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Colgate: Volume driven growth in FY00

May 30, 2000

Colgate Palmolive (India) Ltd reported an impressive growth of 12% in its turnover to Rs 11 bn over the previous year. Profit after tax before exceptional item jumped up by 23% to Rs 518 m.

(Rs m) FY1999 FY2000 Change
Sales 9,982 11,212 12.3%
Other Income 128 152 18.8%
Expenditure 9,143 10,231 11.9%
Operating Profit (EBDIT) 839 981 16.9%
Operating Profit Margin (%) 8.4% 8.7%  
Interest 2 2 0.0%
Depreciation 246 232 -5.7%
Profit before Tax 719 899 25.0%
Other Adjustments 35 -  
Tax 297 381 28.3%
Profit after Tax/(Loss) 457 518 13.3%
Net profit margin (%) 4.6% 4.6%  
Earnings per share 3.36 3.81  

The sales growth was boosted by 11% volume growth and aggressive advertisement expenditure which constitutes 17% of its total revenue. Continuing cost control measures have enabled the company to increase its operating margins to 8.7% in the current year.

The company has maintained its strong brand equity with investment in promotional expenditure. Its core brand Colgate Dental Cream's (CDC) market share increased by 2%. The market share of Colgate Toothpowder reached an all time high at 50% in March 2000.

In the oral care market, Colgate is facing stiff competition from HLL's close up and SmithKline Beecham Consumer's Aquafresh. However the company is able to increase its market share due to its unique brand and quality of the products provided by it.

During the year, the company has launched 6 new toothbrushes which enabled it to see 27% volume growth in the segment. Also in March 2000, Colgate has re-launched its popular "Palmolive Naturals" range of beauty soaps which has received encouraging consumer response.

At the current market price of Rs 165, Colgate is trading at a P/E of 43 times its FY00 earnings on a market cap to sales ratio of 2 times. In the past the company has enjoyed P/E in the range of 50-70 times. The valuation of the company is likely to improve with the change in the perception of investors from technology to FMCG.

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