Dabur Q2 results: Net profit falls 17% to Rs 425 crore on low urban demand

Home-grown fast-moving consumer goods (FMCG) major Dabur India on Wednesday reported a 17.5 per cent year-on-year (Y-o-Y) drop in net profit to Rs 425 crore in the second quarter, as high food inflation and heavy monsoon impacted sales. It had recorded a net profit of Rs 515.1 crore in the same period last year.

 

The maker of Hajmola candy and Real fruit juice recorded a 5.5 per cent drop in net sales to Rs 3,028.6 crore from Rs 3,203.8 crore in the year-ago period. The fall in sales was also exacerbated by a one-time inventory rationalisation exercise for the general trade channel that the company undertook during the quarter.

 

 

"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 convenience. This has resulted in the emerging channels growing at high teens, putting the general trade under stress,” Mohit Malhotra, chief executive officer, Dabur India, stated in a release.

 

“To address the changing dynamics and marketplace, and support our distributor partners in tiding over the challenges, we took a proactive decision to rationalise inventory in the general trade, which resulted in a temporary dip in sales during the quarter,” he added.

 

Meanwhile, the company’s profit before interest, depreciation and tax (PBIDT) fell 9.4 per cent to Rs 704.3 crore from Rs 777.8 in the same period last year. It reported a 7.5 per cent decline in volume growth. Its rural business continued to outpace urban by 130 basis points (bps). While the rural market reported a 1.8 per cent growth, urban lagged behind at 1.2 per cent.

 

“The sector faced challenges from heavy monsoons, floods and high food inflation, which slowed down urban consumption, especially in the beverage category, for us. However, rural continues to be resilient and has outpaced urban growth for the last three quarters,” Malhotra told investors during a post-earnings call.

 

“We believe urban consumption has bottomed out and should see an improvement going forward, as new channels have been growing ahead of general trade,” he added.

 

Strengthening hair oil portfolio

 

Dabur India also announced that it has entered into an agreement to merge Ayurvedic hair-care brand Sesa Care, for which it will acquire 51 per cent of the total paid-up cumulative redeemable preference shares (CRPS) from its existing shareholder True North (a private equity fund) for Rs 12.59 crore.

 

With this acquisition, the company intends to strengthen its hair-oil portfolio, under which it sells brands like Amla, Almond hair oil, Cool King, and Vatika.

 

“The enterprise value is estimated to be in the range of Rs 315-325 crore, including debt of Rs 289 crore, which will be backed by the corporate guarantee of Dabur,” the company stated in a release.

 

This is the second such acquisition by the company in two years. In 2022, it had acquired a 51 per cent stake in Badshah Masala for Rs 587.52 crore, which recorded a 15 per cent growth in the September quarter.