However, the company warned the current financial year's operating performance will be affected by slowing demand and higher input costs.

The company reported an 11% increase in revenues for the year ended 30 April 2008, up to £1.9bn from £1.7bn for the previous financial year.

Chairman Peter Johnson said: "These strong results reflect the benefits of our continuing actions to raise returns across the group.

"In packaging, we are taking advantage of opportunities to invest in growth areas and seeking to improve the stability of this activity's results over the cycle."

In light of the results, Johnson said he was confident in the group's future prospects.

However, group chief executive Tony Thorne warned the current financial year's operating performance will be affected by slowing demand and higher input costs.

He said: "We expect to partly offset the effect of this tougher trading environment through tight cost and cash discipline across all our operations."

Earlier this year, the company bought M-real's New Thames office paper mill in Kemsley, Kent, for £60m.

The move meant that M-real withdrew all production from the UK. Under the ownership of DS Smith, the mill will switch to production of raw material for corrugated board.

DS Smith said work is already well-advanced on the modification of the facilities and it plans to commence production of CCM in January 2009.

The entire project is expected to cost circa £10m, which will be funded from the group's existing debt facilities.

It said a tighter supply position for corrugated case material (CCM) and corrugated packaging during much of the year provided good support for its price increase programme.

For its UK paper and corrugated packaging, the company said its programme to raise prices enabled it "largely to recover the previously incurred higher input costs, although further increases in energy costs are maintaining the pressure on margins."

DS Smith said the strength of the euro is assisting its competitiveness and pricing.

However, it was still faced with some slowing in demand, continued high waste paper costs, further rises in energy costs and lower paper prices on the continent.