UPDATE 2-Alfa Laval says demand falling, to cut 1,000 jobs

* Says market demand declining

* Q4 orders down 6 percent year-on-year

* Plans to cut 1,000 jobs to adjust to weaker demand

* Says measures to yield saving of about 400 mln crowns

* Stock down over 4 pct, underperforming wider market

(Adds analyst, details, updates share price)

STOCKHOLM, Jan 12 (Reuters) - Swedish engineering group Alfa Laval (ALFA.ST) said it would cut about 1,000 jobs as it sought to adjust to weakening market demand, which pushed order bookings down 6 percent in the fourth quarter.

The news sent Alfa Laval shares 4.1 percent lower on Monday to 64 crowns, underperforming a 0.7 percent fall in the broader market .OMXSPI.

Alfa Laval, a maker of fluid-handling equipment, pumps and heat-transfer products, is the last in a long line of Swedish engineering firms to announce job cuts in recent weeks.

Sweden's manufacturing industry has been hurt by a sharp slowdown in demand as the global financial crisis has pushed major export markets into recession.

Alfa Laval said in a statement that group sales grew about 11 percent, including positive currency swings, to 8.0 billion Swedish crowns ($1 billion).

"However, due to the decline in demand during the fourth quarter and the expectations for 2009, restructuring initiatives have been further intensified," the company said.

"The decline in the quarter was particularly significant in Central & Eastern Europe and Asia," it said of the 6-percent fall in order bookings to 6.2 billion crowns in the final quarter of last year.

In late November, the company reaffirmed its outlook, saying it expected demand in the year's final three months to be "in line or somewhat lower" than the year-earlier quarter.

"The numbers are not that dramatic really. Order flow has been affected by cancellations, and they initiate savings," said Mats Liss, analyst at Swedbank.

"It was very much in line with what one might have expected, considering the quarter we have seen. This is at least not worse than expected," he added.

Alfa Laval said it would reduce the number of employees at the group by about 1,000 during the first half of this year, with about 300 jobs being cut in its Swedish home market. The company said the cuts, which also include a reduction in contract workers and consultants, were expected to yield annual savings of about 400 million crowns, while the cost of implementing the measures was seen at 300 million crowns, part of which would be charged in the fourth quarter.

($1=8.000 Swedish Crown)

(Reporting by Niklas Pollard and Victoria Klesty; editing by Simon Jessop)