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Informist, Thursday, May 22, 2025

 

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--Colgate: Expect demand from lower end of urban India to bounce back Oct-Mar 
--CONTEXT: Comments by Colgate's mgmt in post-earnings conference call 
--Colgate: Demand from higher end of urban India remains resilient 
--Colgate: Operational efficiency, not price hikes, improved gross margin Q4 
--Colgate: Objective is to drive top line, sales volume going forward 
--Colgate: See acceleration in growth in premium products category 
--Colgate: See significant scope of e-commerce boosting premium pdt sales 

 

MUMBAI – Demand in the non-premium segment in urban parts of the country is likely to recover in the second half of the current financial year (Oct-Mar) with premiumisation of products seen robust going ahead, Colgate-Palmolive India Ltd.'s Managing Director and Chief Executive Officer Prabha Narasimhan said in an analyst call Thursday. The company will continue to invest to improve product quality and work towards improving efficiency at the same time, Chief Financial Officer M.S. Jacob said.

 

"We will continue to look for opportunities to take it to the next level so those are all going to be cost-accretive... at the same time there would be some level of pricing that will be coming through," Jacob said. Despite soft demand in the urban market and increased competition, the company reported a resilient performance in the segment in the March quarter with toothpaste reporting a mid- to high single-digit volume growth. 

 

The fast-moving consumer goods company reported an earnings before interest, taxes, depreciation, and amortisation margin of 32.6% with a 69.7% gross margin. The company invested INR 8.22 billion in the Colgate brand in 2024-25 (Apr-Mar). For the quarter under review, Colgate's net profit fell 6.5% on year to INR 3.55 billion, slightly higher than analysts' estimate of INR 3.53 billion. Its revenue for the quarter was INR 14.63 billion, down almost 2% on year, and missed analysts' estimate of INR 15.1 billion. 

 

Going forward, the management said it would prefer the EBITDA margin to be in the low 30s. The increase in prices of products has been subdued in the last few quarters, Narasimhan said. "...it's not pricing that's driving this margin, it's actually operational efficiency that's driving this margin," Jacob said. 

 

The company's oral healthcare segment reported a significant demand softening in the urban areas, where premiumisation is a key factor. While this segment is expected to grow, other categories have seen a significant slowdown, the management said. "Rural continues to be resilient and we are seeing rural growth to continue now for the third quarter in a row to outpace urban growth," the company's managing director said.

 

The company expects the premium segment to grow four times faster than the rest of its portfolio. "I think there is a significant opportunity for us in modern trade and e-commerce to move consumers to the more premium products," Narasimhan said. The dental care major said it has seen growth in sales volume of toothpaste products slowing down in the urban areas due to reduced usage.

 

At 1348 IST, shares of the company traded at INR 2,509.60 on the National Stock Exchange, down 5.6%.  End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Edited by Tanima Banerjee

 

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