Dabur India expects a mid-single-digit decline in revenue due to floods and inventory issues

New Delhi: Dabur India is expected to report a mid-single-digit decline in consolidated revenue for the September quarter, mainly due to heavy rains and floods in parts of India.

Adverse weather conditions negatively impacted out-of-home consumption and led to excess inventory at Kirana stores, the company said in its second-quarter earnings update on Tuesday.

“Although demand trends have improved somewhat, heavy rains and floods in various parts of the country impacted out-of-home consumption and consumer demand in the second quarter of FY25. As such, we have observed some impact on our business, particularly in the beverage category,” the company said in its stock exchange filing.

Dabur India is yet to announce its quarterly earnings. Manufacturers of fast-moving consumer goods are scheduled to report earnings in late October. The announcements will reveal whether consumers in rural and urban markets are spending more on daily necessities.

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The maker of Dabur Chyawanprash and Dabur Honey also announced plans to correct distributor stocks in general trade channels, which continue to be impacted by disproportionate growth in channels such as high-speed trade and modern trade.

“Over the past few weeks, we have seen disproportionate growth in organized channels such as modern trade, e-commerce and high-speed trade, which has led to increased general trade (GT) inventory levels impacting distributor ROI (return on investment),” it said business.

The company plans to correct distributor inventories and improve return on investment. “This proactive step, while leading to a temporary decline in revenue, is essential to the long-term health and hygiene of our company.”

Due to this correction, the company is expected to record a mid-single-digit decline in consolidated revenues this quarter.

“While this correction has taken place in the Indian business, the international business is expected to see double-digit steady growth in the value of currency in earnings. Badshah Masala business continued to grow well in the quarter, achieving double-digit growth,” the company added.

Analysts say this move will have a short-term impact on Dabur’s stock. The company’s shares closed today at ₹618.50, which is a decrease of 1.07% compared to the previous close on the National Stock Exchange

“The company is likely to see a 5% decline in consolidated sales (weak beverage sales) in Q2FY25, which will result in pressure on margins. This was due to pipeline correction in general trading due to heavy rains and on-demand flooding,” said Abneesh Roy of Nuvama Institutional Equities.

Roy said pipeline corrections and an expected strong La Nina winter could help the company post better third-quarter results.

As the company reported in its update, investments in advertising and promotions continued in the quarter.

“However, as a result of lower primary sales, our profitability this quarter will be impacted and operating margin this quarter is expected to decline in the mid to high teens due to targeted and continued brand investment. This interim corrective action is a necessary step to strengthen the GT channel and increase efficiency,” he added.

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