In its preliminary results for the year ending 30 April 2003, DS Smith said pre-tax profits rose 27% to 79.7m, compared with the previous year, on group sales of 1.4bn, up 3%.

However, the company also revealed a big increase in the deficit in its pension fund, which rose from 7m last year to 94m this year.

The company said it had been keeping its position on its pension scheme under review, but had decided to retain the scheme and resume payments at the rate of 10m a year.

Group communications manager Peter Aubusson said the deficit was due to the use of the FRS 17 accounting standard, and the decline of the stock market over the past year.

Aubusson said the deficit had no impact on the companys profit and loss account, but would be reviewed again next year.

Sales for its corrugated and paper operations, which include the operations of DS Smith Packaging and St Regis Paper Company, were up 4% to 747m. Operating profits also grew 4% to 53.1m.

Aubusson said that recent investment to raise production performance at St Regis Kemsley and Taplow mills would counteract price rises in recovered paper.

The groups office products business, John Dickinson, turned around a loss of 1.6m in 2002 to a profit of 4m, by cutting costs.

Story by Andy Scott