The Cookson group's precious metals division - which employs 250 people in Birmingham - has suffered unprecedented falls in demand for jewellery.
But the industrial materials firm yesterday said the division remained profitable, despite low volumes, and the group overall saw first half profits up seven per cent.
A group statement said trading conditions for precious metals remained difficult "with unprecedented falls in demand for jewellery products in the UK and continental Europe, together with weak consumer confidence in those regions and the USA."
As a result revenue was down 22 per cent in the first half. Trading profit of £2.7 million was well down on last year.
Chief executive Nick Salmon said: "The precious metals division has had to cope with continued weakness in retail markets but, despite very low volumes, has remained profitable. "
The division runs its only UK operation in Birmingham's Jewellery Quarter and also has a presence in Europe and the USA.
A group spokesman said much work had been done to take costs out of the division in the USA and mainland Europe.
There were no current plans on the table which would affect Birmingham and he expected a more buoyant second half in the run up to Christmas.
Groupwide, Cookson forecast a slightly better performance this year than last but said the outlook for its markets was unclear.
It said pretax profit for the six months ended June 2005 was £39.9 million compared with £37.2 million a year ago under new IFRS accounting rules.
Mr Salmon said: "We think the second half will be better than the first, and we would expect overall performance for the full year to be slightly better than that achieved in
The group said its ceramics division recorded good results on the back of strong global steel production growth, but this would moderate in the third quarter.
"We expect the rate of growth in the steel industry to slow a bit in the third quarter before resuming in the fourth quarter," Mr Salmon said.
There were mixed signals for its electronics division's global markets, while weak market conditions hit precious metals. Its laminates business made a loss.
Cookson set out a strategy in January to raise £100 million pounds by selling businesses over two years to cut debt built up by acquisitions in the 1990s tech boom.
Net debt at the end of the period was £362.8 million, down £39 million.
Revenues fell three per cent to £795 million pounds after the company exited some commodity businesses.
Mr Salmon said the company expected to resume paying dividends "as soon as possible". He did not specify a time frame.