UPDATE 3-SKF Q3 pretax tops consensus, sees weaker demand

* SKF Q3 pretax earnings beat forecast

* Says expects slightly weaker demand in Q4

* To cut manufacturing levels, reduce inventory

(Adds CEO comments, share price)

By Niklas Pollard and Johannes Hellstrom

STOCKHOLM, Oct 16 (Reuters) - World number one bearings maker SKF (SKFb.ST: Quote, Profile, Research, Stock Buzz) posted higher-than-expected quarterly pretax earnings on Thursday, but said it was cutting production due to an expected fall in demand in the coming months.

SKF shares reversed early declines to trade 0.7 percent higher by 0955 GMT, outperforming a 2.23 percent decline in the broader market .OMXSPI.

SKF said third-quarter pretax profit rose to 1.86 billion Swedish crowns ($259 million) from 1.65 billion the prior year, beating the 1.71 billion seen in a Reuters poll of 13 analysts.

The swelling financial crisis has left few in doubt that SKF and its peers in the Nordic engineering sector now face increasingly tough market conditions after years of record earnings and robust growth.

"The results look a little better than one might have thought and that they have a slightly lower outlook was really pretty much expected," Swedbank analyst Mats Liss said.

"All in all it looks better than expected, even if (sales) volumes were somewhat weak. But on the other hand the price/mix component was very strong."

Sales at the Swedish group rose to a record 15.38 billion crowns in the third quarter from 14.16 billion a year ago, topping the 15.14 billion seen in by analysts. But Chief Executive Tom Johnstone said the financial crisis had begun hitting demand toward the end of the period.

"The main changes in demand happened in September. I think the dramatic events in financial markets hit confidence and basically meant our automotive business and general industry in Europe had some effect of that," he told a news conference.

"However, business linked to infrastructure -- that is energy, railways, aerospace -- continues to develop very strongly. I think we will continue to see the same pattern of demand from these three businesses in the fourth quarter."

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