Dabur to invest $20m in African plants

Dabur India , a maker of personal care and food products, plans to invest about USD 20 million to build plants in Africa as competition intensifies in its home market. Dabur's international business, which contributes about a third of the company's sales, grew 38 percent in the third-quarter to December 31, excluding acquisitions. The growth was led by its business in Nigeria, where sales rose 33 percent. The company said on Tuesday that would invest 1 billion rupees over two years to build facilities in Morocco and in southern and eastern Africa, and will add capacity to existing plants in Nigeria and Egypt. Dabur acquired Namaste Laboratories LLC in the United States and Hair Rejuvenation and Revitalisation Nigeria Ltd last year. "The intention is to do local manufacturing in those countries and get the supply chain localised as much as possible to avoid the very high duties which otherwise come in," Chief Executive Sunil Duggal told Reuters. Indian consumer companies have been investing heavily in overseas operations by way of acquisitions and new plants to offset fierce competition and inflationary pressures at home. Dabur makes health and hair care products under the "Dabur" and "Vatika" brands and fruit drinks under the 'Real' brand. In India, it competes with multinationals such as Hindustan Lever as well as local companies such as ITC Ltd . Easing inflation in India will allow Dabur to make fewer price increases in the coming months, Duggal said. The company, with market capitalisation of $3.3 billion, raised prices by 3 percent in the December quarter. "We are still witnessing some inflation in the home and personal care categories, which hurt our margins in this quarter," Duggal said. "But inflation has largely peaked and it will go down from the earlier highs. So price hikes in the coming months will be few and far between." High advertising and promotional spending also squeezed margins but the company will continue to heavily invest in promotional spends in the next fiscal year, Duggal said. "We can gain back the lost margins when the economy improves. We are concentrating on building market-share, which once lost is difficult to gain back," he said. Earlier, the company said consolidated net profit rose 12 percent to 1.73 billion rupees in the quarter on a 34 percent rise in sales to 14.5 billion rupees. Analysts had expected a profit of 1.74 billion rupees, according to Thomson Reuters I/B/E/S.

The results for the quarter included its two acquisitions, so the latest figures are not strictly comparable with those of a year earlier, the company said. "The currency impact in the third quarter was quite big. We did not expect it at the pace at which it happened," Duggal said. Consolidated sales, excluding acquisitions, rose 21 percent of which 11 percentage points was driven by volumes and the rest by price increases. Profit from the Indian business fell 20 percent to 1.02 billion rupees. Dabur shares closed 1.84 percent higher at 94.2 rupees in a firm Mumbai market.

Expect Sri Lanka arm to boost margins: Dabur India

Sunil Duggal, chief executive officer, Dabur India in an interview to CNBC-TV18 said that the new subsidiary in Singapore is expected capture better margins. He said, "We could feed South India markets from Sri Lanka as against from Rajasthan and Nepal where two of our plants are located. There would be supply chain upside with regard to freight." Dabur would be producing 'Real' brand of beverages in this plant. Production in this plant is expected to commence in August 2012. Below is the edited transcript of Duggal's interview with CNBC-TV18. Also watch the accompanying video. Q: I understand that you are going to make some important announcements on Sri Lankan subsidiary? A: We are planning to set up a plant in Sri Lanka. We have signed an agreement with the board of industries of Sri Lanka. The plant should go on stream by next year August-September. This is a fairly significant investment which will augment our capacity in the juice segment. Q: What items will you produce there? Will margins be much better in that location? A: Yes. It would be. We would largely produce Real brand of our beverages. We would also produce some cosmetic and toiletry items. But the plan for the next year is confined to beverages. The margins would be better because we could feed south India markets from Sri Lanka as against from Rajasthan and Nepal where our current two plants are located. There would be supply chain upside with regard to freight. We could capture better margins out of Sri Lanka than we are currently doing so.

Q: The international sales of Dabur which according to reports is basically doing better than the domestic sales for the company. Take us through this strategy and what we could expect in terms of contribution from international sales vis--vis domestic? A: The international sales today are around 30% of total business. They are going ahead of domestic sales but not by very wide margin. Growth overseas is around 18-20% excluding the acquisitions as against 13-14% in the domestic space. That is the pattern which we have seen over the last few years and that continues. Even though overseas growth has come down a little bit this year than earlier because of local political uncertainties in the Middle East. Going forward we would see overseas sales inching ahead of domestic in terms of growth. But domestic sales would be the dominant portion. The ratio would be around two-thirds, one-thirds in favour of domestic over the next three-five years. If there were other acquisitions which may or may not happen then the ratio could be skewed quite differently. Q: We have seen fairly decent monsoon - have you noticed any fall in your raw material prices and what are your plans in respect to passing on the prices which you could not do in the first quarter? A: There are some visibility in terms of softening of commodity prices. The impact of which will be felt towards middle and the latter part of the year. We would start capturing some upsides in the third quarter. The second quarter has been the worst in terms of inflationary impact. We have been sitting on very high price raw materials so the numbers would be impacted by that fact. Having said that, the outlook seems to be much more benign.

Dabur to spend USD15m on new beverage venture in Sri Lanka

FMCG company Dabur India is entering Sri Lanka, and will invest USD 15 million to set up an exportoriented facility for producing a range of fruit-based beverages in Gampaha, north of Colombo. The new manufacturing facility will have a capacity to produce 2.8 lakh cases of fruit-based beverages every month, and will be commissioned in August-September 2012, the company said Tuesday. It has set up a new subsidiary Dabur Lanka Pvt Ltd for the venture. The plant will initially employ 75 people when operational, and the company plans to increase number of staff to around 200 by 2013-14. "Our fruit-based juices and beverages under the Real brand have been reporting strong growth month-on-month. Dabur's Food business had reported over 28% growth in 2010-11 despite the supply constraints. As continued high growth is expected in the future too, we are setting up this

new facility to augment our production capacity for fruit-based beverages and meet the growing demand for our products," Dabur India's CEO Sunil Duggal said. Apart from Sri Lanka, Dabur already has manufacturing units in neighbouring Bangladesh and Nepal. It also has facilities in Dubai and Ras-al-Khaimah in UAE, apart from Nigeria, Egypt and Turkey. Dabur India shares were trading up 1% at Rs 102.65 on NSE in afternoon trade.

Dabur to enter Sri Lanka, invest $15m in beverage plant Consumer products maker Dabur India Ltd said on Tuesday it plans to invest USD 15 million in Sri Lanka to set up a new export-oriented manufacturing facility for producing fruit-based beverages. The company has signed an agreement with the Board of Investment of Sri Lanka for this venture, the company said in a statement. The new facility will have a monthly capacity of 280,000 cases of fruit beverages and will be commissioned in Aug-Sept 2012. $1=49.195 rupees