Informist, Wednesday, Oct. 30, 2024

--Dabur Jul-Sept consol net profit INR 4.25 bln
--Analysts saw Dabur Jul-Sept consol net profit INR 4.23 bln
--Dabur Jul-Sept consol net profit INR 4.25 bln vs INR 5.15 bln
--Dabur Jul-Sept consol revenue INR 30.29 bln vs INR 32.04 bln
--Dabur to pay INR 2.75 per share interim dividend
--Dabur Apr-Sept consol net profit INR 9.25 bln vs INR 9.79 bln
--Dabur Apr-Sept consol revenue INR 63.78 bln vs INR 63.34 bln
--Dabur Jul-Sept consumer care business sales INR 24.88 bln vs INR 25.95 bln
--Dabur Jul-Sept food business sales INR 4.67 bln vs INR 5.40 bln year ago
--Dabur: Seeing Consumer favour emerging channels such as quick commerce
--Dabur: Consumers' shift to emerging channels put general trade under stress
--Dabur: Rationatised inventory in general trade led to dip in Jul-Sept sales
--Dabur: Expect demand recovery in urban, rural markets in coming quarters
--Dabur: Rural demand outpaced urban demand by 130 bps in Jul-Sept
--Dabur: Jul-Sept India FMCG sales at INR 22.18 bln, down 7.6% on year
--Dabur: Jul-Sept Intl sales INR 8.47 bln, up 13% on yr in constant currency
--Dabur: Jul-Sept consol operating profit INR 5.53 bln vs INR 6.61 bln
--Dabur: Jul-Sept India home, personal care sales INR 10.35 bln, dn 8.1% YoY
--Dabur: Jul-Sept India healthcare sales INR 5.98 bln, down 9.8% on year
--Dabur: Jul-Sept India foods, beverages sales INR 3.17 bln, dn 20.7% on yr
--Dabur: Jul-Sept advertisement expense 7.4% of sales, up 60 bps

KOLKATA – Despite facing demand headwinds for consumer products and its decision to rationalise inventory in the general trade, ayurvedic and natural health care company Dabur India Ltd.'s financial performance for Jul-Sept was in line with the Street's expectations.

Profit attributable to shareholders of the company fell by 17.5% on year to INR 4.3 billion. The profit was marginally higher than the Street's estimate of INR 4.2 billion. The consolidated revenue for the quarter fell 5.5% on year to INR 30.3 billion, against market expectations of INR 30.6 billion. A decline in sales volume on account of the rationalisation of inventory in general trade was the primary reason for the decline in revenue. At the same time, declining profits from the foods and consumer care business impacted the profits negatively. The retail business ran into losses which weighed on the profit further.

In the year ago period, Dabur India's profit attributable to shareholders was INR 5.2 billion and revenue was INR 32.0 billion. In the Apr-Jun quarter, the company had reported a profit attributable to shareholders of the company of INR 5.0 billion and revenue of INR 33.5 billion.

"Over the past couple of years, we have witnessed a marked shift in consumer buying patterns in favour of emerging channels like quick commerce, driven by the convenience this channel offers. This has resulted in the emerging channels growing at high teens, putting the general trade under stress," Chief Executive Officer Mohit Malhotra said in a company-issued statement.

General trade refers to the traditional distribution channels like smaller, independent stores, such as kirana stores. To address the changing dynamics in the marketplace and support its distributors financially, Dabur India rationalised its inventory, which resulted in a temporary dip in sales during the quarter.

"However, the move has resulted in improving the long-term health and hygiene of our business, paving the way for healthy growth going forward," Malhotra said. "This one-off adjustment notwithstanding, Dabur's business fundamental remains strong with secondary sales for the second quarter growing at over 2% and our 5-year Revenue CAGR (compounded annual growth rate) for the India business at over 8%."

In an investor presentation submitted to the bourses after declaring the results, Dabur India blamed high food inflation and heavy floods in the country to the slowdown in consumption. However, the company said demand from rural India outpaced urban demand by 130 basis points on-year in Jul-Sept.

The inventory rationalisation led to the company's overall cost shrinking by 1.3% on year to INR 26.3 billion, although all other cost overheads, except raw materials, rose. However, the fall in costs was short of the decline in sales. As a result, Dabur India's operating profit of INR 5.5 billion declined to 18.2% as a percentage of sales for the quarter under review from INR 6.6 billion or 20.6% as a percentage of sales in the year-ago period. Earnings before interest, tax, depreciation, and amortisation fell 9.4% on year to INR 7.0 billion in Jul-Sept from INR 7.8 billion in the year-ago period.

Inventory rationalisation resulted in the consumer care business, which accounted for 53% of Dabur India's Jul-Sept sales, report a 4% on-year decline in revenue to INR 24.9 billion. The same reason impacted the foods business as well which accounted for 30.7% of the top line. Revenue from the foods business fell more than 13% on year to INR 4.7 billion, and beverage sales declined by 20.7% on year to INR 3.2 billion.

However, Dabur India continued to gain market share across the consumer care portfolio marginally. Advertisement expense rose by 60 basis point on year and accounted for 7.4% of the company's sales in Jul-Sept.

Although its performance in the domestic market was muted, Dabur India posted a 13% on-year sales growth from international operations during Jul-Sept at INR 8.5 billion in constant currency terms. Sales in South Africa grew by 26.1% on year, and in Egypt, the growth was 72.8%. In West Asia, sales were up by 9.8% on-year.

For the Apr-Sept period, the company's profit attributable to shareholders of the company fell by 5.5% to INR 9.3 billion, and consolidated sales rose marginally by 0.7% on year to INR 63.8 billion.

The company's board Wednesday approved an interim dividend of INR 2.75 per share.

In a separate notice to the bourses, Dabur India said it is acquiring 51% of the total paid up cumulative redeemable preference shares of Sesa Care Pvt. Ltd. from True North for INR 125.9 million. The enterprise value is estimated to be INR 3.2 billion to INR 3.3 billion, including a debt of INR 2.9 billion. Dabur India will be the corporate guarantor of this debt and will be merging Sesa Care with itself.

"Dabur is a market leader in the hair oils category. The proposed merger of Sesa will bring to Dabur a premium brand with strong credentials around Ayurveda that will complement our existing portfolio and strengthen our presence in the hair care category. We look forward to the exciting opportunities this deal brings," Dabur India Chairman Mohit Burman said in a statement.

On the National Stock Exchange, shares of Dabur India Wednesday closed 2% higher at INR 546.65. End

Edited by Ashish Shirke

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