UPDATE 2-TietoEVRY's profits rise in first quarter

(Adds CEO, analyst, shares)

HELSINKI, April 29 (Reuters) - Nordic IT services provider TietoEVRY on Thursday reported a small rise in its first-quarter operating profit, while profits fell at its IT infrastructure and cloud business unit, its largest division.

The company, which finalised the acquisition of Norway’s Evry in December of 2019, said its operating profit rose to 56.7 million euros ($69 million) from 50 million a year ago.

“We are in the middle of a major merger, and the time of the pandemic has been tough. Considering that, we had a good start to the year,” Chief Executive Kimmo Alkio told Reuters.

“The big picture we are executing now is moving from deep integration to growth,” Alkio said.

Tieto repeated its forecast for roughly flat 2021 sales, while margin for operating profit before amortisation (EBITA) would improve to 13%-14% from 12.7% last year.

“Overall, the report was slightly better than expected,” Inderes analysts said in a note.

Shares in Tieto were more than 2% higher in midday trading.

First-quarter revenue dropped 4.4% to 711.5 million euros, with cloud and infra business declining 15% to 216.2 million.

The business, the company’s largest division, provides IT infrastructure services and cloud technologies and services. Its underlying operating profit fell to 8.6 million euros from 23.7 million in the year-ago quarter.

“Due to contracts lost prior to the merger and accelerated shift to cloud environments, the company has initiated measures to reduce production capacity and headcount, including personnel consultations affecting up to 300 roles,” the company said.

Alkio said last June’s change in Tieto’s co-operation with IBM also continued to have a significant impact on the unit in January-March quarter.

$1 = 0.8244 euros Reporting by Essi Lehto and Tarmo Virki, editing by Terje Solsvik, Uttaresh.V and Jane Merriman