Dec. 4 (Bloomberg) -- Billabong International Ltd., the world’s biggest publicly traded surfwear maker, plunged by a record in Sydney trading after saying first-half earnings will probably fall for a second straight year.

Billabong plummeted 18 percent to A$8.20 at the close of trading, the largest decline since first selling shares to the public on Aug. 11, 2000.

The U.S. recession has accelerated a slowdown in demand for clothing and surfing accessories, causing earnings per share to fall in the six months ending December, the Gold Coast, Australia-based company said in a statement today. Billabong also cut its annual EPS growth forecast to between 6 percent and 10 percent in the year ending June, down from an October prediction for a rise of as much as 16 percent.

“Billabong’s poor performance is a reflection of the broader economic slowdown in the U.S., rather than the health of its brands,” Craig Woolford, an analyst at Citigroup Inc., said in a note to clients. “The company’s strategy is to protect its brand equity and minimize discounting. While we agree with the philosophy, its sales growth will likely continue to suffer.”

Citigroup affirmed its “hold” rating and A$8.78 price target on Billabong.

U.S. customers, Billabong’s biggest market, are deferring deliveries of new clothing to cope with the slowdown while slumps in the value of the Canadian dollar and South African rand against the U.S. currency cut the value of sales. Chief Executive Officer Derek O’Neill is trying to reduce his inventory levels to minimize the impact.

‘Weaker Conditions’

“The company has taken the view that the weaker than anticipated conditions are likely to extend well into the financial year,” Billabong said. “The second half is expected to be significantly stronger given it is the larger selling season in the Northern Hemisphere.”

The company, whose brands include Nixon Watches and Kustom Shoes, gets 70 percent of sales from outside Australia. Domestic sales remain “subdued” and European growth has slowed, the company said.

Revenue for the year is expected to rise more than 25 percent with growth in earnings before interest, tax, depreciation and amortization of 20 percent.

The reduced annual EPS forecast comes less than six weeks after Billabong raised earnings expectations, citing a slump in the Australian dollar. The Australian dollar has fallen 34 percent since reaching a 25-year high of 98.5 U.S. cents on July 15.

To contact the reporter on this story: Robert Fenner in Melbourne rfenner@bloomberg.net

Last Updated: December 4, 2008 01:07 EST