FILTRONIC'S fluctuating economic fortunes are continuing with the company unveiling a mixture of good and bad news.

The semiconductor manufacturer revealed to the City that it had tied up an agreement with an unnamed company that could be worth several millions of pounds.

But, at the same time, it admitted a number of factors were affecting business.

The net result left analysts uncertain about the company's progress, with one expert expecting to downgrade estimated pre-tax profits by £1m to £2.65m.

One analyst's note said of the latest trading statement: "The very positive headline hides a bundle of bad news. This only serves to remind us of our concerns about this group."

News that Filtronic, which has a manufacturing plant in Newton Aycliffe, County Durham, had tied up a deal with a customer for modules used in cellular base stations was seen as a significant move.

The arrangement could see the unit output of its wireless infrastructure business, which accounts for about 60 per cent of the company's sales, increase by 20 per cent.

Filtronic will begin to supply the customer in the last quarter of 2004. But the company has been hampered by extra costs incurred by its attempts to establish manufacturing operations in China.

It also said that fluctuations in exchange rates had affected the translation of overseas subsidiaries profits.

Filtronic estimated that operating profit would suffer to the tune of about £2.6m for the full year, of which £700,000 is due to the retranslation of its first half results.

The continued weakness of the dollar has had an adverse effect as many of Filtronic's customers are in the US.

Analysts KBC Peel Hunt said: "Despite the disappointment in the rise in the operating costs in the current year, we are encouraged that the underlying trading of the business continues to improve - and the contract announced today will over the next few years be of far more significant value than the temporary increase in stated losses owing to the exchange rates."