• MAY 29, 1999

Colgate declares FY99 results

Colgate reported net profit of Rs 457 m in FY99. Excluding extraordinary profit of Rs35m (write back of provisions), net profit is Rs 422 m, a decline of 47% over FY98.

Net profit in the last quarter of FY99 was Rs147 m. Though still a decline of 16% compared to FY98, it is a significant increase over the average Rs 90-100 m profit reported in the previous 3 quarters of FY99.

Better results in the last quarter do not indicate any fundamental turnaround since higher profitability was led primarily by a 25% year-on-year (y-o-y) decrease in advertising.

Advertising (the key factor affecting Colgate's profitability) has increased 22% y-o-y in the first 3QFY99 and was led by higher competition. The cutback on adspend in the fourth quarter may not be sustainable since competitive activity in oral care continues to rise.

Besides advertising, higher cost of goods sold (COGS) also impacted margins. This is indicated by the fact that operating margin before advertising has decreased 3% in FY99 and the decrease was a steep 6% in 4QFY99.

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