By Dhanya Ann Thoppil

BANGALORE (Reuters) - A.O. Smith Corp (AOS.N: Quote, Profile, Research), which makes water heaters and storage tanks, posted a rise in quarterly profit, helped by sales growth in China and higher prices, but lowered its 2008 earnings forecast range.

The company cited a continued weakness in residential market, steeper decline in non-residential activity and rising raw material costs, particularly steel, for the cut in outlook.

A.O. Smith also warned that the decline in non-residential market may be steeper than originally projected.

The non-residential market, which has held up relatively well over the past two years despite the slump in the U.S. housing market, has been showing signs of weakness in 2008.

The company forecast 2008 earnings of $2.60 to $2.80 a share, including a restructuring expense of about 25 cents a share.

It had previously forecast earnings of $2.70 to $2.90 a share for the period.

Adjusted for restructuring expense, the new forecast is $2.85 to $3.05 a share, Chief Executive Officer Paul Jones said in a conference call with analysts.

Analysts were expecting a profit of $3.02 a share, before items, according to Reuters Estimates.