Colgates results were largely in line with expectations at the top line with the company delivering 10% volume growth, but significant increase in advertising spend led to Ebitda and net income coming in 29/30% below our estimates for the quarter.
Given the heightened level of competitive intensity in the oral care segment, we believe A&P (advertising & promotion) spend is likely to remain at elevated levels.
The companys net revenue increased 13.7% to R900 crore against our expectation of R920 crore and consensus at R890 crore. Volume growth in the toothpaste business stood at 9% (overall volume growth at 10%). Market share in toothpaste stood at 56%, flat q-o-q, but up 140 bps y-o-y. Gross margins expanded 70 bps to 59.8% versus our estimate of a 90-bps expansion.
Ebitda came in at R150 crore versus our estimate of R210 crore and consensus at R180 crore. The Ebitda margin came in at 16.2%, down 600 bps y-o-y. We were expecting an Ebitda margin at 22.5% (up 30 bps y-o-y) and consensus was at 20.4%. The key negative surprise was other expenses, which rose 47% y-o-y to 24.4% of sales (up 550 bps y-o-y). We were expecting 19.5%.