UPDATE 2-Siemens says sees strong profitability in Q3

* Siemens says demand from emerging countries lifts sales

* Strong dollar a positive factor

* Q3 net profit from continuing ops flat y/y, down q/q

* Shares down 2.3 percent, in line with market (Adds background, comment, changes dateline)

By Marilyn Gerlach

MUNICH, June 29 (Reuters) - Cost cuts, strong demand in emerging countries and a weak euro will boost Siemens's (SIEGn.DE) core profit margin in its fiscal third quarter, the German group said on Tuesday.

Finance director Joe Kaeser said new orders and revenues at the three core businesses of Europe's biggest engineering group are set to exceed year-earlier figures for the first time since the fourth quarter of fiscal 2008.

He said the operating profit margin was expected to be higher in the third quarter, implying total sector profit -- the operating profit of its core energy, industry and healthcare businesses -- will be higher on the year.

But net profit from continuing operations will be flat on the year and down on the quarter, he said, with analysts noting this was well-flagged, given the expected charges at its equity investments in Nokia Siemens and its fully owned IT unit Solutions and Services.

Analyst Eerik Budarz of Bankhaus Metzler said Tuesday's statement indicated Siemens would easily achieve its operating profit goal of around 7.5 billion euros for the year to end-September 2010.

"The total sector profit in the third quarter could be around 2 billion euros, or maybe even above that, which would then take us to around 6.5 billion euros for the first nine months," Budarz said.

In the quarter to the end of June total sectors profit was likely to "closely approach" the 2.1 billion euros ($2.59 billion) it made in the quarter to March, he said.

Siemens, which is due to release third-quarter results late in July, raised its profit outlook on April 29 on the back of productivity improvements and higher demand from factories cranking up production amidst an economic rebound.

WEAK EURO BOOST

All third-quarter projections reflect the positive impact of the strong dollar against the euro, Siemens said.

Two German think tanks last week raised their 2010 GDP growth forecast for euro zone's biggest economy, saying growth will be fuelled by a pickup in global trade and a depreciation in the value of the euro against the dollar. [ID:nBAF004134]

Euro zone industrial new orders rose in April at their fastest annual pace in 10 years, data showed last week, as an export-driven economic recovery continued with German new orders rising 3.3 percent on the month and 32.4 percent year-on-year. [ID:nLDE65N0UR]

Analysts have said the dollar's strength against the euro dollar was improving Siemens' competitiveness in all three sectors and should partly offset weakness in some divisions.

JP Morgan said in a note to clients last week the overall energy market has been weak with very few large orders for rivals like Alstom (ALSO.PA), ABB (ABBN.VX) and Vestas (VWS.CO), but Siemens was clearly enjoying a better trend than most competitors.

Siemens Energy head Wolfgang Dehen cited signs of an upturn in energy technology in the infrastructure market.

"Not all our divisions have bottomed out, but the energy market is now reaching its low point. Major fluctuations are still to be expected in some areas," Dehen said.

"We can already see encouraging signs of a recovery of demand in business with renewables, power distribution and service," he said.

French engineering group Alstom predicted in May its operating margin will fall over the next two fiscal years amid a still challenging economic climate.[ID:nLDE6430UQ]

Shares in Siemens fell 2.3 percent by 0944 GMT while the German blue-chip index .GDAX eased 2.2 percent. (Reporting by Marilyn Gerlach and Jens Hack) ($1 = 0.8103 euro)