PotashCorp 2007 Net Income Tops $1.1 Billion With Record Quarter



    Listed: TSX, NYSE
    Symbol: POT

    SASKATOON, SK, Jan. 24 /CNW/ - Potash Corporation of Saskatchewan Inc.
(PotashCorp) today announced fourth-quarter earnings of $1.16 per share(1), a
100-percent increase over the same period last year and the highest quarterly
earnings in company history. This raised 2007 earnings to $3.40 per share,
72 percent higher than the $1.98 per share of 2006, marking the fourth
consecutive year of record earnings. Net income for the quarter reached
$376.8 million, more than double the $186.0 million reported for last year's
fourth quarter and raising full-year net income to a record $1.1 billion
compared to $631.8 million in 2006.
    With strong market conditions and rising prices for all three nutrients,
gross margin for the quarter climbed to a record $535.0 million, up
$235.7 million from last year's fourth quarter, and raised total 2007 gross
margin to $1.9 billion, surpassing the previous high of $1.1 billion set in
2005. Adjusted earnings before interest, taxes, depreciation and amortization
(adjusted EBITDA) grew to a record $553.2 million(2) for the quarter, compared
to the $326.5 million in fourth-quarter 2006. Full-year adjusted EBITDA
reached a record $1.9 billion, a 68-percent improvement over the previous high
achieved in 2005. Cash flow from operations of $531.6 million was the
second-highest quarterly total in our history, while the $1.7 billion achieved
for the year exceeded the 2005 record by 95 percent.
    Fourth-quarter performance was enhanced by a reversal of the
3-percentage-point upward adjustment to our 2007 consolidated effective income
tax rate reported in the third quarter. This rate returned to 30 percent for
the year and reduced our income tax expense by $0.14 per share for the
quarter. The reversal resulted partially from the enactment of a Canadian
federal corporate income tax rate reduction in the fourth quarter rather than
in 2008 as previously expected. This corporate income tax rate reduction
enacted during the quarter resulted in a one-time decrease in our future
income tax liability of $0.11 per share, which was partially offset by a
provision for impaired investments of $0.06 per share.
    The market factors behind this record quarter also contributed to the
strong performance of our offshore investments in Arab Potash Company Ltd.
(APC) in Jordan, Sociedad Quimica y Minera de Chile S.A. (SQM) in Chile and
Israel Chemicals Ltd. (ICL) in Israel. These investments added $28.6 million
in other income to our fourth-quarter performance. For the year, these
offshore investments, along with Sinofert Holdings Limited (Sinofert) in
China, contributed $134.3 million to our earnings. The total market value of
our investments in these publicly traded companies is now $5.7 billion and
equates to almost $17.50 per PotashCorp share.
    "Our record performance for the quarter and the full year reflect the
increasing potential of our company," said PotashCorp President and Chief
Executive Officer Bill Doyle. "For nearly two decades we have carefully
assembled and managed our world-class assets with a long-term view. With
growing demand and strong market conditions, we have reached new heights in
each of the past four years. More important, we are looking ahead and
preparing ourselves for expected future growth that we believe will continue
to deliver greater value for our customers and investors."

    Market Conditions

    Increasing demand for crops grown around the world reduced the combined
stocks-to-use ratio for grain and soybeans - crops that compete with one
another for planted acres - to the lowest level in recorded history. As a
result, agricultural commodity prices continued to increase in the fourth
quarter, providing farmers with the means and motivation to increase
fertilizer use to achieve higher yields and protect soil fertility.
    While the fourth quarter historically has allowed fertilizer producers to
build inventories in anticipation of the coming planting season, strong demand
reduced 2007 year-end inventories of all three nutrients. Compared to previous
five-year averages, North American producer inventories at year-end were down
26 percent for potash, while urea inventories dropped 17 percent and
diammonium phosphate (DAP) was down 21 percent. With this tight supply, the
growth in demand led to price increase announcements, especially in potash,
which continued to sell on an allocation basis. The phosphate market saw
significant price increases in response to tight inventories, strong demand
and rising input costs. In nitrogen, global agricultural demand growth more
than offset a significant increase in urea exports from China, and US prices
for that product remained high. Urea imports by India continued to rise
sharply, moving from 200,000 tonnes in 2003 to a record 6.7 million tonnes in
2007.
    Ocean freight costs peaked at a record high during the quarter due to
strong global demand for commodities and other products, as well as increased
congestion that lengthened loading/unloading times at certain ports.

    Potash

    Potash gross margin of $256.4 million approached the record
$260.4 million of this year's second quarter and was 39 percent higher than
the $183.9 million of last year's fourth quarter. This lifted 2007 potash
gross margin to a record $912.3 million, 63 percent higher than 2006 when
offshore volumes were impacted by lengthy price negotiations with China and
India, and 29 percent above the previous high of $707.4 million in 2005.
Potash gross margin as a percentage of net sales increased to 60 percent from
57 percent in last year's fourth quarter, and from 58 percent in the third
quarter of 2007.
    Fourth-quarter realized prices to offshore markets were up $36 per tonne
over the same period in 2006, but the full benefit of announced offshore price
increases was not captured because of higher ocean freight rates and locked-in
contract pricing to China and India. In the North American spot market, our
fourth-quarter realized prices were $48 per tonne higher than in the fourth
quarter of 2006 and $19 per tonne above last quarter.
    Total fourth-quarter potash sales volumes of 2.3 million tonnes were
5 percent above last year's fourth quarter, when offshore markets were
actively restocking after purchasing delays earlier in 2006. The full-year
total of 9.4 million tonnes established a new company record and was 31
percent higher than the total sales volumes of 2006.
    Offshore, fourth-quarter sales volumes of 1.5 million tonnes were
10 percent higher than the same quarter in the previous year, and full-year
shipments were up 34 percent to 5.9 million tonnes. When considering our share
of sales through Canpotex Limited (Canpotex), the offshore marketing company
for Saskatchewan potash producers, and sales directly from our facility in New
Brunswick, Brazil was our largest market in 2007, taking 24 percent of our
total offshore shipments. China was next at 23 percent and India followed at
9 percent, while Indonesia, Malaysia and Vietnam combined to represent
16 percent. In the fourth quarter alone, Brazil purchased approximately
470,000 tonnes from Canpotex, as farmers worked to capitalize on record-high
soybean and corn prices and prepare for the upcoming winter corn (safrinha)
planting season while contending with third-quarter shipping delays and low
in-country inventories. This, along with approximately 625,000 tonnes shipped
to China, 230,000 tonnes to India and 550,000 tonnes to Southeast Asian
countries, resulted in Canpotex surpassing its previous fourth-quarter volume
record by 14 percent. For the year, Canpotex shipped 9.3 million tonnes, a
38-percent increase over the abnormally low 2006 total and 14 percent higher
than its previous full-year shipping record set in 2005.
    Our North American sales volumes for the fourth quarter were just
slightly lower than the previous year's very strong fourth-quarter sales,
while full-year 2007 volumes of 3.5 million tonnes were up 25 percent over
2006. During the first three quarters of 2006, North American customers backed
away from the market due mainly to low crop commodity prices. Once crop prices
started moving sharply upward, customers responded with record potash
purchases in the fourth quarter of 2006.
    Our potash production reached a quarterly record of 2.5 million tonnes,
6 percent higher than in the fourth quarter of the previous year as we saw the
benefit of additional tonnes after the completion of our Allan project in
2007. Still, our potash inventories of roughly 680,000 tonnes were 27 percent
below 2006 year-end levels and represented our second-lowest year-end
inventory since 1991. The stronger Canadian dollar raised our potash cost of
goods sold by about $8 per tonne compared to last year's fourth quarter, while
continuing higher brine inflow costs at New Brunswick and Esterhazy had a
further negative impact of $6 per tonne. Excluding the impact of currency,
brine inflow and period costs related to the substantially higher number of
mine shutdown weeks in 2006, record production volumes in 2007 drove potash
operating costs down by more than $5 per tonne compared to the previous year.

    Nitrogen

    Fourth-quarter 2007 nitrogen gross margin of $136.7 million was the
second-highest quarterly total in company history, 67 percent above the same
quarter in 2006 and trailing only the second quarter of 2007, on the
foundation of continuing strong agricultural demand and higher global natural
gas prices. Our Trinidad operation, which benefits from lower-cost, long-term
natural gas contracts, generated $73.9 million in gross margin during the
quarter, while our US operations added $45.1 million and natural gas hedging
gains contributed $17.7 million. For the full year, nitrogen generated gross
margin of $536.1 million, surpassing the previous record of $318.7 million set
in 2005.
    With the continuation of tight supply/demand fundamentals, realized
prices for ammonia and urea were up 9 percent (+$25 per tonne) and 46 percent
(+$120 per tonne), respectively, from fourth-quarter 2006. The significant
price improvements for these products were achieved since the third quarter of
2007, with ammonia 11 percent higher (+$31 per tonne) and urea up 14 percent
(+$46 per tonne). Prices for nitrogen solutions were up 52 percent quarter
over quarter.
    Total nitrogen sales volumes of 1.4 million tonnes were up 19 percent
from fourth-quarter 2006 levels, built on strong US agricultural demand. This
was achieved even though production was flat, as our Augusta facility took a
planned 35-day turnaround during the quarter. As a result, our year-end
inventories were 48 percent lower for ammonia, and down 50 percent for urea
and 32 percent for nitrogen solutions. We again opportunistically produced
nitrogen solutions at our Geismar facility from imported ammonia and purchased
carbon dioxide, enabling us to increase total sales volumes for this product
by 160 percent quarter over quarter.
    Our average natural gas cost for the quarter, including the benefit of
our hedge and our lower-cost Trinidad gas contracts, was $4.41 per MMBtu,
19 percent higher than the same quarter a year ago and 12 percent higher than
in the third quarter of 2007.

    Phosphate

    Driven by continued strong sales volumes and higher pricing in all major
product categories, phosphate generated record quarterly gross margin of
$141.9 million in the fourth quarter of 2007, exceeding the total in the same
quarter of 2006 by $108.6 million. For the year, phosphate gross margin
reached $432.8 million, surpassing the previous record of $230.1 million set
in 1998. Solid phosphate fertilizers continued their strong turnaround,
generating $70.3 million in gross margin during the quarter, while liquid
fertilizer ($31.5 million), feed ($22.3 million) and industrial products
($14.9 million) were consistent contributors.
    Our fourth-quarter realized prices were up from the same period a year
earlier in all major product categories, in part because of strong
agricultural demand and in part due to the global impact of higher costs for
inputs such as sulfur, phosphate rock and ammonia. As producers around the
world allocated more phosphoric acid - the intermediate feedstock for all
downstream products - to manufacturing solid fertilizers, markets for liquid,
feed and industrial products were squeezed. Pricing for phosphate products
sold on spot markets moved dramatically upward, while certain industrial
products rose on a delayed basis. Our solid fertilizer realized prices were up
82 percent (+$192 per tonne) compared to the same quarter in 2006, while
liquid fertilizer rose 37 percent (+$86 per tonne), feed 22 percent (+$67 per
tonne) and industrial product 6 percent (+$22 per tonne).
    North American sales volumes for liquid fertilizer were up 9 percent and
solid fertilizers were 22 percent higher than the previous year's fourth
quarter, as we focused on these markets ahead of lower-netback offshore
regions. Total fourth-quarter liquid and solid fertilizer sales volumes were
2 percent higher and 3 percent lower than in the same quarter in 2006,
respectively. Feed sales volumes rose 12 percent quarter over quarter, driven
by a 32-percent increase in sales to offshore markets, primarily in Latin
America. Fourth-quarter industrial volumes were 17 percent higher than the
fourth quarter of 2006 as a result of stronger demand for phosphoric acid and
retail technical grade purified acid.
    Sulfur production disruptions and greater demand from the phosphate
sector continued to challenge global sulfur supply in the quarter,
particularly in the international market. The impact of this continued to be
felt in North America and, as a result, our fourth-quarter sulfur costs rose
49 percent from the same quarter in 2006 and 30 percent from the trailing
quarter. Ammonia costs were 8 percent higher quarter over quarter and compared
to the previous quarter.
    In November 2007, we began a $260-million debottlenecking project at our
Aurora facility that will add 180,000 tonnes of annual phosphoric acid
production. The majority of the cost involves constructing a new sulfuric acid
plant, which is scheduled for completion in late 2009.

    Financial

    Reductions to the Canadian federal corporate income tax rate between 2008
and 2012 were enacted in the fourth quarter, which decreased our future income
tax liability and income tax expense by $35.4 million and contributed to the
reduction in our consolidated effective income tax rate from the previous
33-percent estimate back down to 30 percent. This was supplemented by more
permanent deductions generated in the US than previously forecast and a
reduction in our US blended state income tax rate. While these factors are
expected to be present on an ongoing basis, the potential tax recovery due to
a favorable income tax decision related to prior years' deductions discussed
in the third quarter did not occur in the fourth quarter, but may be realized
in 2008.
    Fourth-quarter performance was impacted by our decision to take a
$26.5-million charge related to investments in certain auction rate securities
assessed as being other-than-temporarily impaired, and this charge is included
in other income. We have commenced an arbitration proceeding against the
investment firm that purchased the securities for our account, and we intend
to pursue our claim vigorously.
    Selling and administrative expenses were substantially higher for the
2007 fourth quarter and full year, due primarily to higher medium-term
incentive plan accruals and valuation of deferred share units that were
directly impacted by the significant upward movement in our share price.
Capital expenditures on property, plant and equipment reached $225.6 million
in the fourth quarter, with the majority of this spent on continued
debottlenecking and expansion projects at our Lanigan, Patience Lake, Cory and
New Brunswick facilities. Total capital expenditures on property, plant and
equipment for 2007 were $607.2 million.

    Outlook

    The growth in global population and strengthening of world economies that
is driving demand for agricultural products and fertilizers is expected to
continue. China has seen strong increases in its gross domestic product
annually for over 15 years and double-digit growth in the past five, while
India, Southeast Asia, Brazil and Latin America have more recently been
experiencing excellent economic growth. An increasing number of people in
these areas now have the money and the desire for a higher standard of living,
and are developing appetites for the protein-rich diets that westerners have
enjoyed for decades. Rather than leveling off, this trend is gaining momentum.
The world has been enjoying unsustainably low grain prices for many years by
drawing down inventories. Grain consumption has exceeded production in seven
of the past eight years (and the USDA 2007/08 crop year forecast is expected
to extend this further), so this decline in grain stocks began before biofuels
became much of an additional draw on global crop production. The world's wheat
and coarse grains stocks-to-use ratio is at a record low after being adjusted
downward again in January 2008 to 14.1 percent, just a 1.7-month supply. This
is resulting in further significant increases in crop prices around the world.
With agricultural land declining on a per capita basis, farmers are working to
improve yields to meet rising global food demand.
    With rising prices for crops and crop nutrients, $1 invested in
appropriate fertilization can generate approximately a $3 return through
higher yields. Expectations for this type of return can vary depending on many
factors such as type of crop, climate, soil quality or access to water. For
some crops, such as Brazilian sugar cane and Malaysian oil palm, the payback -
with current crop and fertilizer prices - is typically much greater than the 3
to 1 relationship. This environment makes the economics of the fertilizer
business, especially potash, very attractive. For a US corn farmer, average
farmgate corn prices have increased by $2.00 per bushel over the past two
years, which roughly translates into a $300-per-acre boost in farm returns on
a yield of 150 bushels/acre. By comparison, a $100-per-short-ton increase in
North American potash prices adds only $0.03 per bushel, or $4.50 per acre, to
the cost of producing corn. A similar economic model exists for soybeans and
wheat. This relative inelasticity to price leaves demand undamaged, even in
the face of fertilizer price increases.
    In potash, our North American customers are on allocation through the
first half of 2008, a function of an empty pipeline dating back to the spring
of 2007. We anticipate this allocation could continue through at least the
second half of 2008. A $30-per-short-ton price increase that took effect on
December 1, 2007 and an additional $50-per-ton increase that went into effect
on January 1, 2008 are expected to be fully realized in the first quarter of
2008. The recently announced price increase of an additional $80 per ton is
set to take effect on March 1, 2008.
    Delivered spot pricing to Brazil and Southeast Asia has risen above $500
per tonne and could climb higher, based on extremely tight potash market
fundamentals and record soybean, corn and palm oil prices. The gap between
contract market prices in China and India and spot market prices has widened,
but is expected to close considerably in each respective negotiation for 2008
pricing. While the 2007 price agreement between Canpotex and Sinofert ended
December 31, 2007, Indian pricing runs through March 31, 2008. Historically,
it has been difficult to predict when negotiations with the Chinese will
conclude. Existing customer allocations to higher-netback markets will fully
consume Canpotex's available potash supply through the first quarter of 2008
and, given the robust global agricultural economy, extremely low potash
inventories and record crop commodity prices, the world's farmers appear
anxious to take whatever potash might become available during negotiations
with China. As a result, Canpotex has communicated to Sinofert that it cannot
deliver a full 2008 potash allocation without a full year to ship it and will
prorate volumes depending on the timing of completion of 2008 pricing.
    Although ocean freight rates have dropped more than a third from their
peak in November 2007, we anticipate that robust offshore economies will keep
the cost of shipping at relatively high - but not record - levels through
2008. However, in the event that ocean freights are meaningfully lower, a
large portion of our realized prices on sales shipped to customers on a
delivered basis would improve.
    Prices for potash remain strong and we expect that our 2008 shipments
will rise by 7 percent to both North American and offshore potash markets. As
a result, we expect our 2008 potash segment gross margin to be approximately
2.5 times that of 2007.
    In nitrogen, we expect high global costs for natural gas and ammonia
transportation combined with strong industrial and agricultural demand to
underlie higher US ammonia prices through 2008. Robust agricultural
fundamentals are expected to keep urea markets tight and, with estimated US
corn plantings of 88-90 million acres, nitrogen solutions markets should
remain strong as well. Assuming similar nitrogen product sales volumes as
2007, we are currently forecasting another record year for our nitrogen
segment.
    Strong demand and higher input costs are rapidly pushing prices for
phosphate end-products to record highs. Global producers that import sulfur
and/or phosphate rock are faced with costs nearly five times higher than a
year ago, necessitating high end-product prices. Our company is the world's
third-largest producer of phosphates and second-largest seller of phosphoric
acid and, with our high-quality, low-cost phosphate rock and access to
lower-cost North American sulfur, we are well positioned in these
unprecedented phosphate market conditions.
    Over the first half of 2008, we expect the gap between spot prices for
solid fertilizers and various-term contracts for liquid and feed products to
close considerably. Given where published spot prices for phosphoric acid are
today, the next round of negotiations with India could see dramatic price
increases for our liquid phosphate products. Additionally, PotashCorp recently
announced significant price increases for our primary domestic feed products
of $250 per short ton for monocal and dical, and $200 per short ton for DFP.
The increases are effective March 1, 2008 and are expected to be realized in
the second quarter. Overall, as a result of these conditions, we expect 2008
to be another year of record gross margin in our phosphate segment. We expect
combined gross margin for nitrogen and phosphate to exceed 2007 levels by
20-25 percent.
    Capital expenditures in 2008 are expected to exceed $1.3 billion, plus
capitalized interest, of which $200 million will relate to sustaining capital.
A significant portion of these funds will be used to finance our previously
announced potash projects, including our 1.5-million-tonne debottleneck at
Lanigan, 360,000-tonne debottleneck at Patience Lake, 1.2-million-tonne
debottleneck/expansion at Cory, 1.2-million-tonne expansion at New Brunswick
and 2-million-tonne expansion at Rocanville. Additionally, we are undertaking
rail and loadout expansions at Allan and Rocanville. Depreciation and
amortization expense is expected to be 7 percent higher than 2007 levels.
    Our consolidated effective income tax rate is projected to be 29 percent
in 2008, but could fall within our expected range of 27-30 percent, with an
expected current/future split of 85/15. Provincial mining and other taxes are
forecast to be 12 percent of total potash gross margin in the year, but could
fall within a range of 10-15 percent depending on price realizations,
Canadian/US exchange rate, and the timing and amount of capital spending on
potash projects in Saskatchewan. Other income is expected to exceed 2007
levels by approximately $60 million while total selling and administrative
expenses are forecast to remain consistent with 2007 levels.
    Given these conditions and assuming a Canadian dollar at parity with the
US dollar, PotashCorp is expecting first-quarter net income to be in the range
of $1.30-$1.60 per share and net income for the full year in the range of
$6.25 to $7.25 per share. In the current trading range of the Canadian dollar
relative to the US dollar, each one-cent change in the Canadian dollar
typically impacts our foreign exchange line by approximately $5.7 million, or
$0.01 per share on an after-tax basis, which is primarily a non-cash item.

    Conclusion

    "One of the biggest challenges our world now faces is how to feed
hundreds of millions of new consumers in China, India and other emerging
countries where people are developing appetites for more and better food,"
said Doyle. "PotashCorp's world-class assets and long-term strategies have
been built to serve these customers, both today and in the years ahead. Our
attention remains focused on growing our business to meet the need for our
essential products - particularly potash. Along the way, we look forward to
demonstrating our gross margin potential through expanding volumes, higher
prices and lower per-tonne costs, thereby rewarding our shareholders."

    
    Notes:
    ------
    (1) All references to per-share amounts pertain to diluted net income per
        share.
    (2) See reconciliation and description of non-GAAP measures in the
        attached section titled "Selected Non-GAAP Measures and
        Reconciliations."
    

    Potash Corporation of Saskatchewan Inc. is the world's largest fertilizer
enterprise producing the three primary plant nutrients and a leading supplier
to three distinct market categories: agriculture, with the largest capacity in
the world in potash, second largest in nitrogen and third largest in
phosphate; animal nutrition, with the world's largest capacity in phosphate
feed ingredients; and industrial chemicals, as the largest global producer of
industrial nitrogen products and the world's largest capacity for production
of purified industrial phosphoric acid.

    This release contains forward-looking statements. These statements are
based on certain factors and assumptions as set forth in this release,
including foreign exchange rates, expected growth, results of operations,
performance, business prospects and opportunities, and effective income tax
rates. While the company considers these factors and assumptions to be
reasonable, based on information currently available, they may prove to be
incorrect. A number of factors could cause actual results to differ materially
from those in the forward-looking statements, including, but not limited to:
fluctuations in supply and demand in fertilizer, sulfur, transportation and
petrochemical markets; changes in competitive pressures, including pricing
pressures; the results of negotiations with China and India; timing and amount
of capital expenditures; risks associated with natural gas and other hedging
activities; changes in capital markets and corresponding effects on the
company's investments; changes in currency and exchange rates; unexpected
geological or environmental conditions; government policy changes; and
earnings, exchange rates and the decisions of taxing authorities, all of which
could affect our effective tax rates. Additional risks and uncertainties can
be found in our 2006 financial review annual report and in filings with the
U.S. Securities and Exchange Commission and Canadian provincial securities
commissions. Forward-looking statements are given only as at the date of this
release and the company disclaims any obligation to update or revise the
forward-looking statements, whether as a result of new information, future
events or otherwise, except as required by law.

    
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    PotashCorp will host a conference call on Thursday, January 24, 2008,
                         at 1:00 p.m. Eastern Time.

     To join the call, dial (416) 640-1907 at least 10 minutes prior to
                               the start time.

                       Use reservation ID No. 21257504.

      Alternatively, visit www.potashcorp.com for a live webcast of the
                               conference call.

          This news release is also available at this same website.



                   Potash Corporation of Saskatchewan Inc.
           Condensed Consolidated Statements of Financial Position
              (in millions of US dollars except share amounts)
                                 (unaudited)

                                                  December 31,   December 31,
                                                      2007           2006
    -------------------------------------------------------------------------
    Assets
     Current assets
      Cash and cash equivalents                     $   719.5      $   325.7
      Accounts receivable                               596.2          442.3
      Inventories                                       428.1          501.3
      Prepaid expenses and other current assets          36.7           40.9
      Current portion of derivative instrument assets    30.8              -
    -------------------------------------------------------------------------
                                                      1,811.3        1,310.2

     Derivative instrument assets                       104.2              -
     Property, plant and equipment                    3,887.4        3,525.8
     Investments (Note 2)                             3,581.5        1,148.9
     Other assets                                       210.7          105.8
     Intangible assets                                   24.5           29.3
     Goodwill                                            97.0           97.0
    -------------------------------------------------------------------------
                                                    $ 9,716.6      $ 6,217.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities
     Current liabilities
      Short-term debt                               $    90.0      $   157.9
      Accounts payable and accrued charges              911.7          545.2
      Current portion of long-term debt                   0.2          400.4
    -------------------------------------------------------------------------
                                                      1,001.9        1,103.5

     Long-term debt (Note 3)                          1,339.4        1,357.1
     Future income tax liability                        988.1          632.1
     Accrued pension and other post-retirement
      benefits                                          244.8          219.6
     Accrued environmental costs and asset
      retirement obligations                            121.0          110.3
     Other non-current liabilities and deferred
      credits                                             2.7           14.1
    -------------------------------------------------------------------------
                                                      3,697.9        3,436.7
    -------------------------------------------------------------------------

    Shareholders' Equity
     Share capital                                    1,461.3        1,431.6
      Unlimited authorization of common shares
      without par value; issued and outstanding
      316,411,209 and 314,403,147 at December 31,
      2007 and December 31, 2006, respectively
     Contributed surplus                                 98.9           62.3
     Accumulated other comprehensive income (Note 5)  2,178.9              -
     Retained earnings                                2,279.6        1,286.4
    -------------------------------------------------------------------------
                                                      6,018.7        2,780.3
    -------------------------------------------------------------------------
                                                    $ 9,716.6      $ 6,217.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (See Notes to the Condensed Consolidated Financial Statements)



                   Potash Corporation of Saskatchewan Inc.
    Condensed Consolidated Statements of Operations and Retained Earnings
            (in millions of US dollars except per-share amounts)
                                 (unaudited)

                                    Three Months Ended   Twelve Months Ended
                                       December 31           December 31
                                     2007       2006       2007       2006
    -------------------------------------------------------------------------
    Sales (Note 8)                $ 1,431.4  $ 1,022.9  $ 5,234.2  $ 3,766.7
    Less: Freight                      91.3       73.0      346.1      255.8
          Transportation and
           distribution                29.5       29.5      124.1      134.1
          Cost of goods sold          775.6      621.1    2,882.8    2,374.8
    -------------------------------------------------------------------------
    Gross Margin                      535.0      299.3    1,881.2    1,002.0
    -------------------------------------------------------------------------
    Selling and administrative         54.6       43.8      212.6      158.4
    Provincial mining and other
     taxes                             40.1       25.3      135.4       66.5
    Foreign exchange loss (gain)        2.8      (13.6)      70.2       (4.4)
    Other income (Note 11)            (14.2)     (21.7)    (125.5)     (94.0)
    -------------------------------------------------------------------------
                                       83.3       33.8      292.7      126.5
    -------------------------------------------------------------------------
    Operating Income                  451.7      265.5    1,588.5      875.5
    Interest Expense                    9.7       16.5       68.7       85.6
    -------------------------------------------------------------------------
    Income Before Income Taxes        442.0      249.0    1,519.8      789.9
    Income Taxes (Note 6)              65.2       63.0      416.2      158.1
    -------------------------------------------------------------------------
    Net Income                    $   376.8  $   186.0    1,103.6      631.8
                                 ----------------------
                                 ----------------------
    Retained Earnings, Beginning
     of Year                                              1,286.4      716.9
    Change in Accounting Policy (Note 1)                      0.2          -
    Dividends                                              (110.6)     (62.3)
    -------------------------------------------------------------------------
    Retained Earnings, End of Year                      $ 2,279.6  $ 1,286.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net Income Per Share (Note 7)
      Basic                       $    1.19   $   0.59  $    3.50  $    2.03
      Diluted                     $    1.16   $   0.58  $    3.40  $    1.98
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Dividends Per Share           $    0.10   $   0.05  $    0.35  $    0.20
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (See Notes to the Condensed Consolidated Financial Statements)



                   Potash Corporation of Saskatchewan Inc.
               Condensed Consolidated Statements of Cash Flow
                         (in millions of US dollars)
                                 (unaudited)

                                    Three Months Ended   Twelve Months Ended
                                       December 31           December 31
                                     2007       2006       2007       2006
    -------------------------------------------------------------------------
    Operating Activities
    Net income                    $   376.8  $   186.0  $ 1,103.6  $   631.8
    -------------------------------------------------------------------------

    Adjustments to reconcile net
     income to cash provided by
     operating activities
      Depreciation and amortization    75.0       61.0      291.3      242.4
      Stock-based compensation          3.9        2.7       38.6       29.5
      Loss (gain) on disposal of
       property, plant and equipment
       and long-term investments        2.3       (4.7)       7.9       (8.6)
      Provision for auction rate
       securities                      26.5          -       26.5          -
      Provision for plant shutdowns
       - phosphate segment                -          -          -        6.3
      Foreign exchange on future
       income tax                       4.9      (11.6)      52.4        0.5
      (Recovery of) provision for
       future income tax               (0.2)      46.1      119.6       50.0
      Undistributed earnings of
       equity investees               (18.0)     (15.4)     (35.6)     (24.5)
      Unrealized gain on derivative
       instruments                     (2.7)         -      (21.1)         -
      Other long-term liabilities     (36.6)       1.5      (57.9)      13.4
    -------------------------------------------------------------------------
      Subtotal of adjustments          55.1       79.6      421.7      309.0
    -------------------------------------------------------------------------

      Changes in non-cash operating
       working capital
      Accounts receivable             (14.7)      12.1     (154.6)      11.0
      Inventories                       8.7       (7.9)      60.3       13.9
      Prepaid expenses and other
       current assets                   5.7       23.5        7.0        0.2
      Accounts payable and accrued
       charges                        100.0       49.9      250.9     (269.1)
    -------------------------------------------------------------------------
      Subtotal of changes in
       non-cash operating working
       capital                         99.7       77.6      163.6     (244.0)
    -------------------------------------------------------------------------
    Cash provided by operating
     activities                       531.6      343.2    1,688.9      696.8
    -------------------------------------------------------------------------

    Investing Activities
    Additions to property, plant
     and equipment                   (225.6)    (123.7)    (607.2)    (508.6)
    Purchase of long-term
     investments                          -     (222.5)     (30.7)    (352.5)
    Purchase of investments in
     auction rate securities              -          -     (132.5)         -
    Proceeds from disposal of
     property, plant and equipment
     and long-term investments          0.3       12.0        4.5       22.0
    Other assets and intangible
     assets                            (2.0)      (2.9)       7.8       (0.6)
    -------------------------------------------------------------------------
    Cash used in investing
     activities                      (227.3)    (337.1)    (758.1)    (839.7)
    -------------------------------------------------------------------------
    Cash before financing
     activities                       304.3        6.1      930.8     (142.9)
    -------------------------------------------------------------------------

    Financing Activities
    Proceeds from long-term debt
     obligations                        1.5      483.9        1.5      483.9
    Repayment and issue costs of
     long-term debt obligations           -       (0.3)    (403.6)      (1.3)
    Repayment of short-term debt
     obligations                       (2.1)    (372.1)     (67.9)     (94.3)
    Dividends                         (31.0)     (15.2)     (93.6)     (60.9)
    Issuance of common shares           4.3       31.9       26.6       47.3
    -------------------------------------------------------------------------
    Cash (used in) provided by
     financing activities             (27.3)     128.2     (537.0)     374.7
    -------------------------------------------------------------------------
    Increase in Cash and Cash
     Equivalents                      277.0      134.3      393.8      231.8
    Cash and Cash Equivalents,
     Beginning of Period              442.5      191.4      325.7       93.9
    -------------------------------------------------------------------------
    Cash and Cash Equivalents,
     End of Period                $   719.5  $   325.7  $   719.5  $   325.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash and cash equivalents
     comprised of:
      Cash                        $    23.1  $     7.9  $    23.1  $     7.9
      Short-term investments          696.4      317.8      696.4      317.8
    -------------------------------------------------------------------------
                                  $   719.5  $   325.7  $   719.5  $   325.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental cash flow
     disclosure
      Interest paid               $    22.4  $    32.3  $    93.9  $   106.8
      Income taxes paid
       (recovered)                $    92.8  $   (16.4) $   221.0  $   226.8
    -------------------------------------------------------------------------
    (See Notes to the Condensed Consolidated Financial Statements)



                   Potash Corporation of Saskatchewan Inc.
          Condensed Consolidated Statement of Comprehensive Income
                         (in millions of US dollars)
                                 (unaudited)

                                                   Three Months Ended
                                                    December 31, 2007

                                              Before                Net of
                                              Income     Income     Income
                                               Taxes      Taxes      Taxes
    -------------------------------------------------------------------------
    Net income                               $   442.0  $    65.2  $   376.8
    -------------------------------------------------------------------------
    Other comprehensive income
     Net increase in unrealized gains on
      available-for-sale securities(1)           551.5       29.7      521.8
     Net gains on derivatives designated
      as cash flow hedges(2)                      35.5       10.2       25.3
     Reclassification to income of net
      gains on cash flow hedges(2)               (18.0)      (4.2)     (13.8)
     Unrealized foreign exchange gains on
      translation of self-sustaining
      foreign operations                           0.8          -        0.8
    -------------------------------------------------------------------------
    Other comprehensive income                   569.8       35.7      534.1
    -------------------------------------------------------------------------
    Comprehensive income                     $ 1,011.8  $   100.9  $   910.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                   Twelve Months Ended
                                                    December 31, 2007

                                              Before                Net of
                                              Income     Income     Income
                                               Taxes      Taxes      Taxes
    -------------------------------------------------------------------------
    Net income                               $ 1,519.8  $   416.2  $ 1,103.6
    -------------------------------------------------------------------------
    Other comprehensive income
     Net increase in unrealized gains on
      available-for-sale securities(1)         1,396.2       87.1    1,309.1
     Net gains on derivatives designated
      as cash flow hedges(2)                      49.4       14.8       34.6
     Reclassification to income of net
      gains on cash flow hedges(2)               (57.8)     (17.3)     (40.5)
     Unrealized foreign exchange gains on
      translation of self-sustaining
      foreign operations                           6.7          -        6.7
    -------------------------------------------------------------------------
    Other comprehensive income                 1,394.5       84.6    1,309.9
    -------------------------------------------------------------------------
    Comprehensive income                     $ 2,914.3  $   500.8  $ 2,413.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Available-for-sale securities are comprised of shares in Israel
        Chemicals Ltd., Sinofert Holdings Limited and investments in auction
        rate securities
    (2) Natural gas derivative instruments
    -------------------------------------------------------------------------
    (See Notes to the Condensed Consolidated Financial Statements)



                   Potash Corporation of Saskatchewan Inc.
          Notes to the Condensed Consolidated Financial Statements
           For the Three and Twelve Months Ended December 31, 2007
       (in millions of US dollars except share and per-share amounts)
                                 (unaudited)

    1.  Significant Accounting Policies

    With its subsidiaries, Potash Corporation of Saskatchewan Inc. ("PCS") -
    together known as "PotashCorp" or "the company" except to the extent the
    context otherwise requires - forms an integrated fertilizer and related
    industrial and feed products company. The company's accounting policies
    are in accordance with accounting principles generally accepted in Canada
    ("Canadian GAAP"). The accounting policies used in preparing these
    condensed consolidated financial statements are consistent with those
    used in the preparation of the 2006 annual consolidated financial
    statements, except as described below.

    These interim condensed consolidated financial statements include the
    accounts of PCS and its subsidiaries; however, they do not include all
    disclosures normally provided in annual consolidated financial statements
    and should be read in conjunction with the 2006 annual consolidated
    financial statements. In management's opinion, the unaudited financial
    statements include all adjustments (consisting solely of normal recurring
    adjustments) necessary to present fairly such information.

    Comprehensive Income, Equity, Financial Instruments and Hedges

    Effective January 1, 2007, the company adopted Canadian Institute of
    Chartered Accountants ("CICA") Section 1530, "Comprehensive Income",
    Section 3251, "Equity", Section 3855, "Financial Instruments -
    Recognition and Measurement" and Section 3865, "Hedges". These
    pronouncements increase harmonization with US GAAP. Under the standards:

    - Financial assets are classified as loans and receivables, held-to-
    maturity, held-for-trading or available-for-sale. Loans and receivables
    include all loans and receivables except debt securities and are
    accounted for at amortized cost. Held-to-maturity classification is
    restricted to fixed maturity instruments that the company intends and is
    able to hold to maturity and are accounted for at amortized cost. Held-
    for-trading instruments include all derivative financial instruments not
    included in a hedging relationship and any designated instruments and are
    recorded at fair value with realized and unrealized gains and losses
    reported in net income. The remaining financial assets are classified as
    available-for-sale. These are recorded at fair value with unrealized
    gains and losses reported in a new category of the Consolidated Statement
    of Financial Position under shareholders' equity called accumulated other
    comprehensive income ("AOCI");

    - Financial liabilities are classified as either held-for-trading or
    other. Held-for-trading instruments are recorded at fair value with
    realized and unrealized gains and losses reported in net income. Other
    instruments are accounted for at amortized cost with gains and losses
    reported in net income in the period that the liability is derecognized;
    and

    - Derivative instruments ("derivatives") are classified as held-for-
    trading unless designated as hedging instruments. All derivatives are
    recorded at fair value on the Consolidated Statement of Financial
    Position. For derivatives that hedge the changes in fair value of an
    asset or liability, changes in the derivatives' fair value are reported
    in net income and are substantially offset by changes in the fair value
    of the hedged asset or liability attributable to the risk being hedged.
    For derivatives that hedge variability in cash flows, the effective
    portion of the changes in the derivatives' fair value are initially
    recognized in other comprehensive income ("OCI") and the ineffective
    portion is recorded in net income. Amounts temporarily recorded in AOCI
    will subsequently be reclassified to net income in the periods when net
    income is affected by the variability in the cash flows of the hedged
    item.

    These standards have been applied prospectively; accordingly comparative
    amounts for prior periods have not been restated. The adoption of these
    standards resulted in the following adjustments as of January 1, 2007 in
    accordance with the transition provisions:

    (1) Available-for-sale securities
    - The company's investments in Israel Chemicals Ltd. ("ICL") and Sinofert
    Holdings Limited ("Sinofert") have been classified as available-for-sale
    and recorded at fair value in the Consolidated Statement of Financial
    Position, resulting in an increase in investments of $887.8, an increase
    to AOCI of $789.6 and an increase in future income tax liability of
    $98.2;

    (2) Deferred debt costs
    - Bond issue costs were reclassified from other assets to long-term debt
    and deferred swap gains were reclassified from other non-current
    liabilities to long-term debt, resulting in a reduction in other assets
    of $23.9, a reduction in other non-current liabilities of $6.6 and a
    reduction in long-term debt of $17.3;

    (3) Natural gas derivatives
    - The company employs futures, swaps and option agreements to establish
    the cost of a portion of its natural gas requirements. These derivative
    instruments generally qualify for hedge accounting. Derivative
    instruments were recorded on the Consolidated Statement of Financial
    Position at fair value resulting in an increase in current portion of
    derivative instrument assets of $50.9, an increase in derivative
    instrument assets (non-current asset) of $69.4, an increase in future
    income tax liability of $45.6 and an increase in AOCI of $74.7;

    - Hedge ineffectiveness on these derivative instruments was recorded as a
    cumulative effect adjustment to opening retained earnings, net of tax,
    resulting in an increase in retained earnings of $0.2 and a decrease in
    AOCI of $0.2; and

    - Deferred realized hedging gains were reclassified from inventory to
    AOCI resulting in an increase in inventory of $8.0, an increase in future
    income tax liability of $3.1 and an increase in AOCI of $4.9.

    Stripping Costs Incurred in the Production Phase of a Mining Operation

    In March 2006, the Emerging Issues Committee issued Abstract No. 160,
    "Stripping Costs Incurred in the Production Phase of a Mining Operation"
    ("EIC-160"). EIC-160 discusses the treatment of costs associated with the
    activity of removing overburden and other mine waste minerals in the
    production phase of a mining operation. It concludes that such stripping
    costs should be accounted for according to the benefit received by the
    entity and recorded as either a component of inventory or a betterment to
    the mineral property, depending on the benefit received. The
    implementation of EIC-160, effective January 1, 2007, resulted in a
    decrease in inventory of $21.1, a decrease in other assets of $7.4 and an
    increase in property, plant and equipment of $28.5.

    2.  Investments

    During July 2007, the company's ownership interest in Sinofert was
    diluted from 20 percent to approximately 19 percent due to issuance of
    shares of Sinofert.

    Also during July 2007, the company purchased an additional 1,011,062
    shares of Sociedad Quimica y Minera de Chile S.A. ("SQM") for cash
    consideration of $16.8. The company's ownership interest in SQM remains
    at approximately 32 percent.

    Investments include auction rate securities that are classified as
    available-for-sale. The company has determined that the fair value of the
    auction rate securities was $56.0 at December 31, 2007 (face value
    $132.5). Of the $76.5 unrealized loss, $50.0 was considered temporary and
    $26.5 was considered other-than-temporary. Due to the current lack of
    liquidity for the auction rate securities, these investments are now
    considered non-current and were reclassified from Other Short-term
    Investments, where they were recorded at September 30, 2007. The company
    is able and willing to hold these investments until liquidity improves,
    but does not expect this to occur in the upcoming year. In periods prior
    to third-quarter 2007, auction rate securities were included with cash
    and cash equivalents. The company has not reclassified prior periods as
    the adjustments are not considered material.

    3.  Long-term Debt

    In February 2007, the company entered into a back-to-back loan
    arrangement involving certain financial assets and financial liabilities.
    The company has presented an additional $195.0 of financial assets and
    financial liabilities on a net basis related to this arrangement because
    a legal right to set-off exists, and it intends to settle with the same
    party on a net basis. The company incurred $3.2 of debt issue costs as
    a result of this arrangement which were included as a reduction to
    long-term debt and are being amortized using the effective interest rate
    method over the term of the related liability.

    In June 2007, the company repaid 10-year notes issued under one of the
    company's shelf registration statements in the principal amount of
    $400.0. The stated interest rate on the notes was 7.125%.

    4.  Share Capital

    On May 2, 2007, the Board of Directors of PCS approved a split of the
    company's outstanding common shares on a three-for-one basis. The stock
    split was effected in the form of a stock dividend of two additional
    common shares for each share owned by shareholders of record at the close
    of business on May 22, 2007. All equity-based benefit plans have been
    adjusted to reflect the stock split. All share and per-share data have
    been adjusted to reflect the stock split effective with second-quarter
    2007 reporting. Information on an adjusted basis, showing the impact of
    this split for the first quarter of 2007, and by quarter and total year
    for 2006 and 2005 follows. Comparative results for the second, third and
    fourth quarters of 2007 and the 2007 year are also included.

    Quarterly Data               First    Second   Third    Fourth
    (Post Split Basis)           Quarter  Quarter  Quarter  Quarter  Year
    -------------------------------------------------------------------------
    Basic net income per share
    2007                         $  0.63  $  0.91  $  0.77  $  1.19  $  3.50
    2006                         $  0.40  $  0.56  $  0.47  $  0.59  $  2.03
    2005                         $  0.39  $  0.50  $  0.40  $  0.37  $  1.67
    Diluted net income per share
    2007                         $  0.62  $  0.88  $  0.75  $  1.16  $  3.40
    2006                         $  0.40  $  0.55  $  0.46  $  0.58  $  1.98
    2005                         $  0.38  $  0.49  $  0.39  $  0.36  $  1.63

    Net income per share for each quarter has been computed based on the
    weighted average number of shares issued and outstanding during the
    respective quarter; therefore, quarterly amounts may not add to the
    annual total.

    5.  Accumulated Other Comprehensive Income

    The balances related to each component of accumulated other comprehensive
    income, net of related income taxes, are as follows:

                                                           December 31, 2007
    -------------------------------------------------------------------------
    Net unrealized holding gains on available-for-sale
     securities                                                    $ 2,098.7
    Net unrealized gains on derivatives designated as
     cash flow hedges                                                   73.5
    Unrealized foreign exchange gains on translation of
     self-sustaining foreign operations                                  6.7
    -------------------------------------------------------------------------
    Accumulated other comprehensive income                         $ 2,178.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    6.  Income Taxes

    The company's consolidated reported income tax rate for the three months
    ended December 31, 2007 was approximately 15 percent (2006 - 25 percent)
    and for the twelve months ended December 31, 2007 was approximately
    27 percent (2006 - 20 percent). For the three and twelve months ended
    December 31, 2007, the consolidated effective income tax rate was
    30 percent (2006 - 30 percent). Items to note include the following:

    - A scheduled 2-percentage point reduction in the Canadian federal income
    tax rate applicable to resource companies, effective at the beginning of
    2007, and a reduction of the future income tax rates enacted during the
    fourth quarter of 2007 were offset by a higher percentage of consolidated
    income earned in higher-tax jurisdictions during the three and twelve
    months ended December 31, 2007, compared to the same periods in 2006. As
    a result of the increasing proportion of consolidated income earned in
    higher-tax jurisdictions, during the third quarter of 2007 it was
    determined that the consolidated effective rate for the year had
    increased from 30 percent to 33 percent. This reverted back to 30 percent
    during the fourth quarter of 2007 due to enacted changes in the Canadian
    federal income tax rate as discussed below and higher permanent
    deductions in the United States than originally anticipated. The reported
    income tax rate for the fourth quarter of 2007 is lower than the
    effective rate as the impact of this change on prior periods, as
    applicable, was reflected during the quarter.

    - During the fourth quarter of 2007, the Government of Canada enacted a
    reduction of the federal corporate income tax rate from 21.0 percent in
    2007 to 15.0 percent by 2012. This was in addition to a small change
    enacted in the second quarter of 2007. These changes reduced the
    company's future income tax liability by $40.1 ($4.7 in the second
    quarter and $35.4 in the fourth quarter). In the second quarter of 2006,
    changes were enacted by the Government of Canada to reduce the federal
    corporate income tax rate and the federal corporate surtax. These changes
    reduced the company's future income tax liability by $22.9 in 2006.

    - During the second quarter of 2006, the Province of Saskatchewan enacted
    changes to the corporate income tax, reducing the rate from 17 percent to
    12 percent by 2009. These changes resulted in a $21.9 reduction in the
    company's future income tax liability in that year.

    - In 2006, income tax refunds totaling $34.1 for the 1999 through 2005
    taxation years were recorded, $11.7 of which was recognized during the
    fourth quarter of 2006. The refunds related to a Canadian appeal court
    decision (pertaining to a uranium producer) which affirmed the
    deductibility of the Saskatchewan capital tax resource surcharge.

    7.  Net Income Per Share

    Basic net income per share for the quarter is calculated on the weighted
    average shares issued and outstanding for the three months ended
    December 31, 2007 of 316,227,000 (2006 - 313,469,000). Basic net income
    per share for the twelve months ended December 31, 2007 is calculated
    based on the weighted average shares issued and outstanding of
    315,641,000 (2006 - 311,880,000).

    Diluted net income per share is calculated based on the weighted average
    number of shares issued and outstanding during the period. The
    denominator is: (1) increased by the total of the additional common
    shares that would have been issued assuming exercise of all stock options
    with exercise prices at or below the average market price for the period;
    and (2) decreased by the number of shares that the company could have
    repurchased if it had used the assumed proceeds from the exercise of
    stock options to repurchase them on the open market at the average share
    price for the period. The weighted average number of shares outstanding
    for the diluted net income per share calculation for the three months
    ended December 31, 2007 was 325,727,000 (2006 - 321,084,000) and for the
    twelve months ended December 31, 2007 was 324,308,000 (2006 -
    318,689,000).

    8.  Segment Information

    The company has three reportable business segments: potash, nitrogen and
    phosphate. These business segments are differentiated by the chemical
    nutrient contained in the product that each produces. Inter-segment sales
    are made under terms that approximate market value. The accounting
    policies of the segments are the same as those described in Note 1.

                                     Three Months Ended December 31, 2007
    -------------------------------------------------------------------------
                                                              All    Consoli-
                          Potash   Nitrogen  Phosphate     Others      dated
    -------------------------------------------------------------------------
    Sales              $   479.1  $   463.1  $   489.2  $       -  $ 1,431.4
    Freight                 43.1       15.6       32.6          -       91.3
    Transportation and
     distribution            8.2       12.5        8.8          -       29.5
    Net sales - third
     party                 427.8      435.0      447.8          -
    Cost of goods sold     171.4      298.3      305.9          -      775.6
    Gross margin           256.4      136.7      141.9          -      535.0
    Depreciation and
     amortization           17.3       22.7       32.5        2.5       75.0
    Inter-segment sales        -       28.2          -          -          -

                                     Three Months Ended December 31, 2006
    -------------------------------------------------------------------------
                                                              All    Consoli-
                          Potash   Nitrogen  Phosphate     Others      dated
    -------------------------------------------------------------------------
    Sales              $   371.0  $   317.2  $   334.7  $       -  $ 1,022.9
    Freight                 39.1        8.7       25.2          -       73.0
    Transportation and
     distribution            9.9       11.9        7.7          -       29.5
    Net sales - third
     party                 322.0      296.6      301.8          -
    Cost of goods sold     138.1      214.5      268.5          -      621.1
    Gross margin           183.9       82.1       33.3          -      299.3
    Depreciation and
     amortization           15.1       19.8       24.1        2.0       61.0
    Inter-segment sales      0.7       26.6        1.7          -          -

                                    Twelve Months Ended December 31, 2007
    -------------------------------------------------------------------------
                                                              All    Consoli-
                          Potash   Nitrogen  Phosphate     Others      dated
    -------------------------------------------------------------------------
    Sales              $ 1,797.2  $ 1,799.9  $ 1,637.1  $       -  $ 5,234.2
    Freight                178.1       55.6      112.4          -      346.1
    Transportation and
     distribution           39.1       51.6       33.4          -      124.1
    Net sales - third
     party               1,580.0    1,692.7    1,491.3          -
    Cost of goods sold     667.7    1,156.6    1,058.5          -    2,882.8
    Gross margin           912.3      536.1      432.8          -    1,881.2
    Depreciation and
     amortization           71.7       88.2      121.1       10.3      291.3
    Inter-segment sales        -      112.3        1.9          -          -

                                    Twelve Months Ended December 31, 2006
    -------------------------------------------------------------------------
                                                              All    Consoli-
                          Potash   Nitrogen  Phosphate     Others      dated
    -------------------------------------------------------------------------
    Sales              $ 1,227.5  $ 1,284.1  $ 1,255.1  $       -  $ 3,766.7
    Freight                130.5       36.8       88.5          -      255.8
    Transportation and
     distribution           38.8       52.2       43.1          -      134.1
    Net sales - third
     party               1,058.2    1,195.1    1,123.5          -
    Cost of goods sold     497.1      879.5      998.2          -    2,374.8
    Gross margin           561.1      315.6      125.3          -    1,002.0
    Depreciation and
     amortization           58.3       77.6       94.6       11.9      242.4
    Inter-segment sales      5.7      112.4        7.2          -          -


    9.  Stock-Based Compensation

    On May 3, 2007, the company's shareholders approved the 2007 Performance
    Option Plan under which the company may, after February 20, 2007 and
    before January 1, 2008, issue options to acquire up to 3,000,000 common
    shares. Under the plan, the exercise price shall not be less than the
    quoted market closing price of the company's common shares on the last
    trading day immediately preceding the date of grant and an option's
    maximum term is 10 years. In general, options will vest, if at all,
    according to a schedule based on the three-year average excess of the
    company's consolidated cash flow return on investment over weighted
    average cost of capital. As of December 31, 2007, options to purchase a
    total of 1,730,550 common shares have been granted under the plan. The
    weighted average fair value of options granted was $22.68 per share,
    estimated as of the date of grant using the Black-Scholes-Merton option-
    pricing model with the following weighted average assumptions:

    Expected dividend                                                  $0.40
    Expected volatility                                                  29%
    Risk-free interest rate                                            4.48%
    Expected life of options                                       6.4 years

    10. Pension and Other Post-Retirement Expenses

    Defined Benefit Pension Plans   Three Months Ended   Twelve Months Ended
                                       December 31           December 31
                                     2007       2006       2007       2006
    -------------------------------------------------------------------------
    Service cost                  $     3.8  $     3.4  $    15.3  $    14.2
    Interest cost                       9.2        8.2       36.5       33.5
    Expected return on plan assets    (10.7)      (9.3)     (42.8)     (38.2)
    Net amortization and change
     in valuation allowance             0.4        4.6       10.0       13.2
    -------------------------------------------------------------------------
    Net expense                   $     2.7  $     6.9  $    19.0  $    22.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Other Post-Retirement Plans     Three Months Ended   Twelve Months Ended
                                       December 31           December 31
                                     2007       2006       2007       2006
    -------------------------------------------------------------------------
    Service cost                  $     1.7  $     1.2  $     6.1  $     4.7
    Interest cost                       4.3        3.1       14.9       12.4
    Net amortization                    1.3       (0.1)       1.7       (0.4)
    -------------------------------------------------------------------------
    Net expense                   $     7.3  $     4.2  $    22.7  $    16.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    For the three months ended December 31, 2007, the company contributed
    $44.0 to its defined benefit pension plans, $3.7 to its defined
    contribution pension plans and $2.0 to its other post-retirement plans.
    Contributions for the twelve months ended December 31, 2007 were $100.2
    to its defined benefit pension plans, $16.9 to its defined contribution
    pension plans and $8.2 to its other post-retirement plans.

    11. Other Income

                                    Three Months Ended   Twelve Months Ended
                                       December 31           December 31
                                     2007       2006       2007       2006
    -------------------------------------------------------------------------
    Share of earnings of equity
     investees                    $    18.0  $    15.4  $    76.2  $    54.4
    Dividend income                    10.6          -       58.1       21.1
    Other                              12.1        6.3       17.7       18.5
    Provision for auction rate
     securities (Note 2)              (26.5)         -      (26.5)         -
    -------------------------------------------------------------------------
                                  $    14.2  $    21.7  $   125.5  $    94.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    12. Comparative Figures

    Certain of the prior periods' figures have been reclassified to conform
    with the current periods' presentation.

    13. Subsequent Events

    In January 2008 the company settled its forward purchase contract, that
    was denominated in Hong Kong dollars, to acquire an additional
    194,290,175 shares of Sinofert for cash consideration of $173.7. A gain
    of $25.3 and a pre-tax foreign exchange translation loss of $0.2 were
    recognized during 2008 as a result of the change in fair value of the
    contract from December 31, 2007 to the settlement date. The acquisition
    increases the company's ownership interest in Sinofert to approximately
    20 percent.

    On January 23, 2008, the Board of Directors of PCS authorized, subject to
    regulatory approval, a share repurchase program of up to 15.82 million
    common shares (approximately 5 percent of the company's issued and
    outstanding common shares) through a normal course issuer bid. If
    considered advisable, shares may be repurchased from time to time on the
    open market for a one year period from commencement of the program at
    prevailing market prices. The timing and amount of purchases, if any,
    under the program will be dependent upon the availability and alternative
    uses of capital, market conditions and other factors.



                   Potash Corporation of Saskatchewan Inc.
                     Selected Operating and Revenue Data
                                 (unaudited)

                                    Three Months Ended   Twelve Months Ended
                                       December 31           December 31
                                     2007       2006       2007       2006
    -------------------------------------------------------------------------

    Potash Operating Data
    Production (KCl Tonnes -
     thousands)                       2,542      2,392      9,160      7,018
    Shutdown weeks                      1.1        3.0       18.7       65.9
    Sales (tonnes - thousands)
     Manufactured Product
      North America                     818        846      3,471      2,785
      Offshore                        1,452      1,318      5,929      4,411
    -------------------------------------------------------------------------
     Manufactured Product             2,270      2,164      9,400      7,196
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Potash Net Sales
     (US $ millions)
      Sales                          $479.1     $371.0   $1,797.2   $1,227.5
      Less: Freight                    43.1       39.1      178.1      130.5
            Transportation and
             distribution               8.2        9.9       39.1       38.8
    -------------------------------------------------------------------------
      Net Sales                      $427.8     $322.0   $1,580.0   $1,058.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

     Manufactured Product
      North America                  $174.9     $140.6     $656.9     $470.5
      Offshore                        247.8      177.4      909.6      576.0
     Other miscellaneous and
      purchased product                 5.1        4.0       13.5       11.7
    -------------------------------------------------------------------------
     Net Sales                       $427.8     $322.0   $1,580.0   $1,058.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Potash Average Price per MT
      North America                 $214.03    $166.26    $189.26    $168.95
      Offshore                      $170.63    $134.52    $153.41    $130.56
    -------------------------------------------------------------------------
     Manufactured Product           $186.26    $146.92    $166.65    $145.42
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                   Potash Corporation of Saskatchewan Inc.
                     Selected Operating and Revenue Data
                                 (unaudited)

                                    Three Months Ended   Twelve Months Ended
                                       December 31           December 31
                                     2007       2006       2007       2006
    -------------------------------------------------------------------------

    Nitrogen Operating Data
    Production (N Tonnes -
     thousands)                         704        709      2,986      2,579
    Average Natural Gas Cost
     per MMBtu                        $4.41      $3.70      $4.30      $3.83
    Sales (tonnes - thousands)
     Manufactured Product
      Ammonia                           510        451      2,132      1,695
      Urea                              325        300      1,333      1,199
      Nitrogen solutions/Nitric
       acid/Ammonium nitrate            573        428      2,266      1,781
    -------------------------------------------------------------------------
     Manufactured Product             1,408      1,179      5,731      4,675
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

     Fertilizer sales tonnes            523        368      2,054      1,474
     Industrial/Feed sales tonnes       885        811      3,677      3,201
    -------------------------------------------------------------------------
                                      1,408      1,179      5,731      4,675
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Nitrogen Net Sales
     (US $ millions)
      Sales                          $463.1     $317.2   $1,799.9   $1,284.1
      Less: Freight                    15.6        8.7       55.6       36.8
            Transportation and
             distribution              12.5       11.9       51.6       52.2
    -------------------------------------------------------------------------
      Net Sales                      $435.0     $296.6   $1,692.7   $1,195.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Manufactured Product
      Ammonia                        $159.9     $129.9     $664.3     $499.7
      Urea                            123.6       78.1      468.6      317.8
      Nitrogen solutions/Nitric
       acid/Ammonium nitrate          114.0       65.4      437.8      305.4
    Other miscellaneous and
     purchased product                 37.5       23.2      122.0       72.2
    -------------------------------------------------------------------------
     Net Sales                       $435.0     $296.6   $1,692.7   $1,195.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Fertilizer net sales             $164.3      $85.8     $620.7     $352.6
    Industrial/Feed net sales         233.2      187.6      950.0      770.3
    Other miscellaneous and
     purchased product                 37.5       23.2      122.0       72.2
    -------------------------------------------------------------------------
     Net Sales                       $435.0     $296.6   $1,692.7   $1,195.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Nitrogen Average Price per MT
      Ammonia                       $313.41    $288.14    $311.55    $294.84
      Urea                          $380.41    $260.14    $351.63    $264.97
      Nitrogen solutions/Nitric
       acid/Ammonium nitrate        $198.91    $152.87    $193.21    $171.45
    -------------------------------------------------------------------------
     Manufactured Product           $282.28    $231.92    $274.07    $240.16
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

     Fertilizer average price
      per MT                        $314.05    $233.36    $302.23    $239.12
     Industrial/Feed average
      price per MT                  $263.49    $231.27    $258.35    $240.64
    -------------------------------------------------------------------------
     Manufactured Product           $282.28    $231.92    $274.07    $240.16
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                   Potash Corporation of Saskatchewan Inc.
                     Selected Operating and Revenue Data
                                 (unaudited)

                                    Three Months Ended   Twelve Months Ended
                                       December 31           December 31
                                     2007       2006       2007       2006
    -------------------------------------------------------------------------

    Phosphate Operating Data
    Production (P2O5 Tonnes -
     thousands)                         536        528      2,086      2,021
    P2O5 Operating Rate                 94%        93%        91%        89%
    Sales (tonnes - thousands)
     Manufactured Product
      Fertilizer - Liquid
       phosphates                       296        291        983        911
      Fertilizer - Solid
       phosphates                       430        444      1,623      1,634
      Feed                              218        195        814        778
      Industrial                        190        162        731        647
    -------------------------------------------------------------------------
     Manufactured Product             1,134      1,092      4,151      3,970
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Phosphate Net Sales
     (US $ millions)
      Sales                          $489.2     $334.7   $1,637.1   $1,255.1
      Less: Freight                    32.6       25.2      112.4       88.5
            Transportation and
             distribution               8.8        7.7       33.4       43.1
    -------------------------------------------------------------------------
      Net Sales                      $447.8     $301.8   $1,491.3   $1,123.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Manufactured Product
      Fertilizer - Liquid
       phosphates                     $94.4      $67.6     $283.4     $206.6
      Fertilizer - Solid
       phosphates                     183.0      103.5      607.5      391.6
      Feed                             81.5       60.0      272.7      238.4
      Industrial                       74.1       59.6      277.4      239.7
     Other miscellaneous and
      purchased product                14.8       11.1       50.3       47.2
    -------------------------------------------------------------------------
     Net Sales                       $447.8     $301.8   $1,491.3   $1,123.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Phosphate Average Price per MT
      Fertilizer - Liquid
       phosphates                   $318.71    $232.47    $288.37    $226.89
      Fertilizer - Solid
       phosphates                   $425.30    $233.24    $374.22    $239.64
      Feed                          $374.98    $307.68    $335.03    $306.63
      Industrial                    $389.39    $367.42    $379.47    $370.33
    -------------------------------------------------------------------------
     Manufactured Product           $381.79    $266.26    $347.14    $271.14
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Exchange Rate (Cdn$/US$)                                2007       2006
    -------------------------------------------------------------------------
    December 31                                            0.9881     1.1653
    Fourth-quarter average conversion rate                 0.9892     1.1270


                   Potash Corporation of Saskatchewan Inc.
          Selected Non-GAAP Financial Measures and Reconciliations
                         (in millions of US dollars)
                                 (unaudited)

    The following information is included for convenience only. Generally, a
    non-GAAP financial measure is a numerical measure of a company's
    performance, financial position or cash flows that either excludes or
    includes amounts that are not normally excluded or included in the most
    directly comparable measure calculated and presented in accordance with
    generally accepted accounting principles ("GAAP"). EBITDA, adjusted
    EBITDA, cash flow prior to working capital changes and free cash flow are
    not measures of financial performance (nor do they have standardized
    meanings) under either Canadian GAAP or US GAAP. In evaluating these
    measures, investors should consider that the methodology applied in
    calculating such measures may differ among companies and analysts.

    The company uses both GAAP and certain non-GAAP measures to assess
    performance. The company's management believes these non-GAAP measures
    provide useful supplemental information to investors in order that they
    may evaluate PotashCorp's financial performance using the same measures
    as management. PotashCorp's management believes that, as a result, the
    investor is afforded greater transparency in assessing the financial
    performance of the company. These non-GAAP financial measures should not
    be considered as a substitute for, nor superior to, measures of financial
    performance prepared in accordance with GAAP.

    A.  EBITDA AND ADJUSTED EBITDA
        --------------------------

    Set forth below is a reconciliation of "EBITDA" and "adjusted EBITDA" to
    net income, the most directly comparable financial measure calculated and
    presented in accordance with Canadian GAAP.

                                    Three Months Ended   Twelve Months Ended
                                       December 31           December 31
                                     2007       2006       2007       2006
    -------------------------------------------------------------------------
    Net income                    $   376.8  $   186.0  $ 1,103.6  $   631.8
    Income taxes                       65.2       63.0      416.2      158.1
    Interest expense                    9.7       16.5       68.7       85.6
    Depreciation and amortization      75.0       61.0      291.3      242.4
    -------------------------------------------------------------------------
    EBITDA                        $   526.7  $   326.5  $ 1,879.8  $ 1,117.9
    Provision for auction rate
     securities                        26.5          -       26.5          -
    Provision for plant shutdowns
     - phosphate segment                  -          -          -        6.3
    -------------------------------------------------------------------------
    Adjusted EBITDA               $   553.2  $   326.5  $ 1,906.3  $ 1,124.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    EBITDA is calculated as earnings before interest, income taxes,
    depreciation and amortization. Adjusted EBITDA is calculated as earnings
    before interest, income taxes, depreciation and amortization, and
    impairment charges. PotashCorp uses EBITDA and adjusted EBITDA as
    supplemental financial measures of its operational performance.
    Management believes EBITDA and adjusted EBITDA to be important measures
    as they exclude the effects of items which primarily reflect the impact
    of long-term investment decisions, rather than the performance of the
    company's day-to-day operations. As compared to net income according to
    GAAP, these measures are limited in that they do not reflect the periodic
    costs of certain capitalized tangible and intangible assets used in
    generating revenues in the company's business, or the non-cash charges
    associated with impairments. Management evaluates such items through
    other financial measures such as capital expenditures and cash flow
    provided by operating activities. The company believes that these
    measurements are useful to measure a company's ability to service debt
    and to meet other payment obligations or as a valuation measurement.


                   Potash Corporation of Saskatchewan Inc.
          Selected Non-GAAP Financial Measures and Reconciliations
                         (in millions of US dollars)
                                 (unaudited)

    B.  CASH FLOW
        ---------

    Set forth below is a reconciliation of "cash flow prior to working
    capital changes" and "free cash flow" to cash provided by operating
    activities, the most directly comparable financial measure calculated and
    presented in accordance with Canadian GAAP.

                                    Three Months Ended   Twelve Months Ended
                                       December 31           December 31
                                     2007       2006       2007       2006
    -------------------------------------------------------------------------
    Cash flow prior to working
     capital changes(1)           $   431.9  $   265.6  $ 1,525.3  $   940.8
    -------------------------------------------------------------------------
    Changes in non-cash operating
     working capital
      Accounts receivable             (14.7)      12.1     (154.6)      11.0
      Inventories                       8.7       (7.9)      60.3       13.9
      Prepaid expenses and other
       current assets                   5.7       23.5        7.0        0.2
      Accounts payable and
       accrued charges                100.0       49.9      250.9     (269.1)
    -------------------------------------------------------------------------
    Changes in non-cash
     operating working capital         99.7       77.6      163.6     (244.0)
    -------------------------------------------------------------------------
    Cash provided by operating
     activities                   $   531.6  $   343.2  $ 1,688.9  $   696.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Free cash flow(2)             $   204.3  $   (83.5) $   895.2  $    79.1
    Additions to property, plant
     and equipment                    225.6      123.7      607.2      508.6
    Purchase of long-term
     investments                          -      222.5       30.7      352.5
    Other assets and intangible
     assets                             2.0        2.9       (7.8)       0.6
    Changes in non-cash
     operating working capital         99.7       77.6      163.6     (244.0)
    -------------------------------------------------------------------------
    Cash provided by operating
     activities                   $   531.6  $   343.2  $ 1,688.9  $   696.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) The company uses cash flow prior to working capital changes as a
        supplemental financial measure in its evaluation of liquidity.
        Management believes that adjusting principally for the swings in non-
        cash working capital items due to seasonality assists management in
        making long-term liquidity assessments. The company also believes
        that this measurement is useful as a measure of liquidity or as a
        valuation measurement.

    (2) The company uses free cash flow as a supplemental financial measure
        in its evaluation of liquidity and financial strength. Management
        believes that adjusting principally for the swings in non-cash
        operating working capital items due to seasonality, additions to
        property, plant and equipment, purchases of long-term investments,
        and changes to other assets assists management in the long-term
        assessment of liquidity and financial strength. The company also
        believes that this measurement is useful as an indicator of the
        company's ability to service its debt, meet other payment obligations
        and make strategic investments. Readers should be aware that free
        cash flow does not represent residual cash flow available for
        discretionary expenditures.

    Certain of the prior periods' figures have been reclassified to conform
    with the current periods' presentation.
    

    %SEDAR: 00001608EF




For further information:

For further information: Investors: Denita Stann, Director, Investor
Relations, Phone: (847) 849-4277, Fax: (847) 849-4663, Email:
ir@potashcorp.com; Media: Rhonda Speiss, Manager, Public Relations, Phone:
(306) 933-8544, Fax: (306) 933-8844, pr@potashcorp.com; Web Site:
www.potashcorp.com


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