Dabur India's Q4 margins shrink as discounts, rising costs hurt

By Navamya Ganesh Acharya and Praveen Paramasivam

BANGALORE/CHENNAI (Reuters) -Dabur India Ltd said on Thursday discounts and higher material costs ate into margins in the fourth quarter, overshadowing strong demand for its packaged foods and home care products.

The company raised prices to combat costs, joining rival consumer goods makers like Hindustan Unilever and Nestle India, which have also passed on higher commodity costs to consumers.

However, raising prices on their products led to weaker sales, especially in rural India, companies have said.

To counter that, Dabur said it offered customers "promotions" to soften the impact on consumer spending.

The discounts, coupled with an almost 10% increase in material costs led to consolidated operating profit margin - a key earnings metric - slipping to 15.3% for the quarter ended March 31 from 18% a year earlier.

"We expect inflationary pressure to remain in the near term which will lead to delay in margin recovery," Prabhudas Lilladher analyst Amnish Aggarwal said in a client note.

Dabur shares closed 1.4% lower, taking their declines to nearly 6% this year.

CEO Mohit Malhotra said there are "near-term concerns around inflationary pressures" even as the Hajmola maker aims to invest in its brands and new launches.

However, demand from more well-off urban consumers helped Dabur's revenue from operations rise 6% to 26.78 billion rupees.

It benefited from a 10% growth in its homecare branch, which makes air fresheners and floor cleaners, and a 22% jump in its foods business.

Net income rose around 2% to 3.01 billion rupees ($36.79 million), Dabur said in an exchange filing.

Other consumer gods names have reported mixed results, with Adani Wilmar's earnings more than halving on lower prices, while Nestle India posted a 25% increase on higher prices and demand for its chocolates and instant coffee.

($1 = 81.8080 Indian rupees)

(Reporting by Navamya Ganesh Acharya in Bengaluru and Praveen Paramasivam in Chennai; Editing by Nivedita Bhattacharjee)