Colgate Q4 net profit up 15% as new launches boost sales
Moneylife Digital Team 31 May 2012

Colgate Palmolive India has reported healthy results, with 18% increase in quarterly sales and 15% increase in net profits despite a challenging economic environment

Colgate Palmolive India (Colgate), a leading fast moving consumer goods (FMCG) company, reported net sales for the quarter ended March 2012 at Rs685.9 crore, 18% higher than the corresponding quarter last year. Its net profit was Rs446.5 crore, an increase of 15% over the March 2011 quarter, which stood at Rs114.1 crore. Its growth was fuelled by volume growth of 12%, with toothpaste leading the category with an impressive 14% growth. Also, prudent price increases and cost management has enable the company to maintain steady operating profit margins, which has grown at a CAGR of 29% over the last three-and-half years.

The FMCG major’s net sales grew by 18%, which is in line with its historic year-on-year sales growth for its last three quarters which stood at 19%. In a challenging environment, its operating profit grew at 21%, which is less than its average year-on-year growth over the last three quarters, but impressive nonetheless. In an industry characterised by purchasing power of consumers, the fact that consumers are buying despite inflation and low buying power, essential products like toothpastes will sell and hence ‘recession-proof’. Its valuation might look a bit overpriced with a market-cap to operating profit of 24.42 times. Like Hindustan Unilever, Colgate has performed well in benign market conditions. Hence the markets could be attaching a premium to it, as it hopes that economic condition improve, going forward. However, an aggressive valuation in times of uncertainty would make a value investor, or for that matter any investor, uneasy. Having said this, the company has had a good history of marketing solid products which there is always demand. 

The company commands a market share of 54% in the toothpaste segment, which is up from 52.2%.  In the mouthwash category, it has a volume share of 26.2%, up from 25.7%. Apart from its flagship brands Colgate Dental Cream, Active Salt, MaxFresh, Colgate Sensitive and Colgate Total, the company has launched new products. It has launched Colgate Super Shine Toothbrush that provides circular bristles that helps remove stains from teeth. In the mouthwash segment, it launched another variant of its Colgate Plax Fresh Tea, which contains natural tea extracts. It also released Palmolive body wash variants as well as Palmolive Thermal Spa range.

The company has paid a total dividend of Rs25 per share for the fiscal ended 31 March 2012, as against Rs22 for the corresponding period last year. 

 

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