Anglo-Dutch steelmaker Corus has reported a 32% drop in first-half earnings after selling prices fell and raw material and energy costs rose.
Core earnings fell to £433m ($823m) in the first half of the year, down from £638m in the same period of 2005.
Corus said its UK energy costs were double those of some European rivals, and would rise 25% to £550m this year.
It also warned that a maintenance shutdown at a Dutch plant would cut its profits for the rest of 2006 by £40m.
Corus said it expected business to pick up in the second half of the year and it would raise steel prices to offset rising energy costs and the loss of output.
However, it is also facing rising costs for iron ore and coking coal, which have doubled in price over the past two years.
Corus is the world's ninth biggest steelmaker by production and has been the subject of merger speculation this year.
This has helped drive its share price 67% higher in the past 12 months.