The company said higher sales volume and continuing cost control have let to an increase in the pre-tax profits (by 54 per cent) and post-tax profits. Total expenditure at Rs 264.6 crore in the quarter is up by 20.76 per cent from Rs 219.1 crore in the same period last year. Operating profit registered a 36.8 per cent increase to Rs 23.4 crore from Rs 17.1 crore.

Margins have improved over the previous quarter due to better profitability. Operating profit margins rectified to 8.1 per cent from 7.2 per cent last year, while net profit margins improved to 4.2 per cent compared with 3.5 per cent last year.

Interest costswere nil during the quarter against Rs 10 lakh in the previous period. Depreciation was lower at Rs 6.8 crore compared to Rs 5.5 crore. Provision for taxation was higher at Rs 8.5 crore against Rs 4.9 crore.

The Colgate-Palmolive stock rallied from Rs 205 on July 2, this year, to close at Rs 278 on July 16 on the Bombay Stock Exchange (BSE) with the counter clocking the highest ever volume of 13.23 lakh shares on July 13. The frenzied buying in the stock was attributed to expectations of a phenomenal jump of around 100 per cent in net profit for the first quarter. In fact, the Colgate scrip was one of a few FMCG counters, which have participated in the current bull run, led by cyclical stocks, in the last two weeks.

The company said in line with the previously announced strategy, a significant portion of the increased revenues has been reinvested to support new and existing products. According to analysts, since the base of the previous quarter was low, the spurt in profitability is not surprising.Analysts said the company will have to continue spending on advertising and marketing so as to sustain market leadership and maintain growth. The company said in a press release, "The company has increased total marketing investments in advertising and promotions during the quarter to its highest levels ever, to support both new and existing products. This reflects the company's commitment to aggressively support its technologically superior products and strengthen existing brand equities in an increasingly competitive market place." The strategic marketing and infrastructure investments are part of the company's "Investing for the Future" programme initiated in 1997. The programme was kicked off when Colgate was facing a fierce battle for market share in the Rs 1,000-crore toothpaste market from ace rival Hindustan Lever. HLL has garnered a 34 per cent share in toothpastes, and is a potential threat to Colgate's leadership position (54 per cent market share).

The company's new product initiatives andrelaunches during the period include the revitalisation of "Colgate Dental Cream" with "super shakti", repositioning of all new "Palmolive Naturals" for the popular segment in the toilet soaps market, the launch of "Colgate Active Flexible" toothbrush and "Colgate Super Flexi" toothbrush in the value segment.

Strategies pay off

Colgate-Palmolive's aggressive marketing & advertising initiatives appear to be paying off. There are indications that the company has already managed to arrest the fall in its share of the oral & dental care market. The launch of new products under extentions of the "Colgate" brand and the revitalisation of existing products through the introduction of additional features have also helped in the strengthening of its position in the market. The higher ad-spend, the launch of new products & varients to take on competition and repositioning of "premium" brands like Palmolive Naturals for the popular segment have resulted in renewed ties with its customers. That the company hasdecided to continue making sizable marketing investments augur well for its future and should help to ensure that it continues to lead the oral care market and enhances its share of the personal care market.

--Sarad Saraf