Q1: PotashCorp Reports First-Quarter Earnings of $0.18 per Share

Webcast Details

Apr 27 17

Forward-Looking Statements

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Key Highlights

• First-quarter earnings of $0.18 per share
• Cash provided by operating activities of $223 million
• Rocanville ramp-up well underway; on track to reduce company-wide potash cost of goods sold by approximately $10 per tonne in 2017
• Full-year 2017 guidance increased to $0.45-$0.65 per share, including merger-related costs of $0.05 per share

CEO Commentary

'Potash market fundamentals continued to improve in the first quarter, creating a supportive earnings environment,' said PotashCorp President and Chief Executive Officer Jochen Tilk. 'We expect improved consumption trends and nutrient affordability in key markets to support potash demand and our results through the remainder of 2017.

'Our potash portfolio optimization and cost reduction strategy, which includes the ramp-up of our low-cost Rocanville mine, also contributed to stronger first-quarter results. We are well into our Canpotex allocation audit process at Rocanville and anticipate our sales entitlement will increase for the second half of the year.

'We are also making good progress on our merger of equals with Agrium. We continue to work through the regulatory process in key jurisdictions and remain confident the transaction will close mid-2017. Our integration teams are working hard to position the combined company for growth - including achievement of our synergy targets - and to ensure we can create value for all our stakeholders,' said Tilk.

Saskatoon, Saskatchewan - Potash Corporation of Saskatchewan Inc. (PotashCorp) reported first-quarter earnings of $0.18 per share ($149 million), up from $0.09 per share ($75 million) generated in the same period of 2016.

Gross margin for the quarter of $268 million surpassed the $234 million generated in the first quarter of 2016, primarily due to lower cost of goods sold for all three nutrients and increased potash sales volumes more than offsetting weaker phosphate prices. Similarly, cash from operating activities of $223 million exceeded 2016's first-quarter amount of $188 million.

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 $46 million to our first-quarter earnings, exceeding the $21 million generated in the first quarter of 2016, a period that did not include a dividend from ICL. The market value of our investments in these three publicly traded companies, as well as Sinofert Holdings Limited (Sinofert) in China, was approximately $4.5 billion, or $5 per PotashCorp share, at market close on April 26, 2017.

Market Conditions

Nutrient affordability and lower inventories led to consistent buyer engagement in potash during the first quarter. Deliveries increased to most major markets and contributed to modest increases in global spot prices from fourth-quarter 2016 levels.

Lower urea exports from China were offset by increased supply from other regions and limited demand from India, leading to a softer pricing environment, especially late in the quarter. Urea prices in the US were further pressured by large offshore imports during the quarter. Ammonia was more resilient as supply issues in key exporting regions supported a more constructive pricing environment.

Phosphate markets were supported by strong demand in much of the Western Hemisphere, supply constraints in key producing regions and rising costs for key inputs. Spot prices for most phosphate fertilizer products strengthened from those realized late in 2016, but remained well below that year's first quarter. Prices for feed and industrial products continued to trend lower in the first quarter and remained below prior-year levels, due primarily to increased supply from offshore producers.

Potash

Potash gross margin for the quarter increased to $160 million, reflecting higher offshore sales volumes and reduced per-tonne costs, which more than offset lower offshore netbacks. Total gross margin was well above the $88 million generated during the same period in 2016 when we incurred costs related to suspending production at our Picadilly facility in New Brunswick ($32 million).

First-quarter sales volumes of 2.2 million tonnes were well above the 1.8 million tonnes sold in the same period last year. While North American volumes were 10 percent higher, offshore shipments increased by 31 percent due to stronger demand in all key markets. The majority of Canpotex's volumes for the quarter were sold to Other Asian markets outside of China and India (36 percent) and Latin America (24 percent), while China and India accounted for 20 percent and 11 percent, respectively.

Despite a continued recovery in global spot prices during the first quarter, our average realized potash price of $166 per tonne was below the $178 per tonne realized in 2016's first quarter, as weaker prices in standard-grade markets more than offset higher prices in North America.

Increased production from our lower-cost mines - including Rocanville - resulted in average manufactured cost of goods sold for the quarter of $90 per tonne, down from $128 per tonne in the same period last year when we incurred suspension-related costs at Picadilly.

Nitrogen

In nitrogen, weaker prices and slightly lower sales volumes more than offset reduced per-tonne costs, resulting in gross margin of $97 million for the first quarter, down from $107 million in first-quarter 2016. Our US operations accounted for 55 percent of the quarter's nitrogen gross margin, with our operations in Trinidad providing the remainder.

Total sales volumes of 1.6 million tonnes for the quarter were down 6 percent compared to the same period in 2016, primarily due to lower industrial demand and seasonal weakness for nitrogen solutions.

Our average realized price of $229 per tonne during the quarter was down from $244 per tonne in the same period last year as increased global supply weighed on benchmark pricing for most products.

Cost of goods sold for the quarter averaged $170 per tonne, down from $182 per tonne in 2016's first quarter, as lower natural gas costs in Trinidad and smaller hedging losses more than offset increased gas costs in the US.

Phosphate

Weaker prices resulted in gross margin of $11 million for the quarter, significantly lower than the $39 million earned in 2016's first quarter.

First-quarter sales volumes of 0.6 million tonnes trailed last year's comparable total of 0.7 million tonnes, largely due to weaker demand for our liquid fertilizer products.

Our average realized phosphate price for the quarter was $423 per tonne, down from $499 per tonne in the same period last year, reflecting lower benchmark pricing for all our products.

Per-tonne cost of goods sold for the quarter was $406, down from $446 in the same quarter last year, primarily due to lower input costs and the absence of non-cash impairment charges ($27 million).

Financial

Provincial mining and other taxes for the quarter totaled $34 million, slightly higher than the $31 million in last year's corresponding period, largely due to higher potash earnings.

Income tax expense for the first quarter ($13 million) was down from the comparable period in 2016 ($32 million), primarily due to lower forecasted annual earnings in higher-tax jurisdictions.

Potash Market Outlook

Strong demand is expected to continue through the remainder of the year. We maintain our global shipments estimate of 61-64 million tonnes for 2017, above the approximately 60 million tonnes shipped in 2016, and expect supportive market fundamentals through the balance of this year.

In North America, we believe fertilizer affordability and the need to replenish soil nutrients following 2016's record harvest will contribute to healthy demand at the farm level. We maintain our full-year shipment expectation in the range of 9.3-9.8 million tonnes, consistent with our previous estimate.

In Latin America, we expect the affordability of nutrients to continue to support a positive demand environment. Factoring in robust deliveries during the first quarter, we have increased our estimate of full-year shipments to 11.7-12.2 million tonnes, exceeding 2016's total.

In China, healthy consumption levels driven by attractive crop prices and strong affordability relative to other nutrients have resulted in a drawdown of inventory levels. We continue to expect demand for the full year in the range of 14.5-15.5 million tonnes, above the approximately 14 million tonnes shipped in 2016.

In India, we have lowered our expected shipment range to 3.8-4.3 million tonnes for the year due to recent potash subsidy changes that are expected to result in higher retail prices for farmers.

In Other Asian markets, we expect improved moisture conditions and favorable economics for key crops such as oil palm to support demand in 2017. We have increased our estimated shipment range to 9.0-9.5 million tonnes for the full year, above 2016's total of approximately 9 million tonnes.

Financial Outlook

Taking the above market factors into consideration, we have raised the bottom end of our guidance ranges for potash sales volumes and gross margin to 8.9-9.4 million tonnes and $600-$800 million, respectively.

In nitrogen, we continue to expect that pressure from new US capacity will keep margins below those of the previous year. Similarly, we forecast phosphate profitability to be below 2016 levels as difficult market fundamentals are expected to weigh on realizations for our products. Given these considerations, we maintain our combined nitrogen and phosphate gross margin estimate of $150-$400 million in 2017.

Our effective income tax rate is anticipated to fall to a range of 2-5 percent, primarily due to a non-cash income tax provision recovery relating to provincial tax changes that will be realized in future years.

Selling and administrative expenses have been lowered and are now forecast in the range of $220-$230 million, while finance costs are now expected to be higher, in the range of $225-$235 million.

Additionally, income from equity investments is now anticipated in the range of $150-$170 million, above the previous guidance range.

We have revised our full-year foreign exchange rate assumption to CDN$1.33 per US dollar, slightly higher than previous guidance.

Based on these factors, we have increased our full-year 2017 earnings guidance to $0.45-$0.65 per share, including merger-related costs of $0.05 per share.

All annual guidance numbers - including those noted above - are outlined in the table below.

2017 Guidance
Annual earnings per share	$0.45-$0.65
Potash sales volumes	8.9-9.4 million tonnes
Potash gross margin	$600-$800 million
Nitrogen and phosphate gross margin	$150-$400 million
Capital expenditures*	~$600 million
Effective tax rate	2-5 percent
Provincial mining and other taxes**	17-20 percent
Selling and administrative expenses	$220-$230 million
Finance costs	$225-$235 million
Income from offshore equity investments***	$150-$170 million
Annual foreign exchange rate assumption	CDN$1.33 per US$
Annual EPS sensitivity to foreign exchange	US$ strengthens vs. CDN$ by $0.02 = +$0.01 EPS
Annual EPS sensitivity to potash exchange	Increases by $20 per tonne = +$0.14 EPS
* Does not include capitalized interest ** As a percentage of potash gross margin *** Includes income from dividends and share of equity earnings

Notes

1.	All references to per-share amounts pertain to diluted net income per share.
2.	Canpotex Limited (Canpotex), the offshore marketing company for PotashCorp and two other Saskatchewan potash producers.
3.	Agrium Inc.

PotashCorp is the world's largest crop nutrient company and plays an integral role in global food production. The company produces the three essential nutrients required to help farmers grow healthier, more abundant crops. With global population rising and diets improving in developing countries, these nutrients offer a responsible and practical solution to meeting the long-term demand for food. PotashCorp is the largest producer, by capacity, of potash and one of the largest producers of nitrogen and phosphate. While agriculture is its primary market, the company also produces products for animal nutrition and industrial uses. Common shares of Potash Corporation of Saskatchewan Inc. are listed on the Toronto Stock Exchange and the New York Stock Exchange.

For further information please contact:

Investors	Media
Denita Stann Senior Vice President, Investor and Public Relations Phone: [phone] Fax: [phone] E-mail Denita	Randy Burton Director, Public Relations and Communications Phone: [phone] Fax: [phone] E-mail Randy

This release contains 'forward-looking statements' (within the meaning of the US Private Securities Litigation Reform Act of 1995) or 'forward-looking information' (within the meaning of applicable Canadian securities legislation) that relate to future events or our future performance. These statements can be identified by expressions of belief, expectation or intention, as well as those statements that are not historical fact. These statements often contain words such as 'should,' 'could,' 'expect,' 'forecast,' 'may,' 'anticipate,' 'believe,' 'intend,' 'estimates,' 'plans' and similar expressions. These statements are based on certain factors and assumptions as set forth in this document, including with respect to: foreign exchange rates, expected growth, results of operations, performance, business prospects and opportunities, including the completion of the proposed merger of equals with Agrium, and effective tax rates. While we consider these factors and assumptions to be reasonable based on information currently available, they may prove to be incorrect. Forward-looking statements are subject to risks and uncertainties that are difficult to predict. The results or events set forth in forward-looking statements may differ materially from actual results or events. Several factors could cause our actual results or events to differ materially from those expressed in forward-looking statements including, but not limited to, the following: our proposed merger of equals transaction with Agrium, including the failure to satisfy all required conditions, including required regulatory approvals, or to satisfy or obtain waivers with respect to all other closing conditions in a timely manner and on favorable terms or at all; the occurrence of any event, change or other circumstances that could give rise to the termination of the arrangement agreement; certain costs that we may incur in connection with the proposed merger of equals; certain restrictions in the arrangement agreement on our ability to take action outside the ordinary course of business without the consent of Agrium; the effect of the announcement of the proposed merger of equals on our ability to retain customers, suppliers and personnel and on our operating future business and operations generally; risks related to diversion of management time from ongoing business operations due to the proposed merger of equals; failure to realize the anticipated benefits of the proposed merger of equals and to successfully integrate Agrium and PotashCorp; the risk that our credit ratings may be downgraded or there may be adverse conditions in the credit markets; the results of our impairment assessment regarding the carrying value of certain assets; 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 and petrochemical markets; changes in competitive pressures, including pricing pressures; risks and uncertainties related to any operating and workforce changes made in response to our industry and the markets we serve, including mine and inventory shutdowns; adverse or uncertain economic conditions and changes in credit and financial markets; economic and political uncertainty around the world; changes in capital markets; the results of sales contract negotiations within major markets; unexpected or adverse weather conditions; risks related to reputational loss; the occurrence of a major safety incident; inadequate insurance coverage for a significant liability; our inability to obtain relevant permits for our operations; catastrophic events or malicious acts, including terrorism; certain complications that may arise in our mining process, including water inflows; risks and uncertainties related to our international operations and assets; our ownership of non-controlling equity interests in other companies; our prospects to reinvest capital in strategic opportunities and acquisitions; risks associated with natural gas and other hedging activities; security risks related to our information technology systems; imprecision in reserve estimates; costs and availability of transportation and distribution for our raw materials and products, including railcars and ocean freight; changes in, and the effects of, government policies and regulations; earnings and the decisions of taxing authorities which could affect our effective tax rates; increases in the price or reduced availability of the raw materials that we use; our ability to attract, develop, engage and retain skilled employees; strikes or other forms of work stoppage or slowdowns; rates of return on, and the risks associated with, our investments and capital expenditures; timing and impact of capital expenditures; the impact of further innovation; adverse developments in pending or future legal proceedings or government investigations; and violations of our governance and compliance policies. These risks and uncertainties are discussed in more detail under the headings 'Risk Factors' and 'Management's Discussion and Analysis of Results and Operations and Financial Condition' in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016 and in other documents and reports subsequently filed by us with the US Securities and Exchange Commission and the Canadian provincial securities commissions. Forward-looking statements are given only as of the date hereof and we disclaim any obligation to update or revise any forward-looking statements in this release, whether as a result of new information, future events or otherwise, except as required by law.