UPDATE 2-Osram Q1 profit beats forecast as cost cuts pay off
* Adj EBITA 123 mln euros vs Rtrs poll avg 113 mln
* Reported EBITA margin 8.5 pct vs yr-earlier -1.8 pct
* Osram affirms 2014 outlook
* CFO says price decline in LED lamps slowed in fiscal Q1
* Shares up 5.3 pct, outperform market
FRANKFURT, Jan 29 (Reuters) - German lighting company Osram Licht AG beat quarterly profit forecasts on Wednesday, signalling its drive to cut costs and switch from traditional light bulbs to new LED technologies is paying off.
Osram, the world's No.2 in the sector behind Philips , is cutting about a fifth of its workforce and selling or closing down some of its factories.
The restructuring, which targets gross savings of 1.2 billion euros ($1.6 billion), helped push Osram's operating profit margin for the fiscal first quarter through December above 8 percent for the first time in two years, to 8.5 percent.
Adjusted earnings before interest, tax and amortisation (EBITA) rose 14 percent to 123 million euros ($168 million), beating the average estimate of 113 million from analysts in a Reuters poll.
"Osram is performing better than we expected," DZ Bank analyst Harald Schnitzer said. "Obviously restructuring is paying off."
Osram, spun off from engineering group Siemens last year, said it still expected to post a sharp rise in annual net profit this year from last year's 34 million euros, enabling it to pay its first dividend to shareholders.
Shares in Osram were up 5.3 percent at 48.595 euros by 0926 GMT, at the top of the German mid-cap MDAX index, which was up 0.9 percent.
Shares in Osram have roughly doubled in value since Osram's stock market debut on July 8, suggesting investors have faith in the company's ability to turn around its business but there are still challenges ahead.
Semiconductor-based LED (light-emitting diode) technology is rapidly gaining in popularity as it is more energy efficient, longer-lasting and more flexible in its design than traditional types of lighting.
But the technology shift has caused a market shake-up as new competitors such as South Korea's Samsung Electronics and Japan's Toyoda Gosei grab market share from the incumbents in the lighting market - Philips, Osram and General Electric.
Osram, the top supplier for automotive and display lighting, and its peers have been racing to snap up a share of the changed market, causing a steady slide in prices.
According to IHS, the average retail price of LED lamps fell 11.8 percent in 2013, though Osram finance chief Klaus Patzak said on Wednesday he had seen the price decline across the company's range of products slow in its first quarter.
Osram now generates a third of its revenue with LED products, though according to analysts at JP Morgan its LED business still grew more slowly than that of peers like Philips, U.S.-based Acuity and Austria's Zumtobel.
Osram trades at 18.1 times its estimated 12-month forward earnings, at a premium to Zumtobel and Philips, which trade at multiples of 16.6 and 15.2, respectively, but at a discount to pure-play LED players like Cree, according to Thomson Reuters StarMine.