UPDATE 2-H&E Q1 profit drops on falling sales, rentals

* Q1 EPS $0.06 vs yr-ago EPS $0.28, rev down 24 pct

* Company sees no significant improvement this year

* Says optimistic about govt infrastructure spending

* Shares fall as much as 11 pct (Recasts; adds conference call details, updates share movement)

May 6 (Reuters) - Equipment services company H&E Equipment Services (HEES.O) posted a nearly 80 percent drop in quarterly profit due to lower rentals and sales and said it saw no significant improvement this year, sending its shares down as much as 11 percent.

"The availability of credit remains extremely tight and non-residential construction in the industrial sectors has slowed substantially," a company executive said on a conference call with analysts.

The company, which sells and rents out cranes, earthmoving equipment and industrial lift trucks, said lending remains at a standstill, resulting in project delays or cancellations.

About half of H&E's revenue comes from the industrial sector, which includes the energy and mining industries, while the non-residential construction sector brings in 40 percent. The remaining 10 percent of revenue comes from residential construction.

"The environment remains very challenging and we do not expect any significant improvement in conditions during 2009," the executive said.

However, H&E said it was optimistic about potential increased governmental infrastructure spending and its positive impact on the company's business.

H&E, which reduced its workforce by 10 percent last year, said it cut its employee base by an additional 3 percent during the first quarter.

It also completed another workforce reduction of similar magnitude during the first part of the second quarter, the company said.

As of Dec. 31, 2008, the Baton Rouge, Louisiana-based company had about 1,871 employees.

LOWER RENTALS HIT Q1

For the first quarter, H&E reported net income of $2.2 million, or 6 cents a share, compared with $10.2 million, or 28 cents a share, a year ago.

Revenue decreased 24 percent to $186.2 million.

Analysts on average were expecting earnings of 6 cents a share on revenue of $207.5 million, according to Reuters Estimates.

"During the first quarter, the industry continued to experience tremendous rate and pricing pressure as our rental rates decreased 9.9 percent," Chief Financial Officer Leslie Magee said in a statement. Equipment rentals fell 22 percent to $55.5 million, while used equipment sales declined more than 61 percent to $16.1 million.

New equipment sales fell about 16 percent to $64.1 million for the period.

Shares of the company fell 11 percent to $6.62, before paring some losses to trade down 6 percent at $7.00 Wednesday afternoon on Nasdaq. (Reporting by Biswarup Gooptu and Mary Meyase in Bangalore; Editing by Aradhana Aravindan)