Note ban pulls down Dabur's Q3 profit 7.3%

Consolidated sales dipped 6.1% during the quarter to Rs 1,847.7 crore

Fast-moving consumer goods major Dabur’s net profit declined 7.3 per cent in the December quarter to Rs 295 crore from Rs 318 crore during the same quarter a year ago.

The company’s consolidated sales dipped 6.1 per cent during the quarter to Rs 1,847.7 crore from Rs 1,967.5 crore in the same period a year ago.

Demonetisation affected revenue as consumers cut down on discretionary spending. Dabur’s primary sales declined 7 per cent during the quarter.

“The wholesale trade was severely impacted by demonetisation and we witnessed massive destocking in the trade channel,” said Sunil Duggal, chief executive officer, Dabur India.

Increasing input costs affected the company’s profitability during the quarter. The cost of materials dipped from last year but the ratio of material cost to sales climbed to 51 per cent, year on year, from 48 per cent.

To address falling profits, Dabur to cut down advertising and media expenditure by 21 per cent to Rs 177 crore from Rs 225 crore during the same quarter a year ago.

“The business environment remained challenging with key geographies witnessing sharp currency devaluations. We have taken steps to efficiently manage the emerging risks and challenges,” Duggal said.

Dabur has changed its production plans, reduced inventory and tightened credit control. “We revamped our supply chain to focus on urban markets, particularly modern trade. We also stepped up direct distribution. These measures helped us report market share gains in key categories,” Duggal added.

Dabur in not the only FMCG company to face poor sales after demonetisation. Hindustan Unilever has reported a 4 per cent dip in sales during October-December. Its revenue fell by 0.7 per cent and profit grew 6.8 per cent as price hikes offset lower sales. ITC saw its net profit rise 0.67 per cent and revenue 2.6 per cent as tepid demand hurt sales.

Demand for consumer goods, weak for several quarters, was expected to revive in the second half of 2016 on a normal monsoon and a hike in pay and pensions of central government employees. But the liquidity crunch due to the note ban in November affected demand growth.

Dabur’s oral care products portfolio witnessed a 5 per cent decline in sales and its home care segment a decline of 20 per cent. The consumer care business posted Rs 1,562.5 crore sales, down 11 per cent from the same quarter a year ago. Revenue from overseas markets, which accounts for 30 per cent, remained flat in constant currency.