The world's top cellphone maker Nokia reported on Thursday a sharp fall in January-March sales and profits as the economic downturn sapped demand for new phones.

Nokia reported first-quarter earnings per share falling to 0.03 euros from 0.32 euros, missing he average forecast of 0.06 euros in a Reuters poll, but within the wide range of estimates.

The cellphone market is facing its toughest year ever in 2009, with Nokia repeating its forecast for the market volumes to fall around 10 percent.

Nokia Chief Executive Olli-Pekka Kallasvuo said inventories of unsold cellphones had decreased substantially in the quarter.

(This) has also resulted in the demand picture becoming more predictable as we enter the second quarter, he said. To cope with slowing demand Nokia has focused on cost cuts in early 2009, slashing jobs across its operations while also halting the use of subcontractors in phone manufacturing.

(Reporting by Tarmo Virki)