PotashCorp Surpasses Previous Quarterly Earnings Record by Over 60 Percent



    Listed: TSX, NYSE
    Symbol: POT

    SASKATOON, SK, July 24 /CNW/ - Potash Corporation of Saskatchewan Inc.
(PotashCorp) today reported record second-quarter earnings of $2.82 per
share(1) ($905.1 million), a 220 percent increase over the $0.88 per share
($285.7 million) earned in last year's second quarter. This represents the
highest quarterly earnings in company history - 62 percent above the record
$1.74 per share ($566.0 million) set in first-quarter 2008 - and reflects
rising global fertilizer demand and the impact of significantly higher prices
for potash, nitrogen and phosphate products. Record quarterly gross margin of
$1.4 billion was up 187 percent from the $501.4 million generated in the
second quarter of 2007, with all three nutrients making record contributions.
Earnings for the first six months of 2008 were $4.54 per share ($1.5 billion),
more than triple the $1.50 per share ($483.7 million) earned in the first half
of last year and higher than the record $3.40 per share ($1.1 billion) earned
for the full year 2007. First-half gross margin reached $2.3 billion, compared
to $871.1 million in the first six months of 2007, and has already exceeded
the record full-year total of $1.9 billion set last year.
    Cash flow from operating activities prior to working capital changes(2)
reached $1.1 billion for the quarter and $1.7 billion for the first six months
of 2008, compared to $473.7 million for the second quarter of 2007 and $756.7
million for the first half of that year. Earnings before interest, taxes,
depreciation and amortization(2) in the quarter grew to $1.4 billion from
$496.4 million in last year's second quarter, raising first-half EBITDA to
$2.2 billion compared to $877.4 million in the same period of 2007.
    This strong performance was enhanced by our offshore investments in Arab
Potash Company Ltd. (APC) in Jordan, Sociedad Quimica y Minera de Chile S.A.
(SQM) in Chile, Israel Chemical Ltd. (ICL) in Israel and Sinofert Holdings
Limited (Sinofert) in China, which added $94.0 million to our before-tax
earnings in the quarter. Year to date, these investments have contributed
$117.4 million to our other income and the total market value of our
investments today is $9.8 billion, roughly equivalent to $30 per PotashCorp
share.
    "This quarter established a new standard of performance for our company,"
said PotashCorp President and Chief Executive Officer Bill Doyle. "We are
experiencing strong growth in demand and are capturing the value of higher
prices in all three nutrients, especially in potash. With farmers around the
world striving to maximize yields and placing a priority on fertilization,
this quarter provided a glimpse of the future potential of our company."

    Market Conditions

    Fertilizer demand remained strong, fuelled by the global need to increase
food production and by supportive crop commodity prices. Corn prices in the
second quarter were up more than 60 percent from the same period last year,
while soybean prices were almost double. This is providing farmers with record
income and significant motivation to increase acreage planted and yields.
    The resulting tight fertilizer supply/demand fundamentals impacted all
three nutrients in the quarter, and were clearly evident in higher product
prices. First, in potash, inventories were reduced to historically low levels
around the world. For example, reported North American producer inventories
were 41 percent below the previous five-year average at the end of June, an
extremely low level given upcoming summer maintenance shutdowns. Global demand
remains unsatisfied, even without considering the protracted contract
settlements that left China approximately 3 million tonnes short of previously
expected 2008 potash requirements.
    Global nitrogen and phosphate supply was impacted in the second quarter
by China, the world's largest urea exporter and second-largest phosphate
exporter in 2007. China introduced a 35 percent tax on phosphate and nitrogen
exports during the first quarter to protect its domestic supply, and then
raised it to 135 percent effective from April 20 to September 30, 2008.
Phosphate supply tightened further in May when a severe earthquake struck
Sichuan Province, which produces 11 percent of China's phosphate rock and a
significant amount of related downstream fertilizer, feed and industrial
products. In nitrogen, while higher global costs for oil and natural gas
supported higher product prices and generally restricted product movement to
regions relatively close to the source of production, the Chinese export tax
immediately and significantly drove world urea prices higher.
    Phosphate producers without an integrated supply of phosphate rock
continued to be affected by rising costs for key inputs. The price of rock
from Morocco rose to $350-$400 per tonne, compared to $190 in the first
quarter of 2008 and $56 in last year's second quarter. Delivered sulfur prices
rose to $800 per tonne or higher in China and India, while US molten sulfur
prices increased $200 per long ton from the first quarter of 2008.

    Potash

    Quarterly potash gross margin of $886.4 million was 240 percent higher
than the $260.4 million of last year's second quarter and approached 2007's
record full-year gross margin, reflecting the benefit of rising prices. For
the first six months of 2008, potash generated gross margin of $1.4 billion,
more than triple the $434.6 million of the first half of 2007. Gross margin as
a percentage of net sales rose to 79 percent compared to 59 percent in the
same quarter last year.
    As demand continued to exceed available supply in the quarter, PotashCorp
and Canpotex, the offshore marketing company for Saskatchewan potash
producers, shipped volumes to customers in North America and offshore,
respectively, on an allocation basis. The per-tonne North American realized
price of $403 was up 122 percent quarter over quarter, as we realized five
price increases in that time totaling more than $330 per tonne. This includes
the $80-per-short-ton increase established for March-May deliveries while
$150-$175 increases announced for June 1 began to be realized. The offshore
realized price of $417 was up 192 percent from last year's second quarter as,
since that time, Canpotex realized 10 price increases totaling approximately
$520 per tonne to Brazil and eight increases totaling $465 per tonne to
Southeast Asia. It also began to realize the $355-per-tonne increase built
into India's new contract in March, while the $400-per-tonne increase in
China's contract signed in April did not appear until late in the quarter
because of limited available supply.
    Quarterly potash sales volumes of 2.7 million tonnes were the second
highest in our history, trailing only last year's second quarter, which we
entered with 1.1 million tonnes of inventory and therefore had more product to
sell. By quarter-end, our inventories had declined to a record-low 315,000
tonnes, 58 percent below the same time last year and 53 percent below March
31, 2008 levels. North American customers continued to purchase available
potash supply despite a weather-delayed spring season, pushing up sales
volumes by 3 percent quarter over quarter to 1.1 million tonnes. Offshore
volumes for the quarter were 1.6 million tonnes, 7 percent below the same
period last year due to lack of available product. Canpotex shipments were
down 3 percent quarter over quarter, but up 12 percent year-to-date. Compared
to the same period in 2007, second-quarter volumes to Brazil increased by 36
percent to 670,000 tonnes, to Southeast Asia by 49 percent to 825,000 tonnes
and to India by 28 percent to 310,000 tonnes. Those countries consumed volumes
made available by delays in the negotiation with China, which received only
150,000 tonnes in the quarter (down 82 percent from the second quarter of
2007).
    Potash cost of goods sold was almost $21 per tonne higher than in the
same quarter last year, largely due to three factors: the translation of
Canadian-dollar production costs to a weaker US dollar ($9 per tonne), potash
royalties included in the cost of goods sold ($5 per tonne) as a result of
higher potash prices, and higher brine inflow costs at New Brunswick ($4 per
tonne).
    Three-year contracts with unionized employees at each of Cory, Allan and
Patience Lake expired on April 30, 2008, and through the course of
negotiations, PotashCorp has provided our best and final offer, which we
believe is fair, reasonable and responsible. No settlement has yet been
reached and, on July 21, 2008, these employees gave their respective
bargaining units the authorization to strike. On July 23, each bargaining unit
served the company with a strike notice, which enables them to strike at any
time following the expiration of 48 hours after the notice was served. In
response to the strike notice, PotashCorp served each bargaining unit a
lockout notice, which enables us to lock these employees out at any time 48
hours after the notice was served. While we cannot predict the likelihood,
form or timing of any work stoppage at these locations, we believe we have
appropriate contingency plans in place.

    Nitrogen

    In a strong pricing environment underpinned by high world energy prices
and heavy global agricultural demand, our nitrogen segment generated a record
$210.0 million of gross margin in the quarter. This is 46 percent higher than
the $144.2 million generated in the same quarter last year, and 13 percent
more than the previous record of $185.4 million generated in the first quarter
of this year. Year-to-date nitrogen gross margin of $395.4 million is 44
percent ahead of 2007. Our Trinidad operation, which benefits from long-term,
lower-cost natural gas contracts, generated $91.8 million in second-quarter
gross margin, even with volumes significantly reduced by a major plant outage.
This compared to $77.2 million in the same quarter last year. Our US
operations, which are geographically insulated from Gulf imports, contributed
$106.3 million in gross margin, while hedging gains added $11.9 million.
    Realized prices for ammonia increased 70 percent quarter over quarter,
while urea prices rose 50 percent from the same quarter last year. The higher
prices for other nitrogen fertilizers pushed nitrogen solutions prices up 44
percent compared to the same period of 2007.
    Second-quarter ammonia sales volumes fell by 25 percent from 2007, due to
reduced product availability resulting from a 53-day shutdown at our Trinidad
04 plant. Urea sales volumes rose 6 percent quarter over quarter, as the
negative impact of the delayed 2008 spring season was outweighed by the effect
of significantly lower offshore imports that reduced pressure on sales from
North American producers. The combination of the late spring and restricted
availability of production inputs led to a 31 percent drop in nitrogen
solutions volumes.
    Driven by significantly higher Tampa ammonia prices to which our Trinidad
natural gas cost is indexed, our total average gas cost in the quarter,
including hedge, was $7.74 per MMBtu. This was 76 percent higher than in the
same quarter of 2007 but 29 percent below the NYMEX average for the second
quarter of 2008 of $10.83 per MMBtu.

    Phosphate

    Substantially higher prices drove second-quarter phosphate gross margin
to a record $340.9 million, 252 percent higher than the $96.8 million
generated in the same quarter last year. Year-to-date phosphate gross margin
of $496.9 million was 209 percent higher than in the first six months of 2007
and has already exceeded the full-year record of $432.8 million set last year.
Solid fertilizers generated $191.7 million in the quarter, almost quadruple
the $51.4 million of the second quarter of 2007. Liquid fertilizers generated
$54.9 million, feed supplements contributed $70.7 million and industrial
products added $19.8 million.
    Strong global demand and higher input costs contributed to an increase in
solid fertilizer realized prices to $961 per tonne in the second quarter, 145
percent above the same quarter last year and 46 percent higher than in the
trailing quarter. Liquid fertilizer prices rose 166 percent quarter over
quarter, largely the result of a PhosChem contract with India signed at $1,985
per phosphoric acid (P(2)O(5)) tonne for selected second-quarter shipments
versus $566 per P(2)O(5) tonne under the previous contract. North American
liquid prices did not yet fully reflect the rising value of P(2)O(5), as these
sales are primarily contracted on a fertilizer-year basis. Feed prices were up
146 percent quarter over quarter following $250 per-short-ton increases on
each of April 1 and May 1. Realized prices for industrial products, which have
several contracts with pricing that will not reset until early 2009, rose 71
percent from last year's second quarter.
    Strong offshore demand raised solid fertilizer volumes by 6 percent from
the second quarter of 2007 and 38 percent from this year's first quarter. This
demand was driven by India, which increased its DAP purchases from PhosChem by
225 percent, or almost 500,000 tonnes, from last year's second quarter. Our
share of this increase more than offset a 57,000 tonne decline in our North
American volumes because of the delayed spring season. Despite weather
conditions, liquid fertilizer volumes rose 3 percent from the second quarter
of 2007. Feed phosphate sales volumes were down 10 percent quarter over
quarter due primarily to current weakness in the US beef, pork and poultry
industries, while industrial sales volumes were 11 percent lower after a
scheduled plant turnaround and our decision to divert more P(2)O(5) to
higher-margin liquid products.
    Phosphate cost of sales was negatively impacted by sulfur, which rose 311
percent compared to the same quarter in 2007 and affected all products, while
ammonia was up 60 percent quarter over quarter, affecting solid fertilizer
costs. Higher prices in all product categories more than offset these rising
input costs.

    Financial

    Provincial mining and other taxes rose by 371 percent from the same
quarter last year, and actual provincial mining and other taxes as a
percentage of potash segment gross margin rose to 18 percent versus 13 percent
in the same quarter in 2007. The significant increase in potash profit per
tonne somewhat reduced the impact of the per-tonne deduction benefit for
capital spending on potash projects in Saskatchewan. Capital expenditures on
property, plant and equipment reached $237.9 million in the quarter, up 87
percent quarter over quarter, with the majority of this related to potash
debottlenecking and expansion projects at Lanigan, Patience Lake, Cory, New
Brunswick and Rocanville, and loadout expansions at Rocanville and Allan.
    As previously disclosed in January 2008, the Board of Directors
authorized a share repurchase program that allows PotashCorp to buy back up to
15.8 million shares over the course of one year. Prevailing stock market
conditions in the second quarter provided an opportunity to accelerate the
buyback. We purchased 7.5 million shares for cancellation in the second
quarter, in addition to the 3.4 million shares repurchased in the first
quarter. By the end of the second quarter, we had purchased approximately 10.9
million shares under the repurchase program at a cost of approximately $2
billion. We temporarily increased available and outstanding borrowings under
our short-term credit facilities to accommodate accelerated buying in the
second quarter.

    Outlook

    We believe the recent attention to issues of food production and food
security is a necessary and positive development, as those issues are a
long-term reality underpinning growth in the fertilizer industry. Global
population continues to rise by an estimated 77 million people per year, with
the largest portion of that growth occurring in countries with increasing
economic strength such as China and India. Improving diets, specifically
adding more protein from animal sources, is a priority in these regions and is
putting considerable pressure on global grain supply.
    The world's farmers must produce record volumes of grain and oilseeds
every year just to meet the growing need for food, animal feed, fiber and
fuel. This does not even begin to address the issue of restoring severely
depleted global grain inventories, now down to less than two months of supply.
That presents farmers with a significant challenge - one that becomes greater
as population covers a larger portion of the world's agricultural spaces,
leaving less land for food production.
    Producing record crops globally year after year is difficult and
unpredictable for many reasons, particularly the weather. Due to cool wet
weather, more than half of the US corn crop was seeded after May 10th this
year -much later than usual - which could reduce crop production. Flooding in
the Midwest further impacted production potential and total harvested acreage.
The result is higher corn prices, signaling farmers to plant a very large corn
crop in 2009. The potential for higher corn plantings has increased
competition for acres from other crops, such as soybeans, and has raised
futures prices for those crops.
    These conditions, in turn, underpin demand for fertilizers, which are
essential to maximize the quality and quantity of crop yields. Research has
established that without fertilizer, at least 40 percent of the world's annual
crop production would be lost. If nutrients in the soil are not replaced
following harvest, future production suffers. Thus, the world's ability to
produce more grain is tied directly to best farming practices, which include
appropriate application of fertilizer, especially in developing regions that
continue to under-apply.
    The evidence about the financial benefits of proper fertilizer
application is powerful. Sensitivity analyses estimate that an average US
farmer planting fertilizer-intensive corn - with short ton costs of $1,000 for
potash, $1,200 for DAP and $1,000 for urea - and receiving farmgate corn
prices of $5.50 per bushel would generate a return of approximately $435 per
acre over and above variable costs. This is nearly four times the estimated
per-acre returns of US farmers in 2005, the year before crop prices began
their strong advance. Of the three nutrients, potash has the smallest per-acre
impact on cost, so assuming even higher potash prices in the analysis, the
farmer will still generate historically exceptional returns. Although corn
futures continue to fluctuate, short-term volatility does not change the
long-term equation: proper fertilizer application equals greater return. This
holds true for fertilizer investment on other global crops, even at much lower
crop prices than are being achieved today. Farmers understand this, which is
why higher fertilizer prices have not reduced demand.
    Supply and demand will continue to be the drivers of the potash business
for the foreseeable future, barring an improbable collapse in crop commodity
prices, as an estimated 3-4 million tonnes of annual global potash demand
today remains unmet. As a result, delivered offshore spot prices have reached
or exceeded $1,000 per tonne. The situation could tighten further, as China's
2008 potash imports are expected to be less than 70 percent of 2007 levels,
which should significantly reduce its inventories by the end of the year.
While we expect global supply to grow by about 2.5 million tonnes in 2009,
with more than half of that coming from our Lanigan and Patience Lake
debottlenecks, an increase in demand from China in a short potash market -
even a return to its 2007 level of purchases - would leave the world facing
even larger potash shortages. None of the buyers in other major
potash-consuming markets - including North America, Brazil, India and
Southeast Asia - are expected to reduce consumption at a time of tight food
supply and high crop prices.
    The world's soils will be increasingly deficient in potassium if the
unmet demand continues to grow. This will reduce future yield potential, an
untenable situation that makes PotashCorp's ongoing capacity expansion program
essential to filling the large potash supply/demand gap. On July 17, we
announced plans to invest a further $1.6 billion to add a combined 2.7 million
tonnes of operational capacity at Allan, Cory and Rocanville. This follows
previously completed capacity expansion initiatives at Rocanville (2005),
Allan and Esterhazy (2007) and Lanigan (2008), as well as in-progress projects
scheduled for completion at Patience Lake (2008), Cory (2010), New Brunswick
(2011) and Rocanville (2012). In total, we expect to raise our operational
capacity by almost 8 million tonnes between now and the end of 2012.
Developing potash capacity is a long-term initiative and requires significant
foresight, expertise and understanding of global demand patterns. Just as
previous projects announced as long ago as 2003 are today providing increased
volumes for our customers and record returns for our company, we anticipate
that our projects currently underway will be needed to meet growing global
demand. When they come online over the next five years, we expect them to
continue generating strong returns for PotashCorp. If demand for any reason is
less than expected, we plan to match our production to meet market demand to
minimize downside risk, as we have done for the past 21 years.
    For the remainder of this year, both PotashCorp and Canpotex are in a
sold-out volume position and will continue to ship to North American and
offshore customers on an allocation basis. We recently announced a
$250-per-short-ton price increase in the North American market effective
September 1 through November 30, while Canpotex announced that delivered
prices to Brazil and Southeast Asia are now $1,000 per tonne for standard
product and $1,025 for granular product. We expect to realize these price
increases in the fourth quarter. As a result, we are now forecasting 2008
potash gross margin more than 300 percent higher than that achieved in 2007.
    In nitrogen and phosphate, a strong fall season in the US appears likely,
driven by the prospect of large 2009 corn plantings and farmers' strong desire
to prepare in advance after a difficult wet 2008 spring. High costs for sulfur
and phosphate rock are unlikely to abate, and industry consultants expect that
contracts for Moroccan rock could reach $450-$500 per tonne in the third
quarter. The impact of reduced urea and DAP exports from China is expected to
become clearer, with consultants' reports suggesting the 135 percent tax on
phosphate exports could be extended through at least the end of 2008. Under
these conditions, delivered solid phosphate fertilizer prices to offshore
markets could rise in the fourth quarter beyond the current $1,270 per tonne.
Urea could be sustained at current high levels for the remainder of 2008 and
ammonia is likely to play catch-up and climb substantially in the third
quarter. In liquid phosphate, our North American fertilizer-year-based
contracts that begin in July will carry realized prices more than 80 percent
higher than those achieved in the second quarter, while industrial prices
established under longer-term customer contracts will rise slowly through 2008
and should see substantial catch-up in early 2009. As a result, our nitrogen
and phosphate gross margins are now forecast to exceed 2007 levels by more
than 85 percent and 200 percent, respectively.
    Capital expenditures, excluding capitalized interest, are expected to be
approximately $1.4 billion for 2008, of which $270 million will relate to
sustaining capital. We estimate our consolidated effective income tax rate to
be 29 percent in 2008, but it could fall within a range of 28-30 percent, with
a current/future split of 90/10. Due to higher potash prices and margins,
provincial mining taxes are forecast to be 16.5 percent of total potash gross
margin for the year, but could fall within a range of 15-18 percent depending
on price realizations, Canadian/US exchange rate and the timing and amount of
capital spending on potash projects in Saskatchewan.
    With higher expected overall gross margin, which will be partially offset
by increased royalties, provincial mining and corporate income taxes, and
assuming parity between the Canadian and US dollar, PotashCorp is raising
full-year net income guidance from $9.50-$10.50 per share to $12.00-$13.00 per
share. We expect third-quarter net income to be in the range of $3.25-$3.75
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 $10.0 million, or $0.02 per share on an
after-tax basis, and is primarily a non-cash item.

    Conclusion

    "The current operating environment provides an opportunity to deliver
record results, but more importantly gives us the ability to reinvest our
strong cash flow for sustainable growth in the future," said Doyle. "Food
production and fertilizer demand are not quarter-to-quarter issues. They are
long-term necessities tied to human development which are likely to intensify
over time. As we have in the past, we will keep our focus on the future and
execute strategies designed to generate the greatest long-term value and
opportunity for all our stakeholders, including our customers, investors and
employees."

    
    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 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 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; 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 including the possibility of work
stoppages at our Allan, Cory and Patience Lake facilities; 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, 2007 under captions
"Forward-Looking Statements" and "Item 1A - Risk Factors" and in our 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, July 24, 2008,
                         at 1:00 p.m. Eastern Time.

               To join the call, dial (604) 638-5340 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 this same website.



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

                                                      June 30,   December 31,
                                                        2008         2007
    -------------------------------------------------------------------------
    Assets
     Current assets
      Cash and cash equivalents                      $   269.9     $   719.5
      Accounts receivable                              1,091.1         596.2
      Inventories                                        605.0         428.1
      Prepaid expenses and other current assets           57.0          36.7
      Current portion of derivative instrument assets     96.1          30.8
    -------------------------------------------------------------------------
                                                       2,119.1       1,811.3

     Derivative instrument assets                        285.8         104.2
     Property, plant and equipment                     4,172.1       3,887.4
     Investments (Note 2)                              5,020.9       3,581.5
     Other assets                                        262.0         210.7
     Intangible assets                                    22.8          24.5
     Goodwill                                             97.0          97.0
    -------------------------------------------------------------------------
                                                     $11,979.7     $ 9,716.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities
     Current liabilities
      Short-term debt                                $   932.3     $    90.0
      Accounts payable and accrued charges             1,476.6         911.7
      Current portion of long-term debt                    0.2           0.2
    -------------------------------------------------------------------------
                                                       2,409.1       1,001.9

     Long-term debt                                    1,339.2       1,339.4
     Future income tax liability                       1,237.9         988.1
     Accrued pension and other post-retirement
      benefits                                           254.0         244.8
     Accrued environmental costs and asset
      retirement obligations                             125.0         121.0
     Other non-current liabilities and deferred
      credits                                              3.4           2.7
    -------------------------------------------------------------------------
                                                       5,368.6       3,697.9
    -------------------------------------------------------------------------

    Shareholders' Equity
     Share capital                                     1,440.7       1,461.3
      Unlimited authorization of common shares
       without par value; issued and outstanding
       306,596,987 and 316,411,209 at June 30,
       2008 and December 31, 2007, respectively
     Contributed surplus                                 126.3          98.9
     Accumulated other comprehensive income            3,337.9       2,178.9
     Retained earnings                                 1,706.2       2,279.6
    -------------------------------------------------------------------------
                                                       6,611.1       6,018.7
    -------------------------------------------------------------------------
                                                     $11,979.7     $ 9,716.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (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      Six Months Ended
                                         June 30               June 30
                                     2008       2007       2008       2007
    -------------------------------------------------------------------------

    Sales (Note 6)                $ 2,621.0  $ 1,353.1  $ 4,511.6  $ 2,507.8
    Less: Freight                     103.4       92.3      205.8      174.2
          Transportation and
           distribution                33.3       32.6       65.6       63.6
          Cost of goods sold        1,047.0      726.8    1,946.9    1,398.9
    -------------------------------------------------------------------------
    Gross Margin                    1,437.3      501.4    2,293.3      871.1
    -------------------------------------------------------------------------
    Selling and administrative         79.7       73.5      126.9      114.1
    Provincial mining and
     other taxes                      163.0       34.6      262.4       67.1
    Foreign exchange loss (gain)        1.9       39.5      (25.8)      41.5
    Other income (Note 9)            (103.3)     (68.5)    (115.2)     (82.2)
    -------------------------------------------------------------------------
                                      141.3       79.1      248.3      140.5
    -------------------------------------------------------------------------
    Operating Income                1,296.0      422.3    2,045.0      730.6
    Interest Expense                   15.7       20.8       26.9       46.3
    -------------------------------------------------------------------------
    Income Before Income Taxes      1,280.3      401.5    2,018.1      684.3
    Income Taxes (Note 4)             375.2      115.8      547.0      200.6
    -------------------------------------------------------------------------
    Net Income                    $   905.1  $   285.7    1,471.1      483.7
                                 ----------------------
                                 ----------------------
    Retained Earnings,
     Beginning of Period                                  2,279.6    1,286.4
    Repurchase of Common
     Shares (Note 3)                                     (1,981.7)         -
    Change in Accounting Policy                                 -        0.2
    Dividends                                               (62.8)     (47.3)
    -------------------------------------------------------------------------
    Retained Earnings,
     End of Period                                      $ 1,706.2  $ 1,723.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net Income Per Share (Note 5)
      Basic                       $    2.91  $    0.91  $    4.70  $    1.53
      Diluted                     $    2.82  $    0.88  $    4.54  $    1.50
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Dividends Per Share           $    0.10  $    0.10  $    0.20  $    0.15
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (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      Six Months Ended
                                         June 30               June 30
                                     2008       2007       2008       2007
    -------------------------------------------------------------------------

    Operating Activities
    Net income                    $   905.1  $   285.7  $ 1,471.1  $   483.7
    -------------------------------------------------------------------------

    Adjustments to reconcile net
     income to cash provided by
     operating activities
      Depreciation and
       amortization                    83.9       74.1      163.8      146.8
      Stock-based compensation         25.1       27.8       27.9       30.5
      (Gain) loss on disposal
       of property, plant and
       equipment and long-term
       investments                     (6.9)       5.5       (6.8)       5.4
      Provision for auction
       rate securities                  0.7          -       43.8          -
      Foreign exchange on
       future income tax               (4.6)      23.4       (9.3)      26.1
      Provision for future
       income tax                      47.4       41.8       26.8       67.2
      Undistributed earnings of
       equity investees                (1.1)      11.1      (24.5)      (1.9)
      (Gain) loss on derivative
       instruments                     (1.9)       0.9      (19.0)      (5.4)
      Other long-term liabilities       7.7        3.4        7.1        4.3
    -------------------------------------------------------------------------
      Subtotal of adjustments         150.3      188.0      209.8      273.0
    -------------------------------------------------------------------------

      Changes in non-cash
       operating working capital
      Accounts receivable            (283.5)      11.1     (494.9)     (39.7)
      Inventories                    (106.2)      26.7     (229.3)      16.1
      Prepaid expenses and other
       current assets                   0.8       11.9      (23.4)       0.5
      Accounts payable and
       accrued charges                228.1        2.7      403.6      112.1
    -------------------------------------------------------------------------
      Subtotal of changes in
       non-cash operating
       working capital               (160.8)      52.4     (344.0)      89.0
    -------------------------------------------------------------------------
    Cash provided by operating
     activities                       894.6      526.1    1,336.9      845.7
    -------------------------------------------------------------------------

    Investing Activities
    Additions to property,
     plant and equipment             (237.9)    (127.5)    (434.4)    (236.5)
    Purchase of long-term
     investments                      (76.7)         -     (251.2)      (9.7)
    Proceeds from disposal of
     property, plant and
     equipment and long-term
     investments                        9.3        1.0        9.6        1.3
    Other assets and intangible
     assets                           (17.4)      12.5      (21.4)      10.7
    -------------------------------------------------------------------------
    Cash used in investing
     activities                      (322.7)    (114.0)    (697.4)    (234.2)
    -------------------------------------------------------------------------
    Cash before financing
     activities                       571.9      412.1      639.5      611.5
    -------------------------------------------------------------------------

    Financing Activities
    Repayment and issue costs of
     long-term debt obligations        (0.2)    (400.2)      (0.2)    (403.6)
    Proceeds from (repayment of)
     short-term debt obligations      828.9       (9.5)     842.4      (71.3)
    Dividends                         (30.7)     (15.6)     (62.5)     (31.3)
    Repurchase of common shares    (1,476.6)         -   (1,897.1)         -
    Issuance of common shares          12.0        8.4       28.3       18.7
    -------------------------------------------------------------------------
    Cash used in financing
     activities                      (666.6)    (416.9)  (1,089.1)    (487.5)
    -------------------------------------------------------------------------
    (Decrease) Increase in Cash
     and Cash Equivalents             (94.7)      (4.8)    (449.6)     124.0
    Cash and Cash Equivalents,
     Beginning of Period              364.6      454.5      719.5      325.7
    -------------------------------------------------------------------------
    Cash and Cash Equivalents,
     End of Period                $   269.9  $   449.7  $   269.9  $   449.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash and cash equivalents
     comprised of:
      Cash                        $    42.5  $     2.6  $    42.5  $     2.6
      Short-term investments          227.4      447.1      227.4      447.1
    -------------------------------------------------------------------------
                                  $   269.9  $   449.7  $   269.9  $   449.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental cash flow
     disclosure
      Interest paid               $    22.8  $    41.6  $    37.1  $    55.8
      Income taxes paid           $   227.1  $    37.0  $   385.6  $    69.1
    -------------------------------------------------------------------------
    (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
                                                      June 30, 2008

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

    Net income                               $ 1,280.3  $   375.2  $   905.1
    -------------------------------------------------------------------------
    Other comprehensive income
      Net increase in unrealized gains on
       available-for-sale securities(1)          976.4      155.8      820.6
      Net gains on derivatives designated
       as cash flow hedges(2)                    216.9       62.3      154.6
      Reclassification to income of net
       gains on cash flow hedges(2)              (11.8)      (3.3)      (8.5)
      Unrealized foreign exchange gains on
       translation of self-sustaining
       foreign operations                          3.3          -        3.3
    -------------------------------------------------------------------------
    Other comprehensive income                 1,184.8      214.8      970.0
    -------------------------------------------------------------------------
    Comprehensive income                     $ 2,465.1  $   590.0  $ 1,875.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                    Six Months Ended
                                                      June 30, 2008

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

    Net income                               $ 2,018.1  $   547.0  $ 1,471.1
    -------------------------------------------------------------------------
    Other comprehensive income
      Net increase in unrealized gains on
       available-for-sale securities(1)        1,155.8      186.2      969.6
      Net gains on derivatives designated
       as cash flow hedges(2)                    279.9       81.2      198.7
      Reclassification to income of net
       gains on cash flow hedges(2)              (20.0)      (5.8)     (14.2)
      Unrealized foreign exchange gains on
       translation of self-sustaining
       foreign operations                          4.9          -        4.9
    -------------------------------------------------------------------------
    Other comprehensive income                 1,420.6      261.6    1,159.0
    -------------------------------------------------------------------------
    Comprehensive income                     $ 3,438.7  $   808.6  $ 2,630.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                    Three Months Ended
                                                      June 30, 2007

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

    Net income                               $   401.5  $   115.8  $   285.7
    -------------------------------------------------------------------------
    Other comprehensive income
      Net increase in unrealized gains on
       available-for-sale securities(1)          318.2       21.3      296.9
      Net (losses) gains on derivatives
       designated as cash flow hedges(2)          (4.2)      (1.2)      (3.0)
      Reclassification to income of net
       gains on cash flow hedges(2)              (14.1)      (4.3)      (9.8)
      Unrealized foreign exchange gains on
       translation of self-sustaining
       foreign operations                          0.3          -        0.3
    -------------------------------------------------------------------------
    Other comprehensive income                   300.2       15.8      284.4
    -------------------------------------------------------------------------
    Comprehensive income                     $   701.7  $   131.6  $   570.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                    Six Months Ended
                                                      June 30, 2007

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

    Net income                               $   684.3  $   200.6  $   483.7
    -------------------------------------------------------------------------
    Other comprehensive income
      Net increase in unrealized gains on
       available-for-sale securities(1)          563.2       34.0      529.2
      Net (losses) gains on derivatives
       designated as cash flow hedges(2)          30.9        9.3       21.6
      Reclassification to income of net
       gains on cash flow hedges(2)              (31.3)      (9.4)     (21.9)
      Unrealized foreign exchange gains on
       translation of self-sustaining
       foreign operations                          4.9          -        4.9
    -------------------------------------------------------------------------
    Other comprehensive income                   567.7       33.9      533.8
    -------------------------------------------------------------------------
    Comprehensive income                     $ 1,252.0  $   234.5  $ 1,017.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Available-for-sale securities are comprised of shares in Israel
        Chemicals Ltd., 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
                         (in millions of US dollars)
                                 (unaudited)

                                                       Unrealized
                                                        foreign
                                  Net     Unrealized    exchange
                              unrealized   gains on     gains on
                               gains on   derivatives     self-
                              available-  designated   sustaining
    (Net of related            for-sale     as cash     foreign
     income taxes)            securities  flow hedges  operations    Total
    -------------------------------------------------------------------------

    Accumulated other
     comprehensive income,
     December 31, 2007         $ 2,098.7   $    73.5   $     6.7   $ 2,178.9
    Increase for the six
     months ended June 30, 2008    969.6       184.5         4.9     1,159.0
    -------------------------------------------------------------------------
    Accumulated other
     comprehensive income,
     June 30, 2008             $ 3,068.3   $   258.0   $    11.6   $ 3,337.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (See Notes to the Condensed Consolidated Financial Statements)



                   Potash Corporation of Saskatchewan Inc.
          Notes to the Condensed Consolidated Financial Statements
              For the Three and Six Months Ended June 30, 2008
       (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 2007 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 2007 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.

    Inventories

    In June 2007, the CICA issued Section 3031, "Inventories", which replaces
    Section 3030 and harmonizes the Canadian standard related to inventories
    with International Financial Reporting Standards. This standard provides
    more extensive guidance on the determination of cost, including
    allocation of overhead; narrows the permitted cost formulas; restricts
    the classification of spare and replacement parts as inventory; requires
    impairment testing; and expands the disclosure requirements to increase
    transparency. This standard applies to interim and annual financial
    statements relating to fiscal years beginning on or after January 1,
    2008.

    This standard has been applied prospectively; accordingly comparative
    amounts for prior periods have not been restated. The adoption of this
    standard resulted in a reclassification of certain spare and replacement
    parts to property, plant and equipment. The effects of the adjustment
    were to decrease inventory by $21.5 at January 1, 2008 and increase
    property, plant and equipment in the same amount. Since there was no
    difference in the measurement of the assets, no adjustment to opening
    retained earnings was necessary.

    2. Investments

    In January 2008, the company settled its forward purchase contract, which
    was denominated in Hong Kong dollars, to acquire an additional
    194,290,175 shares of Sinofert Holdings Limited ("Sinofert") for cash
    consideration of $173.7. A tax-exempt gain of $25.3 was recognized during
    2008 as a result of the change in fair value of the contract from
    December 31, 2007 to the settlement date. During the second quarter of
    2008, the company purchased an additional 102,128,000 shares of Sinofert
    for cash consideration of $76.4. Net of the ownership interest dilution
    that resulted from the issuance of shares of Sinofert, the acquisitions
    increased the company's ownership interest in Sinofert to approximately
    21 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 $46.9 at June 30, 2008 (face value $132.5).
    Of the $85.6 impairment, $18.8 was considered temporary and $66.8 was
    considered other-than-temporary. This represents an increase of $9.1 from
    the $76.5 impairment at December 31, 2007, of which $50.0 was considered
    temporary and $26.5 was considered other-than-temporary. At March 31,
    2008 the total impairment was $89.4 of which $19.8 was considered
    temporary and $69.6 was considered other-than-temporary. Market
    conditions that existed at the end of 2007 which caused the investments
    to be illiquid continued through the first half of 2008. The company is
    able to hold these investments until liquidity improves, but does not
    expect this to occur in the next 12 months.

    3. Share Repurchase

    On January 23, 2008, the Board of Directors of PCS authorized a share
    repurchase program of up to 15,820,000 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 through January 30, 2009
    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.

    During the three months ended June 30, 2008, the company repurchased for
    cancellation 7,456,700 common shares under the program, at a cost of
    $1,515.9 and an average price per share of $203.30. The repurchase
    resulted in a reduction of share capital of $34.8, and the excess of cost
    over the average book value of the shares of $1,481.1 has been recorded
    as a reduction of retained earnings. During the six months ended June 30,
    2008, a total of 10,855,500 shares were repurchased at a cost of $2,032.2
    and an average price per share of $187.21, resulting in a reduction of
    share capital of $50.5 and a reduction in retained earnings of $1,981.7.
    Of the $2,032.2 of common shares repurchased with trade dates through
    June 30, 2008, only $1,897.1 had settled in cash by the close of the
    quarter.

    4. Income Taxes

    The company's consolidated reported income tax rate for the three months
    ended June 30, 2008 was approximately 29 percent (2007 - 29 percent) and
    for the six months ended June 30, 2008 was approximately 27 percent (2007
    - 29 percent). For the three and six months ended June 30, 2008, the
    consolidated effective income tax rate was 29 percent (2007 -
    30 percent). Items to note include the following:

    -   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 became effective at the
        beginning of 2008. In addition, there was an increase in permanent
        deductions in the US.

    -   As a result of the higher permanent deductions in the US, it was
        determined that the consolidated effective income tax rate for the
        year had decreased from 30 percent to 29 percent. The impact of this
        change on the prior period was reflected during the quarter.

    -   Future income tax assets were written down by $11.0 during the second
        quarter of 2008.

    -   During the first quarter of 2008, an income tax recovery of $42.0 was
        recorded that related to an increase in permanent deductions in the
        US from prior years.

    -   The $25.3 gain recognized in first-quarter 2008 as a result of the
        change in fair value of the forward purchase contract for shares in
        Sinofert was not taxable.

    5. 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 June 30,
    2008 of 310,615,000 (2007 - 315,458,000). Basic net income per share for
    the year to date is calculated based on the weighted average shares
    issued and outstanding for the six months ended June 30, 2008 of
    313,138,000 (2007 - 315,180,000).

    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 June 30, 2008 was 321,089,000 (2007 - 323,674,000) and for the six
    months ended June 30, 2008 was 323,716,000 (2007 - 323,139,000).

    6. 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 June 30, 2008
    -------------------------------------------------------------------------
                                                                      Consol-
                             Potash  Nitrogen  Phosphate  All Others  idated
    -------------------------------------------------------------------------
    Sales                   $1,194.5  $  644.5  $  782.0  $      -  $2,621.0
    Freight                     60.3      13.3      29.8         -     103.4
    Transportation and
     distribution               13.9      11.0       8.4         -      33.3
    Net sales - third party  1,120.3     620.2     743.8         -
    Cost of goods sold         233.9     410.2     402.9         -   1,047.0
    Gross margin               886.4     210.0     340.9         -   1,437.3
    Depreciation and
     amortization               24.0      22.3      35.7       1.9      83.9
    Inter-segment sales            -      40.6      10.5         -         -


                                     Three Months Ended June 30, 2007
    -------------------------------------------------------------------------
                                                                      Consol-
                             Potash  Nitrogen  Phosphate  All Others  idated
    -------------------------------------------------------------------------
    Sales                   $  510.2  $  481.2  $  361.7  $      -  $1,353.1
    Freight                     53.2      13.3      25.8         -      92.3
    Transportation and
     distribution               12.6      12.6       7.4         -      32.6
    Net sales - third party    444.4     455.3     328.5         -
    Cost of goods sold         184.0     311.1     231.7         -     726.8
    Gross margin               260.4     144.2      96.8         -     501.4
    Depreciation and
     amortization               21.0      21.6      29.7       1.8      74.1
    Inter-segment sales            -      26.1       1.0         -         -


                                      Six Months Ended June 30, 2008
    -------------------------------------------------------------------------
                                                                      Consol-
                             Potash  Nitrogen  Phosphate  All Others  idated
    -------------------------------------------------------------------------
    Sales                   $1,990.7  $1,225.7  $1,295.2  $      -  $4,511.6
    Freight                    115.6      28.3      61.9         -     205.8
    Transportation and
     distribution               25.3      23.9      16.4         -      65.6
    Net sales - third party  1,849.8   1,173.5   1,216.9         -
    Cost of goods sold         448.8     778.1     720.0         -   1,946.9
    Gross margin             1,401.0     395.4     496.9         -   2,293.3
    Depreciation and
     amortization               46.8      44.9      68.3       3.8     163.8
    Inter-segment sales            -      82.6      14.7         -         -


                                      Six Months Ended June 30, 2007
    -------------------------------------------------------------------------
                                                                      Consol-
                             Potash  Nitrogen  Phosphate  All Others  idated
    -------------------------------------------------------------------------
    Sales                   $  890.7  $  900.8  $  716.3  $      -  $2,507.8
    Freight                     96.7      24.6      52.9         -     174.2
    Transportation and
     distribution               22.2      26.2      15.2         -      63.6
    Net sales - third party    771.8     850.0     648.2         -
    Cost of goods sold         337.2     574.5     487.2         -   1,398.9
    Gross margin               434.6     275.5     161.0         -     871.1
    Depreciation and
     amortization               38.9      43.3      59.3       5.3     146.8
    Inter-segment sales            -      59.1       1.9         -         -


    7.  Stock-Based Compensation

    On May 8, 2008, the company's shareholders approved the 2008 Performance
    Option Plan under which the company may, after February 20, 2008 and
    before January 1, 2009, issue options to acquire up to 1,000,000 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 June 30, 2008, options to purchase a
    total of 486,450 common shares have been granted under the plan. The
    weighted average fair value of options granted was $74.76 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                                                  34%
    Risk-free interest rate                                            3.30%
    Expected life of options                                       5.8 years

    8. Pension and Other Post-Retirement Expenses

    Defined Benefit                Three Months Ended      Six Months Ended
     Pension Plans                       June 30               June 30
                                     2008       2007       2008       2007
    -------------------------------------------------------------------------

    Service cost                  $     3.8  $     3.8  $     7.6  $     7.6
    Interest cost                      10.0        9.1       20.0       18.2
    Expected return on plan assets    (12.8)     (10.7)     (25.8)     (21.4)
    Net amortization and change
     in valuation allowance             2.9        3.2        5.0        6.4
    -------------------------------------------------------------------------
    Net expense                   $     3.9  $     5.4  $     6.8  $    10.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Other Post-Retirement Plans    Three Months Ended      Six Months Ended
                                         June 30               June 30
                                     2008       2007       2008       2007
    -------------------------------------------------------------------------

    Service cost                  $     1.4  $     1.5  $     2.8  $     2.9
    Interest cost                       4.0        3.5        8.0        7.0
    Net amortization                    0.2        0.1        0.3        0.3
    -------------------------------------------------------------------------
    Net expense                   $     5.6  $     5.1  $    11.1  $    10.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    For the three months ended June 30, 2008, the company contributed $5.7 to
    its defined benefit pension plans, $4.2 to its defined contribution
    pension plans and $2.0 to its other post-retirement plans. Contributions
    for the six months ended June 30, 2008 were $11.9 to its defined benefit
    pension plans, $12.3 to its defined contribution pension plans and $4.1
    to its other post-retirement plans. Total 2008 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, 2007.

    9. Other Income

                                   Three Months Ended      Six Months Ended
                                         June 30               June 30
                                     2008       2007       2008       2007
    -------------------------------------------------------------------------

    Share of earnings of
     equity investees             $    60.3  $    29.8  $    83.7  $    42.8
    Dividend income                    33.7       38.7       33.7       38.7
    Gain on forward purchase
     contract for shares in
     Sinofert (Note 2)                    -          -       25.3          -
    Other                              10.0          -       16.3        0.7
    Provision for auction rate
     securities                        (0.7)         -      (43.8)         -
    -------------------------------------------------------------------------
                                  $   103.3  $    68.5  $   115.2  $    82.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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


                                   Three Months Ended      Six Months Ended
                                         June 30               June 30
                                     2008       2007       2008       2007
    -------------------------------------------------------------------------

    Potash Operating Data
    Production (KCl Tonnes -
     thousands)                       2,361      2,491      4,887      4,794
    Shutdown weeks                      2.0        7.4        2.0        9.4
    Sales (tonnes - thousands)
     Manufactured Product
      North America                   1,086      1,051      2,053      1,943
      Offshore                        1,633      1,762      3,202      3,035
    -------------------------------------------------------------------------
     Manufactured Product             2,719      2,813      5,255      4,978
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Potash Net Sales
     (US $ millions)
      Sales                        $1,194.5     $510.2   $1,990.7     $890.7
      Less: Freight                    60.3       53.2      115.6       96.7
            Transportation
             and distribution          13.9       12.6       25.3       22.2
    -------------------------------------------------------------------------
      Net Sales                    $1,120.3     $444.4   $1,849.8     $771.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

     Manufactured Product
      North America                  $437.5     $190.9     $729.1     $343.6
      Offshore                        680.8      251.1    1,112.8      422.1
     Other miscellaneous and
      purchased product                 2.0        2.4        7.9        6.1
    -------------------------------------------------------------------------
     Net Sales                     $1,120.3     $444.4   $1,849.8     $771.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Potash Average Price per MT
      North America                 $403.03    $181.62    $355.12    $176.81
      Offshore                      $416.93    $142.56    $347.56    $139.08
    -------------------------------------------------------------------------
     Manufactured Product           $411.38    $157.16    $350.51    $153.81
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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


                                   Three Months Ended      Six Months Ended
                                         June 30               June 30
                                     2008       2007       2008       2007
    -------------------------------------------------------------------------

    Nitrogen Operating Data
    Production (N Tonnes -
     thousands)                         702        777      1,422      1,524
    Average Natural Gas Cost
     per MMBtu                        $7.74      $4.41      $7.23      $4.41
    Sales (tonnes - thousands)
     Manufactured Product
      Ammonia                           432        576        906      1,096
      Urea                              330        312        627        651
      Nitrogen solutions/Nitric
       acid/Ammonium nitrate            512        647      1,067      1,125
    -------------------------------------------------------------------------
     Manufactured Product             1,274      1,535      2,600      2,872
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

     Fertilizer sales tonnes            499        617        938      1,049
     Industrial/Feed sales tonnes       775        918      1,662      1,823
    -------------------------------------------------------------------------
                                      1,274      1,535      2,600      2,872
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Nitrogen Net Sales
     (US $ millions)
      Sales                          $644.5     $481.2   $1,225.7     $900.8
      Less: Freight                    13.3       13.3       28.3       24.6
            Transportation and
             distribution              11.0       12.6       23.9       26.2
    -------------------------------------------------------------------------
      Net Sales                      $620.2     $455.3   $1,173.5     $850.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

     Manufactured Product
      Ammonia                        $238.0     $186.7     $478.6     $356.1
      Urea                            177.0      111.9      308.9      225.8
      Nitrogen solutions/Nitric
       acid/Ammonium nitrate          145.6      132.4      276.3      218.8
     Other miscellaneous and
      purchased product                59.6       24.3      109.7       49.3
    -------------------------------------------------------------------------
     Net Sales                       $620.2     $455.3   $1,173.5     $850.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

     Fertilizer net sales            $233.5     $190.6     $394.2     $315.8
     Industrial/Feed net sales        327.1      240.4      669.6      484.9
     Other miscellaneous and
      purchased product                59.6       24.3      109.7       49.3
    -------------------------------------------------------------------------
     Net Sales                       $620.2     $455.3   $1,173.5     $850.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Nitrogen Average Price per MT
      Ammonia                       $551.09    $323.85    $528.24    $324.74
      Urea                          $536.09    $357.74    $492.88    $346.72
      Nitrogen solutions/Nitric
       acid/Ammonium nitrate        $284.38    $204.88    $258.87    $194.64
    -------------------------------------------------------------------------
     Manufactured Product           $440.04    $280.66    $409.15    $278.78
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

     Fertilizer average price
      per MT                        $468.02    $308.89    $420.44    $301.05
     Industrial/Feed average
      price per MT                  $422.03    $261.69    $402.77    $265.96
    -------------------------------------------------------------------------
     Manufactured Product           $440.04    $280.66    $409.15    $278.78
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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


                                   Three Months Ended      Six Months Ended
                                         June 30               June 30
                                     2008       2007       2008       2007
    -------------------------------------------------------------------------

    Phosphate Operating Data
    Production (P2O5 Tonnes -
     thousands)                         489        483      1,000      1,008
    P2O5 Operating Rate                 86%        85%        87%        88%
    Sales (tonnes - thousands)
     Manufactured Product
      Fertilizer - Liquid phosphates    190        184        449        435
      Fertilizer - Solid phosphates     370        349        637        776
      Feed                              183        204        397        411
      Industrial                        166        186        358        359
    -------------------------------------------------------------------------
     Manufactured Product               909        923      1,841      1,981
    -------------------------------------------------------------------------

    Phosphate Net Sales
     (US $ millions)
      Sales                          $782.0     $361.7   $1,295.2     $716.3
      Less: Freight                    29.8       25.8       61.9       52.9
            Transportation
             and distribution           8.4        7.4       16.4       15.2
    -------------------------------------------------------------------------
      Net Sales                      $743.8     $328.5   $1,216.9     $648.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

     Manufactured Product
      Fertilizer - Liquid
       phosphates                    $128.8      $47.0     $223.7     $109.7
      Fertilizer - Solid
       phosphates                     355.0      137.1      531.3      257.5
      Feed                            139.9       63.5      235.4      126.2
      Industrial                      105.2       68.7      196.4      131.9
     Other miscellaneous and
      purchased product                14.9       12.2       30.1       22.9
    -------------------------------------------------------------------------
     Net Sales                       $743.8     $328.5   $1,216.9     $648.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Phosphate Average Price per MT
      Fertilizer - Liquid
       phosphates                   $679.76    $255.91    $498.44    $252.13
      Fertilizer - Solid
       phosphates                   $960.63    $392.41    $834.31    $331.67
      Feed                          $762.31    $310.43    $592.62    $306.59
      Industrial                    $633.50    $369.89    $548.48    $367.95
    -------------------------------------------------------------------------
     Manufactured Product           $802.20    $342.56    $644.67    $315.56
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Exchange Rate (Cdn$/US$)
                                                            2008       2007
    -------------------------------------------------------------------------
    December 31                                                       0.9881
    June 30                                                1.0186     1.0634
    Second-quarter average conversion rate                 1.0051     1.1325



                   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      Six Months Ended
                                         June 30               June 30
                                     2008       2007       2008       2007
    -------------------------------------------------------------------------

    Net income                    $   905.1  $   285.7  $ 1,471.1  $   483.7
    Income taxes                      375.2      115.8      547.0      200.6
    Interest expense                   15.7       20.8       26.9       46.3
    Depreciation and amortization      83.9       74.1      163.8      146.8
    -------------------------------------------------------------------------
    EBITDA                          1,379.9      496.4    2,208.8      877.4
    Provision for auction rate
     securities                         0.7          -       43.8          -
    -------------------------------------------------------------------------
    Adjusted EBITDA               $ 1,380.6  $   496.4  $ 2,252.6  $   877.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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      Six Months Ended
                                         June 30               June 30
                                     2008       2007       2008       2007
    -------------------------------------------------------------------------
    Cash flow prior to working
     capital changes(1)           $ 1,055.4  $   473.7  $ 1,680.9  $   756.7
    -------------------------------------------------------------------------
    Changes in non-cash operating
     working capital
      Accounts receivable            (283.5)      11.1     (494.9)     (39.7)
      Inventories                    (106.2)      26.7     (229.3)      16.1
      Prepaid expenses and
       other current assets             0.8       11.9      (23.4)       0.5
      Accounts payable and
       accrued charges                228.1        2.7      403.6      112.1
    -------------------------------------------------------------------------
    Changes in non-cash operating
     working capital                 (160.8)      52.4     (344.0)      89.0
    -------------------------------------------------------------------------
    Cash provided by operating
     activities                   $   894.6  $   526.1  $ 1,336.9  $   845.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Free cash flow(2)             $   723.4  $   358.7  $   973.9  $   521.2
    Additions to property, plant
     and equipment                    237.9      127.5      434.4      236.5
    Purchase of long-term
     investments                       76.7          -      251.2        9.7
    Other assets and intangible
     assets                            17.4      (12.5)      21.4      (10.7)
    Changes in non-cash operating
     working capital                 (160.8)      52.4     (344.0)      89.0
    -------------------------------------------------------------------------
    Cash provided by operating
     activities                   $   894.6  $   526.1  $ 1,336.9  $   845.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (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, Director, Investor
Relations, Phone: (847) 849-4277, Email: ir@potashcorp.com; Media, Rhonda
Speiss, Manager, Public Relations, Phone: (306) 933-8544, Email:
pr@potashcorp.com, Web Site: www.potashcorp.com


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