Dabur India matched street expectations with the third quarter consolidated net profit rising 16.4 percent year-on-year to Rs 282.8 crore. Consolidated net sales grew 9.2 percent to Rs 2,074 crore during October-December quarter from Rs 1,899.6 crore in the year-ago period. Discussing the numbers, Lalit Malik, CFO, Dabur India, said the company has posted volume growth of 7.4 percent this quarter as against 8.7 percent in the last quarter. The advancing of Diwali to Q2 led to subdued growth in Q3, he said, adding that the skincare segment got impacted due to small fire at company’s factory. However, according to Malik, the positive impact of crude on freight expenses is seen and a gradual improvement in demand pattern is expected. “We will maintain ad spends at current levels,” he said.
Below is the transcript of Lalit Malik’s interview with CNBC-TV18's Menaka Doshi and Sonia Shenoy.Menaka: If you could share with me what your volume growth number was for the quarter gone by because that is the one piece of data I don’t have as yet?A: As far as India Fast Moving Consumer Goods (FMCG) is concerned our volume growth is 7.4 percent this quarter.Menaka: 7.4 percent; is that a decline versus your second quarter which was at 8.7 percent or am I not comparing like to like figures?A: No, you are absolutely right. Last quarter it was 8.7 percent, now it is 7.4.Menaka: Can you talk me through why you have seen a decline in margins?A: One of the reason is that last year there was a higher base in case of our food business on account of Diwali which was end of October wherein this year it was first week of October. So the DGP Diwali’s gift sales have happened in last quarter and therefore last quarter was a higher growth in terms of food segment wherein this quarter due to higher base of last year and preponment of Diwali there has been a little slowdown in terms of the volume.Second reason is that in our skincare factory there was a fire in the month of October. So, as a result of it there was production restarted in the month of November and as a result of it there is a small impact arising on account of skincare segments. So these are the two factors as far as India is concerned. The volume growth has reduced from 8.7 to 7.4.
Menaka: You expect volume growth to recover in the ongoing quarter?A: We are expecting it to come back. It will all depend upon the external environment and in terms of the inflationary impact but our efforts would be to come back.Menaka: Are you seeing signs of a pickup in consumer spend already? The question I am asking you is pertinent to whether you are already seeing evidence of a pickup and therefore whether you expect volume growth to comeback to let’s say eight or nine percent levels this undergoing quarter or maybe even the first quarter of the next fiscal?A: As far as our last quarter for this financial year is concerned we do not expect any major change to happen because though the sentiments are very positive but we haven’t seen the real benefit of it coming down from the urban and rural markets to that extent and we do expect there will be gradual improvements and next year we will certainly see a better impact than the last quarter of this financial year.
Sonia: Can you take us through what the international business has done this time around. Last quarter you did see some impact because of currency translation but what has the growth been in the international business this quarter and going ahead what is the expectation?A: As far as the international market is concerned there are two implications, one as you said on account of exchange translation there has been an impact compared to last year wherein there was translation gain and this quarter is a loss and on the other hand in our acquisition business on Namaste there has been stock correction and also the price stabilisation that has taken place. So the growth has been slower for this quarter and as a result of it our topline growth at the consolidated level has been at 9.2 percent.Sonia: Can you tell me a little bit about the ad spends and what the expectation is going ahead. This time around your ad spends have gone up a tad bit but can you tell me, for, say, the next three to six months what could the average ad spends be for the company?A: Our ad spends is going to be within the similar range. This quarter as I mentioned there was some pressure on the topline. So therefore you see the percent is slightly higher. However going forward we will continue to invest into the ad spend based on different categories and new product launches and will continue to spend on the ads in the next six months to over a year time.
Menaka: I wanted to talk to you about your margins, your operating margin has improved from 15.6 percent in the year ago period to 16.9 percent for Q3 this fiscal. What is the trajectory hereon for operating margins, are you already seeing some benefit of lower raw material prices, what is the expectation on input cost therefore in the quarters to come?A: I think we have seen positive impact of slower inflation reflecting into better margins for us. At the same time we have also taken the operating leverages in terms of the cost reduction. Thirdly, there has been a positive impact on account of the crude on the freight expenses. So all these three things put together we have seen improvement in margins and we do expect going forward if the trend continues with regard to lower inflation to have improvement on the margins.Sonia: One thing that investors have liked about the stock is the fact that despite the slowdown in the economy in rural markets etc, you have held on to your margins, can you just take us through the segment wise breakup between food and hair care and what the growth has been and what the average growth trajectory will look like?A: As far as our food business is concerned, it has grown at around 11.8-12 percent and if you look at in terms of our other categories are healthcare business and our oral care and hair care business is also within the similar trajectory of around 12 percent. So what we do see here is that a kind of a steady growth over the different segments and in fact our homecare segment has grown better, which is around 16 percent. So what we do see is that within the segments we see more or less on a similar range of 12 percent to 13 percent as a growth except on the skin care there has been some pressure on account of the fire in the manufacturing unit in the month of October, there has been slight slowdown. Otherwise we are seeing the trajectory of around 12 percent within different categories.Sonia: That is much slower than what you did last quarter, is it not? Last quarter you did about 29 percent growth in the foods business, is it because the base has gone up or are you seeing some signs of a slowdown over there in terms of overall growth?A: Like I just mentioned, in the beginning last year Diwali was in the last week of October. Therefore, the Diwali related gift packs on the juices were sold in the month of October. Therefore, Q3 was much higher and if we were to look at in the current year Q2 because of the preponement of all the Diwali related products on the food segment, the Q2 sale growth was very high. However, the impact on this quarter has been low because the last year base was high and this year due to the preponement of Diwali, there has been a sale in Q2 whereby Q2 itself was 28-29 percent growth and the impact has come on account of the phasing in this quarter.
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