Colgate Palmolive Q1 net up 43% YoY

Beating market expectations, oral care major, Colgate Palmolive registered a consolidated net profit increase of 43 per cent for the quarter ended June 30, 2009 to touch Rs 103 crore as compared to Rs 72 crore in the corresponding quarter last financial year.

The revenue for the first quarter this financial year increased by 15 per cent to touch Rs 468 crore as compared to Rs 408 crore in the corresponding quarter of the previous financial year.

During the quarter the company achieved a volume growth of 12 per cent, continuing its strong momentum in the toothpaste category which grew by 14 per cent. The maker of Colgate Dental Cream, Active Salt, and Cibaca has increased its volume market share in the toothpaste category to 52.3 per cent  for the period of  January to May 2009.
 
In the toothbrush category, volume market share has increased to 38.2 per cent and in the toothpowder category to 48.8 per cent in the January to May 2009 period.

The company's advertising and promotional expenses saw a dip of 16 per cent at Rs 58 crore as compared to Rs 69 crore during the same period a year ago.  The drop in spends was account of lesser number of new product launches, lower media rates and lower competitive scenario.

According to its press statement, "The company is continuing its efforts and focused programmes to enhance efficiencies and reduce costs. We have also benefitted on account of incentives available from higher production at Baddi and reduced income tax rates."

Anand Shah, FMCG analyst with Angel Broking said: "The higher-than-anticipated growth in bottom-line, despite 8.5 per cent year-on-year drop in other income, was aided by sharp margin expansion and 344 basis points (bps) reduction in tax rate. The benefits and incentives available from higher production at the Baddi Plant helped reduced the effective income tax rate."

On the operating front, the company delivered a sharp margin expansion of 557 bps to 22.5 per cent (16.9 per cent), despite 82 bps reduction in gross margins, aided by 455 bps reduction in advertising spends and 210 bps fall in other expenditure.

"We are positively surprised with the strong earnings growth posted by Colgate during the quarter, albeit due to reductions in advertising spends. However, steady volume growth and consistent marketshare gains during the last several quarters, despite cuts in ad spends, is indicative of Colgate’s strengthening position in Oral care market and benign competitive scenario," said Shah.

During the just concluded quarter, the Bombay High Court in Goa has sanctioned the amalgamation of the company's subsidiaries, Advanced Oral care products with professional Oral Care from April 1, 2008. The amalgamation has become effective July 1, 2009.