April 5, 2016 / 10:40 AM / 4 years ago

UPDATE 1-Finland's Outokumpu announces job cuts and bold profit targets

* Stainless maker to cut up to 600 jobs, save 100 mln euros

* New CEO targets operating profit of 500 mln euros

* Shares rise 7 pct (Adds analyst comment, share reaction, background)

By Jussi Rosendahl

HELSINKI, April 5 (Reuters) - The new chief executive of Europe’s largest stainless steel marker Outokumpu announced job cuts and ambitious profit targets on Tuesday in a bid to turn the loss-making Finnish company around.

Outokumpu, which is 26 percent state owned, has struggled since the financial crisis and an unsuccessful acquisition of Thyssenkrupp’s Inoxum unit in 2012, failing to make annual underlying operating profit since 2008.

Roeland Baan, a former executive at aluminium firm Aleris who took over in January, said Outokumpu was planning to cut up to 600 jobs worldwide, save 100 million euros ($114 million), and outsource operations that would affect 100 employees.

Outokumpu also said it was aiming to reach an operating profit of 500 million euros by the end of 2020 at the latest, a far more ambitious target than expected by market analysts.

“The true profitability potential of the company is far higher than the current financial performance shows. To bridge that gap, we must significantly improve our competitiveness,” Baan said in a statement.

The stock, which set a high 76 euros in 2008, rose 6.8 percent after the announcements to hit 3.6 euros by 1029 GMT.

A glut of cheap Chinese steel exports combined with global overcapacity have hurt steel makers in Europe, the United States and elsewhere in Asia, leading to tit for tat import tariffs on steel products and job losses.

According to Thomson Reuters estimates, analysts on average are forecasting annual operating profit of about 270 million euros by 2017.

“The cost cuts came as no surprise. But the targets are very challenging and clearly above market expectations,” said Evli brokerage analyst Antti Kansanen, who has a buy rating on the shares.

Outokumpu’s acquisition of Inoxum was supposed to offer the Finnish company a route to recovery, but the deal was partially reversed after the European Union demanded a significant mill in Italy be excluded.

Since then, the company has been hit by a string of internal and external problems. Lately, it has suffered as a steep drop in the price of nickel, an ingredient in stainless steel, has led to distributors holding back orders, while production problems have also harmed the business.

Baan also said he would take on the operational lead of the company’s Europe business, on top of his CEO duties.

“I have a positive impression from him, he has significant experience from the sector and a hands-on approach,” analyst Kansanen said.

$1 = 0.8789 euros Editing by David Clarke

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