Dabur Q4 Update: Revenue Growth In Single Digits As Demand Falls Short Of Full Recovery

Dabur Ltd. expects to report mid-single digit revenue growth on a consolidated basis in the fourth quarter, as demand is yet to fully recover.

During the January-March period, the demand trajectory across urban and rural markets in India has shown a slight improvement sequentially, the maker of Ayurvedic products said in its quarterly business update released to the bourses on Thursday. However, it fell short of a full recovery, it said.

While the urban markets have returned to positive volume growth, the rural markets remain muted, according to the company.

Despite near-term consumption pressure, the company said it is seeing some green shoots emerge, such as moderated inflation, improved consumer confidence, and an increase in government spending.

Its peer, Marico Ltd., concurred. It anticipates a sustained and visible recovery in the coming quarters. However, Godrej Consumer Products Ltd. said its performance in India has exceeded expectations, led by steady demand.

• Dabur's India business is expected to report mid-single-digit revenue growth.

• Food and beverages continue to trend at strong double-digit growth rates (on a high base of 31.3% in Q4).

• The home and personal care segment is expected to grow in the low single digits due to a slowdown in the personal care categories.

• Healthcare to report positive growth despite a high base due to the Omicron wave.

• Brands continued to gain market share in most segments.

However, the international business is expected to register high single-digit growth in constant currency. Growth in rupee terms will be impacted due to currency headwinds in Egypt and Turkey, the company said.

While there are short-term pressures, Dabur said it has been restructuring its distribution network in key markets and increasing investments behind its brands, which is expected to benefit the company in the long term.

The quarter also marks the consolidation of Badshah Masala (effective Jan. 2, 2023) with the business, and the company is tracking it according to internal expectations.

Dabur said that gross margins for the domestic business are expected to show improvement as inflation continues to cool off for most commodities. But, consolidated gross margins will be impacted due to currency headwinds in international markets.

"We have also strategically increased our ad spends behind our brands, leading to short-term pressure on the operating margin, which is expected to be lower by around 200 to 250 basis points as compared to Q4 FY22," said Dabur.

Dabur's gross margin was at 47.4% in Q4 of last year, while its operating margin was at 18%.

Shares of Dabur fell 3.16% after the company's quarterly update, as compared to a 0.25% gain in the benchmark Nifty 50.

The stock has declined 5.54% year-to-date, in comparison to its peer Hindustan Unilever Ltd.'s 0.9% gain, Marico's 5.4% fall, and Godrej Consumer Products' 8.79% gain year-to-date.