##### Table of Contents









SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




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FORM 10-Q



|  |                                                                                            
|- | -------------------------------------------------------------------------------------------
|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended
September 30, 2003

OR



|  |                                                                                             
|- | --------------------------------------------------------------------------------------------
|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-10351

POTASH CORPORATION OF SASKATCHEWAN
INC.

(Exact name of registrant as specified in its
charter)


|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|Canada                                                             |  | N/A                                     
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer
    Identification No.)
|                                                                  
|122  1st Avenue South                                             |  | S7K 7G3                                 
|Saskatoon, Saskatchewan, Canada                                    |  | (Zip Code)                              
|(Address of principal executive
    offices)                       |  |                                         

306-933-8500

(Registrants telephone number, including
area code)


Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by
Sections 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the
past 90 days.

YES x  NO o

Indicate by check mark whether the registrant is
an accelerated filer (as defined in Exchange Act
Rule 12b-2).

YES x  NO o

APPLICABLE ONLY TO CORPORATE
ISSUERS:

Indicate
the number of shares outstanding of each of the issuers
classes of common stock, as of the latest practicable date.

As at
October 31, 2003, Potash Corporation of Saskatchewan Inc.
had 52,484,816 Common Shares outstanding.



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TABLE OF CONTENTS



|                                                                                                                |                               |                                                                                               |  |  |  |  |  | 
|--------------------------------------------------------------------------------------------------------------- | ----------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  | 
|                                                                                                                | PART I. FINANCIAL INFORMATION
|                                                                                                                |                               | ITEM 1. FINANCIAL STATEMENTS                                                                 
|Potash Corporation of Saskatchewan Inc.                                                                        
|Notes to the Consolidated Financial Statements (in millions of US dollars except per share amounts) (unaudited)
|                                                                                                                |                               | ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
|                                                                                                                |                               | ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                           
|                                                                                                                |                               | ITEM 4. CONTROLS AND PROCEDURES                                                              
|                                                                                                                | PART II. OTHER INFORMATION   
|                                                                                                                |                               | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                                                                                                     
|EXHIBIT INDEX                                                                                                  
|Exhibit 4(b)                                                                                                   
|Exhibit 10(s)                                                                                                  
|Exhibit 11                                                                                                     
|Exhibit 31                                                                                                     
|Exhibit 32                                                                                                     



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##### Table of Contents






PART I.     FINANCIAL
INFORMATION






ITEM
1.     FINANCIAL
STATEMENTS


These interim consolidated financial statements
do not include all disclosures normally provided in annual
consolidated financial statements and should be read in
conjunction with the most recent annual consolidated financial
statements. In managements opinion, the unaudited
consolidated financial information includes all adjustments
(consisting solely of normal recurring adjustments) necessary to
present fairly such information. Interim results are not
necessarily indicative of the results expected for the fiscal
year.

Potash Corporation of Saskatchewan
Inc.

Consolidated Statements of Operations and
Retained Earnings

(in millions of US dollars except per share
amounts)


(unaudited)


|                                           |         |                    |        |                   |   |      |       |      |  |   |         |       |   |   |         |      | 
|------------------------------------------ | ------- | ------------------ | ------ | ----------------- | - | ---- | ----- | ---- |  | - | ------- | ----- | - | - | ------- | ---- | 
|                                           |         |                    |        |                  
|                                           |         | Three Months Ended |        | Nine Months Ended
|                                           |         | September 30       |        | September 30     
|                                           |         | 2003               |        | 2002              |   | 2003 |       | 2002
|                                          
|                                          
|Net sales                                  |         | $                  | 590.4  |                   |   | $    | 458.9 |      |  | $ | 1,821.8 |       |   | $ | 1,416.2 |     
|Cost of goods sold                         |         |                    | 505.9  |                   |   |      | 383.8 |      |  |   | 1,533.9 |       |   |   | 1,172.7 |     
|                                          
|Gross Margin                               |         |                    | 84.5   |                   |   |      | 75.1  |      |  |   | 287.9   |       |   |   | 243.5   |     
|                                          
|Selling and administrative                 |         |                    | 24.2   |                   |   |      | 21.8  |      |  |   | 71.8    |       |   |   | 68.6    |     
|Provincial mining and other taxes          |         |                    | 12.2   |                   |   |      | 15.2  |      |  |   | 45.1    |       |   |   | 55.2    |     
|Provision for plant shutdowns (Note 4)     |         |                    | 121.5  |                   |   |      |      |      |  |   | 123.7   |       |   |   |        |     
|Provision for PCS Yumbes S.C.M. (Note 5)   |         |                    | 140.5  |                   |   |      |      |      |  |   | 140.5   |       |   |   |        |     
|Foreign exchange loss (gain)               |         |                    | 2.2    |                   |   |      | (5.0  | )    |  |   | 41.5    |       |   |   | 5.9     |     
|Other income                               |         |                    | (5.2   | )                 |   |      | (1.2  | )    |  |   | (21.6   | )     |   |   | (10.0   | )   
|                                          
|                                           |         |                    | 295.4  |                   |   |      | 30.8  |      |  |   | 401.0   |       |   |   | 119.7   |     
|                                          
|Operating (Loss) Income                    |         |                    | (210.9 | )                 |   |      | 44.3  |      |  |   | (113.1  | )     |   |   | 123.8   |     
|Interest Expense                           |         |                    | 24.6   |                   |   |      | 21.5  |      |  |   | 67.2    |       |   |   | 62.5    |     
|                                          
|(Loss) Income Before Income Taxes          |         |                    | (235.5 | )                 |   |      | 22.8  |      |  |   | (180.3  | )     |   |   | 61.3    |     
|Income Taxes (Note 6)                      |         |                    | (49.6  | )                 |   |      | 8.3   |      |  |   | (27.5   | )     |   |   | 22.1    |     
|                                          
|Net (Loss) Income                          |         | $                  | (185.9 | )                 |   | $    | 14.5  |      |  |   | (152.8  | )     |   |   | 39.2    |     
|                                           |         |                    |        |                   |   |      |       |      |  |  
|Retained Earnings, Beginning of
    Period |         |                    |        |                   |   |      |       |      |  |   | 641.4   |       |   |   | 639.8   |     
|Dividends                                  |         |                    |        |                   |   |      |       |      |  |   | (39.1   | )     |   |   | (39.0   | )   
|                                          
|Retained Earnings, End of Period           |         |                    |        |                   |   |      |       |      |  | $ | 449.5   |       |   | $ | 640.0   |     
|                                          
|Net (Loss) Income Per Share
    (Note 7)   |         |                    |        |                   |   |      |       |      |  |   |         |       |   |   |         |     
|                                           | Basic   |                    | $      | (3.57             | ) |      | $     | 0.28 |  |   | $       | (2.93 | ) |   | $       | 0.75 | 
|                                           | Diluted |                    | $      | (3.57             | ) |      | $     | 0.28 |  |   | $       | (2.93 | ) |   | $       | 0.75 | 
|                                          
|Dividends Per Share                        |         | $                  | 0.25   |                   |   | $    | 0.25  |      |  | $ | 0.75    |       |   | $ | 0.75    |     
|                                          

(See Notes to the Consolidated Financial
Statements)

2



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##### Table of Contents



Potash Corporation of Saskatchewan
Inc.

Consolidated Statements of Financial
Position

(in millions of US dollars)


|                                                                                                                                                                               |                                      |               |         |              |  |   |         |       | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | ------------------------------------ | ------------- | ------- | ------------ |  | - | ------- | ----- | 
|                                                                                                                                                                               |                                      | September 30, |         | December 31,
|                                                                                                                                                                               |                                      | 2003          |         | 2002        
|                                                                                                                                                                              
|                                                                                                                                                                              
|                                                                                                                                                                               |                                      | (unaudited)   |         |             
|Assets                                                                                                                                                                         |                                      |               |         |              |  |   |         |      
|Current Assets                                                                                                                                                                 |                                      |               |         |              |  |   |         |      
|                                                                                                                                                                               | Cash and cash equivalents            |               | $       | 57.9         |  |   | $       | 24.5  | 
|                                                                                                                                                                               | Accounts receivable                  |               |         | 290.7        |  |   |         | 267.8 | 
|                                                                                                                                                                               | Inventories (Note 3)                 |               |         | 458.7        |  |   |         | 499.3 | 
|                                                                                                                                                                               | Prepaid expenses                     |               |         | 30.9         |  |   |         | 40.4  | 
|                                                                                                                                                                              
|                                                                                                                                                                               |                                      |               | 838.2   |              |  |   | 832.0   |      
|Property, plant and equipment                                                                                                                                                  |                                      |               | 3,086.9 |              |  |   | 3,269.9 |      
|Goodwill                                                                                                                                                                       |                                      |               | 97.0    |              |  |   | 97.0    |      
|Other assets                                                                                                                                                                   |                                      |               | 423.9   |              |  |   | 486.7   |      
|                                                                                                                                                                              
|                                                                                                                                                                               |                                      | $             | 4,446.0 |              |  | $ | 4,685.6 |      
|                                                                                                                                                                              
|Liabilities                                                                                                                                                                    |                                      |               |         |              |  |   |         |      
|Current Liabilities                                                                                                                                                            |                                      |               |         |              |  |   |         |      
|                                                                                                                                                                               | Short-term debt                      |               | $       | 143.4        |  |   | $       | 473.0 | 
|                                                                                                                                                                               | Accounts payable and accrued charges |               |         | 362.2        |  |   |         | 347.0 | 
|                                                                                                                                                                               | Current portion of long-term debt    |               |         | 3.4          |  |   |         | 3.4   | 
|                                                                                                                                                                              
|                                                                                                                                                                               |                                      |               | 509.0   |              |  |   | 823.4   |      
|Long-term debt                                                                                                                                                                 |                                      |               | 1,269.2 |              |  |   | 1,019.9 |      
|Future income tax liability                                                                                                                                                    |                                      |               | 467.7   |              |  |   | 468.9   |      
|Accrued post-retirement/post-employment benefits                                                                                                                               |                                      |               | 206.7   |              |  |   | 195.4   |      
|Accrued reclamation costs                                                                                                                                                      |                                      |               | 81.1    |              |  |   | 80.0    |      
|Other non-current liabilities and deferred credits                                                                                                                             |                                      |               | 6.2     |              |  |   | 5.5     |      
|                                                                                                                                                                              
|                                                                                                                                                                               |                                      |               | 2,539.9 |              |  |   | 2,593.1 |      
|                                                                                                                                                                              
|Shareholders Equity                                                                                                                                                           |                                      |               |         |              |  |   |         |      
|Share Capital                                                                                                                                                                  |                                      |               | 1,192.4 |              |  |   | 1,186.9 |      
|Unlimited authorization of common shares without
    par value; issued and outstanding 52,188,916 and 52,077,648 at
    September 30, 2003 and December 31, 2002, respectively |                                      |               |         |              |  |   |         |      
|Contributed Surplus                                                                                                                                                            |                                      |               | 264.2   |              |  |   | 264.2   |      
|Retained Earnings                                                                                                                                                              |                                      |               | 449.5   |              |  |   | 641.4   |      
|                                                                                                                                                                              
|                                                                                                                                                                               |                                      |               | 1,906.1 |              |  |   | 2,092.5 |      
|                                                                                                                                                                              
|                                                                                                                                                                               |                                      | $             | 4,446.0 |              |  | $ | 4,685.6 |      
|                                                                                                                                                                              

(See Notes to the Consolidated Financial
Statements)

3



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##### Table of Contents



Potash Corporation of Saskatchewan
Inc.

Consolidated Statements of Cash Flow

(in millions of US dollars)


(unaudited)


|                                                                  |                                                            |                    |        |                   |   |      |       |       |   |   |        |       |   |   |        |       |  
|----------------------------------------------------------------- | ---------------------------------------------------------- | ------------------ | ------ | ----------------- | - | ---- | ----- | ----- | - | - | ------ | ----- | - | - | ------ | ----- | -
|                                                                  |                                                            |                    |        |                  
|                                                                  |                                                            | Three Months Ended |        | Nine Months Ended
|                                                                  |                                                            | September 30       |        | September 30     
|                                                                  |                                                            | 2003               |        | 2002              |   | 2003 |       | 2002 
|                                                                 
|                                                                 
|Operating Activities                                              |                                                            |                    |        |                   |   |      |       |       |   |   |        |       |   |   |        |      
|Net (loss) income                                                 |                                                            | $                  | (185.9 | )                 |   | $    | 14.5  |       |   | $ | (152.8 | )     |   | $ | 39.2   |      
|Items not affecting cash                                          |                                                            |                    |        |                   |   |      |       |       |   |   |        |       |   |   |        |      
|                                                                  | Depreciation and amortization                              |                    |        | 53.9              |   |      |       | 54.4  |   |   |        | 172.9 |   |   |        | 165.4 |  
|                                                                  | Loss on disposal of property, plant and equipment          |                    |        |                  |   |      |       | 0.3   |   |   |        | 0.3   |   |   |        | 0.6   |  
|                                                                  | Foreign exchange on future income tax                      |                    |        | 1.2               |   |      |       | (6.9  | ) |   |        | 26.3  |   |   |        | 0.4   |  
|                                                                  | Provision for plant shutdowns                              |                    |        | 118.3             |   |      |       |      |   |   |        | 118.3 |   |   |        |      |  
|                                                                  | Provision for PCS Yumbes S.C.M.                            |                    |        | 127.6             |   |      |       |      |   |   |        | 127.6 |   |   |        |      |  
|                                                                  | Share of earnings of equity investees                      |                    |        | (2.3              | ) |      |       |      |   |   |        | (7.2  | ) |   |        |      |  
|                                                                  | Provision for future income tax                            |                    |        | (49.6             | ) |      |       | 1.6   |   |   |        | (27.5 | ) |   |        | 4.4   |  
|                                                                  | Provision for post-retirement/post-employment
    benefits |                    |        | 2.2               |   |      |       | 3.7   |   |   |        | 11.3  |   |   |        | 13.6  |  
|                                                                 
|                                                                  |                                                            |                    | 65.4   |                   |   |      | 67.6  |       |   |   | 269.2  |       |   |   | 223.6  |      
|Changes in non-cash operating working
    capital                 |                                                            |                    |        |                   |   |      |       |       |   |   |        |       |   |   |        |      
|                                                                  | Accounts receivable                                        |                    |        | 10.4              |   |      |       | (14.2 | ) |   |        | (25.1 | ) |   |        | (5.5  | )
|                                                                  | Inventories                                                |                    |        | 20.7              |   |      |       | (0.8  | ) |   |        | (31.2 | ) |   |        | 4.6   |  
|                                                                  | Prepaid expenses                                           |                    |        | 8.3               |   |      |       | 2.8   |   |   |        | 9.5   |   |   |        |      |  
|                                                                  | Accounts payable and accrued charges                       |                    |        | 22.6              |   |      |       | 16.0  |   |   |        | 27.8  |   |   |        | 22.8  |  
|                                                                  | Current income taxes                                       |                    |        | 0.8               |   |      |       | 13.5  |   |   |        | (12.6 | ) |   |        | 18.3  |  
|Accrued reclamation costs                                         |                                                            |                    |       |                   |   |      | (1.4  | )     |   |   | 1.1    |       |   |   | (3.0   | )    
|Other non-current liabilities and deferred credits                |                                                            |                    | 0.2    |                   |   |      | 1.8   |       |   |   | 0.7    |       |   |   | 1.9    |      
|                                                                 
|Cash provided by operating
    activities                         |                                                            |                    | 128.4  |                   |   |      | 85.3  |       |   |   | 239.4  |       |   |   | 262.7  |      
|                                                                 
|Investing Activities                                              |                                                            |                    |        |                   |   |      |       |       |   |   |        |       |   |   |        |      
|Additions to property, plant and equipment                        |                                                            |                    | (33.4  | )                 |   |      | (57.6 | )     |   |   | (81.3  | )     |   |   | (151.1 | )    
|Investment in Sociedad Quimica y Minera de Chile
    S.A. (SQM) |                                                            |                    |       |                   |   |      |      |       |   |   |       |       |   |   | (23.2  | )    
|Dividends received from equity investees                          |                                                            |                    |       |                   |   |      |      |       |   |   | 4.0    |       |   |   |       |      
|Additions to other assets                                         |                                                            |                    | (3.9   | )                 |   |      | (12.7 | )     |   |   | (14.7  | )     |   |   | (28.4  | )    
|                                                                 
|Cash used in investing activities                                 |                                                            |                    | (37.3  | )                 |   |      | (70.3 | )     |   |   | (92.0  | )     |   |   | (202.7 | )    
|                                                                 
|Cash before financing activities                                  |                                                            |                    | 91.1   |                   |   |      | 15.0  |       |   |   | 147.4  |       |   |   | 60.0   |      
|                                                                 
|Financing Activities                                              |                                                            |                    |        |                   |   |      |       |       |   |   |        |       |   |   |        |      
|Proceeds from long-term debt                                      |                                                            |                    |       |                   |   |      | 0.9   |       |   |   | 250.0  |       |   |   | 11.2   |      
|Repayment of long-term debt                                       |                                                            |                    | (0.3   | )                 |   |      | (0.7  | )     |   |   | (0.8   | )     |   |   | (1.3   | )    
|(Repayment of) proceeds from short-term debt                      |                                                            |                    | (88.0  | )                 |   |      | 39.1  |       |   |   | (329.6 | )     |   |   | (5.5   | )    
|Dividends                                                         |                                                            |                    | (13.0  | )                 |   |      | (12.9 | )     |   |   | (39.1  | )     |   |   | (39.0  | )    
|Issuance of shares                                                |                                                            |                    | 4.6    |                   |   |      | 0.5   |       |   |   | 5.5    |       |   |   | 3.7    |      
|                                                                 
|Cash (used in) provided by financing
    activities               |                                                            |                    | (96.7  | )                 |   |      | 26.9  |       |   |   | (114.0 | )     |   |   | (30.9  | )    
|                                                                 
|(Decrease) Increase in Cash and Cash
    Equivalents              |                                                            |                    | (5.6   | )                 |   |      | 41.9  |       |   |   | 33.4   |       |   |   | 29.1   |      
|Cash and Cash Equivalents, Beginning of
    Period                |                                                            |                    | 63.5   |                   |   |      | 32.5  |       |   |   | 24.5   |       |   |   | 45.3   |      
|                                                                 
|Cash and Cash Equivalents, End of
    Period                      |                                                            | $                  | 57.9   |                   |   | $    | 74.4  |       |   | $ | 57.9   |       |   | $ | 74.4   |      
|                                                                 
|Supplemental cash flow disclosure                                 |                                                            |                    |        |                   |   |      |       |       |   |   |        |       |   |   |        |      
|                                                                  | Interest paid                                              |                    | $      | 6.9               |   |      | $     | 1.5   |   |   | $      | 46.3  |   |   | $      | 43.4  |  
|                                                                  | Income taxes paid (refunded)                               |                    | $      | 3.5               |   |      | $     | (7.3  | ) |   | $      | 23.6  |   |   | $      | 1.5   |  

(See Notes to the Consolidated Financial
Statements)

4



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##### Table of Contents






Potash Corporation of Saskatchewan
Inc.






Notes to the Consolidated Financial
Statements

(in millions of US dollars except per share
amounts)


(unaudited)


1.   Significant Accounting
Policies

The Companys accounting policies are in
accordance with accounting principles generally accepted in
Canada (Canadian GAAP). These policies are
consistent with accounting principles generally accepted in the
United States (US GAAP) except as outlined in
Note 10. The accounting policies used in preparing these
interim consolidated financial statements are consistent with
those used in the preparation of the annual consolidated
financial statements, except as disclosed in Note 2.

As described in notes 4 and 5, during
the quarter the Company approved plans to restructure certain
operations. These plans require significant estimates to be made
of the recoverability of the carrying value of certain assets
based on their capacity to generate future cash flows. Although
Company management believes it has made reasonable estimates
consistent with current conditions, internal planning and
expected future operations, such estimates are subject to
significant uncertainties and judgements. As a result, it is
reasonably possible that the amounts reported for asset
impairments in connection with these initiatives could be
different if the Company were to use different assumptions or if
conditions were to change in the future. The Company is also
required to report estimated expenses for employee termination,
contract termination and other exit costs. Because such
activities are complex processes that can take several months to
complete, they involve periodically assessing estimates. As a
result, the Company may have to change originally reported
estimates when actual payments are made or the activities are
completed.

Basis of Presentation

The consolidated financial statements include the
accounts of Potash Corporation of Saskatchewan Inc. and its
principal operating subsidiaries (the Company except
to the extent the context otherwise requires):

 PCS
Sales (Canada) Inc.

 PCS
Joint Venture, L.P.


 PCS
Sales (USA), Inc.


 PCS
Phosphate Company, Inc.


 PCS
Purified Phosphates


 White
Springs Agricultural Chemicals, Inc.


 PCS
Nitrogen, Inc.


 PCS
Nitrogen Fertilizer, L.P.


 PCS
Nitrogen Ohio, L.P.


 PCS
Nitrogen Limited


 PCS
Nitrogen Trinidad Limited


 PCS
Cassidy Lake Company


 PCS
Yumbes S.C.M. (PCS Yumbes)


 PCS
Fosfatos do Brasil Ltda.


2.   Change in Accounting
Policy

Effective January 1, 2003, the Company
changed the method of determining cost for substantially all
finished product inventories from the first in, first out method
to the weighted-average cost method. This change was made to
more closely align product costing with product movement. This
change in accounting policy had no significant effect on the
Companys results of operations or financial position for
any of the periods presented.

5



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##### Table of Contents



3.   Inventories

|                       |  |               |       |              |  |   |       | 
|---------------------- |  | ------------- | ----- | ------------ |  | - | ----- | 
|                       |  | September 30, |       | December 31,
|                       |  | 2003          |       | 2002        
|                      
|                      
|                       |  | (unaudited)   |       |             
|Finished product       |  | $             | 186.3 |              |  | $ | 165.0 | 
|Materials and supplies |  |               | 114.0 |              |  |   | 123.5 | 
|Raw materials          |  |               | 58.2  |              |  |   | 44.6  | 
|Work in process        |  |               | 100.2 |              |  |   | 166.2 | 
|                      
|                       |  | $             | 458.7 |              |  | $ | 499.3 | 
|                      

4.   Provision for Plant
Shutdowns

Memphis and Geismar Nitrogen
Operations

In June 2003, the Company indefinitely shut down
its Memphis, Tennessee plant and suspended production of ammonia
and nitrogen solutions at its Geismar, Louisiana facilities due
to high US natural gas costs and low product margins. In August
2003, Company management determined that there were no immediate
intentions of re-starting the unprofitable plants. The Company
has not yet decided whether to mothball, dismantle, or sell the
shutdown facilities.

The Company determined that all employee
positions pertaining to the affected operations would be
eliminated and recorded $4.8 in connection with costs of special
termination benefits. The number of employees terminated as a
result of the shutdowns were 187, of which 161 have left the
Company as of September 30, 2003. The remaining employees
are expected to leave the Company by December 31, 2003. As
of September 30, 2003, the Company had made payments
relating to these terminations totaling $1.5. All workforce
reduction costs are expected to be paid by December 31,
2004.

In connection with the shutdowns, management
conducted an assessment of the recoverability of the long-lived
assets in its nitrogen operations. As a result of its review,
management determined that the carrying amounts of the
long-lived assets at the Memphis and Geismar nitrogen facilities
were not fully recoverable, and an impairment loss of $101.6,
equal to the amount by which the carrying amount of the
facilities asset groups exceeded their respective fair
values, should be recognized. Of the total impairment charge,
$100.6 related to property, plant and equipment and $1.0 related
to other assets. For purposes of the impairment measurement,
fair value was determined based on the present value of expected
future net cash flows.

As part of its review, management also determined
that a write-down of certain parts inventories at these plants
in the amount of $12.4 was required.

In addition to the costs described above,
management expects to incur other shutdown-related costs of
approximately $11.1 and nominal annual expenditures for site
security and other maintenance costs. These amounts have not
been recorded in the consolidated financial statements as of
September 30, 2003. Such costs will be recognized and
recorded in the period in which they are incurred.

Kinston Phosphate Feed Plant

The phosphate feed plant at Kinston, North
Carolina ceased operations in the first quarter of 2003. During
that quarter, the Company recorded $0.6 for costs of special
termination benefits for Kinston employees, $0.3 for parts
inventory write-downs, and $1.3 for long-lived asset impairment
charges.

In lieu of full plant closure, the Company
operated the facility as a warehouse during the first and second
quarters of 2003. In the third quarter of 2003, Company
management determined that the cost of operating Kinston as a
stand-alone warehouse was uneconomical. This decision triggered
a further review by management of the carrying amounts of the
plants long-lived assets. As a result of this review,
management determined that the carrying amounts of the
long-lived assets were not recoverable, and an additional
impairment charge of $2.7, equal to the amount by which the
carrying amount of the plants long-lived assets

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exceeded their fair value, should be recognized.
For purposes of the impairment measurement, fair value was
determined based on the present value of expected future net
cash flows.


The following table summarizes, by reportable
segment, the total amount of costs incurred for the three months
ended September 30, 2003, the total costs incurred to date,
and the total costs expected to be incurred in connection with
the plant shutdowns described above:

|                                          |  |          |       |              |  |             |       |  |  |   |       | 
|----------------------------------------- |  | -------- | ----- | ------------ |  | ----------- | ----- |  |  | - | ----- | 
|                                          |  | Costs    |       |              |  | Total Costs
|                                          |  | Incurred |       | Costs        |  | Expected   
|                                          |  | During   |       | Incurred     |  | to be      
|(unaudited)                               |  | Quarter  |       | Year-to-Date |  | Incurred   
|                                         
|                                         
|Nitrogen Segment                          |  |          |       |              |  |             |       |  |  |   |       | 
|Employee termination and related benefits |  | $        | 4.8   |              |  | $           | 4.8   |  |  | $ | 4.8   | 
|Write-down of parts inventory             |  |          | 12.4  |              |  |             | 12.4  |  |  |   | 12.4  | 
|Asset impairment charges                  |  |          | 101.6 |              |  |             | 101.6 |  |  |   | 101.6 | 
|Other related exit costs                  |  |          |      |              |  |             |      |  |  |   | 11.1  | 
|                                         
|                                          |  |          | 118.8 |              |  |             | 118.8 |  |  |   | 129.9 | 
|                                         
|Phosphate Segment                         |  |          |       |              |  |             |       |  |  |   |       | 
|Employee termination and related benefits |  |          |      |              |  |             | 0.6   |  |  |   | 0.6   | 
|Write-down of parts inventory             |  |          |      |              |  |             | 0.3   |  |  |   | 0.3   | 
|Asset impairment charges                  |  |          | 2.7   |              |  |             | 4.0   |  |  |   | 4.0   | 
|                                         
|                                          |  |          | 2.7   |              |  |             | 4.9   |  |  |   | 4.9   | 
|                                         
|                                          |  | $        | 121.5 |              |  | $           | 123.7 |  |  | $ | 134.8 | 
|                                         

The following table summarizes, by reportable
segment, the costs accrued as of September 30, 2003 in
connection with the plant shutdowns described above:

|                                          |  |          |       |              |  |          |       |             |  |              |      |   |  |   |        |   |  |   |     | 
|----------------------------------------- |  | -------- | ----- | ------------ |  | -------- | ----- | ----------- |  | ------------ | ---- | - |  | - | ------ | - |  | - | --- | 
|                                          |  | Costs    |       |              |  |          |       |             |  | Accrued     
|                                          |  | Incurred |       | Costs        |  |          |       |             |  | Balance     
|                                          |  | During   |       | Incurred     |  | Cash     |       | Non-cash    |  | at          
|(unaudited)                               |  | Quarter  |       | Year-to-Date |  | Payments |       | Settlements |  | September 30
|                                         
|                                         
|Nitrogen Segment                          |  |          |       |              |  |          |       |             |  |              |      |   |  |   |        |   |  |   |     | 
|Employee termination and related benefits |  | $        | 4.8   |              |  | $        | 4.8   |             |  | $            | (1.5 | ) |  | $ |       |   |  | $ | 3.3 | 
|Write-down of parts inventory             |  |          | 12.4  |              |  |          | 12.4  |             |  |              |     |   |  |   | (12.4  | ) |  |   |    | 
|Asset impairment charges                  |  |          | 101.6 |              |  |          | 101.6 |             |  |              |     |   |  |   | (101.6 | ) |  |   |    | 
|                                         
|                                          |  |          | 118.8 |              |  |          | 118.8 |             |  |              | (1.5 | ) |  |   | (114.0 | ) |  |   | 3.3 | 
|                                         
|Phosphate Segment                         |  |          |       |              |  |          |       |             |  |              |      |   |  |   |        |   |  |   |     | 
|Employee termination and related benefits |  |          |      |              |  |          | 0.6   |             |  |              | (0.1 | ) |  |   |       |   |  |   | 0.5 | 
|Write-down of parts inventory             |  |          |      |              |  |          | 0.3   |             |  |              |     |   |  |   | (0.3   | ) |  |   |    | 
|Asset impairment charges                  |  |          | 2.7   |              |  |          | 4.0   |             |  |              |     |   |  |   | (4.0   | ) |  |   |    | 
|                                         
|                                          |  |          | 2.7   |              |  |          | 4.9   |             |  |              | (0.1 | ) |  |   | (4.3   | ) |  |   | 0.5 | 
|                                         
|                                          |  | $        | 121.5 |              |  | $        | 123.7 |             |  | $            | (1.6 | ) |  | $ | (118.3 | ) |  | $ | 3.8 | 
|                                         

5.   Provision for PCS Yumbes
S.C.M.

On August 27, 2003, the Company provided to
SQM an irrevocable option to acquire its interest in PCS Yumbes.
Acquired in 1999, PCS Yumbes holds mining concessions on certain
sodium nitrate reserves in the Atacama Desert in northern Chile
and is a producer of potassium nitrate, sodium nitrate and
iodine. The option is for a maximum period of 20 weeks at a
price of $1.7. If the option is exercised, the parties will
enter into a share purchase agreement under which SQM would
acquire the shares of PCS Yumbes for an aggregate purchase price
of $35.0 (including the price of the option), subject to
adjustments.

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Under the terms of the agreement, and prior to
the sale closing, PCS Yumbes will continue to operate the
facility and expeditiously liquidate the inventory of nitrates.
All other working capital is to be fully realized or discharged
(as applicable) by the Company prior to the close. It is
expected that closing would occur no later than the end of 2004.

Upon entering the option agreement, management
commenced an assessment of the recoverability of the long-lived
assets of the PCS Yumbes operations. As a result of its review,
management determined that the carrying amounts of PCS
Yumbes long-lived assets were not recoverable and recorded
an impairment charge of $77.4, equal to the amount by which the
carrying amount of the asset group exceeded fair value. Of the
total impairment charge, $13.0 related to property, plant and
equipment, $63.9 related to deferred pre-production costs, and
$0.5 related to deferred acquisition costs. For purposes of the
impairment measurement, fair value was determined in reference
to the commercial agreement described above.

As part of this review, management also
determined that a reduction in the carrying amount of certain
non-parts inventory equal to $50.2 was required due to the need
to liquidate all inventories that would not be transferred to
SQM under the agreement.

The Company has determined that all employee
positions at PCS Yumbes will be eliminated by December 31,
2004. Accordingly, the Company has recorded a provision of $1.8
pertaining to contractual termination benefits to be paid,
primarily under Chilean law. As of September 30, 2003,
approximately 68 of the employees had left the Company, and the
Company had made contractual payments relating to these
terminations totaling $0.5. The remaining 156 employees are
expected to leave the Company by December 31, 2004, and all
remaining workforce reduction costs are expected to be paid by
December 31, 2004.

In September 2003, the Company incurred early
termination penalties in respect of certain PCS Yumbes
contractual arrangements. The Company recorded a provision of
$11.1 in respect of these contract termination costs and expects
such amounts to be substantially settled by the end of fiscal
2003.

The following table summarizes the total amount
of costs incurred for the three months ended September 30,
2003, the total costs incurred to date, and the total costs
expected to be incurred in connection with PCS Yumbes as
described above:

|                                          |  |          |       |              |  |             |       |  |  |   |       | 
|----------------------------------------- |  | -------- | ----- | ------------ |  | ----------- | ----- |  |  | - | ----- | 
|                                          |  | Costs    |       |              |  | Total Costs
|                                          |  | Incurred |       | Costs        |  | Expected   
|                                          |  | During   |       | Incurred     |  | to be      
|(unaudited)                               |  | Quarter  |       | Year-to-Date |  | Incurred   
|                                         
|                                         
|Potash Segment                            |  |          |       |              |  |             |       |  |  |   |       | 
|Contract termination costs                |  | $        | 11.1  |              |  | $           | 11.1  |  |  | $ | 11.1  | 
|Employee termination and related benefits |  |          | 1.8   |              |  |             | 1.8   |  |  |   | 1.8   | 
|Write-down of non-parts inventory         |  |          | 50.2  |              |  |             | 50.2  |  |  |   | 50.2  | 
|Asset impairment charges                  |  |          | 77.4  |              |  |             | 77.4  |  |  |   | 77.4  | 
|                                         
|                                          |  | $        | 140.5 |              |  | $           | 140.5 |  |  | $ | 140.5 | 
|                                         

The following table summarizes the costs accrued
as of September 30, 2003 in connection with PCS Yumbes as
described above:

|                                          |  |          |       |              |  |          |       |             |  |              |      |   |  |   |        |   |  |   |      | 
|----------------------------------------- |  | -------- | ----- | ------------ |  | -------- | ----- | ----------- |  | ------------ | ---- | - |  | - | ------ | - |  | - | ---- | 
|                                          |  | Costs    |       |              |  |          |       |             |  |             
|                                          |  | Incurred |       | Costs        |  |          |       |             |  | Accrued     
|                                          |  | During   |       | Incurred     |  | Cash     |       | Non-cash    |  | Balance at  
|(unaudited)                               |  | Quarter  |       | Year-to-Date |  | Payments |       | Settlements |  | September 30
|                                         
|                                         
|Potash Segment                            |  |          |       |              |  |          |       |             |  |              |      |   |  |   |        |   |  |   |      | 
|Contract termination costs                |  | $        | 11.1  |              |  | $        | 11.1  |             |  | $            |     |   |  | $ |       |   |  | $ | 11.1 | 
|Employee termination and related benefits |  |          | 1.8   |              |  |          | 1.8   |             |  |              | (0.5 | ) |  |   |       |   |  |   | 1.3  | 
|Write-down of non-parts inventory         |  |          | 50.2  |              |  |          | 50.2  |             |  |              |     |   |  |   | (50.2  | ) |  |   |     | 
|Asset impairment charges                  |  |          | 77.4  |              |  |          | 77.4  |             |  |              |     |   |  |   | (77.4  | ) |  |   |     | 
|                                         
|                                          |  | $        | 140.5 |              |  | $        | 140.5 |             |  | $            | (0.5 | ) |  | $ | (127.6 | ) |  | $ | 12.4 | 
|                                         

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6.   Income Taxes

The Companys effective consolidated income
tax rate for the current period is approximately 40 percent
(exclusive of the charges relating to PCS Yumbes as described in
Note 5). In the third quarter of 2002, this rate was
approximately 36 percent.

7.   Net (Loss) Income Per
Share

Basic net (loss) income per share for the
year-to-date is calculated based on the weighted average shares
issued and outstanding for the nine months ended
September 30, 2003 of 52,106,000 (2002 
52,006,000). Third quarter basic net (loss) income per share is
calculated based on the weighted average shares issued and
outstanding for the three months ended September 30, 2003
of 52,129,000 (2002  52,039,000).

Diluted net income per share is calculated based
on the weighted average shares issued and outstanding during the
period, adjusted by the total of the additional common shares
that would have been issued assuming exercise of all share
options with exercise prices at or below the average market
price for the period. For periods in which there was a loss
attributable to common shares, share options with exercise
prices at or below the average market price for the period were
excluded for the calculations of diluted net loss per share, as
inclusion of these securities would have been antidilutive to
the net loss per share. Weighted average shares outstanding for
the diluted net (loss) income per share calculation for the nine
months ended September 30, 2003 were 52,106,000
(2002  52,291,000). The number of shares for the
third quarter diluted net (loss) income per share calculation
was 52,129,000 (2002  52,262,000).

8.   Segment
Information

The Company has three reportable business
segments: potash, phosphate and nitrogen. These business
segments are differentiated by the chemical nutrient contained
in the product that each produces. Inter-segment net sales are
made under terms which approximate market prices.

|                              |  |                                       |       |           |  |          |       |            |  |              |       |  |  |   |     |  |  |   |       | 
|----------------------------- |  | ------------------------------------- | ----- | --------- |  | -------- | ----- | ---------- |  | ------------ | ----- |  |  | - | --- |  |  | - | ----- | 
|                              |  |                                      
|                              |  | Three Months Ended September 30, 2003
|                             
|                             
|(unaudited)                   |  | Potash                                |       | Phosphate |  | Nitrogen |       | All Others |  | Consolidated
|                             
|                             
|Net sales  third party       |  | $                                     | 143.9 |           |  | $        | 204.3 |            |  | $            | 242.2 |  |  | $ |    |  |  | $ | 590.4 | 
|Inter-segment net sales       |  |                                       | 1.2   |           |  |          | 1.5   |            |  |              | 18.5  |  |  |   |    |  |  |   |      | 
|Gross Margin                  |  |                                       | 52.2  |           |  |          | (9.6  | )          |  |              | 41.9  |  |  |   |    |  |  |   | 84.5  | 
|Depreciation and amortization |  |                                       | 9.1   |           |  |          | 18.0  |            |  |              | 23.4  |  |  |   | 3.4 |  |  |   | 53.9  | 

|                              |  |                                       |       |           |  |          |       |            |  |              |       |  |  |   |     |  |  |   |       | 
|----------------------------- |  | ------------------------------------- | ----- | --------- |  | -------- | ----- | ---------- |  | ------------ | ----- |  |  | - | --- |  |  | - | ----- | 
|                              |  |                                      
|                              |  | Three Months Ended September 30, 2002
|                             
|                             
|(unaudited)                   |  | Potash                                |       | Phosphate |  | Nitrogen |       | All Others |  | Consolidated
|                             
|                             
|Net sales  third party       |  | $                                     | 121.4 |           |  | $        | 161.3 |            |  | $            | 176.2 |  |  | $ |    |  |  | $ | 458.9 | 
|Inter-segment net sales       |  |                                       | 0.9   |           |  |          | 0.9   |            |  |              | 5.7   |  |  |   |    |  |  |   |      | 
|Gross Margin                  |  |                                       | 48.9  |           |  |          | 9.8   |            |  |              | 16.4  |  |  |   |    |  |  |   | 75.1  | 
|Depreciation and amortization |  |                                       | 9.7   |           |  |          | 21.2  |            |  |              | 21.7  |  |  |   | 1.8 |  |  |   | 54.4  | 

|                              |  |                                      |       |           |  |          |       |            |  |              |       |  |  |   |     |  |  |   |         | 
|----------------------------- |  | ------------------------------------ | ----- | --------- |  | -------- | ----- | ---------- |  | ------------ | ----- |  |  | - | --- |  |  | - | ------- | 
|                              |  |                                     
|                              |  | Nine Months Ended September 30, 2003
|                             
|                             
|(unaudited)                   |  | Potash                               |       | Phosphate |  | Nitrogen |       | All Others |  | Consolidated
|                             
|                             
|Net sales  third party       |  | $                                    | 485.6 |           |  | $        | 562.4 |            |  | $            | 773.8 |  |  | $ |    |  |  | $ | 1,821.8 | 
|Inter-segment net sales       |  |                                      | 4.8   |           |  |          | 7.0   |            |  |              | 47.4  |  |  |   |    |  |  |   |        | 
|Gross Margin                  |  |                                      | 162.3 |           |  |          | (8.7  | )          |  |              | 134.3 |  |  |   |    |  |  |   | 287.9   | 
|Depreciation and amortization |  |                                      | 39.9  |           |  |          | 56.2  |            |  |              | 69.5  |  |  |   | 7.3 |  |  |   | 172.9   | 

|                              |  |                                      |       |           |  |          |       |            |  |              |       |  |  |   |     |  |  |   |         | 
|----------------------------- |  | ------------------------------------ | ----- | --------- |  | -------- | ----- | ---------- |  | ------------ | ----- |  |  | - | --- |  |  | - | ------- | 
|                              |  |                                     
|                              |  | Nine Months Ended September 30, 2002
|                             
|                             
|(unaudited)                   |  | Potash                               |       | Phosphate |  | Nitrogen |       | All Others |  | Consolidated
|                             
|                             
|Net sales  third party       |  | $                                    | 430.0 |           |  | $        | 465.7 |            |  | $            | 520.5 |  |  | $ |    |  |  | $ | 1,416.2 | 
|Inter-segment net sales       |  |                                      | 5.2   |           |  |          | 4.8   |            |  |              | 17.3  |  |  |   |    |  |  |   |        | 
|Gross Margin                  |  |                                      | 177.3 |           |  |          | 45.5  |            |  |              | 20.7  |  |  |   |    |  |  |   | 243.5   | 
|Depreciation and amortization |  |                                      | 36.1  |           |  |          | 58.0  |            |  |              | 65.4  |  |  |   | 5.9 |  |  |   | 165.4   | 

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9.   Pro Forma Stock
Compensation Expense

The Company has two stock-based compensation
plans for which fair value accounting is not required. No
compensation expense has been recognized with respect to these
plans as the exercise price is the quoted market closing price
of the Companys common shares on the last trading day
immediately preceding the date of the grant. Had compensation
expense for the Companys plans been determined based on
the fair value at the grant dates for awards under the plans,
the Companys net (loss) income and net (loss) income per
share would have been reflected as the pro forma amounts
indicated below:

|                                    |             |              |        |              |   |      |      |      |  |   |        |       |   |   |       |      | 
|----------------------------------- | ----------- | ------------ | ------ | ------------ | - | ---- | ---- | ---- |  | - | ------ | ----- | - | - | ----- | ---- | 
|                                    |             |              |        |             
|                                    |             | Three Months |        | Nine Months 
|                                    |             | Ended        |        | Ended       
|                                    |             | September 30 |        | September 30
|(unaudited)                         |             | 2003         |        | 2002         |   | 2003 |      | 2002
|                                   
|                                   
|Net (loss) income  as reported     |             | $            | (185.9 | )            |   | $    | 14.5 |      |  | $ | (152.8 | )     |   | $ | 39.2  |     
|Stock compensation                  |             |              | (3.7   | )            |   |      | (3.5 | )    |  |   | (11.1  | )     |   |   | (10.7 | )   
|                                   
|Net (loss) income  pro forma       |             | $            | (189.6 | )            |   | $    | 11.0 |      |  | $ | (163.9 | )     |   | $ | 28.5  |     
|                                   
|Basic net (loss) income per share   |             |              |        |              |   |      |      |      |  |   |        |       |   |   |       |     
|                                    | As reported |              | $      | (3.57        | ) |      | $    | 0.28 |  |   | $      | (2.93 | ) |   | $     | 0.75 | 
|                                    | Pro forma   |              | $      | (3.64        | ) |      | $    | 0.21 |  |   | $      | (3.15 | ) |   | $     | 0.55 | 
|Diluted net (loss) income per share |             |              |        |              |   |      |      |      |  |   |        |       |   |   |       |     
|                                    | As reported |              | $      | (3.57        | ) |      | $    | 0.28 |  |   | $      | (2.93 | ) |   | $     | 0.75 | 
|                                    | Pro forma   |              | $      | (3.64        | ) |      | $    | 0.21 |  |   | $      | (3.15 | ) |   | $     | 0.54 | 

In calculating the foregoing pro forma amounts,
the fair value of each option grant was estimated as of the date
of grant using the Modified Black-Scholes option-pricing model
with the following weighted average assumptions:

|                         |  |      |          |      |  |   |          | 
|------------------------ |  | ---- | -------- | ---- |  | - | -------- | 
|                         |  | 2002 |          | 2001
|                        
|                        
|Expected dividend        |  | $    | 1.00     |      |  | $ | 1.00     | 
|Expected volatility      |  |      | 32%      |      |  |   | 32%      | 
|Risk-free interest rate  |  |      | 4.13%    |      |  |   | 4.54%    | 
|Expected life of options |  |      | 8  years |      |  |   | 8  years | 
|Expected forfeitures     |  |      | 10%      |      |  |   | 10%      | 

10. United States Generally Accepted
Accounting Principles (US GAAP)

A description of certain significant differences
between Canadian GAAP and US GAAP follows:

Marketable securities:The Companys investment in
Israel Chemicals Ltd. (ICL) is stated at cost. US
GAAP would require that this investment be classified as
available-for-sale and be stated at market value with the
difference between market value and cost reported as Other
Comprehensive Income (OCI).

Property, plant and equipment and goodwill:The net book value of property, plant
and equipment and goodwill under Canadian GAAP is higher than
under US GAAP, as past provisions for asset impairment under
Canadian GAAP were measured based on the undiscounted cash flow
from use together with the residual value of the assets. Under
US GAAP they were measured based on fair value, which was lower
than the undiscounted cash flow from use together with the
residual value of the assets.

Pre-operating costs:Operating costs incurred during the
start-up phase of new projects are deferred until commercial
production levels are reached, at which time they are amortized
over the estimated life of the project. US GAAP would require
that these costs be expensed as incurred.

Asset retirement obligations:Asset retirement obligations are not
presently required under Canadian GAAP. US GAAP would require
that the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred
if a reasonable estimate of fair value can be made. The

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associated asset retirement costs are capitalized
as part of the carrying amount of the long-lived asset and then
amortized over its estimated useful life. The asset retirement
obligation must be accreted on an annual basis.


Additional minimum liability:The Companys accumulated benefit
obligation for its US pension plans exceeds the fair value of
plan assets. US GAAP requires that the Company recognize a
liability that is at least equal to the unfunded accumulated
benefit obligation. If an additional liability required to be
recognized exceeds unrecognized prior service cost, the excess
is reported as OCI.

Foreign currency translation adjustment:The foreign currency translation
adjustment results from the restatement of prior periods so that
all periods presented are in the same reporting currency. US
GAAP requires that the comparative Consolidated Statements of
Income and the Consolidated Statements of Cash Flow be
translated using weighted average exchange rates for the
applicable periods. In contrast, the Consolidated Statements of
Financial Position are translated using the exchange rates at
the end of the applicable periods. The difference in these
exchange rates is what gives rise to the foreign currency
translation adjustment.

Derivative instruments and hedging activities:The Companys derivative
instruments which have not yet been settled are not recognized
in the consolidated financial statements and gains or losses
arising from settled hedging transactions are deferred as a
component of inventory until the product containing the hedged
item is sold, at which time both the natural gas purchase cost
and the related hedging deferral are recorded as cost of goods
sold. US GAAP would require that derivative instruments be
recorded at fair value in the Consolidated Statement of
Financial Position with the change in fair value of instruments
designated as cash flow hedges recorded as OCI. The portion of
gain or loss on derivative instruments designated as cash flow
hedges that are effective at offsetting changes in the hedged
item is reported as a component of OCI and reclassified into
cost of goods sold when the product containing the hedged item
is sold (see supplemental Derivative Instruments and Hedging
Activities disclosures below). The ineffective portion is
recognized in cost of goods sold.

Net sales:Sales are
recorded net of freight costs (less related revenues) and
transportation and distribution expenses. US GAAP would require
that net freight costs be included in cost of goods sold and
transportation and distribution expenses be reported as
operating expenses.

Provision for plant shutdowns:The provision for plant shutdowns
under Canadian GAAP includes $12.4 (third quarter) and $12.7
(year-to-date) for write-downs of parts inventory. US GAAP would
require that these write-downs be presented as a component of
cost of goods sold.

Provision for PCS Yumbes S.C.M.:The provision for PCS Yumbes S.C.M.
under Canadian GAAP includes $50.2 (quarter and year-to-date)
for write-downs of non-parts inventory. US GAAP would require
that these write-downs be presented as a component of cost of
goods sold.

Depreciation and amortization:Depreciation and amortization under
Canadian GAAP is higher than under US GAAP, as the net book
values of property, plant and equipment and goodwill under
Canadian GAAP are higher than under US GAAP.

Comprehensive income:Comprehensive income is recognized
under US GAAP, but not under Canadian GAAP. Comprehensive income
is comprised of two components, net income and OCI. OCI refers
to amounts that under US GAAP are recorded as an element of
shareholders equity but are excluded from net income
because these transactions or events were attributed to changes
from non-owner sources.

11



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The application of US GAAP, as described
above, would have had the following approximate effects on net
(loss) income, net (loss) income per share, total assets and
shareholders equity:

|                                                              |                                           |                    |            |       |   |   |            |      |  
|------------------------------------------------------------- | ----------------------------------------- | ------------------ | ---------- | ----- | - | - | ---------- | ---- | -
|                                                              |                                           |                   
|                                                              |                                           | Three Months Ended
|                                                              |                                           | September 30      
|                                                              |                                           | 2003               |            | 2002 
|                                                             
|                                                             
|                                                              |                                           |                   
|                                                              |                                           | (unaudited)       
|Net (loss) income as reported 
    Canadian GAAP             |                                           | $                  | (185.9     | )     |   | $ | 14.5       |     
|Items increasing or decreasing reported net
    (loss) income |                                           |                    |            |       |   |   |            |     
|                                                              | Pre-operating costs                       |                    |            | 59.9  |   |   |            | 0.4  |  
|                                                              | Depreciation and amortization             |                    |            | 2.1   |   |   |            | 2.1  |  
|                                                              | Accretion of asset retirement obligations |                    |            | (0.8  | ) |   |            |     |  
|                                                              | Future income taxes                       |                    |            | (24.5 | ) |   |            | (0.9 | )
|                                                             
|Net (loss) income  US GAAP                                   |                                           | $                  | (149.2     | )     |   | $ | 16.1       |     
|                                                             
|Weighted average shares outstanding 
    US GAAP             |                                           |                    | 52,129,000 |       |   |   | 52,039,000 |     
|                                                             
|Basic net (loss) income per share  US
    GAAP               |                                           | $                  | (2.86      | )     |   | $ | 0.31       |     
|                                                             
|Diluted net (loss) income per share 
    US GAAP             |                                           | $                  | (2.86      | )     |   | $ | 0.31       |     
|                                                             

|                                                              |                                           |                   |            |       |   |   |            |      |  
|------------------------------------------------------------- | ----------------------------------------- | ----------------- | ---------- | ----- | - | - | ---------- | ---- | -
|                                                              |                                           |                  
|                                                              |                                           | Nine Months Ended
|                                                              |                                           | September 30     
|                                                              |                                           | 2003              |            | 2002 
|                                                             
|                                                             
|                                                              |                                           |                  
|                                                              |                                           | (unaudited)      
|Net (loss) income as reported 
    Canadian GAAP             |                                           | $                 | (152.8     | )     |   | $ | 39.2       |     
|Items increasing or decreasing reported net
    (loss) income |                                           |                   |            |       |   |   |            |     
|                                                              | Pre-operating costs                       |                   |            | 63.0  |   |   |            | 1.9  |  
|                                                              | Depreciation and amortization             |                   |            | 6.4   |   |   |            | 6.3  |  
|                                                              | Accretion of asset retirement obligations |                   |            | (2.5  | ) |   |            |     |  
|                                                              | Future income taxes                       |                   |            | (26.7 | ) |   |            | (2.9 | )
|                                                             
|Net (loss) income  US GAAP                                   |                                           | $                 | (112.6     | )     |   | $ | 44.5       |     
|                                                             
|Weighted average shares outstanding 
    US GAAP             |                                           |                   | 52,106,000 |       |   |   | 52,006,000 |     
|                                                             
|Basic net (loss) income per share  US
    GAAP               |                                           | $                 | (2.16      | )     |   | $ | 0.86       |     
|                                                             
|Diluted net (loss) income per share 
    US GAAP             |                                           | $                 | (2.16      | )     |   | $ | 0.85       |     
|                                                             

|                                                        |                                                                    |               |         |              |   |   |         |        |  
|------------------------------------------------------- | ------------------------------------------------------------------ | ------------- | ------- | ------------ | - | - | ------- | ------ | -
|                                                        |                                                                    | September 30, |         | December 31,
|                                                        |                                                                    | 2003          |         | 2002        
|                                                       
|                                                       
|                                                        |                                                                    | (unaudited)   |         |             
|Total assets as reported  Canadian GAAP                |                                                                    | $             | 4,446.0 |              |   | $ | 4,685.6 |       
|Items increasing (decreasing) reported total
    assets |                                                                    |               |         |              |   |   |         |       
|                                                        | Inventory                                                          |               |         | (5.3         | ) |   |         | (4.0   | )
|                                                        | Available-for-sale securities (unrealized holding
    gain (loss)) |               |         | 23.8         |   |   |         | (7.7   | )
|                                                        | Fair value of natural gas hedging contracts                        |               |         | 60.4         |   |   |         | 52.7   |  
|                                                        | Property, plant and equipment                                      |               |         | (137.0       | ) |   |         | (143.4 | )
|                                                        | Pre-operating costs                                                |               |         |             |   |   |         | (63.0  | )
|                                                        | Goodwill                                                           |               |         | (46.7        | ) |   |         | (46.7  | )
|                                                       
|Total assets  US GAAP                                  |                                                                    | $             | 4,341.2 |              |   | $ | 4,473.5 |       
|                                                       

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|                                                                |                                                               |               |         |              |   |   |         |        |  
|--------------------------------------------------------------- | ------------------------------------------------------------- | ------------- | ------- | ------------ | - | - | ------- | ------ | -
|                                                                |                                                               | September 30, |         | December 31,
|                                                                |                                                               | 2003          |         | 2002        
|                                                               
|                                                               
|                                                                |                                                               | (unaudited)   |         |             
|Total shareholders equity as
    reported  Canadian GAAP      |                                                               | $             | 1,906.1 |              |   | $ | 2,092.5 |       
|Items increasing (decreasing) reported
    shareholders equity |                                                               |               |         |              |   |   |         |       
|                                                                | Accumulated other comprehensive income (loss),
    net of tax |               |         | 13.6         |   |   |         | (9.1   | )
|                                                                | Pre-operating costs                                           |               |         |             |   |   |         | (63.0  | )
|                                                                | Accretion of asset retirement obligations                     |               |         | (2.5         | ) |   |         |       |  
|                                                                | Provision for asset impairment                                |               |         | (218.0       | ) |   |         | (218.0 | )
|                                                                | Depreciation and amortization                                 |               |         | 34.3         |   |   |         | 27.9   |  
|                                                                | Future income taxes                                           |               |         | 36.0         |   |   |         | 62.7   |  
|                                                               
|Shareholders equity  US GAAP                                  |                                                               | $             | 1,769.5 |              |   | $ | 1,893.0 |       
|                                                               

Supplemental US GAAP Disclosures

Available-for-Sale Securities

The Companys investment in ICL is
classified as available-for-sale. The fair market value of this
investment at September 30, 2003 was $142.2 and the
unrealized holding gain was $49.4.

New Accounting Pronouncements

Effective January 1, 2003, the Company
adopted SFAS No. 143 Accounting for Asset Retirement
Obligations. This statement requires that the fair value
of a liability for an asset retirement obligation be recognized.
The fair value of this liability is added to the carrying amount
of the associated tangible long-lived asset and then depreciated
over the life of the asset. The liability is accreted during the
period through charges to operating expenses. The adoption of
this pronouncement has had no significant effect on the
financial position of the Company. On an annual basis, the
impact of accretion related to these obligations will
approximate $1.9 after tax (approximately $0.04 per diluted
share).

Effective January 1, 2003, the Company
adopted FASB Interpretation (FIN) No. 45
Guarantors Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness of
Others. This interpretation requires recognition, at the
inception of certain guarantees, of a liability for the fair
value of the obligation undertaken in issuing the guarantee and
clarifies the disclosures that are necessary. The adoption of
this interpretation has not had any significant effect on the
results of operations or financial position of the Company.

In July 2002, the FASB issued SFAS No. 146
Accounting for Costs Associated with Exit or Disposal
Activities. SFAS No. 146 nullifies the guidance
previously provided under Emerging Issues Task Force Issue
No. 94-3 Liability Recognition for Certain Employee
Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring).
Among other things, SFAS No. 146 requires that a liability
for a cost associated with an exit or disposal activity be
recognized when the liability is incurred as opposed to when
there is commitment to a restructuring plan as set forth under
the nullified guidance. The Company adopted SFAS No. 146
effective January 1, 2003.

In December 2002, the FASB issued SFAS
No. 148 Accounting for Stock-Based
Compensation  Transition and Disclosure. SFAS
No. 148 provides alternative methods of transition for a
voluntary change to the fair value based method of accounting
for stock-based employee compensation. This statement also
amends the disclosure requirements of SFAS No. 123 to
require prominent disclosures in both annual and interim
financial statements regarding the method of accounting for
stock-based employee compensation and the effect of the method
used on reported results. The disclosure provisions of SFAS
No. 148 are effective for fiscal years ending after
December 15, 2002. The Company adopted the disclosure
provisions of SFAS No. 148.

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In January 2003, the FASB issued FIN No. 46
Consolidation of Variable Interest Entities, which
addresses consolidation by a business of variable interest
entities in which it is the primary beneficiary. FIN No. 46
is effective immediately for certain disclosure requirements and
for variable interest entities created after January 31,
2003; however, the provisions have been deferred by FASB Staff
Position FIN 46-6 until December 31, 2003 for variable
interest entities created before February 1, 2003. The
Company is in the process of determining the effects, if any, on
its financial position, results of operations and cash flows
that will result from the adoption of FIN No. 46.

In April 2003, the FASB issued SFAS No. 149
Amendment of Statement 133 on Derivative Instruments and
Hedging Activities. This statement amends and clarifies
accounting for derivative instruments, including certain
derivative instruments embedded in other contracts, and for
hedging activities under SFAS No. 133. This statement is
effective for contracts entered into or modified after
June 30, 2003, for hedging relationships designated after
June 30, 2003, and for certain pre-existing contracts. The
Company adopted SFAS No. 149 and there was no significant
effect on the results of operations or financial position of the
Company.

In May 2003, the FASB issued SFAS No. 150
Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity. This
statement establishes standards for how to classify and measure
certain financial instruments with characteristics of both
liabilities and equity. It requires that a financial instrument
within its scope be classified as a liability (or an asset in
some circumstances). This statement is effective for financial
instruments entered into or modified after May 31, 2003,
and otherwise is effective July 1, 2003. The Company
adopted SFAS No. 150 and there was no significant effect on
the results of operations or financial position of the Company.

Derivative Instruments and Hedging
Activities

The Company formally documents all relationships
between hedging instruments and hedged items, as well as its
risk management objective and strategy for undertaking various
hedge transactions. The Companys natural gas purchase
strategy is based on diversification of price for its total gas
requirements. Its objective is to acquire a reliable supply of
natural gas feedstock and fuel on a location-adjusted,
cost-competitive basis in a manner that minimizes volatility
without undue risk. It employs derivative instruments including
futures, swaps and option agreements in order to manage the cost
on a portion of its natural gas requirements. These instruments
are intended to hedge the future cost of the committed and
anticipated natural gas purchases primarily for its US nitrogen
plants. The maximum period for these hedges cannot exceed five
years. The Company uses these instruments to reduce price risk,
not for speculative purposes.

The Company formally assesses, both at the
inception of the hedge and on an ongoing basis, whether each
derivative is highly effective in offsetting changes in cash
flows or fair value of the hedged item. Fluctuations in the
value of the derivative instruments are generally offset by
changes in the hedged item; however, if it is determined that a
derivative is not highly effective as a hedge or if a derivative
ceases to be a highly effective hedge, the Company will
discontinue hedge accounting prospectively for the affected
derivative. The amounts previously recognized in accumulated OCI
are then reclassified to cost of goods sold when the product
containing the hedged item is sold. On sale or early termination
of a derivative instrument, gains and losses are reclassified
immediately to cost of goods sold.

The Company has designated its natural gas
derivative instruments as cash flow hedges. The gain or loss of
an effective cash flow hedge is deferred in OCI until such time
as the natural gas that it relates to is used, at which time the
gain or loss is reclassified from OCI to cost of goods sold. In
the third quarter of 2003, a gain of $18.1 was recognized in
cost of goods sold ($73.1 gain on a year-to-date basis). Of the
deferred gains at the quarter end, approximately $37.8 will be
reclassified to cost of goods sold within the next twelve
months. The fair value of the Companys gas hedging
contracts at September 30, 2003 was $60.4.

11. Seasonality

The Companys sales of fertilizer are
seasonal. Typically, the second quarter of the year is when
fertilizer sales will be highest, due to the North American
spring planting season. However, planting conditions and the

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##### Table of Contents



timing of customer purchases will vary each year
and sales can be expected to shift from one quarter to another.


12. Comparative Figures

Certain of the prior periods figures have
been reclassified to conform with the current periods
presentation.

13. Subsequent Event

On October 16, 2003, the Company acquired
26 percent of the issued and outstanding common shares of
Arab Potash Company (APC) from Jordan Investment
Company (JIC). APC, a publicly listed company in
Jordan, produces potash from the Dead Sea and has 2 million
tonnes of annual capacity. The purchase price was $173.3 and was
financed by short-term debt. The Company will account for the
investment in APC by the equity method.

Subsequent to the acquisition, APC is
26.9 percent held by JIC, 26 percent held by the
Company, 21 percent held by Arab Mining Company, and the
remainder of APC shares are held by other governments, banks and
individual investors.

The terms of the Shareholders Agreement
with JIC provide that, from October 17, 2006 to
October 16, 2009, JIC may seek to exercise a put option
(the Put) to require the Company to purchase
JICs remaining common shares in APC. If the Put was
exercised, the Companys purchase price would be calculated
in accordance with a specified formula based, in part, on future
earnings of APC. The amount, if any, that the Company may have
to pay for JICs remaining common shares if there was to be
a valid exercise of the Put is not presently determinable.

15



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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS
    OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Managements Discussion and Analysis of
Financial Condition and Results of Operations is based on the
Companys unaudited interim consolidated financial
statements reported under Canadian GAAP. All references to per
share amounts pertain to diluted income or loss per share.
Diluted net income per share is calculated based on the weighted
average shares issued and outstanding during the period,
adjusted by the total of the additional common shares that would
have been issued assuming exercise of all share options with
exercise prices at or below the average market price for the
period. For periods in which there was a loss attributable to
common shares, share options with exercise prices at or below
the average market price for the period were excluded for the
calculations of diluted net loss per share, as inclusion of
these securities would have been antidilutive to the net loss
per share.

Earnings Guidance Review

The Companys projection for earnings per
share for third-quarter 2003 was in the range of $0.25 to $0.35.
The final result was a net loss of $185.9 million, or $3.57
per share. This loss was largely due to impairment and
shutdown-related costs incurred during the quarter totalling
$201.8 million (after tax), or the equivalent of $3.87 per
share. These costs pertained to asset write-downs, workforce
reductions and contract terminations at four of the
Companys properties. In addition, the Canadian dollar
compared to the US dollar continued to strengthen during the
quarter and ended the quarter at 1.3504. In the third-quarter
guidance, the Company had expected the Canadian dollar to weaken
during the third quarter to 1.4000. The difference between the
Companys model and the actual figure was the equivalent of
$0.12 per share. Third-quarter gross margin of
$84.5 million exceeded the gross margin implicit with the
earnings guidance, reflecting a quarter of strong potash volumes
and much higher nitrogen prices. The reduction in potash
production taxes also helped mitigate the operating loss.

Overview of Actual Results

|                                      |  |                                 |        |                                |  |        |       |        |  |      |        |      |  |        |    |        |  |   |         |   |  |   |         |  |  |   |        |   |  |  |    | 
|------------------------------------- |  | ------------------------------- | ------ | ------------------------------ |  | ------ | ----- | ------ |  | ---- | ------ | ---- |  | ------ | -- | ------ |  | - | ------- | - |  | - | ------- |  |  | - | ------ | - |  |  | -- | 
|                                      |  |                                 |        |                               
|                                      |  | Three Months Ended September 30 |        | Nine Months Ended September 30
|                                     
|                                     
|($ millions                          |  | Dollar                          |        | %                              |  |        |       | Dollar |  | %   
|except per share amounts)             |  | 2003                            |        | 2002                           |  | Change |       | Change |  | 2003 |        | 2002 |  | Change |    | Change
|                                     
|                                     
|Net Sales                             |  | $                               | 590.4  |                                |  | $      | 458.9 |        |  | $    | 131.5  |      |  |        | 29 |        |  | $ | 1,821.8 |   |  | $ | 1,416.2 |  |  | $ | 405.6  |   |  |  | 29 | 
|                                     
|Gross Margin                          |  | $                               | 84.5   |                                |  | $      | 75.1  |        |  | $    | 9.4    |      |  |        | 13 |        |  | $ | 287.9   |   |  | $ | 243.5   |  |  | $ | 44.4   |   |  |  | 18 | 
|                                     
|Operating (Loss) Income               |  | $                               | (210.9 | )                              |  | $      | 44.3  |        |  | $    | (255.2 | )    |  |        |   |        |  | $ | (113.1  | ) |  | $ | 123.8   |  |  | $ | (236.9 | ) |  |  |   | 
|                                     
|Net (Loss) Income                     |  | $                               | (185.9 | )                              |  | $      | 14.5  |        |  | $    | (200.4 | )    |  |        |   |        |  | $ | (152.8  | ) |  | $ | 39.2    |  |  | $ | (192.0 | ) |  |  |   | 
|                                     
|Net (Loss) Income Per Share  Basic   |  | $                               | (3.57  | )                              |  | $      | 0.28  |        |  | $    | (3.85  | )    |  |        |   |        |  | $ | (2.93   | ) |  | $ | 0.75    |  |  | $ | (3.68  | ) |  |  |   | 
|                                     
|Net (Loss) Income Per Share  Diluted |  | $                               | (3.57  | )                              |  | $      | 0.28  |        |  | $    | (3.85  | )    |  |        |   |        |  | $ | (2.93   | ) |  | $ | 0.75    |  |  | $ | (3.68  | ) |  |  |   | 
|                                     

Third-quarter impairment and shutdown charges
contributed to a quarterly net loss of $185.9 million or
$3.57 loss per share for the Company as compared to $0.28 per
share in the same period of 2002. The third-quarter impairment
charges and shutdown-related costs totalled $201.8 million
($262.0 million before tax), or the equivalent of $3.87 per
share. These amounts pertained to asset write-downs, workforce
reductions and contract terminations at the Companys
Yumbes, Geismar, Memphis and Kinston properties. On a
year-to-date basis, the Company recorded a net loss of
$152.8 million, or $2.93 per share. Of this, the impairment
charges and shutdown-related costs were $203.1 million
($264.2 million before tax), or the equivalent of $3.89 per
share.

Third-quarter gross margin was higher than the
amount earned in the same period last year. Higher potash sales
volumes and strong nitrogen prices more than offset weak
phosphate markets.

16



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##### Table of Contents



The Canadian dollar exchange rate compared to the
US dollar started the year at 1.5796, ended the first quarter at
1.4693, the second quarter at 1.3553 and the third quarter at
1.3504. This strengthening of the Canadian dollar impacts the
Companys consolidated financial statements in two ways: on
its foreign exchange gain or loss line arising from currency
conversion and on its Canadian dollar operating costs. The
largest component of the unrealized foreign exchange loss for
the first nine months of 2003 pertains to the translation of
future income tax liabilities on the Consolidated Statement of
Financial Position at September 30, 2003.

The strengthening Canadian dollar, relative to
the US dollar, negatively affected earnings in both the third
quarter and the first nine months of 2003. There was a quarterly
foreign exchange loss of $0.03 per share and a year-to-date loss
of $0.48 per share, which were primarily non-cash. Additionally,
foreign exchange affected the Canadian cash costs of potash
production, freight and administration. The stronger Canadian
dollar increased the US dollar equivalent of these expenses by
$17.1 million before tax since the beginning of the year.
This reduced earnings by $0.07 per share in the third quarter
and $0.20 per share for the first nine months. Based on the
December 31, 2002 exchange rate of 1.5796, the stronger
Canadian dollar has reduced earnings by $0.68 per share on a
year-to-date basis.

Potash

|                   |                               |                                 |       |                    |  |                      |       |      |  |      |    |        |   |      |       |      |  |        |       |     |  |  |    |    |  |   |       |       |  |   |       |       |  |  |    |     |  
|------------------ | ----------------------------- | ------------------------------- | ----- | ------------------ |  | -------------------- | ----- | ---- |  | ---- | -- | ------ | - | ---- | ----- | ---- |  | ------ | ----- | --- |  |  | -- | -- |  | - | ----- | ----- |  | - | ----- | ----- |  |  | -- | --- | -
|                   |                               |                                
|                   |                               | Three Months Ended September 30
|                  
|                  
|                   |                               |                                 |       |                    |  |                     
|                   |                               | Dollars (millions)              |       | Tonnes (thousands) |  | Average Price Per MT
|                  
|                  
|                   |                               | %                               |       |                    |  | %                    |       |      |  | %   
|                   |                               | 2003                            |       | 2002               |  | Change               |       | 2003 |  | 2002 |    | Change |   | 2003 |       | 2002 |  | Change
|                  
|                  
|Net Sales          |                               |                                 |       |                    |  |                      |       |      |  |      |    |        |   |      |       |      |  |        |       |     |  |  |    |    |  |   |       |       |  |   |       |       |  |  |    |    
|                   | North American                |                                 | $     | 61.5               |  |                      | $     | 51.6 |  |      |    | 19     |   |      |       | 768  |  |        |       | 676 |  |  |    | 14 |  |   | $     | 80.15 |  |   | $     | 76.37 |  |  |    | 5   |  
|                   | Offshore                      |                                 |       | 69.4               |  |                      |       | 64.0 |  |      |    | 8      |   |      |       | 889  |  |        |       | 740 |  |  |    | 20 |  |   | $     | 77.98 |  |   | $     | 86.42 |  |  |    | (10 | )
|                  
|                   |                               |                                 | 130.9 |                    |  |                      | 115.6 |      |  |      | 13 |        |   |      | 1,657 |      |  |        | 1,416 |     |  |  | 17 |    |  | $ | 78.98 |       |  | $ | 81.62 |       |  |  | (3 | )  
|                   | Miscellaneous                 |                                 |       | 13.0               |  |                      |       | 5.8  |  |      |    | 124    |   |      |       |     |  |        |       |    |  |  |    |   |  |   |       |      |  |   |       |      |  |  |    |    |  
|                  
|                   |                               |                                 | 143.9 |                    |  |                      | 121.4 |      |  |      | 19 |        |   |      | 1,657 |      |  |        | 1,416 |     |  |  | 17 |    |  | $ | 86.84 |       |  | $ | 85.73 |       |  |  | 1  |    
|                  
|Cost of Goods Sold |                               |                                 |       |                    |  |                      |       |      |  |      |    |        |   |      |       |      |  |        |       |     |  |  |    |    |  |   |       |       |  |   |       |       |  |  |    |    
|                   | Cash costs                    |                                 |       | 82.6               |  |                      |       | 62.8 |  |      |    | 32     |   |      |       |      |  |        |       |     |  |  |    |    |  |   | $     | 49.85 |  |   | $     | 44.35 |  |  |    | 12  |  
|                   | Depreciation and amortization |                                 |       | 9.1                |  |                      |       | 9.7  |  |      |    | (6     | ) |      |       |      |  |        |       |     |  |  |    |    |  |   | $     | 5.49  |  |   | $     | 6.85  |  |  |    | (20 | )
|                  
|                   |                               |                                 | 91.7  |                    |  |                      | 72.5  |      |  |      | 26 |        |   |      |       |      |  |        |       |     |  |  |    |    |  | $ | 55.34 |       |  | $ | 51.20 |       |  |  | 8  |    
|                  
|Gross Margin       |                               | $                               | 52.2  |                    |  | $                    | 48.9  |      |  |      | 7  |        |   |      |       |      |  |        |       |     |  |  |    |    |  | $ | 31.50 |       |  | $ | 34.53 |       |  |  | (9 | )  
|                  

|                   |                               |                                |       |                    |  |                      |       |       |  |      |    |        |  |      |       |       |  |        |       |       |  |  |    |    |  |   |       |       |  |   |       |       |  |  |     |    |  
|------------------ | ----------------------------- | ------------------------------ | ----- | ------------------ |  | -------------------- | ----- | ----- |  | ---- | -- | ------ |  | ---- | ----- | ----- |  | ------ | ----- | ----- |  |  | -- | -- |  | - | ----- | ----- |  | - | ----- | ----- |  |  | --- | -- | -
|                   |                               |                               
|                   |                               | Nine Months Ended September 30
|                  
|                  
|                   |                               |                                |       |                    |  |                     
|                   |                               | Dollars (millions)             |       | Tonnes (thousands) |  | Average Price Per MT
|                  
|                  
|                   |                               | %                              |       |                    |  | %                    |       |       |  | %   
|                   |                               | 2003                           |       | 2002               |  | Change               |       | 2003  |  | 2002 |    | Change |  | 2003 |       | 2002  |  | Change
|                  
|                  
|Net Sales          |                               |                                |       |                    |  |                      |       |       |  |      |    |        |  |      |       |       |  |        |       |       |  |  |    |    |  |   |       |       |  |   |       |       |  |  |     |   
|                   | North American                |                                | $     | 190.9              |  |                      | $     | 167.2 |  |      |    | 14     |  |      |       | 2,422 |  |        |       | 2,143 |  |  |    | 13 |  |   | $     | 78.80 |  |   | $     | 78.01 |  |  |     | 1  |  
|                   | Offshore                      |                                |       | 257.8              |  |                      |       | 242.2 |  |      |    | 6      |  |      |       | 3,216 |  |        |       | 2,852 |  |  |    | 13 |  |   | $     | 80.17 |  |   | $     | 84.92 |  |  |     | (6 | )
|                  
|                   |                               |                                | 448.7 |                    |  |                      | 409.4 |       |  |      | 10 |        |  |      | 5,638 |       |  |        | 4,995 |       |  |  | 13 |    |  | $ | 79.58 |       |  | $ | 81.96 |       |  |  | (3  | ) 
|                   | Miscellaneous                 |                                |       | 36.9               |  |                      |       | 20.6  |  |      |    | 79     |  |      |       |      |  |        |       |      |  |  |    |   |  |   |       |      |  |   |       |      |  |  |     |   |  
|                  
|                   |                               |                                | 485.6 |                    |  |                      | 430.0 |       |  |      | 13 |        |  |      | 5,638 |       |  |        | 4,995 |       |  |  | 13 |    |  | $ | 86.13 |       |  | $ | 86.09 |       |  |  |    |   
|                  
|Cost of Goods Sold |                               |                                |       |                    |  |                      |       |       |  |      |    |        |  |      |       |       |  |        |       |       |  |  |    |    |  |   |       |       |  |   |       |       |  |  |     |   
|                   | Cash costs                    |                                |       | 283.4              |  |                      |       | 216.6 |  |      |    | 31     |  |      |       |       |  |        |       |       |  |  |    |    |  |   | $     | 50.26 |  |   | $     | 43.36 |  |  |     | 16 |  
|                   | Depreciation and amortization |                                |       | 39.9               |  |                      |       | 36.1  |  |      |    | 11     |  |      |       |       |  |        |       |       |  |  |    |    |  |   | $     | 7.08  |  |   | $     | 7.23  |  |  |     | (2 | )
|                  
|                   |                               |                                | 323.3 |                    |  |                      | 252.7 |       |  |      | 28 |        |  |      |       |       |  |        |       |       |  |  |    |    |  | $ | 57.34 |       |  | $ | 50.59 |       |  |  | 13  |   
|                  
|Gross Margin       |                               | $                              | 162.3 |                    |  | $                    | 177.3 |       |  |      | (8 | )      |  |      |       |       |  |        |       |       |  |  |    |    |  | $ | 28.79 |       |  | $ | 35.50 |       |  |  | (19 | ) 
|                  

Gross margin increased in the third quarter as
the Company benefited from higher sales volumes and lower costs.
Third-quarter volumes were up 14 percent in the domestic
market. July was the Companys second-best month ever for
North American potash volumes as dealers purchased in advance of
price

17



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##### Table of Contents



increases. The volume increase for the first nine
months was also helped by a higher market share in 2003 compared
to the same period last year. Third-quarter offshore volumes
were up with India, Indonesia, Malaysia and Vietnam all
increasing imports. Brazil is on track for another record year,
with the Companys volumes to that country up
30 percent in the first nine months of 2003. The higher
volume for the year also reflected increased sales to India,
Indonesia, Malaysia, Taiwan and Vietnam.


Strong demand created low inventories and higher
prices in North America during the quarter. Canadian producers
were 22 percent below normal seasonal inventory levels and
the Companys price increased more than 15 percent
over the course of the quarter. Although offshore volumes were
up and prices in the spot market improved, a considerable spike
in ocean freight rates reduced the price realized on previously
agreed-upon sales. On a quarter-over-quarter basis, North
American prices FOB mine were up 5 percent while offshore
prices realized, FOB mine, were down 10 percent, after
increased freight charges, for a total reduction of
3 percent. For the first nine months, North American prices
were up slightly and the lower offshore prices reflected the
increase in freight costs.

The Canadian dollar and higher natural gas prices
continued to have an impact on the cost of potash operations.
Although the stronger Canadian dollar alone increased cost of
sales by nearly $5.00 per tonne for the third quarter, overall
the unit cost of potash (excluding nitrates) decreased
4 percent through efficiencies gained by higher operating
rates. The higher costs on a year-to-date basis were primarily
due to the rising Canadian dollar coupled with the increase in
natural gas costs, resulting in a gross margin decrease on a
year-over-year basis.

Phosphate

|                   |                               |                                 |       |                    |  |                      |       |       |  |      |    |        |   |      |     |      |  |        |     |     |  |  |    |    |   |   |        |        |  |   |        |        |  |  |    |     |  
|------------------ | ----------------------------- | ------------------------------- | ----- | ------------------ |  | -------------------- | ----- | ----- |  | ---- | -- | ------ | - | ---- | --- | ---- |  | ------ | --- | --- |  |  | -- | -- | - | - | ------ | ------ |  | - | ------ | ------ |  |  | -- | --- | -
|                   |                               |                                
|                   |                               | Three Months Ended September 30
|                  
|                  
|                   |                               |                                 |       |                    |  |                     
|                   |                               | Dollars (millions)              |       | Tonnes (thousands) |  | Average Price Per MT
|                  
|                  
|                   |                               | %                               |       |                    |  | %                    |       |       |  | %   
|                   |                               | 2003                            |       | 2002               |  | Change               |       | 2003  |  | 2002 |    | Change |   | 2003 |     | 2002 |  | Change
|                  
|                  
|Net Sales          |                               |                                 |       |                    |  |                      |       |       |  |      |    |        |   |      |     |      |  |        |     |     |  |  |    |    |   |   |        |        |  |   |        |        |  |  |    |    
|                   | Fertilizer  liquids          |                                 | $     | 40.0               |  |                      | $     | 34.5  |  |      |    | 16     |   |      |     | 188  |  |        |     | 164 |  |  |    | 15 |   |   | $      | 212.69 |  |   | $      | 210.46 |  |  |    | 1   |  
|                   | Fertilizer  solids           |                                 |       | 71.3               |  |                      |       | 35.7  |  |      |    | 100    |   |      |     | 434  |  |        |     | 239 |  |  |    | 82 |   |   | $      | 164.46 |  |   | $      | 149.44 |  |  |    | 10  |  
|                   | Feed                          |                                 |       | 46.1               |  |                      |       | 50.4  |  |      |    | (9     | ) |      |     | 211  |  |        |     | 219 |  |  |    | (4 | ) |   | $      | 218.50 |  |   | $      | 230.43 |  |  |    | (5  | )
|                   | Industrial                    |                                 |       | 44.6               |  |                      |       | 38.8  |  |      |    | 15     |   |      |     | 140  |  |        |     | 123 |  |  |    | 14 |   |   | $      | 318.87 |  |   | $      | 315.30 |  |  |    | 1   |  
|                  
|                   |                               |                                 | 202.0 |                    |  |                      | 159.4 |       |  |      | 27 |        |   |      | 973 |      |  |        | 745 |     |  |  | 31 |    |   | $ | 207.61 |        |  | $ | 213.96 |        |  |  | (3 | )  
|Miscellaneous      |                               |                                 | 2.3   |                    |  |                      | 1.9   |       |  |      | 21 |        |   |      |    |      |  |        |    |     |  |  |   |    |   |   |       |        |  |   |       |        |  |  |   |    
|                  
|                   |                               | $                               | 204.3 |                    |  | $                    | 161.3 |       |  |      | 27 |        |   |      | 973 |      |  |        | 745 |     |  |  | 31 |    |   | $ | 209.97 |        |  | $ | 216.51 |        |  |  | (3 | )  
|                  
|North American     |                               | $                               | 159.2 |                    |  | $                    | 124.1 |       |  |      | 28 |        |   |      | 696 |      |  |        | 509 |     |  |  | 37 |    |   | $ | 228.60 |        |  | $ | 243.60 |        |  |  | (6 | )  
|Offshore           |                               |                                 | 45.1  |                    |  |                      | 37.2  |       |  |      | 21 |        |   |      | 277 |      |  |        | 236 |     |  |  | 17 |    |   | $ | 163.34 |        |  | $ | 158.05 |        |  |  | 3  |    
|                  
|                   |                               |                                 | 204.3 |                    |  |                      | 161.3 |       |  |      | 27 |        |   |      | 973 |      |  |        | 745 |     |  |  | 31 |    |   | $ | 209.97 |        |  | $ | 216.51 |        |  |  | (3 | )  
|                  
|Cost of Goods Sold |                               |                                 |       |                    |  |                      |       |       |  |      |    |        |   |      |     |      |  |        |     |     |  |  |    |    |   |   |        |        |  |   |        |        |  |  |    |    
|                   | Cash costs                    |                                 |       | 195.9              |  |                      |       | 130.3 |  |      |    | 50     |   |      |     |      |  |        |     |     |  |  |    |    |   |   | $      | 201.34 |  |   | $      | 174.90 |  |  |    | 15  |  
|                   | Depreciation and amortization |                                 |       | 18.0               |  |                      |       | 21.2  |  |      |    | (15    | ) |      |     |      |  |        |     |     |  |  |    |    |   |   | $      | 18.50  |  |   | $      | 28.46  |  |  |    | (35 | )
|                  
|                   |                               |                                 | 213.9 |                    |  |                      | 151.5 |       |  |      | 41 |        |   |      |     |      |  |        |     |     |  |  |    |    |   | $ | 219.84 |        |  | $ | 203.36 |        |  |  | 8  |    
|                  
|Gross Margin       |                               | $                               | (9.6  | )                  |  | $                    | 9.8   |       |  |      |   |        |   |      |     |      |  |        |     |     |  |  |    |    |   | $ | (9.87  | )      |  | $ | 13.15  |        |  |  |   |    
|                  

18



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##### Table of Contents



|                   |                               |                                |       |                    |  |                      |       |       |  |      |    |        |   |      |       |       |  |        |       |     |  |  |    |    |   |   |        |        |  |   |        |        |  |  |    |     |  
|------------------ | ----------------------------- | ------------------------------ | ----- | ------------------ |  | -------------------- | ----- | ----- |  | ---- | -- | ------ | - | ---- | ----- | ----- |  | ------ | ----- | --- |  |  | -- | -- | - | - | ------ | ------ |  | - | ------ | ------ |  |  | -- | --- | -
|                   |                               |                               
|                   |                               | Nine Months Ended September 30
|                  
|                  
|                   |                               |                                |       |                    |  |                     
|                   |                               | Dollars (millions)             |       | Tonnes (thousands) |  | Average Price Per MT
|                  
|                  
|                   |                               | %                              |       |                    |  | %                    |       |       |  | %   
|                   |                               | 2003                           |       | 2002               |  | Change               |       | 2003  |  | 2002 |    | Change |   | 2003 |       | 2002  |  | Change
|                  
|                  
|Net Sales          |                               |                                |       |                    |  |                      |       |       |  |      |    |        |   |      |       |       |  |        |       |     |  |  |    |    |   |   |        |        |  |   |        |        |  |  |    |    
|                   | Fertilizer  liquids          |                                | $     | 119.6              |  |                      | $     | 99.3  |  |      |    | 20     |   |      |       | 533   |  |        |       | 466 |  |  |    | 14 |   |   | $      | 224.31 |  |   | $      | 213.30 |  |  |    | 5   |  
|                   | Fertilizer  solids           |                                |       | 170.3              |  |                      |       | 83.1  |  |      |    | 105    |   |      |       | 1,022 |  |        |       | 541 |  |  |    | 89 |   |   | $      | 166.76 |  |   | $      | 153.59 |  |  |    | 9   |  
|                   | Feed                          |                                |       | 138.0              |  |                      |       | 159.8 |  |      |    | (14    | ) |      |       | 650   |  |        |       | 700 |  |  |    | (7 | ) |   | $      | 212.37 |  |   | $      | 228.13 |  |  |    | (7  | )
|                   | Industrial                    |                                |       | 128.7              |  |                      |       | 118.5 |  |      |    | 9      |   |      |       | 400   |  |        |       | 368 |  |  |    | 9  |   |   | $      | 321.82 |  |   | $      | 322.51 |  |  |    |    |  
|                  
|                   |                               |                                | 556.6 |                    |  |                      | 460.7 |       |  |      | 21 |        |   |      | 2,605 |       |  |        | 2,075 |     |  |  | 26 |    |   | $ | 213.67 |        |  | $ | 222.02 |        |  |  | (4 | )  
|Miscellaneous      |                               |                                | 5.8   |                    |  |                      | 5.0   |       |  |      | 16 |        |   |      |      |       |  |        |      |     |  |  |   |    |   |   |       |        |  |   |       |        |  |  |   |    
|                  
|                   |                               | $                              | 562.4 |                    |  | $                    | 465.7 |       |  |      | 21 |        |   |      | 2,605 |       |  |        | 2,075 |     |  |  | 26 |    |   | $ | 215.89 |        |  | $ | 224.43 |        |  |  | (4 | )  
|                  
|North American     |                               | $                              | 475.0 |                    |  | $                    | 397.9 |       |  |      | 19 |        |   |      | 2,074 |       |  |        | 1,688 |     |  |  | 23 |    |   | $ | 229.04 |        |  | $ | 235.77 |        |  |  | (3 | )  
|Offshore           |                               |                                | 87.4  |                    |  |                      | 67.8  |       |  |      | 29 |        |   |      | 531   |       |  |        | 387   |     |  |  | 37 |    |   | $ | 164.74 |        |  | $ | 175.19 |        |  |  | (6 | )  
|                  
|                   |                               |                                | 562.4 |                    |  |                      | 465.7 |       |  |      | 21 |        |   |      | 2,605 |       |  |        | 2,075 |     |  |  | 26 |    |   | $ | 215.89 |        |  | $ | 224.43 |        |  |  | (4 | )  
|                  
|Cost of Goods Sold |                               |                                |       |                    |  |                      |       |       |  |      |    |        |   |      |       |       |  |        |       |     |  |  |    |    |   |   |        |        |  |   |        |        |  |  |    |    
|                   | Cash costs                    |                                |       | 514.9              |  |                      |       | 362.2 |  |      |    | 42     |   |      |       |       |  |        |       |     |  |  |    |    |   |   | $      | 197.66 |  |   | $      | 174.55 |  |  |    | 13  |  
|                   | Depreciation and amortization |                                |       | 56.2               |  |                      |       | 58.0  |  |      |    | (3     | ) |      |       |       |  |        |       |     |  |  |    |    |   |   | $      | 21.57  |  |   | $      | 27.95  |  |  |    | (23 | )
|                  
|                   |                               |                                | 571.1 |                    |  |                      | 420.2 |       |  |      | 36 |        |   |      |       |       |  |        |       |     |  |  |    |    |   | $ | 219.23 |        |  | $ | 202.50 |        |  |  | 8  |    
|                  
|Gross Margin       |                               | $                              | (8.7  | )                  |  | $                    | 45.5  |       |  |      |   |        |   |      |       |       |  |        |       |     |  |  |    |    |   | $ | (3.34  | )      |  | $ | 21.93  |        |  |  |   |    
|                  

Phosphate gross margin was down as poor
fundamentals in the solid fertilizer DAP and feed products more
than offset an industrial phosphate improvement. Domestic and
offshore phosphate sales volumes were up 37 and 17 percent,
respectively, compared to the third quarter of last year. This
was primarily due to additional DAP production from the
companys White Springs, FL operation and the expanded
industrial acid plant in Aurora, NC. These same factors were the
primary contributors to increased sales volumes on a
year-over-year basis.

Feed margins were under pressure as overall
market demand was down about 7 percent year to date, and
supply was up with new competitive capacity in the market. This
put pressure on prices, which were down 5 percent quarter
over quarter. In addition, the Company worked through production
problems at its new DFP plant in Aurora, which increased costs
and reduced gross margin by approximately $4 million for
the third quarter. On a year-to-date basis, the Companys
costs were negatively affected as it reduced feed production in
response to lower sales volumes and worked to reduce inventories
to more sustainable levels. In addition, the now resolved
start-up issues at the Companys new DFP facility in Aurora
reduced gross margin by approximately $12 million for the
first nine months of 2003.

While phosphate fertilizer prices were up over
the same quarter last year, they were still disappointing. With
China importing less DAP than anticipated, North American buyers
waited to measure the impact on prices, causing further
deterioration. For DAP, both volume and prices were less than
expected. Overall, phosphate prices were down 3 percent
quarter over quarter and 4 percent year over year, largely
because of the reduction in feed prices.

At the same time, costs were higher as the prices
of key inputs continued to climb. Ammonia costs were up
54 percent and sulfur was up 41 percent compared to
the third quarter last year. Rock costs fell by 6 percent,
quarter over quarter, as a result of mining higher-quality rock.
For the first nine months of 2003, rock costs were down
13 percent over the same period in 2002, but gross margin
continued to deteriorate. Phosphate prices did not rise enough
to offset the increased cost for sulfur and ammonia (up
59 percent and 46 percent, respectively, on a
year-over-year basis).

19



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##### Table of Contents



Nitrogen

|                   |                               |                                 |       |                    |  |                      |       |       |  |      |     |        |   |      |       |      |  |        |       |     |  |  |     |     |   |   |        |        |  |   |        |        |  |  |     |    | 
|------------------ | ----------------------------- | ------------------------------- | ----- | ------------------ |  | -------------------- | ----- | ----- |  | ---- | --- | ------ | - | ---- | ----- | ---- |  | ------ | ----- | --- |  |  | --- | --- | - | - | ------ | ------ |  | - | ------ | ------ |  |  | --- | -- | 
|                   |                               |                                
|                   |                               | Three Months Ended September 30
|                  
|                  
|                   |                               |                                 |       |                    |  |                     
|                   |                               | Dollars (millions)              |       | Tonnes (thousands) |  | Average Price Per MT
|                  
|                  
|                   |                               | %                               |       |                    |  | %                    |       |       |  | %   
|                   |                               | 2003                            |       | 2002               |  | Change               |       | 2003  |  | 2002 |     | Change |   | 2003 |       | 2002 |  | Change
|                  
|                  
|Net Sales          |                               |                                 |       |                    |  |                      |       |       |  |      |     |        |   |      |       |      |  |        |       |     |  |  |     |     |   |   |        |        |  |   |        |        |  |  |     |   
|                   | Ammonia                       |                                 | $     | 83.2               |  |                      | $     | 58.6  |  |      |     | 42     |   |      |       | 406  |  |        |       | 503 |  |  |     | (19 | ) |   | $      | 204.83 |  |   | $      | 116.43 |  |  |     | 76 | 
|                   | Urea                          |                                 |       | 66.9               |  |                      |       | 43.7  |  |      |     | 53     |   |      |       | 361  |  |        |       | 314 |  |  |     | 15  |   |   | $      | 184.96 |  |   | $      | 139.39 |  |  |     | 33 | 
|                   | Nitrogen Solutions            |                                 |       | 19.7               |  |                      |       | 24.9  |  |      |     | (21    | ) |      |       | 161  |  |        |       | 284 |  |  |     | (43 | ) |   | $      | 122.22 |  |   | $      | 87.75  |  |  |     | 39 | 
|                   | Nitric Acid                   |                                 |       | 17.7               |  |                      |       | 14.0  |  |      |     | 26     |   |      |       | 232  |  |        |       | 246 |  |  |     | (6  | ) |   | $      | 76.39  |  |   | $      | 56.83  |  |  |     | 34 | 
|                   | Ammonium Nitrate              |                                 |       | 25.9               |  |                      |       | 19.3  |  |      |     | 34     |   |      |       | 137  |  |        |       | 130 |  |  |     | 5   |   |   | $      | 188.83 |  |   | $      | 148.23 |  |  |     | 27 | 
|                   | Purchased                     |                                 |       | 24.3               |  |                      |       | 11.6  |  |      |     | 109    |   |      |       | 131  |  |        |       | 94  |  |  |     | 39  |   |   | $      | 186.28 |  |   | $      | 123.13 |  |  |     | 51 | 
|                  
|                   |                               |                                 | 237.7 |                    |  |                      | 172.1 |       |  |      | 38  |        |   |      | 1,428 |      |  |        | 1,571 |     |  |  | (9  | )   |   | $ | 166.46 |        |  | $ | 109.55 |        |  |  | 52  |   
|                   | Miscellaneous                 |                                 |       | 4.5                |  |                      |       | 4.1   |  |      |     | 10     |   |      |       |     |  |        |       |    |  |  |     |    |   |   |        |       |  |   |        |       |  |  |     |   | 
|                  
|                   |                               | $                               | 242.2 |                    |  | $                    | 176.2 |       |  |      | 37  |        |   |      | 1,428 |      |  |        | 1,571 |     |  |  | (9  | )   |   | $ | 169.61 |        |  | $ | 112.16 |        |  |  | 51  |   
|                  
|Fertilizer         |                               | $                               | 107.7 |                    |  | $                    | 69.8  |       |  |      | 54  |        |   |      | 644   |      |  |        | 672   |     |  |  | (4  | )   |   | $ | 167.26 |        |  | $ | 103.99 |        |  |  | 61  |   
|Non-fertilizer     |                               |                                 | 134.5 |                    |  |                      | 106.4 |       |  |      | 26  |        |   |      | 784   |      |  |        | 899   |     |  |  | (13 | )   |   | $ | 171.39 |        |  | $ | 118.26 |        |  |  | 45  |   
|                  
|                   |                               |                                 | 242.2 |                    |  |                      | 176.2 |       |  |      | 37  |        |   |      | 1,428 |      |  |        | 1,571 |     |  |  | (9  | )   |   | $ | 169.61 |        |  | $ | 112.16 |        |  |  | 51  |   
|                  
|Cost of Goods Sold |                               |                                 |       |                    |  |                      |       |       |  |      |     |        |   |      |       |      |  |        |       |     |  |  |     |     |   |   |        |        |  |   |        |        |  |  |     |   
|                   | Cash costs                    |                                 |       | 176.9              |  |                      |       | 138.1 |  |      |     | 28     |   |      |       |      |  |        |       |     |  |  |     |     |   |   | $      | 123.88 |  |   | $      | 87.91  |  |  |     | 41 | 
|                   | Depreciation and amortization |                                 |       | 23.4               |  |                      |       | 21.7  |  |      |     | 8      |   |      |       |      |  |        |       |     |  |  |     |     |   |   | $      | 16.39  |  |   | $      | 13.81  |  |  |     | 19 | 
|                  
|                   |                               |                                 | 200.3 |                    |  |                      | 159.8 |       |  |      | 25  |        |   |      |       |      |  |        |       |     |  |  |     |     |   | $ | 140.27 |        |  | $ | 101.72 |        |  |  | 38  |   
|                  
|Gross Margin       |                               | $                               | 41.9  |                    |  | $                    | 16.4  |       |  |      | 155 |        |   |      |       |      |  |        |       |     |  |  |     |     |   | $ | 29.34  |        |  | $ | 10.44  |        |  |  | 181 |   
|                  

|                   |                               |                                |       |                    |  |                      |       |       |  |      |     |        |   |      |       |       |  |        |       |       |  |  |    |     |   |   |        |        |  |   |        |        |  |  |     |    | 
|------------------ | ----------------------------- | ------------------------------ | ----- | ------------------ |  | -------------------- | ----- | ----- |  | ---- | --- | ------ | - | ---- | ----- | ----- |  | ------ | ----- | ----- |  |  | -- | --- | - | - | ------ | ------ |  | - | ------ | ------ |  |  | --- | -- | 
|                   |                               |                               
|                   |                               | Nine Months Ended September 30
|                  
|                  
|                   |                               |                                |       |                    |  |                     
|                   |                               | Dollars (millions)             |       | Tonnes (thousands) |  | Average Price Per MT
|                  
|                  
|                   |                               | %                              |       |                    |  | %                    |       |       |  | %   
|                   |                               | 2003                           |       | 2002               |  | Change               |       | 2003  |  | 2002 |     | Change |   | 2003 |       | 2002  |  | Change
|                  
|                  
|Net Sales          |                               |                                |       |                    |  |                      |       |       |  |      |     |        |   |      |       |       |  |        |       |       |  |  |    |     |   |   |        |        |  |   |        |        |  |  |     |   
|                   | Ammonia                       |                                | $     | 270.1              |  |                      | $     | 164.7 |  |      |     | 64     |   |      |       | 1,356 |  |        |       | 1,425 |  |  |    | (5  | ) |   | $      | 199.19 |  |   | $      | 115.57 |  |  |     | 72 | 
|                   | Urea                          |                                |       | 205.4              |  |                      |       | 146.0 |  |      |     | 41     |   |      |       | 1,122 |  |        |       | 1,125 |  |  |    |    |   |   | $      | 183.02 |  |   | $      | 129.74 |  |  |     | 41 | 
|                   | Nitrogen Solutions            |                                |       | 68.9               |  |                      |       | 62.6  |  |      |     | 10     |   |      |       | 597   |  |        |       | 760   |  |  |    | (21 | ) |   | $      | 115.38 |  |   | $      | 82.37  |  |  |     | 40 | 
|                   | Nitric Acid                   |                                |       | 55.3               |  |                      |       | 38.4  |  |      |     | 44     |   |      |       | 682   |  |        |       | 629   |  |  |    | 8   |   |   | $      | 81.13  |  |   | $      | 61.08  |  |  |     | 33 | 
|                   | Ammonium Nitrate              |                                |       | 69.7               |  |                      |       | 58.2  |  |      |     | 20     |   |      |       | 406   |  |        |       | 402   |  |  |    | 1   |   |   | $      | 171.85 |  |   | $      | 144.73 |  |  |     | 19 | 
|                   | Purchased                     |                                |       | 91.8               |  |                      |       | 37.2  |  |      |     | 147    |   |      |       | 450   |  |        |       | 325   |  |  |    | 38  |   |   | $      | 204.16 |  |   | $      | 114.40 |  |  |     | 78 | 
|                  
|                   |                               |                                | 761.2 |                    |  |                      | 507.1 |       |  |      | 50  |        |   |      | 4,613 |       |  |        | 4,666 |       |  |  | (1 | )   |   | $ | 165.01 |        |  | $ | 108.68 |        |  |  | 52  |   
|                   | Miscellaneous                 |                                |       | 12.6               |  |                      |       | 13.4  |  |      |     | (6     | ) |      |       |      |  |        |       |      |  |  |    |    |   |   |        |       |  |   |        |       |  |  |     |   | 
|                  
|                   |                               | $                              | 773.8 |                    |  | $                    | 520.5 |       |  |      | 49  |        |   |      | 4,613 |       |  |        | 4,666 |       |  |  | (1 | )   |   | $ | 167.74 |        |  | $ | 111.55 |        |  |  | 50  |   
|                  
|Fertilizer         |                               | $                              | 344.5 |                    |  | $                    | 218.9 |       |  |      | 57  |        |   |      | 2,108 |       |  |        | 2,154 |       |  |  | (2 | )   |   | $ | 163.41 |        |  | $ | 101.62 |        |  |  | 61  |   
|Non-fertilizer     |                               |                                | 429.3 |                    |  |                      | 301.6 |       |  |      | 42  |        |   |      | 2,505 |       |  |        | 2,512 |       |  |  |   |     |   | $ | 171.42 |        |  | $ | 120.06 |        |  |  | 43  |   
|                  
|                   |                               |                                | 773.8 |                    |  |                      | 520.5 |       |  |      | 49  |        |   |      | 4,613 |       |  |        | 4,666 |       |  |  | (1 | )   |   | $ | 167.74 |        |  | $ | 111.55 |        |  |  | 50  |   
|                  
|Cost of Goods Sold |                               |                                |       |                    |  |                      |       |       |  |      |     |        |   |      |       |       |  |        |       |       |  |  |    |     |   |   |        |        |  |   |        |        |  |  |     |   
|                   | Cash costs                    |                                |       | 570.0              |  |                      |       | 434.4 |  |      |     | 31     |   |      |       |       |  |        |       |       |  |  |    |     |   |   | $      | 123.56 |  |   | $      | 93.10  |  |  |     | 33 | 
|                   | Depreciation and amortization |                                |       | 69.5               |  |                      |       | 65.4  |  |      |     | 6      |   |      |       |       |  |        |       |       |  |  |    |     |   |   | $      | 15.07  |  |   | $      | 14.01  |  |  |     | 8  | 
|                  
|                   |                               |                                | 639.5 |                    |  |                      | 499.8 |       |  |      | 28  |        |   |      |       |       |  |        |       |       |  |  |    |     |   | $ | 138.63 |        |  | $ | 107.11 |        |  |  | 29  |   
|                  
|Gross Margin       |                               | $                              | 134.3 |                    |  | $                    | 20.7  |       |  |      | 549 |        |   |      |       |       |  |        |       |       |  |  |    |     |   | $ | 29.11  |        |  | $ | 4.44   |        |  |  | 556 |   
|                  

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Higher prices for nitrogen products and the
Companys hedging activities led to a gross margin increase
of 155 percent from the same quarter last year, even though
sales volumes were 9 percent lower. Of the
$41.9 million in gross margin, almost half came from the
sale of the Companys natural gas hedges earlier in the
year with the remainder from its Trinidad operations. Rising
natural gas prices led to additional shutdowns across the
industry, with third-quarter production reduced by approximately
30 percent. That tightening of supply led to significant
price increases for nitrogen. On a year-to-date basis,
approximately half of the Companys gross margin in
nitrogen came from its Trinidad production with the remainder
coming from the liquidated gas hedge contracts.

The Companys decision to shut down Memphis
and Geismar ammonia production led to a quarter-over-quarter
drop in volumes of 19 percent for ammonia and
43 percent for nitrogen solutions. This was more than
offset by price increases of 76 percent for ammonia and
39 percent for nitrogen solutions. Overall prices for
nitrogen products were up 51 percent over the third quarter
of last year. A similar price increase was also seen on a
year-over-year basis, accounting for the significant increase in
the Companys nitrogen gross margin.

Costs for nitrogen production continued to climb
in tandem with natural gas prices. Between the US and Trinidad,
the Companys average gas costs were up 22 percent
over last years third quarter. For the first nine months,
gas costs were up 40 percent over the same period in 2002
($2.96 per MMBtu compared to $2.12 per MMBtu). However, the
Company is a net beneficiary of high-priced natural gas, as its
Trinidad facility operates with long-term, low-cost natural gas
contracts with sheltered margins. With higher global ocean
freight costs, Trinidads proximity to the large
US market further demonstrates the value of this asset.

Expenses and Other Income

|                                  |  |                    |       |                   |  |        |      |      |  |      |     |        |  |   |       |   |  |   |      |  |  |  |     |  
|--------------------------------- |  | ------------------ | ----- | ----------------- |  | ------ | ---- | ---- |  | ---- | --- | ------ |  | - | ----- | - |  | - | ---- |  |  |  | --- | -
|                                  |  |                    |       |                  
|                                  |  | Three Months Ended |       | Nine Months Ended
|                                  |  | September 30       |       | September 30     
|                                 
|                                 
|                                  |  | %                  |       |                   |  | %     
|($ millions)                      |  | 2003               |       | 2002              |  | Change |      | 2003 |  | 2002 |     | Change
|                                 
|                                 
|Selling and Administrative        |  | $                  | 24.2  |                   |  | $      | 21.8 |      |  |      | 11  |        |  | $ | 71.8  |   |  | $ | 68.6 |  |  |  | 5   |  
|Provincial Mining and Other Taxes |  |                    | 12.2  |                   |  |        | 15.2 |      |  |      | (20 | )      |  |   | 45.1  |   |  |   | 55.2 |  |  |  | (18 | )
|Provision for Plant Shutdowns     |  |                    | 121.5 |                   |  |        |     |      |  |      |    |        |  |   | 123.7 |   |  |   |     |  |  |  |    |  
|Provision for PCS Yumbes S.C.M.   |  |                    | 140.5 |                   |  |        |     |      |  |      |    |        |  |   | 140.5 |   |  |   |     |  |  |  |    |  
|Foreign Exchange Loss (Gain)      |  |                    | 2.2   |                   |  |        | (5.0 | )    |  |      |    |        |  |   | 41.5  |   |  |   | 5.9  |  |  |  | 603 |  
|Other Income                      |  |                    | 5.2   |                   |  |        | 1.2  |      |  |      | 333 |        |  |   | 21.6  |   |  |   | 10.0 |  |  |  | 116 |  
|Interest Expense                  |  |                    | 24.6  |                   |  |        | 21.5 |      |  |      | 14  |        |  |   | 67.2  |   |  |   | 62.5 |  |  |  | 8   |  
|Income Tax (Recovery) Expense     |  |                    | (49.6 | )                 |  |        | 8.3  |      |  |      |    |        |  |   | (27.5 | ) |  |   | 22.1 |  |  |  |    |  

Selling and administrative expenses increased
$2.4 million on a quarter-over-quarter basis and
$3.2 million on a year-over-year basis. These increases
were primarily due to an increase in fringe benefits and higher
amortization expense.

Saskatchewans Potash Production Tax is
comprised of a base tax per tonne of product sold and an
additional tax based on mine profits. The New Brunswick
division and the Saskatchewan divisions pay a provincial Crown
royalty, which is accounted for in cost of goods sold. A revised
tax structure for potash producers in Saskatchewan, adjusted for
the first nine months of the year, contributed
$4.1 million, or the equivalent of $0.05 per share, to
earnings. The Government of Saskatchewan has reduced the profits
tax on all incremental sales tonnes above the 2001 and 2002
average of 5.722 million tonnes effective January 2003. In
addition, to the extent that net capital spending is greater
than 90 percent of 2002 net expenditures, the excess is
fully deductible in the current year. This will benefit the
Company as it increases sales with improved market demand.

In June 2003, the Company indefinitely shut down
its Memphis plant and suspended production of ammonia and
nitrogen solutions at its Geismar facilities due to high US
natural gas costs and low product margins. In August 2003,
Company management determined that there were no immediate
intentions of re-starting the unprofitable plants. During the
third quarter, Company management also determined that the cost

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of operating Kinston (a phosphate feed supplement
plant that ceased operations in first-quarter 2003) as a
stand-alone warehouse was uneconomical. As a result of these
decisions, the Company recorded a provision for plant shutdowns
of $121.5 million in the third quarter and
$123.7 million on a year-to-date basis. The charge
recognized a write-down of certain plant assets and costs
associated with eliminating job positions by the end of the
year. The shutdown of the Memphis nitrogen plant will result in
an annualized reduction in production capacity of
0.371 million tonnes of ammonia and 0.409 million
tonnes of urea. The suspension of ammonia and nitrogen solutions
production at the Geismar plant will result in an annualized
reduction in production capacity of 0.483 million tonnes of
ammonia and 1.028 million tonnes of nitrogen solutions. The
closure of the Kinston feed supplement plant will result in an
annualized reduction in production capacity of
0.141 million tonnes of feed supplements. Please refer to
Note 4 of the unaudited interim consolidated financial
statements for more details on the provision for plant shutdowns.


On August 27, 2003, the Company provided to
SQM an irrevocable option to acquire its interest in PCS Yumbes.
Acquired in 1999, PCS Yumbes holds mining concessions on certain
sodium nitrate reserves in the Atacama Desert in northern Chile
and is a producer of potassium nitrate, sodium nitrate and
iodine. If the option is exercised, the parties will enter into
a share purchase agreement under which SQM would acquire the
shares of PCS Yumbes for an aggregate purchase price of
$35.0 million (including the price of the option), subject
to adjustment. The Company recorded a charge of
$140.5 million in the third quarter, recognizing a
write-down of certain assets and costs associated with workforce
reductions and contract terminations. Please refer to
Note 5 of the unaudited interim consolidated financial
statements for more details on the provision for PCS Yumbes.

The foreign exchange amount arises primarily from
the month-end translation of the Companys Canadian-dollar
denominated monetary items on the Consolidated Statement of
Financial Position. The foreign exchange loss increased
significantly quarter over quarter and year over year due to the
strengthening of the Canadian dollar relative to the US dollar.
At September 30, 2003, the Canadian dollar was slightly
higher than at June 30, 2003 and $0.23 higher than at
December 31, 2002. This compares to a $0.07 decrease from
June 30, 2002 to September 30, 2002 and a $0.01
decrease from December 31, 2001 to September 30, 2002.

During the quarter, other income was up
$4.0 million as the Company received a dividend of
$3.2 million from its investment in ICL. For the year, the
increase in other income relates primarily to nitrogen insurance
proceeds, the timing of the receipt of the ICL dividends and the
2003 equity earnings of SQM exceeding the 2002 dividends
received.

Interest expense was up this year compared to
both the third quarter and the first nine months of 2002,
primarily due to the issuance of $250.0 million of
4.875 percent ten-year notes under the Companys shelf
registration in March 2003. Weighted average long-term debt
outstanding in the third quarter of 2003 was
$1,272.7 million (2002  $1,023.9 million)
with a weighted average interest rate of 6.9 percent
(2002  7.4 percent). Weighted average long-term
debt outstanding for the first nine months of 2003 was
$1,217.4 million (2002  $1,021.7 million)
with a weighted average interest rate of 7.0 percent
(2002  7.4 percent). The weighted average
interest rate on short-term debt outstanding in the third
quarter of 2003 was 1.4 percent (2002 
2.1 percent) and for the first nine months of 2003 was
1.5 percent (2002  2.1 percent).

The effective consolidated income tax rate for
the third quarter and first nine months of 2003 was
approximately 40 percent of income before income taxes
(exclusive of the charges relating to PCS Yumbes described
above). This compares to an effective consolidated income tax
rate of approximately 36 percent for the 2002 periods. The
increase in the effective rate was primarily due to the
expiration of the last tax holiday in Trinidad. The tax
provision for the third quarter and first nine months of 2003
was all future income taxes as compared to a current/ future
split of 80 percent current and 20 percent future for
the 2002 periods. The decrease in the current portion of the
provision was primarily due to utilization of tax losses in the
US as well as certain reclassifications from current to future
income taxes.

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ANALYSIS OF FINANCIAL CONDITION AND CASH
FLOW

|                                                |  |                    |       |                   |  |      |       |      |  |   |        |   |  |   |        |  
|----------------------------------------------- |  | ------------------ | ----- | ----------------- |  | ---- | ----- | ---- |  | - | ------ | - |  | - | ------ | -
|                                                |  |                    |       |                  
|                                                |  | Three Months Ended |       | Nine Months Ended
|                                                |  | September 30       |       | September 30     
|                                               
|                                               
|($ millions)                                    |  | 2003               |       | 2002              |  | 2003 |       | 2002
|                                               
|                                               
|Cash Provided by Operating Activities           |  | $                  | 128.4 |                   |  | $    | 85.3  |      |  | $ | 239.4  |   |  | $ | 262.7  |  
|Cash Used in Investing Activities               |  | $                  | (37.3 | )                 |  | $    | (70.3 | )    |  | $ | (92.0  | ) |  | $ | (202.7 | )
|Cash (Used in) Provided by Financing Activities |  | $                  | (96.7 | )                 |  | $    | 26.9  |      |  | $ | (114.0 | ) |  | $ | (30.9  | )

Cash provided by operating activities was up from
third-quarter 2002 due to the collection of the large
second-quarter 2003 receivables. For the first nine months of
2003, cash provided by operating activities was down compared to
the same time period in 2002 due to receivables, inventories and
current income taxes being a net use of cash in 2003 but a net
source in 2002.

The decrease in cash used in investing activities
in both the third quarter and year-to-date was primarily due to
the Companys additional investment of $23.2 million
in SQM and spending on the new DFP plant and expansion of the
purified acid plant at Aurora in 2002.

During the third quarter, the Company paid down
short-term debt of $88.0 million. The Company paid
dividends of $13.0 million in the third quarter and
$39.1 million for the first nine months (similar to the
2002 amounts). During the first quarter, the Company issued
$250.0 million of 4.875 percent notes due 2013 under
its shelf registration statement. The net proceeds from the
notes were used to repay short-term debt in that quarter.

CONTRACTUAL OBLIGATIONS AND OTHER
COMMITMENTS

|                                  |  |                        |         |               |  |              |       |              |  |              |       |  |  |   |       |  |  |   |         | 
|--------------------------------- |  | ---------------------- | ------- | ------------- |  | ------------ | ----- | ------------ |  | ------------ | ----- |  |  | - | ----- |  |  | - | ------- | 
|                                  |  |                       
|                                  |  | Payments Due By Period
|                                  |  |                       
|                                  |  | Dollars (millions)    
|                                 
|                                 
|                                  |  | Total                  |         | Within 1 year |  | 2 to 3 years |       | 4 to 5 years |  | Over 5 years
|                                 
|                                 
|Long-term Debt                    |  | $                      | 1,272.6 |               |  | $            | 3.4   |              |  | $            | 11.8  |  |  | $ | 401.9 |  |  | $ | 855.5   | 
|Operating Leases                  |  |                        | 338.2   |               |  |              | 59.7  |              |  |              | 83.8  |  |  |   | 55.3  |  |  |   | 139.4   | 
|Raw Material Purchase Commitments |  |                        | 1,021.3 |               |  |              | 135.7 |              |  |              | 184.8 |  |  |   | 169.0 |  |  |   | 531.8   | 
|Other Commitments                 |  |                        | 10.9    |               |  |              | 8.0   |              |  |              | 2.2   |  |  |   | 0.7   |  |  |   |        | 
|Other Long-Term Liabilities       |  |                        | 309.2   |               |  |              | 21.3  |              |  |              | 76.4  |  |  |   | 84.2  |  |  |   | 127.3   | 
|                                 
|Total                             |  | $                      | 2,952.2 |               |  | $            | 228.1 |              |  | $            | 359.0 |  |  | $ | 711.1 |  |  | $ | 1,654.0 | 
|                                 

Long-term debt consists of $1,250.0 million
of notes payable that were issued under shelf registration
statements, $13.2 million Adjustable Rate Industrial
Revenue and Pollution Control Obligations, a net of
$5.9 million under a back-to-back loan arrangement and
commitments of $3.5 million payable over five years. The
notes payable are unsecured. Of the notes outstanding,
$400.0 million bear interest at 7.125 percent and
mature in 2007, $600.0 million bear interest at
7.75 percent and mature in 2011 and $250.0 million
bear interest at 4.875 percent and mature in 2013. There
are no sinking fund requirements. The notes are subject to
certain covenants and events of default, including an event of
default for acceleration of other debt in excess of
$50.0 million. The Adjustable Rate Industrial Revenue and
Pollution Control Obligations bear interest at varying rates,
are secured by bank letters of credit and have no sinking fund
requirements.

Operating leases consist primarily of three
items. The first is railcars that are used to transport finished
goods and raw materials. These leases extend out to
approximately 2020. The second is the lease of port facilities
at the Port of Saint John for shipping New Brunswick potash
offshore. This lease runs until 2018. The third is the lease of
three vessels for transporting ammonia from Trinidad. These
leases extend to 2011. The operating lease amounts disclosed in
the above table were calculated as at September 30, 2003.

The Company has long-term agreements for the
purchase of sulfur for use in the production of phosphoric acid.
These agreements provide for minimum purchase quantities and
certain prices are based on

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market rates at the time of delivery. The
commitments included in the above table are based on the market
prices as at September 30, 2003. The Companys
Trinidad subsidiaries have entered into long-term natural gas
contracts with the National Gas Company of Trinidad. The
contracts provide for prices that vary with ammonia market
prices, escalating floor prices and minimum purchase quantities.
The commitments included in the above table are based on floor
prices and minimum purchase quantities. The Company also has a
long-term agreement for the purchase of phosphate rock used at
the Geismar facility. This agreement sets base prices (less
volume discounts) through to December 2003. Prices in subsequent
years are subject to renegotiation. The commitments included in
the above table are based on the expected purchase quantity and
the set base prices (less applicable discounts).


Other commitments consist of amounts relating to
an acid storage agreement that is in effect until 2004, the
Companys Rocanville expansion project through 2005 and
contracts to purchase limestone that run through 2007.

Other long-term liabilities include accrued
post-retirement/post-employment benefits and accrued reclamation
costs.

LIQUIDITY

|                           |  |                    |         |                    |  |                    |         |  |  |   |       | 
|-------------------------- |  | ------------------ | ------- | ------------------ |  | ------------------ | ------- |  |  | - | ----- | 
|                           |  |                   
|                           |  | Dollars (millions)
|                          
|                          
|                           |  | Amount             |         | Amount            
|                           |  | Total              |         | Outstanding at     |  | Available at      
|                           |  | Amount             |         | September 30, 2003 |  | September 30, 2003
|                          
|                          
|Syndicated Credit Facility |  | $                  | 750.0   |                    |  | $                  |        |  |  | $ | 606.6 | 
|Line of Credit             |  |                    | 75.0    |                    |  |                    |        |  |  |   | 58.9  | 
|Commercial Paper           |  |                    | 500.0   |                    |  |                    | 143.4   |  |  |   | 356.6 | 
|US Shelf Registration      |  |                    | 2,000.0 |                    |  |                    | 1,250.0 |  |  |   | 750.0 | 

The Company has a syndicated credit facility,
renewable annually, which provides for unsecured advances.
During the quarter, it was increased to $750.0 million from
$650.0 million. The amount available is the total committed
amount less the amount of direct borrowings and commercial paper
outstanding. The line of credit is also renewable annually and
the amount available is reduced by outstanding letters of credit
and direct borrowings. During the quarter, it was reduced to
$75.0 million from approximately $120 million. Both
the syndicated credit facility and the line of credit have
financial and other covenants which the Company must comply with
at each quarter end. The principal covenants require debt to
capital of less than 0.55:1, long-term debt to EBITDA (as
defined in the syndicated credit facility) of less than 3.5:1,
tangible net worth greater than $1,250.0 million and debt
of subsidiaries less than $590.0 million. The Company was
in compliance with these covenants at September 30, 2003.

The Company also has a commercial paper program
of up to $500.0 million. Access to this source of
short-term financing depends primarily on the Companys
rating by Dominion Bond Rating Service (DBRS) and
conditions in the money markets. The Companys commercial
paper is currently rated by DBRS as R1 low, which should allow
unrestricted access to the money markets.

The Company has a US shelf registration statement
available under which it may issue up to an additional
$750.0 million in unsecured debt securities.

The Company believes that internally generated
cash flow, supplemented by borrowing from existing financing
sources, will be sufficient to meet its anticipated capital
expenditures and other cash requirements, exclusive of any
possible acquisitions, in 2003.

FAIR VALUE OF GAS HEDGING CONTRACTS

In addition to physical spot and term purchases,
the Company employs futures, swaps and option agreements to
manage the cost on a portion of its natural gas requirements.
These instruments are intended to hedge the future cost of the
committed and anticipated natural gas purchases primarily for
its US nitrogen and

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phosphate plants. By Company policy, the maximum
period for these hedges cannot exceed five years. The Company
uses these instruments to reduce price risk, not for speculative
or trading purposes.


The fair value of the Companys gas hedging
contracts at September 30, 2003 was $60.4 million
($52.7 million at December 31, 2002). The
Companys futures contracts are exchange-traded and fair
value was determined based on exchange prices. Swaps and option
agreements are traded in the over-the-counter market and fair
value was calculated based on a price that was converted to an
exchange-equivalent price.

RELATED PARTY TRANSACTIONS

The Company sells potash from its Saskatchewan
mines for use outside of North America exclusively to Canpotex
Limited, a potash export, sales and marketing company owned in
equal shares by the three potash producers in the Province of
Saskatchewan. Sales to Canpotex for the quarter ended
September 30, 2003 were $58.6 million
(2002  $53.0 million). On a year-to-date basis,
these sales were $200.4 million (2002 
$192.2 million). Sales to Canpotex are at prevailing market
prices and are settled on normal trade terms.

In connection with entering into the option
agreement with SQM on August 27, 2003, PCS Yumbes has
agreed to purchase potash from SQM at an arms length
negotiated price. In addition, PCS Yumbes has agreed to
sell to SQM all of its potassium nitrate production at an
arms length negotiated price. Both agreements are in
effect until no later than December 31, 2004. Potash
purchases for third-quarter 2003 were $5.3 million
(2002  $3.3 million). Year-to-date purchases
were $8.0 million (2002  $10.4 million).
Potassium nitrate sales to SQM for the quarter ended
September 30, 2003 were $7.3 million (there were no
such sales in third-quarter 2002). Year-to-date sales were
$17.2 million (there were no such sales in the first nine
months of 2002).

The Company has no other significant related
party transactions.

CRITICAL ACCOUNTING POLICIES

The Companys accounting policies are in
accordance with Canadian GAAP. These differ in some material
respects from US GAAP. These differences are explained and
quantified in Note 10 of the unaudited interim consolidated
financial statements.

The accounting policies followed by the Company
will affect the reported amount of assets, liabilities, revenues
and expenses. The Company has changed its method of determining
the cost of finished product inventories from the first in,
first out method to the weighted average method. This change in
accounting policy had no significant effect on the
Companys results of operations or financial position for
any of the periods presented (see Note 2 of the unaudited
interim consolidated financial statements). There were no other
changes to critical accounting policies.

During the first quarter, the Companys
Board of Directors decided to proceed with a policy of expensing
all future stock options, such policy to be effective with the
fiscal year beginning January 1, 2004.

CRITICAL ACCOUNTING ESTIMATES

In preparing the Companys consolidated
financial statements in accordance with Canadian GAAP, the
Company makes estimates concerning a variety of matters. Some of
these matters are highly uncertain and the estimates involve
judgements made based on the information available. The
Companys results of operations and financial condition
could be materially affected if either (a) the Company used
different estimates that it could reasonably have used or
(b) in the future the Company changes its estimates in
response to changes that are reasonably likely to occur.

During the quarter, the Company approved plans to
restructure certain operations. These plans require significant
estimates to be made of the recoverability of the carrying value
of certain assets based on their capacity to generate future
cash flows. Although Company management believes it has made
reasonable estimates consistent with current conditions,
internal planning and expected future operations, such estimates
are subject to significant uncertainties and judgements. As a
result, it is reasonably possible that the amounts

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reported for asset impairments in connection with
these initiatives could be different if the Company were to use
different assumptions or if conditions were to change in the
future. The Company is also required to report estimated
expenses for employee termination, contract termination and
other exit costs. Because such activities are complex processes
that can take several months to complete, they involve
periodically assessing estimates. As a result, the Company may
have to change originally reported estimates when actual
payments are made or the activities are completed.


RISK MANAGEMENT

Understanding and managing risks is part of the
Companys overall strategic planning process. The
Companys Board of Directors has adopted a comprehensive
approach to risk identification and risk management. From a
comprehensive risk universe, the risks likely to
affect the Company are identified and analyzed. Those risks are
then ranked in order of importance according to severity,
duration and controllability, recognizing that there are
interconnections among them. The most effective way to manage
these risks was identified and is being implemented. The
identification and management of risk is an ongoing process
because circumstances change and risks change with them.

RECENT TRANSACTION

On October 16, 2003, the Company purchased
from JIC, an arm of the Jordanian government, 26 percent of
the shares of APC for approximately $173.3 million. APC is
publicly traded on the Amman Stock Exchange. APC produces potash
from the Dead Sea and is the worlds eighth largest potash
producer with 2 million tonnes of annual capacity. Its
primary markets are India (27 percent), China
(23 percent) and Europe (15 percent), a good
complement to the Companys sales to North America
(44 percent), Brazil (13 percent) and China
(13 percent). APCs location advantage to certain
markets, access to port and low production costs make that
company a natural fit to advance the Companys strategy to
be a low-cost global supplier. The purchase was financed using
short-term debt and will be accounted for under the equity
method of accounting.

OUTLOOK

Grain inventories are at very low levels and the
worlds grain stocks-to-use ratio is at its lowest point in
30 years. Commodity prices are up for many crops around the
world that require the Companys products, which should
drive increased demand in all three nutrients.

Business conditions are better in potash and
nitrogen than in phosphate. In potash, the combination of low
world inventories, more cost-conscious Russian competitors and
strong projected demand from major world customers is expected
to support a positive price trend moving forward. Strong
third-quarter volumes, however, could signal that North American
dealers made purchases in advance of price increases, which
could impact fourth-quarter sales. The stronger Canadian dollar
will continue to hurt potash operating costs and higher freight
rates will not all be covered in existing contract prices to
offshore customers, continuing to impact offshore margins.

In phosphate fertilizers, too much production is
chasing too little demand. However, changes to subsidy programs
in India could have a positive impact on DAP imports. In North
America, low phosphate soil nutrient levels need to be
replenished but dealers continue to hold off on filling their
bins. In feed, prices for cattle, poultry and hogs are up, which
could create a rebound for both prices and volumes entering
2004. In the interim, the increased competitive environment as a
result of the over-supply situation looks set to continue.
Start-up issues at the Companys new DFP facility in Aurora
have been addressed allowing for the shut down of the DFP
production at the White Springs facility. This should have a
positive impact on production costs moving forward, although
higher-cost inventoried product remains in the system.
Industrial products continue to be the one bright light in
phosphate. This is reinforced by a recent industry plant closure
and tight supply and demand.

With lower natural gas costs at quarter end, some
nitrogen production has been restarted (North American
production is now about 25 percent curtailed). However,
supply-demand fundamentals in nitrogen

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are expected to remain tight due to cost
pressures, restricted imports caused by high freight rates,
limited new global capacity coming on stream and strong
industrial demand in keeping with a better economic outlook.
Prices are expected to hold or improve and more than offset
higher production costs in North America due to higher natural
gas costs. The Companys Trinidad operation, with its
low-cost natural gas contracts, will continue to be key to its
nitrogen profitability. Assuming current market-priced natural
gas, the Company expects positive earnings from its
US plants. Fourth-quarter earnings will also benefit from
the sale of natural gas hedges earlier this year. As of
September 30, 2003, the Company was 86 percent hedged
at $3.41 per MMBtu for November through December 2003, subject
to collared profits.


The Canadian dollar will continue to affect the
Companys earnings. The Company expects the dollar to end
the year at 1.3310 (which would result in an $0.80 per share
decrease from the results if the exchange rate entering the year
had been maintained). In spite of this, the Company believes
that it can earn in the range of $0.30 to $0.50 per share in the
fourth quarter.

Annual capital expenditures are expected to be
approximately $150 million with additions to other assets
of approximately $20 million. Cash from operating
activities is expected to be over $390 million (a
24-percent improvement over 2002). Outstanding shares are
expected to be 52.3 million.

Foreign exchange continues to be unpredictable.
In the trading range of $1.33 for the Canadian dollar relative
to the US dollar, there will be an effect of approximately
$2.2 million on the Companys foreign exchange
gain/loss before tax for each $0.01 change in the Canadian
dollar. These gains/ losses are primarily non-cash so earnings
are affected more than cash flow. The sensitivity has increased
from the last quarter, due to an increase in
Canadian-denominated net monetary liabilities and a stronger
Canadian dollar.

FORWARD LOOKING STATEMENTS

Certain statements in this quarterly report on
Form 10-Q and this Managements Discussion and
Analysis of Financial Condition and Results of Operations,
including those in the Outlook section relating to
the period after September 30, 2003, are forward-looking
statements subject to risks and uncertainties. A number of
factors could cause actual results to differ materially from
those expressed in the forward-looking statements, including,
but not limited to: fluctuation in supply and demand in
fertilizer, sulfur and petrochemical markets; changes in
competitive pressures, including pricing pressures; risks
associated with natural gas and other hedging activities;
changes in capital markets; changes in currency and exchange
rates; unexpected geological or environmental conditions;
imprecision in reserve estimates; the outcome of legal
proceedings; changes in government policy and regulation; and
acquisitions the Company may undertake in the future. The
Company sells to a diverse group of customers both by geography
and by end product. Market conditions will vary on a
quarter-over-quarter and year-over-year basis and sales can be
expected to shift from one period to another. The Company
disclaims any intention or obligation to update or revise any
forward-looking statements, whether as a result of new
information, future events or otherwise, except as otherwise
required by applicable law.






|        |                                                               
|------- | --------------------------------------------------------------
|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES
    ABOUT MARKET RISK

The Companys nitrogen operations are
significantly affected by the price of natural gas. The Company
employs derivative commodity instruments related to a portion of
its natural gas requirements (primarily futures, swaps and
options) for the purpose of managing its exposure to commodity
price risk in the purchase of natural gas. Changes in the market
value of these derivative instruments have a high correlation to
changes in the spot price of natural gas. Under Canadian GAAP,
gains or losses arising from settled hedging transactions are
deferred as a component of inventory until the product
containing the hedged item is sold. Changes in the market value
of open hedging transactions are not recognized as they
generally relate to changes in the spot price of anticipated
natural gas purchases.

A sensitivity analysis has been prepared to
estimate the Companys market risk exposure arising from
derivative commodity instruments. The fair value of such
instruments is calculated by valuing each position using quoted
market prices. Market risk is estimated as the potential loss in
fair value resulting from a hypothetical 10 percent adverse
change in such prices. The results of this analysis indicate
that as of

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September 30, 2003, the Companys
estimated derivative commodity instruments market risk exposure
was $21.5 million (2002  $20.8 million).
Actual results may differ from this estimate. Changes in the
fair value of such derivative instruments, with maturities in
2003 through 2008, will generally relate to changes in the spot
price of anticipated natural gas purchases.


The Company also enters into forward exchange
contracts for the sole purpose of limiting its exposure to
exchange rate fluctuations relating to certain trade accounts.
Gains or losses resulting from foreign exchange contracts are
recognized at the time that the contracts are entered into and
are included in Other Income.






|        |                        
|------- | -----------------------
|ITEM 4. | CONTROLS AND PROCEDURES

As of September 30, 2003, the Company
carried out an evaluation under the supervision and with the
participation of the Companys management, including the
Companys Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the design and operation of the
Companys disclosure controls and procedures. Based upon
that evaluation and as of September 30, 2003, the Chief
Executive Officer and Chief Financial Officer concluded that the
disclosure controls and procedures were effective in all
material respects to ensure that information required to be
disclosed in the reports the Company files and submits under the
Securities Exchange Act of 1934 is recorded, processed,
summarized and reported as and when required.

There has been no change in the Companys
internal control over financial reporting during the quarter
ended September 30, 2003 that has materially affected, or
is reasonably likely to materially affect, the Companys
internal control over financial reporting.

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PART II.     OTHER
INFORMATION






ITEM 6. EXHIBITS AND REPORTS ON FORM
8-K


(a) EXHIBITS

|        |      |                         |  |                                                                                                                                                                                                                                                                                             
|------- | ---- | ----------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |                        
|Number  |      | Description of Document
|        |      |                        
|        | 3(a) |                         |  | Articles of Continuance of the registrant dated
    May 15, 2002, incorporated by reference to
    Exhibit 3(a) to the registrants report on
    Form 10-Q for the quarterly period ended June 30, 2002
    (the Second Quarter 2002 Form 10-Q).                                         
|       
|        | 3(b) |                         |  | Bylaws of the registrant effective May 15,
    2002, incorporated by reference to Exhibit 3(a) to the
    Second Quarter 2002 Form 10-Q.                                                                                                                                                    
|       
|        | 4(a) |                         |  | Term Credit Agreement between The Bank of Nova
    Scotia and other financial institutions and the registrant dated
    September 25, 2001, incorporated by reference to
    Exhibit 4(a) to the registrants report on
    Form 10-Q for the quarterly period ended September 30,
    2001.
|       
|        | 4(b) |                         |  | Syndicated Term Credit Facility Amending
    Agreement between The Bank of Nova Scotia and other financial
    institutions and the registrant dated as of September 23,
    2003.                                                                                                          
|       
|        | 4(c) |                         |  | Indenture dated as of June 16, 1997, between
    the registrant and The Bank of Nova Scotia Trust Company of New
    York, incorporated by reference to Exhibit 4(a) to the
    registrants report on Form 8-K dated June 18,
    1997 (the 1997 Form 8-K).                              
|       
|        | 4(d) |                         |  | Indenture dated as of February 27, 2003,
    between the registrant and The Bank of Nova Scotia Trust Company
    of New York, incorporated by reference to Exhibit 4(c) to
    the registrants report on Form 10-K for the year
    ended December 31, 2002 (the 2002
    Form 10-K).   
|       
|        | 4(e) |                         |  | Form of Notes relating to the registrants
    offering of $400,000,000 principal amount of 7.125% Notes due
    June 15, 2007, incorporated by reference to
    Exhibit 4(b) to the 1997 Form 8-K.                                                                                         
|       
|        | 4(f) |                         |  | Form of Notes relating to the registrants
    offering of $600,000,000 principal amount of 7 3/4% Notes
    due May 31, 2011, incorporated by reference to
    Exhibit 4 to the registrants report on Form 8-K
    dated May 17, 2001.                                                    
|       
|        | 4(g) |                         |  | Form of Note relating to the registrants
    offering of $250,000,000 principal amount of 4.875% Notes due
    March 1, 2013, incorporated by reference to Exhibit 4
    to the registrants report on Form 8-K dated
    February 28, 2003.                                               

The registrant hereby undertakes to file with the
Securities and Exchange Commission, upon request, copies of any
constituent instruments defining the rights of holders of
long-term debt of the registrant or its subsidiaries that have
not been filed herewith because the amounts represented thereby
are less than 10% of the total assets of the registrant and its
subsidiaries on a consolidated basis.

|        |       |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- | ----- | ----------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                        
|Number  |       | Description of Document
|        |       |                        
|        | 10(a) |                         |  | Sixth Voting Agreement dated April 22, 1978,
    between Central Canada Potash, Division of Noranda, Inc.,
    Cominco Ltd., International Minerals and Chemical Corporation
    (Canada) Limited, PCS Sales and Texasgulf Inc., incorporated by
    reference to Exhibit 10(f) to the registrants
    registration statement on Form F-1 (File No. 33-31303)
    (the F-1 Registration Statement).                                                           
|       
|        | 10(b) |                         |  | Canpotex Limited Shareholders Seventh Memorandum
    of Agreement effective April 21, 1978, between Central
    Canada Potash, Division of Noranda Inc., Cominco Ltd.,
    International Minerals and Chemical Corporation (Canada)
    Limited, PCS Sales, Texasgulf Inc. and Canpotex Limited as
    amended by Canpotex S & P amending agreement dated
    November 4, 1987, incorporated by reference to
    Exhibit 10(g) to the F-1 Registration Statement.

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|        |       |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|------- | ----- | ----------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                        
|Number  |       | Description of Document
|        |       |                        
|       
|        | 10(c) |                         |  | Producer Agreement dated April 21, 1978,
    between Canpotex Limited and PCS Sales, incorporated by
    reference to Exhibit 10(h) to the F-1 Registration
    Statement.                                                                                                                                                                                                                                                                                                                                                                             
|       
|        | 10(d) |                         |  | Canpotex/PCS Amending Agreement, dated as of
    October 1, 1992, incorporated by reference to the
    registrants report on Form 10-K for the year ended
    December 31, 1995 (the 1995 Form 10-K).                                                                                                                                                                                                                                                                                                                                               
|       
|        | 10(e) |                         |  | Canpotex PCA Collateral Withdrawing/PCS Amending
    Agreement, dated as of October 7, 1993, incorporated by
    reference to Exhibit 10(g) to the 1995 Form 10-K.                                                                                                                                                                                                                                                                                                                                                                                     
|       
|        | 10(f) |                         |  | Canpotex Producer Agreement amending agreement
    dated as of January 1, 1999, incorporated by reference to
    Exhibit 10(f) to the registrants report on
    Form 10-K for the year ended December 31, 2000 (the
    2000 Form 10-K).                                                                                                                                                                                                                                                                                                            
|       
|        | 10(g) |                         |  | Form of Agreement of Limited Partnership of
    Arcadian Fertilizer, L.P. dated as of March 3, 1992, and
    the related Certificate of Limited Partnership of Arcadian
    Fertilizer, L.P., filed with the Secretary of State of the State
    of Delaware on March 3, 1992, incorporated by reference to
    Exhibits 3.1 and 3.2 to Arcadian Partners L.P.s
    Registration Statement on Form S-1 (File No. 33-45828).                                                                                                                           
|       
|        | 10(h) |                         |  | Amendment to Agreement of Limited Partnership of
    Arcadian Fertilizer, L.P. and related Certificates of Limited
    Partnership of Arcadian Fertilizer, L.P. filed with the
    Secretary of State of the State of Delaware on March 6,
    1997 and November 26, 1997, incorporated by reference to
    Exhibit 10(f) to the registrants report on
    Form 10-K for the year ended December 31, 1998 (the
    1998 Form 10-K).                                                                                                                 
|       
|        | 10(i) |                         |  | Second amendment to Agreement of Limited
    Partnership of PCS Nitrogen Fertilizer, L.P. dated
    December 15, 2002, incorporated by reference to
    Exhibit 10(i) to the 2002 Form 10-K.                                                                                                                                                                                                                                                                                                                                                           
|       
|        | 10(j) |                         |  | Geismar Complex Services Agreement dated
    June 4, 1984, between Honeywell International, Inc. and
    Arcadian Corporation, incorporated by reference to
    Exhibit 10.4 to Arcadian Corporations Registration
    Statement on Form S-1 (File No. 33-34357).                                                                                                                                                                                                                                                                                     
|       
|        | 10(k) |                         |  | Esterhazy Restated Mining and Processing
    Agreement dated January 31, 1978, between International
    Minerals & Chemical Corporation (Canada) Limited and the
    registrants predecessor, incorporated by reference to
    Exhibit 10(e) to the F-1 Registration Statement.                                                                                                                                                                                                                                                                      
|       
|        | 10(l) |                         |  | Agreement dated December 21, 1990, between
    International Minerals & Chemical Corporation (Canada)
    Limited and the registrant, amending the Esterhazy Restated
    Mining and Processing Agreement dated January 31, 1978,
    incorporated by reference to Exhibit 10(p) to the
    registrants report on Form 10-K for the year ended
    December 31, 1990.                                                                                                                                                                                 
|       
|        | 10(m) |                         |  | Agreement effective August 27, 1998, between
    International Minerals & Chemical (Canada) Global Limited
    and the registrant, amending the Esterhazy Restated Mining and
    Processing Agreement dated January 31, 1978 (as amended),
    incorporated by reference to Exhibit 10(l) to the 1998
    Form 10-K.                                                                                                                                                                                                                                  
|       
|        | 10(n) |                         |  | Agreement effective August 31, 1998, among
    International Minerals & Chemical (Canada) Global Limited,
    International Minerals & Chemical (Canada) Limited
    Partnership and the registrant assigning the interest in the
    Esterhazy Restated Mining and Processing Agreement dated
    January 31, 1978 (as amended) held by International
    Minerals & Chemical (Canada) Global Limited to International
    Minerals & Chemical (Canada) Limited Partnership,
    incorporated by reference to Exhibit 10(m) to the 1998
    Form 10-K.

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|        |        |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------- | ------ | ----------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |                        
|Number  |        | Description of Document
|        |        |                        
|       
|        | 10(o)  |                         |  | Operating Agreement dated May 11, 1993,
    between BP Chemicals Inc. and Arcadian Ohio, L.P., as amended by
    the First Amendment to the Operating Agreement dated as of
    November 20, 1995, between BP Chemicals Inc. and Arcadian
    Ohio, L.P. (the First Amendment), incorporated by
    reference to Exhibit 10.2 to Arcadian Partners L.P.s
    current report on Form 8-K for the report event dated
    May 11, 1993, except for the First Amendment which is
    incorporated by reference to Arcadian Corporations report
    on Form 10-K for the year ended December 31, 1995.
|       
|        | 10(p)  |                         |  | Second Amendment to Operating Agreement between
    BP Chemicals, Inc. and Arcadian Ohio, L.P., dated as of
    November 25, 1996, incorporated by reference to
    Exhibit 10(k) of the registrants report on
    Form 10-K for the year ended December 31, 1997 (the
    1997 Form 10-K).                                                                                                                                                                                                                                                                                                       
|       
|        | 10(q)  |                         |  | Manufacturing Support Agreement dated
    May 11, 1993, between BP Chemicals Inc. and Arcadian Ohio,
    L.P., incorporated by reference to Exhibit 10.3 to Arcadian
    Partners L.P.s current report on Form 8-K for the
    report event dated May 11, 1993.                                                                                                                                                                                                                                                                                                                                     
|       
|        | 10(r)  |                         |  | First Amendment to Manufacturing Support
    Agreement dated as of November 25, 1996, between BP
    Chemicals, Inc. and Arcadian Ohio, L.P., incorporated by
    reference to Exhibit 10(l) to the 1997 Form 10-K.                                                                                                                                                                                                                                                                                                                                                                                  
|       
|        | 10(s)  |                         |  | Letter of amendment to the Manufacturing Support
    Agreement and Operating Agreement dated September 8, 2003,
    between BP Chemicals Inc. and PCS Nitrogen Ohio, L.P.                                                                                                                                                                                                                                                                                                                                                                                                                            
|       
|        | 10(t)  |                         |  | Master Termination Agreement dated as of
    May 23, 2001, between Trinidad Ammonia Company, Limited
    Partnership and PCS Nitrogen Fertilizer, L.P., incorporated by
    reference to Exhibit 10(x) to the registrants report
    on Form 10-Q for the quarterly period ended June 30,
    2001 (the Second Quarter 2001 Form 10-Q).                                                                                                                                                                                                                                                           
|       
|        | 10(u)  |                         |  | Master Termination Agreement dated as of
    May 23, 2001, between Nitrogen Leasing Company, Limited
    Partnership and PCS Nitrogen Fertilizer, L.P., incorporated by
    reference to Exhibit 10(y) to the Second Quarter 2001
    Form 10-Q.                                                                                                                                                                                                                                                                                                                                                     
|       
|        | 10(v)  |                         |  | Potash Corporation of Saskatchewan Inc. Stock
    Option Plan  Directors, as amended January 23,
    2001, incorporated by reference to Exhibit 10(bb) to the
    Second Quarter 2001 Form 10-Q.                                                                                                                                                                                                                                                                                                                                                                                                    
|       
|        | 10(w)  |                         |  | Potash Corporation of Saskatchewan Inc. Stock
    Option Plan  Officers and Employees, as amended
    January 23, 2001, incorporated by reference to
    Exhibit 10(aa) to the 2000 Form 10-K.                                                                                                                                                                                                                                                                                                                                                                                                      
|       
|        | 10(x)  |                         |  | Short-Term Incentive Plan of the registrant
    effective January 2000, incorporated by reference to
    Exhibit 10(z) to the registrants report on
    Form 10Q for the quarterly period ended March 31, 2000
    (the First Quarter 2000 Form 10-Q).                                                                                                                                                                                                                                                                                                                                            
|       
|        | 10(y)  |                         |  | Long-Term Incentive Plan of the registrant
    effective January 2000, incorporated by reference to
    Exhibit 10(aa) to the registrants report on
    Form 10-Q for the quarterly period ended June 30, 2000
    (the Second Quarter 2000 Form 10-Q).                                                                                                                                                                                                                                                                                                                                           
|       
|        | 10(z)  |                         |  | Long-Term Incentive Plan of the registrant
    effective January 2003, incorporated by reference to
    Exhibit 10(y) to the 2002 Form 10-K.                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       
|        | 10(aa) |                         |  | Resolution and Forms of Agreement for
    Supplemental Retirement Income Plan, for officers and key
    employees of the registrant, incorporated by reference to
    Exhibit 10(o) to the 1995 Form 10-K.                                                                                                                                                                                                                                                                                                                                                                                           

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|        |        |                         |  |                                                                                                                                                                                                                                                                                                                                                  
|------- | ------ | ----------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |                        
|Number  |        | Description of Document
|        |        |                        
|       
|        | 10(bb) |                         |  | Amending Resolution and revised forms of
    agreement regarding Supplemental Retirement Income Plan of the
    registrant, incorporated by reference to Exhibit 10(x) to
    the registrants report on Form 10-Q for the quarterly
    period ended June 30, 1996.                                                                             
|       
|        | 10(cc) |                         |  | Amended and restated Supplemental Retirement
    Income Plan of the registrant and text of amendment to existing
    supplemental income plan agreements, incorporated by reference
    to Exhibit 10(mm) to the registrants report on
    Form 10-Q for the quarterly period ended September 30,
    2000 (the Third Quarter 2000 Form 10-Q).
|       
|        | 10(dd) |                         |  | Form of Letter of amendment to existing
    supplemental income plan agreements of the registrant dated
    November 4, 2002, incorporated by reference to
    Exhibit 10(cc) to the 2002 Form 10-K.                                                                                                                                             
|       
|        | 10(ee) |                         |  | Supplemental Retirement Benefits Plan for
    U.S. Executives dated effective January 1, 1999,
    incorporated by reference to Exhibit 10(aa) to the Second
    Quarter 2002 Form 10-Q.                                                                                                                                                         
|       
|        | 10(ff) |                         |  | Forms of Agreement dated December 30, 1994,
    between the registrant and certain officers of the registrant,
    concerning a change in control of the registrant, incorporated
    by reference to Exhibit 10(p) to the 1995 Form 10-K.                                                                                                       
|       
|        | 10(gg) |                         |  | Form of Agreement of Indemnification dated
    August 8, 1995, between the registrant and certain officers
    and directors of the registrant, incorporated by reference to
    Exhibit 10(q) to the 1995 Form 10-K.                                                                                                                            
|       
|        | 10(hh) |                         |  | Resolution and Form of Agreement of
    Indemnification dated January 24, 2001, incorporated by
    reference to Exhibit 10(ii) to the 2000 Form 10-K.                                                                                                                                                                                           
|       
|        | 10(ii) |                         |  | Chief Executive Officer Medical and Dental Plan,
    incorporated by reference to Exhibit 10(jj) to the 2000
    Form 10-K.                                                                                                                                                                                                                      
|       
|        | 10(jj) |                         |  | Second Amended and Restated Membership Agreement
    dated January 1, 1995, among Phosphate Chemicals Export
    Association, Inc. and members of such association, including
    Texasgulf Inc., incorporated by reference to Exhibit 10(t)
    to the 1995 Form 10-K.                                                                          
|       
|        | 10(kk) |                         |  | International Agency Agreement dated
    January 1, 1995, between Phosphate Chemicals Export
    Association, Inc. and Texasgulf Inc. establishing Texasgulf Inc.
    as exclusive marketing agent for such associations wet
    phosphatic materials, incorporated by reference to
    Exhibit 10(u) to the 1995 Form 10-K.                    
|       
|        | 10(ll) |                         |  | Royalty Agreement dated October 7, 1993, by
    and between the registrant and Rio Algom Limited, incorporated
    by reference to Exhibit 10(x) to the 1995 Form 10-K.                                                                                                                                                                          
|       
|        | 10(mm) |                         |  | Deferred Share Unit Plan for Non-Employee
    Directors, incorporated by reference to Exhibit 4.1 to the
    registrants Form S-8 (File No. 333-75742) filed
    December 21, 2001.                                                                                                                                                             
|       
|        | 11     |                         |  | Statement re Computation of Per Share Earnings                                                                                                                                                                                                                                                                                                   
|       
|        | 31     |                         |  | Certifications pursuant to Section 302 of
    the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                    
|       
|        | 32     |                         |  | Certification pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                     

(b) REPORTS
ON FORM 8-K

On July 24, 2003, the Company furnished a
current report on Form 8-K, which included as an exhibit
the Companys news release concerning its financial results
for the second quarter of 2003.

32



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##### Table of Contents






SIGNATURES

Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly
authorized.



| |                      
| | ---------------------
| | POTASH CORPORATION OF
| | SASKATCHEWAN INC.    

November 6, 2003

| |     |                      
| | --- | ---------------------
| | By: | /s/ JOHN L.M. HAMPTON

| |                                                           
| | ----------------------------------------------------------
| |                                                           
| | John L.M. Hampton                                         
| | Senior Vice President, General Counsel 
     and Secretary

November 6, 2003

| |     |                      
| | --- | ---------------------
| | By: | /s/ WAYNE R. BROWNLEE

| |                                                 
| | ------------------------------------------------
| |                                                 
| | Wayne R. Brownlee                               
| | Senior Vice President, Treasurer,
    and       
| | Chief Financial Officer                         
| | (Principal Financial and Accounting
    Officer)

33



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##### Table of Contents






EXHIBIT INDEX

|        |      |                         |  |                                                                                                                                                                                                                                                                                             
|------- | ---- | ----------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |                        
|Number  |      | Description of Document
|        |      |                        
|        | 3(a) |                         |  | Articles of Continuance of the registrant dated
    May 15, 2002, incorporated by reference to
    Exhibit 3(a) to the registrants report on
    Form 10-Q for the quarterly period ended June 30, 2002
    (the Second Quarter 2002 Form 10-Q).                                         
|       
|        | 3(b) |                         |  | Bylaws of the registrant effective May 15,
    2002, incorporated by reference to Exhibit 3(a) to the
    Second Quarter 2002 Form 10-Q.                                                                                                                                                    
|       
|        | 4(a) |                         |  | Term Credit Agreement between The Bank of Nova
    Scotia and other financial institutions and the registrant dated
    September 25, 2001, incorporated by reference to
    Exhibit 4(a) to the registrants report on
    Form 10-Q for the quarterly period ended September 30,
    2001.
|       
|        | 4(b) |                         |  | Syndicated Term Credit Facility Amending
    Agreement between The Bank of Nova Scotia and other financial
    institutions and the registrant dated as of September 23,
    2003.                                                                                                          
|       
|        | 4(c) |                         |  | Indenture dated as of June 16, 1997, between
    the registrant and The Bank of Nova Scotia Trust Company of New
    York, incorporated by reference to Exhibit 4(a) to the
    registrants report on Form 8-K dated June 18,
    1997 (the 1997 Form 8-K).                              
|       
|        | 4(d) |                         |  | Indenture dated as of February 27, 2003,
    between the registrant and The Bank of Nova Scotia Trust Company
    of New York, incorporated by reference to Exhibit 4(c) to
    the registrants report on Form 10-K for the year
    ended December 31, 2002 (the 2002
    Form 10-K).   
|       
|        | 4(e) |                         |  | Form of Notes relating to the registrants
    offering of $400,000,000 principal amount of 7.125% Notes due
    June 15, 2007, incorporated by reference to
    Exhibit 4(b) to the 1997 Form 8-K.                                                                                         
|       
|        | 4(f) |                         |  | Form of Notes relating to the registrants
    offering of $600,000,000 principal amount of 7 3/4% Notes
    due May 31, 2011, incorporated by reference to
    Exhibit 4 to the registrants report on Form 8-K
    dated May 17, 2001.                                                    
|       
|        | 4(g) |                         |  | Form of Note relating to the registrants
    offering of $250,000,000 principal amount of 4.875% Notes due
    March 1, 2013, incorporated by reference to Exhibit 4
    to the registrants report on Form 8-K dated
    February 28, 2003.                                               

The registrant hereby undertakes to file with the
Securities and Exchange Commission, upon request, copies of any
constituent instruments defining the rights of holders of
long-term debt of the registrant or its subsidiaries that have
not been filed herewith because the amounts represented thereby
are less than 10% of the total assets of the registrant and its
subsidiaries on a consolidated basis.

|        |       |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|------- | ----- | ----------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                        
|Number  |       | Description of Document
|        |       |                        
|        | 10(a) |                         |  | Sixth Voting Agreement dated April 22, 1978,
    between Central Canada Potash, Division of Noranda, Inc.,
    Cominco Ltd., International Minerals and Chemical Corporation
    (Canada) Limited, PCS Sales and Texasgulf Inc., incorporated by
    reference to Exhibit 10(f) to the registrants
    registration statement on Form F-1 (File No. 33-31303)
    (the F-1 Registration Statement).                                                           
|       
|        | 10(b) |                         |  | Canpotex Limited Shareholders Seventh Memorandum
    of Agreement effective April 21, 1978, between Central
    Canada Potash, Division of Noranda Inc., Cominco Ltd.,
    International Minerals and Chemical Corporation (Canada)
    Limited, PCS Sales, Texasgulf Inc. and Canpotex Limited as
    amended by Canpotex S & P amending agreement dated
    November 4, 1987, incorporated by reference to
    Exhibit 10(g) to the F-1 Registration Statement.





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##### Table of Contents



|        |       |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|------- | ----- | ----------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                        
|Number  |       | Description of Document
|        |       |                        
|       
|        | 10(c) |                         |  | Producer Agreement dated April 21, 1978,
    between Canpotex Limited and PCS Sales, incorporated by
    reference to Exhibit 10(h) to the F-1 Registration
    Statement.                                                                                                                                                                                                                                                                                                                                                                             
|       
|        | 10(d) |                         |  | Canpotex/PCS Amending Agreement, dated as of
    October 1, 1992, incorporated by reference to the
    registrants report on Form 10-K for the year ended
    December 31, 1995 (the 1995 Form 10-K).                                                                                                                                                                                                                                                                                                                                               
|       
|        | 10(e) |                         |  | Canpotex PCA Collateral Withdrawing/PCS Amending
    Agreement, dated as of October 7, 1993, incorporated by
    reference to Exhibit 10(g) to the 1995 Form 10-K.                                                                                                                                                                                                                                                                                                                                                                                     
|       
|        | 10(f) |                         |  | Canpotex Producer Agreement amending agreement
    dated as of January 1, 1999, incorporated by reference to
    Exhibit 10(f) to the registrants report on
    Form 10-K for the year ended December 31, 2000 (the
    2000 Form 10-K).                                                                                                                                                                                                                                                                                                            
|       
|        | 10(g) |                         |  | Form of Agreement of Limited Partnership of
    Arcadian Fertilizer, L.P. dated as of March 3, 1992, and
    the related Certificate of Limited Partnership of Arcadian
    Fertilizer, L.P., filed with the Secretary of State of the State
    of Delaware on March 3, 1992, incorporated by reference to
    Exhibits 3.1 and 3.2 to Arcadian Partners L.P.s
    Registration Statement on Form S-1 (File No. 33-45828).                                                                                                                           
|       
|        | 10(h) |                         |  | Amendment to Agreement of Limited Partnership of
    Arcadian Fertilizer, L.P. and related Certificates of Limited
    Partnership of Arcadian Fertilizer, L.P. filed with the
    Secretary of State of the State of Delaware on March 6,
    1997 and November 26, 1997, incorporated by reference to
    Exhibit 10(f) to the registrants report on
    Form 10-K for the year ended December 31, 1998 (the
    1998 Form 10-K).                                                                                                                 
|       
|        | 10(i) |                         |  | Second amendment to Agreement of Limited
    Partnership of PCS Nitrogen Fertilizer, L.P. dated
    December 15, 2002, incorporated by reference to
    Exhibit 10(i) to the 2002 Form 10-K.                                                                                                                                                                                                                                                                                                                                                           
|       
|        | 10(j) |                         |  | Geismar Complex Services Agreement dated
    June 4, 1984, between Honeywell International, Inc. and
    Arcadian Corporation, incorporated by reference to
    Exhibit 10.4 to Arcadian Corporations Registration
    Statement on Form S-1 (File No. 33-34357).                                                                                                                                                                                                                                                                                     
|       
|        | 10(k) |                         |  | Esterhazy Restated Mining and Processing
    Agreement dated January 31, 1978, between International
    Minerals & Chemical Corporation (Canada) Limited and the
    registrants predecessor, incorporated by reference to
    Exhibit 10(e) to the F-1 Registration Statement.                                                                                                                                                                                                                                                                      
|       
|        | 10(l) |                         |  | Agreement dated December 21, 1990, between
    International Minerals & Chemical Corporation (Canada)
    Limited and the registrant, amending the Esterhazy Restated
    Mining and Processing Agreement dated January 31, 1978,
    incorporated by reference to Exhibit 10(p) to the
    registrants report on Form 10-K for the year ended
    December 31, 1990.                                                                                                                                                                                 
|       
|        | 10(m) |                         |  | Agreement effective August 27, 1998, between
    International Minerals & Chemical (Canada) Global Limited
    and the registrant, amending the Esterhazy Restated Mining and
    Processing Agreement dated January 31, 1978 (as amended),
    incorporated by reference to Exhibit 10(l) to the 1998
    Form 10-K.                                                                                                                                                                                                                                  
|       
|        | 10(n) |                         |  | Agreement effective August 31, 1998, among
    International Minerals & Chemical (Canada) Global Limited,
    International Minerals & Chemical (Canada) Limited
    Partnership and the registrant assigning the interest in the
    Esterhazy Restated Mining and Processing Agreement dated
    January 31, 1978 (as amended) held by International
    Minerals & Chemical (Canada) Global Limited to International
    Minerals & Chemical (Canada) Limited Partnership,
    incorporated by reference to Exhibit 10(m) to the 1998
    Form 10-K.





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##### Table of Contents



|        |        |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------- | ------ | ----------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |                        
|Number  |        | Description of Document
|        |        |                        
|       
|        | 10(o)  |                         |  | Operating Agreement dated May 11, 1993,
    between BP Chemicals Inc. and Arcadian Ohio, L.P., as amended by
    the First Amendment to the Operating Agreement dated as of
    November 20, 1995, between BP Chemicals Inc. and Arcadian
    Ohio, L.P. (the First Amendment), incorporated by
    reference to Exhibit 10.2 to Arcadian Partners L.P.s
    current report on Form 8-K for the report event dated
    May 11, 1993, except for the First Amendment which is
    incorporated by reference to Arcadian Corporations report
    on Form 10-K for the year ended December 31, 1995.
|       
|        | 10(p)  |                         |  | Second Amendment to Operating Agreement between
    BP Chemicals, Inc. and Arcadian Ohio, L.P., dated as of
    November 25, 1996, incorporated by reference to
    Exhibit 10(k) of the registrants report on
    Form 10-K for the year ended December 31, 1997 (the
    1997 Form 10-K).                                                                                                                                                                                                                                                                                                       
|       
|        | 10(q)  |                         |  | Manufacturing Support Agreement dated
    May 11, 1993, between BP Chemicals Inc. and Arcadian Ohio,
    L.P., incorporated by reference to Exhibit 10.3 to Arcadian
    Partners L.P.s current report on Form 8-K for the
    report event dated May 11, 1993.                                                                                                                                                                                                                                                                                                                                     
|       
|        | 10(r)  |                         |  | First Amendment to Manufacturing Support
    Agreement dated as of November 25, 1996, between BP
    Chemicals, Inc. and Arcadian Ohio, L.P., incorporated by
    reference to Exhibit 10(l) to the 1997 Form 10-K.                                                                                                                                                                                                                                                                                                                                                                                  
|       
|        | 10(s)  |                         |  | Letter of amendment to the Manufacturing Support
    Agreement and Operating Agreement dated September 8, 2003,
    between BP Chemicals Inc. and PCS Nitrogen Ohio, L.P.                                                                                                                                                                                                                                                                                                                                                                                                                            
|       
|        | 10(t)  |                         |  | Master Termination Agreement dated as of
    May 23, 2001, between Trinidad Ammonia Company, Limited
    Partnership and PCS Nitrogen Fertilizer, L.P., incorporated by
    reference to Exhibit 10(x) to the registrants report
    on Form 10-Q for the quarterly period ended June 30,
    2001 (the Second Quarter 2001 Form 10-Q).                                                                                                                                                                                                                                                           
|       
|        | 10(u)  |                         |  | Master Termination Agreement dated as of
    May 23, 2001, between Nitrogen Leasing Company, Limited
    Partnership and PCS Nitrogen Fertilizer, L.P., incorporated by
    reference to Exhibit 10(y) to the Second Quarter 2001
    Form 10-Q.                                                                                                                                                                                                                                                                                                                                                     
|       
|        | 10(v)  |                         |  | Potash Corporation of Saskatchewan Inc. Stock
    Option Plan  Directors, as amended January 23,
    2001, incorporated by reference to Exhibit 10(bb) to the
    Second Quarter 2001 Form 10-Q.                                                                                                                                                                                                                                                                                                                                                                                                    
|       
|        | 10(w)  |                         |  | Potash Corporation of Saskatchewan Inc. Stock
    Option Plan  Officers and Employees, as amended
    January 23, 2001, incorporated by reference to
    Exhibit 10(aa) to the 2000 Form 10-K.                                                                                                                                                                                                                                                                                                                                                                                                      
|       
|        | 10(x)  |                         |  | Short-Term Incentive Plan of the registrant
    effective January 2000, incorporated by reference to
    Exhibit 10(z) to the registrants report on
    Form 10Q for the quarterly period ended March 31, 2000
    (the First Quarter 2000 Form 10-Q).                                                                                                                                                                                                                                                                                                                                            
|       
|        | 10(y)  |                         |  | Long-Term Incentive Plan of the registrant
    effective January 2000, incorporated by reference to
    Exhibit 10(aa) to the registrants report on
    Form 10-Q for the quarterly period ended June 30, 2000
    (the Second Quarter 2000 Form 10-Q).                                                                                                                                                                                                                                                                                                                                           
|       
|        | 10(z)  |                         |  | Long-Term Incentive Plan of the registrant
    effective January 2003, incorporated by reference to
    Exhibit 10(y) to the 2002 Form 10-K.                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|       
|        | 10(aa) |                         |  | Resolution and Forms of Agreement for
    Supplemental Retirement Income Plan, for officers and key
    employees of the registrant, incorporated by reference to
    Exhibit 10(o) to the 1995 Form 10-K.                                                                                                                                                                                                                                                                                                                                                                                           





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##### Table of Contents



|        |        |                         |  |                                                                                                                                                                                                                                                                                                                                                  
|------- | ------ | ----------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |                        
|Number  |        | Description of Document
|        |        |                        
|       
|        | 10(bb) |                         |  | Amending Resolution and revised forms of
    agreement regarding Supplemental Retirement Income Plan of the
    registrant, incorporated by reference to Exhibit 10(x) to
    the registrants report on Form 10-Q for the quarterly
    period ended June 30, 1996.                                                                             
|       
|        | 10(cc) |                         |  | Amended and restated Supplemental Retirement
    Income Plan of the registrant and text of amendment to existing
    supplemental income plan agreements, incorporated by reference
    to Exhibit 10(mm) to the registrants report on
    Form 10-Q for the quarterly period ended September 30,
    2000 (the Third Quarter 2000 Form 10-Q).
|       
|        | 10(dd) |                         |  | Form of Letter of amendment to existing
    supplemental income plan agreements of the registrant dated
    November 4, 2002, incorporated by reference to
    Exhibit 10(cc) to the 2002 Form 10-K.                                                                                                                                             
|       
|        | 10(ee) |                         |  | Supplemental Retirement Benefits Plan for
    U.S. Executives dated effective January 1, 1999,
    incorporated by reference to Exhibit 10(aa) to the Second
    Quarter 2002 Form 10-Q.                                                                                                                                                         
|       
|        | 10(ff) |                         |  | Forms of Agreement dated December 30, 1994,
    between the registrant and certain officers of the registrant,
    concerning a change in control of the registrant, incorporated
    by reference to Exhibit 10(p) to the 1995 Form 10-K.                                                                                                       
|       
|        | 10(gg) |                         |  | Form of Agreement of Indemnification dated
    August 8, 1995, between the registrant and certain officers
    and directors of the registrant, incorporated by reference to
    Exhibit 10(q) to the 1995 Form 10-K.                                                                                                                            
|       
|        | 10(hh) |                         |  | Resolution and Form of Agreement of
    Indemnification dated January 24, 2001, incorporated by
    reference to Exhibit 10(ii) to the 2000 Form 10-K.                                                                                                                                                                                           
|       
|        | 10(ii) |                         |  | Chief Executive Officer Medical and Dental Plan,
    incorporated by reference to Exhibit 10(jj) to the 2000
    Form 10-K.                                                                                                                                                                                                                      
|       
|        | 10(jj) |                         |  | Second Amended and Restated Membership Agreement
    dated January 1, 1995, among Phosphate Chemicals Export
    Association, Inc. and members of such association, including
    Texasgulf Inc., incorporated by reference to Exhibit 10(t)
    to the 1995 Form 10-K.                                                                          
|       
|        | 10(kk) |                         |  | International Agency Agreement dated
    January 1, 1995, between Phosphate Chemicals Export
    Association, Inc. and Texasgulf Inc. establishing Texasgulf Inc.
    as exclusive marketing agent for such associations wet
    phosphatic materials, incorporated by reference to
    Exhibit 10(u) to the 1995 Form 10-K.                    
|        | 10(ll) |                         |  | Royalty Agreement dated October 7, 1993, by
    and between the registrant and Rio Algom Limited, incorporated
    by reference to Exhibit 10(x) to the 1995 Form 10-K.                                                                                                                                                                          
|       
|        | 10(mm) |                         |  | Deferred Share Unit Plan for Non-Employee
    Directors, incorporated by reference to Exhibit 4.1 to the
    registrants Form S-8 (File No. 333-75742) filed
    December 21, 2001.                                                                                                                                                             
|       
|        | 11     |                         |  | Statement re Computation of Per Share Earnings                                                                                                                                                                                                                                                                                                   
|       
|        | 31     |                         |  | Certifications pursuant to Section 302 of
    the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                    
|       
|        | 32     |                         |  | Certification pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002.