UPDATE 2-SIG slumps as construction weakness leads to fresh profit warning

* Shares fall as much as 26%, drag rivals lower

* 2019 profit forecast misses analyst consensus

* Firm says sales deteriorated in December

* Measures to offset construction slump running late (Recasts, adds analyst comment, industry data, background)

Jan 9 (Reuters) - SIG Plc shares tumbled as much 26% on Thursday as the building materials supplier warned on 2019 profit for the second time in three months, after December sales were hit by a long-running weakness in European construction markets.

Demand in the UK and Germany has taken a beating from political uncertainty and fears of a recession respectively, prompting SIG to focus on streamlining operations, switching to higher-margin sales, and cutting down costs and debt.

The British company, which previously issued a profit warning in October, said its sales rate in December was about a quarter lower than the previous month.

The downturn in Britain's construction industry deepened last month, driven by the sharpest drop in civil engineering activity since 2009, a survey showed here last week, underscoring the economy's frailties at the end of last year.

Sheffield-based SIG, which supplies insulation, energy management and roofing products, said it expects underlying pretax profit of about 42 million pounds ($55 million) for the year to December.

SIG’s profit forecast was well short of the analyst consensus of 68 million pounds, Peel Hunt analysts said.

The brokerage, which cut its rating on SIG’s stock to “hold” from “buy”, said the company’s trading position in December was “much worse” than expected, further exacerbated by wet weather in November and December.

The forecast was also over 40% lower than SIG’s 2018 profit, hurt by a fall in like-for-like sales at its unit focusing on insulation products and interiors and its UK business in the second half of the year.

The company also pointed to a delay in the impact of measures it took earlier in the year to offset the slump in construction markets. It now expects those benefits to show up in 2020 instead of 2019.

SIG shares were down 25.8% at 88.40 pence as of 0928 GMT.

Its warning spooked rival stocks as well, with shares of Travis Perkins, Howden Joinery Group, Grafton Group and B&Q-Owner Kingfisher all 1-4% lower.

SIG also said the disposal of its air handling division would be completed later this month, and that it expects the sale of its building solutions business to close in the first quarter.

The company is banking on cash from these transactions to cut down debt, having reduced borrowings at the end of last year to 162 million pounds from 189 million pounds a year earlier.

$1 = 0.7631 pounds Reporting by Pushkala Aripaka in Bengaluru; Editing by Saumyadeb Chakrabarty and Jan Harvey