Mammoth German electronics and engineering group Siemens has said it is back in profit, beating analyst forecasts.

The firm warned of "difficult" conditions and a drop-off in orders which it said would hurt its earnings in the short-term.

The outlook is simply bad

Analys

However, investors have become so edgy after days of falling markets that Siemens share price plummeted more than 8% in a downward-plunging market.

Frankfurt's blue chip Dax index had opened lower on Wednesday. But Siemen's shares are such a significant chunk of the Frankfurt market that its falls had helped to knock more than 30 points off the Dax by lunchtime, contributing to the spiral of panic.

Recovery

Siemens said it made net profits of 725m euros ($719m; �458m) in the three months to 30 June. This contrasts with a loss of 705m euros in the same period of last year.

Siemens has posted profits already this year, for the January to March period, but those figures were boosted by one-off gains from selling off shares in chip maker Infineon.

The latest figures revealed the electronics giant's core profits have recovered too: earnings before interest and tax were 892m euros against a loss of 479m euros year-earlier.

Siemens, which is in the midst of cutting about 17,000 jobs to reduce costs, said a strong performance at its power generation, medical and automation and drives businesses had helped its recovery.

'Difficult markets'

But it was not all good news. Sales were down during April to June at 10 of the trains-to-phones firm's 13 businesses.

And chief executive Hans von Pierer warned that 20% fall in orders in June would show up in weaker earnings for July to September, which "will come in below the level of the third quarter".

Market conditions remain "difficult" for many of the group's businesses, he said.

"The outlook is simply bad, and when you look at the order intake it is really bad," said Frank Rothauge, an analyst at Sal Oppenheim in Frankfurt.

The decline in orders at the power generation business - down 51% - caused particular concern as the business had contributed strongly to growth.

In the mobile phone sector, Mr von Pierer said global demand for the construction of mobile networks would fall by 15% in 2002 and about 5% next year.