Oral-care company Colgate aims to sustain its current EBITDA margins in the upcoming June quarter while prioritising strategies to fuel growth.
“We are at a good place in terms of margins, both gross and EBITDA margins,” said Jacob MS, chief financial officer (CFO) at Colgate.
Earnings before interest, tax, depreciation and amortisation (EBITDA) for the quarter grew 17.7 percent year on year (YoY) to Rs 532 crore in the January-March quarter. EBITDA margins improved 220 bps YoY to 35.7 percent.
Based on Colgate’s analysis of both its and competitors’ performance, Jacob said that the company is seeing a healthy growth trend within the category, with rural markets showing signs of resurgence. The company’s rural sales outpaced urban, and with rural markets aligning with urban trends, the company anticipates sustained category growth.
The company does not foresee any spike in input costs for the immediate quarters.
The oral-care leader said that a larger portion of sales is driven by pricing largely followed by the volume of the goods sold, and this trend has persisted in the current quarter. The company is achieving a balanced mix of both pricing and volume, especially as inflationary pressures ease.
“And if we continue to deliver the current type of growth, volume will need to play a key part going forward,” Jacob said. “So our key thrust is quite a big way on volumes and it is a combination of driving category volume growth through media campaigns,” he added.
Investing in brand advertising remains a crucial aspect of the company’s strategy. Colgate ramped up its advertising expenditure significantly, with an increase of 125 basis points to reach 13.5 percent levels. “This translates to Rs 760 crore spent on advertising over the course of the year,” a company official said in a post-earnings call.
Read more: Colgate-Palmolive Q4 results: Net profit rises 20% to Rs 380 crore
New products
Talking about the recent product launch in oral beauty, particularly in the whitening category, Colgate believes they have a competitive advantage as market leaders. In India, whitening products have ample room for growth, and the company already offer two variants – Visible White and Visible White O2.
“The upcoming gel application product will further enhance our whitening portfolio. This expansion in whitening products, along with Colgate Total oral-care offerings, will be pivotal in our strategy for premiumisation,” said Jacob.
Premiumisation is more prevalent in e-commerce and direct trade for the company. E-commerce forms about 5-6 percent of the total sales of the company.
The company’s personal care have outpaced oral care. Though it is just 3 percent of the total sales, Colgate plans to ramp it up significantly with a major focus on shower gel.
The management mentioned that the focus with Palmolive is centred on the cleansing market, particularly in the body wash and hand wash segments.
Q4 profit
The company reported a consolidated net profit of Rs 379.82 crore for the March quarter, a growth of 20.11 percent from the year-ago period.
Total sales came at Rs 1,480.66 crore, rising 10.35 percent in the year-ago quarter, the personal-care company said in a regulatory filing on May 13.
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