* Q2 EBIT $45 million, versus $46 million forecast
* Company sticks to 2009 guidance, sees trend improving
* Says adjustment of its dry bulk fleet completed
* Shares down more than 4 percent
(Adds detail, quotes, updates share price)
COPENHAGEN, Aug 19 (Reuters) - Danish bulk shipper D/S Norden posted an sharp fall in second-quarter earnings, hit by lower freight rates, but said it expected continued improvement, with Chinese demand supporting its dry-bulk business.
April-June earnings before interest and tax (EBIT) fell 85 percent to $45 million, just below the average forecast for $46 million and about twice what it achieved in the first quarter.
Chief executive Carsten Mortensen told Reuters he expected the improving trend to continue for the rest of the year and that Chinese demand was largely responsible for sustaining dry-bulk shipping, which is D/S Norden's main focus.
"I don't dare to think of how the situation would have looked for some industries, and especially bulk shipping, if we did not have China," he said.
Dry-bulk shipping has been hit hard by the global economic downturn, which has knocked freight volumes and rates. The industry is also struggling with overcapacity.
D/S Norden's dry cargo profits rose from the weak first quarter but the division's earnings before interest, tax, depreciation and amortisation (EBITDA) were still down 81 percent from a year ago "when market rates were considerably higher", the company said.
The Baltic Exchange's main sea freight index is down 77 percent from an all-time peak of 11,793 points set in May 2008, but it has climbed this year from levels below 800 points seen at the end of 2008 to 2,704 points on Tuesday.
But the index has remained erratic and it is down by a third from eight-month highs above 4,000 points visited in June.
UNCERTAINTIES REMAIN
Analysts said that a recent pick-up in demand had made freight rates attractive again, but big uncertainties remain.
Nordea analyst Finn Bjarke Petersen said: "What is crucial going forward is how much of the extremely strong demand in the second quarter will drop out in the second half."
"Chinese iron ore production has risen much more than could be expected on a trend basis," he said. "Stocks have been built up to levels seen before the crisis," he said, noting a risk that demand for transport of iron ore and coal could plummet.
D/S Norden said: "The adjustment of the dry cargo fleet has now been completed, and Norden is well equipped for future challenges in the market."
At the end of the first half, Norden operated 118 active bulk carriers, down from a fleet of 193 bulk carriers at the end of the first half of 2008, it said.
The group's tanker division had a $1 million loss at the core EBITDA level which the company said was "due to the substantially worse market conditions".
The company repeated its recently upgraded guidance for full-year 2009 EBIT of between $122 million and $172 million, including about $67 million in gains from vessel sales.
Norden predicted full-year EBITDA for the group of $100 million to $150 million, and said its Dry Cargo Department should reach EBITDA of $110 million to $150 million, while the Tanker Department's EBITDA would be between nil and $20 million.
"The uncertainty regarding expectations is still more significant than usual," the company said.
Norden shares were down 4.5 percent at 182.50 crowns by 0954 GMT, underperforming a 0.9 percent fall in the Copenhagen bourse blue-chip index. (Reporting by John Acher and Henriette Jacobsen; Additional reporting by Peter Levring; Editing by Will Waterman and Jon Loades-Carter)