Dabur Q4 net profit down 22% to Rs 294 crore, net sales up 7.7% to Rs 2,518 crore

Consumer goods maker Dabur India reported weaker-than-expected results in the fourth quarter, hurt by higher input costs.

Net profit at the maker of Dabur Honey and Vatika Oil fell 22.2% to Rs 294.22 crore, missing the analysts’ average estimate of Rs 394.7 crore, according to Bloomberg. Revenue rose 8% to Rs 2,517.8 crore, while analysts on average had expected Rs 2,528.8 crore.

Fast-moving consumer goods makers have been raising prices or reducing grammage to cope with rising costs of everything from wheat to oil, exacerbated by Russia’s assault on Ukraine. To make things worse, many Indian households are spending less on non-essential items to make their budgets work amid inflationary pressures.

Ghaziabad-based Dabur responded to the rise in raw material costs with a mix of “pricing hikes and cost control measures,” said its chief executive officer, Mohit Malhotra.

Analysts expect Dabur to increase prices further like its FMCG peers Hindustan Unilever and Britannia.

Another factor that affected Dabur was “a tempering of the Covid portfolio of health products", said Akshay D’Souza, Chief of Growth & Insights at retail insights firm Bizom.

The belt-tightening by budget-conscious shoppers also “seems to have also affected Dabur's personal care portfolio,” he said.

Going forward, the management doesn't see inflation abetting and would be forced to take more price hikes to offset further margin compression. "There could be a price increase that we would have to take to avoid gross margin shrinkage but that said I cannot tell you with confidence that there will be no gross margin compression going forward at least for 2 quarters", Malhotra said in a post-earnings concall.

Dabur, which sells fruit juices under the “Real” label, saw a 35% increase in sales of its beverages and its food & beverage segment contributed to 18.6% of overall sales. Analysts expect Dabur’s beverages portfolio to drive growth in the current quarter, helped by factors such as summer demand and a waning pandemic.