* Withdraws 2009 outlook
* Sees Q1 EPS half of St est
* Says could violate covenants in H2
* Cites lower proceeds from sale of ice business
* Shares down as much as 37 percent (Recasts; adds details, background, analyst comment; updates share movement)
March 30 (Reuters) - Diversified manufacturer Manitowoc Co (MTW.N) forecast first-quarter earnings sharply below Wall Street expectations, hurt by weakening demand for its cranes, and it withdrew its outlook for the year, sending its shares down as much as 37 percent.
The company also said it was heading towards a possible violation of debt covenants this year as proceeds from sale of its ice business were lower than expected.
The crane segment, which has been hurt by project cancellations, accounts for about 85 percent of Manitowoc's total business and reported a sharp drop in backlogs and sales in the last quarter.
"Over the last six to nine months, global demand for the company's crane products has not stabilized and continues to decline further than previously anticipated due to the continuing global recession," Manitowoc said in a statement.
The company had forecast 2009 adjusted earnings of $1.35 to $1.60 a share. Analysts were expecting the company to earn 96 cents a share, according to Reuters Estimates.
It expects first-quarter earnings from continuing operations to be more than 50 percent below current Street estimates of 21 cents a share.
The company, which has seen its share price drop about 88 percent in the past 12 months, said it will not be issuing new outlook.
It has implemented global workforce reductions, hiring freeze, temporary production shutdowns and shifting certain crane production to lower cost destinations.
Manitowoc earlier last week said it had signed an agreement to sell the Enodis global ice machine operations to an affiliate of Warburg Pincus for $160 million. [ID:nBNG419227]
"Given this sales price as well as updated guidance, it looks like a violation in 2009 is more than likely," Longbow Research's Paul Bodnar said.
He said the sale price of $160 million was significantly below previous expectations and the original price at which Manitowoc purchased it.
Bodnar, who has a "neutral" rating on the stock, said he was expecting around $200 million from the sale.
Manitowoc said it intends to use the after-tax net proceeds of about $150 million to reduce a portion of the debt incurred in November 2008 to acquire Enodis Plc.
As of Dec. 31, the company had a total debt of $2.5 billion, most of which was incurred to fund the acquisition of British kitchen-equipment maker Enodis for about $2.7 billion last October.
"If it becomes necessary, Manitowoc would work with its lender group and would expect to obtain covenant relief," it said in a statement.
It expects to incur an additional non-cash impairment charge of $30 million in the first quarter of 2009.
Shares of the company were down $1.50 at $3.11 Monday morning on the New York Stock Exchange. They earlier touched a low of $2.88. (Editing by Anil D'Silva)