Management Discussion & Analysis
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DABUR INDIA LIMITED ANNUAL REPORT www.dabur.com Report on Corporate Governance 06 Auditors’ Report 17 Consolidated Financial Statements 25 Directors’ Report 13 Financial Statements 18 Statements as per US GAAP 31 CHAIRMAN’S MESSAGE BOARD OF DIRECTORS Dear Shareholders, Dabur's traditional ayurvedic business is under- taken by the Consumer Healthcare Division. This busi- Mr V C Burman Chairman oday India is at the forefront of global economic ness consistently recorded high growths throughout activity and investments on account of its strong the year. With sales of Rs.148.6 crore, it has registered Dr Anand Burman Vice Chairman Teconomic growth and stellar corporate perfor- 38.7 per cent growth. This growth has been led by a mance. The GDP in India has grown at 8.5 per cent, number of initiatives like reaching out to the con- Mr Pradip Burman Director 7.2 per cent and 8.1 per cent in the last three years. sumers directly through Dabur Ayurvedic centers, or- The consensus among analysts is that India has gone ganising health camps, vaid meets, collaborating with Mr Amit Burman Director beyond the point of inflexion and is poised for a peri- the academicia, etc. We identify our healthcare busi- od of sustained high growth. ness as one of the growth drivers in future. Increasing Mr P D Narang Director However, the FMCG industry had not kept pace preference for natural remedies is likely to ensure a with this overall economic growth. The period 2000- sustained demand for our ayurvedic products. Mr Sunil Duggal Director 2004 saw low rates of growth in demand for FMCG The group's foods business under Dabur Foods products leading to intense competition between com- Limited, a wholly owned subsidiary of your Compa- HH Maharaja Gaj Singh Director panies and severe pricing pressures. It has often been ny grew by over 46 per cent to reach sales of Rs.190 postulated that a few consecutive years of sustained crore. Today, many of its products, especially its juices Mr R C Bhargava Director high growth is necessary for overall economic pros- under the brands Real, Real Activ and Coolers are perity to translate into benefits for the FMCG sector. found in every household and account for almost 57 Mr P N Vijay Director In 2005-06, on the back of 3 consecutive years of strong per cent of India's juice market. During the year, the economic growth, the fortunes of the FMCG industry business more than doubled its profit due to scale and Mr Stuart Edward Purdy Director as a whole have started to look much better. operational excellence and has become a significant The FMCG sector will continue to gain from the driver of growth of your Company. Changing lifestyles Dr S Narayan Director fact that domestic consumption is growing both on and modern retail formats are expected to benefit the the urban as well as the rural front. Successful busi- foods business in future. nesses of the future will have to reach out to the vast I would also like to share with you your Compa- semi-urban and rural markets in India. The low lev- ny's overseas business performance. Overseas busi- els of FMCG market penetration in rural and semi-ur- ness grew at 19% with markets such as GCC growing ban India coupled with improved economic condi- at 27% and Egypt at 49%.There is a lot of potential for PERFORMANCE HIGHLIGHTS tions provide considerable scope of growth in these Dabur products in the international market. During areas. Your company with its product mix and sales the year, your company has reorganised its interna- FMCG+Pharma Pharma FMCG and distribution network is well positioned to lever- tional business around the focus, potential and op- 200 age its strengths and consistently deliver high quali- portunistic markets to be able to tap its potential to the 1600 50 ty products at affordable prices in these markets. In fullest. A subsidiary has been established for Pakistan 183.8 160 40 1200 189.08 addition the consumer spends in urban areas are in- market to leverage on Dabur's equity there. 43.1 38.7 creasing with rising affluence, changing lifestyles and On the operational front, the company's manu- 1369.7 120 30 34.9 13.1 1268.72 148.02 a seeming up-gradation to premium / higher end prod- facturing unit at Uttaranchal crossed Rs 500 crore pro- 1163.2 800 1148.0 1048.5 ucts. Your company has a good portfolio of brands and duction in a span of just 18 months. Your company is 80 20 27.2 101.2 products catering to this market as well. the first company in Uttaranchal to achieve this mile- 72 400 In 2005-06, your Company has successfully lever- stone. It has become the largest employer in the re- 40 10 14.5 aged the revival in the FMCG sector and combined it gion and has added to the region's economic pros- 64.44 with laudable improvements in costs, productivity, ef- perity. Going ahead further capacity expansion has 0 0 0 2001 ’02- ’03 ’04 ’05- 2001 ’02- ’03 ’04 ’05- 2001 ’02- ’03 ’04 ’05- ficiency and supply chain management to deliver su- been planned for this unit. Also, the Silvassa unit that -02 03 -04 -05 2006 -02 03 -04 -05 2006 -02 03 -04 -05 2006 perior growth in revenues and even more so in profits. came with the acquisition of Balsara is being up- graded/transformed into an EOU to cater to the export SALES PROFIT AFTER RETURN ON Some key achievements are- requirements. During the year, the company spent its (Rs crore) TAX CAPITAL I Consolidated net sales from operations increased time and resources to migrate to an improved ERP (Rs crore) EMPLOYED (%) by 23.6 per cent from Rs.1,537 crore in 2004-05 to platform- SAP to ensure best business practices. The Rs.1,900 crore in 2005-06. target of going live on 1st April 2006 on SAP was suc- I Consolidated profits after tax (PAT) after accounting cessfully met. for minority interests and exceptional items grew The Institute of Companies Secretaries of India by 37.5 per cent from Rs.155.8 crore to Rs.214.2 crore. conferred upon Dabur the 'National Award for Excel- I Return on capital employed (ROCE) increased from lence in Corporate Governance' for the year2005. The 31.5 per cent to 39 per cent. company's CFO was recognised as one among the best MANAGEMENT I Return on net worth (RONW) increased from three CFOs of the country for the year 2005 by Busi- 43.5 per cent to 46.1 per cent. ness India. Your company has always made concert- I Fully diluted earnings per share (EPS-diluted) rose ed efforts to ensure highest levels of disclosures, trans- DISCUSSION & ANALYSIS from Rs.2.71 to Rs.3.71. parency and corporate governance. Such recognition further motivates the Company towards continuing I would like to touch upon some of the key devel- its efforts in this direction. our years ago, Dabur India Limit- Revenue from operations increased opments that occurred during the year 2005-06. A major survey conducted by two reputed HR con- ed (“Dabur”, ‘DIL” or “the compa- by 8 per cent from Rs.1,269 crore in As you know, we had acquired the Balsara busi- sulting firms and published in the Business World list- ny”) had laid down its long-term 2004-05 to Rs.1,370 crore in 2005-06 ness in the current year. Integration is the key to any ed your Company as one of the top ten 'Great Places To Fplan of transforming to focused Operating profit (EBIDTA) increased successful acquisition. I am delighted to inform you Work'. This is a creditable achievement for your com- and transformed FMCG player. The by 29.5 per cent from Rs.188 crore in that due to the focussed efforts of your Company and pany and recognizes its efforts to empower its employ- blueprint involved developing and im- 2004-05 to Rs.243 crore in 2005-06 the Balsara team, the integration was successfully com- ees and keep them fully motivated and aligned with the plementing marketing initiatives based Profit after tax (PAT) increased by pleted within the first six months of acquisition. Bal- Company's goals. on a clear strategic plan with a restruc- 27.7 per cent 20 sara's home care and oral care products have been well During the year your Company made a bonus is- tured brand architecture, continuous- from Rs.148 positioned in the overall Dabur portfolio and have sue of one share for every share held thereby reward- ly introducing a stream of new products crore in demonstrated good potential for growth. Also we have ing the shareholders for its outstanding growth in the and creating a niche for the company in 2004-05 to turned a loss making business into a profit making one. past few years. The Company also declared a dividend the FMCG segment based on the “herbal Rs.189 crore Operational integration completed, the process of merg- of 350% on pre-bonus capital, the highest till date. and natural” products platform. In 2005- in 2005-06 ing the three Balsara entities with Dabur is underway I would like to take this opportunity to thank all 06, Dabur has surpassed all the key mile- Return on and will further contribute to shareholders' value. the employees, vendors and distributors for their com- stones set out in this plan. Today, these capital Dabur's Consumer Care Division, which comprises mitment and hard work leading to the Company's suc- drivers are firmly entrenched in Dabur of the core FMCG business has performed well dur- cess.