Dabur Q1 Update: Revenue Growth Estimated At 10%

Dabur India Ltd. has estimated that sales in the June quarter increased more than 10%, led by its healthcare and personal care portfolios, even as its beverage portfolio faced the heat.

The healthcare business is projected to achieve double-digit growth, backed by mid-single-digit volume growth, the maker of Real fruit juice and Red toothpaste said in its quarterly update that was filed with the bourses on Thursday.

The home and personal care businesses in India have also "performed well", it said. "While the home care category is expected to report value growth in the  high teens, the oral and hair care portfolio is growing in (the) low double digit."

However, the food and beverage business had a muted quarter as sales of its summer-centric beverage portfolio were impacted due to "unseasonal rain and a moderate summer".

Overall, the domestic business is expected to post growth in the high single digits. The recently acquired Badshah Masala will see growth in the high teens, it said. The international business, however, is expected to perform better, reporting double-digit growth in the first quarter, according to the company.

During the quarter, trends in both urban and rural India showed signs of improvement as easing inflation allowed customers to spend more on the consumer goods company's products, Dabur said. The reduction in inflation is also expected to lead to year-on-year gross margin expansion.

"We are channelising a major part of the gross margin expansion towards ramping up advertising and promotion spends to ensure long-term success," the company said.

And as a result, Dabur expects operating profit to grow in line with revenue. However, on an annualised basis, the gross margin expansion is expected to result in an improvement in operating margin as well. Its profitability is also likely to be impacted due to brand amortisation expenditures on account of acquisitions.

Peers, including Marico Ltd., Godrej Consumer Products Ltd., and Adani Wilmar Ltd., have also released their first-quarter updates so far, and the responses have been mixed.

Marico said its consolidated revenue fell in the low single digits. This was due to the persistent sluggishness of rural consumption. However, price cuts, which made its cooking oil 30% cheaper, resulted in double-digit volume growth for its Saffola range.

Adani Wilmar, the owner of Fortune Brand, said its sales declined by 15% due to a sharp fall in edible oil prices. This, however, eclipsed the strong demand for its products. It has pegged Q1 volume growth at 25%.

Godrej Consumer said it saw double-digit volume growth in its domestic business in the June quarter, driven by strong demand in home and personal care.

Easing raw material prices would drive gross margin expansion for most consumer goods companies, but advertising spends are expected to go up.

Shares of Dabur closed 0.14% lower at Rs 591.65 apiece as compared with a 0.52% rise in the benchmark Sensex. The quarterly update was released after market hours.

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