Key highlights from Dabur India Limited (DABUR) Q2 FY24 Earnings Concall
- Financial Results
- Revenue grew 10.4% in constant currency and 7.3% in INR terms to INR3,204 crores.
- International business grew 23.6% in constant currency and 10.4% in INR terms.
- India business ex-beverages grew 6% backed by 5% volume growth.
- Consolidated operating profit grew 10% excluding one-off legal costs.
- Gross margin expanded 300 bps on material cost reduction.
- Consolidated operating profit grew 10%, while consolidated PAT increased 14.1%.
- Segment Performance
- Home care grew 15% led by Odomos and Odonil.
- Odonil growing faster than category growth of 20%.
- Gained market share in mosquito repellents, air fresheners, toothpaste and hair oils.
- Healthcare grew 5.4% with market share gains in Chyawanprash and honey.
- Digestives grew 18.1% driven by Hajmola.
- Beverages declined 10% due to uneven monsoon rainfall and new coconut water competitor Storia impacted market share.
- Investing in aseptic pet bottles to boost coconut water sales.
- Growth Drivers
- Distribution reach expanded to 1.4 million outlets directly.
- Increased media investments by 43% to drive long-term growth.
- Innovation across categories and countries gaining market share.
- Onset of festive season expected to boost growth.
- Legal Issues
- Lawsuit filed against US subsidiary Namaste Labs on product safety concerns.
- Allegations disputed; portfolio in question is less than 1% of revenue.
- 1% of sales from relaxer portfolio affected by lawsuit.
- Building non-relaxer portfolio now 75-80% of business.
- Matter is sub judice with product liability insurance in place.
- The insurance covers a specific hourly rate for legal counsel, with any additional costs to be covered by the company.
- Discovery phase had higher costs of INR30-35 crores per quarter.
- Legal costs estimated at INR20-22 crores per quarter going forward for 2 plus years.
- No legal merit seen due to inconclusive study basis and confident in winning given past precedent and safety studies.
- Defense counsel costs incurred so far not recoverable.
- Advertising Spends
- Ramping up ad spends in HPC categories like oral care and home care.
- Peak ad spend is 8-10% of sales; currently at 7.5-8%.
- Building brand equity and consideration set requires ad investments.
- Less ad spend needed for impulse purchases like food and beverage.
- Festive Season Impact
- Diwali season shifted by 20 days versus last year.
- Loading of beverages and Chyawanprash got postponed to Q4.
- Expect lost Q2 sales to be recovered in Q4 with season shift.
- Seeing uptick in beverages and Chyawanprash sales in October and expects recovery in Chyawanprash in H2 with onset of winter.
- Margin Outlook
- Benefited from input cost reductions in 2Q.
- Confident of maintaining guided 19.5% margin for the year.
- DABUR will try to better guidance despite legal costs of INR63 crores.
- Rural Recovery
- Seeing gradual recovery in rural growth trends.
- Rural growth is ahead of urban, benefitting from distribution expansion and increasing penetration.
- Government measures driving rural demand.
- South India lagging most in rural recovery currently.
- International Business
- Expecting double digit constant currency growth in H2.
- Situation in Middle East a potential headwind.
- Gross margins expanded 600 bps on lower costs.
- Depletion in costs to continue aiding margin growth.
- New Product Development
- In the personal care industry, Cool King has achieved sales of around INR20 crores, while Dapper Red gel extensions have reached 25 crores in sales.
- In healthcare, the baby care range and advocacy team achieved INR50 crores turnover.
- In foods, coconut water in Tetra Pak reached INR20 crores sales, with additional capacity coming up.
- Fizz and pet bottle products have achieved around INR20-25 crores turnover each.