UPDATE 2-Cablemaker NKT warns on sales as customers hold back

Thu Nov 8, 2012 6:43am EST

* European, U.S. customers cautious, China demand weak

* Q3 core earnings 102 mln DKK below forecast 127 mln

* Trims full-year profit outlook

* Shares slide 4.5 percent (Adds analyst quote and details, updates share)

By Teis Jensen and Mia Shanley

COPENHAGEN, Nov 8 (Reuters) - Danish cable manufacturer NKT Holding warned that sales and profits this year would not meet its forecasts as customers in Europe and the United States hold back on orders.

NKT, which also makes professional cleaning equipment, has been hurt by the downturn in Europe and slow equipment sales to China where the government last year put a temporary freeze on high-speed railway construction after an overheated 2010.

The Danish company said on Thursday it expects organic revenue to fall 2 to 3 percent in 2012, when its previous outlook was for flat sales.

It also trimmed its guidance for core profit in 2012, forecasting about 1.0 billion crowns ($171 million) compared with a previous forecast of 1.05 billion.

"We are experiencing restraint and low demand in a number of our markets," Chief Executive Officer Thomas Hofman-Bang told Reuters.

Earnings before interest and tax for the third quarter came in at 102 million Danish crowns ($17.4 million), up marginally on the year but below average analyst expectations for 127 million in a Reuters survey.

NKT shares were down 4.0 percent at 1119 GMT, after hitting their lowest level in more than four months and underperforming a 0.9 percent decline in the wider Copenhagen bourse.

"It is a disappointing quarter on revenue - they have been hit hard on volumes in almost all divisions, and it is particularly the U.S. and China where it has gone weak," said Jesper Christensen, an analyst at Alm Brand.

"Against a backdrop of weak volumes, one worries about the future and whether they can reach their new guidance. They don't have a good track record there," he said.

EYE ON CHINA

The company's NKT Cables division, one of Europe's biggest power cable suppliers, saw flat organic sales growth in the third quarter as it faced intense competition in almost all product areas and on weak demand in China's railway industry.

Infrastructure for the railway and automotive sectors account for about 20 percent of group revenues and NKT said organic railway revenue in the third quarter had halved from the previous year.

China has said railway investment will resume, but at reduced levels compared with 2010.

NKT expects decisions on major new projects to be taken after a new Chinese government is in place and has had time to review the situation, probably not before the second quarter.

Hofman-Bang said on an analyst call he saw "flattish to modest positive growth" in the cable division next year.

"We expect to see growth in infrastructure, negative growth in construction, hard times in automotive and growth in railway," he said.

NKT's Nilfisk-Advance business, which supplies indoor and outdoor cleaning equipment to international customers, had a 4 percent fall in organic revenues, reflecting weak demand in the Americas - the United States in particular - and also the economic downturn in Europe.

It launched a range of new products during the quarter, including vacuum cleaners and high pressure washers, and plans to roll out some 30 new products in 2012. ($1=5.8485 Danish crowns) (Additional reporting by Shida Chayesteh; Editing by Jane Merriman and Mike Nesbit)

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