Dabur India increases its ad spends

MUMBAI: Dabur India delivered a good performance in June 2012 quarter. The major surprise of the June quarter numbers was the year-on-year 51% jump in its advertising and publicity expenses.

Dabur had kept its advertising cost in control over the past several months in order to maintain its profitability. However, the strategy seems to have changed as the company again has started pumping money in marketing its products.

Its advertisement to sales ratio increased by 310 bps year-on-year to 15.7% in March 2012 quarter. Its sales grew by 20% y-o-y to Rs 1462 crore, which its net profit grew by 17% to Rs 150 crore. Operating margins remained flat at 16% which is positive for the company considering the additional advertisement expense.

The second most diversified Indian FMCG company showed a healthy growth across segments. Its food business which contributes to around 15% of the company’s net sales grew by 31%, while its consumer care business which is 80% of its total sales grew at 15%. Its retail business ( Kaya Skin Clinic) continues to be loss making but the size of this business is negligible when compared to its overall business

Dabur’s stock closed 0.1% up at Rs 118 while the Sensex was down by 1.7%. The company’s stock is trading at a price to earning multiple of 31.