Colgate Palmolive Pakistan, one of the leading manufacturers of personal care and consumer products in the country, began its operations back in 1985 when the US granted the firm license to manufacture and market Colgate Palmolive products in Pakistan.
Currently, the firm is engaged in the production and marketing of some of the leading international brands of oral and personal care products, bringing a few of the world's most trusted household names such as Colgate Toothpaste and Palmolive Naturals to the Pakistani market.
Working under the umbrella of the Lakson Group, the company boasts of 450 distributors across the country and has been a KSE top performer, being listed amongst the Top 25 best performing companies for seven years straight as of 2012.
Financial highlights The company's accounts ended 30th June saw its Net Profits go through the roof, managing a 38.7 percent increase to top off Rs 1.6 billion versus Rs 1.17 billion recorded last year on account of a hefty top-line growth that saw sales climb by 28.6 percent year on year.
The steady growth in revenue, which amounted to Rs 18.71 billion- up from Rs 14.15 billion in the last year-came mainly off the back of the firm's well spent money devoted to advertisement and distribution as well as through effective in-store promotions which allowed the relevant brands to achieve steady volume growth thorough out the year.
The company managed to retain profitability as a result of their ongoing cost-saving initiatives which enabled to offset the exorbitant input prices hindering most other manufacturers. Consequently, the firm also made small price adjustments across various products to pass on the rising costs of packaging and raw material to the consumers, thereby ensuring that the Gross profit margin only saw a small decline, going down to 28.92 percent as compared to 29.40 percent.
However, despite the fact that the rising input prices dampened the firm's stellar top line growth somewhat, Colgate continued to steadily increase its overall spending on sales promotion which has been mainly responsible for the propagation of the company's sales volumes. Overall, the media and promotional spending increased by 43 percent, going up to Rs 1.6 billion as compared to Rs 1.1 billion spent during the same period last year.
The year-end also saw Colgate's financial position improve as the firm's cash and cash equivalents increased by 35.3 percent, signing off at Rs 840 million, up from Rs 620 million recorded during last year.
Key operational highlights In the previous quarter, Colgate Palmolive Pakistan had launched "Brite Anti Bacterial Detergent" powder, which was the first such product in the Pakistani market. Marketed as a detergent with a unique germ-busting formula, this latest innovation was hailed positively by the consumers. The product continued to strengthen Colgate's equity during the last leg of FY12, and was a major driver of sales volume growth.
In the dishwashing category, Colgate saw increasing competition from a number of local and imported brands, however, the firm arranged a brand re-launch for the entire Lemon Max range. This make-over saw one of the pioneer dishwashing products on the market undergo an overhaul and acquiring a new look. Formulated with real lemon juice, the re-launched Lemon Max boasted greater grease cutting powers in heavily circulating adverts, which allowed increased brand equity and sales growth.
Continued consumer engagement through initiatives in oral health education etc also managed to payoff for the oral healthcare division which saw its sales volume grow significantly during this period according to company reports. Colgate Max fresh launched a new campaign in May 2012 fronted by two well-known Indian stars which managed to garner major consumer attention. Apart from that the year also saw Colgate launch its 360- Sensitive Pro-Relief toothbrush, which was a major hit with the sensitivity relief segment in oral care.
Future outlook Significant investments into product and brand innovations have translated into market share gains across core categories for Colgate Palmolive Pakistan. Strong brand equity backed by an innovation centric policy has meant that the company has been able to easily meet its growth targets for the year ended June 30th.
In the long haul however, things remain slightly more uncertain. The pressures on the company's gross margins are likely to rise with the ever increasing raw material prices which is going to test the company's operational efficiencies. The Firm's management can only pass off so much additional cost to the customers and the ever increasing distribution expenses may also leach away from the company's margins.
Whether or not Colgate Palmolive can remain on track depends upon the firm's management's policies which must focus on aggressive expansion backed by continued cost-cuttings. However, since the foreseeable future for Pakistan remains mired in political uncertainty and unfortunate energy and law and order crises, the company is likely to face more pressure in the coming year.
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Colgate Palmolive Pakistan Ltd
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4QFY11 4QFY12 FY10 FY11 FY12
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Profitability
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Gross profit margin 0.31 0.31 0.33 0.29 0.29
Net Profit Margin 0.09 0.08 0.10 0.08 0.09
ROE 0.09 0.08 0.32 0.27 0.29
ROA 0.06 0.05 0.24 0.18 0.21
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Liquidity
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Current Ratio 2.43 2.39 2.85 2.21 2.68
Equity as a % of total asset 0.71 0.68 0.74 0.68 0.70
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Efficiency Ratios
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Total asset turnover 0.65 0.66 2.33 2.21 2.37
Fixed asset turnover 1.62 1.71 5.98 5.20 6.47
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Operating Results
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Year ended June 30th 2010 2011 chg 2012 chg
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Gross sales 14,584 18,132 24.3 23,328 29
Operating Income 1,775 1,796 1.3 2,258 26
NPAT 1,152 1,167 1.4 1,620 38.8
EPS 36 37 22.3 45 38.7
Shareholder's Equity 3,577 4,374 32.5 5,554 27
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