* Q4 EBIT 170 mln euros vs forecast 178 mln
* Dividend raised to 1.35 euros, previously proposed 1.30
* DSM shares down 1.17 pct
(Adds CFO comments, details, updates shares)
AMSTERDAM, Feb 23 (Reuters) - Dutch DSM (DSMN.AS), the world's biggest vitamins maker, will hunt for large and small acquisitions and raise prices in 2011 to offset higher costs that kept its quarterly operating profit growth in check.
DSM, which also makes raw ingredients for drugmakers, has shed low-margin base chemicals assets and is buying Martek MATK.O, the U.S. baby foods ingredients maker, for $1.1 billion to expand in life sciences. [ID:nLDE6BK04U]
With more than 2 billion euros ($2.74 billion) for acquisitions, Chief Executive Feike Sijbesma said DSM was on the prowl for deals in nutrition and performance materials and that takeovers the size of the Martek deal were possible.
"With our cash position we can do more of that size," Chief Financial Officer Rolf-Dieter Schwalb added. "I would not conclude that this is the one large deal and now we will have others that are much smaller. No, that is not the case."
DSM said it expects higher prices for energy and oil-based raw materials this year and would raise its prices.
Schwalb told Reuters ongoing uncertainty in the Middle East and north Africa could keep oil prices artificially high.
"But demand is still strong, so there should be a good chance to pass on these higher prices," Schwalb said.
DSM's shares were down 1.17 percent at 42.65 euros by 1301 GMT, underperforming the Stoxx Europe 600 chemicals index .SX4P.
Chemicals companies, buoyed by recovering demand, faced accelerating price rises in late 2010, testing their ability to raise selling prices to support margins.
Quarterly results for Dutch AkzoNobel (AKZO.AS), the world's largest paint maker which buys resins for its coatings from DSM, were hit by higher input costs. The firm said last week it would aim to raise its prices this year. [ID:nLDE71F1WB]
DSM, which was founded more than century ago as the Dutch state coal mining company, reported fourth-quarter earnings before interest and tax (EBIT) from continuing operations of 170 million euros, up 17 percent year on year but slightly below the average forecast of 178 million in a Reuters poll.
Its sales rose 18 percent to 2.08 billion euros, in line with estimates, as it swung to a net profit of 149 million, helped by the reversal of an earlier impairment.
ABN AMRO analyst Mark van der Geest said the results were "a bit disappointing, due to a relatively weak performance in the core clusters nutrition and performance materials".
The performance materials business, which supplies the automotive, construction and electronics sectors, had EBIT of 30 million euros, missing estimates because of higher costs.
CEO Sijbesma said DSM, a maker of engineering plastics and materials for bullet-proof vests, mainly bought Martek for its baby food formula business, but added it will also boost DSM's push into second-generation biofuel technology.
Analysts say DSM shares, which trade at 13.6 times estimated earnings, are undervalued versus newer peers such as Danish food ingredients and enzymes maker Danisco DCO.CO, which is being bought by DuPont DD.N.. DSM's traditional rival BASF (BASFn.DE) trades at 12.5 times.
(Reporting by Aaron Gray-Block; Editing by Sara Webb and David Hulmes)