Higher focus on the expansion of distribution and sales force, realignment of product categories, new product launches and infrastructure development have begun to pay off
Dabur India’s profit after tax (PAT) went up 25 per cent year-on-year (y-o-y) to Rs 3.3 billion in the June quarter. This was owing to strong volume-led growth and softer commodity prices. It’s PAT stood at Rs 2.65 billion in the corresponding quarter.
The ayurveda major’s net sales surged 16 per cent y-o-y to Rs 20.8 billion during the quarter from Rs 17.9 billion in the earlier period. During the quarter, Dabur’s volumes grew 21 per cent y-o-y — the highest in a decade for the company — helping its topline surge above Street estimates.
According to Edelweiss Securities, its volume-led growth remains higher than the country’s fast-moving consumer good makers’ two-year average. Despite its advertisement and promotional expenses growing by a third to Rs 1.99 billion during the quarter, Dabur’s earnings before interest tax depreciation and amortization (Ebitda) grew 31 per cent to Rs 3.86 billion. Softer commodity prices helped the firm keep its raw material costs at Rs 8.26 billion — 11 per cent higher than last year.
Sunil Duggal, chief executive officer, Dabur India, had told Business Standard in June that the firm added around 400 people in its sales force, built “massive infrastructure” to expand its retail reach and divided its team into healthcare and personal care divisions during the past few months.
He said Dabur has regained some lost ground to Patanjali during the quarter by growing above the industry rate. Results show that Dabur honey, juices and oral care — the three categories where it faced stiff competition from Patanjali and juice makers like ITC — grew 42 per cent, 26 per cent and 17 per cent, respectively. As demand for ayurvedic products is expected to grow, Dabur is setting up a plant that will cost over Rs 1 billion to ramp up its production. “The company has put in place a prudent growth strategy and continued to invest heavily on its brands to successfully tap emerging opportunities,” said Abneesh Roy, senior vice-president, Edelweiss Securities.
According to Naveen Trivedi, assistant vice-president, HDFC Securities, exceptional category-led growth helped the firm’s domestic business. Also, macroeconomic “issues in the MENA region and currency are softening. The headwinds that have been witnessed are now easing.”
Dabur’s international business, which forms 30 per cent of its sales, grew 10.5 per cent (on constant currency) during the quarter backed by strong growth in markets like Saudi Arabia, Pakistan and Egypt.
However, inflationary pressure may dampen the show in the coming quarters.
During the last quarter, a low base aided the firm’s growth numbers, according to Lalit Malik, chief executive officer of Dabur.
The firm may go for selective price hikes given that raw materials like coconut oil and LLP are turning out to be costlier. During the quarter, it enjoyed a 1.4 percentage point backing of price-led growth.