* New goal to grow EBIT by at least 7 pct 2016-2018
* CEO says sees flat market ahead
* Shares slightly down (Adds detail, background, shares)
SANDVIKEN, May 24 (Reuters) - Swedish engineering group Sandvik targets operating profit growth of at least 7 percent annually in the coming three years but is not counting on market growth in the near term, it's top executive said on Tuesday, sending shares lower.
Seeking to convince shareholders of an upcoming recovery for the firm after years of cost-cutting and sluggish demand for mining gear, CEO Bjorn Rosengren, in charge since November, said he expected no help from the market ahead.
Sandvik said the new financial targets, also including an improvement of return on capital employed (ROCE) by at least 3 percentage points, would replace previous targets of 8 percent yearly sales growth and 25 percent ROCE over a business cycle.
Rosengren said he would drive the company toward decentralisation, like at fierce local rival Atlas Copco where he was formerly an executive, with each product area given full responsibility of their performance.
"Before we start driving growth we need to make sure we have stabilised businesses," Rosengren told investors and journalists at a capital market's day.
Rosengren took over after cost cuts under former CEO Olof Faxander had failed to have a significant impact on profit, leaving Sandvik's shares lagging European peers.
Sandvik's shares rose as much as 3.4 percent after the news, but were down 1.8 percent by 1023 GMT. They are up some 5 percent since Rosengren took charge, compared with a 5 percent decline in shares of Atlas Copco.
Sandvik maintained its financial targets for a net debt/equity ratio of less than 0.8 and a 50 percent dividend payout ratio of reported earnings per share.
The company said earlier this month it was preparing to exit two non-core operations as it consolidated its structure into three business areas. It is also in the process of selling its Mining Systems unit, with a deal expected during the second quarter.
Sandvik reported in April a smaller than expected fall in first quarter core operating earnings, as cost cuts helped partly offset the deep slump in its mining business. (Reporting by Helena Soderpalm; editing by Sven Nordenstam)