Market unhappy with Dabur's profit squeeze

[caption id=“attachment_2855” align=“alignleft” width=“380” caption=“Source:Dabur.com”]  [/caption]

Stock prices follow profit growth, pundits say. Dabur India, a listed FMCG company, announced an 8.5 percent rise in net profit at Rs 147 crore for the March 2011 quarter. Yet, the share price shed 2.3%. The stock market does not like the squeeze the company has faced on margins.Operating profit margin (operating profit as a % of net revenue) contracted to 17% vis–vis 18.4% in the March 2011 quarter. Rising input costs are now hurting the company’s profit growth. The stock market has quickly noted that and pared down expectations.

A similar trend was witnessed in case of Wipro. The consumer care and lighting segment reported a similar squeeze in margins. The operating profit margin for Wipro fell to 12% from 13.6% in the year-ago period.

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Key highlights for the quarter:

• Robust revenue growth of 30% to Rs 1,108.22 crore for the quarter ended March 2011, includes revenues from the recently acquired Hobi-Kozmetik ofTurkeyand Namaste Laboratories of theUS

• Raw material expenses increased by 57.5% to Rs 501.33 crore.

• Operating profit margin (operating profit as a % of net revenue) contracted to 17% vis–vis 18.4% in the March 2011 quarter

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• Consumer care business rose by 36.6% to Rs 873.30 crore

• Consumer health business rose by 12% to Rs 86.07 crore

• Foods business rose by 9.4% to Rs 126.44 crore.

• Company to focus on rural growth.

• For the year 2010-11, sales were up by 20.3% to Rs 4, 077.43 crore and net profit is up 13% to Rs.568.58 crore.