* 35 million sterling H1 hit from paper problems * H1 revenue down 17 percent at 209.2 million sterling
* Underlying pretax profit 23.8 million sterling vs 48 million
* Very close to appointing new CEO
* Shares plunge 13 percent, hit four-year low
(Updates shares, adds analyst comment)
By Golnar Motevalli
LONDON, Nov 23 (Reuters) - Bank note printer De La Rue said its production problems could lead to the loss of a top customer, knocking its shares to a four-year low.
Executive Chairman Nicholas Brookes told Reuters on Tuesday that doubt lingered over De La Rue's relationship with the customer for whom the faulty banknote paper was originally produced.
"There is still uncertainty with a principal customer and we have not heard whether we will continue or not continue supplying this customer," Brookes said, adding that the client in question is one of De La Rue's largest.
Newspapers have reported the faulty paper was destined for India, one of the company's largest clients. The Reserve Bank of India has declined to comment.
De La Rue shares, which have lost more than 30 percent of their value since the company first reported problems at its paper factory in July, had fallen 9 percent at 1026 GMT to 568 pence, after earlier touching their lowest price in four years.
De La Rue said its profit more than halved in the first half of 2010, following a 35 million pound hit caused by the suspension of production at one of its plants.
The costs were in line with a September profit warning and the company said it would resolve the production issue through management appointments, a focus on paper quality and engaging its customers.
First-half revenue was down 17 percent at 209.2 million pounds and profit before tax and exceptional items was 23.8 million, down from 48 million pounds in the same period last year. The company maintained its interim dividend at 14.1 pence.
LACK OF CLARITY, NO CEO
De La Rue said uncertainty over the impact of the paper investigation on its full-year results remained. Brookes said further disciplinary action would be taken and a number of new managers had been appointed.
Group Finance Director Colin Child said De La Rue's full year financial health depended on whether the main customer involved in the paper problems decided to continue doing business with the company.
"...without the principal customer, the consensus that is emerging is that operating profit without resumption of supply will be around the 40 million pound mark," Child told Reuters, citing analysts' forecasts.
Adrian Kearsey at Evolution Securities said the fact the company kept a dividend provided some good news, but said concerns about clarity over the impact of its problems on its full year perfomance would cast a shadow over forecasts.
Brookes also said De La Rue had hired another company to conduct external quality and security tests on all its paper since the debacle at the factory in Overton, southern England.
The firm's former chief executive, James Hussey, stepped down in the wake of the problems and a successor has yet to be found, a fact which analysts have said has put additional pressure on De La Rue's share price.
"Underneath James we have a tremendous strength, we've had a very, very high level of candidates coming forward, and I think we have a very, very good preferred candidate," Brookes said, but would not confirm whether the candidate was internal.
De La Rue, which was founded by Thomas de la Rue in Guernsey in 1813 and has been listed since 1947, is expected to post full-year pretax profit of 73.2 million pounds, according to a poll of seven analysts compiled by Thomson Reuters I/B/E/S. (Editing by James Davey, David Cowell and Alexander Smith) ($1=.6244 Pound)