* Key European waste division core earnings down 4.5 pct
* Net profit up 40 pct on absence of restructuring cost
* Group positions itself in renewable energy, biogas
* Dividend unchanged at 0.65 euros; shares up 6 pct (Adds CEO quotes, forecasts, price move)
PARIS, Feb 20 (Reuters) - Suez Environnement is looking to invest in growth markets to reinvigorate the French environmental services company after its key European waste market finally stopped shrinking last year.
Suez, the world's second-largest water and waste group by sales after French peer Veolia, said core 2013 earnings rose 2.9 percent to 2.52 billion euros ($3.5 billion) and forecast organic growth of at least 2 percent this year.
Its sales fell 3 percent to 14.64 billion euros as Europe's weak economy kept pressure on volumes and margins in the firm's waste division, which accounts for about half of group revenue.
Suez said the cyclical waste business had stabilised around the end of last year and it expected no further deterioration.
The group plans targeted investments or acquisitions in its waste and water businesses and will seek to expand in growth markets, Chief Executive Jean-Louis Chaussade said.
"North Africa, China and India have opened their doors for us. We have big ambitions for these countries," Chaussade said.
He added Suez would also seek to expand in its European home markets when the opportunity arises, and referred to the additional minority stake in Rome-based utility Acea it bought from its parent company GDF Suez.
He said Italy could become a third pillar of its European water business, after France and Spain, where it earned 2.3 and 1.4 billion euros of revenue respectively.
Suez shares rose as much as 8 percent on Thursday in the highest volume since April last year, before easing back to stand 6.2 percent higher in mid-afternoon trade.
The price jump made Suez's market value higher than rival Veolia, at 7.12 billion euros compared to 6.96 billion.
"We are turning more optimistic on the French environmental utilities as we believe these companies can return to a structural growth path, after years of pricing pressure, macro headwinds and, in Veolia's case, restructuring," UBS analysts said in a note to clients.
It added that Suez in particular should deliver additional upside from growth areas and upgraded the shares to 'buy'. It remained neutral on Veolia.
Suez said it would pay an unchanged dividend of 0.65 euros per share and aimed to pay at least that amount on its 2014 earnings. Its dividend has been the same since 2010.
Chief financial officer Jean-Marc Boursier said Suez would rather reduce investments and cut more costs than lower its dividend if economic growth turned out to be weaker than expected.
Core earnings before interest, tax, depreciation and amortisation (EBITDA) in Suez's European waste business fell 4.5 percent to 834 million euros, while sales fell 3 percent to 6.5 billion.
Net profit rose 40 percent to 352 million euros, partly due to the reversal of provisions. Core earnings in the international division rose 25 percent to 581 million, boosted in part by the absence of further provisions on its Melbourne, Australia desalination plant.
The company said that, while maintaining a strong presence in its traditional waste disposal and collection activities, it has been developing its waste activities towards recovery, and specifically energy production.
"The group has positioned itself as a major producer of renewable energy and secondary raw materials," Suez said.
In Sweden, Suez expanded its cooperation with the city of Stockholm to include the collection of food waste. It turns 900 tons of food waste into biogas and organic fertiliser every month.
Chaussade denied rumours about a possible resumption of talks with Veolia. The two briefly considered linking up at the end of 2012 but dropped the idea over anti-trust concerns. ($1 = 0.7271 euros) (Additional reporting by Benjamin Mallet; Editing by Erica Billingham)