UPDATE 2-Dutch builder Heijmans swings to H1 profit

* H1 revenue down 17 pct to 1.24 bln eur v poll avg 1.32 bln

* H1 net profit 4 mln versus poll avg of 1.6 mln * Says expects 2010 to end profitably

* Shares underperform index

(Adds analyst comment, detail, share price)

By Greg Roumeliotis

AMSTERDAM, Aug 23 (Reuters) - Dutch builder Heijmans (HEIJ.AS) swung to a stronger-than-expected first-half net profit after cost cuts and tighter project management helped it beat harsh winter conditions and a property downturn at home.

Contractors in the Netherlands have had to keep a laser-sharp focus on margins to remain profitable. Construction output in the country shrank 9.8 percent year-on-year in the second quarter, Eurostat data released last week showed.

"Even though the residential market shows some weak signs of modest recovery, the market conditions remain very difficult. Our strategy remains focused on the Netherlands," Chief Executive Gerrit Witzel said in a statement on Monday.

Heijmans posted first-half net profit of 4 million euros ($5.1 million), up from a loss of 43 million euros last year, on a 17 drop in revenues to 1.24 billion euros, pointing to a selective contracting policy and difficult market conditions.

Analysts in a Reuters poll had expected net profit of 1.6 million euros on revenues of 1.32 billion euros.

"The company has done a great job restructuring the business and striving to push up its margins but sentiment in Dutch construction overall remains negative, and this is weighing on the shares," ING analyst Tijs Hollestelle said.

Heijmans shares were down 1 percent by 0811 GMT at 11.88 euros, slightly underperforming Amsterdam's midcap index .AMX, which was down 0.4 percent.

Heijmans, which raised 100 million euros in a rights issue last year, said that there was still no sign of sustainable recovery in the housing market but it expected 2010 to end profitably, barring unforeseen circumstances.

The builder has tried to limit its exposure to residential construction and focus on more profitable construction projects in a bid to bring its operating profit margin, now at 1.1 percent, in line with the 5.6 percent industry average.

Heijmans also improved earnings in its Dutch infrastructure division, where it capitalised on stimulus spending by clinching three of six so-called emergency packages for the sector in the first half of the year. This contrasted with its foreign operations, as profits in Belgium, Britain and Germany fell.

Foreign operations accounted for a third of sales in the half but whereas domestic operations added 22 million euros to operating profit, foreign operations took out 12 million.

Exports helped the Dutch economy grow faster than expected in the second quarter, although domestic demand stayed weak. [ID:nLDE64I1UU]

Dutch construction and property have been hit hard by the economic crisis, with volumes set to decline in the years ahead, peer Ballast Nedam (BALNc.AS) said in July. The largest Dutch builder, Royal BAM (BAMN.AS), reports earnings on Thursday.

Heijmans trades at 7.1 times 12-month forward earnings, whereas BAM trades at 7.4 times and Ballast at 13.4 times, according to Thomson Reuters StarMine, which weights analysts' forecasts according to their past accuracy and timeliness. (Editing by Marcel Michelson and Michael Shields)