Colgate Palmolive - Rules The Roost; Result Update Q3FY15 :: Edelweiss

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Colgate Palmolive’s (Colgate) revenue and PAT were bang in line with our estimates. Premiumisation, soft commodity prices and prudent cost controls resulted in a 228bps YoY improvement in gross margin (highest in past 18 quarters). Colgate’s toothpaste volume growth at 5% YoY (7% YoY in Q2FY15) continues to outpace overall toothpaste category growth rate (declined 3% YoY in Q3FY15). On the other hand, Hindustan Unilever’s (HUL) oral care category grew slower than market in Q3FY15. Toothbrush volume growth witnessed some recovery with 3-4% YoY growth against flattish volumes in Q2FY15. Rising market share, benign commodity prices, successful launches (Active Salt and Slim Soft toothbrush), portfolio premiumisation and lacklustre launch by P&G remain key positives. However, the company will see some impact of phasing out of excise benefits from Q1FY16 end.

Toothpaste continues to grow ahead of market

Colgate’s toothpaste category logged volume growth of 5% YoY (7% YoY in Q2FY15; 4% YoY in Q1FY15). Overall toothpaste category extended subdued performance with 3% YoY dip in Q3FY15 (category fell by 5% YoY in Q2FY15 and 4% YoY in Q1FY15). Colgate recorded 80bps YoY increase in toothpaste category market share in CY14 with 56.7% volume market share. Flagship brands, Colgate Dental Cream, Active Salt, Max Fresh, Colgate Total and Visible White contributed to this rise in market share.

Marginal recovery in toothbrush; excise phase out to impact FY16

Toothbrush category saw some recovery with volume growth of 3-4% YoY (flattish in Q2FY15). Volume market share rose by 80bps YoY in CY14 to 42.4%. Phasing out of excise benefits from May 2015 end will likely impact sales growth (as seen for HUL). However, we expect Colgate will pass on the same.

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https://www.edelweiss.in/research/Colgate-Palmolive--Rules-The-Roost;-Result-Update-Q3FY15/28110.html