Colgate Palmolive Ltd (PSX: COLG), one of the leading multinational consumer goods company in Pakistan, has ended the financial year FY16 on a pleasant note. Despite the fact that during the year it faced with the challenging market environment due to higher competition, the Company reported a 27 percent year-on-year growth in after-tax profits.
The key growth driver for the firm has been its oral care segment, and once again it has contributed the highest in its top line during the period under discussion. At the same time, the fabric care and dishwasher division have also started to perform well. Another, source of growth for COLG has been a restraint in the cost of sales.
The raw material cost has remained low during the period on account of low commodity prices worldwide.
These conditions have helped the toothpaste company to record a 400 bps increase in its gross profit margin in FY16.
The oral health division is the flagship segment of the company, but it is also trying hard to become a major player in fabric care.
In FY16 in order to compete, COLG in FY16 used media- supported price promotion and offered deep trade discounts.
The practice has delivered volumetric growth though it failed to deliver value growth. Beside the firms soap division is still under duress, as local soap-makers were writhed by the influx of imported soaps at a price much lower than the raw material cost of manufacturing in Pakistan. But, in the oral health care sector, the company has strengthened its leadership once again in the period under review by introducing multiple new products.
Selling and distribution cost and administrative expenses stayed on the higher side mainly due to higher advertisement and sales promotion spending, employee-related expenditure and higher depreciation cost.
Other income contribution continues to lend support to bottom line during FY16, primarily due to the realization of profit on short-term investments. Following its historical trend, Colgate has also given final cash dividend of Rs 30, per share of Rs 10 each, or 300 percent to end the financial year 2016.
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