Dabur Q2 Results: Profit Rises 3.3%, Margin Beats Estimates

Dabur India Ltd.'s second quarter profit rose in line with analysts' estimates, and margin expanded as it reaped the benefit of moderating inflation.

Consolidated net profit of the Ayurveda products maker rose 3.3% over the previous year to Rs 507.4 crore in the quarter ended September, according to an exchange filing. That compares with the Rs 515.76-crore consensus estimate of analysts tracked by Bloomberg.

The profitability was impacted on account of a one-time legal cost of Rs 36 crore. The lawsuits pertain to hair relaxer products sold by the company's foreign subsidiary—Namaste Laboratories LLC. Net profit, excluding legal costs and amortisation related to Badshah acquisition, grew 14.7%.

• Revenue rose 7.3% to Rs 3,203.8 crore, against the projected Rs 3,231.83 crore.

• Operating profit increased 10% to Rs 660.9 crore, against the Rs 652.43 crore forecast.

• Margin stood at 20.6% versus 20.1%. Analysts had pegged the metric at 20.2%.

• Excluding exceptional legal costs, the operating profit surged 16%.

• Domestic volume growth stood at 3%. With Badshah, it stands at 5.8%.

• Ad spends for the quarter marked a 42.6% growth to Rs 216.5 crore.

The quarterly performance was impacted due to the triple whammy of deficient monsoon, mild summer and a shift in the festive season to the third quarter. This combination of factors has resulted in a dip in the food and beverages revenue during the quarter, even as the healthcare and the home and personal care businesses bucked the trend, the company said.

Segmentwise Highlights (YoY)

• Revenue in healthcare business grew 5.4% to Rs 663 crore.

• The home and personal care portfolio, which accounts for over half of sales, reported a 5.8% rise in revenue to Rs 1,126 crore.

• Revenue in food and beverages declined 7.1% to Rs 400 crore. While the food business grew 40.4%, the beverages category fell 10%.

• Dabur Chyawanprash saw muted growth as season was delayed.

• New launches contributed 4.3% of the F&B portfolio during Q2.

• Badshah spices portfolio recorded 16.4% growth.

• Dabur's digestive business, riding on steady performance of its flagship brand Hajmola, grew by 18.1%.

• The Ayurvedic over-the-counter and ethicals business rose by 8.1%.

"We have witnessed a marked sequential improvement in urban demand, led by new-age channels," said Mohit Malhotra, chief executive officer of Dabur India. While the rural growth still lags urban demand, the gap has reduced. "We are increasingly optimistic of the future as we are seeing green shoots of recovery in rural sentiments," he said, adding that the company will continue to invest behind its brands, distribution infrastructure and innovation to deliver volume-led profitable growth.

Dabur's international business grew by 23.6% in constant currency terms, driven by Turkey (77.8%), Egypt (35%) and MENA (18.4%), among others.

The company is on track to achieve Rs 500 crore of exit revenue in the food business, including Badshah, it said. Dabur acquired a majority stake in the spices brand Badshah Masala Pvt. earlier this year, in line with its strategic intent of entering into new adjacent categories in the food space.

In Q2, the domestic business saw key brands posting category-leading growth, with market share gains across 90% of the product portfolio.

Market Share Gains

• Dabur's baby massage oils gained 90 basis points in market share, while cold and cough segment increased 40 basis points.

• Dabur continued to gain market share and drive the herbal segment ahead of non-herbals.

• Market share for hair oils portfolio improved by 143 basis points to touch 17%.

• Odonil recorded an increase of 160 basis points in market share in air fresheners category, strengthening its leadership position.

• Odomos' market share increased by 560 basis points.

"We believe we are on the right path with our strategic playbook," said Malhotra. "We remain focused on managing our business with agility, leveraging our strong distribution footprint, while enhancing our margin, quarter after quarter."

Shares of Dabur India rose 1.47% to Rs 524.7 apiece after the results were declared, as compared with a 0.65% gain in the benchmark BSE Sensex on Thursday.