UPDATE 2-Grafton see sales slide on market weakness

* Turnover falls 220 mln eur

* H1 results will reflect challenging trading environment

* Expects to benefit from seasonally stronger H2 trading

(Adds interview with chief executive)

By Padraic Halpin

DUBLIN, April 29 (Reuters) - Grafton (GRF_u.I), the Irish building supplies group, expects 2009 revenues to fall 24 percent amid what it described as the most challenging trading conditions in decades.

The company said the trading environment this year was much weaker than the first four months of 2008 due to the reduced availability of credit, decline in housing starts and completions, and fall in the value of sterling against the euro.

Grafton suffered a 22 percent dip in first-quarter sales in constant currency terms and Executive Chairman Michael Chadwick said market expectations of 2.02 billion euros ($2.67 billion) sales for the year, down from 2.67 billion euros in 2008, were reasonable.

"Brokers generally are forecasting something over 2 billion and that would seem reasonable to me," Chadwick told Reuters in an interview before the company's AGM on Wednesday.

"If anything (the market in) Ireland so far this year is tougher than we expected and tougher than the analysts were expecting."

The owner of builders' and plumbers' merchants in the UK and Ireland said turnover to March 31 was 470 million euros, down 220 million euros, or 32 percent, on the first quarter of 2008, and by 22 percent in constant currency terms.

Shares in Grafton were down four percent in afternoon trade, underperforming the wider index .ISEQ, which was 2.5 percent stronger, as it said results for the first half of 2009 will reflect the challenging environment.

WELL PLACED

The company (GRF_u.L), which makes around two thirds of its profits in the UK with the remainder in Ireland, sees conditions improving faster in its primary market, Chadwick said.

"We are inclined to think that housing starts (in Ireland) are at an annualised rate of under 10,000 and close to the bottom," Chadwick said.

"We would expect to see completions falling for the remainder of this year."

In a trading statement, the group said that its merchanting business, which made up 85 percent of first quarter turnover, fell 25 percent while retailing, located exclusively in Ireland, saw turnover decline by 17 percent.

Grafton, which owns Buildbase builders' yards in the UK and Heiton Buckley builders' merchants in Ireland, said it expected to benefit from seasonally stronger trading in the second half of the year, with savings of up to 55 million euros in 2009.

The group, which said it maintained a strong balance sheet, cut around 1,500 staff last year for aimed annual savings of 45 million euros and said in February that it expected to make further job cuts.

Chadwick said there had since been a "relatively small number" of job losses as the group attempted to cut its operating structure in line with sales. (Editing by Simon Jessop and David Cowell)