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Q1 Results: Dabur Scores Well On All Parameters Amid Consumption Slowdown

Dabur India’s quarterly profit beat estimates amid a slowdown in consumption.

A range of Dabur India Ltd. products is displayed at the company’s head office in Ghaziabad. (Photographer: Prashanth Vishwanathan/Bloomberg)
A range of Dabur India Ltd. products is displayed at the company’s head office in Ghaziabad. (Photographer: Prashanth Vishwanathan/Bloomberg)

Dabur India Ltd.’s quarterly profit beat estimates amid a consumption slowdown.

Net profit rose 10.3 percent year-on-year to Rs 364 crore in the quarter ended June, according to the consumer goods maker’s exchange filing. That compares with the Rs 345-crore consensus estimate of analysts tracked by Bloomberg. The company reported an exceptional loss of Rs 20 crore during the period due to provision for impairment in the value of treasury investment due to rating downgrade.

Revenue rose 9.2 percent year-on-year to Rs 2,273 crore, higher than the Rs 2,181-crore estimate. The company said in a separate statement it reported a domestic volume growth of 9.6 percent for the quarter.

That comes at a time when growth in India’s fast-moving consumer goods industry declined for the second straight quarter in the April-June period, according to market researcher Nielsen India. Domestic demand for consumer goods makers fell as agrarian distress hurt rural growth. India’s GDP growth, too, slowed, pulling down overall consumption.

Dabur told BloombergQuint in March that it forecasts a mid- to-high single-digit volume growth in the ongoing financial year due to lower demand. The company expects demand to improve only from the second quarter of the financial year ending March 2020, Chief Financial Officer Lalit Malik had said.

“While the macroeconomic environment continues to be challenging with an overall demand slowdown in India and competitive intensity remaining high, we have executed well on our distribution expansion strategy in rural India which has resulted in consistent improvement of our performance,” Dabur’s Chief Executive Officer Mohit Malhotra was quoted as saying in the statement.

“Our increased focus on the consumer health space and disproportionately higher investments behind our power brands have started paying dividend,” he said. We will continue to invest behind our brands, accelerate on product innovation efforts, and enhance our capabilities for sustainable future growth.”

Segment-Wise Revenue (YoY)

  • Revenue from consumer care business rose 14.4 percent to Rs 433.65 crore.
  • Revenue from food business increased 4.7 percent to Rs 54.4 crore.
  • Revenue from retail business fell 47.2 percent to less than Rs 1 crore.
  • Revenue from other segments declined 13.8 percent to Rs 1.68 crore.

“Amid a slowdown, there was an expectation that the company’s performance was muted,” Nitin Gupta, analyst at SBICAP Securities, told BloombergQuint over the phone. “The overall earnings came as a surprise and we will have to wait for the management commentary in the analysts call which is scheduled later today on what led growth in the company.”

The company’s operating income, or earnings before interest, tax, depreciation and amortisation, rose 18 percent over last year to Rs 457 crore during the quarter—the consensus estimate was Rs 408 crore. Operating margin expanded to 20.1 percent from 18.6 percent against the estimated 18.7 percent.

Shares of Dabur dropped as much as 3 percent, the most in a month, after the earnings announcement. That compares with 1.3 percent rise in the NSE Nifty FMCG Index.

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Management Rejig

Dabur India’s Chairman Anand Chand Burman stepped down immediately , according to a separate exchange filing. Vice-Chairman Amit Burman has been elevated as chairman.

Mohit Burman will replace Amit Burman as vice chairman, the statement said, adding Non-Executive Director Sunil Duggal has resigned.