PotashCorp Triples Earnings in Fifth Consecutive Record Year



    
    Listed: TSX, NYSE                                            Symbol: POT
    

    SASKATOON, Jan. 22 /CNW/ - Potash Corporation of Saskatchewan Inc.
(PotashCorp) today announced record fourth-quarter earnings of $2.56 per
share(1) ($788.0 million), more than double the $1.16 per share ($376.8
million) earned in the same period last year. This represented our third-best
quarter ever and pushed our 2008 earnings to $11.01 per share ($3.5 billion),
more than triple the $3.40 per share ($1.1 billion) earned in 2007. This was
PotashCorp's fifth consecutive year of record earnings, reflecting the global
need for fertilizer and, specifically, the increasing value of potash, our
core nutrient.
    Although the global economic crisis led to slower demand for all three
nutrients and lower prices for phosphate and nitrogen, our potash operations
drove fourth-quarter gross margin to $873.1 million, 63 percent above the
$535.0 million generated in the same period last year. With all three
nutrients achieving annual gross margin performance records, 2008 gross margin
rose to $4.9 billion, a 161 percent increase over 2007's $1.9 billion.
Included in these results is $88.9 million in writedowns of year-end nitrogen
and phosphate inventory values, which reduced earnings by $0.22 per share in
the quarter. Earnings before interest, taxes, depreciation and amortization(2)
(EBITDA) grew to $955.8 million for the quarter (compared to $526.7 million in
last year's fourth quarter) and raised full-year EBITDA to $5.0 billion, $3.1
billion higher than that of 2007. Fourth-quarter cash flow from operating
activities prior to working capital changes(2) of $849.1 million was up from
$431.9 million in the same period last year, raising the full-year total to
$3.8 billion, compared to $1.5 billion in 2007.
    Potash market conditions bolstered returns of our offshore investments in
Arab Potash Company Ltd. (APC) in Jordan, Sociedad Quimica y Minera de Chile
S.A. (SQM) in Chile and Israel Chemicals Ltd. (ICL) in Israel, which together
contributed $105.8 million to other income in the fourth quarter and, along
with our investment in Sinofert Holdings Limited (Sinofert) in China, $362.8
million for the year, almost triple the 2007 total. The market value of our
investments in these publicly traded companies, as of market close on January
21, 2009, was $5.1 billion, which equates to approximately $16 per PotashCorp
share.
    "The unprecedented global economic challenges of the fourth quarter were
a sharp contrast to the positive operating environment of the first three
quarters of 2008," said PotashCorp President and Chief Executive Officer Bill
Doyle. "Our success over the course of the year demonstrated the resilience
and adaptability of our company, as well as the effectiveness of our
strategies in rapidly changing conditions. Potash, our core nutrient, holds
unique advantages that enable us to deliver strong performance, even in a very
difficult economic climate."

    Market Conditions

    The economic crisis accelerated in the fourth quarter of 2008, affecting
nearly every industry including global agriculture. Even after record harvests
drew large volumes of nutrients from soils, fertilizer distributors and
farmers suspended purchases in the face of the uncertainty of world markets.
We believe this was largely a psychological barrier, as the economics of food
production and fertilizer use remain very attractive. Although crop prices
declined substantially amidst a widespread market and commodity sell-off, they
rebounded to supportive levels by the end of the quarter. However, restricted
access to credit due to the timing of the global financial crisis created more
than a psychological barrier for farmers in South America, reducing fertilizer
application rates during their primary planting season. This could have
significant implications for crop production in this key exporting region.
    In the US, the combination of a late harvest and uncertain economic
conditions caused a deferral of fertilizer purchases. Against a backdrop of
falling raw material prices and growing inventories, nitrogen and phosphate
producers around the world - looking to move product or acquire cash - lowered
prices. These factors contributed to farmers delaying purchases in
anticipation of even lower prices. This put additional pressure on fertilizer
distributors who were left holding large quantities of higher-cost inventories
and in no position to purchase normal seasonal volumes.
    Spot prices for nitrogen products fell sharply during the quarter. Demand
for industrial nitrogen was severely impacted by the economic crisis, and with
international nitrogen prices below cash production costs for many producers
(including some in the US), significant worldwide capacity was shuttered by
the end of the quarter. Solid phosphate fertilizers followed a similar
pattern, with approximately 50 percent of world phosphate production
reportedly curtailed by December 31.
    Consistent with our long-held view, it was evident over the course of the
quarter that the substantial lowering of prices in various key markets did not
entice new demand or address farmers' uncertainty about financial conditions.
    In this environment, major spot markets for potash - North America,
Brazil and Southeast Asia - were largely inactive while contract volumes
continued to move to China and India at prices agreed upon in the first half
of 2008. Potash inventories did not reach excessive levels due to inherently
tight supply that had customers on allocation for much of 2007 and 2008, a
labor strike at three of our facilities and widespread production curtailments
throughout the industry in response to the global demand slowdown. During the
fourth quarter, potash prices remained firm.

    Potash

    Fourth-quarter potash gross margin of $744.8 million was almost three
times higher than the $256.4 million generated in the same quarter last year.
Potash full-year gross margin was a record $3.1 billion, more than triple the
$912.3 million generated in 2007.
    Total realized fourth-quarter prices climbed to $625 per tonne, a 235
percent increase over fourth-quarter 2007 levels. The offshore realized price
of $583 per tonne was 242 percent higher than in last year's fourth quarter,
and reflected a larger proportion of sales directed to contract markets with
lower netbacks based on prices established earlier in the year. Fourth-quarter
realized prices in the North American spot market reached $740 per tonne, up
246 percent from the same quarter last year and 32 percent from the trailing
quarter, as a September 2008 price increase was realized.
    Potash sales volumes of 1.4 million tonnes during the fourth quarter were
37 percent lower than in the same period last year and resulted in full-year
2008 potash volumes of 8.5 million tonnes, 9 percent below 2007 levels. Our
offshore sales volumes of 1.1 million tonnes were down 27 percent compared to
the same quarter last year, with full-year volumes of 5.6 million tonnes
reflecting a 6 percent drop from 2007. During the quarter, Canpotex Limited
(Canpotex), the offshore marketing company for Saskatchewan potash producers,
shipped approximately 340,000 tonnes to China and 475,000 tonnes to India, the
two largest contract markets. These totals were 45 percent lower and 107
percent higher, respectively, than shipments in the same quarter last year.
Although spot market sales volumes declined abruptly in the fourth quarter of
2008 versus the same quarter last year, Brazil's full-year volumes were only 3
percent lower than the previous year, reflecting the strength of spot market
demand earlier in 2008. Our North American potash volumes were down 54 percent
from last year's fourth quarter, while full-year volumes of 3.0 million tonnes
were 15 percent lower than 2007.
    Potash cost of goods sold was approximately $33 per tonne higher quarter
over quarter. This was primarily the result of increased royalties paid in
Saskatchewan and New Brunswick, and strike and other labor costs that mainly
resulted from work stoppages. A total of 24 mine shutdown weeks were taken in
the quarter as a result of strikes at our Allan, Cory and Patience Lake
facilities.

    Nitrogen

    Nitrogen contributed $17.9 million of gross margin in the fourth quarter,
compared to $136.7 million in the fourth quarter of 2007. This reflected the
rapid decline in volumes, along with a $36.0 million writedown of inventories
produced with higher cost natural gas early in the quarter. Our Trinidad
operation generated $11.4 million in fourth-quarter gross margin, while our US
operations added $6.5 million. Despite the weak fourth quarter, the strong
global demand and pricing environment drove full-year nitrogen gross margin to
a record $737.4 million, compared to $536.1 million in 2007.
    Market prices for nitrogen products fell dramatically over the quarter. 
However, with most of our fourth-quarter nitrogen volumes sold early in the
quarter when prices were at their peak, realized prices for ammonia were 42
percent above the same quarter last year. Urea prices were flat compared to
last year's fourth quarter while prices for nitrogen solutions rose 78 percent
quarter over quarter on early fourth-quarter business.
    The international ammonia market weakened considerably during the fourth
quarter as large-scale cutbacks were made to operating rates in the phosphate
and industrial sectors, which account for a significant portion of global
ammonia import demand. This led to sizable curtailments in ammonia export
supply (including a portion of our Trinidad operation). Our ammonia sales
volumes for the quarter fell 23 percent from the same period last year and
full-year ammonia sales volumes dropped 16 percent compared to 2007. Urea
sales volumes were 14 percent lower than last year's fourth quarter and
contributed to full-year volumes declining 11 percent from 2007 levels. Sales
volumes for nitrogen solutions were down 59 percent from the fourth quarter of
2007, pushing full-year volumes 11 percent lower than in 2007.
    Our total average natural gas cost in the fourth quarter, including our
hedge, was $6.16 per MMBtu, a 40 percent increase from the same quarter last
year.

    Phosphate

    Due to substantially lower sales volumes, fourth-quarter phosphate gross
margin of $110.4 million was 22 percent below the $141.9 million of last
year's fourth quarter. However, our unique ability to allocate phosphoric acid
feedstock to a broad range of higher-netback downstream products proved
beneficial to us in the quarter's difficult market conditions. Liquid
fertilizers generated $92.9 million of quarterly phosphate gross margin,
industrial products added $20.0 million and feed phosphate $18.2 million. With
rapidly deteriorating market demand and prices, solid fertilizers incurred a
loss of $21.8 million, inclusive of a writedown of $52.9 million of inventory
on hand at year-end that was produced earlier in the quarter with high-cost
sulfur and ammonia. Notwithstanding the slow fourth quarter, robust demand and
prices in the first three quarters led full-year phosphate gross margin to a
record $1.1 billion, compared to $432.8 million in 2007.
    Higher-priced sales early in the quarter led to increases in
quarter-over-quarter realized prices for liquid fertilizer (+220 percent),
solid fertilizers (+145 percent), feed (+153 percent) and industrial products
(+91 percent). By the end of the quarter, prices for all products were
negatively affected by market conditions, including rapidly declining spot
prices for raw material inputs. This weakening was especially evident in the
solid fertilizer sector, demonstrating the importance of our diverse phosphate
product mix.
    Solid fertilizer sales volumes fell 81 percent from the fourth quarter of
2007, while liquid fertilizer sales volumes dropped 42 percent. Feed sales
volumes declined 53 percent as the beef, pork and poultry industries continued
to suffer and many feed mills remained shut down. Sales volumes for industrial
products, traditionally a more stable area of the phosphate business, declined
a comparatively small 17 percent from the same quarter last year.
    Although spot market prices for sulfur and ammonia, both key inputs for
phosphate production, fell dramatically during the quarter, we will not
realize the full benefit of these reductions until these inputs are consumed
in 2009.

    Financial

    With higher potash prices and profitability in our potash segment,
fourth-quarter provincial mining and other taxes rose to $109.0 million, or 15
percent of total potash gross margin. This was a $68.9 million increase from
the same quarter last year. For the year, these taxes reached $543.4 million
or 18 percent of total potash gross margin, a $408.0 million increase over
2007. Our selling and administrative expenses were $24.8 million lower quarter
over quarter due to reduced compensation accruals because of a lower average
share price over the period. The weakening Canadian dollar resulted in the
recognition of a primarily non-cash foreign exchange gain of $62.8 million. We
incurred an additional $17.5 million charge in the fourth quarter (included in
other income) related to further writedowns of investments in certain auction
rate securities.
    Additions to property, plant and equipment were $427.7 million in the
fourth quarter, a 90 percent increase over the same quarter last year, with
the majority of capital spending on potash debottlenecking and expansion
projects at Patience Lake, Cory, New Brunswick and Rocanville and load-out
expansions at Rocanville and Allan. We repurchased for cancellation
approximately 7 million common shares for $453.5 million, using additional
borrowings under our credit facilities.

    Outlook

    The duration and depth of the global economic crisis are impossible to
predict, with governments, industries and individuals trying to understand and
react to the current environment. This, however, does not alter the underlying
fundamentals that drive long-term growth in demand for fertilizers. With world
population now in excess of 6.7 billion and growing by 75 million people
annually, the need to increase food production is real and immediate. In order
to meet the growing necessity of sustaining and improving crop yields, proper
fertilization is imperative. Successive record crops in both 2007 and 2008 did
little to improve the global grain stocks-to-use ratio, which currently sits
at 18.8 percent - substantially below historical levels. This concern was at
the forefront early in 2008 as the potential for food shortages became
evident. While attention shifted to financial issues in the second half of the
year, potential food shortages remain a concern, and the problem could worsen
as the economic crisis impacts farmers' fertilizer buying patterns. This
appears to be something other than an economic response, because crop prices
continue to generate excellent returns for farmers. In the current
environment, the payback on an appropriate fertilizer investment continues to
be attractive, typically generating a return of $3 or more for every $1
invested. If farmers do not plant sufficient acreage or do not apply enough
fertilizer - even for a single season - the impact on world food supply could
be severe. Production decreases are already expected to occur in the exporting
region of South America as a result of reduced fertilizer applications and
drier weather. As farmers and dealers around the world return to more normal
fertilizer purchasing practices in efforts to optimize yields and capitalize
on the opportunity for strong returns, the potential exists for extremely
tight supply/demand conditions.
    In potash, growth in demand has exceeded increases in new supply,
consuming all available potash production in recent years and leaving major
markets short and on allocation through much of 2007 and 2008. While nitrogen
and phosphate prices have fallen precipitously, the long-term underlying
fundamentals for potash remain strong. The world's ability to depend on
continued brownfield expansions - additions of new capacity by debottlenecking
or expanding existing sites - for significant new production is limited.
However, the economic viability of a greenfield project depends in large part
on a potash pricing environment that supports its development. A new potash
facility carries financial challenges: the cost is measured in billions of
dollars and the timeline for first production and any positive cash flow is at
least five to seven years with subsequent lengthy ramp-up after construction
completion. There are also significant qualitative issues such as the rarity
of good deposits, difficulty in obtaining financing in the current credit
environment, geological and geopolitical risks involved in this type of
long-term project and the world's limited amount of expertise and specialized
equipment needed to successfully execute a potash project. Numerous mines have
been damaged or destroyed by water inflow, an uninsurable hazard that can wash
away investment capital. Despite increases, current potash prices still
represent a challenge in justifying a greenfield investment.
    This challenge underscores the importance and value of our Potash First
strategy, as we believe the 6.2 million tonnes of brownfield operational
capacity we are adding over the next four years is even more valuable today
than when we announced the projects. Certain competitive potash projects in
other regions have been delayed due to increased geopolitical risk and
inability to secure financing. Our potash capacity expansions, which we have
funded and expect to continue to fund through our strong cash flow, are
progressing on schedule. We expect those at Lanigan and Patience Lake will be
operational as demand returns. If for any reason demand does not materialize
on the anticipated timelines, we will continue to follow our strategy of
matching production to market demand to reduce volatility in our financial
performance.
    While we expect slow demand in all major potash markets early in 2009,
the pace of sales should intensify in the second quarter. In North America,
because farmers deferred fertilizer purchases in the fall when at least 40
percent of potash applications traditionally occur, we expect above-normal
spring applications. This should draw inventories substantially lower by the
end of the spring season and lead to considerable restocking of the system in
the second half of the year.
    Similarly, China produced a record crop in 2008, but was short on potash
because of its late entry to the market last year. This creates a very strong
agronomic need, as below-normal application rates for a second year could
significantly affect yields. China entered 2009 without a contract in place
and is not receiving any potash from Canpotex - a situation that could carry
on through at least the first quarter. We expect China will require total
imports of at least 7 million tonnes in 2009, substantially more than the 5.5
million tonnes imported in 2008. India's contract extends to March 31, 2009
and its demand is expected to approximate 2008 levels.
    In Brazil, the recent weakening of the real and the rise in soybean
prices are positive for agricultural exports, but cannot correct the
fertilizer applications missed during their spring planting season. Demand in
this spot market is likely to be limited in the first quarter of 2009,
although we expect Brazil to be largely de-stocked in the second quarter and
back in the market near 2008 levels. Southeast Asian countries are now
benefiting from an improvement in palm oil prices and are expected to maintain
stable potash demand in 2009.
    We expect 2009 gross margin for potash to be in the range of $4.5 billion
to $5.5 billion, with total shipments flat to slightly below 2008 levels. With
sales expected to be more heavily weighted to the last three quarters of the
year, we are curtailing production from our 2009 operational capability early
in the year by more than 2 million tonnes.
    In nitrogen, ammonia demand is expected to remain soft due to economic
conditions, with industrial demand likely to be slow at least through the
first half. However, with substantial capacity offline and questions about
natural gas reliability in some key producing regions, conditions could
improve more quickly. For example, urea prices rose substantially in early
January and, with the spring season approaching, could improve further. Until
the market improves, we intend to operate our US plants at approximately 70
percent of capacity. Trinidad, with its lower-cost gas contracts, is expected
to operate at full capacity for the foreseeable future.
    Despite high levels of solid phosphate fertilizer inventories worldwide,
phosphate rock prices have been in the $250-$290 per tonne range early in
2009, while phosphoric acid prices remain above $1,000 per tonne. We expect
that the combination of significant capacity curtailments occurring around the
world and strong underlying rock and acid prices will strengthen solid
fertilizer markets once demand returns. Until then, we plan to curtail all
production of finished phosphates at our White Springs facility through the
first half of 2009, and will run Aurora at reduced rates through the first
quarter.
    We expect capital expenditures, excluding capitalized interest, to
approximate $1.8 billion in 2009, of which $250 million will be sustaining
capital. Depreciation and amortization expense is expected to be 8 percent
higher than 2008 levels. We expect our consolidated reported income tax rate
to be in the 27-29 percent range in 2009, with a projected current/future
split of 95/5. Provincial mining and other taxes are forecast within a range
of 16-20 percent of total potash gross margin, depending on potash price
realizations, the Canadian/US exchange rate and the timing and amount of
capital spending on potash projects in Saskatchewan. We expect other income to
exceed 2008 levels by more than $100 million, while total selling and
administrative expenses are forecast to be slightly above 2008 levels.
    As it is difficult to predict performance in this environment, we
currently estimate first-quarter net income will be in the range of
$0.70-$1.00 per share, based on a $1.15 Canadian dollar relative to the US
dollar. As we expect demand to return in major fertilizer markets in the
second quarter, our full-year earnings are currently estimated to be in the
range of $10.00-$12.00 per share, weighted heavily toward the second half,
based on an average $1.10 exchange rate. 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
$9 million, or $0.02 per share on an after-tax basis, which is primarily a
non-cash item.

    Conclusion

    "Our long-held strategies, especially in potash, have been tested through
periods of demand fluctuation in the past and have proven effective in leading
to long-term sustainable growth," said Doyle. "With our focus on potash, the
nutrient with the strongest fundamentals, we anticipate even greater
opportunities ahead and will continue to build capacity to meet future growth
in demand. The world needs to produce more per acre and, as global economic
stability returns, we will be ready to meet the needs of our customers and
deliver even stronger performance for our shareholders."

    
    Notes
    -----
    1.  All references to per-share amounts pertain to diluted net income per
        share.
    2.  See reconciliation and description of non-GAAP measures in the
        attached section titled "Selected Non-GAAP 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; the current global
financial crisis and conditions and changes in credit markets; the results of
negotiations with China and India; timing and amount of capital expenditures;
risks associated with natural gas and other hedging activities; changes in
capital markets and corresponding effects on the company's investments;
changes in currency and exchange rates; unexpected geological or environmental
conditions, including water inflow; strikes and other forms of work stoppage
or slowdowns; changes in and the effects of, government policy and
regulations; and earnings, exchange rates and the decisions of taxing
authorities, all of which could affect our effective tax rates. Additional
risks and uncertainties can be found in our Form 10-K for the fiscal year
ended December 31, 2007 under captions "Forward-Looking Statements" and "Item
1A - Risk Factors" and in our other filings with the US Securities and
Exchange Commission and Canadian provincial securities commissions.
Forward-looking statements are given only as at the date of this presentation
and the company disclaims any obligation to update or revise the
forward-looking statements, whether as a result of new information, future
events or otherwise, except as required by law.

    
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                  PotashCorp will host a conference call on
            Thursday, January 22, 2009 at 1:00 p.m. Eastern Time.

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

                       No reservation ID is required.

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

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

          This news release is also available at this same website.



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

                                                   December 31,  December 31,
                                                        2008          2007
    -------------------------------------------------------------------------

    Assets
      Current assets
        Cash and cash equivalents                   $    276.8    $    719.5
        Accounts receivable                            1,189.9         596.2
        Inventories                                      714.9         428.1
        Prepaid expenses and other current assets         79.2          36.7
        Current portion of derivative instrument
         assets                                            6.4          30.8
    -------------------------------------------------------------------------
                                                       2,267.2       1,811.3

      Derivative instrument assets                        11.5         104.2
      Property, plant and equipment                    4,812.2       3,887.4
      Investments (Note 2)                             2,750.7       3,581.5
      Other assets                                       288.7         210.7
      Intangible assets                                   21.5          24.5
      Goodwill                                            97.0          97.0
    -------------------------------------------------------------------------
                                                    $ 10,248.8    $  9,716.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities
      Current liabilities
        Short-term debt                             $  1,323.9    $     90.0
        Accounts payable and accrued charges           1,183.6         911.5
        Current portion of derivative instrument
         liabilities                                     108.1           0.2
        Current portion of long-term debt                  0.2           0.2
    -------------------------------------------------------------------------
                                                       2,615.8       1,001.9

      Long-term debt                                   1,739.5       1,339.4
      Derivative instrument liabilities                  120.4             -
      Future income tax liability                        794.2         988.1
      Accrued pension and other post-retirement
       benefits                                          253.4         244.8
      Accrued environmental costs and asset
       retirement obligations                            133.4         121.0
      Other non-current liabilities and
       deferred credits                                    3.2           2.7
    -------------------------------------------------------------------------
                                                       5,659.9       3,697.9
    -------------------------------------------------------------------------

    Shareholders' Equity
      Share capital                                    1,402.5       1,461.3

        Unlimited authorization of common shares
        without par value; issued and outstanding
        295,200,987 and 316,411,209 at December 31,
        2008 and December 31, 2007, respectively

      Contributed surplus                                126.2          98.9
      Accumulated other comprehensive income             657.9       2,178.9
      Retained earnings                                2,402.3       2,279.6
    -------------------------------------------------------------------------
                                                       4,588.9       6,018.7
    -------------------------------------------------------------------------
                                                    $ 10,248.8    $  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      Twelve Months Ended
                                     December 31             December 31
                                  2008        2007        2008        2007
    -------------------------------------------------------------------------

    Sales (Note 6)            $  1,870.6  $  1,431.4  $  9,446.5  $  5,234.2
    Less: Freight                   37.7        91.3       324.9       346.1
          Transportation and
           distribution             35.2        29.5       132.4       124.1
          Cost of goods sold       924.6       775.6     4,081.8     2,882.8
    -------------------------------------------------------------------------
    Gross Margin                   873.1       535.0     4,907.4     1,881.2
    -------------------------------------------------------------------------
    Selling and administrative      29.8        54.6       188.4       212.6
    Provincial mining and
     other taxes                   109.0        40.1       543.4       135.4
    Foreign exchange (gain)
     loss                          (62.8)        2.8      (126.0)       70.2
    Other income (Note 9)          (78.3)      (14.2)     (333.5)     (125.5)
    -------------------------------------------------------------------------
                                    (2.3)       83.3       272.3       292.7
    -------------------------------------------------------------------------
    Operating Income               875.4       451.7     4,635.1     1,588.5
    Interest Expense                20.6         9.7        62.8        68.7
    -------------------------------------------------------------------------
    Income Before Income Taxes     854.8       442.0     4,572.3     1,519.8
    Income Taxes (Note 4)           66.8        65.2     1,077.1       416.2
    -------------------------------------------------------------------------
    Net Income                $    788.0  $    376.8     3,495.2     1,103.6
                              -----------------------
                              -----------------------
    Retained Earnings,
     Beginning of Year                                   2,279.6     1,286.4
    Repurchase of Common
     Shares (Note 3)                                    (3,250.3)          -
    Change in Accounting
     Policy                                                    -         0.2
    Dividends                                             (122.2)     (110.6)
    -------------------------------------------------------------------------
    Retained Earnings, End
     of Year                                          $  2,402.3  $  2,279.6
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net Income Per Share
     (Note 5)
      Basic                   $     2.63  $     1.19  $    11.37  $     3.50
      Diluted                 $     2.56  $     1.16  $    11.01  $     3.40
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Dividends Per Share       $     0.10  $     0.10  $     0.40  $     0.35
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (See Notes to the Condensed Consolidated Financial Statements)



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

                                 Three Months Ended      Twelve Months Ended
                                     December 31             December 31
                                  2008        2007        2008        2007
    -------------------------------------------------------------------------

    Operating Activities
    Net income                $    788.0  $    376.8  $  3,495.2  $  1,103.6
    -------------------------------------------------------------------------

    Adjustments to reconcile
     net income to cash provided
     by operating activities
      Depreciation and
       amortization                 80.4        75.0       327.5       291.3
      Stock-based compensation       4.1         3.9        36.2        38.6
      Loss (gain) on disposal
       of property, plant and
       equipment and long-term
       investments                   1.2         2.3       (27.1)        7.9
      Provision for auction
       rate securities              17.5        26.5        88.8        26.5
      Foreign exchange on
       future income tax           (82.5)        4.9      (106.4)       52.4
      Provision for future
       income tax                    6.7        (0.2)       82.2       119.6
      Undistributed earnings
       of equity investees         (32.9)      (18.0)     (166.7)      (35.6)
      Loss (gain) on derivative
       instruments                  67.1        (2.7)       48.7       (21.1)
      Other long-term liabilities   (0.5)      (36.6)        2.3       (57.9)
    -------------------------------------------------------------------------
      Subtotal of adjustments       61.1        55.1       285.5       421.7
    -------------------------------------------------------------------------

    Changes in non-cash
     operating working capital
      Accounts receivable          183.1       (14.7)     (593.7)     (154.6)
      Inventories                   36.1         8.7      (324.4)       60.3
      Prepaid expenses and
       other current assets         10.4         5.7       (23.7)        7.0
      Accounts payable and
       accrued charges            (315.4)      100.0       174.3       250.9
    -------------------------------------------------------------------------
      Subtotal of changes in
       non-cash operating
       working capital             (85.8)       99.7      (767.5)      163.6
    -------------------------------------------------------------------------
    Cash provided by operating
     activities                    763.3       531.6     3,013.2     1,688.9
    -------------------------------------------------------------------------

    Investing Activities
    Additions to property,
     plant and equipment          (427.7)     (225.6)   (1,198.3)     (607.2)
    Purchase of long-term
     investments                  (116.1)          -      (445.6)      (30.7)
    Purchase of auction rate
     securities                        -           -           -      (132.5)
    Proceeds from disposal of
     property, plant and
     equipment and long-term
     investments                     2.3         0.3        43.2         4.5
    Other assets and
     intangible assets             (13.5)       (2.0)      (46.6)        7.8
    -------------------------------------------------------------------------
    Cash used in investing
     activities                   (555.0)     (227.3)   (1,647.3)     (758.1)
    -------------------------------------------------------------------------
    Cash before financing
     activities                    208.3       304.3     1,365.9       930.8
    -------------------------------------------------------------------------

    Financing Activities
    Proceeds from (repayment of)
     long-term and short-term
     debt obligations               47.6        (0.6)    1,633.7      (470.0)
    Dividends                      (30.3)      (31.0)     (122.6)      (93.6)
    Repurchase of common shares   (453.5)          -    (3,356.4)          -
    Issuance of common shares        5.2         4.3        36.7        26.6
    -------------------------------------------------------------------------
    Cash used in financing
     activities                   (431.0)      (27.3)   (1,808.6)     (537.0)
    -------------------------------------------------------------------------
    (Decrease) Increase in
     Cash and Cash Equivalents    (222.7)      277.0      (442.7)      393.8
    Cash and Cash Equivalents,
     Beginning of Period           499.5       442.5       719.5       325.7
    -------------------------------------------------------------------------
    Cash and Cash Equivalents,
     End of Period            $    276.8  $    719.5  $    276.8  $    719.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cash and cash equivalents
     comprised of:
      Cash                    $     29.9  $     23.1  $     29.9  $     23.1
      Short-term investments       246.9       696.4       246.9       696.4
    -------------------------------------------------------------------------
                              $    276.8  $    719.5  $    276.8  $    719.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplemental cash flow
     disclosure
      Interest paid           $     31.4  $     22.4  $     82.8  $     93.9
      Income taxes paid       $     74.2  $     92.8  $    669.9  $    221.0
    -------------------------------------------------------------------------
    (See Notes to the Condensed Consolidated Financial Statements)



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

                                                  Three Months Ended
                                                   December 31, 2008

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

    Net income                            $    854.8  $     66.8  $    788.0
    -------------------------------------------------------------------------
    Other comprehensive income (loss)
      Net decrease in unrealized gains on
       available-for-sale securities(1)     (1,053.2)     (118.5)     (934.7)
      Net losses on derivatives designated
       as cash flow hedges(2)                 (182.0)      (76.2)     (105.8)
      Reclassification to income of net
       losses (gains) on cash flow hedges(2)     7.4         1.1         6.3
      Unrealized foreign exchange losses
       on translation of self-sustaining
       foreign operations                       (7.7)          -        (7.7)
    -------------------------------------------------------------------------
    Other comprehensive loss                (1,235.5)     (193.6)   (1,041.9)
    -------------------------------------------------------------------------
    Comprehensive (loss) income           $   (380.7) $   (126.8) $   (253.9)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                 Twelve Months Ended
                                                  December 31, 2008

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

    Net income                            $  4,572.3  $  1,077.1  $  3,495.2
    -------------------------------------------------------------------------
    Other comprehensive income (loss)
      Net decrease in unrealized gains on
       available-for-sale securities(1)     (1,398.4)      (61.5)   (1,336.9)
      Net losses on derivatives designated
       as cash flow hedges(2)                 (266.8)     (100.8)     (166.0)
      Reclassification to income of net
       losses (gains) on cash flow hedges(2)   (12.9)       (4.8)       (8.1)
      Unrealized foreign exchange losses
       on translation of self-sustaining
       foreign operations                      (10.0)          -       (10.0)
    -------------------------------------------------------------------------
    Other comprehensive loss                (1,688.1)     (167.1)   (1,521.0)
    -------------------------------------------------------------------------
    Comprehensive (loss) income           $  2,884.2  $    910.0  $  1,974.2
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



                                                  Three Months Ended
                                                   December 31, 2007

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

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


                                                 Twelve Months Ended
                                                  December 31, 2007

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

    Net income                            $  1,519.8  $    416.2  $  1,103.6
    -------------------------------------------------------------------------
    Other comprehensive income
      Net increase in unrealized gains on
       available-for-sale securities(1)      1,396.2        87.1     1,309.1
      Net gains on derivatives designated
       as cash flow hedges(2)                   49.4        14.8        34.6
      Reclassification to income of net
       gains on cash flow hedges(2)            (57.8)      (17.3)      (40.5)
      Unrealized foreign exchange gains
       on translation of self-sustaining
       foreign operations                        6.7           -         6.7
    -------------------------------------------------------------------------
    Other comprehensive income               1,394.5        84.6     1,309.9
    -------------------------------------------------------------------------
    Comprehensive income                  $  2,914.3  $    500.8  $  2,413.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Available-for-sale securities are comprised of shares in Israel
        Chemicals Ltd. and Sinofert Holdings Limited and investments in
        auction rate securities.
    (2) Cash flow hedges are comprised of natural gas derivative instruments.



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

                                          Unrealized   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
     twelve months ended
     December 31, 2008          (1,336.9)     (174.1)      (10.0)   (1,521.0)
    -------------------------------------------------------------------------
    Accumulated other
     comprehensive income
     (loss), December 31,
     2008                     $    761.8  $   (100.6) $     (3.3) $    657.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (See Notes to the Condensed Consolidated Financial Statements)



                   Potash Corporation of Saskatchewan Inc.
          Notes to the Condensed Consolidated Financial Statements
           For the Three and Twelve Months Ended December 31, 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 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.

    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 year ended
    December 31, 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. Also, in October 2008, the company purchased
    an additional 14,288,605 shares of Israel Chemicals Ltd. for cash
    consideration of $116.4, which increased the company's ownership interest
    to 11%.

    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 $17.2 at December 31, 2008 (face value
    $132.5), representing an impairment of $115.3 which was all considered to
    be other-than-temporary. This represents a decline in fair value of $17.5
    and $38.8 for the three and twelve months ended December 31, 2008,
    respectively. For the three and twelve months ended December 31, 2008 net
    income was reduced by $17.5 and $88.8, respectively, and unrealized
    losses in accumulated other comprehensive income were reduced by $NIL 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 of 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 December 31, 2008, the company repurchased
    for cancellation 7,029,200 common shares under the program, at a cost of
    $453.5 and an average price per share of $64.51. The repurchase resulted
    in a reduction of share capital of $32.3, and the excess of cost over the
    average book value of the shares of $421.2 has been recorded as a
    reduction of retained earnings. During the twelve months ended
    December 31, 2008, a total of 22,849,200 shares were repurchased at a
    cost of $3,356.4 and an average price per share of $146.89, resulting in
    a reduction of share capital of $106.1 and a reduction in retained
    earnings of $3,250.3.

    4.  Income Taxes

    The company's consolidated reported income tax rate for the three months
    ended December 31, 2008 was 8 percent (2007 - 15 percent) due to the
    cumulative adjustment for the reduction in the consolidated effective
    income tax rate. For the twelve months ended December 31, 2008, the
    reported income tax rate was 24 percent (2007 - 27 percent). For the
    three and twelve months ended December 31, 2008, the consolidated
    effective income tax rate was 25 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 a
        significant 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 that was recognized in the first quarter of 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
    December 31, 2008 of 299,819,000 (2007 - 316,227,000). Basic net income
    per share for the year is calculated based on the weighted average shares
    issued and outstanding for the twelve months ended December 31, 2008 of
    307,480,000 (2007 - 315,641,000).

    Diluted net income per share is calculated based on the weighted average
    number of shares issued and outstanding during the period. The
    denominator is: (1) increased by the total of the additional common
    shares that would have been issued assuming exercise of all stock options
    with exercise prices at or below the average market price for the period;
    and (2) decreased by the number of shares that the company could have
    repurchased if it had used the assumed proceeds from the exercise of
    stock options to repurchase them on the open market at the average share
    price for the period. The weighted average number of shares outstanding
    for the diluted net income per share calculation for the three months
    ended December 31, 2008 was 307,511,000 (2007 - 325,727,000) and for the
    twelve months ended December 31, 2008 was 317,438,000 (2007 -
    324,308,000).

    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 December 31, 2008
    -------------------------------------------------------------------------
                                                            All
                           Potash   Nitrogen  Phosphate  Others  Consolidated
    -------------------------------------------------------------------------

    Sales                 $ 932.2    $ 433.1    $ 505.3  $    -     $ 1,870.6
    Freight                  15.7       10.1       11.9       -          37.7
    Transportation and
     distribution             6.9       14.1       14.2       -          35.2
    Net sales - third
     party                  909.6      408.9      479.2       -
    Cost of goods sold      164.8      391.0      368.8       -         924.6
    Gross margin            744.8       17.9      110.4       -         873.1
    Depreciation and
     amortization            16.3       26.0       36.1     2.0          80.4
    Inter-segment sales         -       28.2        0.7       -             -


                                 Three Months Ended December 31, 2007
    -------------------------------------------------------------------------
                                                            All
                           Potash   Nitrogen  Phosphate  Others  Consolidated
    -------------------------------------------------------------------------

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


                                 Twelve Months Ended December 31, 2008
    -------------------------------------------------------------------------
                                                            All
                           Potash   Nitrogen  Phosphate  Others  Consolidated
    -------------------------------------------------------------------------

    Sales               $ 4,068.1  $ 2,497.7  $ 2,880.7  $    -     $ 9,446.5
    Freight                 167.3       56.5      101.1       -         324.9
    Transportation and
     distribution            42.1       50.9       39.4       -         132.4
    Net sales - third
     party                3,858.7    2,390.3    2,740.2       -
    Cost of goods sold      803.2    1,652.9    1,625.7       -       4,081.8
    Gross margin          3,055.5      737.4    1,114.5       -       4,907.4
    Depreciation and
     amortization            82.0       97.1      140.5     7.9         327.5
    Inter-segment sales         -      173.6       23.1       -             -


                                 Twelve Months Ended December 31, 2007
    -------------------------------------------------------------------------
                                                            All
                           Potash   Nitrogen  Phosphate  Others  Consolidated
    -------------------------------------------------------------------------

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


    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 December 31, 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      Twelve Months Ended
                                     December 31             December 31
                                  2008        2007        2008        2007
    -------------------------------------------------------------------------

    Service cost                $    3.8    $    3.8    $   15.1    $   15.3
    Interest cost                    9.9         9.2        39.9        36.5
    Expected return on plan
     assets                        (12.6)      (10.7)      (51.1)      (42.8)
    Net amortization and
     change in valuation
     allowance                       1.4         0.4         9.0        10.0
    -------------------------------------------------------------------------
    Net expense                 $    2.5    $    2.7    $   12.9    $   19.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Other Post-Retirement Plans

                                 Three Months Ended      Twelve Months Ended
                                     December 31             December 31
                                  2008        2007        2008        2007
    -------------------------------------------------------------------------

    Service cost                $    1.4    $    1.7    $    5.7    $    6.1
    Interest cost                    3.9         4.3        15.9        14.9
    Net amortization                 0.1         1.3         0.6         1.7
    -------------------------------------------------------------------------
    Net expense                 $    5.4    $    7.3    $   22.2    $   22.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    For the three months ended December 31, 2008, the company contributed
    $8.8 to its defined benefit pension plans, $3.8 to its defined
    contribution pension plans and $2.4 to its other post-retirement plans.
    Contributions for the twelve months ended December 31, 2008 were $28.4 to
    its defined benefit pension plans, $19.8 to its defined contribution
    pension plans and $8.0 to its other post-retirement plans.

    9.  Other Income

                                 Three Months Ended      Twelve Months Ended
                                     December 31             December 31
                                  2008        2007        2008        2007
    -------------------------------------------------------------------------

    Share of earnings of
     equity investees           $   62.8    $   18.0    $  255.8    $   76.2
    Dividend income                 43.0        10.6       107.0        58.1
    Gain on forward purchase
     contract for shares in
     Sinofert (Note 2)                 -           -        25.3           -
    Other                          (10.0)       12.1        34.2        17.7
    Provision for auction
     rate securities (Note 2)      (17.5)      (26.5)      (88.8)      (26.5)
    -------------------------------------------------------------------------
                                $   78.3    $   14.2    $  333.5    $  125.5
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Included in the Other category for the twelve months ended December 31,
    2008, is 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.

    10. Comparative Figures

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


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

                                 Three Months Ended      Twelve Months Ended
                                     December 31             December 31
                                  2008        2007        2008        2007
    -------------------------------------------------------------------------

    Potash Operating Data
    Production (KCl Tonnes
     - thousands)                  2,079       2,542       8,697       9,160
    Shutdown weeks                  23.6         1.1        49.9        18.7
    Sales (tonnes - thousands)
      Manufactured Product
        North America                379         818       2,962       3,471
        Offshore                   1,058       1,452       5,585       5,929
    -------------------------------------------------------------------------
      Manufactured Product         1,437       2,270       8,547       9,400
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Potash Net Sales
     (US $ millions)
      Sales                       $932.2      $479.1    $4,068.1    $1,797.2
      Less: Freight                 15.7        43.1       167.3       178.1
            Transportation and
             distribution            6.9         8.2        42.1        39.1
    -------------------------------------------------------------------------
      Net Sales                   $909.6      $427.8    $3,858.7    $1,580.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

      Manufactured Product
        North America             $280.4      $174.9    $1,307.5      $656.9
        Offshore                   617.3       247.8     2,526.8       909.6
      Other miscellaneous and
       purchased product            11.9         5.1        24.4        13.5
    -------------------------------------------------------------------------
      Net Sales                   $909.6      $427.8    $3,858.7    $1,580.0
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Potash Average Price per MT
        North America            $740.48     $214.03     $441.38     $189.26
        Offshore                 $583.27     $170.63     $452.43     $153.41
    -------------------------------------------------------------------------
      Manufactured Product       $624.70     $186.26     $448.60     $166.65
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

                                 Three Months Ended      Twelve Months Ended
                                     December 31             December 31
                                  2008        2007        2008        2007
    -------------------------------------------------------------------------

    Nitrogen Operating Data
    Production (N Tonnes
     - thousands)                    617         704       2,780       2,986
    Average Natural Gas Cost
     per MMBtu                     $6.16       $4.41       $7.54       $4.30
    Sales (tonnes - thousands)
      Manufactured Product
        Ammonia                      395         510       1,794       2,132
        Urea                         279         325       1,186       1,333
        Nitrogen solutions/
         Nitric acid/Ammonium
         nitrate                     381         573       2,062       2,266
    -------------------------------------------------------------------------
      Manufactured Product         1,055       1,408       5,042       5,731
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

      Fertilizer sales tonnes        353         523       1,794       2,054
      Industrial/Feed sales
       tonnes                        702         885       3,248       3,677
    -------------------------------------------------------------------------
      Manufactured Product         1,055       1,408       5,042       5,731
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Nitrogen Net Sales
     (US $ millions)
      Sales                       $433.1      $463.1    $2,497.7    $1,799.9
      Less: Freight                 10.1        15.6        56.5        55.6
            Transportation and
             distribution           14.1        12.5        50.9        51.6
    -------------------------------------------------------------------------
      Net Sales                   $408.9      $435.0    $2,390.3    $1,692.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

      Manufactured Product
        Ammonia                   $176.4      $160.3      $999.5      $664.9
        Urea                       104.6       123.6       633.1       468.6
        Nitrogen solutions/
         Nitric acid/Ammonium
         nitrate                   108.3       114.1       577.9       438.1
      Other miscellaneous and
       purchased product            19.6        37.0       179.8       121.1
    -------------------------------------------------------------------------
      Net Sales                   $408.9      $435.0    $2,390.3    $1,692.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

      Fertilizer net sales        $119.9      $164.3      $809.6      $620.7
      Industrial/Feed net
       sales                       269.4       233.7     1,400.9       950.9
      Other miscellaneous and
       purchased product            19.6        37.0       179.8       121.1
    -------------------------------------------------------------------------
      Net Sales                   $408.9      $435.0    $2,390.3    $1,692.7
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Nitrogen Average Price
     per MT
        Ammonia                  $447.13     $314.19     $557.05     $311.84
        Urea                     $374.54     $380.41     $533.77     $351.64
        Nitrogen solutions/
         Nitric acid/Ammonium
         nitrate                 $283.95     $199.15     $280.34     $193.32
    -------------------------------------------------------------------------
      Manufactured Product       $368.95     $282.66     $438.43     $274.22
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

      Fertilizer average price
       per MT                    $339.39     $314.05     $451.19     $302.23
      Industrial/Feed average
       price per MT              $383.83     $264.10     $431.37     $258.58
    -------------------------------------------------------------------------
     Manufactured Product        $368.95     $282.66     $438.43     $274.22
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


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

                                 Three Months Ended      Twelve Months Ended
                                     December 31             December 31
                                  2008        2007        2008        2007
    -------------------------------------------------------------------------
    Phosphate Operating Data
    Production (P2O5 Tonnes
     - thousands)                    338         536       1,873       2,086
    P2O5 Operating Rate              59%         94%         82%         91%
    Sales (tonnes - thousands)
      Manufactured Product
        Fertilizer - Liquid
         phosphates                  173         296         893         983
        Fertilizer - Solid
         phosphates                   80         430       1,069       1,623
        Feed                         102         218         654         814
        Industrial                   157         190         706         731
    -------------------------------------------------------------------------
      Manufactured Product           512       1,134       3,322       4,151
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Phosphate Net Sales
     (US $ millions)
      Sales                       $505.3      $489.2    $2,880.7    $1,637.1
      Less: Freight                 11.9        32.6       101.1       112.4
            Transportation and
             distribution           14.2         8.8        39.4        33.4
    -------------------------------------------------------------------------
      Net Sales                   $479.2      $447.8    $2,740.2    $1,491.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

      Manufactured Product
        Fertilizer - Liquid
         phosphates               $175.7       $94.2      $734.6      $283.2
        Fertilizer - Solid
         phosphates                 83.1       183.0       996.8       607.5
        Feed                        96.8        81.5       492.9       272.7
        Industrial                 116.9        74.1       471.0       277.4
      Other miscellaneous and
       purchased product             6.7        15.0        44.9        50.5
    -------------------------------------------------------------------------
      Net Sales                   $479.2      $447.8    $2,740.2    $1,491.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Phosphate Average Price
     per MT
        Fertilizer - Liquid
         phosphates            $1,016.58     $317.82     $823.17     $288.13
        Fertilizer - Solid
         phosphates            $1,041.79     $425.33     $932.44     $374.23
        Feed                     $948.20     $374.98     $753.90     $335.03
        Industrial               $744.85     $389.32     $666.97     $379.46
    -------------------------------------------------------------------------
      Manufactured Product       $923.51     $381.56     $811.50     $347.08
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Exchange Rate (Cdn$/US$)
                                                           2008        2007
    -------------------------------------------------------------------------

    December 31                                           1.2246      0.9881
    Fourth-quarter average conversion rate                1.1538      0.9892



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

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

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

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

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

                                 Three Months Ended      Twelve Months Ended
                                     December 31             December 31
                                  2008        2007        2008        2007
    -------------------------------------------------------------------------
    Net income                 $   788.0   $   376.8   $ 3,495.2   $ 1,103.6
    Income taxes                    66.8        65.2     1,077.1       416.2
    Interest expense                20.6         9.7        62.8        68.7
    Depreciation and
     amortization                   80.4        75.0       327.5       291.3
    -------------------------------------------------------------------------
    EBITDA                         955.8       526.7     4,962.6     1,879.8
    Provision for auction
     rate securities                17.5        26.5        88.8        26.5
    -------------------------------------------------------------------------
    Adjusted EBITDA            $   973.3   $   553.2   $ 5,051.4   $ 1,906.3
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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


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

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

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

                                 Three Months Ended      Twelve Months Ended
                                     December 31             December 31
                                  2008        2007        2008        2007
    -------------------------------------------------------------------------
    Cash flow prior to
     working capital
     changes(1)                $   849.1   $   431.9   $ 3,780.7   $ 1,525.3
    -------------------------------------------------------------------------
    Changes in non-cash
     operating working
     capital
      Accounts receivable          183.1       (14.7)     (593.7)     (154.6)
      Inventories                   36.1         8.7      (324.4)       60.3
      Prepaid expenses and
       other current assets         10.4         5.7       (23.7)        7.0
      Accounts payable and
       accrued charges            (315.4)      100.0       174.3       250.9
    -------------------------------------------------------------------------
    Changes in non-cash
     operating working
     capital                       (85.8)       99.7      (767.5)      163.6
    -------------------------------------------------------------------------
    Cash provided by
     operating activities      $   763.3   $   531.6   $ 3,013.2   $ 1,688.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Free cash flow(2)          $   291.8   $   204.3   $ 2,090.2   $   895.2
    Additions to property,
     plant and equipment           427.7       225.6     1,198.3       607.2
    Purchase of long-term
     investments                   116.1           -       445.6        30.7
    Other assets and
     intangible assets              13.5         2.0        46.6        (7.8)
    Changes in non-cash
     operating working
     capital                       (85.8)       99.7      (767.5)      163.6
    -------------------------------------------------------------------------
    Cash provided by
     operating activities      $   763.3   $   531.6   $ 3,013.2   $ 1,688.9
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

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

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

    %SEDAR: 00001608EF




For further information:

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


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