Corus, the former British Steel, exceeded City hopes for its third-quarter results as operating profits hit £103 million in the face of tougher market conditions.
The figure was sharply down on the £247 million achieved a year earlier when prices in the sector were lifted by booming demand from China.
But analysts were still cheered by the performance, especially as Corus also said it expected a recent recovery in prices to continue into the first quarter of next year.
Corus, formed by the 1999 merger of British Steel and Dutch firm Hoogoevens, employs some 1,800 people in the West Midlands, mainly at its strip steel operation at Halesowen and stockholding centres at Wednesfield and Oldbury.
In line with other operators, the group has seen demand slow this year, due to a combination of higher stocks in the supply chain and weaker levels of consumption in the car and construction sectors.
Chief executive Philippe Varin said yesterday: "Corus has delivered a robust financial performance in the third quarter, in challenging market conditions."
He hailed the impact of the company's Restoring Success push, which has played a key role in reviving the fortunes of the group and ensuring that it can cope in times of falling steel prices and high overheads.
Since 2003, when the company introduced it, Corus has cut hundreds of jobs and made significant changes to working practices. It targeted benefits of £680 million a year by the end of 2006.
Analysts say that without the initiative, the group could well have been in the red at this stage.
"They are showing they can make money when things are bad as well as good," one said.
Other long-term initiatives have seen investment of £130 million at one of the company's biggest plants at Scunthorpe, where it will make structural sections, rail and wire rods. Its other major UK sites include Rotherham and Port Talbot.
Corus recently paid a dividend to shareholders for the first time since 2000.
Figures for the three months to the end of September showed that turnover rose by just over one per cent to £2.383 billion while profits at the pretax level were 65 per down on the equivalent period in 2004 at £80 million.
Measured over the first nine months of the year, however, same basis profits were 34 per cent up at £515 million.
Corus said a cut in production across Europe in the quarter and lower imports had gradually restored the balance between supply and demand.
Europe's steelmakers responded by trimming production to protect prices and margins as they also faced sharp rises in the prices of iron ore and coal in 2005.
The company reduced by seven per cent on a year ago, in addition to normal production breaks in what is traditionally the quietest quarter for the industry.
"European stock levels have returned to normal, and apparent demand has improved during the fourth quarter. Selling prices have therefore stabilised and are beginning to recover," it said, adding that the improvement was expected to continue into the first quarter of 2006.
It said it would raise mainland European flat steel prices by five per cent next year, having already announced a similar rise for the UK.