PotashCorp - Scotiabank Agriculture, Fertilizers and Chemicals Conference - September 18, 2012

PotashCorp.com

Scotiabank Agriculture, Fertilizers and

Chemicals Conference

September 18, 2012

Wayne Brownlee

Executive Vice-President and CFO

This presentation contains forward-looking statements or forward-looking information (forward-looking statements). These statements can be identified by expressions of belief, expectation or intention, as well as those statements that are not historical fact. These statements are based on certain factors and assumptions including with respect to foreign exchange rates, 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 the forward-looking statements, including, but not limited to: 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, transportation and petrochemical markets; costs and availability of transportation and distribution for our raw materials and products, including railcars and ocean freight; changes in competitive pressures, including pricing pressures; adverse or uncertain economic conditions and changes in credit and financial markets; the results of sales contract negotiations with major markets; the European sovereign debt crisis and the recent downgrade of US sovereign debt and political concerns over budgetary matters; timing and impact of capital expenditures; risks associated with natural gas and other hedging activities; changes in capital markets and corresponding effects on the company’s investments; unexpected or adverse weather conditions; changes in currency and exchange rates; unexpected geological or environmental conditions, including water inflows; imprecision in reserve estimates; adverse developments in new and pending legal proceedings or government investigations; acquisitions we may undertake; strikes or other forms of work stoppage or slowdowns; changes in and the effects of, government policies and regulations; security risks related to our information technology systems; and earnings, exchange rates and the decisions of taxing authorities, all of which could affect our effective tax rates. Additional risks and uncertainties can be found in our Form 10-K for the fiscal year ended December 31, 2011 under the captions “Forward-Looking Statements” and “Item 1A – Risk Factors” and in our other filings with the US Securities and Exchange Commission and the Canadian provincial securities commissions. Forward-looking statements are given only as at the date of this presentation and the company disclaims any obligation to update or revise the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Forward-looking Statements

Potash Overview

SQM

ICL

APC

Nitrogen

Phosphate

(Mining/Processing)

Potash

Investments

Sinofert

Source: Fertecon; CRU; Blue, Johnson & Associates; PotashCorp

A Global Crop Nutrient Company

PotashCorp Profile

Potash Phosphate Nitrogen

% of Global Capacity 20% 5% 2%

Global Position #1 #3 #3

% of Gross Margin (2011) 64% 15% 21%

20042005

20062007

20082009

20102011

2012F*

0

1

2

3

4

5

6Potash GM Phosphate GM Nitrogen GM

2003 2004 2005 2006 2007 2008 2009 2010 20110%

10%

20%

30%

40%

50%PotashCorp CFR

* 2012F as at July 26, 2012

PercentageGross Margin - US$ Billions

Unique Potash Position Drives Earnings Growth and Strong Cash Flow Returns

PotashCorp Profile

CFR = Cash Flow Return

WACC = Weighted Average Cost of Capital

Source: PotashCorp

Agriculture Market Overview

Source: USDA, World Commodity Analysis Corporation, Doane, Brilliant Pioneer Consultants, PotashCorp

Less Than Ideal Conditions Have Impacted 2012 Crop Production Potential

Global Crop Condition

Rapid deterioration of US corn and soybean conditions.

Projected corn yield is the lowest since 1995

Dry conditions have reduced FSU crop expectations; Russian wheat exports could be down more than

60% in 2012/13

Brazil is gearing up for increased corn/soybean planting; need some

rain to get planting started

Indian monsoon rains have improved in recent weeks but

remain 8% below normal

Key Factors to Watch in 2012:• How will US corn and soybean demand be rationed• Uncertainty of FSU grain export supply• Planted area and crop conditions in Brazil • China corn and soybean import demand

Expect decent crops in Canada; heat and disease pressure

have impacted yields

Australian wheat production could be down more than 20% if dryness persists

Argentina expected to increase soybean acreage

19901992

19941996

19982000

20022004

20062008

20102012F

80

90

100

110

120

130

140

150

160

170

180

Source: USDA

2012F refers to the 2012/13 crop year

Corn Yield – Bushels per Acre

Projected Yield Expected To Be the Lowest in 17 Years

US Corn Yield

19721975

19781981

19841987

19901993

19961999

20022005

20082011

0

5

10

15

20

25

30

35

40

45

50Chart Title

2012F refers to the 2012/13 crop year

Share of World Corn Exports (Average 2007-2011)

52%

16%

10%

7%

15%

World Corn Stocks-to-Use (Percent)

Tightest Stocks Level Since 1973; US Drought Has Global Implications

World Corn Situation

Source: USDA

Other

Ukraine

Brazil

Argentina

US

Top Investor Questions: Will the US Drought Impact Fertilizer Demand?

Source: USDA, AAPFCO

Percentage Change

Fertilizer Use Increased in Majority of Fertilizer Years Following a Major Yield Decline

US Fertilizer Use Following Major Yield Declines

1970 1974 1980 1983 1988 1993 1995-40%

-30%

-20%

-10%

0%

10%

20%

30%

7%

-9%

3%

20%

0%

7% 4%

Change in US Fertilizer use (in following fertilizer year)

Year-over-Year Corn Yield Decline

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012F0

20

40

60

80

100

120

140

160

Source: USDA

US$ Billions

Higher Crop Prices and Insurance Payments Support Record Farm Income

US Net Cash Farm Income

Nov 2012 Nov 2013 Nov 20140

2

4

6

8

10

12

14

16

18

20

17.34

13.6313.0012.58

11.53 11.42

As of Sept 10 As of June 1

Source: Bloomberg

US$/bushel

Soybeans

US$/bushel

Corn

Prices Have Moved Higher in Response to Global Production Issues

US Crop Prices

Dec 2012 Dec 2013 Dec 20140

1

2

3

4

5

6

7

8

9

7.94

6.586.03

5.10 5.15 5.04

As of Sept 10 As of June 1

2013 Economics (Sept 10 vs June 1)$1.43/bu x 160 bu/acre

+ $229/acre

2013 Economics (Sept 10 vs June 1)$2.10/bu x 43 bu/acre

+ $90/acre

$4.00

$5.00

$6.00

$7.00

$8.00

0

2

4

6

8

10

12

14

16

1810- year high

10- year low

$4.00

$5.00

$6.00

$7.00

$8.00

0

2

4

6

8

10

12

14

16

18

10- year high

10- year low

$4.00 $5.00 $6.00 $7.00 $8.00 0

2

4

6

8

10

12

14

16

18

10- year high

10- year low

Source: USDA, DTN, PotashCorp

Percent

Potash

Percent

Phosphate

Percent

Nitrogen

P & K Costs Account for Small Percentage of Projected Corn Revenue

Fertilizer Cost Percentage of US Corn Revenue

Based on DTN reported retail fertilizer prices as of September 7, 2012

US$/bushel US$/bushel US$/bushel

Top Investor Questions: How Can Demand Grow In 2013?Fertilizer Market Update

Source: Fertecon, CRU, Industry Publications, PotashCorp

* Based on PotashCorp estimate

** Excluding India

2011 India Distributor Destocking*

Consumption Growth**

2012F46

48

50

52

54

56

58

60

Million Tonnes KCl

Inventory Destocking and Lower Indian Imports Affect Demand in 2012

World Potash Demand


Million Tonnes KCl

Scenario #2

2012F India North America

Other 2013F48

50

52

54

56

58

60

62

Million Tonnes KCl

Scenario #1

Expect Strong Demand Rebound in 2013

World Potash Shipments

2012F India North America

Other 2013F48

50

52

54

56

58

60

62


12F

13F

Rec

ord

12F

13F

Rec

ord

12F

13F

Rec

ord

12F

13F

Rec

ord

12F

13F

Rec

ord

12F

13F

Rec

ord

0

2

4

6

8

10

12

14

Million Tonnes KCl

Expect Strong Rebound in 2013

World Potash Shipments

India China Latin America

Other Asia

North America

Other

Source: USDA, Fertecon

• Crop production flat over the past four years despite increased global acreage

• Adverse weather has impacted crop production but we believe reduced potash applications have played a role

• Adequate soil potassium levels are most important in years with adverse growing conditions

20002001

20022003

20042005

20062007

20082009

20102011

2012F1.0

1.1

1.2

1.3

1.4

1.5

1.6

1.7

1.8

1.9

2.0

0.1

0.3

Grain Production K:N Ratio

Grain Production – Billion Tonnes

Balanced Fertilization is Essential to Long-Term Crop Production Growth

World Grain Production and Fertilizer Application Balance

K:N Ratio

Jan

FebM

arApr

May

Jun Ju

lAug

SepO

ctNov

Dec0

200

400

600

800

1,000

1,2002012 2011

Source: Potafertz

• South American farmers will have first opportunity to respond to significant increase in crop economics

• Expect record Brazilian fertilizer consumption in 2012

• After slow start in first-quarter 2012, expect record potash imports through remainder of year

Million Tonnes KCl

KCl Imports - Brazil

Import Pace Has Picked Up to Meet Strong Anticipated Application Season

Latin America Market Update

• Higher global crop prices and strong domestic demand driving up China’s food import costs

• Opportunity to increase domestic crop productivity with more balanced nutrient application

• Expect strong long-term growth in Chinese potash demand

US$ Billions

Import Cost

Higher Prices and Demand Drive Up Food Import Costs; KCl Fraction of Cost

China Market Update

2004 2005 2006 2007 2008 2009 2010 2011 2012F0

5

10

15

20

25

30

35

40Soybeans Corn KCl

Source: Bloomberg, Industry Publications, PotashCorp

20022003

20042005

20062007

20082009

20102011 2

0

1

2

3

4

5 Chart Title

Source: Fertecon

• Rising regional food demand and supportive crop prices have driven significant potash consumption growth

• Potash distributor inventories have been drawn down from elevated levels at the end of 2011

• We expect growth in potash shipments in 2013 due to anticipated higher consumption and reduced inventories

Million Tonnes K2O

Potash Fertilizer Consumption

Expect Continued Steady Consumption Growth

Other Asia Market Update

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012F

40

50

60

70

80

90

100

110

0.00

0.05

0.10

0.15

0.20

0.25

0.30Rice Production K:N Ratio

Source: USDA, Fertecon

• India’s rice yields are more than 20% below those in the rest of Asia

• Reduced potash applications over past two years is not agronomically sustainable

• Expect rebound in potash shipments in 2013; magnitude will depend on potential crop production issues and government policy

Million Tonnes

Rice Production

Crop Production was Improving with more Balanced Fertilization

India Market Update

2001/02

2002/03

2003/04

2004/05

2005/06

2006/07

2007/08

2008/09

2009/10

2010/11

2011/120

2

4

6

8

10

12Domestic Shipments Offshore Imports

Total Potash Consumption

Source: Fertecon, AAPFCO, TFI, PotashCorp

• Domestic dealers entered the 2012/13 fertilizer year with limited inventory

• US farm income projected at record levels; very supportive crop prices

• Farmers have mined soil potassium banks over the past decade; reflected in soil test results

Million Tonnes KCl

Anticipate Strong Demand Given Low Dealer Inventories

North American Market Update

Top Investor Questions: Looming Capacity Overhang?

Source: AMEC, Company Reports, PotashCorp

* New Brunswick cost per tonne based on new 2MMT mine (net addition totals 1.2MMT).

** Based on 2MMT conventional greenfield mine constructed in Saskatchewan.

PotashCorp project costs exclude infrastructure outside the plant gate.

Assuming US$/CDN$ at par

POT Projects Completed

POT Projects in Progress*

MOS Projects in Progress

AGU Project SK Green-field**

0

500

1,000

1,500

2,000

2,500

3,000

3,500Greenfield (Excluding infrastructure and reserve costs)

Greenfield (Including infrastructure and reserve costs)

Capital Cost per Tonne

New Projects are Increasingly Expensive and Complex to Complete

Saskatchewan Brownfield & Greenfield Potash Costs

2012F Total 2013F 2014F 2015F 2016F 2016F Total0

10

20

30

40

50

60

70

80Operational Capability Additions

Source: Fertecon, CRU, IFA, PotashCorp

* Based on percentage of operational capability (estimated annual achievable production level).

Million Tonnes KCl

Based on Public Announcements ~13 Million Tonnes of New Operational Capability

World Potash Supply Estimates

2009 2010 20110

2

4

6

8

10Actual Capacity Additions Forecast Capacity Additions*

Source: Industry Publications

* Based on percentage of operational capability (estimated annual achievable production level).

Million Tonnes KCl

Historical Overestimation of Capacity Additions

Industry Consultant Potash Capacity Outlook

Cumulative Capacity Additions

PotashCorp: Our Value Argument

Source: Bloomberg, PotashCorp

Disclaimer: Historical share price information is not indicative of future performance and is not necessarily correlated to the metrics provided herein.

* As of the end of June 30

Series10

5

10

15

20

25

30

35

40

45

50

Share Price - US$

Significant Potential: We Believe Share Price Has Yet to Fully Reflect Fundamentals

PotashCorp Share Price (Then and Now)

August 16, 2010:

• Corn = $4.27/bu

• Global Potash Consumption (2010) = ~50mmt

• POT Q2 Netback* = ~$309/mt

• POT remaining CAPEX = ~$4.3 billion*

September 11, 2012:

• Corn = $7.99/bu

• Global Potash Consumption (2012E) = ~54mmt

• POT Q2 Netback* = ~$433/mt

• POT remaining CAPEX = ~$1.9 billion*

1 2

1

2

Source: Bloomberg, PotashCorp

* As at September 10, 2012

** As at June 30, 2012

Market Value* Total Contribution to Earnings Since

Purchased**

0

1

2

3

4

5

6

7

8

9

10

Billions - US$

Significant Financial and Strategic Value

PotashCorp Investments Profile

APC (28% ownership):• ~2.5-million tonnes of potash capacity (~4% of global capacity)

• Board (3/13 members) and Mgmt representation (4 members)

SQM (32% ownership):• ~2.0-million tonnes of potash capacity (~3% of global capacity)

• Board representation (3/8 members)

ICL (14% ownership):• ~6-million tonnes of potash capacity (~9% of global capacity)

• No Board or Mgmt representation

Sinofert (22% ownership):• Distributes nearly 50% of total potash in China

• Board representation (2/7 members)

1

2

3

4

Total Contribution to Earnings Since

Purchased**

Source: PotashCorp

* Excluding capitalized interest and major repairs and maintenance

** Scenario One: assumes flat cash flow from 2012F (based on July 26, 2012 earnings guidance)

*** Scenario Two: assumes 10% growth in potash cash gross margin from 2012F (based on July 26, 2012 earnings guidance

2006 2007 2008 2009 2010 2011 2012F 2013F 2014F 2015F0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500 Capital Expenditures Estimates* Scenario One** Scenario Two***

US$ Millions

Cash Flow Expected to Remain Strong

PotashCorp Capital Spending and Cash Flow

Source: PotashCorp

Focused on Using Free Cash Flow to Drive Long-Term Shareholder Value

Historical Cash Flow Deployment

Opportunity Capital

$6.6 Billion since 2003

5-Year Average CFR = 24.3%

Equity Investments


Current Market Value* = $9.2 billion

Share Repurchases


Average purchase price = $26/share

Dividend Payments


Increased dividend 3x since January 2011

* As at September 11, 2012

Source: PotashCorp

Focused on Using Free Cash Flow to Drive Long-Term Shareholder Value

Future Cash Flow Priorities

2012 2013 2014 2015 2016

Potential: Dividend Increases / Share Buybacks / M&A

Potash Brownfield Projects (Announced)

Phosphate & Nitrogen Brownfield Projects (Announced)

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PotashCorp - Scotiabank Agriculture, Fertilizers and Chemicals Conference - September 18, 2012

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Transcript of PotashCorp - Scotiabank Agriculture, Fertilizers and Chemicals Conference - September 18, 2012