Car parts specialist Tomkins confirmed expectations of a slip in pretax profit in the second quarter and first half of 2005.
The British engineering firm posted a 4.4 per cent decline in first-half earnings despite maintaining sales at £1.55 billion and increasing operating profits.
The firm said that cost cuts and lower raw-material costs were helping offset a tough American automotive market.
Tomkins, which makes products ranging from petrol caps to windscreen wipers, has 65 per cent of sales in the United States and has recently witnessed tough market conditions, along with other auto-part makers.
Among its UK locations, Tomkins has sites at Whitstable in Kent, Bridgnorth in Shropshire, Dumfries and Pontypool, Torfaen.
Pretax profit for the six months to the end of June was £123.1 million, down compared to £125.6 million a year earlier. However, operating profit for the same period was £140.4 million, up from £137.9 million.
Once a buckle-maker in Walsall, Tomkins is now hoping to expand trading to the Far East as a reaction to the American market. American manufacturers have been trying to counter fierce competition from foreign automakers while high oil prices eat into demand for their high-profit sports utility vehicles.
Chief executive James Nicol said: "We are building up momentum with our focus on operational efficiencies and cost containment and have some good activity in new markets for us in China and India."
The views were heightened after the group announced its business in Asia showed a return to good sales growth of 5.2 per cent, particularly in the automotive aftermarket.
Despite a dip in profits Tomkins still maintains a positive outlook for next year.
Mr Nicol said the performance of acquisitions was very encouraging. Together with an improved raw material cost environment the firm should ensure progress in line with market expectations for the full year.
He expected the US auto market to improve in the fourth quarter. Lower rawmaterial costs, more favourable currency movements, a strong residential construction market and income from new acquisitions would also drive earnings.
The car and building parts specialist said it was targeting an additional $300-500 million in sales this year through acquisitions. So far, it has achieved $200 million and has raised its interim dividend to 5.07 pence from 4.83 pence previously.
Chairman David Newlands said management had responded well to some challenging market conditions.
Currency translation was having less of an impact in the first half of the year and the board was confident that Tomkins could make further progress for the year as a whole.
Despite weakness in the non-residential business, the firm achieved market share gains particularly in nonstandard product areas.
It has also won new business, resulting in a higher rate of order intake and increased order backlog for the remainder of the year.
Mr Newlands said the fluid power business also continued to perform well in a strong industrial market.
The recent acquisition of EMB, an industrial hydraulics fitting business, continued to provide a platform for the further development of business outside the North American automotive equipment market.