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PotashCorp - Citi Basic Materials Symposium - November 28, 2012

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  • 1. Citi BasicMaterialsSymposiumNovember 28, 2012Wayne BrownleeExecutive VP and CFO PotashCorp.com
  • 2. Forward-looking StatementsThis presentation contains forward-looking statements or forward-looking information (forward-looking statements). Thesestatements can be identified by expressions of belief, expectation or intention, as well as those statements that are nothistorical fact. These statements are based on certain factors and assumptions including with respect to: foreign exchangerates, 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 theforward-looking statements, including, but not limited to: variations from our assumptions with respect to foreign exchangerates, 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 oftransportation and distribution for our raw materials and products, including railcars and ocean freight; changes incompetitive pressures, including pricing pressures; adverse or uncertain economic conditions and changes in credit andfinancial markets; the results of sales contract negotiations with major markets; economic and political uncertainty aroundthe world, including the European sovereign debt crisis; timing and impact of capital expenditures; risks associated withnatural gas and other hedging activities; changes in capital markets and corresponding effects on the company’sinvestments; unexpected or adverse weather conditions; changes in currency and exchange rates; unexpected geologicalor environmental conditions, including water inflows; imprecision in reserve estimates; adverse developments in new andpending legal proceedings or government investigations; acquisitions we may undertake; strikes or other forms of workstoppage or slowdowns; changes in, and the effects of, government policies and regulations; security risks related to ourinformation technology systems; and earnings, exchange rates and the decisions of taxing authorities, all of which couldaffect our effective tax rates. Additional risks and uncertainties can be found in our Form 10-K for the fiscal year endedDecember 31, 2011 under the captions “Forward-Looking Statements” and “Item 1A – Risk Factors” and in our other filingswith the US Securities and Exchange Commission and the Canadian provincial securities commissions. Forward-lookingstatements are given only as at the date of this release and the company disclaims any obligation to update or revise theforward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
  • 3. Potash Phosphate Nitrogen % of Global Capacity 20% 5% 2%PotashCorp Profile Global Position % of Gross Margin (2011) #1 64% #3 15% #3 21%A Global Crop Nutrient Company Sinofert APC ICL Potash Phosphate (Mining/Processing) Nitrogen Investments SQM Source: Fertecon; CRU; Blue, Johnson & Associates; PotashCorp
  • 4. PotashCorp ProfileUnique Potash Position Drives Earnings Growth Gross Margin by Segment Gross Margin Percentage of Net SalesUS$ Billions Percent – Sept 2012 YTD Potash GM Phosphate GM Nitrogen GM6 70%5 60% 50%4 40%3 30%2 20%1 10%0 0% 2004 2006 2008 2010 2012F* Potash Phosphate Nitrogen * 2012F as at October 25, 2012 Source: PotashCorp
  • 5. Top Investor Questions: US Potash and Phosphate Demand
  • 6. North American Market Update Affordability of Fertilizer Remains Extremely Strong US Corn and Retail Fertilizer Prices 2013 Return Over Variable Costs ScenariosPrice Index (January 2011 = 100) US$/Acre170 1,000 Corn Potash DAP Urea 2013F 10-Year Average160150 800140 600130120 400 110100 200 90 80 0 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 $4 $5 $6 $7 Corn Price Scenarios - $/bushel Source: DTN, Bloomberg, USDA, PotashCorp
  • 7. North American Potash Market UpdateAnticipate North American Demand Will Remain Robust Million Tonnes KCl Shipments Jul-Dec Shipments Jan-Jun Consumption 12 10 8 6 4 2 0 2004/05 2006/07 2008/09 2010/11 2012/13F Source: IPNI, USDOC, AAPFCO, PotashCorp
  • 8. US Phosphate Market UpdateSpring Demand Expected to Be Strong Shipments - Million Tons DAP/MAP Fertilizer Consumption – Million Tons P205 Shipments Jul-Dec Shipments Jan-Jun Fertilizer Consumption 8 5 7 4 6 5 3 4 3 2 2 1 1 0 0 2004/05 2006/07 2008/09 2010/11 2012/13F Source: TFI, AAPFCO, PotashCorp
  • 9. Top Investor Questions: Indian Potash Demand
  • 10. Indian Fertilizer Subsidies Government Actions Counter to Agronomic Needs… Fertilizer Subsidies Percentage of Indian Fertilizer SubsidyUS$ Subsidy per Product Tonne Potash500450 DAP 11%400 Potash350300 Phosphate 20%250 Urea200150100 69% Nitrogen 50 0Nov 19, 2010 Mar 9, 2011 May 5, 2011 April 1, 2012 Note: Rupee to US$ conversion is at the rate of 46 Rupees per US$ for 2010-11 and 50 for 2012 Source: Fertecon, India Department of Fertilizers, PotashCorp
  • 11. India Potash SituationDespite Supportive Economics, Subsidy “Shock” Has Impacted Potash Demand Return on Potash Fertilizer Return Per Dollar Spent 14 2010 2012 12 10 8 6 4 2 0 Rice Wheat Source: IPNI, PotashCorp
  • 12. India Potash Situation Crop Production is Impacted by Poor Fertilization Practices Potash Consumption and Fertility Imbalance Crop Production*Million Tonnes of K20 N:K Ratio Tonnes of Grain Produced Per Tonne of Fertilizer Use4.0 Potash Fertilizer Consumption N:K Ratio 9 353.5 8 30 73.0 25 62.5 5 202.0 4 151.5 3 101.0 20.5 5 10.0 0 0 2002 2004 2006 2008 2010 2012F India World US * Based on 2011/12 crop year Source: Fertecon, USDA, PotashCorp
  • 13. India Potash SituationLimited Inventory Expected to act as Catalyst for Demand in 2013 Year End Inventory Millions Tonnes of KCL 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 2011 2012F Source: Canpotex, PotashCorp
  • 14. India Potash Import and N:K Ratio ScenariosStrong Imports Required to Move Toward Proper Nutrient Balance N:K Ratio 10 10-Year High (2012) 8 6 10-Year Low (2010) 4 2 0 4 mmt 5.5 mmt 7 mmt 2013 Potash Import Scenarios Source: Fertecon, PotashCorp
  • 15. Top Investor Questions: Potash S&D Outlook
  • 16. World Potash ShipmentsExpect Strong Rebound in 2013 Million Tonnes KCl 14 12 10 8 6 4 2 0 India China Other Latin North Other Asia America America Source: Fertecon, CRU, Industry Publications, PotashCorp
  • 17. Potash Consumption TrendsLong-term Trends Support Rising Demand OutlookCumulative Annual Growth Rate • 1962-2007: Long-term growth rate5.0 excluding global financial collapse • 1962-2012: Long-term growth rate4.0 including global financial collapse3.0 • 1993-2007: Period of growth following collapse of FSU - excludes global financial collapse2.0 • 1993-2012: Period of growth following1.0 collapse of FSU - includes global financial collapse0.0 • 2001-2007: Strong period of offshore 1962-2007 1962-2012 1993-2007 1993-2012 2001-2007 growth fueled by rising demand for food Source: Fertecon, IFA, PotashCorp
  • 18. World Potash ShipmentsSlower Demand Periods Have Historically Been Followed by Robust Growth Million Tonnes KCl 60 5.3% CAGR 50 6.5% 40 CAGR 30 20 10 0 Source: Fertecon, PotashCorp
  • 19. Global Potash Operational Capability*PotashCorp Represents Majority of New Capability Coming Online Million Tonnes KCl 78 74 70 66 62 58 54 50 2012F POT Other NA FSU Middle East Other 2016F * Estimated annual achievable production level from existing operations; announced probable and possible projects; assuming typical ramp-up periods for new capacity. Probable and possible projects based on PotashCorp’s view of project probabilities. Source: Fertecon, CRU, Public Filings, PotashCorp
  • 20. World Potash Supply/DemandStrong Operating Rates Expected in Coming Years Million Tonnes KCl Operating Rate* - Percent Shipment Range Shipments 80 Operational Capability Operating Rate 100 70 90 60 80 50 40 70 30 60 20 50 10 0 40 2002 2004 2006 2008 2010 2012F 2014F 2016F • Based on percentage of operational capability (estimated annual achievable production level). • Operating rate forecast based on mid-point of shipment range divided by operational capability (including announced projects; assuming typical ramp-up period for new capacity). Source: Fertecon, CRU, IFA, PotashCorp
  • 21. Top Investor Questions: Nitrogen Position and Expansion Potential
  • 22. Nitrogen Product Pricing and Product Mix PotashCorp Benefiting From Strong Ammonia Pricing Spot Price 2012 YTD Nitrogen Product Mix US$/tonne Ammonia Urea Solutions/NA/AN Urea (FOB NOLA) Ammonia (CFR Tampa)800700600 37%500 40%400300200100 23% 0 Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 As of October 30, 2012 Source: IPNI, DTN, USDA, Bloomberg, PotashCorp
  • 23. US Ammonia Capacity by LocationStrengthening our Nitrogen Position Through Capacity Additions Ammonia Production – Million Tonnes • Geismar – Ammonia plant restart will Current Capacity Additions bring on 500,000 mt of capacity in early 0.9 2013 0.8 0.7 • Augusta – Additional 70,000 mt added 0.6 in October 2012 0.5 • Lima – Currently evaluating potential 0.4 options for capacity additions 0.3 0.2 0.1 0.0 Augusta Geismar Lima As of October 30, 2012 Source: PotashCorp
  • 24. Trinidad Gas Cost Indexed to AmmoniaLinear Relationship with Ammonia Provides a Natural Hedge Estimated Gas Cost – US$ Per MMBtu • Each Trinidad plant operates under a 12 separate gas contract 10 • Currently negotiating most recently 8 expired gas contract. A second gas contract expires in 2013 6 • Lower gas prices in the US likely to 4 influence negotiations 2 0 200 300 400 500 600 700 800 900 1,000 Ammonia Price – US$ Per Tonne As of October 30, 2012 Source: PotashCorp
  • 25. Nitrogen Gross Margin by CountryStrong Contributions From US and Trinidad Facilities Gross Margin – US$ Millions Gas Cost – US$ Per MMBtu Trinidad US Gas Price 200 6 180 5 160 140 4 120 100 3 80 2 60 40 1 20 0 0 Q1-2010 Q3-2010 Q1-2011 Q3-2011 Q1-2012 Q3-2012 Source: PotashCorp
  • 26. Top Investor Questions: Use of Future Cash Flow
  • 27. Cash Flow From Operating Activities* (Q3 YTD)Generating Strong Operating Cash Flow US$ Millions 3,000 2,500 2,000 1,500 1,000 500 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 * See selected Non-IFRS Financial Measures and Reconciliations in our 10-Q at www.potashcorp.com Source: PotashCorp
  • 28. PotashCorp Capital SpendingMajor Potash Expansion Program Over 80 Percent Complete US$ Millions 2,500 2,000 1,500 1,000 500 0 2006 2007 2008 2009 2010 2011 2012F 2013F 2014F 2015F * Excluding capitalized interest and major repairs and maintenance Source: PotashCorp
  • 29. Future Cash Flow PrioritiesFocused on Using Free Cash Flow to Drive Long-Term Shareholder Value2012 2013 2014 2015 2016 Potential: Dividend Increases / Share Buybacks / M&A Potash Projects (announced brownfields) Nitrogen Projects (announced brownfields) Source: PotashCorp
  • 30. PotashCorp Dividend Per Share*Dividend More Than Six-Times That of January 2011 Level US$ Per Share $0.25 $0.21 $0.20 $0.15 $0.14 $0.14 $0.10 $0.07 $0.07 $0.07 $0.07 $0.05 $0.03 $0.00 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 * Dividends declared each quarter As of October 30, 2012 Source: Bloomberg
  • 31. Historical Cash Flow DeploymentFocused on Using Free Cash Flow to Drive Long-Term Shareholder Value Equity Investments Opportunity Capital $7.6 Billion since 2003 $2.0 Billion since 1998 Current Market Value2 = $8.9 billion 5-Year Average CFR1 = 24.3% Contributions from Investments3 = $2.2 billion Share Repurchases Dividend Payments $6.3 Billion since 1999 $1.2 Billion since 2002 Average purchase price = $26/share Now 6x higher than January 2011 dividend Current share price2 = $39/share 1 CFR = Cash Flow Return (see selected Non-IFRS Financial Measures and Reconciliations in our Annual Report available at www.potashcorp.com) 2 As at November 25, 2012 3 Proceeds from investments include dividends and share of equity earnings from original purchase date to Sept 30, 2012 Source: PotashCorp
  • 32. Thank youThere’s more online: PotashCorp.com Visit us online Facebook.com/PotashCorp Find us on Facebook Twitter.com/PotashCorp Follow us on Twitter