The Glasgow firm reported a £500,000 drop in sales to £68 million after new business wins narrowly failed to offset a drop in demand.
Turnover at the packaging division was steady at almost £55m but the manufacturing side was down from £13.7m to £13.1m.
Pre-tax profits before exceptional items were up from £900,000 to £1.5m due to improvements in margins and reduced property costs in the six months to June 30, 2012.
In spite of poor yields on bonds, the company's pension deficit declined from £20.5m at the end of 2011 to £17.3m at the mid-point of 2012.
The reduction is mainly due to a Pension Increase Exchange (PIE) exercise, where pensioners are offered higher pensions in the short term but give up future increases.
Deferred and active members in the scheme have also been able to take up the PIE option since May and the changes meant a one-off after tax gain for the company of £1.25m.
Macfarlane said its contributions to the pension scheme in 2012 and 2013 will be between £2.3m and £2.5m following what finance director John Love called "straightforward and sensible" negotiations with trustees.
Net debt was down from £10.4m at the mid-point of 2011 to £7.8m in the same period this year.
Peter Atkinson, chief executive, said: "It is not easy out there so in pretty tough market conditions what the team here have achieved is a strong performance."
A co-operative arrangement signed with packaging businesses across northern Europe, done under the NovuPak banner, looks like increasing European sales but Mr Atkinson is cautious about expanding too quickly.
He said: "It is pretty early days but it is an exciting development for us. Each of us has certain customers we are dealing with on a local basis and those customers want someone to deal with them on a pan European basis.
"We have to be careful. I spent the first three years of my time here rationalising activity from when we expanded too far internationally."
Macfarlane's Reseal-it brand is also said to be making good progress in the United States.
Mr Atkinson was also pleased with growth in online custom and into the third party logistics sector, but added he expects trading conditions in the UK to remain challenging.
Macfarlane's shares ended the day up 1p to 20p.
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