UPDATE 2-Deutsche Boerse cuts costs to pay for Asia expansion

Tue Feb 5, 2013 2:20pm GMT

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* Deutsche Boerse to seek 70 mln eur in annual cost savings

* To propose dividend of 2.10 eur, down from 2.30 eur in 2011

* Cost savings needed to pay for expansion

FRANKFURT, Feb 5 (Reuters) - Deutsche Boerse said it would cut costs in response to lower trading activity and pledged to use future savings to pay for an expansion push into Asia and other markets.

The Frankfurt-based exchange operator said its revenue fell 14 percent in 2012, mirroring a trend seen at rival and former merger partner, NYSE Euronext which also announced a cost reduction plan.

Deutsche Boerse said adjusted preliminary net income for the year fell 22 percent to 660 million euros ($895 million)following an 18 percent fall in derivatives trading volumes and a 23 percent drop in turnover on cash markets.

In response, Deutsche Boerse said it planned to eke out additional annual cost savings of 70 million euros.

"This ensures the necessary flexibility to continue the growth and infrastructure investments," Boerse said in a statement on Tuesday, adding that Asia would be in focus for future expansion.

Analysts at DZ Bank welcomed the move, saying that cost savings were at the "upper end" of expectations. Deutsche Boerse's shares gained 0.7 percent by 1400 GMT.

Last month, Reuters reported that Deutsche Boerse was mulling another round of cost cuts to offset a slump in trading volumes.

The company said it would not resort to forced redundancies but warned that the restructuring would lead to costs of between 90 million euros to 120 million euros.

The operator of the Xetra stock exchange and the Eurex derivatives platform said it would pay a dividend of 2.10 euros a share for 2012, in line with recent years but below the 2.30 euros a share sweetened dividend paid for 2011 in the aftermath of the failed NYSE Euronext deal.

Deutsche Boerse said its earnings before interest and taxes (EBIT) for 2012 were around 1 billion euros.

In October, Deutsche Boerse warned investors it would not meet full-year revenue and profit targets including an EBIT range of between 1.2 billion euros to 1.35 billion euros.

Deutsche Boerse released preliminary figures ahead of its annual press conference, scheduled for February 20.

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