(Reuters) -Consumer goods maker Dabur India said on Tuesday that it saw a short-term moderation in sales during the second quarter ended September, as consumers deferred purchases and retailers rushed to liquidate higher priced inventory ahead of the government’s sweeping goods and services tax cuts.
The tax cuts went into effect on September 22.
The company said in a statement that it expects second quarter revenue to grow in mid-single digits, with operating profit to grow at a similar pace.
However, Dabur expects revenue growth to “regain momentum in the coming quarters,” benefitting from tax cuts and improving urban demand.
The tepid second quarter revenue and profit growth compares to a 5% decline in Dabur’s revenue and 18% drop in net profit in the same quarter last year, as it took a one-time hit from inventory reduction in mom-and-pop stores to account for consumers who were increasingly shopping at supermarkets and online platforms.
Following the goods and services tax cuts, key categories for Dabur such as oral care products, juices, hair oils and shampoos, which make up about 60% of its portfolio and previously saw tax rates of 12% or 18%, now face a 5% levy.
About 85% of Dabur’s portfolio will have a goods and services tax rate of 5%, the company said.
Dabur’s shares were up 1.5% after the quarterly update.
(Reporting by Ananta Agarwal in Bengaluru; Editing by Ronojoy Mazumdar)
