BHP BILLITON LTD. ADRs $70 - New York symbol BHP

BHP BILLITON LTD. ADRs $70 (New York symbol BHP; Conservative Growth Portfolio, Resources sector; ADRs outstanding: 2.7 billion; Market cap: $189.0 billion; Price-to-sales ratio: 2.7; Dividend yield: 3.3%; TSINetwork Rating: Average; www.bhpbilliton.com) is the world’s largest mining company, with major operations in Australia, South Africa, Chile and the U.K. Its main products include iron ore, coal, aluminum, manganese, titanium, oil and natural gas.

In the six months ended December 31, 2012, BHP earned $5.7 billion, or $2.14 per ADR. (BHP’s fiscal year ends June 30; each ADR represents two BHP common shares.) That’s down 43.4% from $10.0 billion, or $3.77 per ADR, a year earlier. Lower prices for commodities, particularly iron ore, cut BHP’s gross profits by $5.4 billion in the latest period. Unfavourable exchange rates also lowered earnings by $574 million. Revenue fell 14.1%, to $32.2 billion from $37.5 billion.

In response to weak commodity prices, BHP has agreed to sell $4.3 billion of less-important projects. That includes a deal to sell its remaining diamond operations in Canada for $500 million.

These sales will free up cash that the company can invest in operations with better long-term prospects. Right now, BHP has 20 new projects under development, worth a total of $22.2 billion, including five oil and gas properties in Australia. The company is also expanding its copper, iron ore and coal operations. BHP expects to complete these projects by 2015.

The stock trades at a moderate 12.6 times the $5.54 per ADR that BHP should earn in fiscal 2013. The $2.28 dividend yields 3.3%.

BHP Billiton is a buy.

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