Colgate Palmolive

Colgate-Palmolive Analysis of Financial Statements at the End of 31st Dec. 2007
Prepared by:
SinghaniaSriharsh 12305682
Date on:- 28.12.08

Company overview

Colgate-Palmolive Company is a leading manufacturer of personal care, home care, and oral care products
The company is serving people in more than 200 countries.
Employs 35,800 people from around the world
The market capitalization is approximately US$34.9 billion
Follows Generally Accepted Accounting Principles (GAAP)

Industry overview

Colgate-Palmolive is a well established, global company in the personal products industry.
The personal products industry is a mature and well-established industry. The market capitalization of personal products Industry is around US$290 billion.
A very competitive industry with sizable barriers for entry.

Operating Performance Analysis
Net Sales of the Company is US$13,789.70 million in ‘07 & US$12,237 in ’06.
Gross Profits stands at 56.18% of the net sales.
Operating Profit Margin increased by 9 % over last year, in FY2007.
Improved its pricing and marketing strategies.
ROI & ROE are 36.36% & 76% respectively. Good efficiency.

Financial Stability
The current financial condition of the company is good in short-terms as well as in long-term prospective
Current Ratio – 1.44:1 & Acid Test Ratio – 0.77:1.
Current Assets increased by 9.6% & Current Liabilities pushed down by 8.8%. Working Capital Ratio displays a very good improvement over last year.
Fixed Assets/Long-term Debts is 1.39:1
Debt-to-equity is a bit high (1.46:1), but Debt Ratio is good at 0.33:1.
Quite Stable Financial Position. But the Debts are also High.

Cash Flow Analysis
The net profit of the company is 78.84% of the net cash flows from operations
There has always been cash surpluses in the company, not much but at appropriate level
Operating Cash Flows is positive, while Investing & Financing Cash Flows are negative. The company is using the operating cash flows to clear its debts.
Extra cash went out in the renewable program started in 2004

Some Other Important Ratios
Cost of Sales-to-Net Sales = 0.44
Interest Cover = 16.94
Profit of Shareholders-to-Net Sales = 0.13
Dividend Cover = 2.32
Stock days-to-Cost of Sales = 70.74
Trade Debtors Days-to-Net Sales = 44.94
Trade Creditors Days-to-Net Sales = 64..44

Competitors Analysis
Main competitor, Procter & Gambler(PG) conquers 81% of the total market, while Colgate-Palmolive (CL) owns 13.75%
Other small competitor, Church Dwight Inc. (CHD)
Prices per share at the end of 2007:
CL – $77.96
PG - $73.42
Church Dwight (CHD) - $54.07
Earnings Per Share for the three companies:
PG – $3.22
CL – 3.35
CHD - $2.46

Predictability for the Next 12 Months
Excellent Performance in FY2007
Expected better cash flows next year
Share Price can go higher in the market and dividends pay-outs could be more
Gain a higher Market Share