CEO says coronavirus impact has been ‘muted’

The coronavirus outbreak will present some uncertainties ahead, but demand has held up reasonably well for Australian miner BHP thus far, its CEO said Tuesday.

BHP reported earnings for the six months that ended in December, with the company’s underlying attributable profit up 39% from a year ago to $5.19 billion, boosted by higher iron ore prices. But, that number came in below profit estimates of $5.28 billion by analysts, Reuters reported.

The company also announced an interim dividend of 65 cents per share, a 10 cent increase from last year.

“At this point in time, for all of our products, we’ve seen demand hold up reasonably strong,” Mike Henry told CNBC’s “Street Signs.” Henry took over from former BHP boss Andrew Mackenzie on Jan. 1.

“We’re moving all our products, prices have held up, in part because of some other supply-side disruptions and we haven’t seen any impact on receiving payment,” Henry said. “So far, the impact on our markets has been muted.”

The fast-spreading coronavirus, first detected in late December, has already infected more than 70,000 people and killed over 1,800, most of them in China. In an effort to contain the disease, Beijing put most of China under quarantine, which meant many factories had been shut for an extended period of time following the Lunar New Year break and workers stayed at home. Analysts have warned about global supply chain disruptions in various sectors as a result.

Henry explained that if the virus outbreak situation continued beyond the current quarter which ends in March, then BHP would have to revisit some of its outlook. In its earnings report, the company listed the coronavirus as one of the major uncertainties to its economic and commodities outlook, stating it may have to revise growth downwards if the situation persists.

For its part, BHP sells the iron ore mined in Australia to Chinese customers to make steel.

Henry explained that while there has been some build up in steel inventories, blast furnace steel production “held up a bit better,” and iron ore inventories are not at excess capacities. He added BHP can ramp up production as needed to meet Chinese demand.