India’s Dabur posts quarterly profit miss as consumption tax cuts disrupt sales

Indian consumer goods maker Dabur reported a smaller-than-expected rise in second-quarter profit on Thursday due to a temporary sales disruption after the government announced sweeping cuts to goods and services taxes (GST).

The company’s consolidated net profit for the September quarter rose 6.5% to 4.53 billion rupees ($51.5 million) from a low base, falling short of analysts’ average estimate of 4.55 billion rupees, as per data compiled by LSEG.

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Dabur, which retails fruit juices, health supplements and hair care products among others, had logged a one-time inventory adjustment in the year-ago quarter, pulling its profit down 18%.

The Indian federal government announced cuts to its GST system in August, making everything from toothpaste to small cars cheaper from September 22.

However, this resulted in a temporary sales disruption as consumers deferred purchases even as retailers and distributors rushed to clear inventory at older prices, delaying the flow of new orders.

Higher-than-expected rainfall and flooding in several parts of the country cooled temperatures and reduced demand for cold beverages in the quarter, weighing on Dabur’s sales.

The company’s revenue for the reporting quarter - up 5.4% to 31.91 billion - narrowly missed analysts’ estimate of 32.08 billion rupees.

However, its net profit margin of 13.94% remained steady, compared to 13.79% in the year-ago quarter.

In the near term, Dabur expects the GST cuts to be a key positive, as 60% of its portfolio that was taxed at rates of 12% and 18% will now see a levy of 5%, it said in a quarterly update.