Diversified miner BHP warned on Tuesday the coronavirus outbreak could hit commodity demand if it is not contained by the end of March, citing this as a reason to be cautious in its dividend payout for the six months to end-December.

The global miner on Monday declared an interim dividend of 65 US cents, the second-highest dividend it has announced, but with the payout ratio falling to 63% from 75% in the prior comparative period.

The miner said it was being cautious due to near-term market volatility due to the coronavirus, as well as geopolitical tension, while it also was targeting lower debt levels.

The group’s policy is to pay out at least 50% of underlying attributable profit — referring to profits received rather than profits accounted for on the balance sheet.

BHP reported a 13.6% rise in profit from operations to $8.3bn (R124.5bn) to end-December, saying it benefited from higher iron ore prices, operational stability, and favourable exchange rate movements. Underlying attributable profit rose 29% to $5.18bn.

BHP said should the coronavirus outbreak not be contained within the March quarter, it expected to revise its economic and commodity demand growth downwards, though the effect on commodities may differ.

“In this regard, we highlight the distinction between a permanent loss of demand in oil due to foregone transport services; and temporary demand losses with the opportunity to be reclaimed, as in steel and copper end-use,” the miner said.

“Despite near term uncertainty — due to the coronavirus outbreak, trade policy and geopolitics — we remain convinced about the positive underlying fundamentals of our commodities,” said CEO Mike Henry.

“We see enormous potential to reliably deliver exceptional financial and operational performance, and to grow value and returns,” Henry said.