HOUSEHOLD appliances manufacturer Electrolux reported a 39 per cent fall in half-year profits following a factory closure and the settlement of a lawsuit.

The group, which employs 2,200 people at a cooker factory in Newton Aycliffe and a Flymo plant in Spennymoor, County Durham, said the price of steel would put pressure on second-half profits.

Electrolux, which is the world's largest supplier of household appliances, said it was closing a US vacuum cleaner factory with the loss of 850 jobs.

Net income fell to £125m in the six months to June 30, while the figure before exceptional costs was down 7.6 per cent to £191m.

This came after costs related to the closure of a Swedish factory and a £17m court settlement following claims the company had stolen someone else's design for a vacuum cleaner.

Electrolux, whose products include Arthur Martin kitchen appliances, Flymo lawnmowers and Frigidaire refrigerators, operates in more than 100 countries.

Although it does not give a breakdown of profits in the UK, the group said new product launches helped lift sales at the European consumer goods division.

Full year operating profits were expected to be lower than last year.

But the company said: "There is a risk that higher costs for steel could have an increasingly negative impact on income for the second half of the year.

"The ambition is to offset the major part of this pressure on margins through price increases, cost reduction programmes and new product launches."

Electrolux is to close its vacuum cleaner factory in El Paso, Texas, and transfer production to Mexico.

New products launched in the first half included a frost-free large capacity fridge-freezer, a dishwasher with electronic display and a cordless hand-held floor cleaner.