THE suspected Islamist militant held over an attack against a French chemical plant has admitted killing his manager, a source close to the investigation has said.

Yassin Salhi, 35, told detectives he had killed Herve Cornara in a parking area before arriving at the plant in Saint Quentin-Fallavier, 30 km (20 miles) south of Lyon, where he attempted to cause an explosion on Friday, the source said.

Police found the 54-year-old victim's decapitated body and head, framed by Islamic inscriptions, at the plant owned by U.S. group Air Products. There were no other casualties.

Examination of one of Salhi's mobile phones has revealed that he took a "selfie" with the severed head before his arrest and sent the image via a messaging application to a Canadian phone number.

"We are assisting the French authorities with their investigation," a Canadian government spokesman said yesterday. He declined to comment on unsubstantiated reports that the message's recipient was now believed to be in Syria.

According to French media reports, Salhi told police he had argued with Cornara as well as his own wife before the killing. One of their work colleagues, quoted on the website of television station i-Tele, also said the two men had clashed days earlier after Salhi dropped a pallet of fragile equipment.

The suspect, whose wife and sister were released on Sunday after two days of questioning, is known to have associated with hard-line Islamists over more than a decade and had previously been flagged by French security services as a potential risk.

Flanked by heavily armed police in masks and flak jackets, Salhi was taken on Sunday to the apartment he shared with his wife and three children in the quiet Lyon suburb of Saint-Priest for further searches to be conducted in his presence.

Earlier in the day, French Prime Minister Manuel Valls said the government was increasing resources in law enforcement and domestic intelligence to combat Islamic extremism.

"We cannot lose this war, because it is essentially a war of civilisation," Valls said in an interview broadcast on Europe 1 radio and i-Tele. "It is our society, our civilisation and our values that we must defend."