(Refiles to clarify second-half slowdown is "projected" in first paragraph and pretax profit is for "first half" in second paragraph)
* Sees good FY opg performance from U.S. materials unit
* Second-half outlook for Europe remains challenging
* Overall H2 earnings will be down vs year ago
* Shares up 2.3 percent at 1027 GMT (Adds detail)
By Padraic Halpin
DUBLIN, Aug 25 (Reuters) - Irish building giant CRH injected a touch more caution into its full-year outlook, despite a projected slowdown in the rate of earnings decline in the second half.
The more cautious outlook came on Tuesday as the company posted a sharp drop in first-half pretax profit, as expected.
CRH, the No.1 asphalt producer and No.3 aggregates producer in the United States, said it expected its U.S. materials division to generate a strong full-year operating performance as U.S. President Barack Obama's $787 billion stimulus programme kicks in.
But in an interview with Reuters, the Dublin-based group said conditions on construction sites remained tough with U.S. residential building stabilising at best and the decline in non-residential construction set to continue into next year.
In Europe, where CRH generates nearly half of its revenues, the second-half outlook remained challenging, particularly in Ireland and Finland.
"It was very much the same as what they said in July with some subtle changes and those subtle changes are actually on the downside particularly in Europe," Robert Eason, analyst with Goodbody Stockbrokers said.
"They said the decline in profits 'should' moderate in the second half for Europe while in July they said 'will' moderate so it it's a touch more negative than we would have expected."
Shares in the group, which represents one-third of the Irish stock exchange, were up 2.3 percent at 1027 GMT after falling 3 percent on the open and dropping 2 percent on Monday.
"Given the sell-off yesterday there is reason for them to bounce back today," said one Dublin-based trader.
CRH said the rate of profit decline would ease in the second half of the year and Finance Director Glenn Culpepper said month by month profits had improved to a 20 percent decline since June 30 from a 40 percent first-half fall, as some of the $27 billion highway construction allocation from the U.S. stimulus package flows through.
MORE CUTS?
Pretax profits before exceptional items in the six months to end-June stood at 108 million euros ($154.5 million), down from 606 million euros but broadly in line with the 100 million euros CRH forecast in July. The company maintained its interim dividend at 18.50 cents.
An average of five analysts surveyed by Reuters Estimates predicted pretax profits before exceptional items in the six months to end-June of 101.1 million euros.
However, the four analysts who also gave a number for the second half forecast a smaller drop of 30 percent from the 1.02 billion euros achieved in the same period of 2008.
CRH did not give a specific earnings forecast for the second half but said overall profitability in the six months to the end of the year would be lower than in the same period of 2008.
CRH said last month that it was targeting an additional 555 million euros in annualised cost savings for 2009 and 2010, on top of 895 million announced in January.
Chief Operating Officer Albert Manifold told Reuters that the group's headcount reduction was around 20 percent as a result and that if necessary, the group would make further cuts.
French building materials group Saint Gobain also said it hoped cost-cutting measures would lead to a better second half when it reported an expected plunge in first-half profit last month.
Holcim of Switzerland, the world's No. 2 cement maker, said last week that government stimulus packages in the United States and Europe would boost the construction industry next year.
British housebuilder Persimmon also said selling prices had stabilised when reporting a drop in first-half pretax profit on Tuesday. (Editing by Carmel Crimmins and Rupert Winchester)