IMI, the engineering group, today said it was confident of continued progress in 2005 despite caution about the economic outlook.

The manufacturer of drinks dispensing equipment and pipes and fittings for the medical and automotive industries said that economic conditions remained positive in the US, Asia and to a lesser extent in the UK. However, it said that markets on the continent remained subdued.

IMI said that 2004 had been a year of improvement for the group, with reported pre-tax profit before one-off costs in the year to December 31 expected to come in between £158 million and £160 million.

After rationalisation costs of about £5 million, profits before tax and goodwill at £153 million and £155 million were set to be in the region of 12.5 per cent ahead of last year's £136.9 million.

However, the company said that the net impact of higher raw material prices and the translation effect of currency movements was expected to cut operating profits by about £17 million. On a constant currency basis, IMI said that they would have been 18 per cent to 20 per cent ahead of last year.

The company said that it expected full year volumes to be about 4 per cent higher than last year, with the second half improvement slower than the first half.

Results from the group's fluid controls business were expected to be significantly ahead of last year after a particularly strong performance in Asia.

In its drinks dispensing operations, volumes in the US remained encouraging, although the amount of beer dispensing equipment sold, particularly in the UK, had been lower than expected "showing a marked decline from a very good 2003".

The rest of Europe was still showing modest growth, it said.

In the group's building products division, sales of its Polypipe product would be ahead of last year, although at a lower rate of growth than in the first half, with high raw material costs still affecting margins.

The group, whose customers include Toyota and Lipton Teas, employs around 16,500 people worldwide, including 5,500 in the UK.

In September, the European Commission fined IMI 44.98 million euros (£30.8 million) for price fixing on the copper tube market. IMI said the fine would be provided for as a one-off item in its 2004 accounts.

A trading update from the group said: "Although we are cautious about the current macro-economic outlook, particularly in Europe with recent economic indicators pointing to a further weakening, we remain confident our businesses will continue to make progress."

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