Aurizon's shareholders are set for higher cash returns, with low iron ore and coal prices leaving the rail operator cool on expensive growth projects.
The company, Australia's largest rail freight hauler, said on Monday a hike in shareholder returns was an option.
The economic attractiveness of the two multi-billion dollar key joint venture growth projects it is a partner in - a West Pilbara iron ore project and Queensland Galilee Basin coal project - is not strong at present prices.
Aurizon still increased half year net profit despite what it called a subdued market.
Profit was up to $308 million from $107 million, with last year's result hit by impairments.
It lifted its unfranked interim dividend 26 per cent to 10.1 cents per share and had spent $60 million since November as part of an ongoing buyback of shares.
Aurizon chief executive Lance Hockridge said a decision with its partners to go ahead with the Pilbara project would only happen if it makes commercial sense, with current $US60 a tonne iron ore prices too low.
Similarly, the Queensland coal project - whose partners include India's GVK and Gina Rinehart - depends on prices with a building start unlikely until the back end of the decade.
"Where we didn't have a project or didn't have sufficient projects that meet the kind of hurdle rates we determined, the option for further capital management activity looms large," Mr Hockridge told a media conference.
"We have demonstrated thus far a preparededness with respect to buybacks and increasing levels of dividends."
Decisions were not based on today's iron ore and coal prices - Australia's two biggest exports over the last decade - but what was expected over decades, he said.
Aurizon is also partly immune to weak prices, with the industry's take-or-pay contracts increasingly generous to it, rather than the lossmaking coal miners who are locked into paying for rail access for years.
That and $69 million in cost and productivity improvements in the half enabled Aurizon to lift profitability, with another $100 million in cost cuts planned this year.
Morningstar analyst Ross Macmillan said the most impressive part of the result was an increase in margins.
The fall in the operating ratio to 75 per cent - or a profit margin of 25 per cent - showed costs compared to revenue falling.
"Aurizon is taking a long-term view, they're the dominant player in this space and they want to remain the dominant player," he said.
Aurizon's shares closed 12 cents lower at $4.88.
AURIZON PROFIT UP DESPITE FLAT REVENUE
* Half year net profit up 188 pct to $308m
* Revenue flat at $1.97b
* Interim dividend up 2.1 cents to 10.1 cents per share
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