Colgate: Efficiencies aid bottomline - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Colgate: Efficiencies aid bottomline

Jul 29, 2002

Oral care major, Colgate Palmolive India, has recorded a 15% dip in 1QFY03 net sales led by aggressive price competitiveness. The company has however, recorded a 19% growth in bottomline led by higher operating efficiencies.

(Rs m) 1QFY02 1QFY03 %Change
Net Sales (incl. Excise duty) 3,066 2,622 -14.5%
Other Income 71 64 -9.9%
Expenditure 2,840 2,319 -18.3%
Operating Profit (EBDIT) 226 303 34.1%
Operating Profit Margin (%) 7.4% 11.6%  
Interest 2 0 -
Depreciation 42 52 23.8%
Profit before Tax 253 315 24.5%
Tax 95 127 33.7%
Profit after Tax 158 188 19.0%
Net profit margin (%) 5.2% 7.2%  
No. of Shares (eoy) (m) 136.0 136.0  
Diluted Earnings per share* 4.6 5.5  
P/E (at current price)   24.6  
(*- annualised)      

The fact that HLL has lost some share in oral care during the June quarter, points to the fact that Colgate has gained some share back. However, the HLL management did indicate that Colgate has been able to do this by aggressive pricing posture. Both Colgate and HLL have indicated that the market for oral care products has not grown in FY02 and continues to be stagnant till date. Though Colgate, on a value basis, has logged in a topline decline for the quarter, on the volume front it has gained share. According to Colgate's press release, its All India toothpaste volume market share has improved to 50.6% in May 2002 (up from 49.9% in March 2002).

Cost break-up
(Rs m) 1QFY02 1QFY03 % change
- (Increase) / decrease in stock in trade 101 58  
- Raw & Packing Material Cost 401 312  
- Purchase of Goods 1,129 962  
Total Cost of goods 1,631 1,332 -18.3%
Staff Cost 151 162 7.3%
Advertising 658 502 -23.7%
Other Expenditure 400 323 -19.3%
Total expenditure 2,840 2,319 -18.3%

The reason for its 19% growth in profits is a significant improvement in operating margins (more than 400 basis point). This has come about largely due to efficiencies in working capital as well as pruning of the advertising expenditure. Colgate, as we know is one of the largest advertising spenders in the FMCG segment. Its ad to sales expenses are among the highest at 19% to 21%. Its ad to sales ratio during the June quarter stood at 19.1% (as compared to 21.5% in 1QFY02).

Though Colgate's performance is encouraging from the net profit angle, the topline continues to be a concern. The oral care market continues to stagnate at 90,000 tonnes per annum (Rs 21 bn). With both HLL and Colgate facing resistance in growing this pie, growth issues continue to haunt valuations. At Rs 136 the stock trades at 25x annualised 1QFY03 earnings.


Equitymaster requests your view! Post a comment on "Colgate: Efficiencies aid bottomline". Click here!

  

More Views on News

COLGATE Announces Quarterly Results (1QFY21); Net Profit Up 17.2% (Quarterly Result Update)

Aug 26, 2020 | Updated on Aug 26, 2020

For the quarter ended June 2020, COLGATE has posted a net profit of Rs 2 bn (up 17.2% YoY). Sales on the other hand came in at Rs 10 bn (down 4.7% YoY). Read on for a complete analysis of COLGATE's quarterly results.

COLGATE Announces Quarterly Results (4QFY20); Net Profit Up 3.3% (Quarterly Result Update)

May 27, 2020 | Updated on May 27, 2020

For the quarter ended March 2020, COLGATE has posted a net profit of Rs 2 bn (up 3.3% YoY). Sales on the other hand came in at Rs 11 bn (down 7.1% YoY). Read on for a complete analysis of COLGATE's quarterly results.

COLGATE 2018-19 Annual Report Analysis (Annual Result Update)

Sep 30, 2019 | Updated on Sep 30, 2019

Here's an analysis of the annual report of COLGATE for 2018-19. It includes a full income statement, balance sheet and cash flow analysis of COLGATE. Also includes updates on the valuation of COLGATE.

More Views on News

Most Popular

How the 8-Year Cycle Can Help Identify Multibaggers (Fast Profits Daily)

Sep 11, 2020

This is how you can apply the greed and fear cycle in the market to pick stocks.

Why am I Recommending Caution? (Fast Profits Daily)

Sep 9, 2020

This is why I have changed my short-term view on the market.

Why We Picked This Small-cap Stock for Our Hidden Treasure Subscribers (Profit Hunter)

Sep 17, 2020

This leading household brand will profit big time in a post covid world.

This Could Be the Best September for Auto Stocks (Profit Hunter)

Sep 11, 2020

Here's why I think this month could be a great for auto stocks.

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

COLGATE SHARE PRICE


Sep 22, 2020 (Close)

TRACK COLGATE

  • Track your investment in COLGATE with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

COLGATE - UNILEVER PLC. COMPARISON

COMPARE COLGATE WITH

MARKET STATS