* To reduce costs by 110 million Swiss francs by H1 2011
* Sees one-off restructuring costs of 55 million francs
* No disposals seen, confirms guidance
* Shares rise over 3 percent (Adds further details, analyst comment, updates shares)
By Jason Rhodes and Katie Reid
ZURICH, June 24 (Reuters) - Swiss engineering group Sulzer AG is slashing 11 percent of its workforce in a drive to cut costs in the face of lower demand and with no recovery in sight, the company said on Wednesday.
Sulzer said conditions had continued to decline in key market segments and it expected no quick improvement, prompting it to target annual cost savings of around 110 million Swiss francs ($101.2 million) by the first half of 2011.
One-off restructuring costs would run to 55 million francs, and 1,400 jobs would be cut, Sulzer said. The company had 12,726 employees at the end of 2008 and had already introduced shorter working hours at some sites.
Sulzer, in which Russian billionaire Viktor Vekselberg holds a 31 percent stake, makes pumps for the oil and gas industry as well as surface coatings for jet engines.
"We think that such a restructuring programme is reasonable given the drastic change in market conditions," said Vontobel analyst Fabian Haecki.
"Compared to other industrial companies, Sulzer is in a very solid position with good profitability and a very sound balance sheet. We therefore view this programme as a pro-active measure to preserve its strong earnings power," he said.
By 0904 GMT, shares in the group had risen 3.2 percent to 65.60 Swiss francs, outperforming a 0.8 percent rise in the Swiss mid-cap index.
Other Swiss industrial companies such as ABB, Oerlikon and Rieter have also introduced restructuring programmes as the economic crisis has weighed on demand for their products.
Engineering group ABB in April raised its cost-cutting target to $2 billion by the end of 2010 after previously aiming to cut costs by $1.3 billion.
"The cost reduction effort in 2009 is the highest at Sulzer Metco and Sulzer Chemtech, while Sulzer Turbo Services is affected to a lesser extent," Sulzer said.
"Sulzer Pumps will be fulfilling its high order backlog in many locations before capacities need to be adjusted," it said.
Sulzer CEO Ton Buechner said the group was sticking to its guidance for the full year.
In February, Sulzer said it expected annual sales declines of 5 to 8 percent in the next two to three years. It also cut its mid-term EBIT margin target to around 10 percent.
Sulzer said in April it expected a significant decline in orders in 2009 compared with a high level in 2008.
The company had felt the downturn later than others and expects to experience recovery later too, Buechner said. Sulzer did not currently intend to sell businesses, he added.
For the first quarter it posted a worse-than-expected 26 percent drop in orders due to falling demand, particularly from the oil processing industry, and negative currency effects. (Editing by David Holmes and Rupert Winchester)