Midlands engineering group GKN yesterday said it expected to deliver current year earnings in line with market expectations.

That came after strong aerospace demand offset higher costs and a soft automotive market.

"Notwithstanding the challenging conditions, at the end of November the group's profit before tax was slightly ahead of last year, with the projected outcome for the year in line with current market expectations," the company said in a trading statement.

Analysts are forecasting pretax profits for the year to December of £212 million.

GKN, which makes parts for cars and aircraft, said market conditions softened in the second-half of the year due to cuts in US car production and the reduction in European automotive volumes.

However, aerospace demand was strong, the company said.

Raw material and energy costs were also slightly higher in the second half than previously forecast, it said.

GKN is working on a two-year restructuring and is expanding in China and India. It completed two acquisitions in the second-half.

"Looking ahead to 2007, the group expects to achieve continued improvement in its operating performance," the company said.

Aerospace sales have been driven by demand for civil aircraft, helping to offset soaring steel, copper and nickel prices which have hurt costs.

GKN gets about 20 per cent of its sales from aerospace and 80 per cent from automotive. The group is due to announce its 2006 results on February 27.