Shares in miner BHP (BHP) fell almost 2% to £16.59 after saying it may have to cut guidance if the coronavirus is not contained by the end of March.
The comes alongside a big jump in half year profit for FTSE 100 mining major and announcing its second highest interim dividend ever.
In its interim results to 31 December, BHP reported a 39% increase in underlying net profit after tax - the measure most closely watched by analysts - to $5.2bn, with revenue totalling $23bn.
This was largely driven by higher iron ore prices, with the commodity accounting for 60% of BHP’s underlying earnings before interest, taxes, depreciation, and amortisation (EBITDA).
The firm also paid out an interim dividend 65 cents a share, its second highest on record.
But while its bottom line met market expectations, this dividend payment did not.
The payout, which at 63% of underlying earnings per share was less than the 75% paid out last time, was below the 71% the market had hoped for.
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BHP said this lower payout reflected its focus on cutting down its net debt, as well as caution around near term market volatility from the coronavirus outbreak, trade policy and geopolitics.
The miner forecasts global economic and commodity demand growth of around 3-3.5% this year, but warned it would have to revise that downwards if the virus isn’t ‘demonstrably well contained’ by the end of March.
While the company’s net debt rose by $2.3bn to $12.8bn, as it was forced to adopt new accounting rules on leases.
‘ALL THINGS CONSIDERED... GOOD RESULTS’
Analysts at Jefferies said BHP had reported a ‘good set of results’, but added that a lack of any surplus capital returns, partly due to the coronavirus impact in their view, ‘may disappoint some investors’.
They added, ‘From our perspective, however, a strong balance sheet is important, and we would not view a surplus capital return being funded via balance sheet at interim results as a positive.
‘All things considered, we think this is a good set of results for BHP, but we reiterate our hold rating on BHP shares based on valuation.’