UPDATE 1-ElringKlinger cuts dividend, sees 2009 growth

* Ease in commodity prices for first time in years helps

* Sees at least 5-7 pct annual profit growth over mid-term

* Cuts dividend to 0.15 euros per share from 0.47

FRANKFURT, March 30 (Reuters) - Germany's ElringKlinger (ZILGn.DE) will propose slashing its dividend to a third amid narrowing margins although it does expect to be profitable this year, the maker of cylinder head gaskets said on Monday.

"ElringKlinger cannot rule out that Group sales recede towards 500 million euros. Even in this case, ElringKlinger will be targeting an EBIT margin of 5 to 8 percent, supported by a group-wide streamlining program of 10 million euros," it said in a statement.

While the first signs of a gradual upturn in auto markets are not expected until the second half of 2009, it said the first easing in commodity and material prices in years has begun to have a positive medium-term effect on the overall cost situation.

Revenue rose 8.2 percent to 658 million euros ($882 million) last year, while operating profit fell 38 percent to 76 million.

It will propose cutting the dividend to 0.15 euros per share from last year's 0.47, when adjusted for a stock split, in part due to "the very challenging conditions" in the industry.

Thanks to the growing trend towards fuel consumption and carbon emission reductions, ElringKlinger believes it is well positioned to generate organic growth of 5-7 percent and increase earnings at least proportionately in the medium term.

(Reporting by Christiaan Hetzner)