Introduction:

Colgate Palmolive started its operation in Pakistan in 1985, when US granted license to manufacturers and Market products in Pakistan. Now they have increased their product range as they are now dealing with variety of products and even services. The following are the some brief information about the company their assets and their earnings. Name of the company Nature of the business Ticker Net Turnover HY11 Net profit HY10 Share price Market Capital Colgate Palmolive Pakistan Limited Personal Goods Colgate Palmol Rs. 8,354,987,000 Rs. 500,752,000 Rs.515.45 Per Share Rs. 16,283,529,410.

During the first half of FY11 there is increase of 17.01% in their gross turnover which results in increase in sales by 30.27% and also net turnover increased by 16.20% but side by side there is a rapid increase in cost incurred. The following table shows the results of this increase or decrease respectively. Rupees in 000 Turnover Net turnover Cost of sales Gross profit Selling and distribution cost Administrative expense Profit from operation Finance cost Profit before taxation Taxation Profit after taxation EPS HY10 7,140,341 5,647,677 3,595,456 2,052,222 908,314 72,153 1,027,202 5,541 1,201,661 349,684 671,977 21.27 HY11 8,354,987 6,582,601 4,683,976 1,788,625 1,001,143 75,495 758,630 5,543 753,177 256,635 500,752 15.72 %Changes 17.01 16.20 30.27 -8.46 10.22 4.63 -26.15 -1.59 -26.28 -26.61 -25.48 -26.09

Market Comparison

After doing market analysis we come to know that this company has gone through many changes during the year 2010 and 2011. The sales comparison shows that Colgate Palmolive comprises of third largest position in the chemical industry. The companys ratio comparison with the other companies shows that liquidity position of the company is 2.85 as compared to 2.16 of the market. But asset turnover is low from the market as it is 41.86 as compared to 51.53. In the same way receivables are inefficiently handled as they are 10.03 as compared to 26.36. The total asset turnover is also lower then the market as it is 0.35 as compared to 1.34 of the market it shows company is not generating adequate amount of sales in order to justify their total asset turnover. Debt to equity ratio is slightly low then the market as it is 3.22 as compared to 3.30 because company have larger amount of equity to debt ratio. Debt to asset ratio is lower then the market as it is 25.85 as compared to 33.50 because of low amount of debt. The long term debt is 0.06 as compared to 0.21.

Ratio analysis:
The following are the ratio analysis of the company. 1) Profitability ratio:
35 30 25 20 15 10 5 0 FY04 FY05 FY06 FY07 FY08 FY09 FY10

2) Liquidity ratio: the liquidity position of the company is explained below with the help of chart graph.

Liquidity
3 2 1 0 Fy04 Fy05 Fy06 Fy07 Fy08 Fy09 Fy10 Liquidity

3) Asset management: the graph of asset management is given below.

160 140 120 100 80 60 40 20 0 FY04 FY05 FY06 FY07 FY08 FY09 FY10

operating cycle days sales outstanding Inventory Turnover

4) Debt management Ratio: the following are the debt management graph as shown below.
180 160 140 120 100 80 60 40 20 0 FY04 FY05 FY06 FY07 FY08 FY09 FY10

debt to asset ratio long term debt to equity times interest earned

5) Market value: the graph of market value is given below

Average Market Price

800 600 400 200 0 FY04 FY05 FY06 FY07 FY08 FY09 FY10 Average Market Price

Ratio Analysis:
The gross profit margin of the company improved from 24.16% to 33.22% over FY09-FY10 due to improved management of manufacturing costs, despite increase in raw material oil prices.

The net profit margin showed a similar increase from 6. 71% to 9.99%. The return on assets improved from 19. 03% to 23.96% and the return on equity from 27.77% to 32.19%, showing that the net income earned justified the investment into assets in the company. The current ratio increased from 2.52 in FY09 to 2.85 in FY10. This was due to improving liquidity position of the company due to increase in inventory from Rs 1.128 billion to Rs 1.322 billion. Current maturity of long-term loan decreased from Rs 2 million to Rs 625,000, thus causing the current ratio to increase. The day sales outstanding decreased from 11.08 in FY09 to 10.03 in FY10, indicating that the management could not efficiently monitor its receivables. Inventory turnover in days fell from 64.67 in FY08 to 36.83 in FY09 but improved to 41. 86 in FY10, showing that inventory management significantly improved over the period FY08 onwards and lesser days were required to sell the same amount of inventory. Total asset turnover fell significantly from 2. 72 in FY08 to 0.42 in FY09 and further declined to 0.35 in FY10. This was due to increased investment in fixed assets; however the sales did not how the expected proportionate increase, leading to this decline in total assets turnover. However, the sales to equity ratio decreased over FY09-FY10 from 4.14 to 3.22 due to issuance of further shares by the company. The debt to assets ratio of the company decreased from 31.47 in FY09 to 25.58 in FY10 due to decrease in long-term liabilities of the company. Debt to equity ratio showed a similar trend from 0.46 in FY09 to 0.34 in FY10. Long-term debt o equity ratio decreased significantly from 7.59 in FY08 to 0.06 over FY09 to FY10 due to divestiture of long-term loan and issuance of shares in FY10. Times interest earned showed a huge increase from 24.45 in FY09 to 160.86 in FY10. This was due to significant decrease in interest expense as well as increase in EBIT in FY10. Book value per share improved from Rs 113.04 in FY09 to Rs 130.22 in FY10, since the earnings of the company were reinvested instead of being paid out as dividend. The EPS showed a similar trend from Rs 31.4 to Rs 41. 2. The market price per share increased from Rs 360.82 to Rs 391.2 showing that the market s confidence in Colgate Palmolive Pakistan Ltd. Improved in the FY10. The price earnings ratio declined from 11.49 in FY09 to 9.33 in FY10. This was due to the fact that increased in market price was not as great as increased in EPS

Cash flow statement:

Cash flow from operating activities Rupees in 000 Rupees in 000

cash generated from operation Finance cost paid Tax paid Long term loans Long term security deposit Long term deposit Net cash flow from operating

(2010) 709,736 (5,399) (265,190) (1,917) (2,295) 150 434,365

(2009) 904,985 (5,094) (261,281) (272) (62) 235 638,509

Cash flow from investing

Fixed capital expenditure Sale proceeds on disposal of asset Profit on bank deposit Purchase of short term investment Profit on short term investment received Sale proceeds on sale of short term investment Net cash flow due to investing (358,548) 4,535 26,483 (200,000) 89 101,107 (426,334) (495,483) 4,669 37,012

(453,802)

Cash flow from financing

Long term debt Dividend paid Net cash flow from financing Net decrease in cash Cash beginning Cash ending (625) (370,392) (371,017) (362,986) 1,088,021 725,035 (1,250) (274,342) (275,592) (90,885) 1,024,666 933,781

Interpretation of cash flow:

1) Operating activity figures shows that this is favorable. Company has very efficient cash collection policies because major part of sale are collected or recovered. As sales are increased this means our gross profit increases which results in increase in taxation. But as compared to 2009 our cash from operating activities are decreased because of the current bad condition of the country and due to inflation. If we look towards our supplier figure we come to the point that our suppliers are satisfied by our paying policies but we need to revise our policies as we go for credit payments. 2) Investing activities: figures shows that it is favorable because company is in a growing phase so they need to invest more and more in this department. In this they have deposited some amount into the bank and get profit on that amount from the bank and utilized that money into their venture which is a healthy sign for the company. But if we compared this figure to the

previous year in 2010 there is a decreased in investing figure because of the bad law and order situation here in Pakistan. 3) Financing activities: figures shows that company is reliable and company is getting more and more investment from their stock holder to invest into their business. They are paying dividend on time which shows healthy sign for the company. In the end of the year they do have some cash in their hand because to meet any ambiguity which may occur during the year. But they must revise their investing policies so that they must utilized maximum of their cash in expanding their business.

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