UPDATE 3-Solvay Q3 profit tops estimates, markets tough

* Q3 REBIT 285 mln euros ($420 mln) vs forecast 211 mln

* Says markets remain difficult

* Reiterates full-year outlook for lower operating profit

* Shares up 2.4 pct

(Adds analyst's comments, further details, share price)

By Aaron Gray-Block

AMSTERDAM, Oct 29 (Reuters) - Belgium's Solvay (SOLB.BR) reported better-than-expected operating profit on strong results from the drugs unit it is selling, but said markets remained tough and warned of possible pressure on plastics margins.

Recurring earnings before interest and taxes (REBIT) at the drugs, chemicals and plastics maker fell 2.4 percent to 285 million euros in the third quarter, beating the average forecast of 211 million given in a Reuters poll of 10 analysts. Sales fell 10 percent to 2.24 billion euros.

Shares in Solvay had risen 2.4 percent to 67.6 euros by 0826 GMT, outperforming a flat DJ Stoxx European chemicals index .SX4P.

"I'm positive on the third quarter, but indications for the fourth quarter provide some element of caution," Petercam analyst Jan van den Bossche said.

"The third-quarter results season is providing a reality check that there is not a straight line into this recovery, and people are forgetting that there was always going to be a bumpy road."

Solvay's results have come under pressure this year as a slump in the automotive and construction sector hit sales at its plastics unit, while lower caustic soda prices have also hurt its chemical business.

"The chemicals and plastics sector showed good resilience against the crisis ... but the market conditions remain difficult. The full-year operating result of the group will be lower than last year," Solvay said in a statement.

On an operating level, a 63 percent fall in REBIT to 39 million euros at the plastics unit beat estimates of 18 million euros, with sales better than expected due to improving demand.

Operating profit of 56 million euros at the chemicals unit, supported by cost savings and lower energy costs, was in line with the average estimate of 53 million euros.

Solvay, which agreed to sell its drugs unit to Abbott for 4.5 billion euros cash in September to reinvest in its chemicals and plastics operations, said REBIT at the pharma unit was 204 million euros, well above average estimates of 143 million.

UNDER PRESSURE

Solvay said sales volume for chemicals slightly improved in recent months, but was combined with pressure on prices, while demand at the plastics unit also improved, leading to better operating results compared with the preceding quarters.

Solvay cautioned that although the improvement in demand in plastics continued at the start of the fourth quarter, threats from U.S. imports might place further pressure on margins for European manufacturers.

Analysts have also said increased capacity for soda ash production, used in making glass, could hit pricing for contracts in 2010.

Solvay rival Akzo Nobel (AKZO.AS) reported a surprise 4 percent rise in EBIT excluding one-offs on cost savings this week, but warned it did not expect a quick recovery of its markets. Dutch peer DSM (DSMN.AS) will report third-quarter results next week.

In Germany, BASF said it was unlikely to hit its goal of keeping its annual dividend at least steady for the 16th consecutive year after lower-than-expected third-quarter net profit. [ID:nLT131746]

There has been much speculation about where Solvay will reinvest the proceeds from the sale of its drugs unit, with Switzerland's Clariant (CLN.VX) and Belgium's Umicore (UMI.BR) suggested as possible targets.

Solvay has said it will wait until the drugs unit sale closes next year before entering into any major deal. (Editing by Greg Mahlich/Will Waterman) ($1=.6785 Euro)