RECORD GROSS MARGIN

Record performance in all three nutrient segments produced overall gross margin 88 percent above 2006 and 67 percent increase in overall gross margin from our previous high in 2005.

Potash

In potash, exceptionally tight market conditions prevailed for most of the year. Higher prices, improved per-tonne production costs and record sales volumes led to a 63 percent rise in gross margin over 2006, when offshore volumes were impacted by lengthy price negotiations with China and India. With rising food demand, farmers in developing nations worked to improve crop yields that have been stunted by the historical under-application of potash. Growing demand for this key nutrient, coupled with supply constraints, shrank inventories to record low levels and drove up prices globally, although the benefit of offshore price increases was partially offset by higher ocean freight rates and locked-in contract pricing to China and India.

Nitrogen and Phosphate

Nitrogen gross margin was up 70 percent year over year, with nearly two-thirds of that total coming from our Trinidad operations. Strong fundamentals led to realized price increases in most nitrogen products.

In phosphate, strong demand for solid and liquid fertilizers and rising costs for inputs like rock and sulfur drove up global prices in all major product categories. Largely self-sufficient in rock supply and benefiting from lower-cost North American sulfur, PotashCorp's input costs were more than offset, resulting in improved gross margin.