UPDATE 4-ThyssenKrupp basks in German boom, lifts outlook

* Q3 profit 480 mln eur vs consensus 275 mln eur

* Raises FY profit forecast * Raw material prices may be volatile in coming quarters

* Shares outperform with up 1.6 pct rise (Adds details, quotes, comments, share price)

By Marilyn Gerlach

FRANKFURT, Aug 13 (Reuters) - ThyssenKrupp (TKAG.DE), Germany's top steelmaker, shrugged off high input prices and the threat of Chinese competition, raising its profit target as brisk growth in its home market helped results smash estimates.

The company said on Friday the euro zone recovery had gathered momentum in April to June, with Germany itself showing fast growth thanks to higher exports, strong industrial activity and a catch-up in the construction sector after a harsh winter.

Germany's economy grew 2.2 percent in the second quarter, the fastest rate since reunification. [ID:nLDE67B1I5]

Chief Financial Officer Alan Hippe told analysts the group's strong performance reflected growth in Germany, Europe's largest economy and where it generates a third of its sales.

"We have a stronger than expected recovery of the German economy and I think that's mirrored in the performance of ThyssenKrupp. The business situation has clearly improved.

"When you look at the automobile production in Germany, especially by exports, that is definitely something which helped the business at ThyssenKrupp," Hippe said.

Around 36 percent of ThyssenKrupp's sales come directly from clients in the automotive industry. Including indirect customers, the sector accounts for around 45 percent of sales.

European carmakers published strong quarterly results in July as swelling underlying demand offset the end of scrapping schemes. Some companies voiced concern over the rest of the year and 2011, with austerity measures set to hit demand for cars. [ID:nLDE66M0UA] [ID:nLDE6711lW] [ID:nLDE66M1BL] [ID:nLDE6670K1]

Drastic cost-cutting at its steel businesses and thriving non-steel operations such as automotive components and windmill parts -- also boosted by domestic demand -- underscored its confident tone, although it saw some clouds on the horizon.

"The increasing power of the raw materials producers, rising demand and also speculative elements mean there could be major price swings in the coming quarters," the company said.

Salzgitter (SZGG.DE), Germany's No. 2 steelmaker, had also noted risks from raw material prices when it released quarterly results this week that missed expectations. [ID:nLDE6781LE]

ThyssenKrupp cited slowing growth in China, the world's biggest producer and consumer of steel, echoing statements by rivals such as ArcelorMittal (ISPA.AS), Nippon Steel Corp (5401.T) and POSCO (005490.KS). [ID:nLDE66Ro6U] [ID:TOE66C05Y]

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"A further expansion in capacities worldwide means there is also a risk of rising European imports from third countries, especially China, where domestic demand growth has slowed in recent weeks," ThyssenKrupp said.

Commerzbank analyst Ingo-Martin Schachel called the results excellent.

"We rate it positive that the beat of consensus expectations was this time not driven by Steel Americas, but by earnings suprises in divisions like Components Technology, Materials Services and Stainless Global," he said.

Sales and administration costs fell further, with a drive to cut 1.5 billion ($1.92 billion) to 2.0 billion euros in costs on track. Its full effects will be felt from fiscal 2010/2011. (Editing by Michael Shields) ($1=.7799 Euro)