UPDATE 4-Thyssenkrupp raises outlook as steel sale decision nears

* Expects to almost break even on adj EBIT level

* Steel division swings to 20 mln euros adj oper profit

* Q1 adj EBIT of 78 mln euros, to decline in Q2

* Shares rise as much as 7% to reach 12-month high (Adds details from sources, updates shares)

By Christoph Steitz, Tom Käckenhoff and Arno Schuetze

FRANKFURT, Feb 10 (Reuters) - German conglomerate Thyssenkrupp on Wednesday raised its full-year outlook for the first time in nearly four years, boosted by a recovery at its steel unit that could strengthen the case for a spin-off.

Thyssenkrupp’s steel division, which could be sold, spun off or kept, swung to an adjusted operating profit of 20 million euros ($24 million) in the first quarter, compared with a loss of 127 million a year earlier.

“In a continuing uncertain market environment, we had a good first quarter: we’re noticing signs of an economic recovery and our measures to improve performance in the businesses are starting to bear fruit,” CEO Martina Merz said.

Thyssenkrupp shares rose as much as 7.1% to a one-year high.

Thyssenkrupp’s steel division, which has drawn a bid from Britain’s Liberty Steel, expects to nearly break even this fiscal year, compared with a low triple-digit million euro loss previously expected.

Thyssenkrupp Steel Europe, the continent’s second-largest player, is cutting 3,000 jobs, and said more are at risk.

Talks with Liberty Steel are intense, Thyssenkrupp finance chief Klaus Keysberg said. Sources have said that issues include a negative equity value of more than 1 billion euros ($1.2 billion) Liberty Steel assumes for the division.

This would require Thyssenkrupp to contribute several billions of euros as part of a deal. Liberty Steel, which sources say is expected to submit a firm bid by early March, declined to comment.

Thyssenkrupp’s supervisory board is expected to meet on March 12 to decide whether to sell the unit, people familiar with the matter said.

The steel-to-submarines conglomerate expects to almost break even on an adjusted operating profit level, having previously forecast a mid-triple-digit million euro loss in the year to September.

At a group level, adjusted operating profit was 78 million euros in the October-to-December quarter.

Thyssenkrupp “might have turned the ship just in time,” a trader said, asking not to be named, adding that the company’s operating units were profitable in the quarter. “Almost can’t remember last time we have seen this.”

$1 = 0.8248 euros Reporting by Christoph Steitz, Tom Kaeckenhoff and Arno Schuetze; Editing by Shounak Dasgupta, Jason Neely and Barbara Lewis