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* Declares special dividend of $1 bln
* Share price down 3% in London
* Results in line, operational issues, trade weigh (Adds quotes, share price, comment, graphic)
LONDON, Aug 1 (Reuters) - Rio Tinto announced its strongest first-half profit in five years and a record dividend payout on Thursday but also acknowledged unacceptable operational problems, which it said it was trying to fix.
Underlying earnings for the six months ended June 30 rose 11% year-on-year to $4.93 billion, just shy of a consensus estimate of $4.95 billion compiled by Vuma Financial.
Rio's shares were down 3% by 0933 GMT in London. They have risen by more than 20% this year but analysts cited macro-economic tensions as a reason for caution, as growth slows in China, Rio's biggest customer for iron ore.
Iron ore accounts for more than 60% of Rio Tinto's earnings. It has outperformed other base metals on commodity markets this year, meaning high margins for miners even if sales volumes have fallen following output disruptions.
Rio said its Pilbara iron ore in Australia had delivered a 72% EBITDA (Earnings before Interest Tax, Depreciation and Amortisation) margin, compared with the group's overall EBITDA margin of 47%.
Iron ore supplies have been squeezed by cyclone disruption in Australia and reduced production in Brazil after a Vale dam burst in January that killed at least 240 people.
Rio increased its interim dividend by 19% to 151 cents per share. It also announced a special dividend of $1 billion, making for total interim returns to shareholders of a record $3.5 billion.
Already this year, it had delivered $7.8 billion to shareholders, keeping investors loyal.
"What do investors want? Rio offers high yield and investors want yield," Chris LaFemina, a managing director at Jefferies bank, said.
In a note, he said Rio can offset headwinds by increasing capital returns, but will not be immune if macro conditions deteriorate further. He rates Rio "buy".
Rio CEO Jean-Sebastien Jacques said he believed trade tensions between the United States and China would be resolved.
"I'm always the optimist. I feel at some point commonsense will prevail," he said.
But he also faces issues he should be better able to control including cost overruns and delays at the group's giant copper project in Mongolia and operational problems that have impacted production at the flagship Pilbara iron ore assets.
Jacques said the company was taking actions to address the operational challenges.
"Clearly it's not acceptable. We have a problem, but we are dealing with it," he told reporters in a conference call.
(Reporting by Aditya Soni in Bengaluru; Editing by Shounak Dasgupta/Richard Pullin/Susan Fenton)