February 2, 2017 / 11:28 AM / in 3 years

UPDATE 1-Stainless steel maker Outokumpu proposes first dividends since 2010

* Outokumpu turns first annual core profit since 2007

* Proposes surprise dividend

* Sees bright outlook for 2017

* Shares rise 7 pct (Adds detail, comments)

By Tuomas Forsell and Jussi Rosendahl

HELSINKI, Feb 2 (Reuters) - Outokumpu, Europe’s largest stainless steel maker, reported its first annual core operating profit since 2007 on Thursday and proposed its first dividend since 2010, sending its shares sharply higher.

The Finnish company, which has struggled since the financial crisis and an unsuccessful acquisition of Thyssenkrupp’s Inoxum unit in 2012, swung back to profit helped by cost cuts and rising sales at its Americas division.

Underlying operating profit rose to 45 million euros ($49 million) last year, matching analysts’ expectations, from a loss of 101 million in 2015, but a proposed annual dividend of 0.10 euros per share came as a surprise to all analysts in a Reuters poll.

“The turnaround secured in 2016, combined with the progress made in debt reduction and the positive outlook that starts the year 2017, presents also the right time to start paying dividends,” CEO Roeland Baan said in a statement.

It expects the stainless steel market to be strong in the first quarter both in Europe and United States, and that higher ferrochrome prices will help its profitability in Europe.

Outokumpu forecast its adjusted EBITDA to increase above 250 million euros in the first quarter of 2017, compared to 38 million a year earlier.

Shares in the company rose 6.9 percent by 1055 GMT.

“That first-quarter forecast is very bullish, and no one was expecting a dividend. They have taken the right measures and the market is favourable at the moment,” said Antti Kansanen, analyst at Evli brokerage, with a “buy” rating.

The company cut its net debt target to below 1.1 billion euros at the end of the year, down by 100 million from the previous forecast. ($1 = 0.9253 euros) (Editing by Ruth Pitchford)

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