Media packaging firm Coral Products said a slump in demand for CD cases lay behind a sharp fall in pre-tax profits.

The firm remained upbeat about its prospects after seeing steady growth in the DVD and video case market.

Coral's mood has been further lifted by a recent deal with photographic giant Kodak to provide a range of packaging.

The contract came too late to stop pre-tax profits in the year to April 30 falling to £1.2 million from £2 million a year earlier.

Turnover was also down from £18.4 million to £16.4 million as the slump in the CD market and lower-selling prices affected the core business.

CD sales volumes dipped 12 per cent in the year, a decline blamed in part on poor music releases in the UK.

Chairman Sir David Rowe-Ham said he was hopeful of an upturn after seeing the new financial year start in line with expectations, He said: "I expect the commencement of the Kodak contract, together with the growth we are experiencing in the DVD market, will help reduce our reliance on CD sales and should impact favourably on trading."

The company, which employs 160 people and includes Warner Brothers, EMI and Universal among its customers, is capitalising on demand for DVDs by introducing a number of new ranges.

Over £2 million was invested in the last financial year to boost the company's DVD production facilities.

Figures showed a 70 per cent rise in DVD sales volumes, with the operation now accounting for 12 per cent of the media packaging division. CD cases currently account for around 30 per cent of turnover.

The company has maintained its total dividend at 3.35p.