Steel firm forecasts profit ahead of expectations for this year but warns of declining demand

Structural steel firm Severfield-Rowen has warned that it will be forced to implement “cost reductions” as the downturn continues to hit the construction sector.

Chief executive Tom Haughey made the statement at the group's AGM on Wednesday.

Haughey said it believed its underlying profit before tax for the current year would be ahead of management expectations, because of strong trading in the first five months of 2009.

But he said this was “tempered by the fact that prospects for the UK continue to fade to levels below those forecast by the industry in recent months”.

He added that a significant decline in demand now being experienced in the firm's key UK construction sectors would force it to “implement further cost reductions and reconfigure capacity”.

The chief executive said the firm remained confident of a strong financial performance for the rest of 2009, with a “relatively strong order book” valued at £267m. But he said it continued to remain cautious in its outlook for 2010.

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