UPDATE 3-Metro targets marked profit rise after dividend scrapped
* Positive signs for key Christmas fourth quarter
* Targets slight sales growth for 2013/14, marked EBIT rise
* Hope for dividend return after loss in 2013 financial yr
* New branding campaign to update Metro image in 50th year
* Shares up 0.6 pct, outperform European retailers (Adds comments from news conference)
COLOGNE, Dec 12 (Reuters) - Germany's Metro is confident of an improvement in profitability next year from a revamp of its retail businesses after the group reported a net loss and cancelled its dividend.
Europe's fourth-biggest retailer, which runs cash and carries, supermarkets, department stores and the region's top consumer electronics chain, is slimming down and cutting costs to try to revive its fortunes.
"We are still at the beginning of the transformation but we have made significant progress," Chief Executive Olaf Koch told a news conference, adding that Metro had seen a "significant" rise in sales in the current quarter from the last.
He was confident the group would be able to return to paying a dividend for its new 2013/14 financial year. It scrapped a payout for a shortened 2013 year to September following a net loss of 71 million euros.
Metro forecast "slight absolute sales growth" for 2013/14, while earnings before interest and tax (EBIT) and before special items should "markedly exceed" a comparative level of 1.7 billion euros for 2012/13, a sign it is aiming for improvements in margin growth.
Metro's core earnings before special items, of 728 million euros ($1 billion) for the shortened 2013 business year to September, beating its own target to "slightly exceed" the 706 million of 2012.
"Guidance more optimistic than we expected," Commerzbank analyst Juergen Elfers wrote in a note. "Koch is distributing an air of confidence and this is the really good news."
Metro shares, which jumped last month after it said it might list up to a quarter of its Cash & Carry Russia business on the stock market next year, were up 0.6 percent at 1140 GMT, compared with a 0.8 percent weaker European retail index .
The stock trades at 16.5 times forward earnings, a small discount to Europe's biggest retailer Carrefour, but well ahead of Britain's Tesco with a multiple of 10.5.
Koch said Metro would made a decision about listing the Russian business in the first half of next year, but said the group would definitely keep a majority stake in it.
CASH AND CARRY REVAMP
Metro, which runs over 2,200 outlets in 32 countries but gets just over two thirds of sales from Germany and other western European countries, has been divesting non-core businesses, cutting prices at its cash and carries, as well as revamping product ranges and investing in its delivery arm.
Divestments helped it cut net debt by 2.3 billion euros to 5.4 billion.
Koch said that Metro would still consider selling its Kaufhof department store chain, which has been performing better, if there was a "fair price" on the table, adding there were no concrete talks underway on a sale.
In March, Koch took over direct responsibility for the cash and carry business, which accounts for almost half of group sales and which had underinvested in stores in its core markets in Europe as it expanded rapidly in emerging markets.
"A lot needed doing, to put it politely," he said.
Koch, who presented Metro's results at a revamped cash and carry store in the German city of Cologne, said he was encouraged by 20 percent growth in its delivery service and a slight rise in sales of higher-margin own-brand products.
The business has delisted 30 percent of poor-selling non-food products and put a new focus on higher-margin fresh produce like fish and meat as well as more upmarket Mediterranean products designed to appeal to owners of restaurants and hotels.
Aiming to improve its ties with independent entrepreneurs, Koch presented a new slogan for the cash and carry business "You & Metro" to be the focus of an international campaign in 2014, when the company celebrates its 50th anniversary.
Metro, which shocked investors in March when it trimmed its dividend for the first time in over 14 years, is moving its financial year to start on Oct. 1 to avoid reporting requirements interfering with the Christmas sales period.
($1 = 0.7251 euros) (Reporting by Emma Thomasson; Editing by Erica Billingham and Jane Merriman)