Annual Report - Colgate Palmolive - 2009-2010

COLGATE-PALMOLIVE (INDIA) LIMITED

ANNUAL REPORT 2009-2010

DIRECTOR'S REPORT

To
The Members
Colgate-Palmolive (India) Limited

Your Directors have pleasure in presenting their Report and Audited
Accounts of the Company for the year ended March 31, 2010.



Financial Results
(Rs. Crore)
2009-10 2008-09

Total Revenue 2,060.92 1,802.57
Sales (excluding Excise Duty) 1,962.46 1,694.81
Other Income 98.46 107.76
Profit before Taxation 484.80 345.31
Provision for Taxation 61.54 55.09
Profit after Taxation 423.26 290.22
Balance brought forward 28.84 5.77
Profit available for appropriation 452.10 295.99

Appropriation:

Dividend 271.98 203.99
Dividend Tax 45.84 34.14
General Reserve 42.33 29.02
Balance carried forward 91.95 28.84
452.10 295.99
Business Performance:

Your Company's strong performance continued in 2009-10 despite difficult
economic conditions. In a year marked by volatile financial and currency
markets, your Company achieved a healthy double-digit sales growth during
the year 2009-10. Sales for the year increased by 16 per cent at Rs.1,962
crore as against Rs.1 ,695 crore during the previous year. The toothpaste
business registered an impressive volume growth of 14 per cent during the
year.

The profit after tax for the financial year 2009-10 grew by an impressive
46 per cent to 423 crore as against Rs. 290 crore in the previous year.

The underlying performance can be gauged from the following ratios:

2009-10 2008-09

Earnings per share (Rs.) 31.1 21.3
Dividend per share (Rs.) 20.0 15.0
Return on capital employed (%) 156.9 155.0

During the year cash generation continued to be very strong arising from
significant improvements in the business performance, efficiencies and cost
savings across the organization and a continued efficient collection
system. Your Company managed investments prudently by deployment of surplus
funds after ensuring that such investments satisfy the Company's criteria
of safety and liquidity.

Your Company's market shares are improving steadily. These increases are
driven by our strong focus on understanding our consumers, working with
dental professionals and with our retail customers. Your Company also
continued to focus on driving innovation throughout all areas of business,
increasing effectiveness and efficiency everywhere and strengthening the
leadership competency of the team. The sharp focus on these four clearly
defined strategic initiatives helped your Company continue to maintain its
leadership position in the oral care market. Your Company is positioned
well for the future on account of its financial strength, market leadership
position, a proven business strategy that has helped your Company succeed
in strong and weak economic environment and most importantly a dedicated
and well-trained team of people working together to achieve the Company's
business goals.

Dividend:

The Company's strong cash generation and positive growth momentum led your
Board to declare three interim dividends of Rs.8, Rs.7 and Rs.5 per share
aggregating Rs.20 per share for the financial year 2009-10 as against Rs.15
per share in the previous year - a 33 per cent increase. These dividends
were paid on September 4 and December 28, 2009 and April 23, 2010. Having
declared three interim dividends, your Board has not recommended a final
dividend for the financial year 2009-10.

Responsibility Statement:

Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors,
based on the representations received from the Operating Management,
confirm:

a) that in the preparation of the annual accounts, the applicable
accounting standards have been followed and that no material departures
have been made from the same;

b) that they have, in selection of the accounting policies, consulted the
statutory auditors and have applied them consistently and made judgements
and estimates that are reasonable and prudent so as to give a true and fair
view of the state of affairs of the Company at the end of the financial
year and of the profit of the Company for that period;

c) that to the best of their knowledge and information, they have taken
proper and sufficient care for the maintenance of adequate accounting
records in accordance with the provisions of the Companies Act, 1956 for
safeguarding the assets of the Company and for preventing and detecting
fraud and other irregularities; and

d) that they have prepared the annual accounts on a going concern basis.

Subsidiary Companies:

Your Company was holding 75 per cent shareholding in Professional Oral Care
Products Private Limited at Goa (POC) engaged in the manufacture of
toothpaste. During the year, your Company acquired the remaining 25 per
cent shareholding at a total consideration of Rs. 2.40 crore and proposed
amalgamation of POC with your Company. The Scheme of Amalgamation of POC
with your Company was sanctioned by the Bombay High Court at Goa vide its
order dated April 16, 2010 and accordingly, the amalgamation of POC with
your Company became finally effective from May 1, 2010 with retrospective
effect from April 1, 2009, being the Appointed Date under the Scheme of
Amalgamation.

Your Company was also holding 75 per cent of the shareholding in CC Health
Care Products Private Limited at Hyderabad (CCHL) engaged in the
manufacture of toothpowder. During the year, your Company acquired the
remaining 25 per cent shareholding at a total consideration of Rs. 69.07
Lacs and initiated steps before the Andhra Pradesh High Court for
amalgamation of CCHL with your Company effective from April 1, 2009, being
the Appointed Date under the Scheme of Amalgamation.

The amalgamation of subsidiaries is primarily designed to simplify the
corporate structure and has no material impact either in terms of
operations or in terms of capital structure of the Company.

Corporate Social Responsibility:

Your Company in partnership with the Indian Dental Association (IDA)
successfully concluded the 6t' edition of a two-month long Oral Health
Month Program during the year covering a wide spectrum of activities
designed to spread oral health awareness and good oral hygiene practices.
The mission of this Program continued to be 'Zero Tooth Decay' involving
17,500 dental professionals spread across 1000 towns. This year the Program
extended its support to NGOs like Pratham, Akshara Foundation, Save the
Children, Salaam Balak Trust among others by conducting free dental check-
ups for NGOs workers and children and distributing free samples. In
addition, free dental check-ups were conducted for the Indian Coast Guard
in Chennai.

Education has been the primary focus of your Company's Corporate Social
Responsibility. Since 1976, your Company has been conducting a school
initiative program (now called Bright Smiles Bright Futures' Program)
wherein your Company partnered with IDA, to spread oral health awareness
among school going children in urban and rural schools. Till date, 83
million school children in 173,000 schools in 250 towns in urban and rural
areas have benefited from this Program. In addition, your Company also
conducts in conjunction with IDA a Teachers' Training Program to enable
teachers to instill good oral care habits among school-going children on an
ongoing basis. Till date, 243,500 teachers have undergone this training.

Since 2002, your Company partnered with Pratham, a non-profit organization,
to promote academic education of the less privileged children. The grant
from the Company has supported the concept of Libraries in the 'S' Ward of
Mumbai where children are encouraged to read books to enhance their
knowledge and continue their academic education.

Your Company started supporting the children affected and infected by HIV
with nutritional needs and school fees since last two years. The program
has infused the children with hope leading to a definitive improvement in
their academic performance.

Your Company will continue to take such measures to make a positive and
significant contribution to the society.

Corporate Governance:

A separate report on Corporate Governance along with the Auditors'
Certificate on its compliance is attached as Annexure 1 to this Report.

Investor's Grievance:

The legal heir of a shareholder, who died in 1988, approached the Company
for the first time after 21 years in 2009 for transmission of shares and
payment of accrued dividend. The aggregate of the market value of shares
and accrued dividend is approximately Rs.20 Lacs. However, in 2004 a
request was received by the Company in the name of the shareholder for
issue of duplicate share certificates. The Applicant having complied with
standard formalities, the Registrars of the Company issued duplicate share
certificates as no objection was received to a notice published in
newspaper. Due intimation to the Stock Exchange was also given before the
duplicate share certificates were issued. The duplicate certificates
together with bonus share certificates were despatched to the Applicant in
2005. In view of the claim of the legal heir, the Registrars have now filed
a complaint with the police to investigate the matter. The Registrars have
assured the Company that this incident will have no financial implication
on the Company. The Auditors' attention have been drawn to this incident.

Employee Relations:

The employee relations in the Company continued to be positive. During
theyear, aproductivity-linked long-term settlement was signed with the
Aurangabad Factory Union through a process of bilateral negotiations.

Information as per Section 217(2A) of the Companies Act, 1956 ('the Act')
read with the Companies (Particulars of Employees) Rules, 1975 forms part
of this Report. As per the provisions of Section 219(1) (b)(iv) of the Act,
the Report and Accounts are being sent to the shareholders of the Company
excluding the statement on particulars of employees under Section 217(2A)
of the Act. Any shareholder interested in obtaining a copy of the said
statement may write to the Secretarial Department at the Registered Office
of the Company.

Trade Relations:

Your Directors wish to record appreciation of the continued unstinted
support and co-operation from its retailers, stockists, suppliers of
goods/services, clearing and forwarding agents and all others associated
with it. Your Company will continue to build and maintain strong links with
its business partners.

Energy, Technology Absorption and Foreign Exchange:

The information required under Section 217(1)(e) of the Companies Act, 1956
read with the Companies (Disclosure of Particulars in the Report of the
Directors) Rules, 1988 with respect to conservation of energy, technology
absorption and foreign exchange earnings/ outgo is appended hereto as
Annexure 2 and forms part of this Report.

Directors:

Effective February 1, 2010, Mr. Mukul Deoras was appointed as the Managing
Director of the Company to succeed Mr. Roger Calmeyer, who stepped down as
the Managing of Director of the Company effective January 31, 2010 to
retire from the services of the Corporation. The appointment of Mr. Deoras
is subject to the approval of the shareholders and the Central Government
under the provisions of the Companies Act, 1956.

The Board places on record their appreciation for the distinguished

services rendered by Mr. Calmeyer during his tenure with the Company.

Effective April 1, 2010, Mr. Derrick Samuel has been appointed as Director
and Chairman of the Board to succeed Mr. Justin Skala, who has stepped down
to head the Latin America Division of the Corporation. The Board, while
welcoming Mr. Samuel, places on record their appreciation for the
distinguished services rendered by Mr. Skala during his tenure with the
Company.

Under Article 124 of the Company's Articles of Association, Mr. P.K. Ghosh
and Mr. M.A. Elais retire by rotation at the 69th Annual General Meeting
and, being eligible, offer themselves for re-appointment.

Auditors:

Messrs Price Waterhouse, Chartered Accountants, retire and are eligible for
re-appointment as Auditors.

Acknowledgements:

Your Directors sincerely appreciate the high degree of professionalism,
commitment and dedication displayed by employees at all levels. The
Directors also wish to place on record their gratitude to the Members for
their continued support and confidence.

On behalf of the Board

Mukul Deoras R.A. Shah
Managing Director Vice-Chairman

May 27, 2010

Persons constituting 'Group' for inter se transfer of shares under Clause
3(1)(e) of the Securities and Exchange Board of India (Substantial
Acquisition of Shares and Takeovers) Regulations, 1997 include:

Colgate-Palmolive Company, New York, U.S.A.
Colgate-Palmolive (Asia) Pte. Ltd., Singapore
Colgate-Palmolive (Malaysia) Mktg. SDN BHD, Malaysia
Colgate-Palmolive (Thailand) Ltd., Thailand
Colgate-Palmolive (Guangzhou) Co. Ltd., China
Colgate-Palmolive (H.K.) Ltd., Hong Kong
Colgate-Palmolive (PNG) Limited, PNG
Colgate-Palmolive Philippines Inc., Philippines
Colgate-Palmolive Son Hai Ltd., Vietnam
Norwood International Incorporated, U.S.A.

Information required under the Companies [Disclosure of Particulars in the
Report of the Board of Directors] Rules, 1988.

A. Conservation of Energy:

The Company continues its endeavour to improve energy conservation and
utilization.

B. Technology Absorption, Research & Development (R & D)

1. Specific areas in which R & D carried out by the Company:

* Development of new and innovative products to expand market and increase
consumption.

* All aspects of supply chain to reduce the cost of materials, to effect
import substitution, process simplification and cycle time reduction.

* Quality improvements and upgradation of raw materials suppliers.

* Claim substantiation.

2. Benefits derived as a result of the above R&D:

Development of high quality, cost effective consumer preferred products.
Generation of funds to grow the business through continuous improvement in
our manufacturing processes, by reducing costs of raw and packaging
materials, reduction in batch cycle time.

3. Future plan of action:

The Company continues to focus on developing new, innovative and high
quality products to meet the ever changing consumer needs and drive growth.
Continuous focus on reducing costs to fund the growth.

4. Expenditure on R & D : 2009-10
[Rs. Lacs]

a) Capital 35.56
b) Recurring 2,97.28
c) Total 3,32.84
d) Total R & D expenditure as a
percentage of total turnover 0.17

Technology Absorption, adaptation and innovation:

1. Efforts, in brief, made towards technology absorption, adaptation and
innovation:

* The Company has developed clinically proven and highly efficacious
dentifrice formulae.

* The Technology Centre is involved in process simplification, exploring
every avenue to reduce cost of materials and effecting import substitution.

2. Benefits derived as a result of the above effects

Market expansions through increase in market size and consumption. Benefits
to consumers through quality enhancement and the reduction in costs of the
products.

3. Imported Technology:

The Company continues to receive technological assistance from Colgate-
Palmolive Company, USA, for development and manufacture of oral care
products. The technology received by the Company is being absorbed and
adapted to the demands of the local markets.

C. Foreign Exchange Earnings and Outgo:

During the year, the Company was able to generate export earnings of Rs.
63,84.35 Lacs. The particulars of foreign exchange earned/utilized during
the year are given in Schedule 25 to the Accounts.


MANAGEMENT DISCUSSION AND ANALYSIS

(within the limits set by the Company's competitive position)

The Company is engaged in the Personal Care business which includes Oral
Care. The Oral Care business continues to account for over 90 per cent of
the Company's sales turnover.

During the year 2009-10, while the toothpaste market grew by about 6 per
cent, the toothpowder market declined by about 5 per cent. The overall
market environment continues to be very competitive. In the face of an
intense competitive scenario and despite difficult economic conditions, the
Company reinforced its leadership in the oral care market and achieved a
commendable business performance.

Almost half of the Indian population does not have access to modern dental
care. The per capita consumption of toothpaste is about 116 gms one of the
lowest in the world. The national epidemiological study on the status of
oral health in the country showed that dental caries [tooth decay] is
prevalent in 63% of 15 year olds and as much as 80% amongst adults in the
age group of 35-44 years and periodontal diseases [gum diseases] are
prevalent in 68% of 15 year olds and as much as 90% amongst adults in the
age group of 35-44 years. To address this situation, the Company in
partnership with Indian Dental Association launched an intensive two-month-
long awareness campaign in October/November, 2009 under the banner Oral
Health Month. The aim of this campaign was to create oral health awareness
and motivate people to adopt preventive self-care habits to improve their
oral health.

This was one more step in the Company's longstanding endeavour to spread
the message of good oral health and encourage the use of modern and
efficacious dentifrice products.

To help achieve its objective of expanding the dentifrice market, the
Company has designed its product portfolio in such a manner that its
products are available at different price points to cater to the
requirements of consumers across all segments.

While the predominant business of the Company has been confined to the Oral
Care category where it faced intense competition, the outlook for industry
is positive given the size of the opportunity. The Company is hopeful that
through a combination of powerful marketing strategies, innovative new
products and market development and expansion activities, the dentifrice
market in India would continue to grow strongly over the next several
years.

The Company has good internal control systems, the adequacy of which has
been reported by its auditors in their report. The discussion on financial
performance of the Company is covered in the Directors' Report. There has
been no material development on the human resources and industrial
relations continue to be positive. The number of people employed as on
March 31, 2010 was 1,756.

It may please be noted that the statements in the Management Discussion and
Analysis Report describing the Company's objectives and predictions may be
forward looking within the meaning of applicable rules and regulations.
Actual results may differ materially from those either expressed or implied
in the statement depending on circumstances.