PotashCorp Third-Quarter Earnings of $1.24 Billion Exceed 2007 Full-Year Record



    
    Listed: TSX, NYSE
    Symbol: POT
    

    SASKATOON, SK, Oct. 23 /CNW/ - Potash Corporation of Saskatchewan Inc.
(PotashCorp) today reported 2008 third-quarter earnings of $3.93 per share(1)
($1.24 billion), a five-fold increase over the $0.75 per share
($243.1 million) earned in the same period last year. This exceeded the $3.40
per share ($1.1 billion) earned in the full-year 2007. Fueled by significantly
higher prices for all our potash, nitrogen and phosphate products, gross
margin for the third quarter grew to a record $1.7 billion, up from
$475.1 million in the third quarter of 2007. Year-to-date earnings reached
$8.45 per share ($2.7 billion) and gross margin grew to $4.0 billion,
substantially ahead of the $2.25 per share ($726.8 million) and $1.3 billion
in gross margin in last year's first nine months.
    Cash flow from operating activities prior to working capital changes(2)
was $1.3 billion, almost four times the $336.7 million generated in the same
period last year. Through the first nine months of 2008, operating cash flow
prior to working capital changes of $2.9 billion was 168 percent higher than
the same period of 2007. Third-quarter earnings before interest, taxes,
depreciation and amortization(2) (EBITDA) reached $1.8 billion, compared to
$475.7 million in the third quarter of 2007. This raised EBITDA for the first
nine months of 2008 to $4.0 billion, well ahead of the $1.4 billion earned in
the first nine months of 2007.
    Benefiting from strong market conditions, our offshore investments in
Arab Potash Company Ltd. (APC) in Jordan, Sociedad Quimica y Minera de Chile
S.A. (SQM) in Chile and Israel Chemicals Ltd. (ICL) in Israel contributed
$139.6 million to our earnings in the third quarter, almost six times the
$24.2 million earned in the same quarter last year. Year to date, these
investments, along with our investment in Sinofert Holdings Limited (Sinofert)
in China, have contributed $257.0 million to our other income. The total
market value of our investments in these publicly traded companies, at market
close on October 22, was $4.9 billion, equivalent to $15.25 per PotashCorp
share.
    "The fundamentals of our business remained robust in the third quarter
and continued to support demand and prices for our products, especially
potash," said PotashCorp President and Chief Executive Officer Bill Doyle.
"Despite the recent onset of a global economic downturn, the need for food is
not abating. That enabled us to utilize our unique strengths in each nutrient
to achieve the best quarterly performance in our history, producing record
cash flow and gross margin while also preparing our company for the expected
growth in potash demand."

    Market Conditions

    While grain and oilseed prices remained supportive through the third
quarter, they were caught up in a broad decline in commodity prices initiated
by concerns over the potential impact of inflation on world economic growth.
The global financial crisis exacerbated these conditions, damaging investor
confidence and sparking sales of liquid assets. By the end of the quarter, we
believe lower crop prices no longer reflected the strong underlying global
grain fundamentals, and fears about access to credit for agricultural buyers
had a negative effect on the psychology of the sector as a whole.
    In potash, producer inventories were at historically low levels entering
the quarter. Reduced production due to seasonal maintenance turnarounds for
all producers and ongoing strikes at three PotashCorp facilities limited the
available supplies. As a result, potash fundamentals remained strong through
the entire quarter.
    The major markets for solid nitrogen and phosphate fertilizers - namely
the US, Brazil and India - appeared cautious in light of uncertain global
economic conditions. In the US, late spring planting pushed back the fall
harvest and gave distributors time to replenish inventories. In Brazil,
weather delays held back planting and enabled fertilizer inventories to reach
healthy levels ahead of the spring season. With a late start in other key
markets, India's buyers delayed purchases, opting for low inventories in the
hope that weakening global trade and a precipitous drop in sulfur prices would
lower fertilizer prices. These trends were offset by the restriction of
Chinese urea and phosphate trade due to the continuation of prohibitive export
taxes on these products.

    Potash

    Potash generated a record $909.7 million of gross margin in third quarter
2008, up from $221.3 million in the same quarter last year. Extremely tight
supply/demand fundamentals made fulfilling volume commitments to North
American and offshore customers a challenge and led to significantly higher
prices and gross margin. Year-to-date potash gross margin of $2.3 billion was
252 percent higher than the $655.9 million generated in the first nine months
of 2007.
    The upward trend for potash pricing continued in the third quarter, with
the average realized price for offshore sales reaching $601 per tonne, a
262-percent increase from last year's third quarter. Incremental spot market
prices to Brazil and Southeast Asia each increased by approximately $700 per
tonne since last year's third quarter, while China paid an additional $400 per
tonne and India $355 per tonne on their contracts with Canpotex Limited
(Canpotex), the offshore marketing company for Saskatchewan potash producers.
In North America, realized prices of $563 per tonne were 189 percent higher
than in the same quarter last year, as we continued to recognize the benefit
of approximately $370 per tonne of previously announced price increases since
last year's third quarter. By the end of this year's third quarter, we began
to realize an additional $275 per tonne increase introduced September 1, 2008.
    Third-quarter sales volumes of 1.9 million tonnes were 14 percent below
the same period last year, as potash availability was limited and our
quarter-end inventories were reduced to 212,000 tonnes, the lowest in our
history. Year-to-date total volumes of 7.1 million tonnes were flat compared
to the same period last year. Our third-quarter offshore shipments of 1.3
million tonnes were 8 percent lower than the same quarter last year, primarily
because of tight supply, but were flat on a year-to-date basis. The pattern of
this year's offshore shipments was altered by the late contract settlement
between Canpotex and China. Canpotex shipped 585,000 tonnes to China in third
quarter 2008, reflecting more traditional levels, although year-to-date
volumes to that country were down 50 percent. India continued to benefit from
China's late entry to the market, receiving 336,000 tonnes from Canpotex in
the quarter, an increase of 23 percent from the same period last year. For the
first nine months of 2008, Canpotex shipments to India topped 1.0 million
tonnes and were 43 percent higher than in the same period in 2007. Canpotex's
third-quarter shipments to Brazil (575,000 tonnes) were up 6 percent quarter
over quarter and were 25 percent higher year to date. The 448,000 tonnes sent
to Southeast Asian countries in third quarter 2008 were 16 percent below last
year's third quarter, as countries in that region bought earlier in the year
while China was on the sidelines. For the first nine months of 2008, Canpotex
shipped 2.1 million tonnes to Southeast Asia, an increase of 25 percent over
the same period in 2007. North American potash volumes were down 25 percent
quarter over quarter due to tight supply, while year-to-date figures were
virtually flat.
    Potash per-tonne cost of goods sold was approximately $28 per tonne
higher quarter over quarter. This was the result of a stronger average
Canadian/US dollar exchange rate compared to last year's third quarter,
increased royalties due to higher potash prices, increased brine inflow costs
at New Brunswick and lower sales because of ongoing strikes at our Allan, Cory
and Patience Lake potash facilities. The labor dispute at these three
facilities led to 16 additional mine shutdown weeks compared to last year's
third quarter.

    Nitrogen

    Nitrogen operations contributed a record $324.1 million in the third
quarter, up 162 percent from the $123.9 million in last year's third quarter.
High global energy prices and very tight world ammonia supplies mitigated the
traditional seasonal weakening of nitrogen markets in the third quarter. This
raised year-to-date segment gross margin to $719.5 million, 80 percent ahead
of the first nine months of 2007. Trinidad generated a record $175.6 million
in third-quarter gross margin, while our US operations contributed a record
$148.0 million as we capitalized on lower US natural gas costs and optimized
our mix of ammonia and downstream nitrogen products to maximize gross margin.
    Ammonia realized prices reached record levels, increasing 147 percent
from the third quarter last year, mainly because of strong demand and
disruptions in the global supply of traded ammonia in major producing regions.
China's efforts to limit fertilizer exports contributed to realized urea
prices rising 134 percent from last year's third quarter and 46 percent from
the robust second quarter of 2008. The higher value of upgraded ammonia pushed
nitrogen solution prices 80 percent higher than those realized in the third
quarter last year and 19 percent above the trailing quarter.
    Ammonia sales volumes were down 6 percent quarter over quarter due to
reduced availability of product caused by production issues at our Trinidad
operations. A scheduled 28-day turnaround at our Trinidad urea plant
contributed to a 21-percent reduction in urea sales volumes from last year's
third quarter, while nitrogen solutions sales volumes were 36 percent higher
on strong demand and favorable production economics.
    Our total average natural gas cost for the third quarter, including our
hedge, was $9.36 per MMBtu, 138 percent higher than in the same quarter last
year. This average was pushed higher because our Trinidad gas cost is indexed
to Tampa ammonia prices, which ranged between $585-$931 per tonne in third
quarter 2008 as compared to $295-$303 per tonne in the same quarter of 2007.

    Phosphate

    Record third-quarter phosphate gross margin of $507.2 million was almost
four times the $129.9 million generated in last year's third quarter,
surpassing the full-year 2007 phosphate gross margin of $432.8 million. After
several quarters of a lag in pricing compared to solid fertilizers, the
increasing value of phosphoric acid was reflected in higher liquid fertilizer
and feed phosphate prices. This resulted in liquid fertilizers contributing
$198.9 million in gross margin in third quarter 2008, while solid fertilizers
contributed $183.7 million. Feed phosphate added $81.5 million and industrial
products, which are sold on longer-term contracts and have not yet fully
captured the benefit of higher phosphoric acid value, generated $40.2 million.
Our year-to-date phosphate gross margin grew to $1.0 billion, 245 percent
higher than in the first nine months of 2007.
    Liquid fertilizer realized prices reached $1,238 per tonne in third
quarter 2008, a 293-percent increase from last year's third quarter and 82
percent higher than in the trailing quarter. Prices for solid fertilizer
($1,085 per tonne) and feed ($1,040 per tonne) rose 171 percent and 196
percent, respectively, from the same quarter last year. Realized industrial
prices of $825 per tonne rose 111 percent over the same quarter last year.
    Our North American solid phosphate fertilizer sales volumes declined 38
percent from last year's third quarter, as the late spring season resulted in
higher dealer inventories entering the third quarter and the fall application
season was delayed by the late harvest. Accordingly, we directed more
phosphoric acid to higher-netback and higher-demand liquid fertilizers in
North America, increasing sales volumes for this product 16 percent quarter
over quarter. Total feed phosphate sales volumes declined 16 percent quarter
over quarter as a result of weakening economics for beef, pork and poultry
producers in the US and lower offshore demand. Industrial sales volumes
remained strong, up 4 percent over the same quarter last year and 15 percent
higher than the trailing quarter.
    Quarter over quarter, phosphate cost of goods sold increased
substantially in third quarter 2008 as sulfur costs rose 577 percent and
ammonia costs were up 94 percent.

    Financial

    Provincial mining and other taxes were $172.0 million, six times higher
than the same quarter last year due to the rapid increase in realized prices
and profitability in our potash segment. Quarter-over-quarter selling and
administrative expenses were lower due to reduced compensation accruals
impacted by a reduction in share price during the third quarter. A
$21.4 million gain on sale of assets of our Brazilian phosphate feed plant and
inland warehouse was recognized in the quarter, and we also recorded a
primarily non-cash foreign exchange gain of $37.4 million because of a
weakened Canadian dollar at the quarter's end. These gains were partially
offset by an additional $27.5 million charge in the third quarter (included in
other income) related to the further write-off of investments in certain
auction rate securities.
    Capital expenditures of $336.2 million were up 132 percent from last
year's third quarter, as continued strong cash flow was reinvested in potash
debottlenecking and expansion projects at our Lanigan, Patience Lake, Cory,
New Brunswick and Rocanville potash facilities, and load-out expansions at
Rocanville and Allan. An additional $1.0 billion was used in the quarter to
complete the 15.82 million share repurchase initially announced in January
2008. While we generated $824.5 million of free cash flow(2) in the quarter,
we utilized additional borrowings under our short-term credit facilities to
accommodate accelerated share repurchase activity.

    Outlook

    While the rapid decline in investor confidence in global equity, debt and
commodity markets has shifted political and public attention to issues of
finance, it does not change the sound and solidly entrenched long-term
fundamentals that underpin anticipated growth in the fertilizer industry.
Although all sectors, including agriculture, have been impacted by the
response to the accelerating global financial crisis and increased selling of
liquid assets to attain and hold cash, the most basic drivers of our business
remain intact. The growing world needs to produce more food and, to do that,
it requires more fertilizer.
    Global population is approximately 6.7 billion people and grows by an
estimated 80 million each year. Research has estimated that approximately 40
percent of the world's food could not be produced without the use of
fertilizer, so the importance and value of our products increase on a
continuing basis. Regardless of economic conditions, world grain consumption
rarely declines and has, in fact, increased in 40 of the past 48 years. The
most significant drop over this time was 3.7 percent during a year that saw a
corresponding 4.6 percent drop in global grain production. In the remaining
cases, grain consumption declined less than 1 percent and was typically caused
by weather-related production issues constraining grain supplies.
    With more people to feed and higher demand for protein from meat sources,
which requires even more grain, the world's farmers are challenged to improve
crop yields and maximize production. Grain consumption remains at an all-time
high and, despite record crops, global grain stocks-to-use levels are near
historic lows. Despite these conditions, the impact of traders selling off
crop futures contracts and lowering prices for financial rather than
fundamental reasons could impact crop production patterns in the short term.
If the world's farmers choose to cut back on acreage or reduce crop inputs due
to current economic uncertainty, we expect this would put substantial pressure
on the already-tight global grain supplies and ultimately lead to much higher
crop prices. Additionally, this year's record world production drew an
unprecedented amount of crop nutrients from the soil, creating an even greater
need for fertilizer to protect and restore soil fertility. Our industry has
witnessed many periods of temporary cash conservation in the past, where
buyers deferred purchasing inputs and worked from inventories or mined
residual nutrients in the soil. As this happens, the need to replace crop
nutrient inventories grows, leading to tightened supply/demand fundamentals
for fertilizers.
    In the interim, potash supply is inherently tight, with limited
productive capability supplying the needs of farmers in every country of the
world. We expect that the industry will be challenged to meet demand in coming
years. Potash production faces a number of constraints and even the most
optimistic prospect of significant new greenfield production is at least five
to seven years away.
    Among the major potash markets, US farmers have enjoyed record farm
income in four of the past six years and are operating with very strong
balance sheets, averaging a debt-to-equity ratio of 11 percent. Their lenders
are typically government-sponsored farm credit agencies or regional banks that
understand farmers are among the lowest credit risk of any borrowers in the
current environment. After receiving potash on an allocation basis for the
past 18 months and functioning on available supply while growing record crops,
potassium levels in US farmers' soils have been reduced and must be restored
to protect future fertility. This minimizes the downside risk for potash in
North America and, given the late fall season and an expected rebound in crop
prices, we anticipate that US demand will be strong in the coming spring
season.
    In China, the late settlement of 2008 potash contracts and increased
demand from other major buying regions reduced imports by more than 3 million
tonnes from 2007 levels. Seaborne shipments did not arrive until long after
the spring application season, constraining field-level supplies and lowering
potash consumption. After higher crop production this year removed large
amounts of nutrients from soils, China will need to increase potash
applications to restore low soil nutrient levels. Canpotex's sales to China
have not been impacted by the current global financial crisis and we expect
Chinese buyers to settle 2009 contracts by the first quarter, with a provision
for higher volumes than 2008 to ensure the replenishment of potassium for
sufficient grain production next year. The financial crisis has reduced
concerns about rapid inflation slowing China's powerful economy. As has been
demonstrated over the past two decades and discussed publicly again by its
government officials this week, China continues to emphasize strong industrial
and agricultural growth, which gives more people the desire and income
necessary to purchase more readily available and nutritious food.
    In India, soils are short of all nutrients, particularly potassium, and
the historical under-application of potash relative to nitrogen and phosphate
is severely limiting yield growth for crops in that country. India's
government is focused on improving yields and we expect solid potash demand
growth again there in 2009.
    Although Brazil has a great need for potassium in its soil, of all major
potash markets its economy has experienced the most sensitivity to global
credit issues. Now, as Brazil heads into its primary planting season, it will
likely be impacted by the unfortunate timing of negative investor response to
this crisis and the resulting decline in crop prices. We believe that crop
prices are likely to rebound by harvest time, and that the Brazilian farmer
will do well. However, in the current environment, caution may be exercised.
This could mean a reduction of Brazil's potash applications this fall and
higher carryover of potash inventories into 2009. This could lower Brazil's
potash imports by as much as 300,000-500,000 tonnes next year as compared to
2008. However, in October, the Brazilian government stepped in to provide more
than 10 billion reais (approximately US $5 billion) to Brazilian banks to
provide credit for farmers to purchase crop inputs. With rising global
consumption of soybeans and corn, the world needs Brazil to increase its crop
production. Higher long-term crop prices are required to encourage Brazil to
expand its acreage and increase fertilizer consumption to meet this demand.
    While much of the attention is focused on other countries, Russia's
agricultural industry is also enjoying a quiet yet rapid resurgence that we
expect will have far-reaching effects. The Russian government has indicated it
will require its domestic fertilizer producers to direct significant volumes
of nitrogen, phosphate and potash to its own farmers. This could remove
several hundred thousand tonnes of potash from an already tight international
market next year.
    In the fourth quarter, we expect previously announced potash price
increases to take hold and raise our total realized price by approximately
$100 per tonne. Looking ahead, limited new potash capacity is scheduled to
come on stream in 2009, even as producers are reporting record-low
inventories. With global sales growth estimates ranging from a scenario of
flat to a 5-percent increase, we expect potash fundamentals to remain tight.
In the event of temporary demand weakness in this current economic
environment, we will follow our long-held practice of matching our production
to meet market demand, reducing volatility in our financial performance. This
could also significantly minimize the downside of production lost during
ongoing strikes at our Allan, Cory and Patience Lake potash operations. We
expect our full-year 2008 potash gross margin to exceed the 2007 level by
approximately 250 percent.
    Longer-term, over the next five to seven years we expect demand growth to
meet or exceed the availability of new supply. We continue to move forward on
announced potash debottlenecking and expansion projects that will raise our
operating capability from approximately 10 million tonnes to 18 million tonnes
over this time frame.
    Among the other nutrients, the fundamentals for nitrogen products face
the greatest immediate-term challenge from temporary deferrals of purchases.
With major buyers waiting on the sidelines due to delayed application seasons
in key areas and lack of confidence from the global financial crisis, urea
prices have dropped dramatically. Ammonia prices achieved record levels in
September/October, but have come under pressure in the fourth quarter. Due to
these falling prices, we now expect 2008 nitrogen gross margin to be lower
than our previous forecast but still exceed 2007 by approximately 60 percent.
    Rapidly falling international sulfur costs, which have dropped from a
high of approximately $800 per tonne to well below $200 per tonne, are putting
downward pressure on phosphate prices. However, we expect minimal impact on
phosphate profitability as raw material costs and ocean freight rates decline.
Additionally, announced production cutbacks in the phosphate industry should
minimize the effect of the current market situation on phosphate gross
margins. As a result, 2008 phosphate segment gross margin is now expected to
be higher than previously forecasted, exceeding 2007 by over 250 percent.
    Our 2008 capital expenditures, excluding capitalized interest, are
expected to be approximately $1.2 billion, of which $260 million will relate
to sustaining capital. Our consolidated reported income tax rate for the year
is anticipated to be 27 percent. Due to higher expected potash prices and
margins, provincial mining taxes are forecast to be 19 percent of total potash
gross margin for the year, but could land within a range of 17-19 percent
depending on potash price realizations, the Canadian/US exchange rate, and the
timing and amount of capital spending on potash projects in Saskatchewan.
    In the $12.00-$13.00 per share guidance range we previously provided for
2008, the low end of that range fully considered the risk of a lengthy strike
at our three affected potash sites. Now, the global financial crisis is
creating short-term uncertainty, while falling fourth-quarter nitrogen prices
are expected to be offset somewhat by improving margins in our phosphate
segment as raw material costs drop precipitously. Using a locked in
Canadian/US dollar exchange rate of $1.10, we expect 2008 net income per share
to be at the low end of our previously provided guidance range, with a
possible variance of 2 percent in either direction.

    Conclusion

    "Although we are not immune to the global financial crisis, we believe we
are uniquely sheltered by the immutable long-term need for higher global food
production and the key role that potash plays in helping meet this demand,"
said Doyle. "The gains in crop production must be protected just to maintain
the current supplies and more fertilizer will be needed to ensure food
security in the future. Despite the economic turmoil, governments and farmers
cannot sit on the sidelines while people wait for food. While we anticipate a
recovery in crop prices in 2009, we will continue to follow the long-term
strategies that have guided our company for 20 years, using our agility and
production flexibility to maximize earnings growth while minimizing volatility
in our performance. We also view this as an opportunity to look for additional
ways to increase the strength of our potash business which will reward our
long-term shareholders in the future."

    
    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; the current
global financial crisis and changes in credit markets; unexpected geological
or environmental conditions, including water inflow; strikes and other forms
of work stoppage or slowdowns including 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 release and the company
disclaims any obligation to update or revise the forward-looking statements,
whether as a result of new information, future events or otherwise, except as
required by law.

    
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    PotashCorp will host a conference call on Thursday, October 23, 2008, 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 this same website.



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

                                                  September 30,  December 31,
                                                      2008          2007
    -------------------------------------------------------------------------

    Assets
     Current assets
      Cash and cash equivalents                    $     499.5   $     719.5
      Accounts receivable                              1,373.0         596.2
      Inventories                                        743.9         428.1
      Prepaid expenses and other current assets           68.8          36.7
      Current portion of derivative instrument assets      5.0          30.8
    -------------------------------------------------------------------------
                                                       2,690.2       1,811.3

     Derivative instrument assets                         50.3         104.2
     Property, plant and equipment                     4,429.8       3,887.4
     Investments (Note 2)                              3,670.8       3,581.5
     Other assets                                        267.2         210.7
     Intangible assets                                    22.2          24.5
     Goodwill                                             97.0          97.0
    -------------------------------------------------------------------------
                                                   $  11,227.5   $   9,716.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities
     Current liabilities
      Short-term debt                              $   1,676.3   $      90.0
      Accounts payable and accrued charges             1,468.3         911.7
      Current portion of long-term debt                    0.2           0.2
    -------------------------------------------------------------------------
                                                       3,144.8       1,001.9

     Long-term debt                                    1,339.4       1,339.4
     Future income tax liability                       1,020.7         988.1
     Accrued pension and other post-retirement
      benefits                                           255.2         244.8
     Accrued environmental costs and asset
      retirement obligations                             124.2         121.0
     Other non-current liabilities and deferred
      credits                                             26.6           2.7
    -------------------------------------------------------------------------
                                                       5,910.9       3,697.9
    -------------------------------------------------------------------------

    Shareholders' Equity
     Share capital                                     1,429.0       1,461.3
      Unlimited authorization of common shares
      without par value; issued and outstanding
      301,850,331 and 316,411,209 at September 30,
      2008 and December 31, 2007, respectively
     Contributed surplus                                 122.6          98.9
     Accumulated other comprehensive income            1,699.8       2,178.9
     Retained earnings                                 2,065.2       2,279.6
    -------------------------------------------------------------------------
                                                       5,316.6       6,018.7
    -------------------------------------------------------------------------
                                                   $  11,227.5   $   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    Nine Months Ended
                                       September 30          September 30
                                     2008       2007       2008       2007
    -------------------------------------------------------------------------

    Sales (Note 6)                $ 3,064.3  $ 1,295.0  $ 7,575.9  $ 3,802.8
    Less: Freight                      81.4       80.6      287.2      254.8
          Transportation and
           distribution                31.6       31.0       97.2       94.6
          Cost of goods sold        1,210.3      708.3    3,157.2    2,107.2
    -------------------------------------------------------------------------
    Gross Margin                    1,741.0      475.1    4,034.3    1,346.2
    -------------------------------------------------------------------------
    Selling and administrative         31.7       43.9      158.6      158.0
    Provincial mining and other
     taxes                            172.0       28.2      434.4       95.3
    Foreign exchange (gain) loss      (37.4)      25.9      (63.2)      67.4
    Other income (Note 9)            (140.0)     (29.1)    (255.2)    (111.3)
    -------------------------------------------------------------------------
                                       26.3       68.9      274.6      209.4
    -------------------------------------------------------------------------
    Operating Income                1,714.7      406.2    3,759.7    1,136.8
    Interest Expense                   15.3       12.7       42.2       59.0
    -------------------------------------------------------------------------
    Income Before Income Taxes      1,699.4      393.5    3,717.5    1,077.8
    Income Taxes (Note 4)             463.3      150.4    1,010.3      351.0
    -------------------------------------------------------------------------
    Net Income                    $ 1,236.1  $   243.1    2,707.2      726.8
                                 ----------------------
                                 ----------------------
    Retained Earnings, Beginning
     of Period                                            2,279.6    1,286.4
    Repurchase of Common Shares
     (Note 3)                                            (2,829.1)         -
    Change in Accounting Policy                                 -        0.2
    Dividends                                               (92.5)     (79.0)
    -------------------------------------------------------------------------
    Retained Earnings, End of Period                    $ 2,065.2  $ 1,934.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net Income Per Share (Note 5)
      Basic                       $    4.07  $    0.77  $    8.73  $    2.30
      Diluted                     $    3.93  $    0.75  $    8.45  $    2.25
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Dividends Per Share           $    0.10  $    0.10  $    0.30  $    0.25
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (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    Nine Months Ended
                                       September 30          September 30
                                     2008       2007       2008       2007
    -------------------------------------------------------------------------

    Operating Activities
    Net income                    $ 1,236.1  $   243.1  $ 2,707.2  $   726.8
    -------------------------------------------------------------------------

    Adjustments to reconcile net
     income to cash provided by
     operating activities
      Depreciation and amortization    83.3       69.5      247.1      216.3
      Stock-based compensation          4.2        4.2       32.1       34.7
      (Gain) loss on disposal of
       property, plant and
       equipment and long-term
       investments                    (21.5)       0.2      (28.3)       5.6
      Provision for auction rate
       securities                      27.5          -       71.3          -
      Foreign exchange on future
       income tax                     (14.6)      21.4      (23.9)      47.5
      Provision for future
       income tax                      48.7       52.6       75.5      119.8
      Undistributed earnings of
       equity investees              (109.3)     (15.7)    (133.8)     (17.6)
      Loss (gain) on derivative
       instruments                      0.6      (13.0)     (18.4)     (18.4)
      Other long-term liabilities      (4.3)     (25.6)       2.8      (21.3)
    -------------------------------------------------------------------------
      Subtotal of adjustments          14.6       93.6      224.4      366.6
    -------------------------------------------------------------------------

      Changes in non-cash
       operating working capital
      Accounts receivable            (281.9)    (100.2)    (776.8)    (139.9)
      Inventories                    (131.2)      35.5     (360.5)      51.6
      Prepaid expenses and
       other current assets           (10.7)       0.8      (34.1)       1.3
      Accounts payable and
       accrued charges                 86.1       38.8      489.7      150.9
    -------------------------------------------------------------------------
      Subtotal of changes in
       non-cash operating
       working capital               (337.7)     (25.1)    (681.7)      63.9
    -------------------------------------------------------------------------
    Cash provided by operating
     activities                       913.0      311.6    2,249.9    1,157.3
    -------------------------------------------------------------------------

    Investing Activities
    Additions to property, plant
     and equipment                   (336.2)    (145.1)    (770.6)    (381.6)
    Purchase of long-term
     investments                      (78.3)     (21.0)    (329.5)     (30.7)
    Purchase of auction rate
     securities                           -     (132.5)         -     (132.5)
    Proceeds from disposal of
     property, plant and equipment
     and long-term investments         31.3        2.9       40.9        4.2
    Other assets and intangible
     assets                           (11.7)      (0.9)     (33.1)       9.8
    -------------------------------------------------------------------------
    Cash used in investing
     activities                      (394.9)    (296.6)  (1,092.3)    (530.8)
    -------------------------------------------------------------------------
    Cash before financing
     activities                       518.1       15.0    1,157.6      626.5
    -------------------------------------------------------------------------

    Financing Activities
    Repayment and issue costs of
     long-term debt obligations           -          -       (0.2)    (403.6)
    Proceeds from (repayment of)
     short-term debt obligations      743.9        5.5    1,586.3      (65.8)
    Dividends                         (29.8)     (31.3)     (92.3)     (62.6)
    Repurchase of common shares    (1,005.8)         -   (2,902.9)         -
    Issuance of common shares           3.2        3.6       31.5       22.3
    -------------------------------------------------------------------------
    Cash used in financing
     activities                      (288.5)     (22.2)  (1,377.6)    (509.7)
    -------------------------------------------------------------------------
    Increase (Decrease) in Cash
     and Cash Equivalents             229.6       (7.2)    (220.0)     116.8
    Cash and Cash Equivalents,
     Beginning of Period              269.9      449.7      719.5      325.7
    -------------------------------------------------------------------------
    Cash and Cash Equivalents,
     End of Period                $   499.5  $   442.5  $   499.5  $   442.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash and cash equivalents
     comprised of:
      Cash                        $    62.5  $    11.3  $    62.5  $    11.3
      Short-term investments          437.0      431.2      437.0      431.2
    -------------------------------------------------------------------------
                                  $   499.5  $   442.5  $   499.5  $   442.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental cash flow
     disclosure
      Interest paid               $    14.3  $    15.7  $    51.4  $    71.5
      Income taxes paid           $   210.1  $    59.1  $   595.7  $   128.2
    -------------------------------------------------------------------------
    (See Notes to the Condensed Consolidated Financial Statements)



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

                                                   Three Months Ended
                                                   September 30, 2008

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

    Net income                               $ 1,699.4  $   463.3  $ 1,236.1
    -------------------------------------------------------------------------
    Other comprehensive income
      Net decrease in unrealized gains on
       available-for-sale securities(1)       (1,501.0)    (129.2)  (1,371.8)
      Net losses on derivatives designated
       as cash flow hedges(2)                   (364.7)    (105.8)    (258.9)
      Reclassification to income of net gains
       on cash flow hedges(2)                     (0.3)      (0.1)      (0.2)
      Unrealized foreign exchange losses
       on translation of self-sustaining
       foreign operations                         (7.2)         -       (7.2)
    -------------------------------------------------------------------------
    Other comprehensive loss                  (1,873.2)    (235.1)  (1,638.1)
    -------------------------------------------------------------------------
    Comprehensive (loss) income              $  (173.8) $   228.2  $  (402.0)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                   Nine Months Ended
                                                   September 30, 2008

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

    Net income                               $ 3,717.5  $ 1,010.3  $ 2,707.2
    -------------------------------------------------------------------------
    Other comprehensive income
      Net decrease in unrealized gains on
       available-for-sale securities(1)         (345.2)      57.0     (402.2)
      Net losses on derivatives designated
       as cash flow hedges(2)                    (84.8)     (24.6)     (60.2)
      Reclassification to income of net gains
       on cash flow hedges(2)                    (20.3)      (5.9)     (14.4)
      Unrealized foreign exchange losses
       on translation of self-sustaining
       foreign operations                         (2.3)         -       (2.3)
    -------------------------------------------------------------------------
    Other comprehensive loss                    (452.6)      26.5     (479.1)
    -------------------------------------------------------------------------
    Comprehensive (loss) income              $ 3,264.9  $ 1,036.8  $ 2,228.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                                                   Three Months Ended
                                                   September 30, 2007

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

    Net income                               $   393.5  $   150.4  $   243.1
    -------------------------------------------------------------------------
    Other comprehensive income
      Net increase in unrealized gains on
       available-for-sale securities(1)          281.5       23.4      258.1
      Net (losses) gains on derivatives
       designated as cash flow hedges(2)         (17.0)      (4.7)     (12.3)
      Reclassification to income of net
       gains on cash flow hedges(2)               (8.5)      (3.7)      (4.8)
      Unrealized foreign exchange gains on
       translation of self-sustaining
       foreign operations                          1.0          -        1.0
    -------------------------------------------------------------------------
    Other comprehensive income                   257.0       15.0      242.0
    -------------------------------------------------------------------------
    Comprehensive income                     $   650.5  $   165.4  $   485.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                   Nine Months Ended
                                                   September 30, 2007

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

    Net income                               $ 1,077.8  $   351.0  $   726.8
    -------------------------------------------------------------------------
    Other comprehensive income
      Net increase in unrealized gains on
       available-for-sale securities(1)          844.7       57.4      787.3
      Net (losses) gains on derivatives
       designated as cash flow hedges(2)          13.9        4.6        9.3
      Reclassification to income of net
       gains on cash flow hedges(2)              (39.8)     (13.1)     (26.7)
      Unrealized foreign exchange gains on
       translation of self-sustaining
       foreign operations                          5.9          -        5.9
    -------------------------------------------------------------------------
    Other comprehensive income                   824.7       48.9      775.8
    -------------------------------------------------------------------------
    Comprehensive income                     $ 1,902.5  $   399.9  $ 1,502.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (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
                         (in millions of US dollars)
                                 (unaudited)

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

    Accumulated other
     comprehensive income,
     December 31, 2007            $ 2,098.7  $    73.5  $     6.7  $ 2,178.9
    Decrease for the nine months
     ended September 30, 2008        (402.2)     (74.6)      (2.3)    (479.1)
    -------------------------------------------------------------------------
    Accumulated other
     comprehensive income
     (loss), September 30, 2008   $ 1,696.5  $    (1.1) $     4.4  $ 1,699.8
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (See Notes to the Condensed Consolidated Financial Statements)



                   Potash Corporation of Saskatchewan Inc.
          Notes to the Condensed Consolidated Financial Statements
           For the Three and Nine Months Ended September 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 nine months ended
    September 30, 2008, the company purchased an additional 191,620,000
    shares of Sinofert for cash consideration of $145.3. 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 22 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 $34.7 at September 30, 2008 (face value
    $132.5), representing an impairment of $97.8 which was all considered to
    be other-than-temporary. This represents a decline in fair value of $12.2
    and $21.3 for the three and nine months ended September 30, 2008,
    respectively. For the three and nine months ended September 30, 2008,
    net income was reduced by $27.5 and $71.3, respectively, and unrealized
    losses in accumulated other comprehensive income were reduced by $15.3
    and $50.0 in the same periods, respectively. The current financial credit
    crisis continues to cause these investments to be illiquid. 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. As of September 9, 2008, the company had
    repurchased the maximum allowable number of shares under the program. On
    September 11, 2008, the Board of Directors of PCS approved an increase in
    the share repurchase program to authorize the purchase of up to an
    additional 15,680,000 common shares (approximately 5 percent of the
    company's issued and outstanding common shares). 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 September 30, 2008, the company repurchased
    for cancellation 4,964,500 common shares under the program, at a cost of
    $870.7 and an average price per share of $175.38. The repurchase resulted
    in a reduction of share capital of $23.3, and the excess of cost over the
    average book value of the shares of $847.4 has been recorded as a
    reduction of retained earnings. During the nine months ended
    September 30, 2008, a total of 15,820,000 shares were repurchased at a
    cost of $2,902.9 and an average price per share of $183.50, resulting in
    a reduction of share capital of $73.8 and a reduction in retained
    earnings of $2,829.1.

    4.  Income Taxes

    The company's consolidated reported income tax rate for the three months
    ended September 30, 2008, was approximately 27 percent (2007 - 38
    percent) and for the nine months ended September 30, 2008, was
    approximately 27 percent (2007 - 33 percent). For the three and nine
    months ended September 30, 2008, the consolidated effective income tax
    rate was 29 percent (2007 - 33 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.

    -   In the third quarter of 2008, a current income tax recovery of $29.1
        was recorded that related to an increase in permanent deductions in
        the US from prior years. This is in addition to the future income
        tax recovery of $42.0 that was recorded in the first quarter of 2008.

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

    -   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 September 30, 2008, of 304,017,000 (2007 - 315,962,000). Basic
    net income per share for the year to date is calculated based on the
    weighted average shares issued and outstanding for the nine months
    ended September 30, 2008, of 310,076,000 (2007 - 315,444,000).

    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 September 30, 2008, was 314,132,000 (2007 - 324,741,000) and for
    the nine months ended September 30, 2008, was 320,484,000 (2007 -
    323,580,000).

    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 September 30, 2008
    -------------------------------------------------------------------------
                                                                      Consol-
                             Potash  Nitrogen  Phosphate  All Others  idated
    -------------------------------------------------------------------------

    Sales                   $1,145.2  $  838.9  $1,080.2  $      -  $3,064.3
    Freight                     36.0      18.1      27.3         -      81.4
    Transportation and
     distribution                9.9      12.9       8.8         -      31.6
    Net sales - third party  1,099.3     807.9   1,044.1         -
    Cost of goods sold         189.6     483.8     536.9         -   1,210.3
    Gross margin               909.7     324.1     507.2         -   1,741.0
    Depreciation and
     amortization               18.9      26.2      36.1       2.1      83.3
    Inter-segment sales            -      62.8       7.7         -         -


                                 Three Months Ended September 30, 2007
    -------------------------------------------------------------------------
                                                                      Consol-
                             Potash  Nitrogen  Phosphate  All Others  idated
    -------------------------------------------------------------------------

    Sales                   $  427.4  $  436.0  $  431.6  $      -  $1,295.0
    Freight                     38.3      15.4      26.9         -      80.6
    Transportation and
     distribution                8.7      12.9       9.4         -      31.0
    Net sales - third party    380.4     407.7     395.3         -
    Cost of goods sold         159.1     283.8     265.4         -     708.3
    Gross margin               221.3     123.9     129.9         -     475.1
    Depreciation and
     amortization               15.5      22.2      29.3       2.5      69.5
    Inter-segment sales            -      25.0         -         -         -


                                  Nine Months Ended September 30, 2008
    -------------------------------------------------------------------------
                                                                      Consol-
                             Potash  Nitrogen  Phosphate  All Others  idated
    -------------------------------------------------------------------------

    Sales                   $3,135.9  $2,064.6  $2,375.4  $      -  $7,575.9
    Freight                    151.6      46.4      89.2               287.2
    Transportation and
     distribution               35.2      36.8      25.2                97.2
    Net sales - third
     party                   2,949.1   1,981.4   2,261.0         -
    Cost of goods sold         638.4   1,261.9   1,256.9         -   3,157.2
    Gross margin             2,310.7     719.5   1,004.1         -   4,034.3
    Depreciation and
     amortization               65.7      71.1     104.4       5.9     247.1
    Inter-segment sales            -     145.4      22.4         -         -


                                  Nine Months Ended September 30, 2007
    -------------------------------------------------------------------------
                                                                      Consol-
                             Potash  Nitrogen  Phosphate  All Others  idated
    -------------------------------------------------------------------------

    Sales                   $1,318.1  $1,336.8  $1,147.9  $      -  $3,802.8
    Freight                    135.0      40.0      79.8         -     254.8
    Transportation and
     distribution               30.9      39.1      24.6         -      94.6
    Net sales - third
     party                   1,152.2   1,257.7   1,043.5         -
    Cost of goods sold         496.3     858.3     752.6         -   2,107.2
    Gross margin               655.9     399.4     290.9         -   1,346.2
    Depreciation and
     amortization               54.4      65.5      88.6       7.8     216.3
    Inter-segment sales            -      84.1       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 September 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 Pension Plans
                                    Three Months Ended    Nine Months Ended
                                       September 30          September 30
                                     2008       2007       2008       2007
    -------------------------------------------------------------------------

    Service cost                   $    3.7   $    3.9   $   11.3   $   11.5
    Interest cost                      10.0        9.1       30.0       27.3
    Expected return on plan
     assets                           (12.7)     (10.7)     (38.5)     (32.1)
    Net amortization and change in
     valuation allowance                2.6        3.2        7.6        9.6
    -------------------------------------------------------------------------
    Net expense                    $    3.6   $    5.5   $   10.4   $   16.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Other Post-Retirement Plans
                                    Three Months Ended    Nine Months Ended
                                       September 30          September 30
                                     2008       2007       2008       2007
    -------------------------------------------------------------------------

    Service cost                   $    1.5   $    1.5   $    4.3   $    4.4
    Interest cost                       4.0        3.6       12.0       10.6
    Net amortization                    0.2        0.1        0.5        0.4
    -------------------------------------------------------------------------
    Net expense                    $    5.7   $    5.2   $   16.8   $   15.4
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    For the three months ended September 30, 2008, the company contributed
    $7.7 to its defined benefit pension plans, $3.7 to its defined
    contribution pension plans and $1.5 to its other post-retirement plans.
    Contributions for the nine months ended September 30, 2008, were $19.6
    to its defined benefit pension plans, $16.0 to its defined contribution
    pension plans and $5.6 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    Nine Months Ended
                                       September 30          September 30
                                     2008       2007       2008       2007
    -------------------------------------------------------------------------

    Share of earnings of equity
     investees                     $  109.3   $   15.4   $  193.0   $   58.2
    Dividend income                    30.3        8.8       64.0       47.5
    Gain on forward purchase
     contract for shares in
     Sinofert (Note 2)                    -          -       25.3          -
    Other                              27.9        4.9       44.2        5.6
    Provision for auction rate
     securities                       (27.5)         -      (71.3)         -
    -------------------------------------------------------------------------
                                   $  140.0   $   29.1   $  255.2   $  111.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    The Other category for the three and nine months ended September 30,
    2008, includes a gain on sale of the assets of the company's Brazilian
    phosphate feed plant and inland potash and feed warehouse in the amount
    of $21.4. The property, plant and equipment had a carrying value of
    $9.1. In conjuction with the sale of the assets, all employees were
    terminated on the closing date and rehired by the buyer. Brazilian law
    requires payment of severance to any employees involuntarily terminated
    and, as a result, severance payments of $0.9 were also recorded in the
    Other category.


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

                                    Three Months Ended    Nine Months Ended
                                       September 30          September 30
                                     2008       2007       2008       2007
    -------------------------------------------------------------------------

    Potash Operating Data
    Production (KCl Tonnes -
     thousands)                       1,731      1,824      6,618      6,618
    Shutdown weeks                     24.3        8.2       26.3       17.6
    Sales (tonnes - thousands)
      Manufactured Product
        North America                   532        710      2,585      2,653
        Offshore                      1,325      1,442      4,527      4,477
    -------------------------------------------------------------------------
      Manufactured Product            1,857      2,152      7,112      7,130
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Potash Net Sales
     (US $ millions)
      Sales                        $1,145.2     $427.4   $3,135.9   $1,318.1
      Less: Freight                    36.0       38.3      151.6      135.0
            Transportation and
             distribution               9.9        8.7       35.2       30.9
    -------------------------------------------------------------------------
      Net Sales                    $1,099.3     $380.4   $2,949.1   $1,152.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

      Manufactured Product
        North America                $299.5     $138.4   $1,028.6     $482.0
        Offshore                      796.7      239.7    1,909.5      661.8
      Other miscellaneous and
       purchased product                3.1        2.3       11.0        8.4
    -------------------------------------------------------------------------
      Net Sales                    $1,099.3     $380.4   $2,949.1   $1,152.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Potash Average Price per MT
      North America                 $562.86    $194.82    $397.88    $181.63
      Offshore                      $601.34    $166.20    $421.84    $147.82
    -------------------------------------------------------------------------
    Manufactured Product            $590.31    $175.63    $413.13    $160.40
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

                                    Three Months Ended    Nine Months Ended
                                       September 30          September 30
                                     2008       2007       2008       2007
    -------------------------------------------------------------------------

    Nitrogen Operating Data
    Production (N Tonnes -
     thousands)                         741        759      2,163      2,283
    Average Natural Gas Cost per
     MMBtu                            $9.36      $3.94      $7.95      $4.26
    Sales (tonnes - thousands)
      Manufactured Product
        Ammonia                         494        526      1,400      1,622
        Urea                            280        356        907      1,008
        Nitrogen solutions/Nitric
         acid/Ammonium nitrate          613        569      1,680      1,693
    -------------------------------------------------------------------------
      Manufactured Product            1,387      1,451      3,987      4,323
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

      Fertilizer sales tonnes           504        482      1,441      1,530
      Industrial/Feed sales tonnes      883        969      2,546      2,793
    -------------------------------------------------------------------------
      Manufactured Product            1,387      1,451      3,987      4,323
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Nitrogen Net Sales
     (US $ millions)
      Sales                          $838.9     $436.0   $2,064.6   $1,336.8
      Less: Freight                    18.1       15.4       46.4       40.0
            Transportation and
             distribution              12.9       12.9       36.8       39.1
    -------------------------------------------------------------------------
      Net Sales                      $807.9     $407.7   $1,981.4   $1,257.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

      Manufactured Product
        Ammonia                      $344.4     $148.3     $823.0     $504.4
        Urea                          219.7      119.2      528.5      344.9
        Nitrogen solutions/Nitric
         acid/Ammonium nitrate        193.4      105.1      469.7      323.9
      Other miscellaneous and
       purchased product               50.4       35.1      160.2       84.5
    -------------------------------------------------------------------------
      Net Sales                      $807.9     $407.7   $1,981.4   $1,257.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

      Fertilizer net sales           $295.5     $140.5     $689.7     $456.4
      Industrial/Feed net sales       462.0      232.1    1,131.5      716.8
      Other miscellaneous and
       purchased product               50.4       35.1      160.2       84.5
    -------------------------------------------------------------------------
      Net Sales                      $807.9     $407.7   $1,981.4   $1,257.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Nitrogen Average Price per MT
        Ammonia                     $697.82    $282.63    $588.04    $311.10
        Urea                        $783.79    $334.39    $582.79    $342.36
        Nitrogen solutions/Nitric
         acid/Ammonium nitrate      $315.46    $184.82    $279.52    $191.34
    -------------------------------------------------------------------------
      Manufactured Product          $546.17    $257.01    $456.81    $271.47
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

      Fertilizer average price
       per MT                       $586.86    $291.95    $478.59    $298.19
      Industrial/Feed average
       price per MT                 $522.98    $239.66    $444.48    $256.83
    -------------------------------------------------------------------------
      Manufactured Product          $546.17    $257.01    $456.81    $271.47
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



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

                                    Three Months Ended    Nine Months Ended
                                       September 30          September 30
                                     2008       2007       2008       2007
    -------------------------------------------------------------------------

    Phosphate Operating Data
    Production (P2O5 Tonnes -
     thousands)                         535        542      1,535      1,550
    P2O5 Operating Rate                 94%        95%        90%        90%
    Sales (tonnes - thousands)
     Manufactured Product
       Fertilizer - Liquid
        phosphates                      271        252        720        687
       Fertilizer - Solid
        phosphates                      352        416        989      1,193
       Feed                             155        185        552        596
       Industrial                       191        183        549        541
    -------------------------------------------------------------------------
      Manufactured Product              969      1,036      2,810      3,017
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Phosphate Net Sales
     (US $ millions)
      Sales                        $1,080.2     $431.6   $2,375.4   $1,147.9
      Less: Freight                    27.3       26.9       89.2       79.8
            Transportation and
             distribution               8.8        9.4       25.2       24.6
    -------------------------------------------------------------------------
         Net Sales                 $1,044.1     $395.3   $2,261.0   $1,043.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

     Manufactured Product
       Fertilizer - Liquid
        phosphates                   $335.2      $79.2     $558.9     $189.0
       Fertilizer - Solid
        phosphates                    382.4      167.0      913.7      424.5
       Feed                           160.7       65.1      396.1      191.2
       Industrial                     157.7       71.4      354.1      203.3
     Other miscellaneous and
      purchased product                 8.1       12.6       38.2       35.5
    -------------------------------------------------------------------------
      Net Sales                    $1,044.1     $395.3   $2,261.0   $1,043.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Phosphate Average Price per MT
       Fertilizer - Liquid
        phosphates                $1,238.35    $315.45    $776.74    $275.31
       Fertilizer - Solid
        phosphates                $1,084.98    $400.77    $923.62    $355.80
       Feed                       $1,040.00    $351.39    $717.95    $320.48
       Industrial                   $825.00    $391.79    $644.71    $375.99
    -------------------------------------------------------------------------
      Manufactured Product        $1,069.38    $369.65    $791.11    $334.12
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Exchange Rate (Cdn$/US$)                               2008       2007
    -------------------------------------------------------------------------
    December 31                                                       0.9881
    September 30                                           1.0599     0.9963
    Third-quarter average conversion rate                  1.0279     1.0579



                   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    Nine Months Ended
                                       September 30          September 30
                                     2008       2007       2008       2007
    -------------------------------------------------------------------------
    Net income                     $1,236.1   $  243.1   $2,707.2   $  726.8
    Income taxes                      463.3      150.4    1,010.3      351.0
    Interest expense                   15.3       12.7       42.2       59.0
    Depreciation and amortization      83.3       69.5      247.1      216.3
    -------------------------------------------------------------------------
    EBITDA                          1,798.0      475.7    4,006.8    1,353.1
    Provision for auction rate
     securities                        27.5          -       71.3          -
    -------------------------------------------------------------------------
    Adjusted EBITDA                $1,825.5   $  475.7   $4,078.1   $1,353.1
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    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    Nine Months Ended
                                       September 30          September 30
                                     2008       2007       2008       2007
    -------------------------------------------------------------------------
    Cash flow prior to working
     capital changes(1)            $1,250.7   $  336.7   $2,931.6   $1,093.4
    -------------------------------------------------------------------------
    Changes in non-cash
     operating working capital
      Accounts receivable            (281.9)    (100.2)    (776.8)    (139.9)
      Inventories                    (131.2)      35.5     (360.5)      51.6
      Prepaid expenses and other
       current assets                 (10.7)       0.8      (34.1)       1.3
      Accounts payable and
       accrued charges                 86.1       38.8      489.7      150.9
    -------------------------------------------------------------------------
    Changes in non-cash
     operating working capital       (337.7)     (25.1)    (681.7)      63.9
    -------------------------------------------------------------------------
    Cash provided by operating
     activities                    $  913.0   $  311.6   $2,249.9   $1,157.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Free cash flow(2)              $  824.5   $  169.7   $1,798.4   $  690.9
    Additions to property,
     plant and equipment              336.2      145.1      770.6      381.6
    Purchase of long-term
     investments                       78.3       21.0      329.5       30.7
    Other assets and intangible
     assets                            11.7        0.9       33.1       (9.8)
    Changes in non-cash
     operating working capital       (337.7)     (25.1)    (681.7)      63.9
    -------------------------------------------------------------------------
    Cash provided by operating
     activities                    $  913.0   $  311.6   $2,249.9   $1,157.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (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, 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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