lower production in the world's automotive and aviation industries sent profits tumbling at engineering group GKN last year.

The company has suffered as firms grapple with the tougher economic conditions.

Chief executive Marcus Beresford said he was hopeful GKN's key markets would improve as the year progressed, but he said low demand and reorganisation costs at the group's AgustaWestland joint venture in Yeovil would "adversely affect results in the first half".

GKN, a major supplier to Nissan's Sunderland plant, spun off its industrial services business last year to focus on making car and plane parts.

But demand from major US manufacturers such as Ford and General Motors has plunged, with US car production down ten per cent last year.

GKN's aerospace business has also been hit by the fall-out from the September 11 attacks.

Mr Beresford said the group had posted a resilient performance last year given the tough environment with sales up five per cent at £4.34bn.

But the squeeze on margins meant pre-tax profits fell 37 per cent to £245m before one-off costs.

After exceptional costs linked to the restructuring, bottom-line profits were £107m, compared with £346m in 2000.

The slowdown was most acute in GKN's powder metallurgy business, which makes car parts from powdered metal, where sales fell to £612m from £638m.

GKN's aerospace division was boosted by the acquisition of a military planes structure plant from Boeing and sales edged ahead three per cent to £1.49bn.