Monsanto Company (MON), Mosaic Co (MOS): Three Fertilizer Companies Favoring Expansion

The company is aiming to increase its production by 50% a year to 16.5 million tons by 2021. Mosaic Co (NYSE:MOS) has reported a 37% year-over-year increase in sales from the potash segment amounting to $758 million in the third quarter of 2013.

Concentration on increasing production

There is a rise in the global demand for potash, but the reduction in the Indian subsidy on potash will act as a headwind. This will partially be offset by the demand from North America to meet farmer’s requirement during spring. Potash Corp./Saskatchewan (USA) (NYSE:POT) expects demand to rise to more than 55 million metric tons, or MT, in 2013 from 51 million MT in 2012. With the expectation of increasing demand, the company increased its production of potash by 25% year-over-year, which amounts to two million tons, in the first quarter of 2013. The increasing demand of potash increased the total earnings by 13% year-over-year to $556 million in the first-quarter of 2013. The company expects potash sales to rise approximately to $3.59 billion in 2013 and $4.31 billion in 2014.

The increased demand brings tremendous opportunities for the company.  With higher sales, Potash Corp./Saskatchewan (USA) (NYSE:POT) expects growth in its free cash flow, or FCF, from $624.78 million in 2012 to almost $1.6 billion in 2014. It has already declared a 25% increase in its quarterly dividend, amounting to $0.35 in the first quarter of 2013, payable on July 12, 2013. The annual dividend will amount to $1.4 per share in 2013. The dividend yield of the company is approximately 3.2%, which is higher in comparison to its peers like Mosaic with 1.6%, CF Industries Holdings with 0.8%, and Agrium with 2.2%.

Bottom-line:
Monsanto Company (NYSE:MON) has entered into a deal with DuPont Fabros Technology, Inc. (NYSE:DFT), where it will receive royalty for its technologically advanced fertilizers. Moreover, GMO continues to drive higher revenue for the company.

Mosaic has plans to take over Cargill and increase its production capacity, and hence will witness an increase in the market share of the company.

Potash Corp./Saskatchewan (USA) (NYSE:POT) plans to add capacity to meet the increasing demand of potash which will drive its revenue higher. Also, the expected higher cash flow in the future will help increase the returns to the investors.

I recommend buying all these three stocks.

The article 3 Fertilizer Companies Favoring Expansion originally appeared on Fool.com is written by Shweta Dubey.

Shweta Dubey has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Shweta is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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