Moderation in inflation expected to help gross margin expansion: Dabur

Dabur news: Homegrown FMCG firm Dabur India on Thursday said it expects the improvement in gross margins to continue in the ongoing fiscal, encouraged by moderation in inflation and growth trends in urban and rural India witnessed in the quarter ended on June 30, 2023. In its quarterly update, the company said trends in both urban and rural India have shown signs of improvement in the first quarter.

"One of the key contributing factors to this positive development has been the reduction in inflation. Sequential moderation in inflation has positively impacted consumer spending power and is resulting in gradual improvement in offtakes in the industry," it said. The company further said, "The reduction in inflation is expected to lead to year-on-year gross margin expansion. We are channelising a major part of the gross margin expansion towards ramping up advertising and promotion (A&P) spends to ensure long-term success. Consequently, operating profit should grow in line with revenue growth."

Dabur said its consolidated business, including recently acquired Badshah Masala, is expected to register growth exceeding 10 per cent. "Our International business is expected to report a strong performance with double-digit growth in constant currency. Softening of inflation in international markets is having a positive impact on the business," the company said in its quarterly report.

However, Dabur said profit after tax (PAT) growth will be lower than operating profit growth mainly due to brand amortisation expenditure on account of acquisition. "For the full year, we expect improvement in gross margins to continue. The gross margin expansion will be allocated towards increasing our A&P spends and is also expected to result in improvement in our operating margin on an annualised basis," it added. Overall, the company said, "We are encouraged by the improving trends observed in the urban and rural markets in India, as well as the positive performance of our business segments. We remain committed to driving growth and profitability while navigating market challenges and capitalising on opportunities for the remainder of the fiscal year."

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