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PotashCorp Reports Fourth-Quarter Earnings of $0.48 per Share

January 31, 2013

Listed:  TSX, NYSE
Symbol: POT

Key Performance and Outlook Highlights

        --  Fourth-quarter earnings of $0.48 per share1
        --  Full-year 2012 earnings of $2.37 per share
        --  Record full-year nitrogen gross margin of $978 million
        --  Earnings guidance of $0.50-$0.65 per share for first-quarter
            2013; $2.75-$3.25 per share for full year

SASKATOON, Jan. 31, 2013 /PRNewswire/ – Potash Corporation of Saskatchewan Inc.
(PotashCorp) today reported fourth-quarter earnings of $0.48 per share
($421 million), which compared to $0.78 per share ($683 million) in the
same period last year. Full-year earnings for 2012 of $2.37 per share
($2.1 billion) trailed the $3.51 per share ($3.1 billion) earned in
2011. Our results included a $41 million ($0.04 per share) provision
for the settlement of antitrust claims in the US recorded in the fourth
quarter, and a $341 million ($0.39 per share) non-cash impairment
charge related to our investment in Sinofert Holdings Limited
(Sinofert) in China recorded in the second quarter.

With lower contributions from all three nutrients, gross margin declined
to $0.6 billion from the $0.9 billion generated in the fourth quarter
of 2011. This result brought our full-year gross margin to $3.4
billion, which compared to $4.3 billion earned in the previous year.
Adjusted earnings before finance costs, income taxes and depreciation
and amortization(2) (adjusted EBITDA) totaled $0.7 billion for the quarter and $3.9 billion
for the year, with both amounts trailing those of the comparative
periods. Cash provided by operating activities of $0.9 billion was flat
with the previous year’s fourth quarter and raised our 2012 total to
$3.2 billion, the second-highest annual result in our history.

Our offshore investments in Arab Potash Company (APC) in Jordan, Israel
Chemicals Ltd. (ICL) in Israel and Sociedad Quimica y Minera de Chile
S.A. (SQM) in Chile contributed $94 million to earnings in the fourth
quarter. For the full year, contributions from these investments – and
a dividend from Sinofert – reached a record $412 million. The market
value of our investments in these publicly traded companies was
approximately $9.1 billion, or $10 per PotashCorp share at market close
on January 30, 2013.

“Our fourth-quarter results were adversely affected by weaker
performance in all three nutrients as global fertilizer markets paused
in the absence of significant immediate needs and amid lack of
direction, particularly in phosphate and potash,” said PotashCorp
President and Chief Executive Officer Bill Doyle. “Despite these
temporary challenges, we operated with a consistent approach -
temporarily slowing potash production and leveraging our diversified
product mix in our other nutrients – to best position our company for
the expected rebound in fertilizer demand in 2013.”

Market Conditions
The typical late-season slowdown in global potash demand was more
pronounced in the quarter as buyers awaited clarity on contract
settlements before committing to fully engage in procuring new supply.
The impact on North American potash producers was most evident in
shipments to offshore markets, which declined by 43 percent in the
fourth quarter of 2012 from the same period last year. In contrast to
this weakness, fourth-quarter domestic shipments from North American
producers outpaced those of the previous year by 38 percent as dealers
continued to respond to the immediate needs of farmers capitalizing on
favorable crop economics and an extended fall fertilizer application
season. Despite the relative strength of this market, limited global
purchasing caused prices to move lower through the quarter.

Phosphate demand was affected by similar global trends. Fourth-quarter
US producer sales of solid phosphate to the North American market
reached the highest level of any quarter in 2012 – 33 percent above the
same period last year. However, this strength was offset by weak demand
in offshore markets, primarily India, which led to lower prices for
most phosphate fertilizer products.

In nitrogen, strong industrial and agricultural demand for ammonia,
combined with global supply challenges that limited the amount of
product available for trade, supported prices through much of the
quarter. While prices for urea remained above 2011 levels for most of
the year, a significant rise in imports into the US market and a surge
in Chinese exports during the fourth quarter resulted in a weakening of
prices relative to the comparative period last year.

Potash
With reduced shipments to offshore customers and lower realized prices,
fourth-quarter potash gross margin of $281 million trailed the $486
million earned in the same period of 2011. Although full-year gross
margin of $2.0 billion represented the third-highest total in our
history, weaker sales volumes were primarily responsible for it falling
below the $2.7 billion generated in the previous year.

Total fourth-quarter potash sales volumes declined to 1.3 million
tonnes, down 17 percent from the same period the previous year. In
North America, distributors purchased to meet immediate farmer demand,
which pushed North American sales volumes to 0.6 million tonnes - 39
percent above the fourth quarter of 2011. This strength was more than
offset by a decline in offshore sales volumes. The absence of Canpotex(3) contract shipments to China and India, along with the deferral of
demand in other markets, pushed our fourth-quarter offshore sales
volumes down to 0.7 million tonnes (37 percent below fourth-quarter
2011). Latin American (32 percent) and other Asian (58 percent) markets
represented the majority of shipments from Canpotex.

Our fourth-quarter average realized potash price was $387 per tonne,
which compared to $431 per tonne in the same period of 2011. This
decline reflected heightened competitive pressure in most major spot
markets, as well as the impact of higher per-tonne costs for Canpotex’s
fixed transportation and distribution expenses that were allocated over
fewer tonnes.

In response to market conditions, we reduced fourth-quarter production
to 1.8 million tonnes from 2.2 million tonnes in the closing quarter of
2011. The combination of fewer tonnes produced, a rise in costs
associated with product from Esterhazy and a greater percentage of
production coming from higher-cost facilities negatively impacted
potash cost of goods sold on a per-tonne basis.

Phosphate
Fourth-quarter phosphate gross margin of $99 million was below the $163
million in the comparative period of 2011. This was largely
attributable to a decline in contributions from fertilizer products,
which generated $54 million, while feed and industrial product lines
remained relatively strong and added $41 million in the quarter. For
the year, gross margin was $469 million, which trailed the $648 million
generated in 2011, mainly due to reduced volumes and lower realized
fertilizer prices.

Fourth-quarter sales volumes fell to 0.8 million tonnes compared to 0.9
million tonnes in the same period last year, as temporary production
constraints at Aurora caused by challenging mining conditions primarily
impacted saleable tonnage of fertilizer products.

Average realized phosphate prices for the quarter were $577 per tonne,
down from $631 per tonne in the fourth quarter of 2011, as prices for
solid and liquid fertilizers declined as a result of weaker demand.
This drop was tempered by comparatively stable feed and industrial
realizations.

Per-tonne cost of goods sold for the quarter remained relatively flat
compared to the same period last year as higher ammonia and rock costs
were largely offset by lower sulfur costs.

Nitrogen
Although fourth-quarter nitrogen gross margin of $206 million was below
the $241 million generated in the same period the previous year, it
raised our 2012 total to a record $978 million. For the quarter, our
Trinidad operations contributed $127 million in gross margin and our US
operations added $79 million.

Fourth-quarter nitrogen sales volumes of 1.1 million tonnes were flat
compared to the same period in 2011. The loss of production at our
Trinidad facility due to interruptions in natural gas supply limited
product available for sale and resulted in full-year sales volumes of
4.8 million tonnes trailing the 5.0 million tonnes sold last year.

A combination of strong demand and supply challenges in key producing
regions resulted in higher realized ammonia prices for the quarter
compared to the same period of 2011. While this environment supported
higher prices for nitrogen products through most of 2012,
fourth-quarter prices softened for downstream products. As a result,
our average realized price of $453 per tonne in the fourth quarter
declined slightly from the closing quarter of 2011.

The total average cost of natural gas included in production for the
fourth quarter of 2012, including our hedge position, was $7.01 per
MMBtu, an increase from $6.35 in the same period the previous year. 
This was primarily the result of higher Trinidad gas costs related to
increasing Tampa ammonia prices – the primary benchmark to which those
gas costs are indexed.

Financial
We recognized a $41 million charge during the quarter – included in
other expenses – for a provision related to a settlement of antitrust
claims filed in the US. These claims – which were completely without
merit but would have resulted in a multi-year effort in time and
significant cost to defend – were settled on January 30, 2013 for
$43.75 million, to avoid an unnecessary distraction from the production
of potash and serving the needs of our customers.

Provincial mining and other taxes were $18 million for the fourth
quarter, up from the same period in 2011 when our tax expense was
minimized by higher accruals recognized earlier in the year relative to
our expected expense by year-end. Income taxes in the fourth quarter
were down $134 million from 2011 due to lower earnings, particularly in
potash.

Capital-related cash expenditures, primarily associated with our potash
expansion projects, totaled $628 million in the fourth quarter,
bringing our 2012 total to $2.1 billion. Total anticipated spending on
these projects is now more than 80 percent complete.

General Outlook
Agriculture is inherently an unpredictable business - from variability
in weather and growing conditions to government policy changes that can
affect the decisions of farmers. This reality returned to the forefront
in 2012, as crop production challenges pushed prices for corn and
soybeans to record highs. These rising prices created an expectation
that a surge in fertilizer demand – especially for phosphate and potash
– was imminent, but this failed to consider that our business is tied
to growing seasons and does not necessarily move in lockstep with the
rise and fall of commodity prices. As we enter 2013, farmers in many
parts of the world are only now preparing for their opportunity to help
meet the global need for grains and capitalize on higher crop prices.
Given the importance of crop nutrients to yields and the affordability
of fertilizer as a percentage of crop revenue, we believe demand is
poised for a rebound.

Potash Market Outlook
Increased demand is beginning to take hold in most major potash markets.
We believe buyer confidence has been bolstered by the recent settlement
of new contracts with China, leading many that had temporarily delayed
or stopped purchasing to re-engage. We expect demand to accelerate in
2013 and anticipate global potash shipments for the year to be between
55 million and 57 million tonnes, well above the approximately 51
million tonnes shipped in 2012.

In North America, demand is expected to be strong entering the spring
planting season. Supportive economics and the expectation of large
planted acreage are anticipated to result in significant demand at the
farm level. While dry conditions in certain regions could potentially
weaken demand, we forecast 2013 shipments to this market at
approximately 9.5 million tonnes. With limited inventory positioned in
advance of the season, we anticipate that our ability to keep pace with
just-in-time orders will be a competitive advantage in this market.

Latin America is expected to remain a region of strength, with 2013
demand poised to surpass last year’s robust levels. In contrast to its
slow start in 2012, Brazil is buying early in the year - in part to
reduce the pressure of expected record volumes on its limited port
capabilities during peak import periods. For the year, we anticipate
demand in Latin America will reach approximately 10 million tonnes, and
expect to be well positioned to serve this market through Canpotex and
our New Brunswick facility.

After delaying new contracts for seaborne deliveries during the second
half of 2012, China began to secure them late in the year. By
mid-January, it had settled with all major potash suppliers for
delivery during the first half of 2013 – including record volumes
committed with Canpotex. While these large commitments will help meet
China’s significant potash requirements, we anticipate its internal
needs will grow in 2013 as it works to improve lagging crop yields. We
expect its demand will be in the range of 11-11.5 million tonnes for
2013, with between 6.5 million and 7.0 million tonnes coming from
imports.

We believe the challenges that affected Indian potash demand during 2012
– including high retail prices due to fertilizer subsidy reductions,
weakened currency and fiscal uncertainty – are unlikely to improve
meaningfully in 2013, but anticipate shipments to this market will
surpass the depressed levels of last year. With limited inventory to
draw from and the potential for improved affordability at the farm
level acting as a catalyst, we anticipate India will need to begin
securing new supply during the first quarter of 2013 and forecast
full-year demand will be in the range of 3.5-4.5 million tonnes. While
this would reflect an increase in potassium applications from recent
levels, the agronomic risk of under-application continues to present a
major barrier to improving yields in the long term.

In other Asian countries - those outside of China and India – we
anticipate the consumption strength that was masked by destocking
efforts in 2012 will support demand growth. Fueled by a need to meet
the demands of the region’s potassium-intensive crops, activity in this
market has begun to accelerate. We forecast shipments for the year to
approximate 8.5 million tonnes.

Financial Outlook
In this environment, we estimate our 2013 potash segment gross margin
will be in the range of $1.9-$2.4 billion, with shipments forecast
between 8.5 million and 9.2 million tonnes. While strengthened global
demand is expected to translate into improved sales volumes, our gross
margin guidance reflects lower prices in spot and contract markets
compared to 2012 levels.

We forecast 2013 operational capability of 12.4 million tonnes before
the impact of market-related downtime. This total reflects available
new capacity from our expansion program as well as the loss of tonnage
from Esterhazy following the completion of our tolling agreement with
The Mosaic Company (Mosaic). The reversion of this tonnage to Mosaic
will temporarily reduce our share of 2013 Canpotex shipments, but we
are positioned to complete a Canpotex allocation run for our Cory
expansion during the first half of the year that is expected to
partially offset this loss. Our guidance includes a successful
completion of this run during the first half, and it accounts for
approximately 0.2 million tonnes of our second-half sales volumes
assumptions.

Given our expected operational capability for 2013 and our stated sales
volumes guidance, we see the need for additional market-related
downtime at our facilities during the year. Based on union
notifications to date, we anticipate 17 shutdown weeks in the first
quarter. Despite this downtime, we expect our full-year cost of goods
sold to benefit from higher operating rates as well as the absence of
higher-cost tonnes from Esterhazy.

In phosphate, the expectation of strong demand for fertilizer products
in the North American market is likely to be offset by the continued
depression in Indian requirements and result in weaker fertilizer
margins than we captured in 2012. Feed and industrial demand is
forecast to remain relatively strong and margins are anticipated to be
near those generated last year.

Although the historically high nitrogen prices experienced in 2012 are
likely to ease, we anticipate that strong agricultural and industrial
demand will keep margins at supportive levels. Our ammonia plant
restart at Geismar, expected to add approximately 0.5 million tonnes of
ammonia capacity, is now anticipated to have significant production
available for sale beginning in March of this year. We believe these
tonnes could help us achieve another record gross margin year in this
nutrient.

In this environment, we forecast our combined phosphate and nitrogen
gross margin for 2013 to be in the range of $1.5 billion to $1.7
billion.

Income from offshore investments by way of dividends and share of equity
earnings is expected to approximate $320-$380 million in 2013, while
selling and administrative expenses are forecast to be between $240
million and $260 million. We anticipate finance costs of $100-$130
million.

Capital expenditures for the year – excluding capitalized interest and
major maintenance and repair – are expected to be approximately $1.5
billion, with a significant portion of this total related to our
remaining potash expansion projects at New Brunswick and Rocanville.
Included in this estimate is approximately $500 million of sustaining
capital.

With reduced capital spending anticipated in potash, which impacts the
calculation of the Saskatchewan potash production tax, we expect
provincial mining and other taxes to be higher than 2012 levels and
approximate 11-13 percent of total potash gross margin. Our 2013 annual
effective tax rate is forecast to be 25-27 percent.

Based on these factors, PotashCorp forecasts first-quarter net income
per share in the range of $0.50-$0.65 and between $2.75 and $3.25 per
share for the full year.

Conclusion
“The only certainties in agriculture are that the world depends on
farmers for food and that increased production is required to meet the
demands of a growing population,” said Doyle. “We recognize that ebbs
and flows in fertilizer demand will always be part of our business, but
we believe the factors that limited demand this past year – destocking
and deferred purchases – will begin to drive an even greater need for
our products in 2013 and beyond. We believe our approach to managing
and developing our assets has PotashCorp well positioned for improved
performance as we move forward.”

Notes

      1. All references to per-share amounts pertain to diluted net income
         per share.
      2. See reconciliation and description of non-IFRS measures in the
         attached section titled "Selected Non-IFRS Financial Measures and
         Reconciliations."
      3. Canpotex Limited (Canpotex), the offshore marketing company for
         Saskatchewan potash producers.

——————————

Potash Corporation of Saskatchewan Inc. is the world’s largest
fertilizer enterprise by capacity producing the three primary plant
nutrients and a leading supplier to three distinct market categories:
agriculture, with the largest capacity in the world in potash, third
largest in each of nitrogen and 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. PotashCorp’s common shares are listed on
the Toronto Stock Exchange and the New York Stock Exchange.

This release contains forward-looking statements or forward-looking
information (forward-looking statements). These statements can be
identified by expressions of belief, expectation or intention, as well
as those statements that are not historical fact. 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 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 expressed in the forward-looking statements, including, but not
limited to: variations from our assumptions with respect to foreign
exchange rates, expected growth, results of operations, performance,
business prospects and opportunities, and effective tax rates;
fluctuations in supply and demand in the fertilizer, sulfur,
transportation and petrochemical markets; costs and availability of
transportation and distribution for our raw materials and products,
including railcars and ocean freight; changes in competitive pressures,
including pricing pressures; adverse or uncertain economic conditions
and changes in credit and financial markets; the results of sales
contract negotiations within major markets; economic and political
uncertainty around the world, timing and impact of capital
expenditures; risks associated with natural gas and other hedging
activities; changes in capital markets and corresponding effects on the
company’s investments; unexpected or adverse weather conditions;
changes in currency and exchange rates; unexpected geological or
environmental conditions, including water inflows; imprecision in
reserve estimates; adverse developments in new and pending legal
proceedings or government investigations; acquisitions we may
undertake; strikes or other forms of work stoppage or slowdowns;
changes in and the effects of, government policies and regulations;
security risks related to our information technology systems; 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, 2011 under the captions “Forward-Looking Statements” and
“Item 1A – Risk Factors” and in our other filings with the US
Securities and Exchange Commission and the 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 any forward-looking statements, whether as a result of
new information, future events or otherwise, except as required by law.

——————————

PotashCorp will host a Conference Call on Thursday, January 31, 2013 at
1:00 pm Eastern Time.


    Telephone       Dial-in numbers:
    Conference: 

                    From Canada and the 1-877-881-1303
                    US: 

                    From Elsewhere:     1-412-902-6510

    Live Webcast:   Visit
                    www.potashcorp.com 

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


                    Potash Corporation of Saskatchewan Inc.          

        Condensed Consolidated Statements of Financial Position          

             (in millions of US dollars except share amounts)          

                                         (unaudited)          

                                              December 31,   December 31,  

    As at                                           2012           2011    

           Assets                                                          

             Current assets                                                

               Cash and cash equivalents    $          562 $          430  

               Receivables                           1,089          1,195  

               Inventories                             762            731  

               Prepaid expenses and other
               current assets                           83             52  

                                                     2,496          2,408  

             Non-current assets                                            

               Property, plant and
               equipment                            11,505          9,922  

               Investments in
               equity-accounted investees            1,254          1,187  

               Available-for-sale
               investments (Note 2)                  2,481          2,265  

               Other assets                            344            360  

               Intangible assets                       126            115  

           Total Assets                     $       18,206 $       16,257  

           Liabilities                                                     

             Current liabilities                                           

               Short-term debt and current
               portion of long-term debt    $          615 $          832  

               Payables and accrued charges          1,188          1,295  

               Current portion of
               derivative instrument
               liabilities                              51             67  

                                                     1,854          2,194  

             Non-current liabilities                                       

               Long-term debt                        3,466          3,705  

               Derivative instrument
               liabilities                             167            204  

               Deferred income tax
               liabilities                           1,482          1,052  

               Pension and other
               post-retirement benefit
               liabilities                             569            552  

               Asset retirement obligations
               and accrued environmental
               costs                                   645            615  

               Other non-current
               liabilities and deferred
               credits                                 111             88  

           Total Liabilities                         8,294          8,410  

           Shareholders' Equity                                            

             Share capital                           1,543          1,483  

             Unlimited authorization of
             common shares without par
             value; issued and
             outstanding 864,900,513 and
             858,702,991 at December 31,
             2012 and 2011, respectively                                   

             Contributed surplus                       299            291  

             Accumulated other
             comprehensive income                    1,399            816  

             Retained earnings                       6,671          5,257  

           Total Shareholders' Equity                9,912          7,847  

           Total Liabilities and
           Shareholders' Equity             $       18,206 $       16,257  

    (See Notes to the Condensed
    Consolidated Financial Statements)                                     


                            Potash Corporation of Saskatchewan Inc.

                         Condensed Consolidated Statements of Income

                  (in millions of US dollars except per-share amounts)

                                                 (unaudited)

                               Three Months Ended Twelve Months Ended      

                                    December 31         December 31      

                               2012       2011      2012          2011  

    Sales (Note 3)             $ 1,642 $    1,865 $   7,927 $         8,715

    Freight, transportation
    and distribution             (113)       (86)     (494)           (496)

    Cost of goods sold           (943)      (889)   (4,023)         (3,933)

    Gross Margin                   586        890     3,410           4,286

    Selling and administrative
    expenses                      (53)       (41)     (219)           (217)

    Provincial mining and
    other taxes                   (18)          -     (180)           (147)

    Share of earnings of
    equity-accounted investees      58         76       278             261

    Dividend income                 38         42       144             136

    Impairment of
    available-for-sale
    investment (Note 2)              -          -     (341)               -

    Other expenses (Note 4)       (52)        (3)      (73)            (13)

    Operating Income               559        964     3,019           4,306

    Finance costs                 (25)       (34)     (114)           (159)

    Income Before Income Taxes     534        930     2,905           4,147

    Income taxes (Note 5)        (113)      (247)     (826)         (1,066)

    Net Income                 $   421 $      683 $   2,079 $         3,081

    Net Income per Share (Note
    6)                                                                     

        Basic                  $  0.49 $     0.80 $    2.42 $          3.60

        Diluted                $  0.48 $     0.78 $    2.37 $          3.51

    Dividends Declared per
    Share                      $  0.21 $     0.07 $    0.70 $          0.28

    (See Notes to the Condensed Consolidated Financial Statements)        


                            Potash Corporation of Saskatchewan Inc.

              Condensed Consolidated Statements of Comprehensive Income

                                     (in millions of US dollars)

                                                 (unaudited)

                                   Three Months Ended   Twelve Months Ended

                                        December 31           December 31

    (Net of related income
    taxes)                         2012        2011     2012         2011

    Net Income                   $  421 $         683 $ 2,079 $       3,081

     Other comprehensive income
    (loss)                                                                 

      Net increase (decrease) in
      net unrealized gain on
      available-for-sale
      investments (1)                47         (230)     216       (1,581)

      Reclassification to income
      of unrealized loss on
      impaired
      available-for-sale
      investment (Note 2)             -             -     341             -

      Net actuarial gain (loss)
      on defined benefit plans
      (2)                            22          (11)    (62)         (136)

      Net loss on derivatives
      designated as cash flow
      hedges (3)                    (4)          (20)    (20)          (38)

      Reclassification to income
      of net loss on cash flow
      hedges (4)                     14             9      50            47

      Other                         (2)           (1)     (4)           (6)

    Other Comprehensive Income
    (Loss)                           77         (253)     521       (1,714)

    Comprehensive Income         $  498 $         430 $ 2,600 $       1,367

    (1) Available-for-sale investments are comprised of shares in Israel
    Chemicals Ltd. and Sinofert Holdings Limited.

    (2) Net of income taxes of $(17) (2011 - $4) for the three months ended
    December 31, 2012 and $31 (2011 - $75) for the twelve months ended
    December 31, 2012.

    (3) Cash flow hedges are comprised of natural gas derivative
    instruments and are net of income taxes of $(4) (2011 - $13) for the
    three months ended December 31, 2012 and $7 (2011 - $24) for the twelve
    months ended December 31, 2012.

    (4) Net of income taxes of $(8) (2011 - $(6)) for the three months
    ended December 31, 2012 and $(32) (2011 - $(29)) for the twelve months
    ended December 31, 2012.

    (See Notes to the Condensed Consolidated Financial Statements)        


                                                                  Potash Corporation of Saskatchewan Inc.

                                                       Condensed Consolidated Statement of Changes in Equity

                                                                           (in millions of US dollars)

                                                                                       (unaudited)

                                                              Accumulated Other Comprehensive Income                          

                                                 Net
                                             unrealized          Net         Net                   Total                      

                                                gain on       loss on    actuarial            Accumulated                     

                                             available-    derivatives      loss                   Other                      

                                                           designated       on
                      Share    Contributed     for-sale        as         defined            Comprehensive   Retained   Total

                                                            cash flow     benefit
                     Capital      Surplus    investments     hedges      plans(1)    Other        Income     Earnings   Equity

    Balance -
    December 31,
    2011           $   1,483 $         291 $         982 $       (168) $         - $     2 $           816 $    5,257 $  7,847

    Net income             -             -             -             -           -       -               -      2,079    2,079

    Other
    comprehensive
    income (loss)          -             -           557            30        (62)     (4)             521          -      521

    Dividends              -             -             -             -           -       -               -      (603)    (603)
    declared

    Effect of
    share-based
    compensation
      including
    issuance of
    common shares         47             8             -             -           -       -               -          -       55

    Shares issued
    for dividend
      reinvestment
    plan                  13             -             -             -           -       -               -          -       13

    Transfer of
    net actuarial
    loss on
      defined
    benefit plans          -             -             -             -          62       -              62       (62)        -

    Balance -
    December 31,
    2012           $   1,543 $         299 $       1,539 $       (138) $         - $   (2) $         1,399 $    6,671 $  9,912

    (1) Any amounts incurred during a period are closed out to retained earnings at each period-end. Therefore, no balance
    exists in the reserve at the beginning or end of period.

    (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    

                               2012          2011       2012         2011

    Operating Activities                                                   

    Net income               $   421 $          683 $   2,079 $       3,081

    Adjustments to reconcile
    net income to cash
    provided by operating
    activities                                                             

       Depreciation and
       amortization              144            115       578           489

       Share-based
       compensation                3              2        24            24

       Impairment of
       available-for-sale
       investment (Note 2)         -              -       341             -

       Realized excess tax
       benefit related to
       share-based
       compensation               23              -        30            29

       Provision for
       (recovery of)
       deferred income tax        26            (5)       392           337

       Net distributed
       (undistributed)
       earnings of
       equity-accounted
       investees                  23           (15)      (67)         (133)

       Pension and other
       post-retirement
       benefits                    3              9      (68)         (122)

       Asset retirement
       obligations and
       accrued environmental
       costs                     (6)            (1)       (2)            39

       Other long-term
       liabilities and
       miscellaneous              18           (17)        51          (40)

       Subtotal of
       adjustments               234             88     1,279           623

       Changes in non-cash
       operating working
       capital                                                             

       Receivables               272            122       188         (155)

       Inventories              (70)          (132)       (7)         (146)

       Prepaid expenses and
       other current assets     (11)           (13)      (32)           (1)

       Payables and accrued
       charges                    26            118     (282)            83

       Subtotal of changes
       in non-cash operating
       working capital           217             95     (133)         (219)

    Cash provided by
    operating activities         872            866     3,225         3,485

    Investing Activities                                                   

    Additions to property,
    plant and equipment        (628)          (653)   (2,133)       (2,176)

    Other assets and
    intangible assets           (34)           (64)      (71)          (75)

    Cash used in investing
    activities                 (662)          (717)   (2,204)       (2,251)

    Financing Activities                                                   

    Repayment of long-term
    debt obligations               -            (7)       (2)         (607)

    Proceeds from (repayment
    of) short-term debt
    obligations                   41           (50)     (460)         (445)

    Dividends                  (174)           (60)     (467)         (208)

    Issuance of common
    shares                        24              4        40            44

    Cash used in financing
    activities                 (109)          (113)     (889)       (1,216)

    Increase in Cash and
    Cash Equivalents             101             36       132            18

    Cash and Cash
    Equivalents, Beginning
    of Period                    461            394       430           412

    Cash and Cash
    Equivalents, End of
    Period                   $   562 $          430 $     562 $         430

    Cash and cash
    equivalents comprised
    of:                                                                    

       Cash                  $    64 $           46 $      64 $          46

       Short-term
       investments               498            384       498           384

                             $   562 $          430 $     562 $         430

    Supplemental cash flow
    disclosure                                                             

       Interest paid         $    95 $           65 $     209 $         233

       Income taxes paid     $    93 $          208 $     676 $         623

    (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, 2012

       (in millions of US dollars except share and percentage 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
    International Financial Reporting Standards, as issued by the
    International Accounting Standards Board ("IFRS"). The accounting
    policies used in preparing these unaudited condensed consolidated
    financial statements are consistent with those used in the
    preparation of the 2011 annual consolidated financial statements.  

    These unaudited 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 2011
    annual consolidated financial statements. The company's 2012 annual
    consolidated financial statements will include additional
    information under IFRS in its Annual Integrated Report in February
    2013.  

    In management's opinion, the unaudited condensed consolidated
    financial statements include all adjustments necessary to present
    fairly such information.  

    2. Available-for-Sale Investments               

    The company assesses at the end of each reporting period whether
    there is objective evidence that a financial asset or group of
    financial assets is impaired. In the case of equity instruments
    classified as available-for-sale, for which unrealized gains and
    losses are generally recognized in other comprehensive income
    ("OCI"), a significant or prolonged decline in the fair value of the
    investment below its cost may be evidence that the asset is
    impaired. When objective evidence of impairment exists, the impaired
    amount (i.e., the unrealized loss) is recognized in net income; any
    subsequent reversals would be recognized in OCI and would not flow
    back into net income.  

    Changes in fair value, and related accounting, for the company's
    investment in Sinofert Holdings Limited ("Sinofert") since December
    31, 2011 were as follows:  

                                                    Impact of Unrealized
                                                         Loss on:  

                                                              Net Income
                                                                 and
                                       Unrealized   OCI and    Retained
                          Fair Value      Loss       AOCI     Earnings  

    Balance             $        439 $      (140) $   (140) $       -
    --
    December 31,
    2011               

    Decrease in                 (61)         (61)      (61)         -
    fair value         

    Balance             $        378 $      (201) $   (201) $       -
    -- March
    31, 2012           

    Decrease in                (140)        (140)     (140)         -
    fair value
    prior to
    recognition
    of impairment      

    Recognition                                         341      (341)
    of impairment                  -            -

    Balance             $        238 $      (341) $      -  $    (341)
    -- June
    30, 2012           

    Increase in                   66           66        66         -
    fair value         

    Balance             $        304 $      (275) $      66 $    (341)
    --
    September 30,
    2012               

    Increase in                   73           73        73         -
    fair value         

    Balance             $        377 $      (202) $     139 $    (341)
    --
    December 31,
    2012               

    3. Segment Information                

    The company has three reportable operating segments: potash, phosphate and
    nitrogen. 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, 2012

                                                          All
                        Potash    Phosphate   Nitrogen   Others   Consolidated

    Sales             $     554 $       542 $      546 $      - $        1,642

    Freight,
    transportation
    and
    distribution           (41)        (51)       (21)        -          (113)

    Net sales -
    third party             513         491        525        -               

    Cost of goods
    sold                  (232)       (392)      (319)        -          (943)

    Gross margin            281          99        206        -            586

    Depreciation
    and
    amortization           (34)        (73)       (35)      (2)          (144)

    Inter-segment
    sales                     -           -         83        -              -

    Cash flows for
    additions to
    property,                                                                 

       plant and
       equipment            395          73        118       42            628

                                     Three Months Ended December 31, 2011

                                                          All
                         Potash   Phosphate   Nitrogen   Others   Consolidated

    Sales             $     718 $       606 $      541 $      - $        1,865

    Freight,
    transportation
    and
    distribution           (32)        (37)       (17)        -           (86)

    Net sales -
    third party             686         569        524        -               

    Cost of goods
    sold                  (200)       (406)      (283)        -          (889)

    Gross margin            486         163        241        -            890

    Depreciation
    and
    amortization           (30)        (48)       (35)      (2)          (115)

    Inter-segment
    sales                     -           -         54        -              -

    Cash flows for
    additions to
    property,                                                                 

       plant and
       equipment            479          26        143        5            653

                                    Twelve Months Ended December 31, 2012

                                                          All
                        Potash    Phosphate   Nitrogen   Others   Consolidated

    Sales             $   3,285 $     2,292 $    2,350 $      - $        7,927

    Freight,
    transportation
    and
    distribution          (206)       (191)       (97)        -          (494)

    Net sales -
    third party           3,079       2,101      2,253        -               

    Cost of goods
    sold                (1,116)     (1,632)    (1,275)        -        (4,023)

    Gross margin          1,963         469        978        -          3,410

    Depreciation
    and
    amortization          (169)       (261)      (138)     (10)          (578)

    Inter-segment
    sales                     -           -        247        -              -

    Cash flows for
    additions to
    property,                                                                 

       plant and
       equipment          1,424         245        379       85          2,133

                                    Twelve Months Ended December 31, 2011

                                                          All
                        Potash    Phosphate   Nitrogen   Others   Consolidated

    Sales             $   3,983 $     2,478 $    2,254 $      - $        8,715

    Freight,
    transportation
    and
    distribution          (244)       (166)       (86)        -          (496)

    Net sales -
    third party           3,739       2,312      2,168        -               

    Cost of goods
    sold                (1,017)     (1,664)    (1,252)        -        (3,933)

    Gross margin          2,722         648        916        -          4,286

    Depreciation
    and
    amortization          (142)       (207)      (132)      (8)          (489)

    Inter-segment
    sales                     -           -        187        -              -

    Cash flows for
    additions to
    property,                                                                 

       plant and
       equipment          1,717         159        260       40          2,176

 


    4. Other Expenses                

                                  Three Months Ended   Twelve Months Ended

                                       December 31           December 31

                                  2012        2011     2012         2011

    Foreign exchange gain
                                $ (10) $         (9) $  (7) $          (7)

    Legal matters                   42             -     43              -

    Other                           20            12     37             20

                                $   52 $           3 $   73 $           13

    In January 2013, the company settled its eight antitrust lawsuits for
    a total of $44. A $41 provision was recorded at December 31, 2012
    associated with this matter.

 


    5. Income Taxes                

    A separate estimated average annual effective tax rate is determined
    for each taxing jurisdiction and applied individually to the pre-tax
    income of each jurisdiction.  

                                 Three Months Ended   Twelve Months Ended  

                                      December 31           December 31  

                                 2012        2011     2012         2011  

    Income tax expense         $  113 $         247 $  826 $        1,066  

    Actual effective tax          19%           23%    25%            26%
    rate on ordinary
    earnings                  

    Actual effective tax          21%           27%    28%            26%
    rate including
    discrete items            

    Discrete tax               $   10 $          29 $   27 $            1
    adjustments that
    impacted the rate         

    Significant items to note include the following:                    

        --  The actual effective tax rate on ordinary earnings for the
            fourth quarter of 2012 decreased compared to the same period
            last year due to a lower proportion of earnings in Canada and
            the US.
        --  The impairment of the company's available-for-sale investment
            in Sinofert is not deductible for tax purposes; this increased
            the 2012 actual effective tax rate including discrete items by
            3 percent.
        --  In 2012, a tax expense of $17 ($NIL in the fourth quarter) was
            recorded to adjust the 2011 tax provision to the income tax
            returns filed for that year.
        --  In first-quarter 2011, a current tax recovery of $21 was
            recorded for previously paid withholding taxes.
        --  In fourth-quarter 2011, a deferred tax expense of $26 was
            recorded to adjust amounts related to partnerships.
        --  In 2011, a current tax recovery of $14 ($2 in the fourth
            quarter) was recorded due to income tax losses in a foreign
            jurisdiction.  


    6. Net Income Per Share                                             

    Net income per share was calculated on the following
    weighted average number of shares:                                  

                   Three Months Ended      Twelve Months Ended          

                       December 31             December 31              

                     2012        2011        2012         2011      

    Basic       862,757,000 857,615,000 860,033,000 855,677,000     

    Diluted     875,959,000 875,706,000 875,907,000 876,637,000     

    Diluted net income per share was calculated based on the
    weighted average number of shares issued and outstanding
    during the period, incorporating the following adjustments.
    The denominator was: (1) increased by the total of the
    additional common shares that would have been issued
    assuming the 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. For
    performance-based stock option plans, the number of
    contingently issuable common shares included in the
    calculation was based on the number of shares, if any, that
    would be issuable if the end of the reporting period were
    the end of the performance period and the effect were
    dilutive.

 


                            Potash Corporation of Saskatchewan Inc.

                                        Selected Financial Data

                                                 (unaudited)

                               Three Months Ended     Twelve Months Ended  

                                    December 31              December 31

                               2012        2011     2012            2011

    Potash Sales (tonnes -
    thousands)                                                             

         Manufactured
         Product                                                           

           North America         588          422   2,590             3,114

           Offshore              729        1,159   4,640             5,932

         Manufactured
         Product               1,317        1,581   7,230             9,046

    Potash Net Sales                                                       

         (US $ millions)                                                   

           Sales             $   554 $        718 $ 3,285           $ 3,983

           Freight,
           transportation
           and distribution     (41)         (32)   (206)             (244)

           Net Sales         $   513 $        686 $ 3,079 $           3,739

         Manufactured
         Product                                                           

           North America     $   263 $        217 $ 1,231 $           1,502

           Offshore              247          465   1,835             2,223

         Other miscellaneous
         and purchased
         product                   3            4      13                14

         Net Sales           $   513 $        686 $ 3,079 $           3,739

    Manufactured Product                                                   

         Average Realized
         Sales Price per MT                                                

           North America     $   447 $        514 $   475 $             482

           Offshore          $   339 $        401 $   396 $             375

           Average           $   387 $        431 $   424 $             412

         Cost of Goods Sold
         per MT              $ (172) $      (125) $ (152) $           (112)

         Gross Margin per MT $   215 $        306 $   272 $             300


                            Potash Corporation of Saskatchewan Inc.

                                       Selected Financial Data

                                                (unaudited)

                                  Three Months Ended   Twelve Months Ended

                                     December 31           December 31  

                                  2012        2011     2012         2011

    Phosphate Sales (tonnes -
    thousands)                                                            

         Manufactured Product                                             

           Fertilizer               541          586   2,473         2,666

           Feed and Industrial      297          304   1,170         1,188

         Manufactured Product       838          890   3,643         3,854

    Phosphate Net Sales                                                   

         (US $ millions)                                                  

           Sales                $   542 $        606 $ 2,292 $       2,478

           Freight,
           transportation and
           distribution            (51)         (37)   (191)         (166)

           Net Sales            $   491 $        569 $ 2,101 $       2,312

         Manufactured Product                                             

           Fertilizer           $   287 $        360 $ 1,291 $       1,533

           Feed and Industrial      197          202     778           750

         Other miscellaneous
         and purchased product        7            7      32            29

         Net Sales              $   491 $        569 $ 2,101 $       2,312

    Manufactured Product                                                  

         Average Realized Sales
         Price per MT                                                     

           Fertilizer           $   529 $        614 $   522 $         575

           Feed and Industrial  $   663 $        663 $   665 $         631

           Average              $   577 $        631 $   568 $         592

         Cost of Goods Sold per
         MT                     $ (463) $      (453) $ (444) $       (428)

         Gross Margin per MT    $   114 $        178 $   124 $         164

 


                          Potash Corporation of Saskatchewan Inc.

                                      Selected Financial Data

                                                 (unaudited)

                                 Three Months Ended   Twelve Months Ended

                                     December 31          December 31  

                               2012          2011     2012         2011

    Average Natural Gas Cost
    in Production per MMBtu  $  7.01 $         6.35 $  5.91 $        6.13

    Nitrogen Sales (tonnes -
    thousands)                                                           

         Manufactured
         Product                                                         

           Ammonia               395            458   1,894         1,961

           Urea                  235            242   1,105         1,214

           Nitrogen
           solutions/Nitric
           acid/Ammonium
           nitrate               437            381   1,808         1,837

         Manufactured
         Product               1,067          1,081   4,807         5,012

         Fertilizer sales
         tonnes                  274            272   1,382         1,553

         Industrial/Feed
         sales tonnes            793            809   3,425         3,459

         Manufactured
         Product               1,067          1,081   4,807         5,012

    Nitrogen Net Sales                                                   

         (US $ millions)                                                 

           Sales             $   546 $          541 $ 2,350 $       2,254

           Freight,
           transportation
           and distribution     (21)           (17)    (97)          (86)

           Net Sales         $   525 $          524 $ 2,253 $       2,168

         Manufactured
         Product                                                         

           Ammonia           $   264 $          278 $ 1,058 $       1,052

           Urea                  112            122     568           564

           Nitrogen
           solutions/Nitric
           acid/Ammonium
           nitrate               107             99     445           445

         Other miscellaneous
         and purchased
         product                  42             25     182           107

         Net Sales           $   525 $          524 $ 2,253 $       2,168

         Fertilizer net
         sales               $   119 $          123 $   644 $         667

         Industrial/Feed net
         sales                   364            376   1,427         1,394

         Other miscellaneous
         and purchased
         product                  42             25     182           107

         Net Sales           $   525 $          524 $ 2,253 $       2,168

    Manufactured Product                                                 

         Average Realized
         Sales Price per MT                                              

           Ammonia           $   667 $          607 $   558 $         536

           Urea              $   475 $          502 $   514 $         464

           Nitrogen
           solutions/Nitric
           acid/Ammonium
           nitrate           $   247 $          259 $   247 $         242

           Average           $   453 $          461 $   431 $         411

           Fertilizer
           average price per
           MT                $   436 $          451 $   467 $         430

           Industrial/Feed
           average price per
           MT                $   458 $          464 $   417 $         403

           Average           $   453 $          461 $   431 $         411

         Cost of Goods Sold
         per MT              $ (276) $        (252) $ (242) $       (238)

         Gross Margin per MT $   177 $          209 $   189 $         173


                            Potash Corporation of Saskatchewan Inc.

                                       Selected Additional Data

                                                 (unaudited)

    Exchange Rate (Cdn$/US$)                                               

                                                          2012         2011

    December 31                                         0.9949       1.0170

    Fourth-quarter average
    conversion rate                                     0.9875       1.0161

                               Three Months Ended    Twelve Months Ended 

                                  December 31               December 31

                               2012        2011         2012         2011

    Production                                                             

    Potash production (KCl
    Tonnes - thousands)        1,763        2,244        7,724        9,343

    Potash shutdown weeks (1)     22           15           77           24

    Phosphate production
    (P2O5Tonnes - thousands)     504          555        1,983        2,204

    Phosphate P2O5 operating
    rate                         85%          94%          84%          93%

    Nitrogen production (N
    Tonnes - thousands)          573          698        2,602        2,813

    Shareholders                                                           

    PotashCorp's shareholder
    return                       -6%          -4%           0%         -20%

    Customers                                                              

    Product tonnes involved in
    customer complaints as a
    percentage of the prior
    three-year average           50%          N/A          56%          N/A

    Community                                                              

    Taxes and royalties ($
    millions)(2)                 133          291          654          997

    Employees                                                              

    Annualized turnover rate
    (excluding retirements)       3%           4%           5%           4%

    Safety                                                                 

    Total site severity injury
    rate (per 200,000 work
    hours)(3)                   0.53         0.52         0.55         0.54

    Environment                                                            

    Environmental incidents(4)     1            3           19           14

                                                  December 31, December 31,

    As at                                               2012         2011

    Number of employees                                                    

        Potash                                           2,759        2,520

        Phosphate                                        1,792        1,975

        Nitrogen                                           788          775

        Other                                              440          433

        Total                                            5,779        5,703

    (1) Excludes planned routine annual maintenance shutdowns.        

    (2) Taxes and royalties = current income tax expense - investment tax
    credits - realized excess tax benefit related to share-based
    compensation + potash production tax + resource surcharge + royalties +
    municipal taxes + other miscellaneous taxes (calculated on
    an accrual basis).        

    (3) Total of lost-time injuries and modified work injuries (as defined
    in our 2011 Annual Report). Total site includes PotashCorp
    employees, contractors and others on site.        

    (4) Total of reportable quantity releases, permit excursions and
    provincial reportable spills (as defined in our 2011 Annual Report).  

    N/A = Not applicable                

 

 


                       Potash Corporation of Saskatchewan Inc.    

          Selected Non-IFRS Financial Measures and Reconciliations    

             (in millions of US dollars except percentage amounts)    

                                            (unaudited)    

    The following information is included for convenience only.
    Generally, a non-IFRS 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 IFRS. EBITDA, adjusted EBITDA, adjusted
    EBITDA margin, cash flow prior to working capital changes and free
    cash flow are not measures of financial performance (nor do they have
    standardized meanings) under IFRS. 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 IFRS and certain non-IFRS measures to assess
    performance. Management believes these non-IFRS measures provide
    useful supplemental information to investors in order that they may
    evaluate PotashCorp's financial performance using the same measures
    as management. Management believes that, as a result, the investor is
    afforded greater transparency in assessing the financial performance
    of the company. These non-IFRS financial measures should not be
    considered as a substitute for, nor superior to, measures of
    financial performance prepared in accordance with IFRS.    

    A. EBITDA, ADJUSTED EBITDA AND ADJUSTED EBITDA MARGIN            

    Set forth below is a reconciliation of "EBITDA" and "adjusted EBITDA"
    to net income and "adjusted EBITDA margin" to net income as a
    percentage of sales, the most directly comparable financial measures
    calculated and presented in accordance with IFRS.    

                               Three Months Ended Twelve Months Ended    

                                    December 31         December 31    

                                 2012       2011    2012       2011    

    Net income                 $   421 $      683 $ 2,079 $     3,081    

    Finance costs                   25         34     114         159    

    Income taxes                   113        247     826       1,066    

    Depreciation and
    amortization                   144        115     578         489    

    EBITDA                     $   703 $    1,079 $ 3,597 $     4,795    

    Impairment of
    available-for-sale
    investment                       -          -     341           -    

    Adjusted EBITDA            $   703 $    1,079 $ 3,938 $     4,795    

    EBITDA is calculated as earnings before finance costs, income taxes
    and depreciation and amortization. Adjusted EBITDA is calculated as
    earnings before finance costs, income taxes, depreciation and
    amortization, certain gains and losses on disposal of assets and
    certain 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 and financing
    decisions, rather than the performance of the company's day-to-day
    operations. As compared to net income according to IFRS, these
    measures are limited in that they do not reflect the periodic costs
    of certain capitalized tangible and intangible assets used in
    generating revenues. 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.    

                                Three Months Ended  Twelve Months Ended    

                                     December 31          December 31    

                                 2012       2011    2012       2011    

    Sales                      $ 1,642 $    1,865 $ 7,927 $     8,715    

    Freight, transportation
    and distribution             (113)       (86)   (494)       (496)    

    Net sales                  $ 1,529 $    1,779 $ 7,433 $     8,219    

    Net income as a percentage     26%        37%     26%         35%
    of sales                                               

    Adjusted EBITDA margin         46%        61%     53%         58%    

    Adjusted EBITDA margin is calculated as adjusted EBITDA divided by
    net sales (sales less freight, transportation and distribution).
    Management believes comparing the company's operations (excluding the
    impact of long-term investment decisions) to net sales earned (net of
    costs to deliver product) is an important indicator of efficiency. In
    addition to the limitations given above in using adjusted EBITDA as
    compared to net income, adjusted EBITDA margin as compared to net
    income as a percentage of sales is also limited in that freight,
    transportation and distribution costs are incurred and valued
    independently of sales; adjusted EBITDA also includes earnings from
    equity investees whose sales are not included in consolidated sales.
    Management evaluates these items individually on the consolidated
    statements of income.    

 


                          Potash Corporation of Saskatchewan Inc.  

             Selected Non-IFRS 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 IFRS.  

                                     Three Months Ended Twelve Months Ended

                                          December 31         December 31

                                       2012      2011      2012      2011

    Cash flow prior to working
    capital changes                  $   655 $      771 $   3,358 $   3,704

    Changes in non-cash operating
    working capital                                                        

       Receivables                       272        122       188     (155)

       Inventories                      (70)      (132)       (7)     (146)

       Prepaid expenses and other
       current assets                   (11)       (13)      (32)       (1)

       Payables and accrued charges       26        118     (282)        83

    Changes in non-cash operating
    working capital                      217         95     (133)     (219)

    Cash provided by operating
    activities                       $   872 $      866 $   3,225 $   3,485

    Additions to property, plant and
    equipment                          (628)      (653)   (2,133)   (2,176)

    Other assets and intangible
    assets                              (34)       (64)      (71)      (75)

    Changes in non-cash operating
    working capital                    (217)       (95)       133       219

    Free cash flow                   $   (7) $       54 $   1,154 $   1,453

    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 or other timing
    issues 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.

    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 or other timing
    issues, additions to property, plant and equipment, 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 its 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.

SOURCE Potash Corporation of Saskatchewan Inc.


Source: PR Newswire