* Sees 2013 sales flat if currency effects included
* Had in August cut sales outlook to growth of 1-2 pct
* Q3 EBIT at industrial unit down 60 pct to 42 mln euro
* Sees around 13 pct op EBIT margin vs 12.7 pct year-ago
* CEO sees "no trend change" in weak industrial business (Adds CEO comment and detail)
By Andreas Cremer
BERLIN, Nov 11 (Reuters) - German engineering group Schaeffler lowered yearly sales expectations for a second time in three months on Monday, citing weak demand in its industrial business.
The heavily indebted company, which also posted a sharp drop in quarterly earnings in its industrial business which serves sectors including aerospace and railways, said demand from these areas in Europe and Asia may remain subdued in the fourth quarter.
The warning comes just over a month after Schaeffler named finance chief Klaus Rosenfeld as interim chief executive to replace Juergen Geissinger, who engineered the leveraged takeover of three-times larger rival Continental in 2008.
Schaeffler, whose sector peers include the likes of ABB , Siemens and Schneider, has not so far named a permanent replacement. Rosenfeld declined comment on Monday on whether he wants to stay at the helm full time.
The group, which makes ball bearings and whose other division is automotive, said the sluggish world economy had weighed on the industrial business, which accounts for almost a third of group sales.
It said earnings before interest and tax at the industrial unit plunged 60 percent to 42 million euros ($56.1 million) in the third quarter.
Group operating revenue may be flat this year if adverse currency effects are included, Schaeffler said, though it maintained its profit outlook.
In August, the privately-held company had lowered its sales guidance to growth of between 1 and 2 percent from a previous 4 percent.
The operating EBIT margin may come in at about 13 percent, compared with 12.7 percent last year, Schaeffler said, reaffirming its August target.
"We see no trend change as yet" in the industrial division, CEO Rosenfeld said during a conference call, though he expressed optimism about a recovery in 2014.
Third-quarter group sales rose 1.5 percent to 2.8 billion euros and were up 5 percent once currency effects were excluded, the company said, citing strong automotive business which adds 80 percent to group operating earnings.