Mumbai: Oral care major Colgate Palmolive India Monday said it so far invested about Rs 54 crore to ramp up the tooth brush and tooth paste production capacities.
"We are working on two new projects. One is in Gujarat at Sanand, just outside Ahmedabad, where we have taken on lease from Gujarat Industrial Development Corporation around 39 acres for Rs 42.62 crore. The objective is to make toothpaste at this plant.
"Sri City in southern Andhra Pradesh is another place where we have acquired around 25 acres and have paid Rs 11.4 crore as part of the initial lease. This place, where we will set up a tooth brush manufacturing plant, is not very far from Chennai," Colgate Palmolive India Chairman Mukul Deoras told the 71st annual general meeting here.
Both plants will be operational by 2013, he said, but did not give details of capacity addition at the new units.
The company, which is celebrating it platinum jubilee this year, had to shut operations at its Hyderabad plant last year due to poor demand for tooth powder.
"The Hyderabad plant used to manufacture only tooth powder. And as consumers upgrade from tooth powder to toothpaste, total volume of tooth powder that we could sell started coming down.
"We have two factories that make tooth powder - at Hyderabad and Aurangabad (Maharashtra). The capacity was significantly higher than what we needed for running our business," Deoras said.
He pointed out that demand for tooth powder has been shrinking in the last few years. Therefore, to remain competitive in an increasingly fierce market, the company decided to rationalise its tooth powder manufacturing plant at Hyderabad.
"All 62 employees at the Hyderabad plant had taken voluntary retirement and the factory has been closed with perfect settlement on September 29, 2011," Deoras said without disclosing the financial details of the plant closure.
Meanwhile, the FMCG firm Monday said its net profit rose by 16.9 percent to Rs 117.42 crore in the first quarter ended June 30 over the same period previous fiscal. The firm had posted a net profit of Rs 100.44 crore for the same period of previous financial year. Net sales rose to Rs 735.08 crore in the period as against Rs 611.10 crore last year.
Colgate company said its toothpaste brands like Dental Cream, Active Salt, Colgate Sensitive and Total contributed to the volume growth during the quarter.
"Prudent price increases and cost management has enabled us to maintain its strong gross margin for this quarter," Deoras said.
During the quarter, the company achieved a volume growth of 11 percent. "Our market share in toothpaste volume is 54.3 percent, up from 52.3 percent last year. In tooth brushes it is 38.1 percent from 36.2 percent last year."
The company imports finished goods from China, Thailand and Turkey, while the major export destinations are Sri Lanka, Nepal, the Maldives, Kenya and some African countries, he said.
On royalty paid by Colgate, which spends 10 percent of revenue on advertising, Deoras said, "royalty is paid to the parent company at the rate of 5 percent for tooth paste and tooth brush and 1 percent for tooth powder. Increase in royalty is primarily driven by increase in sales. The royalty is paid to the parent company for the technology provided by them."
Shares of Colgate Palmolive Monday closed at Rs 1,167.85 on the BSE, down 0.05 percent from its previous close.
First Published: Monday, July 23, 2012, 22:00