(Reuters) –
Colgate-Palmolive’s Indian unit reported a decline in second quarter profit on Thursday, due to a temporary disruption to sales after the government announced sweeping cuts to goods and services taxes.
The toothpaste maker’s net profit for the quarter ended September 30 came in at 3.28 billion rupees ($37.32 million), down 7.2% year-on-year, excluding the impact of a one-time tax credit last year.
Revenue from operations for the toothpaste and shower gels maker dropped 6.3% year-on-year to 15.07 billion rupees.
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KEY CONTEXT
Colgate Palmolive India, like other local consumer firms, saw transitory disruptions in the second quarter as retailers and distributors worked to clear inventory at older prices ahead of the government’s implementation of goods and services tax cuts. The cuts were announced on August 15 and implemented from September 22.
The tax cuts have delayed the flow of new orders for consumer firms, including larger peer Hindustan Unilever, which also reported a decline in profit before tax and exceptional items earlier on Thursday.
Colgate has said in prior calls with analysts that weak urban demand has been causing consumers to use staples such as toothpaste for longer, impacting overall volumes. It said the operating environment remained “difficult” in the second quarter.
The company has been sharpening its focus on differentiated offerings that promise higher quality oral benefits to tackle these challenges, leading with a more premium portfolio.
PEER COMPARISON
Valuation (next 12 Estimates (next 12 Analysts’ sentiment
months) months)
RIC PE EV/EBI Price/ Revenue Profit Mean No. of Stock to Div
TDA Sales growth (%) growth (%) rating* analyst price yield
s target** (%)
Colgate-Palmolive 40.38 28.52 5.67 4.74 Hold 29 0.90 2.26
(India)
Hindustan Unilever 53.07 37.07 8.94 7.37 8.14 Buy 20 0.95 1.66
Dabur India 43.30 32.80 6.39 7.81 10.54 Hold 39 0.93 1.58
Godrej Consumer 46.20 27.93 7.04 9.70 18.53 Buy 35 0.83 1.76
Products
* The mean of analyst ratings standardised to a scale of Strong Buy, Buy, Hold, Sell, and Strong Sell
** The ratio of the stock’s last close to analysts’ mean price target; a ratio above 1 means the stock is trading above the PT
JULY TO SEPTEMBER STOCK PERFORMANCE
— All data from LSEG
— $1 = 87.8950 Indian rupees
(Reporting by Ananta Agarwal in Bengaluru; Editing by Ronojoy Mazumdar)
