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Source: Potash Corp. news release

To read the entire report click here.

Key Quarter and Outlook Highlights:

•First-quarter earnings of $0.56 per share

•Record first-quarter nitrogen gross margin of $219 million

•Second-quarter 2012 earnings guidance of $0.90-$1.10 per share

•Revised full-year 2012 earnings guidance of $3.20-$3.60 per share

Potash Corporation of Saskatchewan Inc. (PotashCorp) today reported first-quarter earnings of $0.56 per share ($491 million), which trailed the $0.84 per share ($732 million) in earnings during a record first quarter last year.

Gross margin for the quarter totaled $698 million, compared to the $1.1 billion generated in first-quarter 2011. The results largely reflected lower potash sales and production volumes, which resulted in higher costs. Buyers entered the year with the same cautious mindset they had when 2011 ended.

Earnings before finance costs, income taxes, and depreciation and amortization (EBITDA) of $813 million fell below the $1.1 billion earned in the first quarter of 2011, while cash flow prior to working capital changes of $625 million trailed the $899 million generated in the same period last year.

Our offshore investments in Arab Potash Company Ltd. (APC) in Jordan and Sociedad Quimica y Minera de Chile S.A. (SQM) in Chile contributed $72 million to our first-quarter earnings. The market value of our investments in these publicly traded companies, along with our positions in Israel Chemicals Ltd. (ICL) in Israel and Sinofert Holdings Limited (Sinofert) in China, equated to approximately $8.5 billion, or $10 per PotashCorp share at market close on April 25, 2012.

"Fertilizer buyers continued to move cautiously at the beginning of the year, especially with potash purchases, which impacted our performance during the quarter," said PotashCorp President and Chief Executive Officer Bill Doyle.

"Although we anticipated that an increase in global fertilizer purchasing would not take hold until the latter half of the first quarter, it took longer than we expected for demand to emerge. While the timing of that change was difficult to predict, the direction was not. We expect the acceleration in potash demand that began at the very end of the quarter will continue, supporting increased volumes through the remainder of the year."

Market Conditions

Buyers in all major potash markets were slow to commit to new purchases through most of the first quarter. Shipments from North American producers reflected this pause, declining 48 percent from the record level of last year's first quarter. While underlying consumption at the farm level was expected to be strong globally, most dealers chose to defer major purchasing decisions rather than build inventory.

In North America, distributors felt little pressure to act quickly in light of elevated producer inventories and greater availability of offshore product.

Offshore buyers slowed purchasing in the absence of new Chinese potash supply contracts and the deferral of shipments to India for previously contracted volumes with global suppliers.

Although potash prices avoided the pricing volatility of solid phosphate fertilizer and nitrogen products in previous months, they pulled back slightly on limited demand and increased competitive pressures. In this environment, many buyers focused on consuming inventory and awaited greater certainty before committing to new purchases.

By quarter-end, the global potash market strengthened. China settled new supply contracts late in March - including a contract between Canpotex Limited (Canpotex), the offshore marketing organization for Saskatchewan potash producers, and Sinofert. After this development and the gathering momentum of the North American planting season, customers in most major markets were actively securing new supply to satisfy pent-up demand for potash.

The North American solid phosphate market was impacted by similar caution among dealers, as domestic shipments of solid fertilizers declined from first-quarter 2011 levels. Shipments to offshore markets more than offset weak North American demand, largely as a result of strong movement to India, which had been limited in the first quarter of last year due to the early completion of contract deliveries. The slower demand environment that carried over from late 2011 resulted in solid phosphate fertilizer prices lower than in the first quarter of last year.

In nitrogen, purchasing patterns were markedly better than those of the other nutrients. After the general slowdown in fertilizer markets late in 2011, nitrogen buyers moved quickly to place new orders - buoyed by the prospect of large US corn plantings and concerned about product availability given a reduction in North American import volumes and certain unplanned domestic plant outages. These tight supply/demand fundamentals were most pronounced in urea, which pushed prices higher during the quarter.

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