“While we cannot predict how long surgeries will be delayed, the low end of guidance factors in a significant decline in sales for Greater China for the second half,” said Cochlear chief executive Dig Howitt.
He was hopeful of an eventual rebound after the coronavirus is tempered, similar to the recovery following the SARS outbreak in 2003.
Beef in the firing line
Australian Meat Industry Council chief Patrick Hutchinson said the industry was watching closely for any impact of coronavirus on Chinese consumers eating meat at restaurants and buying meat at supermarkets.
Australia shipped almost 300,000 tonnes of beef to China last year, mainly frozen product.
Mr Hutchinson said he was aware of Chinese port congestion and delays in clearance, though the Chinese New Year holiday period had also contributed.
“I don’t think we will be seeing the same amount of demand as last year, because things will be getting through more slowly and people are being forced to stay in their homes for weeks,” he said.
Western Australia’s fresh seafood exporters are already hurting from the Chinese New Year shutdown which, in effect, is now being extended.
“Compared to the same period last year, the number of shipments of WA rock lobster has declined by 79 per cent,” said Chamber of Commerce and Industry WA chief executive Chris Rodwell.
Supply chain disruptions
Businesses reliant on Chinese imports in their supply chains are also in limbo.
Rail freight company Aurizon warned on Monday the coronavirus would delay the arrival of 66 rail wagons being made in Wuhan, China, after the Chinese manufacturer declared force majeure, invoking a clause in the contract over unavoidable delays outside of its control.
Vitamins group Blackmores went into a trading halt on the ASX on Monday, while electronics retailer JB Hi-Fi said it will use its market clout to ensure it has first access to electronics goods and mobile phones if Chinese manufacturers started to be squeezed.
Cochlear has three months of inventory for most of its parts.
Reserve Bank of Australia governor Philip Lowe on Friday said the economic impact of coronavirus would depend on how long it lasted and how quickly Chinese authorities could control the outbreak.
He said the negative hit was uncertain, but would probably be worse than SARS in 2003, partly because China’s economy was so much bigger and Australia was more integrated with it.
The government is expected to announce this week the travel ban will be extended beyond this weekend.
The government’s chief medical officer Brendan Murphy said: “Because everybody understands the huge implications of these travel bans, and if there’s any reason or basis for relaxing them, that advice will come as soon as it’s there.”
LNG ‘force majeure’
JPMorgan downgraded its Australian economic growth forecasts by 0.5 of a percentage point in annualised terms for the March and June quarters, “assuming some hit to Australia’s real commodity exports, particularly iron ore, coal and LNG”.
“The forecast short-run hit to industry in China is very large, and it may be difficult for affected users of raw commodity inputs to ‘look through’ to the other side of the shock,” JPMorgan economist Ben Jarman said.
China National Offshore Oil Corporation, the country’s biggest LNG importer, advised some suppliers it wouldn’t take delivery of contracted cargoes in February and March because of the coronavirus.
Energy companies have cast doubt on the validity of any declarations of “force majeure” by Chinese buyers, suggesting the move was a negotiating tactic to try to force lower prices in the contract market.