(Adds details on U.S. housing forecast, segment results, analyst est)
* Q2 EPS $0.03 vs $0.76 year ago
* Q2 rev falls 19 pct to $241 mln
* Says cautious of U.S. housing recovery
* Says Europe ops to deliver strong results for rest of 2011
July 29 (Reuters) - Canadian wood panels maker Norbord Inc posted a huge drop in second-quarter profit, hurt by low oriented strand board (OSB) prices, and forecast continuing weakness in the housing markets of United States.
OSBs, similar to plywood but cheaper, are commonly used to sheath roofs, walls and floors.
"U.S. housing continues to bounce along at cyclical lows without any immediate sign of improvement," Norbord Chief Executive Barrie Shineton said in a statement.
On Tuesday, rival Tembec Inc also forecast soft lumber demand outlook and said prices were recovering at very low levels. It expects its forest products segment to remain weak until a U.S. housing rebound.
Groundbreaking for U.S. homes in June, however, scaled a six-month high on growing demand for rentals.
"The OSB market is likely to remain challenging in the face of unbalanced supply and the lagging pace of single-family home construction," CEO Shineton said.
April-June profit was $1 million, or 3 cents a share, versus earnings of $33 million, or 76 cents a share, a year ago. The earnings included a non-recurring tax gain of $7 million, or 16 cents a share. Revenue fell 19 percent to $241 million.
Analysts, on average, expected a loss of 12 cents a share on revenue of $258.2 million, according to Thomson Reuters I/B/E/S.
Norbord -- which also makes plywood and a range of other engineered wood products -- expects its European operations, which generated nearly half its total revenue, to continue to deliver strong results for the rest of the year.
Shares of the company closed at C$10.66 on Thursday on the Toronto Stock Exchange. (Reporting by Gowri Jayakumar in Bangalore; Editing by Joyjeet Das)