Global miner Rio Tinto reported a 6 percent fall in second-half profit on Thursday, before $9.3 billion in writedowns mainly on its aluminum business, but appeased investors with a massive dividend hike.

Underlying earnings before one-offs fell to $7.77 billion for July-December from $8.22 billion a year earlier, beating analysts' forecasts for a second-half profit of $7.5 billion before one-offs.

Rio set a full-year dividend of 145 cents, well above market expectations of 129 cents.

COMMENTARY

MARK TAYLOR, SENIOR RESOURCES ANALYST, MORNINGSTAR:

Cash flow is considerably better than I was expecting and the dividend is higher than I was expecting. I can't see any major surprises at this stage. They haven't said anything about doing anything more in addition (to the share buyback). It doesn't tell you anything specific about the outlook. On the one hand you can say they are worried about cash, but equally you can also argue they are quite bullish on cash and they are spending a lot of money on development. The dividend has surprised on the upside. That's information about their confidence on their outlook.

TIM BARKER, PORTFOLIO MANAGER, BT INVESTMENT MANAGEMENT:

It's not a bad result. It seemed to be pretty much in line with market expectations, or perhaps a tad higher. While I would have liked to have seen some capital management, the higher dividend will be appreciated. Aluminum was probably a little bit worse than I'd expected. We've been expecting a poorish result there. But the rump of the assets they obviously want to keep, probably given the aluminum price, haven't done a bad job.

PETER CHILTON, ANALYST, CONSTELLATION CAPITAL MANAGEMENT:

The underlying earnings look about right. The writedown on the goodwill impairment of the aluminum business was a lot higher than people were expecting. It's a non-cash item, a goodwill item, so I'm not sure to what degree that will affect people's thinking. The underlying EBITDA was pretty much in line with people's expectations. They haven't announced any more (share buyback plans) but if the dividend looks a bit higher then that's probably part of that capital management.

Both companies have got to watch industrial relations and the weather, for floods and things like that. Where there is uncertainty it's difficult to commit any sort of capital. It's certainly affecting BHP more than Rio at the moment but it doesn't mean to say that these things can't spread or affect different companies at different times.

I don't think anything that Xstrata or Glencore do, either separate or merged, will influence what either BHP or Rio does. I'm not sure it's a threat. BHP and Rio have got their own strategies. They are quite different really.

GLYN LAWCOCK, ANALYST, UBS:

I think the dividend is a big surprise on the positive side. We were looking for a 20 percent lift in the dividend and they lifted it 34 percent, I think that's probably above expectations. The size of the writedown was a little bit bigger than we thought but at the end of the day that's a backward-looking figure, we already know the business, they had flagged it well and I don't think people are too concerned by that.

The numbers are about 2 percent ahead of consensus, divisionally they are pretty much in line with consensus. I think overall a result that's broadly in line.

(Reporting by Sonali Paul, Miranda Maxwell, James Grubel, Maggie Lu YueYang and Amy Pyett; Editing by John Mair)

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