The engine maker Rolls-Royce said yesterday it expected higher underlying profits this year, despite the impact of the weaker dollar and rising raw material costs.

Rolls-Royce said the weakness of the US currency had cost some £40m in the first half of the year but underlying profits had still risen 17% to £380m.

Sales rose to almost £3.6bn while the order book increased by more than a third to £35.1bn, with much of that coming from the civil aerospace sector. Revenues from its service operations increased to just over £2bn.

Sir John Rose, the chief executive, said the group had made strong progress over the first six months. "We have a well-balanced business with a broad portfolio of products and services and proven access to global markets.

"Despite the challenges of increasing raw material costs and the effects of a weakening dollar, the group is well placed to deliver growth in underlying profit and, before pension scheme injections, a positive cash flow in 2007."

As well as its civil engine business Rolls-Royce also supplies the defence and marine markets, and builds turbines for the energy industry.

Rolls-Royce said it had brought in three new engine programmes over the last six months - one for a business jet, the Dassault Falcon, another for the Airbus A350 XWB, and the third for the Robinson helicopter - which will give it access to a market which it believes will be worth $200bn (£97bn) over the next 20 years.

The company is also considering its options for a new assembly and test facility, with the choice between Singapore or the US. In Britain the company is close to completing its factory modernisation programme, with facilities at Derby and Bristol expected to come into operation by the end of the year.

The company paid £132m into its UK pension schemes in the first half of the year and said it would put in a further £368m over the next six months.

Analysts at Numis said that the results were slightly ahead of consensus forecasts and Rolls-Royce "remains a very attractive long-term story".

The strong aerospace sector also helped Boeing to record profits of more than $1bn for the last quarter, easily beating Wall Street's expectations. The company now has a record $278.5bn worth of work on its books, with $208bn of that for commercial planes, for which Rolls-Royce makes some of the engines.