Dabur Q1 Update: Revenue Grows In Single-Digits Amid Weak Consumption

Dabur Ltd. expects to report “high single-digit” growth in revenue for the quarter ended June on a high base and weak consumption amid soaring prices.

The revenue growth on a very high base of 35.4% in Q1 FY22 is backed by “mid-single digit” volume growth, the maker of ayurvedic products said in its quarterly business update released on the bourses on Wednesday.

During the quarter, “consumption pressure continued across the sector on account of unprecedented inflation which has impacted the share of the income available for spending on consumer staples”. And this, it said, was witnessed across urban and rural markets.

Peer Marico Ltd. and Godrej Consumer Products Ltd., too, concurred.

Key Highlights

• Food and beverages vertical has seen strong double-digit growth in the quarter on the back of improving out-of-home consumption, innovation, and intense summer season.

• Home and personal care portfolio is expected to record high single to low double-digit growth on a high base of 26.1 % in Q1 FY22.

• Healthcare vertical is expected to report a decline over the previous year's high base as the business had registered growth of 30% in Q1 FY22 led by the surge of Delta variant of Covid-19 during the quarter.

International business, however, is expected to register high single-digit revenue growth during the quarter in constant currency, the company said. Yet, due to the currency devaluation, particularly of Turkish Lira, the reported growth in domestic currency would be in “low single digit”.

Overall, the consolidated revenue is expected to grow at “mid-to-high single digits”. “We continue to grow ahead of category growths and gain market share in most of our segments.”

On the profitability front, inflationary pressures continue to impact input costs such as crude-led derivatives, vegetable oils, honey and other agri-based commodities, the statement said. “We are taking judicious price increases and have embarked on cost saving initiatives to mitigate the impact on our margins.”

But the input cost pressure combined with portfolio mix changes have led to a near-term impact on the operating margin during the April-June period, expected to be lower by 200 basis points year-on-year. “Margins normalised to pre-Covid levels for Q1 despite unprecedented inflation.”

During the first quarter of FY22 and FY21, operating margins were “higher than normal” due to Covid-led surge in healthcare vertical, it said.

Near-term inflationary pressures notwithstanding, the company said that it continues to target higher than industry growth on a medium- to long-term perspective with stable margins. “The company will continue to invest behind power brands, innovation, advertising and promotion, distribution expansion and a strong backend which will help us drive long-term sustainable growth of the business.”