Colgate Palmolive has reported a 32% jump in net profits to Rs 176 for the second quarter ended September 2000. However if one were to exclude the profit of Rs 42 m from sale of a residential apartment (from other income), net profits have increased by marginal 0.8%.
Operating Profit (EBDIT)
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Diluted number of shares(m)
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During the quarter the company's advertisement to sales ratio increased to 19% of sales (from 17% in 2QFY00). Higher investment in brand equity building and rising raw material prices have resulted in more than 100 basis points decline in operating profit margins. However, Colgate's marketing initiatives has helped it to achieve volume growth of 7%.
The company has relaunched and introduced several brands during the quarter. This includes revitalization of 'Colgate Dental Cream', launch of low priced 'Colgate Herbal' toothpaste and new 'Colgate Navigator' - toothbrush with a flexible head.
At the current market price of Rs 149, Colgate is trading at a P/E of 29 times its 2QFY01 annualised earnings. We have projected a growth of 12.8% in sales and 15% in profits for the year ended March 2001. Based on the latest results we have to revise our projections due to higher other income and increasing promotional expenditure. The company's P/E was in the range of 50-60 times in the past 3 years.
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