UPDATE 1-Herbalife shares fall to 3-year low on weak outlook

(Recasts; adds conference call details, analyst comment, updates share movement)

By Anne Pallivathuckal

BANGALORE, Nov 4 (Reuters) - Shares of Herbalife Ltd (HLF.N) lost a third of their value, touching their lowest level in three years Tuesday, a day after the company forecast 2009 results significantly below market estimates on foreign exchange volatility and a slowdown in business in Mexico.

Scott Van Winkle, analyst with Canaccord Adams, said the dietary supplement distributor's weak 2009 forecast was partly due to the company's foreign currency exposure to a weakening euro and Mexican peso.

"The rest of the (shortfall) is driven by a lower volume assumption -- product sales -- predominantly in Mexico," Van Winkle said.

Sales in Mexico -- the company's second-largest market after the United States -- fell 3 percent in the third quarter, excluding currency fluctuations, primarily due to a 15 percent Value Added Tax levied by the Mexican government.

The company, which had increased prices in May, said it had passed on the new costs to distributors.

Herbalife, which operates in 69 different countries, gets about 17 percent of its sales from Mexico, Van Winkle said.

However, Herbalife Chief Executive Michael Johnson was still optimistic about the company's growth prospects in Mexico.

"We still have a huge penetration opportunity in that country," he said.

"And we're going to get there. It's just going to take us a little longer than we thought."

NOT PANICKING

Johnson said the company's 2009 earnings forecast of $3.00 to $3.20 a share, which trailed analysts' earlier consensus of $4.05 a share, was a "floor" estimate that should see more upside.

"I'm not hitting the panic button," Johnson said in a conference call with analysts. "We will be more profitable in '09 than we are in '08."

The company, which also sells personal care products, expects 2008 earnings per share of $3.50 to $3.55.

Shares of the Los Angeles-based company fell as much as 32 percent to $17.23 before paring some of their losses to trade down $6.21 at $19.24 in late afternoon trade on the New York Stock Exchange. (Editing by Jarshad Kakkrakandy, Anthony Kurian)