MUMBAI: Dabur India, a maker of personal care and food products, plans to invest about $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 localized 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 capitalization 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.