Aug 4, 2020
Dabur India did well in limiting its operating costs that helped its Ebitda margin to expand by 91 basis points. During the June-quarter earnings conference call, Mohit Malhotra, CEO, Dabur India Ltd, said covid-19 has acted as a catalyst for change. “We have enhanced our risk-taking ability as an organization,” he emphasized.
Dabur’s June-quarter results were not so impressive which practically were less for the obvious reasons. Consolidated revenues declined by about 13% year-on-year to Rs.1,980 crore. The domestic FMCG business declined by almost 7% and volumes fell by 9.7%.
Dabur’s food segment greatly suffered during last quarter as consumers kept away from consuming any cold beverages, bringing down sales and hurting the sales growth. However, following the shift in strategy, it may take some time before it start-kick the sales and reflect in results.
With curtailing operating costs Dubar took a proper decision, particularly in advertising and publicity expenses. This helped earnings before interest, tax, depreciation and amortization (Ebitda) margin expansion of 91 basis points (bps).
During the pandemic, Dabur remains on a strong for healthcare products. For immunity built up, Dabur Chyawanprash grew nearly sevenfold last quarter, while Dabur Honey saw more than a 60% surge in demand during pandemic crisis.
For current estimates to be acceptable, the increased risk-taking must start showing results. In the past few months, Dabur has had more than 50 new launches. New product contribution improved to 6% of revenue. Sure, there is a flip-side to this as well. “Sustenance of this pool of revenue could be questioned since it would be contingent upon the success of the new launches,” said analysts from JM Financial Institutional Securities Ltd.
They added, “It’s quite well-known that >50% (or much more) of new product developments fail to take off after initial placements.”