The Company With More

The World Needs More Fertilizer, and Fertilizer Is Our Business

The world needs more fertilizer to produce more crops in response to rising demand for food. Farmers want to increase their production to take advantage of higher prices, while those in developing regions, in particular, need to apply more fertilizer – especially potash – to correct soil nutrient imbalances brought about by historical under-application.

PotashCorp has built a thriving international fertilizer enterprise on world-class potash (K) resources, high-quality phosphate (P) and nitrogen (N) assets and strategic offshore potash investments.

We sell our products in three markets – fertilizer, focused on plant nutrition (N, P, K); feed supplements, focused on animal nutrition (mainly P, some N); and industrial, focused on products for high-grade food, technical and other applications (N, P as phosphoric acid, K). In 2008, fertilizer provided 70 percent of our sales and 82 percent of gross margin.

Offshore customers, primarily government agencies and private importers, accounted for half of our fertilizer sales in 2008 – including almost two-thirds of our potash sales. Approximately one-third of our sales volumes in each of the three nutrients was sold in North America to retailers, cooperatives and distributors that provide storage and application services to farmers. Feed and industrial customers consumed most of the remainder of our phosphate, and industrial customers the remainder of our nitrogen.

In both Northern and Southern hemispheres, fertilizers are mainly applied in spring and fall. Prices and profitability, choice of crop, soil quality and conditions, climate, weather, and government policies and subsidies influence customer purchases.

Among major world crops, rice, corn and wheat require all three nutrients, while soybeans need mainly potash and phosphate and oil palm uses mainly potash.

The Potash Business Has More Advantages

Higher Barriers to Entry, Less Government Involvement Are Important

Potash has structural and market advantages that we believe make it the best fertilizer business. Good deposits that are economical to mine are rare and barriers to entering the industry are high: significant upfront and continuing capital investment and at least seven years are required to bring a new conventional mine to production. Government involvement in and ownership of the industry are low, so economics, not politics, is more likely to drive business decisions.

And the world needs more potash. At PotashCorp, we are drawing on our unique strengths as we continue to prepare to respond to that need.

Potash Is the Core of Our Business

We Have Built the World’s Largest Fertilizer Company

PotashCorp began as a potash producer and, even after adding excellent phosphate and nitrogen businesses, the quality nutrient remains the heart of our company. Anticipating today’s market conditions, we have used acquisitions and internal investments to build a company with almost one-quarter of global potash capacity: six large low-cost mines in Saskatchewan and New Brunswick and mineral rights at another Saskatchewan mine.

Potash is the biggest contributor to our earnings, generating 62 percent of our gross margin in 2008. Its position is strengthened by our interests in four offshore potash-related industry players: Arab Potash Company Ltd. (APC) in Jordan, Israel Chemicals Ltd. (ICL) in Israel, Sociedad Quimica y Minera de Chile S.A. (SQM) in Chile and Sinofert Holdings Limited (Sinofert) in China.

Our Strategies Focus on Earnings Quality

Emphasize Potash Growth, Minimize Volatility

For two decades, we have worked to maximize long-term value for our shareholders by following strategies that emphasize earnings growth and reduce the volatility inherent in our business.

Its significant increases in volumes and expanded margins make potash the best place for us to invest. We seek to minimize downside risk by following our long-held strategy of matching production to market demand, which helps reduce volatility in difficult market conditions such as those experienced in late 2008.

In our other nutrients, too, we focus on strengths that lead to higher margins and less cyclicality. In phosphate, we leverage our high-quality rock to produce a flexible range of products that lets us take advantage of shifting market conditions. Our focus in nitrogen is our lower-cost Trinidad production.

Phosphate and Nitrogen Add Strength and Depth

At 23 percent and 15 percent, respectively, phosphate and nitrogen were important contributors to PotashCorp’s gross margin in 2008.

We are the most diversified global phosphate company, economically making phosphoric acid, liquid and solid fertilizers, animal feed supplements and products used by industry, such as purified acid. We stress the product combination that offers the best returns with the least volatility.

Our nitrogen production in Trinidad benefits from long-term, lower-cost natural gas contracts, which together with our proximity to the United States provides significant cost advantages in the markets we serve. Our US nitrogen production emphasizes industrial products.

We Are Uniquely Prepared to Meet Rising Potash Demand

Capability to Deliver on Our Strategy

To ensure we can meet the needs of growing offshore markets, we are expanding our potash capacity significantly. By the end of 2012, we expect to have completed construction on projects that will bring our total capacity to 18 million tonnes. We are funding these Potash First expansions primarily through operating cash flow.

Beyond internal expansions, we are vigilant and disciplined in seeking to allocate our cash in ways that best benefit the company, always with the goal that cash flow return exceed the cost of capital. We continue to look for opportunities that expand our potash reach. We consider repurchases of our own stock an effective way to add long-term shareholder value. In 2008, for example, we spent $3.4 billion to repurchase 22.8 million of our shares at an average price of $147 per share. We also pay dividends quarterly, with $123 million paid in 2008.

Our Assets Let Us Deliver

Our unique assets enable us to deliver on our value proposition and support our vision and strategy. These include:

• An experienced management team able to conceive, develop and implement long-term strategies and commit the company to them
• Balance sheet strength over two decades that enables us to take advantage of opportunities and withstand short-term business fluctuations
• Substantial cash flow, which is both the result and the cause of our success
• A productive workforce, motivated sales teams and a coordinated transportation network to serve our target markets.

We Live by Our Core Values

Living by our core values means we strive always to build support and understanding among stakeholders, focus on creating long-term value for our shareholders, deepen our relationships with customers and improve quality of life in the communities in which our employees live and work. Our goal is no harm to people and no damage to the environment, and we are determined to achieve it.