Colgate's margins up, but volume's an issue

Are the best of margins behind for oral care products company Colgate Palmolive (India) Ltd?

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This is the question its investors must be trying hard to answer, especially after the sparkling gross margin and Ebitda margin show it put up in the December quarter (Q3FY24).

Gross and Ebitda margin rose year-on-year by about 630 basis points (bps) and 560 bps, respectively, to 72.2% and 33.6%.

Both these metrics reached their "highest-ever level", Nomura Financial Advisory and Securities (India) said.

Key factors that facilitated the expansion of margins in Q3 were a drop in raw material costs and price hikes taken earlier. Plus, to an extent, a favourable base also helped given that the margin had contracted year-on-year in Q3FY23.

Collectively, this meant Ebitda increased by 30% year-on-year to ₹468 crore. This comes at a time when Colgate's total operating revenue rose by 8% to nearly 1,396 crore. Even so, shares of Colgate dropped by close to 4% on Tuesday amid weak broader markets.