UPDATE 2-Barloworld sees tough H2 as Europe struggles

* Says trading conditions still weak but "bottomed out"

* Sees tough H2, trading in line with expectations so far

* Slashes H1 dividend by 60 pct

(Adds CEO interview, analyst comment, shares)

By Tiisetso Motsoeneng

JOHANNESBURG, May 11 (Reuters) - South Africa's Barloworld (BAWJ.J) forecast a tough second half as recession in Europe hit its international business and slashed its interim dividend after half-year profits almost halved.

Barloworld, which represents leading international brands such as Caterpillar (CAT.N) earthmoving machines and Avis car hire and operates in 42 countries, reported a 46 percent fall in headline earnings per share from continuing operations in the six months to end March to 199.6 cents.

That was in line with its own forecast.

Chief Executive Clive Thomson told Reuters the first month of the second half of the financial year had been in line with expectations. While the second half would remain difficult, he said trading conditions had "bottomed out".

"It has been challenging in our international operations ... we've seen a big fall in heavy equipment sales in Spain and Portugal," Thomson said in a phone interview.

Shares in Barloworld dipped 0.95 percent to 36.65 rand by 0919 GMT, roughly in line with the broader market, and one Cape Town-based analyst said he was not bullish about Barloworld's prospects given a slowdown in private sector spending globally.

"Things are going to get worse before they get better" the industrial sector analyst said. "All these companies are talking about government spending but I don't think it will help much if the private sector is not spending."

Thomson, CEO since December 2006, said the South African car dealership and rental unit delivered a 3 percent rise in operating profit, and said he expected further improvement by the fourth quarter.

Thomson said the company has not received any offers for its Scandinavian car rental business, which it is trying to sell, but hoped a deal would be completed in November this year as some parties had asked for more information on the business.

Barloworld said earnings were hit by higher net finance costs and losses on financial instruments.

It was also affected by the decline in operating performance at equipment unit in Iberia, where it took a 114 million rand ($12.74 million) restructuring charges after laying off workers.

The group slashed its interim dividend by 60 percent to 40 cents per share, as part of its plan to conserve cash. Revenue rose 6 percent to 22.5 billion rand, boosted by strong equipment sales in southern Africa.

(Reporting by Tiisetso Motsoeneng; Editing by Sharon Lindores)

($1=8.945 Rand)