Sales of Dabur India Ltd in the March quarter grew below expectations, but profit growth was higher than expected. The firm, which sells hair oil, shampoos, health foods and juices and so on, saw sales rise 16% to 849 crore. Its net profit, however, rose by 26% to 133 crore. Analysts had estimated sales of around 870 crore and profit of about 120 crore. Earnings growth is important, but in the consumer business, sales growth is more important.

Dabur’s growth slowed in the March quarter compared with the earlier part of the fiscal. Its consumer care division contributed to 69% of sales in fiscal 2010 and grew 14.6%, lower than the April-December figure of 16.1%. Key segments within this division are oral care, hair care, foods (juices) and health supplements (Chyawanprash). While health supplements did well in the March quarter, perhaps due to the longer winter, the other key categories appear to have grown at a slower rate. Growth in its consumer health (over the counter products) division, that contributes around 8% of sales, too, was slower, up by 15% in the full year against 16% last year.

Dabur’s international business division contributes about 18% of sales, but sales rose at 26% for the full year compared with 31% for the April-December period. However, international revenue is converted to rupees for reporting purposes, so translation losses may have affected growth. In its domestic business, Dabur’s volume growth has been good, with price playing a very small role. Slower growth in the current quarter could be attributable to the base effect of price hikes in the third quarter of fiscal 2009. Also, consumer goods firms have been worried about the effect of high inflation, though Dabur saw no effecton volumes till the December quarter. What’s more, the level of competition has risen, with price cuts and discounts being used to attract consumers, which too may have affected growth.

What saved the quarter for Dabur was lower input costs, which rose by only 12%. This helped cushion a hike in its advertising expenses by 20% and employee costs by 27.4%. Its key raw materials are vegetable oils, sugar, herbs and food inputs. Despite rising trends in these inputs, Dabur’s forward covers have helped it keep costs low. Its operating profit margin improved nearly 170 basis points in the March quarter as a result. Higher earnings growth is always welcome, but investors will be watching Dabur’s performance over the next few quarters, to see if this quarter’s slower sales growth was just an aberration.