German drugs and chemicals group Merck KGaA cut the top end of its 2011 sales forecast after sluggish demand for consumer electronics dimmed prospects for its liquid crystals business.

The world's largest maker of liquid crystals for display screens warned that the flat screen industry was signaling weakness for the next two to three quarters after customers sold off inventory, anticipating economic weakness ahead.

Merck now expects sales this year of between €10 billion and €10.2 billion ($13.9-14.2 billion), down from a previous range of €10.0-10.4 billion.

The operating margin at the liquid crystals business narrowed by more than 10 percentag points to 42.6% in the third quarter, below the 44.4% expected by analysts in a Reuters poll.

Last week, South Korean flat-screen maker LG Display, which vies with local rival Samsung Electronics for the top position in LCD flat screens globally, posted its biggest quarterly loss on tepid demand for televisions and computers.

Earlier this month Corning, the largest maker of specialty glass for LCDs, said it expected the display industry supply chain to remain cautious.

Merck KGaA still affirmed it expects a group operating profit of about €1 billion in 2011 and an underlying core operating profit of €2.25 billion.

Analysts said the results showed prospects were not as gloomy as they had expected.

"Expectations going into the results were low, so solid results and limited changes to consensus numbers means that we believe stock could see some relief rally today," JP Morgan analyst Richard Vosser said in a note.

In the third quarter, Merck's underlying core operating profit, which includes a range of charges including writedowns on the value of acquired businesses, fell 11.6% to €552 million, still above the €534 million consensus.

"Given that we see the true value of Merck in the streamlining of operations, where we expect news at the beginning of 2012, we do not see a reason to turn negative on the story, particularly given the strength in Pharma and (lab equipment unit) Millipore," Silvia Quandt analyst Stefan Muehlbauer said.