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)

By Pushkala Aripaka

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 https://www.reuters.com/article/us-britain-economy-pmi/decline-in-uk-construction-gathers-pace-in-december-pmi-idUSKBN1Z20UY
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)