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Dabur India Limited is a leading FMCG company in India with a wide portfolio of brands. It produces various health, personal care, home care, and food products. Some of its major brands include Dabur Chyawanprash, Vatika, Fem, Real, and Hajmola. It has manufacturing plants located across India in states like Himachal Pradesh, Uttar Pradesh, Jammu and Kashmir, Rajasthan, and others. In the fiscal year 2014, its major categories by sales were consumer care, food, international business, retail, and others. It classifies costs as either fixed, variable, or period costs. Its cost structure based on the income statement shows
Dabur India Limited is a leading FMCG company in India with a wide portfolio of brands. It produces various health, personal care, home care, and food products. Some of its major brands include Dabur Chyawanprash, Vatika, Fem, Real, and Hajmola. It has manufacturing plants located across India in states like Himachal Pradesh, Uttar Pradesh, Jammu and Kashmir, Rajasthan, and others. In the fiscal year 2014, its major categories by sales were consumer care, food, international business, retail, and others. It classifies costs as either fixed, variable, or period costs. Its cost structure based on the income statement shows
Dabur India Limited is a leading FMCG company in India with a wide portfolio of brands. It produces various health, personal care, home care, and food products. Some of its major brands include Dabur Chyawanprash, Vatika, Fem, Real, and Hajmola. It has manufacturing plants located across India in states like Himachal Pradesh, Uttar Pradesh, Jammu and Kashmir, Rajasthan, and others. In the fiscal year 2014, its major categories by sales were consumer care, food, international business, retail, and others. It classifies costs as either fixed, variable, or period costs. Its cost structure based on the income statement shows
DABUR INDIA LIMITED I ntroduction Brief profile of the company Dabur is a leading FMCG player with a wide portfolio of brands, a robust distribution of network. With a deep-rooted understanding of consumer preferences and behaviour dabur is ahead of other companies even in the face of challenging economic environment.To fulfil the changing needs and aspirations of their consumers dabur take proactive measures to adjust their profile and portfolios. They are creating newer channels of growth to optimise their distributed network. With a portfolio of over 400 products, Dabur is todays Indias largest Natural Health & Personal Care Company. Innovation has always been the lifeline of our business and Dabur has, over the past one year, introduced around 30 new products and variants across the globe, straddling a variety of consumer segments. These new introductions, like their existing range, are aimed at meeting a single goal Dedicated to the Health & Well-Being of every Household.
Main products -Master Brands of Dabur
DABUR CHYAWANPRASH VATIKA FEM REAL HAJMOLA
-Major Products
i. Personal Care: Dabur presents a range of Herbal & Ayurvedic Personal Care products, created to make you look and feel good. Bringing together the gentle touch of nature and Ayurveda's wisdom, the range covers categories like Hair Care, Skin Care and Baby Care, and is backed by the unfailing quality stamp of Dabur.
ii. Health Care: Dabur's Health Care range brings for you a wide selection of Ayurvedic and natural products that offer complete care for varying individual needs. Products are derived from the time-tested heritage of Ayurveda, and backed by the most modern scientific test & trials that ensure unfailing quality and safety in anything you pick. iii. Food Home Care: Dabur India Ltd has a portfolio of superior products that help take care of home. The range of Home Care products have been carefully developed to ensure that your living space not only looks good, but also smells good, all day long. And more importantly, they help keep your family healthy. Odonil keeps your home fresh and smelling great. Odomos protects your family from disease causing mosquitoes while Odopic leaves your dishes clean and smelling fresh. Sanifresh Shine keeps your toilet sparkling clean and free from germs while our latest innovation Dazzl gives a mirror like shine to your floors, kitchen and glass surfaces, while keeping them germ-free.
iv. Consumer Health-Ethical: For over 125 years, Dabur has mastered the art of producing Ayurvedic preparations, blending traditional knowledge of drug manufacturing with scientific update. Today, Dabur's Consumer Health Division - - which looks after marketing of Ayurvedic medicines and Ayurvedic Over-The- Counter products -- has redefined the Ayurvedic market and healthcare promotion activities involving leading Ayurvedic practitioners across the globe. At Dabur, has more than 350 Shastriya (Classical) Ayurvedic preparations, which form an important part of every Ayurvedic practitioners daily practice.
v. Professional Range: Dabur is Indias largest natural beauty products company. Leveraging its expertise in Ayurveda and its over 127 years of natural heritage, Dabur has now developed a range of highly differentiated and efficacious products specially for the professional. These products would be available exclusively to the parlours and salons across India through our 180-member strong & dedicated parlour professional team.
vi. Guar Gum: Dabur India is one of the foremost companies who started manufacturing guar gum and other natural gums products in India. The manufacturing facility was christened as Natural Gums Division. With over 30 years rich experience, Dabur India is supplying its natural gums products under brand name DABISCO. DABISCO products are well accepted and appreciated by customers globally for consistent premium quality and rich properties. I ndustry Group Household and Personal Products The household and personal products industry consists of total revenues generated through the sales of household and personal products. The household products segment includes air fresheners, bleach, dishwashing products, furniture & floor polish, general purpose cleaners, insecticides, paper products, scouring products, shoe polish, textile washing products, toilet care products and others. The personal products segment includes baby personal care, feminine care, fragrances, hair care, make-up, male toiletries, oral hygiene, OTC healthcare, personal hygiene, skincare and others. Dabur india sells these kinds of products and so it falls under this category of Industry group.
Table 1:I nstalled and utilized capacity for the last two years
Category wise contribution-consumer care business Sales food international business retail consumer care other
1. Cost categories a. The classification of the cost are as follows:
EXPENSES FIXED COST VARIABLE COST PRODUCT COST PERIOD COST Depreciation Y N Y N Rates And Taxes Y N N Y R&D Y N N Y Auditor's Remuneration Y N N Y Security Y N N Y Insurance Y N N Y Director's Fee Y N N Y Telephone and Fax Y N N Y Legal and Professional Y N N Y Repair and Maintenance Building Y N N Y Rent Y N N Y Advertisement Y N N Y Sales skin care health supplements digestives OTCðical hair care home care Repairs To Machinery N Y Y N Direct Labour N Y Y N Raw Material N Y Y N Primary Packing Material N Y Y N Power and Fuel N Y Y N Stores and Spares N Y Y N Excise Duty N Y Y N Sales tax N Y N Y Freight and forwarding N Y N Y Travel and Conveyance N Y N Y Commission and Discount N Y N Y
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b. Table 2: Cost structure as per income statement
Income statement Industry Average value Company Year end 2014 2013 2012 2014 2013 2012 Number of companies 174 100 115 Gross Sales 540.3644 758.165 638.3235 4926.2 3796.3 3311.6 Less: Excise 18.66264 27.562 22.4313 56.1 38.7 31 Net Sales 521.6598 730.556 615.8426 4870.1 3757.5 3280.6 EXPENDITURE : Increase/Decrease in Stock -5.08563 -4.241 -2.86435 -12.6 -59.3 -78.3 Raw Materials Consumed 248.4701 332.126 286.9087 2575 2086.6 1729 Power & Fuel Cost 7.734483 12.599 15.79217 49.9 46.4 42.4 Employee Cost 23.30747 36.131 28.29304 331.1 233.2 208.9 Other Manufacturing Expenses 36.1046 54.89 44.99217 65.4 52.4 49.9 General and Administration Exp 61.55 76.731 67.76174 302.7 225.2 182.6 Selling and Distribution Expenses 69.40172 105.191 78.89217 718.3 505.6 487.6 Miscellaneous Expenses 14.26897 23.338 17.23478 14.6 37.8 38.9 Less: Pre-operative Expense 0.350575 1.021 0.887826 0 0 0 Total Expenditure 454.7747 635.743 535.1757 4044.4 3127.9 2661 PBIDT (Excl OI) 66.88506 94.813 80.66696 825.7 629.6 619.6 Other Income 11.92701 16.927 10.00261 109.6 55.1 26.4 Operating Profit 78.12356 111.74 89.62783 935.3 684.8 646 Interest 4.774138 4.751 5.014783 19.4 14.1 12 PBDT 73.35057 106.989 84.61478 915.9 670.7 634 Depreciation 8.887356 13.182 12.42348 53.9 38.7 37.7 Profit Before Taxation 64.52471 93.807 72.28435 862.1 631.9 596.3 Exceptional Income / Expenses 1.012069 6.62 1.627826 -0.7 -44.9 0 Profit Before Tax 65.53678 100.427 73.91217 861.3 587 596.3 Provision for Tax 16.64655 25.296 20.35913 189.2 123.8 124.9 PAT 48.89023 75.131 53.55304 672.1 463.2 471.4 Appropriations 90.74425 140.995 98.63739 0 0 0 Dividend(%) 75.50115 125.63 88.41391 1762.1 1177.5 998.3 EPS 8053.621 614.362 282.867 175 130 115 Book Value 15725.75 1968.244 -281.871 3.9 2.7 2.7
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c. Table 3: Income statement analysis of industry and company Analysing the growth rate of industry and the company for the year 2013-2014, Income statement 2013-2014 Industry Company Gross Sales -29% 30% Less: Excise -32% 45% Net Sales -29% 30% EXPENDITURE : Increase/Decrease in Stock 20% -79% Raw Materials Consumed -25% 23% Power & Fuel Cost -39% 8% Employee Cost -35% 42% Other Manufacturing Expenses -34% 25% General and Administration Exp -20% 34% Selling and Distribution Expenses -34% 42% Miscellaneous Expenses -39% -61% Less: Pre-operative Expense -66% Total Expenditure -28% 29% PBIDT (Excl OI) -29% 31% Other Income -30% 99% Operating Profit -30% 37% Profit Before Tax -35% 47% Provision for Tax -34% 53% PAT -35% 45% Dividend(%) -40% 50%
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We can see that the growth rate of industry net sales for the fscal year 2013-2014 was negative, while the company recorded a growth in the net sales by about 30%. The cost of raw materials consumed were more than the industry average mainly attributing to the increased sales.
2. Performance Metrics Dabur India experienced a very strong growth rate in the past year with figures as follows: Sales increased by 15.1% to 7071 crores, profit increased by 19.7% to 913.9 crores. It has a market capitalisation of more than 5 billion dollars. The sales and promotion expense for the last year was 502.4 cr. This year expense is 581.1 cr. So increase in Advertisement expenses is 15.66%. The companys EBIDTA increased to 1288 crores thus causing an increase of 17.4%. From the annual reports it can be said that demand in rural markets is higher than that in urban markets. Dabur gives importance to customer requirements, tastes and causes a metamorphosis of their products and also launch new products.
An initiative on cost cutting involved energy conservation where they managed to reduce fuel usage at manufacturing plant by 25% despite an increase in production. YSLP(Young Sales Leadership Programme) has been launched with the objective to let them have a good sales knowledge by providing them with a 30 months training programme.
Daburs R&D has been successful in producing newer products under various categories.An efficient internal control system ensures that all assets are safey handled, protected and transactions are authorised, reported correctly. The highlights of Dabur India Ltd's performance during fiscal 2013-14 on a consolidated basis are: Net Sales grew by 15.1% to Rs. 7,073.2 crores in fiscal 2013-14 from Rs. 7,147.4 crores in fiscal 2012-13 Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) increased to Rs. 1,287.9 crores in fiscal 2013-14, from Rs. 1,097.7 crores in fiscal 2012-13, recording a growth of 17.4% Profit After Tax (PAT) increased to Rs. 913.9 crores in 2013-14, up 19.7% from Rs. 773.4 crores in 2012-13 Earnings Per Share (EPS) increased to Rs. 5.21 in 2013-14 from Rs. 4.35 in 2012-13 Consolidated sales has increased by 13.2%. International business has contributed to 35% of growth sales. International business grew by 18%. The key performance indicators are as follows: Net Sales (Rs. 7073.2 crores, up by 15.1%) Net Profit (Rs. 913.9 crores, up by 19.7%) Market capitalisation (US$ 5 bn+) International Business contribution (35%) Retail footprint 5.3 million outlets Billion - Rupee brands - 14
3. Modern techniques and the industry standards
The challenge faced by the company nowadays while manufacturing and marketing various products is with a wide range of raw materials that need to be tracked. If an accurate forecasting of the quantity of raw materials is not maintained, there occurs an ineffectiveness in capital management as storage cost increases due to accumulation of piles of inventory accompanied by risk of damage for perishable materials. Thus comes an inventory management system combining all related departments like manufacturing, marketing, sales and supply chain. The finance department helps in linking all these operations and controls information flow through various departments. Based on the sales forecast for the upcoming period, the sales department makes the product- wise requirement for the finished goods and sends this information to the production department which prepares an estimated analysis of raw material requirement to meet production targets. Thereafter the information on raw material requirement is sent to the purchase department. The production department with its accurate estimate thus resists excess purchase of raw materials and contributes to reduction in the storage cost.
Although the company uses JIT(Just-in-Time) approach to procure materials, however this method is not suitable for agricultural products with materials available at cheaper prices post cultivation phase. But they should collect the materials on-season in abundance and store otherwise they have to suffer huge costs in off-season months. Often sufficient stocks are stored and used for both current(40%) and next year(60%).
Dabur India uses value engineering tool to identify and develop more cost effective materials.
4. Table 4: Analysis of overheads and identification of overhead drivers OVERHEAD COST Allocation basis Depreciation(Equipment) machine hours used Rates And Taxes prod/unit R&D divisional sales Auditor's Remuneration divisional sales Insurance divisional sales Director's Fee divisional sales Telephone and Fax divisional sales Legal and Professional divisional sales Repair and Maintenance Building Floor area Rent Floor area Advertisement divisional sales Travel and Conveyance divisional sales Commission and Discount prod/unit Sales tax prod/unit Excise Duty prod/unit Power and Fuel prod/unit
5. CVP relationship and change in profits Calculation: (Data taken from annual report 2013-2014) Total expenses=6089.64 COGS(Variable Cost)=3400.03 TOTAL FIXED COST= Total expenses-COGS =6089.64-3400.03 =2689.61 NET SALES=7073.2
P/V RATIO=Contribution Net sale =3673.17/7073.2 =0.5193
Expected profit=1000 (assumed considering last years profit)
Expected sales in rupees=((expected profit+total fixed cost)/P/V RATIO )
=((1000+2689.61)/ 0.5193)
=Rs. 7104.85Cr. Table 5:Sales Estimation Particulars Amount (in Crores) Total Expenses 6089.64 Cost of goods sold 3400.03 TOTAL FIXED COST 2689.61 NET SALES 7073.2 CONTRIBUTION 3673.17 P/V RATIO 0.519308093 EXPECTED PROFIT 1000 EXPECTED SALES IN RUPEES 7104.85