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Colgate: Margins come under pressure - Views on News from Equitymaster
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Colgate: Margins come under pressure
Oct 4, 2016

Colgate-Palmolive (India) has announced the first quarter results financial year 2016-2017 (1QFY17). While the topline increased by 12.4% YoY, the bottomline has increased by 8.4% YoY.

Performance summary
  • Total income grew by 12.4% YoY. Net sales (incl. excise duty) increased by 12.5% YoY. This was on the back of 6% volume growth, (Domestic volume growth was at 5% in the quarter), selective price increases and product mix changes. Other operating income grew by 4.3% YoY.
  • Operating profit margin declined by about 158 bps and stood at 18.5%. This is on the back of an increase in excise duty and advertising expenses. Excise duty increased 294 bps to sales due to expiry of tax holiday in its Baddi Plant in Himachal Pradesh. However, this was partly offset by Raw material cost to sales. The same has declined 240 bps benefiting from benign commodity prices.
  • Other Income increased by 24.6% YoY in 1QFY17.
  • Net profit for the quarter increased by 8.4% YoY on the back of marginal increase in operating profits. Income tax rate increased from 25.3% to 33.7% owing to phasing out of tax benefits in Baddi.

    Standalone Financial performance snapshot
    (Rs m) 1QFY16 1QFY17 Change
    Net sales (incl. excise duty) 10,147 11,415 12.5%
    Other operating income 72 76 4.3%
    Total income from operations 10,220 11,491 12.4%
    Expenditure 8,182 9,378
    Operating profit (EBDITA) 2038 2113 3.7%
    Operating profit margin (%) 20.1% 18.5%
    Other income 81 101 24.6%
    Interest
    Depreciation 253 316 25.2%
    Exceptional Items -313 0
    Profit before tax 1,553 1,897 22.2%
    Tax 394 640 62.6%
    Effective tax rate 25.3% 33.7%
    Profit after tax/(loss) 1,159 1,257 8.4%
    Net profit margin (%) 11.4% 11.0%
    No. of shares (m) 272
    Fully diluted EPS (Rs)* 21.6
    P/E (x)* 45.5

    *Based on trailing 12-months earnings

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