Steelmaker Corus has reported a 52 per cent fall in second quarter profits as a result of rising raw material and energy costs and a reduction in selling prices.
The UK's largest steelmaker said its net income over the second quarter dropped to £81 million, down from £170 million a year earlier.
Sales also fell 3.3 per cent to £2.41 billion.
Corus said that while strong global demand for steel and higher selling prices are expected to improve trading conditions during the second-half, the higher cost of raw materials and a drop in steel production would continue to impact upon the company's performance.
Iron ore and coking coal costs have doubled over the past two years amid growing demand from the world's expanding steel industry.
Meanwhile, Corus has warned that scheduled maintenance work at its IJmuiden furnace in the Netherlands between September and November 2006 will reduce steel production by about 800,000 metric tons.
As a result, the Anglo-Dutch company expects its second half profit to be reduced by more than £40 million.
Commenting, Corus chief executive Philippe Varin said: "The market outlook for the second half of the year is encouraging, although the blast furnace reline at IJmuiden and seasonal production shutdowns will mitigate the benefits to our income statement over this period."
Mr Varin added that the sale of its downstream aluminium operations, completed at the beginning of this month, was "an important milestone" in allowing Corus to focus on carbon steel.
Corus said that proceeds from the £570 million sale to Aleris International would be used to strengthen its balance sheet and to invest in its carbon steel business.
The company said that it expected to pay investors an interim dividend of 2.75 pence a share.