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Steel

UPDATE 1-Thyssenkrupp faces investor calls to scrap dividend

* Cevian, Union Investment criticise raised dividend

* Says won’t support 0.15 eur/shr dividend proposal

* Thyssenkrupp to seek approval for dividend at AGM on Friday

* Thyssenkrupp counts on steel price recovery in H2 (Recasts with shareholder comments)

By Arno Schuetze and Maria Sheahan

FRANKFURT, Jan 28 (Reuters) - Indebted German industrial group Thyssenkrupp faced calls on Thursday from two influential shareholders not to pay a dividend, but to strengthen its balance sheet instead.

Low steel prices are hurting steelmaker Thyssenkrupp, despite its efforts to transform itself into a diversified industrial group with three quarters of its sales now coming from elevators, car parts and components for energy plants.

Chief Executive Heinrich Hiesinger warned on Thursday that the company’s ability to hit its financial forecasts hinge on a significant recovery in steel prices.

The company also has a high level of debt relative to its equity compared to peers such as ArcelorMittal, which is worrying some of its investors.

In a rare move, some shareholders have said they don’t want the company to pay an annual dividend.

“Given the financial position of the company we agree that it is prudent not to make a dividend payment this year and therefore do not intend to support the dividend proposal,” Lars Foerberg, managing partner of activist fund Cevian Capital, which owns about 15 percent of Thyssenkrupp, told Reuters.

Foerberg was responding to news that influential German asset manager Union Investment, which holds 0.2 percent of Thyssenkrupp’s shares, plans to reject its 0.15 euro-per-share ($0.16 per share) dividend proposal - raised from 0.11 euros a year earlier, at the company’s annual general meeting on Friday.

“Instead of paying almost 85 million euros to shareholders, the balance sheet should urgently be strengthened,” Union Investment fund manager Ingo Speich said.

Thyssenkrupp declined to comment on the calls.

At the end of its financial year through September 2015, Thyssenkrupp’s debt was equivalent to more than its equity. By comparison, ArcelorMittal most recently reported its debt stood at 42 percent of its equity.

A crisis in the steel sector still weighs on Thyssenkrupp’s earnings Hiesinger told a German newspaper on Thursday that the group needed a recovery in steel prices to meet its goals.

“Our materials businesses cannot escape that (crisis),” Handelsblatt quoted Heinrich Hiesinger as saying ahead of Thyssenkrupp’s annual general meeting on Friday.

“All efforts we make to save money catch up with us again quickly.”

Thyssenkrupp forecasts earnings before interest and tax (EBIT) in a wide range of 1.6 billion euros to 1.9 billion euros for the current financial year to the end of September, against 1.68 billion euros in 2014/15.

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