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(Adds sales, details, outlook, CEO)
VIENNA, March 3 (Reuters) - Austrian engineering group Andritz reported a higher-than-expected 3.1 percent increase in its 2016 core profit, driven by increasing demand for its service business.
Sales fell as expected by 5.3 percent, partly because customers postponed modernization projects and big investments.
The group said on Friday it expects to at least reach stable sales and margins in the current year, based on a solid demand for its machines for tissue and paper production and for the pumps it provides for hydropower plants.
"Our central focus this year will be on creating the prerequisites to continue Andritz's profitable growth in the long term, based on acquisition of complementary product areas and on internal growth," Chief Executive Wolfgang Leitner said in a statement.
Andritz plans to increase its 2016 dividend to 1.50 euros from 1.35 euros per share the previous year.
The company reported 2016 earnings before interest, tax and amortisation (EBITA) of 442 million euros ($465 million) on sales of 6.04 billion euros.
Analysts polled by Reuters had on average expected an EBITA of 429 million euros on sales of 6 billion euros. ($1 = 0.9507 euros) (Reporting by Kirsti Knolle; Editing by Subhranshu Sahu and Alexander Smith)