee and Dabur Sharbat E Azam Rose in the foods and beverages category.
Dabur India’s healthcare business reported 30 percent growth in Q1, with the ayurvedic OTC business growing by over 52 percent. Its ayurvedic ethicals business reported a growth of nearly 51 percent and the health supplements category ending the quarter with a 24.5 percent growth.
The revival in discretionary spending also helped the company’s recovery in home and personal care segment, which grew by over 26 percent.
“The hair care category was up nearly 39 percent during the first quarter, while the home care business grew by over 30 percent and the oral care business by over 21 percent. The skin care and salon business (excluding sanitisers) reported a 66 percent growth during the quarter,” the company informed.
“In all the segments of hair oil we have registered an increase in market share on the back of our price aggression, new brand launches, packaging upgradation and marketing initiatives,” said Malhotra.
Dabur Honey, he said, has also gained about 54 percent market share on e-commerce and about 30 percent in modern trade.
E-commerce as a channel overall has seen 100 percent growth, as per the company and now contributes 8.2 percent to India fast moving goods business. The company is also ramping up its footprint in rural India and has expanded its rural coverage by 16 percent, from 60,000 villages at the end of 2020-21 to 69,000 villages in Q1, 2021-21.
“We plan to further expand it by 33 percent to 80,000 villages over the next 2 years,” Malhotra added.
High inflationary pressure
Dabur India’s margins remain under pressure due to the price hike across commodities and though the company has taken price hikes, it has not been enough to mitigate the impact of inflation, said Malhotra.
“The price inflation has been huge. And this has been across our portfolio buckets. So, whether it's agri-commodity, fossil-fuel based, herbs and spices or edible oil, we have seen inflation across the portfolio,” he added.
The 3 percent price hike has not been enough to offset the pressure on margins due to inflation and Malhotra indicated the company might take another set of hikes going ahead.
“We don't want to make any rash price increases because the demand situation is also not very great. We are caught between a rock and a hard place so at one end, there's demand which is not very resilient and there is the inflation hitting us,” he shared. “We will consider second round of price increase if push comes to shove.”
Going ahead, Malhotra expects the inflation to continue unabated at least for the next quarter given the rise in fuel oil prices.