* H1 operating loss 8.3 million euros vs 72 million profit year ago
* To be back in black in H2, at or just above breakeven FY
* Trading stabilising, favourable trends in UK
* Shares up 9 percent
(Adds chairman quotes from interview, analysts, shares)
By Andras Gergely
DUBLIN, Aug 28 (Reuters) - Irish building supplies group Grafton swung to a first-half operating loss but said signs of a UK upturn and a steadier Irish market should help it break even in 2009, boosting its shares 9 percent.
Pointing to consumer confidence and retail growth returning in the UK -- which accounts for two-thirds of its turnover -- Grafton said on Friday it should be back in the black in its second half and around or just above break even in the whole of 2009.
"It's been a tough time in both the UK and Ireland but it doesn't look as dark as it did six months ago," Executive Chairman Michael Chadwick told Reuters.
The owner of builders' and plumbers' merchants posted an operating loss of 8.3 million euros in the six months to the end of June compared with a 71.8 million euro profit a year earlier.
After accounting for a property sale it had a net profit of 3.4 million euros versus 46.4 million in the first half of 2008.
"We should be somewhere around or somewhat above breakeven (for the year)," Chadwick said in an interview.
Grafton, which owns Buildbase builders' yards in the United Kingdom and Heiton Buckley builders' merchants in Ireland, said trading continued to stabilise in July and August.
It said Ireland would exit slower from recession than the UK after experiencing a 90 percent drop in housing starts since the end of a decade-long boom, but it could start recovering next year with house starts steadying around 10,000-12,000 units.
"The outlook statement was encouraging," one Dublin-based trader said. "They are talking about possible signs of recovery in Ireland in 2010, that's what's getting people excited."
Grafton stock traded 9.4 percent higher at 3.62 euros at 0838 GMT, one of the top gainers in a 1.3 percent stronger Irish market.
British housebuilder Persimmon on Tuesday also reported signs of improved activity in the housing market, supporting evidence that the UK economy may emerge from the recession this year.
Data from the Nationwide Building Society on Thursday showed British house prices rose for the fourth month running and at their fastest monthly rate in 2-1/2 years in August.
Investors welcomed the reduction in Grafton's net debt by 56 million euros to 380 million and that it paid a dividend.
"The group's focus on paying down debt and cost control during the current downturn leaves it in a good position when markets return," brokerage NCB said in a note which struck a more cautious note on the Irish economy.
"Ireland remains a significant drag on earnings with no improvement forecasted until at least 2011," it said. (Reporting by Andras Gergely; editing by Will Waterman and Jon Loades-Carter)