* Net debt at end-March climbs to 10.5 bln euros
* Hochtief posts Q1 loss on Australian projects
* Analysts see ACS missing debt-reduction target
* ACS shares down 4.6 pct, IBEX up 0.1 pct (Adds details, background)
By Peter Dinkloh and Tracy Rucinski
FRANKFURT/MADRID, May 8 Spanish builder ACS might miss its debt reduction target this year as earnings from its German affiliate disappoint and asset sales generate insufficient cash, putting pressure on the company to divest more.
ACS, which owns 54 percent of German builder Hochtief , on Tuesday said net debt rose to 10.5 billion euros ($13.7 billion) at the end of March. The company also has an additional 3.7 billion euros in liabilities in other assets.
Thomson Reuters StarMine, which weights analyst's estimates according to their track record, forecasts ACS's net debt will end the year at 9.2 billion euros or 3.4 times forecast earnings before interest, taxes, depreciation and amortisation (EBITDA).
That's above Chief Executive Florentino Perez's target to reduce net debt to less than three times EBITDA to reduce interest payments for loans after it had to accept higher financing costs, that had already risen by 81 percent from 2010 to 2011.
Disappointing earnings and rising debt at Hochtief have complicated ACS's financial situation, while a recession in its Spanish home market makes it hard to sell assets.
The German builder-turned-services company has had to lower its expectations for 2012 earnings twice this year as its cash cow, Australian unit Leighton, disappointed.
"We think this (debt) is too high and has to come down to normalise the financial situation," N+1 Equities analyst Jose Ocina said on Tuesday after ACS released first-quarter results.
Last month Perez reversed his strategy to gain more control of Spanish utility Iberdrola and started selling shares in the power provider to lower liabilities.
That was prompted by a drop in Iberdrola's share price below 4 euros. At that level, some ACS creditors have the right to take ownership of the shares if the builder does not provide fresh collateral.
One of the creditors, Natixis has given up that right in return for ACS paying higher financing costs on its loan. Perez now wants to lower these costs by reducing overall debt.
He plans to sell more non-strategic assets after divesting 10 percent in motorway company Abertis, he said in April.
The builder is also looking for buyers for 750 megawatts of renewable energy assets, high-tension grids in Brazil, desalination plants and various motorway assets, sales which Perez said last month could generate 3 billion euros this year.
Shares in ACS were down 4.6 percent at 13.59 euros at 1344 GMT on Tuesday, while the Spanish blue-chip index IBEX was up 0.1 percent. Hochtief rose 2 percent, while the STOXX Europe 600 Construction & Materials index declined 1 percent.
Earlier on Tuesday Hochtief reported a first-quarter loss weighed down by problems with two construction projects in Australia.
Meanwhile, Leighton reaffirmed its profit expectations. ($1 = 0.7663 euro) (Editing by Erica Billingham)