Home-grown FMCG firm Dabur said consumption pressure continued across the sector in the April-June quarter of FY23 on account of "unprecedented inflation", which has impacted the share of the income available for spending on consumer staples.
"This was witnessed across urban and rural markets," said Dabur in its update for the quarter ended on June 30, 2022.
In this challenging macro environment Dabur's India business has been "fairly resilient", and is expected to report "high single-digit revenue growth" on a very high base of 35.4 per cent revenue growth in Q1 FY22, it added.
"This is backed by mid-single-digit volume growth. Food & beverages vertical has seen strong double-digit growth in the quarter on the back of improving out-of-home consumption, innovation and intense summer season," said Dabur.
The company said its international business is expected to register a "high single-digit revenue growth" during the April-June quarter in constant currency.
However due to currency devaluation, particularly of Turkish Lira, the reported growth in Indian rupees would be in the low single digit.
"Overall, the consolidated revenue is expected to grow at mid to high single digits. We continue to grow ahead of category growths and gain market share in most of our segments," said Dabur.
On the profitability front, inflationary pressures continue to "impact input costs" such as crude led derivatives, vegetable oils, honey and other agri-based commodities.
The company has gone for a judicious price increase and embarked on cost-saving initiatives to mitigate the impact, it said.
"However, the input cost pressure combined with portfolio mix changes have led to a near-term impact on the operating margins which are expected to be lower by around 200 bps as compared to Q1FY22, with margins normalising to pre-Covid levels for Q1 despite unprecedented inflation. During Q1 of FY22 and FY21, the operating margins were higher than normal due to Covid-led surge in healthcare vertical," it said.
The company continues to target higher than industry growth on a medium- to long-term perspective with stable margins, although there are near-term inflationary pressures, said Dabur.
"In spite of high inflation and near-term consumption pressure, the company will continue to invest behind power brands, innovation, A&P, distribution expansion and a strong back-end which will help us drive long-term sustainable growth of the business," it said.
Dabur's update provides an overall summary of the performance and demand trends witnessed during Q1 FY23 and this will be followed by detailed financial results once the board approves the financial results for the quarter ended June 30, 2022.
