PotashCorp Reports First-Quarter Earnings of $1.02 Per Share



    
    Listed: TSX, NYSE                                  Symbol: POT
    

    SASKATOON, SK, April 23 /CNW/ - Potash Corporation of Saskatchewan Inc.
(PotashCorp) today announced first-quarter earnings of $1.02 per share(1), or
$308.3 million, our second-highest first quarter ever. This result compares to
$1.74 per share, or $566.0 million, earned in last year's record first
quarter. It was achieved largely on the strength of potash pricing, as sales
volumes declined for all three nutrients and prices for nitrogen products and
solid phosphate fertilizer weakened substantially. Tax adjustments, of which
approximately $95.0 million was included in our initial guidance, added $166.8
million ($0.55 per share) to first-quarter earnings.
    First-quarter gross margin of $229.6 million compared to $856.0 million
in the same period last year, with almost three-quarters of the current total
generated by potash. Cash flow prior to working capital changes(2) of $182.9
million and earnings before interest, taxes, depreciation and amortization(2)
(EBITDA) of $292.4 million were 71 percent and 65 percent, respectively, below
first-quarter 2008 levels. Contributions from our offshore investments in Arab
Potash Company Ltd. (APC) in Jordan and Sociedad Quimica y Minera de Chile
S.A. (SQM) in Chile grew to $37.9 million from $23.4 million in the same
quarter last year. The market value of our investments in these publicly
traded companies, along with our positions in Israel Chemicals Ltd. (ICL) in
Israel and Sinofert Holdings Limited (Sinofert) in China, as of market close
on April 22, 2009, was $5.8 billion, equating to approximately $19 per
PotashCorp share.
    "The first quarter demonstrated the benefits of our potash strategy of
matching supply to market demand, as well as our ability to remain profitable
even during periods of demand deferral," said PotashCorp President and Chief
Executive Officer Bill Doyle. "While buyers have delayed purchases since the
fourth quarter of 2008, the need for potash and other fertilizers cannot be
denied. The fundamentals of our business remain extremely favorable, with
historically low global grain stocks, supportive crop prices, depleting
customer potash inventories and expectations of tight potash supply/demand
dynamics for at least the next five years."

    Market Conditions

    As the global economic uncertainty that began in the second half of 2008
continued into 2009, most customers for the three primary nutrients appeared
to exercise financial caution and drew down inventories while waiting for
market stability. Farmers in the Northern Hemisphere are expected to reduce
fertilizer application rates, replicating what occurred in the Southern
Hemisphere in the fourth quarter of 2008. This deferred purchasing took hold
despite favorable farmer economics associated with strengthening prices for
most major crops.
    Potash movement was extremely slow in the first quarter as all major
offshore markets destocked inventories and many buyers waited for the outcomes
of contract negotiations with China and India. By the end of the quarter,
Brazil and Southeast Asian customers had worked through significant portions
of their inventories and gradually began placing new orders at spot market
prices of approximately $750 per tonne, comparable to spot prices before the
financial downturn.
    In North America, potash fertilizer sales ground to a virtual halt as
farmers seemed to expect a price decline similar to those in nitrogen and
phosphate fertilizers, despite very different underlying fundamentals. North
American potash shipments for the first nine months of the current fertilizer
year (July 2008 to March 2009) continued at a pace well below normal, 44
percent less than the previous five-year average. First-quarter volumes were
further impacted by uncertainty about planting decisions, and weather delays.
As a result, dealers continued to manage purchases carefully, buying only as
much as needed so they could end the spring season with limited inventories.
    In phosphate, despite significantly lower prices for solid fertilizer, US
producer DAP/MAP shipments continued to be well below normal on a fertilizer
year basis, down 34 percent from the previous five-year average. Offshore,
India was a major buyer of phosphate rock, phosphoric acid and DAP. In
nitrogen, the fact that this nutrient needs to be replenished every year in
the soil helped urea volumes from US producers move in the quarter. However,
imports into the US and global trade were considerably lower. Demand for
liquid phosphate fertilizers and nitrogen solutions was weak. Industrial
nitrogen and phosphate demand continued to be constrained due to poor global
economic conditions.

    Potash

    A sharp decline in sales volumes significantly impacted first-quarter
potash gross margin, which fell to $166.6 million from $514.6 million in the
same quarter of 2008. Sales volumes to North American customers declined 86
percent, while offshore volumes fell 78 percent. Only 0.5 million tonnes were
sold in the quarter, compared to 2.5 million tonnes in first-quarter 2008.
    Average realized potash prices in first-quarter 2009 were almost $250 per
tonne higher than in the same quarter last year because of price increases
during 2008. First-quarter 2009 realized prices were below those of the
trailing quarter, as much of the business in the quarter was weighted towards
lower-netback contract volumes to China (fulfilling remaining 2008 contract
requirements in January 2009) and India (completing a contract that expired
March 31, 2009). Additionally, lack of activity in the domestic fertilizer
market caused price-lagging industrial volumes to represent a higher
proportion of total shipments. At nearly 20 percent of all potash sold in the
quarter, these sales volumes were almost quadruple their normal share of our
product mix. Realized prices were also negatively impacted by much higher
per-tonne fixed costs as transportation and distribution system costs for
Canpotex Limited, the offshore marketing company for Saskatchewan potash
producers, were allocated across far fewer sales tonnes.
    Consistent with our long-held practice of matching production to market
demand, we took 39 mine shutdown weeks in the first quarter of 2009 - unlike
last year, when our production could not keep up with demand. These
curtailments reduced our total potash production to 1 million tonnes, a 59
percent quarter-over-quarter reduction. Fixed costs being absorbed by fewer
tonnes drove our per-tonne cost of goods sold considerably higher than in the
same quarter last year. Per-tonne Saskatchewan and New Brunswick royalties
included in cost of goods sold, and based on potash price, also increased as a
result of higher quarter-over-quarter prices.

    Phosphate

    Phosphate gross margin of $8.8 million in the first quarter was 94
percent lower than the $156.0 million generated in the same period last year
as demand was weak. The value of our high-quality rock and ability to produce
a diverse range of products was evident as our industrial segment
reestablished its premium margin status, generating $35.1 million in quarterly
gross margin, while liquid fertilizer generated $3.1 million. Feed phosphate
generated no gross margin while solid fertilizers had negative gross margin of
$30.5 million.
    Our total phosphate sales volumes were 36 percent lower than in the first
quarter of 2008, largely because of lower liquid fertilizer, feed and
industrial volumes. Solid fertilizer volumes were flat quarter over quarter
but prices dropped 48 percent. Liquid fertilizer volumes were down 63 percent
quarter over quarter, with prices up 25 percent. Feed volumes were down 47
percent due to reduced demand from US livestock producers and substitution of
cheaper phosphate feed sources, but prices were 35 percent higher quarter over
quarter. Industrial sales volumes were down 40 percent due to the poor
economic conditions, but prices rose 72 percent as some of these volumes are
sold to customers pursuant to contracts that contain cost-plus or market index
provisions that lag current market conditions. As a result, higher sulfur and
other costs that we incurred in 2008 are now being recovered. Compared to
fourth-quarter 2008, prices for solid fertilizer, liquid fertilizer and feed
fell 67 percent, 55 percent and 36 percent, respectively, while industrial
product prices rose 10 percent.
    Phosphate cost of goods sold was adversely affected by production
curtailments at White Springs and reduced operating rates at Aurora. Since
phosphate production carries high fixed costs, these costs were distributed
over fewer tonnes.

    Nitrogen

    First-quarter nitrogen gross margin of $54.2 million was 71 percent lower
than the $185.4 million of first-quarter 2008. Our Trinidad operation, which
benefits from long-term, lower-cost natural gas contracts indexed to Tampa
ammonia prices, generated $22.1 million in first-quarter gross margin. Our US
operations enjoyed lower gas costs in the first quarter and contributed $32.1
million in gross margin.
    Nitrogen prices were down sharply from last year's first quarter as the
benchmark Tampa ammonia price started 2009 at levels not seen in many years,
but began to recover as the quarter progressed. Realized ammonia prices were
63 percent ($318 per tonne) lower quarter over quarter. Prices for urea were
down 31 percent ($137 per tonne) from the first quarter of 2008, while
nitrogen solution prices declined 27 percent ($78 per tonne).
    Although total nitrogen sales volumes were down 5 percent from last
year's first quarter, fertilizer volumes increased 32 percent due in large
part to incremental export shipments. Industrial and feed volumes were down 23
percent, as our customers for these products continued to produce at operating
rates well below normal. Ammonia sales volumes were flat versus the first
quarter last year, while urea sales volumes were up 33 percent compared to
first-quarter 2008. Nitrogen solutions sales volumes were down 29 percent
compared to last year's first quarter.
    Our total average natural gas cost, including our hedge, was $3.68 per
MMBtu, 45 percent lower than in the same quarter last year.

    Financial

    In the first quarter, offshore restructuring provided a non-cash future
income tax recovery of $119.2 million. Additionally, we recorded a current
income tax benefit of $47.6 million related to higher permanent deductions in
the US from prior years, which will have a positive impact on cash.
    Provincial mining and other taxes for this quarter were $66.4 million
lower than the first quarter of 2008 due to significantly lower potash gross
margin. Selling and administrative expenses and foreign exchange gains were
relatively flat compared to 2008.
    Due primarily to our potash capacity expansion projects in Saskatchewan
and New Brunswick, capital expenditures on property, plant and equipment
reached $366.1 million in the first quarter, up 86 percent from the same
quarter last year. All these projects are continuing as scheduled.

    Outlook

    The weakening of nutrient markets around the world reflects a response to
the global economic downturn and is not founded in fertilizer industry
fundamentals or crop economics. This situation cannot continue indefinitely
without potential consequences to the world's food supply. Crop nutrition is a
matter of science, and with world population rising by more than 75 million
each year, logic dictates that more people will require increased food
production. Moreover, people in developing nations with expanding economies
want to improve the quality of their lives, beginning with their diet. This
expectation cannot be met without increasing crop production to feed more
people and animals. Soil is the primary asset of every farm - and protecting
soil fertility by replenishing nutrients is essential for sustainability and
improved yields. To ignore proper fertilization - even for a season - creates
the potential for significant food production shortages and higher crop
prices. This can be seen in the Southern Hemisphere, where farmers materially
reduced fertilizer applications and, with less-than-ideal weather conditions
in the most recent planting season, are now experiencing substantial declines
in yield.
    Governments around the world recognize the economic and social importance
of this issue and, even in the midst of the current global economic crisis,
are allocating significant resources to stimulate and support agricultural
development. China's State Council, for example, approved a program in early
April to increase its domestic grain production capacity by 50 million tonnes
by 2020, demonstrating its understanding of the importance and necessity of
long-term growth in food production. The factors leading to what was described
in early 2008 as a global food crisis have not gone away, they have only been
overshadowed by the attention paid to current economic issues.
    Fertilizer inventories exist at several key points in the supply chain,
beginning with nutrients resident in the soil that feed the plants being
grown. Those nutrients are harvested with every crop and consumed by animals
or people. If they are not replaced in the soil, future crop production and
the nutritional value of plants grown are compromised. After two consecutive
record global harvests, nutrient removal from the world's soils has been
significant, creating a need to rebuild soil fertility, particularly with
potash. Fertilizer inventories also exist in dealer warehouses or farm storage
bins. In response to the economic conditions over the past nine months, many
dealers and farmers continue destocking their inventories and deferring new
purchases. As a result, potash inventories in the supply chain, beginning with
the soil, are depleting and must be rebuilt. Slow demand is resulting in a
rapidly growing gap between the higher levels of inventory held by potash
producers and what the supply chain and soils require.
    In North America and around the world, farmers and dealers appear to be
waiting for potash prices to follow a downward trend similar to phosphate and
nitrogen. We believe these expectations are misguided, as the fundamentals of
potash globally are very different from the other nutrients. As demonstrated
in 2007 and most of 2008, world potash demand has been exceeding supply.
Despite the recent lull in demand, we believe the potash industry has changed
from one that for decades had excess capacity to one that is expected to
continue facing intermediate and long-term supply challenges. Potash supply is
fundamentally tight and a surge in demand will necessitate increased capacity,
which takes significant time and money to build. Although some customers
perceive that a short-term price collapse may be beneficial, it could create
significant future supply problems. If potash prices do not remain at levels
supportive of capacity reinvestment, the necessary production may not be
available when the world needs it, leading to the possibility of future prices
considerably higher than those seen recently.
    Beginning in 2005, and continuing today, PotashCorp has committed to
addressing this long-term issue by investing CDN $7.0 billion to raise our
productive capability to 18 million tonnes per year once fully ramped up by
2014. We expect to fill a significant amount of the world's demand growth over
this period.
    With customers nearing the completion of massive destocking efforts in
all major markets, we expect a more normal second half of 2009 followed by a
rush to refill the pipeline and feed necessary consumption growth in 2010. For
now, most buyers appear to be waiting for the settlement of China's 2009
contract before engaging fully. Brazil, a major spot market, is beginning to
rebuild potash supply before the important soybean planting season that begins
in October. We expect shipments to Southeast Asia will ramp up in the second
half of 2009 as prices for palm oil, a key and very profitable commodity
produced in this region, have improved significantly. Contract agreements with
China and India expired December 31, 2008 and March 31, 2009, respectively. We
expect both countries to reach new agreements in the second quarter. We
believe any prolonged delay in the final settlement of these contracts will
only accelerate the restocking efforts required to rebuild inventories and
soil nutrient levels in 2010.
    In North America, where farmers' financial position is strong, they are
still weighing the risk of lower yields from reduced fertilizer application -
especially of phosphate and potash - on profitability at a time of strong crop
commodity prices. This situation has the potential to reduce nutrient
applications for the 2008/09 fertilizer year by significantly more than the
record 15 percent reduction in 1982/83, when plantings declined by 40 million
acres. To put this reduction into context, it is now expected that US farmers
will apply approximately the same amount of nutrients this fertilizer year as
they did in 1983. However, the current plantings include 37 million more acres
of corn and soybeans. This scenario is unprecedented in magnitude and
unpredictable in consequences.
    Given the lower sales volumes we anticipate through at least the first
half of 2009, which led our company to announce potash production curtailments
to date in 2009 of 3.5 million tonnes, we now estimate our full-year potash
gross margin to be in the range of $2.5 billion-$3.0 billion and total
shipments to be around 6 million tonnes. We will continue to follow our more
than two-decades-old strategy of matching supply to market demand and adjust
our production rates as required.
    With slower demand in phosphate, our production at White Springs will
continue to be curtailed through the first half of 2009. Although global
phosphate rock prices appear to have stabilized at a level at least triple
what they were just over two years ago, we believe profitability in our solid
fertilizer business will be challenged in the near term by pressure from the
restarting of previously curtailed production around the world. We expect to
once again benefit from our flexible production capabilities at Aurora by
focusing on higher-margin, non-fertilizer markets.
    In nitrogen, we expect that global demand could weaken after the spring
planting season in the Northern Hemisphere. Industrial demand is likely to
stay depressed through the remainder of 2009. However, we expect that lower US
natural gas prices relative to other major producing regions will limit
imports from some offshore competitors, keeping the US market relatively
balanced.
    Capital expenditures, excluding capitalized interest, are forecast to
approximate $1.8 billion in 2009, of which $250 million will relate to
sustaining capital, with the majority of the spending directed to our
previously announced potash capacity projects.
    We now anticipate our 2009 annual effective tax rate to be in the range
of 20-22 percent, with the remaining quarters at approximately 26-28 percent.
The current/future split is expected to remain at 95/5 (excluding discrete
items). Other income for the year is now forecast to exceed 2008 levels by
approximately $110 million. This includes the effect of a $135.5 million
negotiated cash settlement of our arbitration claim related to the recovery of
unauthorized investments made in certain auction rate securities on our
behalf, which will be recorded in the second quarter. Prior to the settlement,
we had recognized in income a writedown of $115.3 million related to these
securities.
    Based on a $1.18 Canadian dollar, PotashCorp is expecting second-quarter
net income per share to be in the range of $1.10-$1.50. For the full year, we
now anticipate earnings to be in the range of $7.00-$8.00 per share based on a
$1.10 Canadian dollar. 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 $7 million, or
$0.02 per share on an after-tax basis, which is primarily non-cash.

    Conclusion

    "Neither our customers nor our company can afford to be shortsighted when
considering the need for more potash in the intermediate and long term," said
Doyle. "To ignore the realities of global population growth, economic
expansion in developing nations and agricultural science is to put the world's
food supply at risk for years to come. Our company will continue to operate
with a disciplined, long-term approach. The world will be depending on us and
we will be ready - operating with the interests of all our stakeholders in
mind."

    
    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 Financial Measures and
        Reconciliations."
    

    Potash Corporation of Saskatchewan Inc. is the world's largest fertilizer
enterprise by capacity 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 and third largest in phosphate and
nitrogen; 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 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. Several 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 current global
financial crisis and conditions and changes in credit markets; 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, including water inflow; strikes and other forms of work stoppage
or slowdowns; changes in and the effects of, government policy and
regulations; 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 Form 10-K for the fiscal year
ended December 31, 2008 under captions "Forward-Looking Statements" and "Item
1A - Risk Factors" and in our other filings with the US Securities and
Exchange Commission and Canadian provincial securities commissions.
Forward-looking statements are given only as at the date of this presentation
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.


    
                  PotashCorp will host a conference call on
             Thursday, April 23, 2009 at 1:00 p.m. Eastern Time.

          To join the call, dial (412) 317-6040 at least 10 minutes
                           prior to the start time.

                       No reservation ID is required.

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

           Webcast participants can submit questions to management
                online from their audio player pop-up window.

             This news release is also available at our website.



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

                                                      March 31,  December 31,
                                                          2009          2008
    -------------------------------------------------------------------------
    Assets
      Current assets
        Cash and cash equivalents                  $     255.1   $     276.8
        Accounts receivable                            1,052.5       1,189.9
        Inventories                                      659.1         714.9
        Prepaid expenses and other current assets        131.0          79.2
        Current portion of derivative instrument
         assets                                            8.6           6.4
    -------------------------------------------------------------------------
                                                       2,106.3       2,267.2

      Derivative instrument assets                         6.7          11.5
      Property, plant and equipment                    5,137.5       4,812.2
      Investments                                      2,889.2       2,750.7
      Other assets                                       237.9         288.7
      Intangible assets                                   21.0          21.5
      Goodwill                                            97.0          97.0
    -------------------------------------------------------------------------
                                                   $  10,495.6   $  10,248.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities
      Current liabilities
        Short-term debt and current portion of
         long-term debt (Note 2)                   $     539.1   $   1,324.1
        Accounts payable and accrued charges             906.7       1,183.6
        Current portion of derivative instrument
         liabilities                                      82.3         108.1
    -------------------------------------------------------------------------
                                                       1,528.1       2,615.8

      Long-term debt (Note 2)                          2,824.7       1,739.5
      Derivative instrument liabilities                  139.1         120.4
      Future income tax liability                        701.9         794.2
      Accrued pension and other post-retirement
       benefits                                          258.0         253.4
      Accrued environmental costs and asset
       retirement obligations                            131.5         133.4
      Other non-current liabilities and deferred
       credits                                             3.3           3.2
    -------------------------------------------------------------------------
                                                       5,586.6       5,659.9
    -------------------------------------------------------------------------

    Shareholders' Equity
      Share capital                                    1,405.0       1,402.5
        Unlimited authorization of common shares
        without par value; issued and outstanding
        295,292,397 and 295,200,987 at March 31,
        2009 and December 31, 2008, respectively

      Contributed surplus                                128.1         126.2
      Accumulated other comprehensive income             694.9         657.9
      Retained earnings                                2,681.0       2,402.3
    -------------------------------------------------------------------------
                                                       4,909.0       4,588.9
    -------------------------------------------------------------------------
                                                   $  10,495.6   $  10,248.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (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
                                                            March 31
                                                          2009          2008
    -------------------------------------------------------------------------
    Sales (Note 5)                                 $     922.5   $   1,890.6
    Less: Freight                                         37.6         102.4
          Transportation and distribution                 27.0          32.3
          Cost of goods sold                             628.3         899.9
    -------------------------------------------------------------------------
    Gross Margin                                         229.6         856.0
    -------------------------------------------------------------------------
    Selling and administrative                            43.4          47.2
    Provincial mining and other taxes                     33.0          99.4
    Foreign exchange gain                                (30.2)        (27.7)
    Other income (Note 7)                                (35.0)        (11.9)
    -------------------------------------------------------------------------
                                                          11.2         107.0
    -------------------------------------------------------------------------
    Operating Income                                     218.4         749.0
    Interest Expense                                      23.2          11.2
    -------------------------------------------------------------------------
    Income Before Income Taxes                           195.2         737.8
    Income Taxes (Note 3)                               (113.1)        171.8
    -------------------------------------------------------------------------
    Net Income                                           308.3         566.0
    Retained Earnings, Beginning of Period             2,402.3       2,279.6
    Repurchase of Common Shares                              -        (500.6)
    Dividends                                            (29.6)        (32.0)
    -------------------------------------------------------------------------
    Retained Earnings, End of Period               $   2,681.0   $   2,313.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net Income Per Share (Note 4)
      Basic                                        $      1.04   $      1.79
      Diluted                                      $      1.02   $      1.74
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Dividends Per Share                            $      0.10   $      0.10
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (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
                                                               March 31
                                                          2009          2008
    -------------------------------------------------------------------------
    Operating Activities
    Net income                                     $     308.3   $     566.0
    -------------------------------------------------------------------------

    Adjustments to reconcile net income to cash
     provided by operating activities
      Depreciation and amortization                       74.0          79.9
      Stock-based compensation                             2.5           2.8
      Loss on disposal of property, plant
       and equipment                                       0.5           0.1
      Provision for auction rate securities                  -          43.1
      Foreign exchange on future income tax              (13.8)         (4.7)
      Recovery of future income tax                     (116.5)        (20.6)
      Undistributed earnings of equity investees         (37.9)        (23.4)
      Derivatives                                        (45.3)        (17.1)
      Other long-term liabilities                         11.1          (0.6)
    -------------------------------------------------------------------------
      Subtotal of adjustments                           (125.4)         59.5
    -------------------------------------------------------------------------

      Changes in non-cash operating working capital
      Accounts receivable                                137.4        (211.4)
      Inventories                                         60.6        (123.1)
      Prepaid expenses and other current assets          (26.8)        (24.2)
      Accounts payable and accrued charges              (255.4)        175.5
    -------------------------------------------------------------------------
      Subtotal of changes in non-cash operating
       working capital                                   (84.2)       (183.2)
    -------------------------------------------------------------------------
    Cash provided by operating activities                 98.7         442.3
    -------------------------------------------------------------------------

    Investing Activities
    Additions to property, plant and equipment          (366.1)       (196.5)
    Purchase of long-term investments                        -        (174.5)
    Proceeds from disposal of property, plant
     and equipment                                         0.3           0.3
    Other assets and intangible assets                   (11.2)         (4.0)
    -------------------------------------------------------------------------
    Cash used in investing activities                   (377.0)       (374.7)
    -------------------------------------------------------------------------
    Cash before financing activities                    (278.3)         67.6
    -------------------------------------------------------------------------

    Financing Activities
    Proceeds from long-term debt obligations             760.0             -
    Repayment of long-term debt obligations             (675.0)            -
    Financing costs on long-term debt obligations        (15.4)            -
    Proceeds from short-term debt obligations            215.1          13.5
    Dividends                                            (29.7)        (31.8)
    Repurchase of common shares                              -        (420.5)
    Issuance of common shares                              1.6          16.3
    -------------------------------------------------------------------------
    Cash provided by (used in) financing activities      256.6        (422.5)
    -------------------------------------------------------------------------
    Decrease in Cash and Cash Equivalents                (21.7)       (354.9)
    Cash and Cash Equivalents, Beginning of Period       276.8         719.5
    -------------------------------------------------------------------------
    Cash and Cash Equivalents, End of Period       $     255.1   $     364.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash and cash equivalents comprised of:
      Cash                                         $      42.7   $      71.5
      Short-term investments                             212.4         293.1
    -------------------------------------------------------------------------
                                                   $     255.1   $     364.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental cash flow disclosure
      Interest paid                                $      15.5   $      14.3
      Income taxes paid                            $     147.2   $     158.5
    -------------------------------------------------------------------------
    (See Notes to the Condensed Consolidated Financial Statements)



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

                                                    Three Months Ended
                                                      March 31, 2009

                                                Before                Net of
                                                Income     Income     Income
                                                 Taxes      Taxes      Taxes
    -------------------------------------------------------------------------

    Net income                                $  195.2   $ (113.1)  $  308.3
    -------------------------------------------------------------------------
    Other comprehensive income
      Net increase in unrealized gains on
       available-for-sale securities(1)          100.5       26.8       73.7
      Net losses on derivatives designated
       as cash flow hedges(2)                    (72.7)     (27.5)     (45.2)
      Reclassification to income of net
       losses on cash flow hedges(2)              13.9        5.3        8.6
      Unrealized foreign exchange losses on
       translation of self-sustaining
       foreign operations                         (0.1)         -       (0.1)
    -------------------------------------------------------------------------
    Other comprehensive income                    41.6        4.6       37.0
    -------------------------------------------------------------------------
    Comprehensive income                      $  236.8   $ (108.5)  $  345.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                    Three Months Ended
                                                      March 31, 2008

                                                Before                Net of
                                                Income     Income     Income
                                                 Taxes      Taxes      Taxes
    -------------------------------------------------------------------------

    Net income                                $  737.8   $  171.8   $  566.0
    -------------------------------------------------------------------------
    Other comprehensive income
      Net increase in unrealized gains on
       available-for-sale securities(1)          179.4       30.4      149.0
      Net gains on derivatives designated as
       cash flow hedges(2)                        63.0       18.9       44.1
      Reclassification to income of net gains
       on cash flow hedges(2)                     (8.2)      (2.5)      (5.7)
      Unrealized foreign exchange gains on
       translation of self-sustaining
       foreign operations                          1.6          -        1.6
    -------------------------------------------------------------------------
    Other comprehensive income                   235.8       46.8      189.0
    -------------------------------------------------------------------------
    Comprehensive income                      $  973.6   $  218.6   $  755.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Available-for-sale securities are comprised of shares in Israel
        Chemicals Ltd. and Sinofert Holdings Limited and investments in
        auction rate securities.
    (2) Cash flow hedges are comprised of natural gas derivative instruments.



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

                                                     Unrealized
                                               Net      foreign
                                  Net   unrealized     exchange
                           unrealized    losses on       losses
                             gains on  derivatives     on self-
                           available-   designated   sustaining
    (Net of related          for-sale      as cash      foreign
     income taxes)         securities  flow hedges   operations        Total
    -------------------------------------------------------------------------
    Accumulated other
     comprehensive income
     (loss), December 31,
     2008                 $     761.8  $    (100.6) $      (3.3) $     657.9
    Increase (decrease)
     for the three months
     ended March 31, 2009        73.7        (36.6)        (0.1)        37.0
    -------------------------------------------------------------------------
    Accumulated other
     comprehensive income
     (loss), March 31,
     2009                 $     835.5  $    (137.2) $      (3.4) $     694.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (See Notes to the Condensed Consolidated Financial Statements)





                   Potash Corporation of Saskatchewan Inc.
           Notes to the Condensed Consolidated Financial Statements
                  For the Three Months Ended March 31, 2009
       (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
    interim condensed consolidated financial statements are consistent with
    those used in the preparation of the 2008 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 2008 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. Interim
    results are not necessarily indicative of the results expected for the
    fiscal year.

    Goodwill and Intangible Assets

    In February 2008, the Canadian Institute of Chartered Accountants
    ("CICA") issued Section 3064, "Goodwill and Intangible Assets", which
    replaces Section 3062, "Goodwill and Other Intangible Assets", and
    Section 3450, "Research and Development Costs". The purpose of this
    section is to provide more specific guidance on the recognition of
    internally developed intangible assets, and requires that research and
    development expenditures be evaluated against the same criteria as
    expenditures for intangible assets. The section substantially harmonizes
    Canadian standards with International Financial Reporting Standards
    ("IFRSs") and applies to annual and interim financial statements relating
    to fiscal years beginning on or after October 1, 2008.

    Also in February 2008, the CICA amended portions of Section 1000,
    "Financial Statement Concepts", which the CICA concluded permitted
    deferral of costs that did not meet the definition of an asset. The
    amendments apply to annual and interim financial statements relating to
    fiscal years beginning on or after October 1, 2008.

    The implementation of these standards, which the company adopted
    effective January 1, 2009, did not have a material impact on the
    company's consolidated financial statements.

    2.  Credit Facility

    Effective January 21, 2009, the company's 364-day credit facility was
    amended to increase available borrowings to $1,500.0 and to extend the
    maturity date to May 28, 2010. The amount available under the credit
    facility was again increased on March 5, 2009 to $1,850.0. As the credit
    facility was extended for a period greater than one year, draws made
    under it during the first quarter of 2009 have been classified as long-
    term debt obligations. Outstanding borrowings at March 31, 2009 were
    $555.0. Draws of $1,000.0 under this pre-amended facility at December 31,
    2008 were classified as short-term. Since the facility matures in May
    2010, any amounts outstanding at June 30, 2009 will be classified as
    current.

    3. Income taxes

    The company's income tax provision was a recovery of $113.1 for the three
    months ended March 31, 2009 as compared to an expense of $171.8 for the
    same period last year. The effective tax rate for the three months ended
    March 31, 2009 was -58 percent compared to 23 percent for the first three
    months of 2008.

    The provision for first-quarter 2009 included:

    -   A future income tax recovery of $119.2 for a tax rate reduction
        resulting from an internal reorganization.

    -   A current income tax recovery of $47.6 that related to an increase in
        permanent deductions in the US from prior years, which will have a
        positive impact on cash

    The provision for first-quarter 2008 included:

    -   The benefit of a scheduled one and a half percentage point reduction
        in the Canadian federal income tax rate applicable to resource
        companies along with the elimination of the one percent surtax.

    -   A future income tax recovery of $42.0 that related to an increase in
        permanent deductions in the US from prior years.

    -   No tax expense on the $25.3 gain that resulted from the change in
        fair value of the forward purchase contract for shares in
        Sinofert Holdings Limited ("Sinofert") as the gain was not taxable.

    4. 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
    March 31, 2009 of 295,232,000 (2008 - 315,662,000).

    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 March 31, 2009 was 303,324,000 (2008 - 326,081,000).

    5. Segment Information

    The company has three reportable business segments: potash, phosphate and
    nitrogen. 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 March 31, 2009
    -------------------------------------------------------------------------
                       Potash  Phosphate  Nitrogen  All Others  Consolidated
    -------------------------------------------------------------------------

    Sales            $  269.2   $  329.9  $  323.4        $  -      $  922.5
    Freight               6.7       18.2      12.7           -          37.6
    Transportation
     and distribution     3.6        8.4      15.0           -          27.0
    Net sales -
     third party        258.9      303.3     295.7           -
    Cost of goods sold   92.3      294.5     241.5           -         628.3
    Gross margin        166.6        8.8      54.2           -         229.6
    Depreciation
     and amortization     7.5       39.0      25.3         2.2          74.0
    Inter-segment sales     -          -       5.8           -             -


                              Three Months Ended March 31, 2008
    -------------------------------------------------------------------------
                       Potash  Phosphate  Nitrogen  All Others  Consolidated
    -------------------------------------------------------------------------
    Sales            $  796.2   $  513.2  $  581.2        $  -     $ 1,890.6
    Freight              55.3       32.1      15.0           -         102.4
    Transportation
     and distribution    11.4        8.0      12.9           -          32.3
    Net sales -
     third party        729.5      473.1     553.3           -
    Cost of goods
     sold               214.9      317.1     367.9           -         899.9
    Gross margin        514.6      156.0     185.4           -         856.0
    Depreciation
     and amortization    22.8       32.6      22.6         1.9          79.9
    Inter-segment sales     -        4.2      42.0           -             -


    6. Pension and Other Post-Retirement Expenses


    Defined Benefit Pension Plans                         Three Months Ended
                                                               March 31
                                                          2009          2008
    -------------------------------------------------------------------------
    Service cost                                   $       4.3   $       3.8
    Interest cost                                         11.1          10.0
    Expected return on plan assets                        (9.6)        (13.0)
    Net amortization and change in
     valuation allowance                                   7.1           2.1
    -------------------------------------------------------------------------
    Net expense                                    $      12.9   $       2.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Other Post-Retirement Plans                           Three Months Ended
                                                               March 31
                                                          2009          2008
    -------------------------------------------------------------------------
    Service cost                                   $       1.5   $       1.4
    Interest cost                                          4.1           4.0
    Net amortization                                       0.1           0.1
    -------------------------------------------------------------------------
    Net expense                                    $       5.7   $       5.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    For the three months ended March 31, 2009, the company contributed $5.7
    to its defined benefit pension plans, $8.4 to its defined contribution
    pension plans and $2.4 to its other post-retirement plans. Total 2009
    contributions to these plans are not expected to differ significantly
    from the amounts previously disclosed in the consolidated financial
    statements for the year ended December 31, 2008.

    7.  Other Income

                                                          Three Months Ended
                                                               March 31
                                                          2009          2008
    -------------------------------------------------------------------------
    Share of earnings of equity investees          $      37.9   $      23.4
    Gain on forward purchase contract
     for shares in Sinofert                                  -          25.3
    Other                                                 (2.9)          6.3
    Provision for auction rate securities                    -         (43.1)
    -------------------------------------------------------------------------
                                                   $      35.0   $      11.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    8.  Subsequent Event

    In April 2009, the company settled an arbitration it instituted against
    an investment bank that purchased auction rate securities with a par
    value of $132.5 for the company's account without the company's
    authorization. The investment bank has agreed to pay the company the full
    par value of $132.5 in exchange for the transfer of the auction rate
    securities to the investment bank. The company will retain all interest
    paid and accrued on these securities through the date of the transfer of
    the securities to the investment bank. The company will also be
    reimbursed by the investment bank for $3.0 of the company's legal costs.
    Prior to the settlement, the company had recognized in income a loss of
    $115.3 related to these unauthorized securities placed in its account. In
    April 2009, the company will recognize a gain in the same amount to
    account for the settlement of this arbitration.


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

                                                          Three Months Ended
                                                               March 31
                                                          2009          2008
    -------------------------------------------------------------------------
    Potash Operating Data
    Production (KCl Tonnes - thousands)                  1,040         2,526
    Shutdown weeks                                        38.9             -
    Sales (tonnes - thousands)
     Manufactured Product
       North America                                       133           967
       Offshore                                            341         1,569
    -------------------------------------------------------------------------
     Manufactured Product                                  474         2,536
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Potash Net Sales
     (US $ millions)
      Sales                                        $     269.2   $     796.2
      Less: Freight                                        6.7          55.3
            Transportation and distribution                3.6          11.4
    -------------------------------------------------------------------------
      Net Sales                                    $     258.9   $     729.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

     Manufactured Product
       North America                               $      85.4   $     291.6
       Offshore                                          168.0         432.0
     Other miscellaneous and purchased product             5.5           5.9
    -------------------------------------------------------------------------
     Net Sales                                     $     258.9   $     729.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Potash Average Price per MT
       North America                               $    639.91   $    301.36
       Offshore                                    $    493.03   $    275.36
    -------------------------------------------------------------------------
     Manufactured Product                          $    534.35   $    285.28
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

                                                          Three Months Ended
                                                               March 31
                                                          2009          2008
    -------------------------------------------------------------------------
    Phosphate Operating Data
    Production (P2O5 Tonnes - thousands)                   236           530
    P2O5 Operating Rate                                    40%           89%
    Sales (tonnes - thousands)
     Manufactured Product
       Fertilizer - Liquid phosphates                       96           259
       Fertilizer - Solid phosphates                       270           267
       Feed                                                114           214
       Industrial                                          116           192
    -------------------------------------------------------------------------
     Manufactured Product                                  596           932
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Phosphate Net Sales
     (US $ millions)
      Sales                                        $     329.9   $     513.2
      Less: Freight                                       18.2          32.1
            Transportation and distribution                8.4           8.0
    -------------------------------------------------------------------------
      Net Sales                                    $     303.3   $     473.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

     Manufactured Product
       Fertilizer - Liquid phosphates              $      44.1   $      94.9
       Fertilizer - Solid phosphates                      92.6         176.3
       Feed                                               68.5          95.5
       Industrial                                         94.6          91.2
     Other miscellaneous and purchased product             3.5          15.2
    -------------------------------------------------------------------------
     Net Sales                                     $     303.3   $     473.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Phosphate Average Price per MT
       Fertilizer - Liquid phosphates              $    457.62   $    365.97
       Fertilizer - Solid phosphates               $    342.75   $    659.64
       Feed                                        $    603.39   $    446.90
       Industrial                                  $    817.50   $    474.90
    -------------------------------------------------------------------------
     Manufactured Product                          $    503.25   $    491.12
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                   Potash Corporation of Saskatchewan Inc.
                     Selected Operating and Revenue Data
                                 (unaudited)
                                                          Three Months Ended
                                                               March 31
                                                          2009          2008
    -------------------------------------------------------------------------
    Nitrogen Operating Data
    Production (N Tonnes - thousands)                      668           720
    Average Natural Gas Cost per MMBtu             $      3.68   $      6.72
    Sales (tonnes - thousands)
     Manufactured Product
       Ammonia                                             479           474
       Urea                                                395           297
       Nitrogen solutions/Nitric
        acid/Ammonium nitrate                              386           555
    -------------------------------------------------------------------------
     Manufactured Product                                1,260         1,326
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

     Fertilizer sales tonnes                               580           439
     Industrial/Feed sales tonnes                          680           887
    -------------------------------------------------------------------------
     Manufactured Product                                1,260         1,326
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Nitrogen Net Sales
     (US $ millions)
      Sales                                        $     323.4   $     581.2
      Less: Freight                                       12.7          15.0
            Transportation and distribution               15.0          12.9
    -------------------------------------------------------------------------
      Net Sales                                    $     295.7   $     553.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

     Manufactured Product
       Ammonia                                     $      90.9   $     240.6
       Urea                                              121.6         131.9
       Nitrogen solutions/Nitric
        acid/Ammonium nitrate                             73.0         130.7
     Other miscellaneous and purchased product            10.2          50.1
    -------------------------------------------------------------------------
     Net Sales                                     $     295.7   $     553.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

     Fertilizer net sales                          $     144.2   $     160.7
     Industrial/Feed net sales                           141.3         342.5
     Other miscellaneous and purchased product            10.2          50.1
    -------------------------------------------------------------------------
     Net Sales                                     $     295.7   $     553.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Nitrogen Average Price per MT
       Ammonia                                     $    189.74   $    507.43
       Urea                                        $    308.10   $    444.77
       Nitrogen solutions/Nitric
        acid/Ammonium nitrate                      $    189.29   $    235.35
    -------------------------------------------------------------------------
     Manufactured Product                          $    226.69   $    379.47
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

     Fertilizer average price per MT               $    248.72   $    366.34
     Industrial/Feed average price per MT          $    207.90   $    385.95
    -------------------------------------------------------------------------
     Manufactured Product                          $    226.69   $    379.47
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Exchange Rate (Cdn$/US$)
                                                          2009          2008
    -------------------------------------------------------------------------

    December 31                                                       1.2246
    March 31                                            1.2602        1.0279
    First-quarter average conversion rate               1.2353        1.0044



                   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
                                                               March 31
                                                          2009          2008
    -------------------------------------------------------------------------
    Net income                                     $     308.3   $     566.0
    Income taxes                                        (113.1)        171.8
    Interest expense                                      23.2          11.2
    Depreciation and amortization                         74.0          79.9
    -------------------------------------------------------------------------
    EBITDA                                               292.4         828.9
    Provision for auction rate securities                    -          43.1
    -------------------------------------------------------------------------
    Adjusted EBITDA                                $     292.4   $     872.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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
                                                               March 31
                                                          2009          2008
    -------------------------------------------------------------------------
    Cash flow prior to working capital changes(1)  $     182.9   $     625.5
    -------------------------------------------------------------------------
    Changes in non-cash operating working capital
      Accounts receivable                                137.4        (211.4)
      Inventories                                         60.6        (123.1)
      Prepaid expenses and other current assets          (26.8)        (24.2)
      Accounts payable and accrued charges              (255.4)        175.5
    -------------------------------------------------------------------------
    Changes in non-cash operating working capital        (84.2)       (183.2)
    -------------------------------------------------------------------------
    Cash provided by operating activities          $      98.7   $     442.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Free cash flow(2)                              $    (194.4)  $     250.5
    Additions to property, plant and equipment           366.1         196.5
    Purchase of long-term investments                        -         174.5
    Other assets and intangible assets                    11.2           4.0
    Changes in non-cash operating working capital        (84.2)       (183.2)
    -------------------------------------------------------------------------
    Cash provided by operating activities          $      98.7   $     442.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (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.
    

    %SEDAR: 00001608EF




For further information:

For further information: Investors, Denita Stann, Senior Director,
Investor Relations, Phone: (847) 849-4277, Fax: (847) 849-4691, Email:
ir@potashcorp.com; Media, Bill Johnson, Director, Public Affairs, Phone: (306)
933-8849, Fax: (306) 933-8844, Email: pr@potashcorp.com; Web Site:
www.potashcorp.com


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