UPDATE 3-SIG shares tumble on profit warning as UK construction craters

* SIG warns on profit as market conditions deteriorate

* Shares fall to near three-year low

* Shares of rivals also drop on warning

* SIG to divest two businesses
(Adds analyst estimate, comments)

By Yadarisa Shabong

Oct 7 (Reuters) - Building materials supplier SIG Plc
warned on Monday about significantly lower profits due
to a weakening economic outlook in Britain and Germany, driving
its shares down as much as 26% and rattling nerves across the
construction industry.

British construction has slumped, weighed down by
uncertainty over Britain's departure from the European Union,
while the German economy has been slipping towards recession
even as construction remains buoyant.

SIG's warning sent ripples through the FTSE Construction and
Materials sector, with shares of bigger rivals
Travis Perkins Plc, Howden Joinery Group Plc
and B&Q-Owner Kingfisher Plc all lower.

SIG's trading update highlighted "a number of key indicators
pointing to further weakening of the macroeconomic backdrop,
notably in the UK and in Germany."

The Sheffield-based company expects much lower underlying
profitability compared to previous expectations in both its
specialist distribution and roofing merchant businesses.

"This deterioration in trading conditions has accelerated
over recent weeks, and political and macro-economic uncertainty
has continued to increase," the company said as it entered its
"traditionally strongest" trading months of the year.

Berenberg analyst Lushanthan Mahendrarajah said: "There's
also this factor about how much of your weighting in your profit
is geared into September to November time, just when Brexit
negotiations are heating up, which means uncertainty is at a
peak."

"Any company that have a big chunk of their profit coming in
September and October, there's more of a risk of not hitting
their full-year expectations." Mahendrarajah said.

Shore Capital analyst Graeme Kyle said the warning reflected
"political turmoil impacting construction project decisions in
the UK".

SIG's shares were down 16% at 100.2 pence as of 1127 GMT
after earlier flirting with a three-year low.

Peel Hunt analysts have cut their pretax profit estimates
for SIG by 15% to 68 million pounds for 2019.

The company also announced the disposal of its air handling
division and building solutions business.

SIG, which supplies insulation, energy management and
roofing products, said it was taking actions to address the
continuing market weakness, but did not divulge specific
details.

The group reported underlying profit before tax of 75.3
million pounds ($92.6 million) for the year ended Dec. 31, 2018.

($1 = 0.8135 pounds)
(Reporting by Yadarisa Shabong and Uday Sampath Kumar in
Bengaluru;
Editing by Bernard Orr/Edmund Blair/Jane Merriman)