Colgate-Palmolive Q1 Results: Strong volumes aid topline growth; Higher ad-spends impact margins

Shares of Colgate-Palmolive Ltd. gained as much as 2.5% on Wednesday, July 29, in response to its first quarter results, that delivered on expectations on major parameters, while volumes exceeded them.

Colgate-Palmolive (India) reported revenue growth of 11.8% during the quarter to ₹1,603 crore. The figure in the base quarter stood at ₹1,434 crore. The figure is in-line with the CNBC-TV18 poll estimate of ₹1,577 crore.

Growth on the topline was led by a high-single-digit volume growth in the toothpaste segment, which was higher than the street expectations of mid-single-digit growth.

Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) during the quarter grew by 6.6% from last year to ₹482 crore, in-line with the street expectations of the same number.

EBITDA Margin for the quarter saw some pressure, narrowing to 30.1%, from 31.6% during the year-ago period. The figure is marginally lower than the CNBC-TV18 poll of 30.6%.

Margins were impacted during the quarter due to a 33% jump in ad spends to ₹252 crore from ₹188 crore last year. Ad spends as a percentage of sales increased to 15.7% from 13.1% in the same quarter last year.

Net profit for the quarter grew by 6.9% year-on-year to ₹343 crore, in-line with the CNBC-TV18 estimate of ₹345 crore. Excluding one-offs and exceptional items, profitability for the company grew 11% from last year during the quarter.

Gross margins during the quarter grew by 110 basis points from the year-ago quarter to 69.7%, aided by consistent cost savings from funding the growth initiatives and financial discipline.

"We leveraged these strong margins to increase our focused investments in brand building and category premiumisation throughout the quarter. Moving forward, we expect to grow sustainably fuelled by our best in class science backed products, supported by continued investment in advertising," Prabha Narasimhan, MD & CEO of Colgate-Palmolive India said.

Shares of Colgate-Palmolive India made an intraday high of ₹2,213, having gained as much as 2.5% after the earnings announcement. The stock now trades 1.2% higher at ₹2,164.3. The stock is up over 8% in the last one month.