Consumption slowdown hits Dabur India profitability, PBT down 2.5% in Q2

Continued slowdown in consumption in the local market has hit Dabur India’s profitability. The fast-moving consumer goods major on Tuesday declared 2.5 per cent drop in its profit before tax (PBT) for the July-September quarter. The firm’s PBT declined from Rs 473.7 crore last year to Rs 461.8 crore. Apart from poor uptake, its bottom line was impacted by a one-time impairment in value of investments to the tune of Rs 40 crore.

During the quarter, the company clocked 4.1 per cent year-on-year (YoY) growth in consolidated revenue from operations, from Rs 2,125 crore to Rs 2,212 crore. While the India business — forming 69 per cent of its total sales — rose 4.9 per cent, led by 4.8 per cent volume growth. Its international business, however, grew by 3.2 per cent — bringing down its overall volume uptake further. A 35 per cent decline in its business in Nepal dragged down its overseas business growth. “The domestic business continues to face heavy headwinds in the form of a sustained slowdown in demand, aggravated by the liquidity crunch in the market,” said Mohit Malhotra, chief executive officer, Dabur India.

Benign raw material prices helped Dabur expand its operating revenue. Its total cost of materials decreased by 142 basis points (bps) to touch 49.2 per cent in the quarter. Resultantly, operating margin improved by 91 bps to touch 22.1 per cent. Expenditures related to media and promotions, however, increased marginally. 

According to Malhotra, increased investment behind its brands and in innovation is has helped Dabur grow its brands ahead of the categories and in gaining market share. “Despite tough operating conditions, our market share in the toothpaste category increased by 66 basis points YoY. Dabur reported a 30 bps gain in market share in the hair oil segment while our shampoo market share grew by 65 bps,” Malhotra added.

While Dabur’s health care business registered a healthy 11 per cent growth in the domestic market, it is the home and personal care segment that dragged its India business down. Home and personal care, which contributes over 52 per cent to its domestic sales, grew by a meagre 4.3 per cent. Among the sub-categories, Dabur’s hair oil and skin & salon businesses grew by 2.6 per cent and 1.1 per cent, respectively.

Foods business — contributing 16 per cent to its domestic sales —registered 5 per cent growth. Quoting Nielsen data, Dabur informed its investors the ‘juice & nectar’ market de-grew by 7.2 per cent during the quarter.

To beat the slowdown in consumption, Dabur continued to extend its direct retail reach in the hinterlands. During the quarter, it increased the rural footprint to over 51,000 villages, up from 48,000 villages in June 2019. Riding on this expansion, Dabur’s rural demand continues to grow ahead of urban demand, Malhotra said.