UPDATE 2-Atlas Copco Q1 pretax falls, demand to stay weak

* Q1 pretax profit 1.79 bln SEK, down 41 percent

* Says expects demand to remain weak

* To cut staff by about 1,200 in coming quarters (Adds analyst, CEO comments, background, updates shares)

By Niklas Pollard and Johannes Hellstrom

STOCKHOLM, April 27 (Reuters) - Compressor and machinery maker Atlas Copco AB (ATCOa.ST) posted a slightly smaller than expected fall in first-quarter pretax profit on Monday, but orders plunged and it said demand was seen remaining weak.

Quarterly pretax earnings fell to 1.79 billion crowns ($218 million) from a year-ago 3.03 billion to come in above the mean forecast of 1.76 billion seen in Reuters poll of 18 analysts.

"In terms of the results it was pretty okay, but the orders were on the weak side," Swedbank analyst Mats Liss said. "They have continued to see order cancellations, but the cash flow looks good.

The withering economic downturn following the global financial crisis has battered demand and left engineering companies such as Atlas Copco rushing to slash production capacity and costs.

The group, which has seen demand from once-booming sectors such as mining evaporate in recent months, said order bookings fell to 14.3 billion crowns in the quarter from 19.5 billion a year ago, well below the 16.6 billion seen by analysts.

"The economic situation still makes the outlook very uncertain," the company said in a statement. "Demand is however expected to remain weak in most industries and regions and (to) stay around the current level."

Atlas Copco, which only months ago was racking up record results on booming demand, has been cutting staff by the thousands and said another 1,200 employees would be leaving the group in coming quarters.

The company, which has nearly 32,000 employees, said it had slashed its workforce by 2,110 in January through March while it also shed 371 consultants.

Sales at the Sweden-based company fell to 16.6 billion crowns compared to 17.1 billion a year earlier, undershooting the mean forecast of 16.9 billion.

"Although sales of equipment are down considerably, we are pleased to have been able to maintain a good price level," Chief Executive Gunnar Brock said in a statement. "Additionally, the after-market business is holding up very well."

But the company said its operating cash flow, boosted by a reduction in working capital due to lower customer receivables, rose to 2.85 billion crowns from 900 million a year earlier.

Shares in Atlas Copco initially rose somewhat on the results but fell back to be 0.6 percent lower by 1054 GMT, compared with a 1.6 percent decline in the Stockholm bourse's blue-chip OMXS30 index .OMXS30. (Editing by David Holmes and Rupert Winchester)