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By Natalie Huet and Gilles Guillaume

PARIS (Reuters) - France's Schneider Electric said on Thursday it expected limited organic sales growth in 2014 and that unfavourable exchange rates would continue to weigh on revenue and margins.

Schneider said business in Western Europe was showing signs of stabilisation and had potential to improve in the second half, but noted uncertainty around emerging markets due to currency volatility there.

The electrical gear maker forecast low single-digit organic sales growth this year, excluding currency effects, underpinned by solid trends in North America and China.

Schneider said adverse exchange rates in emerging markets, notably in Russia, India, Brazil and Indonesia, slashed 879 million euros ($1.21 billion) off sales - 3.7 percentage points of revenue growth - and 0.42 percentage points off its adjusted EBITA margin last year.

Adjusted earnings before interest, taxes and amortisation (EBITA) fell 3 percent to 3.41 billion euros ($4.69 billion), while sales fell 2 percent to 23.55 billion, undershooting a Thomson Reuters I/B/E/S average estimate of 23.8 billion.

The company had cut its 2013 revenue forecast in October, saying it would raise prices and shift production to emerging markets to preserve margins from currency effects.

The company, which earns about 75 percent of its revenue in foreign currencies and 40 percent in emerging markets, said it expected the currency impact to continue to weigh this year, especially in the first half, cutting around 0.4 percentage points off its adjusted EBITA margin.

Schneider's products help utilities distribute electricity, and it makes automation systems for the car and water treatment industries.

Like rival engineering firms Siemens and ABB , it has seen sales hit by Europe's austerity policies, which have led companies and governments to slash spending on capital equipment.

Switzerland's ABB lowered its target for mid-term sales growth earlier this month, saying it had seen a pick-up in demand in its early-cycle businesses, which make products such as circuit breakers, switches and industrial motors, but that spending remained weak from utility and mining companies.

Schneider, which is also holding an investor conference on Thursday, reiterated that it would focus on organic growth and improving return on capital employed after its $5.2 billion acquisition of British engineer Invensys .

($1 = 0.7271 euros)

(Editing by Andrew Callus and James Regan)