Initially incorporated as National Detergents Limited, a 100% local Company floated in 1977. In 1985 Colgate-Palmolive Company, USA, granted license to manufacture and market their products in Pakistan. In 1990 Colgate-Palmolive Company, joined as equity partner and the name was changed to Colgate-Palmolive (Pakistan) Limited. Colgate Palmolive offers products in various categories including oral care, personal care, surface care and fabric care.
Over the years, Colgate has maintained an overall positive financial position and is one of the leading chemical companies in our country today.
Colgate-Palmolive's profitability depicted a commendable performance. Total net sales volume increased by around 28% over the last year, resulting in a consequent rise in the gross and net profits. The cost of sales also showed an increase, primarily due to increase in raw material prices and as a result rising prices of petroleum based products. However, tighter controls on selling and administrative expenses ensured that the effect of rising cost of goods sold was mitigated. Consequently, the net profit increased by around 65% compared to the previous year, and owing to a laudable profitability performance, the net and gross profit margins, as well as the return on assets have shown a rising trend.
Colgate-Palmolive has shown a positive liquidity trend over the years, enjoying a strong liquidity position over the years. The net cash flow stood at around 400 million during 2006, indeed an enormously affirmative indicator of the company's efficient allocation of assets. The net current assets of the company have shown a rise in terms of cash, inventories and receivables, as have the current liabilities, especially the payables. However, greater percentage rise in current assets, overall liquidity position of the company is surely laudable.
A manifestation of an efficient credit policy, the days sales outstanding of the company have been following a declining trend, showing that the company is receiving cash against its receivables on a shorter period over the years. The inventory turnover ratio followed a rising trend till 2005, until it declined again in 2006. This can be attributed to better credit policies and marketing practices that enabled the company to sell off its inventories to its customers more effectively and efficiently. Overall, the operating cycle declined for Colgate-Palmolive over the years, showing that the company has improved on its performance in terms of receiving cash against its inventories.
Total assets turnover ratio was disappointing as it steadily declined over the years. Even though the net sales showed a phenomenal growth by over 27.7%, 17.1% and 22.4% during the years respectively, total assets of the company increased by an even greater percent, exceeding 37% over the last year. Major portion of this increase in assets was in plant and equipment, cash and bank balances, and inventories, however, asset turnover did not show a positive trend indicates that the company needs to work more on maximizing the gains from an increase in assets.
Even though Colgate's short-term debts showed an increase in the creditor's liabilities and taxation, the long term liabilities portrayed a considerable decrease, especially in the long term loans and the liabilities against assets subject to finance leases. Both the total assets and equity increased over the years, and the overall effect was manifested in a declining debt-to-asset and long-term-debt-to-equity ratio.
Owing to a magnanimous increase in the operating profit over the years, especially during the last year when it increased by 62.5%, and a decline in the financial charges of the company, the Times Interest Earned ratio of the company improved. This is a positive indication of the fact that the company is managing its financial obligations well and is generating enough operating profit to cover up its interest and financial expenses.
The net earnings per share increased by 64.7% compared to the last year, reflecting the consistent underlying strength of the business. The book value of the business increased in equity facilitated by a steady rise in reserves over the years.
The average market price increased considerably over the years, increasing by approximately 77%, 9% and 82% during 2004, 2005 and 2006 respectively. Colgate-Palmolive has been a profitable and praise-worthy company that has managed to adapt itself to the changing marketing environment and needs of its customers.
=====================================================================
COLGATE PALMOLIVE - CONSOLIDATED RATIOS
=====================================================================
2003 2004 2005 2006
=====================================================================
Rupees in '000
=====================================================================
LIQUIDITY
Current Ratio 1.53 1.38 2.01 1.91
ASSET MANAGEMENT
Inventory Turnover 45.42 47.70 50.30 45.34
Days Sales Outstanding 12.85 10.32 7.69 7.61
Operating Cycle 58.27 58.02 57.99 52.95
Total Asset Turnover 2.58 2.38 2.55 2.37
Sales/Equity 5.65 5.16 4.12 3.85
---------------------------------------------------------------------
DEBT MANAGEMENT
---------------------------------------------------------------------
Debt to Asset Ratio 54.42 53.97 38.12 38.48
Debt to Equity Ratio 1.19 1.17 0.62 0.63
Long Term Debt to Equity 28.15 26.96 15.75 8.67
Times Interest Earned 13.28 31.98 33.16 58.81
---------------------------------------------------------------------
PROFITABILITY
---------------------------------------------------------------------
Gross Profit Margin 27.69 28.73 27.00 32.27
Profit Margin 6.40 8.57 7.73 9.97
Return on Assets 16.48 20.36 19.70 23.63
Return on Equity 36.16 44.23 31.84 38.40
---------------------------------------------------------------------
MARKET VALUE
---------------------------------------------------------------------
Book Value 3.96 5.30 7.78 10.62
EPS 14 23 25 41
Average Market Price 103.89 184.46 201.06 366.05
Price/Earnings 7.26 7.86 8.12 8.97
Dividend per share 0.70 1.00 0.00 0.00
---------------------------------------------------------------------
DIVIDENDS
---------------------------------------------------------------------
Total Dividends 86,017 122,841 0 0
=====================================================================