##### Table of Contents









SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




---

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 June 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              |  | (I.R.S. Employer   
|incorporation or organization)               |  | 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 July 31,
2003 Potash Corporation of Saskatchewan Inc. (the
Company) had 52,106,586 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) (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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                  
|                                                                                       |                               | ITEM 5. OTHER INFORMATION                                                                    
|                                                                                       |                               | ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K                                                     
|SIGNATURES                                                                            
|                                                                                       | EXHIBIT INDEX                
|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 Income and Retained
Earnings

(in millions of US dollars except per share
amounts)


(unaudited)


|                                           |         |                    |       |                  |  |      |       |      |  |   |         |      |  |   |       |      | 
|------------------------------------------ | ------- | ------------------ | ----- | ---------------- |  | ---- | ----- | ---- |  | - | ------- | ---- |  | - | ----- | ---- | 
|                                           |         |                    |       |                 
|                                           |         | Three Months Ended |       | Six Months Ended
|                                           |         | June 30            |       | June 30         
|                                           |         | 2003               |       | 2002             |  | 2003 |       | 2002
|                                          
|                                          
|Net sales                                  |         | $                  | 657.0 |                  |  | $    | 492.7 |      |  | $ | 1,231.4 |      |  | $ | 957.3 |     
|Cost of goods sold                         |         |                    | 534.7 |                  |  |      | 404.0 |      |  |   | 1,028.0 |      |  |   | 788.9 |     
|                                          
|Gross Margin                               |         |                    | 122.3 |                  |  |      | 88.7  |      |  |   | 203.4   |      |  |   | 168.4 |     
|                                          
|Selling and administrative                 |         |                    | 23.9  |                  |  |      | 24.0  |      |  |   | 47.6    |      |  |   | 46.8  |     
|Provincial mining and other taxes          |         |                    | 14.8  |                  |  |      | 20.3  |      |  |   | 32.9    |      |  |   | 40.0  |     
|Provision for plant closure                |         |                    |      |                  |  |      |      |      |  |   | 2.2     |      |  |   |      |     
|Foreign exchange loss                      |         |                    | 22.4  |                  |  |      | 11.4  |      |  |   | 39.3    |      |  |   | 10.9  |     
|Other income                               |         |                    | (11.9 | )                |  |      | (5.6  | )    |  |   | (16.4   | )    |  |   | (8.8  | )   
|                                          
|                                           |         |                    | 49.2  |                  |  |      | 50.1  |      |  |   | 105.6   |      |  |   | 88.9  |     
|                                          
|Operating Income                           |         |                    | 73.1  |                  |  |      | 38.6  |      |  |   | 97.8    |      |  |   | 79.5  |     
|Interest Expense                           |         |                    | 23.2  |                  |  |      | 20.0  |      |  |   | 42.6    |      |  |   | 41.0  |     
|                                          
|Income Before Income Taxes                 |         |                    | 49.9  |                  |  |      | 18.6  |      |  |   | 55.2    |      |  |   | 38.5  |     
|Income Taxes (Note 4)                      |         |                    | 20.0  |                  |  |      | 6.7   |      |  |   | 22.1    |      |  |   | 13.8  |     
|                                          
|Net Income                                 |         | $                  | 29.9  |                  |  | $    | 11.9  |      |  |   | 33.1    |      |  |   | 24.7  |     
|                                           |         |                    |       |                  |  |      |       |      |  |  
|Retained Earnings, Beginning of
    Period |         |                    |       |                  |  |      |       |      |  |   | 641.4   |      |  |   | 639.8 |     
|Dividends                                  |         |                    |       |                  |  |      |       |      |  |   | (26.1   | )    |  |   | (26.1 | )   
|                                          
|Retained Earnings, End of Period           |         |                    |       |                  |  |      |       |      |  | $ | 648.4   |      |  | $ | 638.4 |     
|                                          
|Net Income Per Share (Note 5)              |         |                    |       |                  |  |      |       |      |  |   |         |      |  |   |       |     
|                                           | Basic   |                    | $     | 0.57             |  |      | $     | 0.23 |  |   | $       | 0.64 |  |   | $     | 0.47 | 
|                                           | Diluted |                    | $     | 0.57             |  |      | $     | 0.23 |  |   | $       | 0.63 |  |   | $     | 0.47 | 
|                                          
|Dividends Per Share                        |         | $                  | 0.25  |                  |  | $    | 0.25  |      |  | $ | 0.50    |      |  | $ | 0.50  |     
|                                          

(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)


|                                                                                                                                                                          |                                      |             |         |              |  |   |         |       | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------ | ----------- | ------- | ------------ |  | - | ------- | ----- | 
|                                                                                                                                                                          |                                      | June 30,    |         | December 31,
|                                                                                                                                                                          |                                      | 2003        |         | 2002        
|                                                                                                                                                                         
|                                                                                                                                                                         
|                                                                                                                                                                          |                                      | (unaudited) |         |             
|Assets                                                                                                                                                                    |                                      |             |         |              |  |   |         |      
|Current Assets                                                                                                                                                            |                                      |             |         |              |  |   |         |      
|                                                                                                                                                                          | Cash and cash equivalents            |             | $       | 63.5         |  |   | $       | 24.5  | 
|                                                                                                                                                                          | Accounts receivable                  |             |         | 300.9        |  |   |         | 267.8 | 
|                                                                                                                                                                          | Inventories (Note 3)                 |             |         | 542.2        |  |   |         | 499.3 | 
|                                                                                                                                                                          | Prepaid expenses                     |             |         | 39.3         |  |   |         | 40.4  | 
|                                                                                                                                                                         
|                                                                                                                                                                          |                                      |             | 945.9   |              |  |   | 832.0   |      
|Property, plant and equipment                                                                                                                                             |                                      |             | 3,217.0 |              |  |   | 3,269.9 |      
|Goodwill                                                                                                                                                                  |                                      |             | 97.0    |              |  |   | 97.0    |      
|Other assets                                                                                                                                                              |                                      |             | 491.1   |              |  |   | 486.7   |      
|                                                                                                                                                                         
|                                                                                                                                                                          |                                      | $           | 4,751.0 |              |  | $ | 4,685.6 |      
|                                                                                                                                                                         
|Liabilities                                                                                                                                                               |                                      |             |         |              |  |   |         |      
|Current Liabilities                                                                                                                                                       |                                      |             |         |              |  |   |         |      
|                                                                                                                                                                          | Short-term debt                      |             | $       | 231.4        |  |   | $       | 473.0 | 
|                                                                                                                                                                          | Accounts payable and accrued charges |             |         | 338.8        |  |   |         | 347.0 | 
|                                                                                                                                                                          | Current portion of long-term debt    |             |         | 3.4          |  |   |         | 3.4   | 
|                                                                                                                                                                         
|                                                                                                                                                                          |                                      |             | 573.6   |              |  |   | 823.4   |      
|Long-term debt                                                                                                                                                            |                                      |             | 1,269.4 |              |  |   | 1,019.9 |      
|Future income tax liability                                                                                                                                               |                                      |             | 516.0   |              |  |   | 468.9   |      
|Accrued post-retirement/post-employment benefits                                                                                                                          |                                      |             | 204.5   |              |  |   | 195.4   |      
|Accrued reclamation costs                                                                                                                                                 |                                      |             | 81.1    |              |  |   | 80.0    |      
|Other non-current liabilities and deferred credits                                                                                                                        |                                      |             | 5.9     |              |  |   | 5.5     |      
|                                                                                                                                                                         
|                                                                                                                                                                          |                                      |             | 2,650.5 |              |  |   | 2,593.1 |      
|                                                                                                                                                                         
|Shareholders Equity                                                                                                                                                      |                                      |             |         |              |  |   |         |      
|Share Capital                                                                                                                                                             |                                      |             | 1,187.9 |              |  |   | 1,186.9 |      
|Unlimited authorization of common shares without
    par value; issued and outstanding 52,103,585 and 52,077,648 at
    June 30, 2003 and December 31, 2002, respectively |                                      |             |         |              |  |   |         |      
|Contributed Surplus                                                                                                                                                       |                                      |             | 264.2   |              |  |   | 264.2   |      
|Retained Earnings                                                                                                                                                         |                                      |             | 648.4   |              |  |   | 641.4   |      
|                                                                                                                                                                         
|                                                                                                                                                                          |                                      |             | 2,100.5 |              |  |   | 2,092.5 |      
|                                                                                                                                                                         
|                                                                                                                                                                          |                                      | $           | 4,751.0 |              |  | $ | 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 |       | Six Months Ended
|                                                                  |                                                            | June 30            |       | June 30         
|                                                                  |                                                            | 2003               |       | 2002             |   | 2003 |       | 2002 
|                                                                 
|                                                                 
|Operating activities                                              |                                                            |                    |       |                  |   |      |       |       |   |   |        |       |   |   |        |      
|Net income                                                        |                                                            | $                  | 29.9  |                  |   | $    | 11.9  |       |   | $ | 33.1   |       |   | $ | 24.7   |      
|Items not affecting cash                                          |                                                            |                    |       |                  |   |      |       |       |   |   |        |       |   |   |        |      
|                                                                  | Depreciation and amortization                              |                    |       | 60.0             |   |      |       | 57.7  |   |   |        | 119.0 |   |   |        | 111.0 |  
|                                                                  | Loss on disposal of property, plant and equipment          |                    |       | 0.3              |   |      |       | 0.2   |   |   |        | 0.3   |   |   |        | 0.2   |  
|                                                                  | Foreign exchange on future income tax                      |                    |       | 13.3             |   |      |       | 7.4   |   |   |        | 25.1  |   |   |        | 7.4   |  
|                                                                  | Share of earnings of equity investees                      |                    |       | (2.6             | ) |      |       |      |   |   |        | (4.9  | ) |   |        |      |  
|                                                                  | Provision for future income tax                            |                    |       | 20.0             |   |      |       | 1.3   |   |   |        | 22.1  |   |   |        | 2.8   |  
|                                                                  | Provision for post-retirement/post-employment
    benefits |                    |       | (1.9             | ) |      |       | 4.1   |   |   |        | 9.1   |   |   |        | 9.9   |  
|                                                                 
|                                                                  |                                                            |                    | 119.0 |                  |   |      | 82.6  |       |   |   | 203.8  |       |   |   | 156.0  |      
|Changes in non-cash operating working
    capital                 |                                                            |                    |       |                  |   |      |       |       |   |   |        |       |   |   |        |      
|                                                                  | Accounts receivable                                        |                    |       | 14.8             |   |      |       | 32.3  |   |   |        | (35.5 | ) |   |        | 8.7   |  
|                                                                  | Inventories                                                |                    |       | (24.0            | ) |      |       | (1.5  | ) |   |        | (51.9 | ) |   |        | 5.4   |  
|                                                                  | Prepaid expenses                                           |                    |       | 7.2              |   |      |       | 5.4   |   |   |        | 1.2   |   |   |        | (2.8  | )
|                                                                  | Accounts payable and accrued charges                       |                    |       | (49.5            | ) |      |       | (13.8 | ) |   |        | 5.2   |   |   |        | 6.8   |  
|                                                                  | Current income taxes                                       |                    |       | (1.7             | ) |      |       | 3.8   |   |   |        | (13.4 | ) |   |        | 4.8   |  
|Accrued reclamation costs                                         |                                                            |                    | 0.8   |                  |   |      | (0.2  | )     |   |   | 1.1    |       |   |   | (1.6   | )    
|Other non-current liabilities and deferred credits                |                                                            |                    | 0.4   |                  |   |      | 0.7   |       |   |   | 0.5    |       |   |   | 0.1    |      
|                                                                 
|Cash provided by operating
    activities                         |                                                            |                    | 67.0  |                  |   |      | 109.3 |       |   |   | 111.0  |       |   |   | 177.4  |      
|                                                                 
|Investing Activities                                              |                                                            |                    |       |                  |   |      |       |       |   |   |        |       |   |   |        |      
|Additions to property, plant and equipment                        |                                                            |                    | (30.9 | )                |   |      | (63.4 | )     |   |   | (47.9  | )     |   |   | (93.5  | )    
|Investment in Sociedad Quimica y Minera de Chile
    S.A. (SQM) |                                                            |                    |      |                  |   |      | (23.2 | )     |   |   |       |       |   |   | (23.2  | )    
|Dividends received from equity investees                          |                                                            |                    | 4.0   |                  |   |      |      |       |   |   | 4.0    |       |   |   |       |      
|Additions to other assets                                         |                                                            |                    | (2.5  | )                |   |      | (6.2  | )     |   |   | (10.8  | )     |   |   | (15.7  | )    
|                                                                 
|Cash used in investing activities                                 |                                                            |                    | (29.4 | )                |   |      | (92.8 | )     |   |   | (54.7  | )     |   |   | (132.4 | )    
|                                                                 
|Cash before financing activities                                  |                                                            |                    | 37.6  |                  |   |      | 16.5  |       |   |   | 56.3   |       |   |   | 45.0   |      
|                                                                 
|Financing Activities                                              |                                                            |                    |       |                  |   |      |       |       |   |   |        |       |   |   |        |      
|Proceeds from long-term obligations                               |                                                            |                    |      |                  |   |      | 0.3   |       |   |   | 250.0  |       |   |   | 10.3   |      
|Repayment of long-term obligations                                |                                                            |                    | (0.3  | )                |   |      | (0.6  | )     |   |   | (0.5   | )     |   |   | (0.6   | )    
|Repayment of short-term obligations                               |                                                            |                    | (32.8 | )                |   |      | (64.0 | )     |   |   | (241.6 | )     |   |   | (44.6  | )    
|Dividends                                                         |                                                            |                    | (13.1 | )                |   |      | (13.1 | )     |   |   | (26.1  | )     |   |   | (26.1  | )    
|Issuance of shares                                                |                                                            |                    | 0.4   |                  |   |      | 2.6   |       |   |   | 0.9    |       |   |   | 3.2    |      
|                                                                 
|Cash used in financing activities                                 |                                                            |                    | (45.8 | )                |   |      | (74.8 | )     |   |   | (17.3  | )     |   |   | (57.8  | )    
|                                                                 
|(Decrease) Increase in Cash and Cash
    Equivalents              |                                                            |                    | (8.2  | )                |   |      | (58.3 | )     |   |   | 39.0   |       |   |   | (12.8  | )    
|Cash and Cash Equivalents, Beginning of
    Period                |                                                            |                    | 71.7  |                  |   |      | 90.8  |       |   |   | 24.5   |       |   |   | 45.3   |      
|                                                                 
|Cash and Cash Equivalents, End of
    Period                      |                                                            | $                  | 63.5  |                  |   | $    | 32.5  |       |   | $ | 63.5   |       |   | $ | 32.5   |      
|                                                                 
|Supplemental cash flow disclosure                                 |                                                            |                    |       |                  |   |      |       |       |   |   |        |       |   |   |        |      
|                                                                  | Interest paid                                              |                    | $     | 38.0             |   |      | $     | 39.8  |   |   | $      | 39.4  |   |   | $      | 42.0  |  
|                                                                  | Income taxes paid                                          |                    | $     | 4.2              |   |      | $     | 3.1   |   |   | $      | 20.1  |   |   | $      | 8.8   |  

(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)


(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 8. 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.

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
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.

3.   Inventories

|                       |  |             |       |              |  |   |       | 
|---------------------- |  | ----------- | ----- | ------------ |  | - | ----- | 
|                       |  | June 30,    |       | December 31,
|                       |  | 2003        |       | 2002        
|                      
|                      
|                       |  | (unaudited) |       |             
|Finished product       |  | $           | 188.8 |              |  | $ | 165.0 | 
|Materials and supplies |  |             | 119.4 |              |  |   | 123.5 | 
|Raw materials          |  |             | 52.7  |              |  |   | 44.6  | 
|Work in process        |  |             | 181.3 |              |  |   | 166.2 | 
|                      
|                       |  | $           | 542.2 |              |  | $ | 499.3 | 
|                      

5



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##### Table of Contents



4.   Income Taxes

The companys effective consolidated income
tax rate for the second quarter and year-to-date for 2003
approximates 40 percent (2002  36 percent).

5.   Net Income Per
Share

Basic net income per share for the quarter is
calculated on the weighted average shares issued and outstanding
for the three months ended June 30, 2003 of 52,100,000
(2002  52,018,000). Basic net income per share for
the year-to-date is calculated on the weighted average shares
issued and outstanding for the six months ended June 30,
2003 of 52,094,000 (2002  51,989,000). 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.
Weighted average shares outstanding for the diluted net income
per share calculation for the quarter were 52,337,000
(2002  52,391,000) and for the year-to-date were
52,331,000 (2002  52,304,000).

6.   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 June 30, 2003
|                              |  | (unaudited)                     
|                             
|                             
|                              |  | Potash                           |       | Phosphate |  | Nitrogen |       | All Others |  | Consolidated
|                             
|                             
|Net sales  third party       |  | $                                | 181.1 |           |  | $        | 189.7 |            |  | $            | 286.2 |  |  | $ |    |  |  | $ | 657.0 | 
|Inter-segment net sales       |  |                                  | 1.2   |           |  |          | 2.8   |            |  |              | 17.2  |  |  |   |    |  |  |   |      | 
|Gross Margin                  |  |                                  | 60.7  |           |  |          | (1.0  | )          |  |              | 62.6  |  |  |   |    |  |  |   | 122.3 | 
|Depreciation and amortization |  |                                  | 15.6  |           |  |          | 19.6  |            |  |              | 22.9  |  |  |   | 1.9 |  |  |   | 60.0  | 

|                              |  |                                  |       |           |  |          |       |            |  |              |       |  |  |   |     |  |  |   |       | 
|----------------------------- |  | -------------------------------- | ----- | --------- |  | -------- | ----- | ---------- |  | ------------ | ----- |  |  | - | --- |  |  | - | ----- | 
|                              |  |                                 
|                              |  | Three Months Ended June 30, 2002
|                              |  | (unaudited)                     
|                             
|                             
|                              |  | Potash                           |       | Phosphate |  | Nitrogen |       | All Others |  | Consolidated
|                             
|                             
|Net sales  third party       |  | $                                | 164.9 |           |  | $        | 148.7 |            |  | $            | 179.1 |  |  | $ |    |  |  | $ | 492.7 | 
|Inter-segment net sales       |  |                                  | 1.8   |           |  |          | 1.8   |            |  |              | 6.9   |  |  |   |    |  |  |   |      | 
|Gross Margin                  |  |                                  | 70.5  |           |  |          | 13.4  |            |  |              | 4.8   |  |  |   |    |  |  |   | 88.7  | 
|Depreciation and amortization |  |                                  | 14.9  |           |  |          | 18.6  |            |  |              | 22.0  |  |  |   | 2.2 |  |  |   | 57.7  | 

|                              |  |                                |       |           |  |          |       |            |  |              |       |  |  |   |     |  |  |   |         | 
|----------------------------- |  | ------------------------------ | ----- | --------- |  | -------- | ----- | ---------- |  | ------------ | ----- |  |  | - | --- |  |  | - | ------- | 
|                              |  |                               
|                              |  | Six Months Ended June 30, 2003
|                              |  | (unaudited)                   
|                             
|                             
|                              |  | Potash                         |       | Phosphate |  | Nitrogen |       | All Others |  | Consolidated
|                             
|                             
|Net sales  third party       |  | $                              | 341.7 |           |  | $        | 358.1 |            |  | $            | 531.6 |  |  | $ |    |  |  | $ | 1,231.4 | 
|Inter-segment net sales       |  |                                | 3.6   |           |  |          | 5.5   |            |  |              | 28.8  |  |  |   |    |  |  |   |        | 
|Gross Margin                  |  |                                | 110.1 |           |  |          | 0.9   |            |  |              | 92.4  |  |  |   |    |  |  |   | 203.4   | 
|Depreciation and amortization |  |                                | 30.9  |           |  |          | 38.2  |            |  |              | 46.1  |  |  |   | 3.8 |  |  |   | 119.0   | 

|                              |  |                                |       |           |  |          |       |            |  |              |       |  |  |   |     |  |  |   |       | 
|----------------------------- |  | ------------------------------ | ----- | --------- |  | -------- | ----- | ---------- |  | ------------ | ----- |  |  | - | --- |  |  | - | ----- | 
|                              |  |                               
|                              |  | Six Months Ended June 30, 2002
|                              |  | (unaudited)                   
|                             
|                             
|                              |  | Potash                         |       | Phosphate |  | Nitrogen |       | All Others |  | Consolidated
|                             
|                             
|Net sales  third party       |  | $                              | 308.6 |           |  | $        | 304.4 |            |  | $            | 344.3 |  |  | $ |    |  |  | $ | 957.3 | 
|Inter-segment net sales       |  |                                | 4.3   |           |  |          | 3.9   |            |  |              | 11.6  |  |  |   |    |  |  |   |      | 
|Gross Margin                  |  |                                | 128.4 |           |  |          | 35.7  |            |  |              | 4.3   |  |  |   |    |  |  |   | 168.4 | 
|Depreciation and amortization |  |                                | 26.4  |           |  |          | 36.9  |            |  |              | 43.7  |  |  |   | 4.0 |  |  |   | 111.0 | 

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7.   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 income and net income per share would
have been reduced to the pro forma amounts indicated below:

|                             |             |               |      |               |  |      |      |      |  |   |      |      |  |   |      |      | 
|---------------------------- | ----------- | ------------- | ---- | ------------- |  | ---- | ---- | ---- |  | - | ---- | ---- |  | - | ---- | ---- | 
|                             |             |               |      |              
|                             |             | Three Months  |      | Six Months   
|                             |             | Ended June 30 |      | Ended June 30
|                            
|                            
|                             |             | 2003          |      | 2002          |  | 2003 |      | 2002
|                            
|                            
|Net income  as reported     |             | $             | 29.9 |               |  | $    | 11.9 |      |  | $ | 33.1 |      |  | $ | 24.7 |     
|Stock compensation           |             |               | (3.7 | )             |  |      | (3.6 | )    |  |   | (7.4 | )    |  |   | (7.2 | )   
|                            
|Net income  pro forma       |             | $             | 26.2 |               |  | $    | 8.3  |      |  | $ | 25.7 |      |  | $ | 17.5 |     
|                            
|                            
|Basic net income per share   |             |               |      |               |  |      |      |      |  |   |      |      |  |   |      |     
|                             | As reported |               | $    | 0.57          |  |      | $    | 0.23 |  |   | $    | 0.64 |  |   | $    | 0.47 | 
|                             | Pro forma   |               | $    | 0.50          |  |      | $    | 0.16 |  |   | $    | 0.49 |  |   | $    | 0.34 | 
|Diluted net income per share |             |               |      |               |  |      |      |      |  |   |      |      |  |   |      |     
|                             | As reported |               | $    | 0.57          |  |      | $    | 0.23 |  |   | $    | 0.63 |  |   | $    | 0.47 | 
|                             | Pro forma   |               | $    | 0.50          |  |      | $    | 0.16 |  |   | $    | 0.49 |  |   | $    | 0.33 | 

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%      | 

8.   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.


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.

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 to be reported as OCI.

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
the 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).

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.

Comprehensive income:Comprehensive income is not recognized
under Canadian GAAP. US GAAP would require the recognition
of comprehensive income. 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.

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.

8



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

|                                                       |                                           |                    |            |      |   |   |            |      |  
|------------------------------------------------------ | ----------------------------------------- | ------------------ | ---------- | ---- | - | - | ---------- | ---- | -
|                                                       |                                           |                   
|                                                       |                                           | Three Months Ended
|                                                       |                                           | June 30           
|                                                       |                                           | 2003               |            | 2002
|                                                      
|                                                      
|                                                       |                                           |                   
|                                                       |                                           | (unaudited)       
|Net income as reported  Canadian GAAP                 |                                           | $                  | 29.9       |      |   | $ | 11.9       |     
|Items increasing (decreasing) reported net income      |                                           |                    |            |      |   |   |            |     
|                                                       | Pre-operating costs                       |                    |            | 1.8  |   |   |            | 1.5  |  
|                                                       | Depreciation and amortization             |                    |            | 2.2  |   |   |            | 2.1  |  
|                                                       | Accretion of asset retirement obligations |                    |            | (0.9 | ) |   |            |     |  
|                                                       | Future income taxes                       |                    |            | (1.2 | ) |   |            | (1.2 | )
|                                                      
|Approximate net income  US GAAP                       |                                           | $                  | 31.8       |      |   | $ | 14.3       |     
|                                                      
|Weighted average shares outstanding 
    US GAAP      |                                           |                    | 52,100,000 |      |   |   | 52,018,000 |     
|                                                      
|Approximate basic net income per
    share  US GAAP   |                                           | $                  | 0.61       |      |   | $ | 0.27       |     
|                                                      
|Approximate diluted net income per
    share  US GAAP |                                           | $                  | 0.61       |      |   | $ | 0.27       |     
|                                                      

|                                                       |                                           |                  |            |      |   |   |            |      |  
|------------------------------------------------------ | ----------------------------------------- | ---------------- | ---------- | ---- | - | - | ---------- | ---- | -
|                                                       |                                           |                 
|                                                       |                                           | Six Months Ended
|                                                       |                                           | June 30         
|                                                       |                                           | 2003             |            | 2002
|                                                      
|                                                      
|                                                       |                                           |                 
|                                                       |                                           | (unaudited)     
|Net income as reported  Canadian GAAP                 |                                           | $                | 33.1       |      |   | $ | 24.7       |     
|Items increasing (decreasing) reported net income      |                                           |                  |            |      |   |   |            |     
|                                                       | Pre-operating costs                       |                  |            | 3.1  |   |   |            | 1.5  |  
|                                                       | Depreciation and amortization             |                  |            | 4.3  |   |   |            | 4.2  |  
|                                                       | Accretion of asset retirement obligations |                  |            | (1.7 | ) |   |            |     |  
|                                                       | Future income taxes                       |                  |            | (2.2 | ) |   |            | (2.0 | )
|                                                      
|Approximate net income  US GAAP                       |                                           | $                | 36.6       |      |   | $ | 28.4       |     
|                                                      
|Weighted average shares outstanding 
    US GAAP      |                                           |                  | 52,094,000 |      |   |   | 51,989,000 |     
|                                                      
|Approximate basic net income per
    share  US GAAP   |                                           | $                | 0.70       |      |   | $ | 0.55       |     
|                                                      
|Approximate diluted net income per
    share  US GAAP |                                           | $                | 0.70       |      |   | $ | 0.54       |     
|                                                      

|                                                        |                                                                    |             |         |              |   |   |         |        |  
|------------------------------------------------------- | ------------------------------------------------------------------ | ----------- | ------- | ------------ | - | - | ------- | ------ | -
|                                                        |                                                                    | June 30,    |         | December 31,
|                                                        |                                                                    | 2003        |         | 2002        
|                                                       
|                                                       
|                                                        |                                                                    | (unaudited) |         |             
|Total assets as reported  Canadian GAAP                |                                                                    | $           | 4,751.0 |              |   | $ | 4,685.6 |       
|Items increasing (decreasing) reported total
    assets |                                                                    |             |         |              |   |   |         |       
|                                                        | Inventory                                                          |             |         | (3.4         | ) |   |         | (4.0   | )
|                                                        | Available-for-sale securities (unrealized holding
    gain (loss)) |             |         | 26.5         |   |   |         | (7.7   | )
|                                                        | Fair value of natural gas hedging contracts                        |             |         | 93.2         |   |   |         | 52.7   |  
|                                                        | Property, plant and equipment                                      |             |         | (139.1       | ) |   |         | (143.4 | )
|                                                        | Pre-operating costs                                                |             |         | (59.9        | ) |   |         | (63.0  | )
|                                                        | Goodwill                                                           |             |         | (46.7        | ) |   |         | (46.7  | )
|                                                       
|Approximate total assets  US GAAP                      |                                                                    | $           | 4,621.6 |              |   | $ | 4,473.5 |       
|                                                       

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|                                                                |                                                               |             |         |              |   |   |         |        |  
|--------------------------------------------------------------- | ------------------------------------------------------------- | ----------- | ------- | ------------ | - | - | ------- | ------ | -
|                                                                |                                                               | June 30,    |         | December 31,
|                                                                |                                                               | 2003        |         | 2002        
|                                                               
|                                                               
|                                                                |                                                               | (unaudited) |         |             
|Total shareholders equity as
    reported  Canadian GAAP      |                                                               | $           | 2,100.5 |              |   | $ | 2,092.5 |       
|Items increasing (decreasing) reported
    shareholders equity |                                                               |             |         |              |   |   |         |       
|                                                                | Accumulated other comprehensive income (loss),
    net of tax |             |         | 36.0         |   |   |         | (9.1   | )
|                                                                | Pre-operating costs                                           |             |         | (59.9        | ) |   |         | (63.0  | )
|                                                                | Accretion of asset retirement obligations                     |             |         | (1.7         | ) |   |         |       |  
|                                                                | Provision for asset impairment                                |             |         | (218.0       | ) |   |         | (218.0 | )
|                                                                | Depreciation and amortization                                 |             |         | 32.2         |   |   |         | 27.9   |  
|                                                                | Future income taxes                                           |             |         | 60.5         |   |   |         | 62.7   |  
|                                                               
|Approximate shareholders equity 
    US GAAP                  |                                                               | $           | 1,949.6 |              |   | $ | 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 June 30, 2003 was $144.9 and the unrealized
holding gain was $52.1.

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 be
approximately $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 the guarantee, 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 and there was no significant
effect on the results of operations or financial position of the
company.

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 and there was no significant
effect on the results of operations or financial position of the
company.

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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 1,
2003, and in the first fiscal year or interim period beginning
after June 15, 2003 for all other variable interest
entities. The company is currently 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 to certain preexisting contracts. The
company will adopt SFAS No. 149 on a prospective basis at
its effective date. The company is assessing the impact that
SFAS No. 149 may have on its financial statements.

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 is
assessing the impact that SFAS No. 150 may have on its
financial statements.

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 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 in production, at
which time the gain or loss is reclassified from OCI to cost of
goods sold. In the second quarter of 2003, a gain of $28.0 was
recognized in cost of goods sold ($55.0 gain on a year-to-date
basis). Of the deferred gains at the quarter end, approximately
$57.8 will be reclassified to cost of goods sold within the next
twelve months. The fair value of the companys gas hedging
contracts at June 30, 2003 was $93.2.

9.   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
timing of customer purchases will vary each year and sales can
be expected to shift from one quarter to another.

11



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10. Comparative Figures

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

12



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

The narrative included under this
Managements Discussion and Analysis of Financial Condition
and Results of Operations has been derived with reference to the
unaudited interim consolidated financial statements reported
under Canadian GAAP. All references to per share amounts pertain
to diluted earnings per share.

Earnings Guidance Review

The companys initial projection for
earnings per share for second-quarter 2003 was in the range of
$0.90 to $1.00 and this guidance was updated during the quarter.
The final result was $0.57 per share. During the quarter, the
Canadian dollar continued to strengthen, ending up $0.11 higher
relative to the US dollar at March 31, 2003. This resulted
in a foreign exchange loss of $22.4 million ($0.26 per
share), substantially all of which is non-cash. The stronger
dollar also impacted the companys Canadian cash costs of
potash production, freight and administration. This reduced
earnings by another $0.10 per share during the quarter. The
remaining variance was primarily due to higher costs in
phosphate.

Overview of Actual Results

|                                        |  |                            |       |                          |  |        |       |        |  |      |       |      |  |        |     |        |  |   |         |  |  |   |       |  |  |   |       |  |  |  |    | 
|--------------------------------------- |  | -------------------------- | ----- | ------------------------ |  | ------ | ----- | ------ |  | ---- | ----- | ---- |  | ------ | --- | ------ |  | - | ------- |  |  | - | ----- |  |  | - | ----- |  |  |  | -- | 
|                                        |  |                            |       |                         
|                                        |  | Three Months Ended June 30 |       | Six Months Ended June 30
|                                       
|                                       
|                                        |  | Dollar                     |       | %                        |  |        |       | Dollar |  | %   
|($ millions  except per share amounts) |  | 2003                       |       | 2002                     |  | Change |       | Change |  | 2003 |       | 2002 |  | Change |     | Change
|                                       
|                                       
|Net Sales                               |  | $                          | 657.0 |                          |  | $      | 492.7 |        |  | $    | 164.3 |      |  |        | 33  |        |  | $ | 1,231.4 |  |  | $ | 957.3 |  |  | $ | 274.1 |  |  |  | 29 | 
|                                       
|Gross Margin                            |  | $                          | 122.3 |                          |  | $      | 88.7  |        |  | $    | 33.6  |      |  |        | 38  |        |  | $ | 203.4   |  |  | $ | 168.4 |  |  | $ | 35.0  |  |  |  | 21 | 
|                                       
|Operating Income                        |  | $                          | 73.1  |                          |  | $      | 38.6  |        |  | $    | 34.5  |      |  |        | 89  |        |  | $ | 105.6   |  |  | $ | 79.5  |  |  | $ | 26.1  |  |  |  | 33 | 
|                                       
|Net Income                              |  | $                          | 29.9  |                          |  | $      | 11.9  |        |  | $    | 18.0  |      |  |        | 151 |        |  | $ | 33.1    |  |  | $ | 24.7  |  |  | $ | 8.4   |  |  |  | 34 | 
|                                       
|Net Income Per Share  Basic            |  | $                          | 0.57  |                          |  | $      | 0.23  |        |  | $    | 0.34  |      |  |        | 148 |        |  | $ | 0.64    |  |  | $ | 0.47  |  |  | $ | 0.17  |  |  |  | 36 | 
|                                       
|Net Income Per Share  Diluted          |  | $                          | 0.57  |                          |  | $      | 0.23  |        |  | $    | 0.34  |      |  |        | 148 |        |  | $ | 0.63    |  |  | $ | 0.47  |  |  | $ | 0.16  |  |  |  | 34 | 
|                                       

Second-quarter net income was more than double
the amount earned in the same period last year. Volumes were up
in all three nutrients, but the main contributors to better
earnings were higher nitrogen prices and the gas hedge
realization.

The Canadian dollar exchange rate compared to the
US dollar started the year at 1.5796, ended the first quarter at
1.4693 and ended the second quarter at 1.3553. 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 in both second-quarter and
first-half 2003 pertains to the translation of future income tax
liabilities on the Consolidated Statement of Financial Position
at June 30, 2003.

The strengthening Canadian dollar, relative to
the US dollar, negatively affected earnings in both the second
quarter and the first half of 2003. There was a quarterly
foreign exchange loss of $0.26 per share and a year-to-date loss
of $0.45 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
$10.9 million since the beginning of the year. This reduced
earnings by $0.03 per share in the first quarter and $0.10 per
share in the second quarter. Based on the December 31, 2002
exchange rate of 1.5796, the stronger Canadian dollar has
reduced earnings by $0.58 per share on a year-to-date basis.

While the companys potash, phosphate and
nitrogen sales volumes were all better than last years
same quarter, lower-than-expected corn and wheat plantings in
North America took away most of the potential spring season
upside. As expected, the higher production costs in all three
nutrients experienced in the first quarter continued in the
second quarter, but potash and phosphate prices did not rise
enough to offset these

13



---



##### Table of Contents



increased costs. Even nitrogen prices, which were
up substantially, at times were below the higher gas-driven
North American production cost.


Potash

|                   |                               |                            |       |                    |  |                      |       |      |  |      |     |        |  |      |       |       |  |        |       |       |  |  |    |    |  |   |       |       |  |   |       |       |  |  |     |    |  
|------------------ | ----------------------------- | -------------------------- | ----- | ------------------ |  | -------------------- | ----- | ---- |  | ---- | --- | ------ |  | ---- | ----- | ----- |  | ------ | ----- | ----- |  |  | -- | -- |  | - | ----- | ----- |  | - | ----- | ----- |  |  | --- | -- | -
|                   |                               |                           
|                   |                               | Three Months Ended June 30
|                  
|                  
|                   |                               |                            |       |                    |  |                     
|                   |                               | Dollars (millions)         |       | Tonnes (thousands) |  | Average Price Per MT
|                  
|                  
|                   |                               | %                          |       |                    |  | %                    |       |      |  | %   
|                   |                               | 2003                       |       | 2002               |  | Change               |       | 2003 |  | 2002 |     | Change |  | 2003 |       | 2002  |  | Change
|                  
|                  
|Net Sales          |                               |                            |       |                    |  |                      |       |      |  |      |     |        |  |      |       |       |  |        |       |       |  |  |    |    |  |   |       |       |  |   |       |       |  |  |     |   
|                   | North American                |                            | $     | 66.9               |  |                      | $     | 59.0 |  |      |     | 13     |  |      |       | 825   |  |        |       | 736   |  |  |    | 12 |  |   | $     | 81.06 |  |   | $     | 80.06 |  |  |     | 1  |  
|                   | Offshore                      |                            |       | 104.0              |  |                      |       | 98.8 |  |      |     | 5      |  |      |       | 1,288 |  |        |       | 1,178 |  |  |    | 9  |  |   | $     | 80.75 |  |   | $     | 83.92 |  |  |     | (4 | )
|                  
|                   |                               |                            | 170.9 |                    |  |                      | 157.8 |      |  |      | 8   |        |  |      | 2,113 |       |  |        | 1,914 |       |  |  | 10 |    |  | $ | 80.87 |       |  | $ | 82.44 |       |  |  | (2  | ) 
|                   | Miscellaneous                 |                            |       | 10.2               |  |                      |       | 7.1  |  |      |     | 44     |  |      |       |      |  |        |       |      |  |  |    |   |  |   |       |      |  |   |       |      |  |  |     |   |  
|                  
|                   |                               |                            | 181.1 |                    |  |                      | 164.9 |      |  |      | 10  |        |  |      | 2,113 |       |  |        | 1,914 |       |  |  | 10 |    |  | $ | 85.71 |       |  | $ | 86.15 |       |  |  | (1  | ) 
|                  
|Cost of Goods Sold |                               |                            |       |                    |  |                      |       |      |  |      |     |        |  |      |       |       |  |        |       |       |  |  |    |    |  |   |       |       |  |   |       |       |  |  |     |   
|                   | Cash costs                    |                            |       | 104.8              |  |                      |       | 79.5 |  |      |     | 32     |  |      |       |       |  |        |       |       |  |  |    |    |  |   | $     | 49.60 |  |   | $     | 41.54 |  |  |     | 19 |  
|                   | Depreciation and amortization |                            |       | 15.6               |  |                      |       | 14.9 |  |      |     | 5      |  |      |       |       |  |        |       |       |  |  |    |    |  |   | $     | 7.38  |  |   | $     | 7.78  |  |  |     | (5 | )
|                  
|                   |                               |                            | 120.4 |                    |  |                      | 94.4  |      |  |      | 28  |        |  |      |       |       |  |        |       |       |  |  |    |    |  | $ | 56.98 |       |  | $ | 49.32 |       |  |  | 16  |   
|                  
|Gross Margin       |                               | $                          | 60.7  |                    |  | $                    | 70.5  |      |  |      | (14 | )      |  |      |       |       |  |        |       |       |  |  |    |    |  | $ | 28.73 |       |  | $ | 36.83 |       |  |  | (22 | ) 
|                  

|                   |                               |                          |       |                    |  |                      |       |       |  |      |     |        |  |      |       |       |  |        |       |       |  |  |    |    |  |   |       |       |  |   |       |       |  |  |     |    |  
|------------------ | ----------------------------- | ------------------------ | ----- | ------------------ |  | -------------------- | ----- | ----- |  | ---- | --- | ------ |  | ---- | ----- | ----- |  | ------ | ----- | ----- |  |  | -- | -- |  | - | ----- | ----- |  | - | ----- | ----- |  |  | --- | -- | -
|                   |                               |                         
|                   |                               | Six Months Ended June 30
|                  
|                  
|                   |                               |                          |       |                    |  |                     
|                   |                               | Dollars (millions)       |       | Tonnes (thousands) |  | Average Price Per MT
|                  
|                  
|                   |                               | %                        |       |                    |  | %                    |       |       |  | %   
|                   |                               | 2003                     |       | 2002               |  | Change               |       | 2003  |  | 2002 |     | Change |  | 2003 |       | 2002  |  | Change
|                  
|                  
|Net Sales          |                               |                          |       |                    |  |                      |       |       |  |      |     |        |  |      |       |       |  |        |       |       |  |  |    |    |  |   |       |       |  |   |       |       |  |  |     |   
|                   | North American                |                          | $     | 129.3              |  |                      | $     | 115.6 |  |      |     | 12     |  |      |       | 1,654 |  |        |       | 1,468 |  |  |    | 13 |  |   | $     | 78.18 |  |   | $     | 78.77 |  |  |     | (1 | )
|                   | Offshore                      |                          |       | 188.8              |  |                      |       | 178.1 |  |      |     | 6      |  |      |       | 2,327 |  |        |       | 2,111 |  |  |    | 10 |  |   | $     | 81.15 |  |   | $     | 84.39 |  |  |     | (4 | )
|                  
|                   |                               |                          | 318.1 |                    |  |                      | 293.7 |       |  |      | 8   |        |  |      | 3,981 |       |  |        | 3,579 |       |  |  | 11 |    |  | $ | 79.92 |       |  | $ | 82.09 |       |  |  | (3  | ) 
|                   | Miscellaneous                 |                          |       | 23.6               |  |                      |       | 14.9  |  |      |     | 58     |  |      |       |      |  |        |       |      |  |  |    |   |  |   |       |      |  |   |       |      |  |  |     |   |  
|                  
|                   |                               |                          | 341.7 |                    |  |                      | 308.6 |       |  |      | 11  |        |  |      | 3,981 |       |  |        | 3,579 |       |  |  | 11 |    |  | $ | 85.83 |       |  | $ | 86.23 |       |  |  |    |   
|                  
|Cost of Goods Sold |                               |                          |       |                    |  |                      |       |       |  |      |     |        |  |      |       |       |  |        |       |       |  |  |    |    |  |   |       |       |  |   |       |       |  |  |     |   
|                   | Cash costs                    |                          |       | 200.7              |  |                      |       | 153.8 |  |      |     | 30     |  |      |       |       |  |        |       |       |  |  |    |    |  |   | $     | 50.41 |  |   | $     | 42.97 |  |  |     | 17 |  
|                   | Depreciation and amortization |                          |       | 30.9               |  |                      |       | 26.4  |  |      |     | 17     |  |      |       |       |  |        |       |       |  |  |    |    |  |   | $     | 7.76  |  |   | $     | 7.38  |  |  |     | 5  |  
|                  
|                   |                               |                          | 231.6 |                    |  |                      | 180.2 |       |  |      | 29  |        |  |      |       |       |  |        |       |       |  |  |    |    |  | $ | 58.17 |       |  | $ | 50.35 |       |  |  | 16  |   
|                  
|Gross Margin       |                               | $                        | 110.1 |                    |  | $                    | 128.4 |       |  |      | (14 | )      |  |      |       |       |  |        |       |       |  |  |    |    |  | $ | 27.66 |       |  | $ | 35.88 |       |  |  | (23 | ) 
|                  

Strong second-quarter potash volumes followed on
the heels of healthy first-quarter volumes. This resulted in
first half volumes up over last years first half in both
the domestic and offshore markets.

In the offshore market Brazil continued to be an
important customer, with the companys volumes to that
country up 46 percent quarter-over-quarter and
54 percent in the first half of 2003. The higher volume
also reflected increased sales to India, Indonesia and Malaysia
for the second quarter and year-over-year. In the domestic
market, higher market share along with a large June fill in
advance of scheduled price increases raised second-quarter
volumes. The increase in volume for the first six months was
mainly due to a higher market share in 2003 compared to the same
period last year.

Second-quarter prices in North America were up
slightly from last years same quarter and up significantly
from this years first quarter (higher by $5.75 per tonne
or 8 percent). In the offshore market, increased prices
were more than offset by higher ocean freight rates, resulting
in lower returns to the company. For the first six months, North
American prices were down slightly and the lower offshore prices
reflect the increase in freight costs.

14



---



##### Table of Contents



The main factor in the reduced potash gross
margin in this years second quarter was increased costs.
On a per-tonne basis, approximately half of the higher cost was
the result of the stronger Canadian dollar. The remainder was
due mostly to higher natural gas costs and a greater percentage
of volumes sourced from the higher-cost New Brunswick facility.
The gross margin reduction on a year-to-date basis was primarily
due to the increase in natural gas costs coupled with the rising
Canadian dollar.

Phosphate

|                   |                               |                            |       |                    |  |                      |       |       |  |      |      |        |   |      |     |      |  |        |     |     |  |  |    |     |   |   |        |        |  |   |        |        |  |  |      |     |  
|------------------ | ----------------------------- | -------------------------- | ----- | ------------------ |  | -------------------- | ----- | ----- |  | ---- | ---- | ------ | - | ---- | --- | ---- |  | ------ | --- | --- |  |  | -- | --- | - | - | ------ | ------ |  | - | ------ | ------ |  |  | ---- | --- | -
|                   |                               |                           
|                   |                               | Three Months Ended June 30
|                  
|                  
|                   |                               |                            |       |                    |  |                     
|                   |                               | Dollars (millions)         |       | Tonnes (thousands) |  | Average Price Per MT
|                  
|                  
|                   |                               | %                          |       |                    |  | %                    |       |       |  | %   
|                   |                               | 2003                       |       | 2002               |  | Change               |       | 2003  |  | 2002 |      | Change |   | 2003 |     | 2002 |  | Change
|                  
|                  
|Net Sales          |                               |                            |       |                    |  |                      |       |       |  |      |      |        |   |      |     |      |  |        |     |     |  |  |    |     |   |   |        |        |  |   |        |        |  |  |      |    
|                   | Fertilizer  liquids          |                            | $     | 37.6               |  |                      | $     | 28.7  |  |      |      | 31     |   |      |     | 170  |  |        |     | 132 |  |  |    | 29  |   |   | $      | 221.57 |  |   | $      | 216.70 |  |  |      | 2   |  
|                   | Fertilizer  solids           |                            |       | 60.5               |  |                      |       | 22.6  |  |      |      | 168    |   |      |     | 354  |  |        |     | 145 |  |  |    | 144 |   |   | $      | 171.04 |  |   | $      | 156.19 |  |  |      | 10  |  
|                   | Feed                          |                            |       | 44.4               |  |                      |       | 55.0  |  |      |      | (19    | ) |      |     | 206  |  |        |     | 238 |  |  |    | (13 | ) |   | $      | 215.03 |  |   | $      | 231.38 |  |  |      | (7  | )
|                   | Industrial                    |                            |       | 45.0               |  |                      |       | 40.4  |  |      |      | 11     |   |      |     | 138  |  |        |     | 125 |  |  |    | 10  |   |   | $      | 325.60 |  |   | $      | 324.28 |  |  |      |    |  
|                  
|                   |                               |                            | 187.5 |                    |  |                      | 146.7 |       |  |      | 28   |        |   |      | 868 |      |  |        | 640 |     |  |  | 36 |     |   | $ | 215.97 |        |  | $ | 229.43 |        |  |  | (6   | )  
|                   | Miscellaneous                 |                            |       | 2.2                |  |                      |       | 2.0   |  |      |      | 10     |   |      |     |     |  |        |     |    |  |  |    |    |   |   |        |       |  |   |        |       |  |  |      |    |  
|                  
|                   |                               |                            | 189.7 |                    |  |                      | 148.7 |       |  |      | 28   |        |   |      | 868 |      |  |        | 640 |     |  |  | 36 |     |   | $ | 218.55 |        |  | $ | 232.34 |        |  |  | (6   | )  
|                  
|Cost of Goods Sold |                               |                            |       |                    |  |                      |       |       |  |      |      |        |   |      |     |      |  |        |     |     |  |  |    |     |   |   |        |        |  |   |        |        |  |  |      |    
|                   | Cash costs                    |                            |       | 171.1              |  |                      |       | 116.7 |  |      |      | 47     |   |      |     |      |  |        |     |     |  |  |    |     |   |   | $      | 197.12 |  |   | $      | 182.34 |  |  |      | 8   |  
|                   | Depreciation and amortization |                            |       | 19.6               |  |                      |       | 18.6  |  |      |      | 5      |   |      |     |      |  |        |     |     |  |  |    |     |   |   | $      | 22.58  |  |   | $      | 29.06  |  |  |      | (22 | )
|                  
|                   |                               |                            | 190.7 |                    |  |                      | 135.3 |       |  |      | 41   |        |   |      |     |      |  |        |     |     |  |  |    |     |   | $ | 219.70 |        |  | $ | 211.40 |        |  |  | 4    |    
|                  
|Gross Margin       |                               | $                          | (1.0  | )                  |  | $                    | 13.4  |       |  |      | (107 | )      |   |      |     |      |  |        |     |     |  |  |    |     |   | $ | (1.15  | )      |  | $ | 20.94  |        |  |  | (105 | )  
|                  

|                   |                               |                          |       |                    |  |                      |       |       |  |      |     |        |   |      |       |      |  |        |       |     |  |  |    |    |   |   |        |        |  |   |        |        |  |  |     |     |  
|------------------ | ----------------------------- | ------------------------ | ----- | ------------------ |  | -------------------- | ----- | ----- |  | ---- | --- | ------ | - | ---- | ----- | ---- |  | ------ | ----- | --- |  |  | -- | -- | - | - | ------ | ------ |  | - | ------ | ------ |  |  | --- | --- | -
|                   |                               |                         
|                   |                               | Six Months Ended June 30
|                  
|                  
|                   |                               |                          |       |                    |  |                     
|                   |                               | Dollars (millions)       |       | Tonnes (thousands) |  | Average Price Per MT
|                  
|                  
|                   |                               | %                        |       |                    |  | %                    |       |       |  | %   
|                   |                               | 2003                     |       | 2002               |  | Change               |       | 2003  |  | 2002 |     | Change |   | 2003 |       | 2002 |  | Change
|                  
|                  
|Net Sales          |                               |                          |       |                    |  |                      |       |       |  |      |     |        |   |      |       |      |  |        |       |     |  |  |    |    |   |   |        |        |  |   |        |        |  |  |     |    
|                   | Fertilizer  liquids          |                          | $     | 79.6               |  |                      | $     | 64.8  |  |      |     | 23     |   |      |       | 345  |  |        |       | 302 |  |  |    | 14 |   |   | $      | 230.63 |  |   | $      | 214.83 |  |  |     | 7   |  
|                   | Fertilizer  solids           |                          |       | 99.0               |  |                      |       | 47.4  |  |      |     | 109    |   |      |       | 588  |  |        |       | 302 |  |  |    | 95 |   |   | $      | 168.45 |  |   | $      | 156.88 |  |  |     | 7   |  
|                   | Feed                          |                          |       | 91.9               |  |                      |       | 109.4 |  |      |     | (16    | ) |      |       | 439  |  |        |       | 482 |  |  |    | (9 | ) |   | $      | 209.42 |  |   | $      | 227.09 |  |  |     | (8  | )
|                   | Industrial                    |                          |       | 84.1               |  |                      |       | 79.7  |  |      |     | 6      |   |      |       | 260  |  |        |       | 244 |  |  |    | 7  |   |   | $      | 323.40 |  |   | $      | 326.13 |  |  |     | (1  | )
|                  
|                   |                               |                          | 354.6 |                    |  |                      | 301.3 |       |  |      | 18  |        |   |      | 1,632 |      |  |        | 1,330 |     |  |  | 23 |    |   | $ | 217.32 |        |  | $ | 226.56 |        |  |  | (4  | )  
|                   | Miscellaneous                 |                          |       | 3.5                |  |                      |       | 3.1   |  |      |     | 13     |   |      |       |     |  |        |       |    |  |  |    |   |   |   |        |       |  |   |        |       |  |  |     |    |  
|                  
|                   |                               |                          | 358.1 |                    |  |                      | 304.4 |       |  |      | 18  |        |   |      | 1,632 |      |  |        | 1,330 |     |  |  | 23 |    |   | $ | 219.42 |        |  | $ | 228.87 |        |  |  | (4  | )  
|                  
|Cost of Goods Sold |                               |                          |       |                    |  |                      |       |       |  |      |     |        |   |      |       |      |  |        |       |     |  |  |    |    |   |   |        |        |  |   |        |        |  |  |     |    
|                   | Cash costs                    |                          |       | 319.0              |  |                      |       | 231.8 |  |      |     | 38     |   |      |       |      |  |        |       |     |  |  |    |    |   |   | $      | 195.46 |  |   | $      | 174.29 |  |  |     | 12  |  
|                   | Depreciation and amortization |                          |       | 38.2               |  |                      |       | 36.9  |  |      |     | 4      |   |      |       |      |  |        |       |     |  |  |    |    |   |   | $      | 23.41  |  |   | $      | 27.74  |  |  |     | (16 | )
|                  
|                   |                               |                          | 357.2 |                    |  |                      | 268.7 |       |  |      | 33  |        |   |      |       |      |  |        |       |     |  |  |    |    |   | $ | 218.87 |        |  | $ | 202.03 |        |  |  | 8   |    
|                  
|Gross Margin       |                               | $                        | 0.9   |                    |  | $                    | 35.7  |       |  |      | (97 | )      |   |      |       |      |  |        |       |     |  |  |    |    |   | $ | 0.55   |        |  | $ | 26.84  |        |  |  | (98 | )  
|                  

For the second quarter, volumes and prices were
up in all phosphate products except feed, where both indicators
were down. The feed business continued to be under pressure,
with increased competition and soft demand due to reduced
production of beef, pork and poultry. In the US, volumes in
dical and monocal were down 11 percent, while DFP for
poultry dropped 8 percent. The companys costs per
tonne were up as it reduced feed production in response to lower
sales volumes and worked to reduce inventories to more
sustainable levels. In addition, the company had some start-up
issues at its new DFP facility in Aurora. These same factors
affected the companys first half results.

15



---



##### Table of Contents



Industrial volumes were up as the expansion of
the purified acid plant that was completed in the first quarter
of 2003 provided more of these high-margin tonnes. Prices were
flat quarter-over-quarter but slightly down on a year-over-year
basis, reflecting competitive pressure due to imports from China
and Israel.

In fertilizer phosphates, more solid tonnes were
sold reflecting the restart of the White Springs DAP plant which
was shut down most of 2002. More than three quarters of these
additional tonnes were sold domestically as PhosChem has yet to
complete a new contract with customers in China, its largest
market. The company is the largest supplier of liquid phosphate
fertilizer in the US with 80 percent of its second-quarter
liquid sales focused there.

The gains in improved phosphate rock costs that
began in the first quarter of 2003 were firmly established in
the second quarter. On a per-tonne basis, quarter-over-quarter
rock costs were reduced by over $6.00 but were more than offset
by higher costs for ammonia and sulfur (up 56 and
61 percent respectively). For first-half 2003, rock costs
were down 15 percent from first-half 2002 but gross margin
deteriorated as phosphate prices did not rise enough to offset
the increased costs for other raw materials. Sulfur increased
70 percent and ammonia 41 percent on a year-over-year
basis.

Nitrogen

|                   |                                  |                            |       |                    |  |                      |       |       |  |      |    |        |   |      |       |      |  |        |       |     |  |  |   |     |   |   |        |        |  |   |        |        |  |  |    |    | 
|------------------ | -------------------------------- | -------------------------- | ----- | ------------------ |  | -------------------- | ----- | ----- |  | ---- | -- | ------ | - | ---- | ----- | ---- |  | ------ | ----- | --- |  |  | - | --- | - | - | ------ | ------ |  | - | ------ | ------ |  |  | -- | -- | 
|                   |                                  |                           
|                   |                                  | Three Months Ended June 30
|                  
|                  
|                   |                                  |                            |       |                    |  |                     
|                   |                                  | Dollars (millions)         |       | Tonnes (thousands) |  | Average Price Per MT
|                  
|                  
|                   |                                  | %                          |       |                    |  | %                    |       |       |  | %   
|                   |                                  | 2003                       |       | 2002               |  | Change               |       | 2003  |  | 2002 |    | Change |   | 2003 |       | 2002 |  | Change
|                  
|                  
|Net Sales          |                                  |                            |       |                    |  |                      |       |       |  |      |    |        |   |      |       |      |  |        |       |     |  |  |   |     |   |   |        |        |  |   |        |        |  |  |    |   
|                   | Ammonia                          |                            | $     | 108.0              |  |                      | $     | 57.5  |  |      |    | 88     |   |      |       | 517  |  |        |       | 457 |  |  |   | 13  |   |   | $      | 208.86 |  |   | $      | 125.80 |  |  |    | 66 | 
|                   | Urea                             |                            |       | 65.6               |  |                      |       | 54.6  |  |      |    | 20     |   |      |       | 343  |  |        |       | 434 |  |  |   | (21 | ) |   | $      | 191.14 |  |   | $      | 125.82 |  |  |    | 52 | 
|                   | Nitrogen Solutions               |                            |       | 28.7               |  |                      |       | 20.9  |  |      |    | 37     |   |      |       | 243  |  |        |       | 263 |  |  |   | (8  | ) |   | $      | 118.36 |  |   | $      | 79.44  |  |  |    | 49 | 
|                   | Nitric Acid and Ammonium Nitrate |                            |       | 41.9               |  |                      |       | 30.7  |  |      |    | 36     |   |      |       | 358  |  |        |       | 332 |  |  |   | 8   |   |   | $      | 117.04 |  |   | $      | 92.47  |  |  |    | 27 | 
|                   | Purchased                        |                            |       | 37.6               |  |                      |       | 10.4  |  |      |    | 262    |   |      |       | 164  |  |        |       | 87  |  |  |   | 89  |   |   | $      | 228.70 |  |   | $      | 119.46 |  |  |    | 91 | 
|                  
|                   |                                  |                            | 281.8 |                    |  |                      | 174.1 |       |  |      | 62 |        |   |      | 1,625 |      |  |        | 1,573 |     |  |  | 3 |     |   | $ | 173.42 |        |  | $ | 110.68 |        |  |  | 57 |   
|                   | Miscellaneous                    |                            |       | 4.4                |  |                      |       | 5.0   |  |      |    | (12    | ) |      |       |     |  |        |       |    |  |  |   |    |   |   |        |       |  |   |        |       |  |  |    |   | 
|                  
|                   |                                  | $                          | 286.2 |                    |  | $                    | 179.1 |       |  |      | 60 |        |   |      | 1,625 |      |  |        | 1,573 |     |  |  | 3 |     |   | $ | 176.12 |        |  | $ | 113.86 |        |  |  | 55 |   
|                  
|Fertilizer         |                                  | $                          | 135.0 |                    |  | $                    | 80.0  |       |  |      | 69 |        |   |      | 791   |      |  |        | 769   |     |  |  | 3 |     |   | $ | 170.67 |        |  | $ | 104.03 |        |  |  | 64 |   
|Non-fertilizer     |                                  |                            | 151.2 |                    |  |                      | 99.1  |       |  |      | 53 |        |   |      | 834   |      |  |        | 804   |     |  |  | 4 |     |   | $ | 181.29 |        |  | $ | 123.26 |        |  |  | 47 |   
|                  
|                   |                                  |                            | 286.2 |                    |  |                      | 179.1 |       |  |      | 60 |        |   |      | 1,625 |      |  |        | 1,573 |     |  |  | 3 |     |   | $ | 176.12 |        |  | $ | 113.86 |        |  |  | 55 |   
|                  
|Cost of Goods Sold |                                  |                            |       |                    |  |                      |       |       |  |      |    |        |   |      |       |      |  |        |       |     |  |  |   |     |   |   |        |        |  |   |        |        |  |  |    |   
|                   | Cash costs                       |                            |       | 200.7              |  |                      |       | 152.3 |  |      |    | 32     |   |      |       |      |  |        |       |     |  |  |   |     |   |   | $      | 123.51 |  |   | $      | 96.82  |  |  |    | 28 | 
|                   | Depreciation and amortization    |                            |       | 22.9               |  |                      |       | 22.0  |  |      |    | 4      |   |      |       |      |  |        |       |     |  |  |   |     |   |   | $      | 14.09  |  |   | $      | 13.99  |  |  |    | 1  | 
|                  
|                   |                                  |                            | 223.6 |                    |  |                      | 174.3 |       |  |      | 28 |        |   |      |       |      |  |        |       |     |  |  |   |     |   | $ | 137.60 |        |  | $ | 110.81 |        |  |  | 24 |   
|                  
|Gross Margin       |                                  | $                          | 62.6  |                    |  | $                    | 4.8   |       |  |      |   |        |   |      |       |      |  |        |       |     |  |  |   |     |   | $ | 38.52  |        |  | $ | 3.05   |        |  |  |   |   
|                  

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|                   |                                  |                          |       |                    |  |                      |       |       |  |      |    |        |   |      |       |      |  |        |       |     |  |  |    |    |   |   |        |        |  |   |        |        |  |  |    |    | 
|------------------ | -------------------------------- | ------------------------ | ----- | ------------------ |  | -------------------- | ----- | ----- |  | ---- | -- | ------ | - | ---- | ----- | ---- |  | ------ | ----- | --- |  |  | -- | -- | - | - | ------ | ------ |  | - | ------ | ------ |  |  | -- | -- | 
|                   |                                  |                         
|                   |                                  | Six Months Ended June 30
|                  
|                  
|                   |                                  |                          |       |                    |  |                     
|                   |                                  | Dollars (millions)       |       | Tonnes (thousands) |  | Average Price Per MT
|                  
|                  
|                   |                                  | %                        |       |                    |  | %                    |       |       |  | %   
|                   |                                  | 2003                     |       | 2002               |  | Change               |       | 2003  |  | 2002 |    | Change |   | 2003 |       | 2002 |  | Change
|                  
|                  
|Net Sales          |                                  |                          |       |                    |  |                      |       |       |  |      |    |        |   |      |       |      |  |        |       |     |  |  |    |    |   |   |        |        |  |   |        |        |  |  |    |   
|                   | Ammonia                          |                          | $     | 186.9              |  |                      | $     | 106.1 |  |      |    | 76     |   |      |       | 950  |  |        |       | 922 |  |  |    | 3  |   |   | $      | 196.78 |  |   | $      | 115.10 |  |  |    | 71 | 
|                   | Urea                             |                          |       | 138.6              |  |                      |       | 102.3 |  |      |    | 35     |   |      |       | 761  |  |        |       | 812 |  |  |    | (6 | ) |   | $      | 182.09 |  |   | $      | 126.02 |  |  |    | 44 | 
|                   | Nitrogen Solutions               |                          |       | 49.2               |  |                      |       | 37.7  |  |      |    | 31     |   |      |       | 436  |  |        |       | 476 |  |  |    | (8 | ) |   | $      | 112.85 |  |   | $      | 79.15  |  |  |    | 43 | 
|                   | Nitric Acid and Ammonium Nitrate |                          |       | 81.4               |  |                      |       | 63.3  |  |      |    | 29     |   |      |       | 718  |  |        |       | 654 |  |  |    | 10 |   |   | $      | 113.37 |  |   | $      | 96.79  |  |  |    | 17 | 
|                   | Purchased                        |                          |       | 67.4               |  |                      |       | 25.6  |  |      |    | 163    |   |      |       | 319  |  |        |       | 234 |  |  |    | 36 |   |   | $      | 211.47 |  |   | $      | 109.39 |  |  |    | 93 | 
|                  
|                   |                                  |                          | 523.5 |                    |  |                      | 335.0 |       |  |      | 56 |        |   |      | 3,184 |      |  |        | 3,098 |     |  |  | 3  |    |   | $ | 164.42 |        |  | $ | 108.13 |        |  |  | 52 |   
|                   | Miscellaneous                    |                          |       | 8.1                |  |                      |       | 9.3   |  |      |    | (13    | ) |      |       |     |  |        |       |    |  |  |    |   |   |   |        |       |  |   |        |       |  |  |    |   | 
|                  
|                   |                                  | $                        | 531.6 |                    |  | $                    | 344.3 |       |  |      | 54 |        |   |      | 3,184 |      |  |        | 3,098 |     |  |  | 3  |    |   | $ | 166.96 |        |  | $ | 111.14 |        |  |  | 50 |   
|                  
|Fertilizer         |                                  | $                        | 236.7 |                    |  | $                    | 149.1 |       |  |      | 59 |        |   |      | 1,464 |      |  |        | 1,483 |     |  |  | (1 | )  |   | $ | 161.68 |        |  | $ | 100.54 |        |  |  | 61 |   
|Non-fertilizer     |                                  |                          | 294.9 |                    |  |                      | 195.2 |       |  |      | 51 |        |   |      | 1,720 |      |  |        | 1,615 |     |  |  | 7  |    |   | $ | 171.45 |        |  | $ | 120.87 |        |  |  | 42 |   
|                  
|                   |                                  |                          | 531.6 |                    |  |                      | 344.3 |       |  |      | 54 |        |   |      | 3,184 |      |  |        | 3,098 |     |  |  | 3  |    |   | $ | 166.96 |        |  | $ | 111.14 |        |  |  | 50 |   
|                  
|Cost of Goods Sold |                                  |                          |       |                    |  |                      |       |       |  |      |    |        |   |      |       |      |  |        |       |     |  |  |    |    |   |   |        |        |  |   |        |        |  |  |    |   
|                   | Cash costs                       |                          |       | 393.1              |  |                      |       | 296.3 |  |      |    | 33     |   |      |       |      |  |        |       |     |  |  |    |    |   |   | $      | 123.46 |  |   | $      | 95.64  |  |  |    | 29 | 
|                   | Depreciation and amortization    |                          |       | 46.1               |  |                      |       | 43.7  |  |      |    | 5      |   |      |       |      |  |        |       |     |  |  |    |    |   |   | $      | 14.48  |  |   | $      | 14.11  |  |  |    | 3  | 
|                  
|                   |                                  |                          | 439.2 |                    |  |                      | 340.0 |       |  |      | 29 |        |   |      |       |      |  |        |       |     |  |  |    |    |   | $ | 137.94 |        |  | $ | 109.75 |        |  |  | 26 |   
|                  
|Gross Margin       |                                  | $                        | 92.4  |                    |  | $                    | 4.3   |       |  |      |   |        |   |      |       |      |  |        |       |     |  |  |    |    |   | $ | 29.02  |        |  | $ | 1.39   |        |  |  |   |   
|                  

During the second quarter of 2003, the company
sold more nitrogen tonnes when compared to the same quarter of
2002. Additional sales volume was provided by purchased product
tonnes that were nearly double those during the same period last
year. At the beginning of June, the company indefinitely shut
down its Memphis plant as well as the production of ammonia and
nitrogen solutions at its Geismar plant due to poor margins
resulting from high natural gas costs. These shutdowns resulted
in lower urea and nitrogen solutions sales volume for
second-quarter 2003. During the quarter, the companys
Trinidad facility experienced some now-resolved production
problems, which also reduced the amount of urea available for
sale. Nitric acid volume was higher in second-quarter 2003 as a
key customer had plant downtime in second-quarter 2002.

On a year-to-date basis, the decrease in nitrogen
solutions also reflected the companys decision to stop
producing solutions at its Geismar plant for 45 days during
the first quarter. Purchased tonnes were up as the company took
advantage of spot sales opportunities in an appreciating market.
Ammonia prices tend to follow gas prices as North American
producers shut down capacity when gas prices rise, tightening
supply and demand. This increased the margin for ammonia made
offshore with less expensive gas. During the quarter,
40 percent of the companys gross margin in nitrogen
came from its Trinidad production with the bulk of the remainder
coming from the liquidated gas hedge contracts.

Between the US and Trinidad, the companys
average natural gas price during the quarter was up
55 percent from the same quarter last year. Gas prices were
higher for a longer period than anticipated when entering the
second quarter. In fact, at June 30, 2003, gas prices were
80 percent higher than one year earlier. These higher costs
dissipated some of the value of the previously liquidated hedge
benefit as customer commitments were satisfied. On a
year-to-date basis, the average unit cost of natural gas was
$3.12 per MMBtu, a 46-percent increase over the $2.13 per MMBtu
for first-half 2002.

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##### Table of Contents



Expenses and Other Income

|                                  |  |                            |      |                          |  |        |      |      |  |      |     |        |  |   |      |  |  |   |      |  |  |  |     |  
|--------------------------------- |  | -------------------------- | ---- | ------------------------ |  | ------ | ---- | ---- |  | ---- | --- | ------ |  | - | ---- |  |  | - | ---- |  |  |  | --- | -
|                                  |  |                            |      |                         
|                                  |  | Three Months Ended June 30 |      | Six Months Ended June 30
|                                 
|                                 
|                                  |  | %                          |      |                          |  | %     
|($ millions)                      |  | 2003                       |      | 2002                     |  | Change |      | 2003 |  | 2002 |     | Change
|                                 
|                                 
|Selling and Administrative        |  | $                          | 23.9 |                          |  | $      | 24.0 |      |  |      |    |        |  | $ | 47.6 |  |  | $ | 46.8 |  |  |  | 2   |  
|Provincial Mining and Other Taxes |  |                            | 14.8 |                          |  |        | 20.3 |      |  |      | (27 | )      |  |   | 32.9 |  |  |   | 40.0 |  |  |  | (18 | )
|Provision for Plant Closure       |  |                            |     |                          |  |        |     |      |  |      |    |        |  |   | 2.2  |  |  |   |     |  |  |  |    |  
|Foreign Exchange Loss             |  |                            | 22.4 |                          |  |        | 11.4 |      |  |      | 96  |        |  |   | 39.3 |  |  |   | 10.9 |  |  |  | 261 |  
|Other Income                      |  |                            | 11.9 |                          |  |        | 5.6  |      |  |      | 113 |        |  |   | 16.4 |  |  |   | 8.8  |  |  |  | 86  |  
|Interest Expense                  |  |                            | 23.2 |                          |  |        | 20.0 |      |  |      | 16  |        |  |   | 42.6 |  |  |   | 41.0 |  |  |  | 4   |  
|Income Taxes                      |  |                            | 20.0 |                          |  |        | 6.7  |      |  |      | 199 |        |  |   | 22.1 |  |  |   | 13.8 |  |  |  | 60  |  

Selling and administrative expenses were flat on
a quarter-over-quarter basis and have increased slightly in the
first six months of this year as compared to the first six
months of 2002 due to increases in the cost of benefits.

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. For the second
quarter, the Provincial mining and other taxes were down by
34 percent, on a per-tonne basis, due to lower profits and
an over-accrual in the first quarter; on a year-to-date basis,
they were down 26 percent.

To improve efficiency, the company shut down its
Kinston, NC feed plant during the first quarter, resulting in a
provision for plant closure.

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 June 30, 2003, the Canadian dollar was $0.11 higher than
at March 31, 2003 and $0.22 higher than at
December 31, 2002. This compares to a $0.07 increase from
March 31, 2002 to June 30, 2002 and a $0.07 increase
from December 31, 2001 to June 30, 2002.

During the quarter, other income was up as the
company received dividends of $2.4 million from its
investment in Israel Chemicals Ltd. In addition, nitrogen
insurance proceeds of $2.0 million were received. For the
year, other income has also increased due to 2003 equity
earnings of SQM exceeding the 2002 dividends received.

Interest expense was up this year compared to
both second-quarter and first-half 2002 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 second quarter of 2003
was $1,273.0 million (2002 
$1,023.5 million) with a weighted average interest rate of
6.9 percent (2002  7.4 percent). Weighted
average long-term debt outstanding for the first six months of
2003 was $1,189.7 million (2002 
$1,020.2 million) with a weighted average interest rate of
7.1 percent (2002  7.4 percent). The
weighted average interest rate on short-term debt outstanding in
the second quarter of 2003 was 1.5 percent
(2002  2.2 percent) and for the first half of
2003 was 1.5 percent (2002  2.2 percent).

The effective consolidated income tax rate for
the second quarter and first half of 2003 was 40 percent
(2002  36 percent) of income before income
taxes. The increase in the effective rate was primarily due to
the expiration of the last tax holiday in Trinidad. The tax
provision for the second quarter and first half of 2003 was all
future income taxes. This compares to a current/ future split of
80 percent current and 20 percent future for both
second-quarter and first-half 2002. 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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##### Table of Contents



ANALYSIS OF FINANCIAL CONDITION AND CASH
FLOW

|                                      |  |                    |       |                  |  |      |       |      |  |   |       |   |  |   |        |  
|------------------------------------- |  | ------------------ | ----- | ---------------- |  | ---- | ----- | ---- |  | - | ----- | - |  | - | ------ | -
|                                      |  |                    |       |                 
|                                      |  | Three Months Ended |       | Six Months Ended
|                                      |  | June 30            |       | June 30         
|                                     
|                                     
|($ millions)                          |  | 2003               |       | 2002             |  | 2003 |       | 2002
|                                     
|                                     
|Cash provided by operating activities |  | $                  | 67.0  |                  |  | $    | 109.3 |      |  | $ | 111.0 |   |  | $ | 177.4  |  
|Cash used in investing activities     |  | $                  | (29.4 | )                |  | $    | (92.8 | )    |  | $ | (54.7 | ) |  | $ | (132.4 | )
|Cash used in financing activities     |  | $                  | (45.8 | )                |  | $    | (74.8 | )    |  | $ | (17.3 | ) |  | $ | (57.8  | )

Cash provided by operating activities was down
from second-quarter and first-half 2002 due to higher
receivables from large June sales volumes and higher nitrogen
inventory.

The decrease in cash used in investing activities
in both the second 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.

The company paid dividends of $13.1 million
in the second quarter and $26.1 million for the first six
months (unchanged from 2002). 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.

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                    |  | $                      | 1,272.8 |               |  | $            | 3.4   |              |  | $            | 11.8  |  |  | $ | 401.9 |  |  | $ | 855.7   | 
|Operating Leases                  |  |                        | 322.0   |               |  |              | 43.7  |              |  |              | 78.8  |  |  |   | 61.7  |  |  |   | 137.8   | 
|Raw Material Purchase Commitments |  |                        | 1,135.1 |               |  |              | 151.8 |              |  |              | 191.2 |  |  |   | 180.4 |  |  |   | 611.7   | 
|Other Commitments                 |  |                        | 32.7    |               |  |              | 8.6   |              |  |              | 22.7  |  |  |   | 1.4   |  |  |   |        | 
|Other Long-term Liabilities       |  |                        | 307.5   |               |  |              | 21.3  |              |  |              | 76.4  |  |  |   | 84.2  |  |  |   | 125.6   | 
|                                 
|Total                             |  | $                      | 3,070.1 |               |  | $            | 228.8 |              |  | $            | 380.9 |  |  | $ | 729.6 |  |  | $ | 1,730.8 | 
|                                 

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 $3.7 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 2008. The operating lease amounts disclosed in
the above table were calculated as at June 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 market rates at the time of
delivery. The commitments included in the above table are based
on the market prices as at June 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,

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##### Table of Contents



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).


The company has a contractual commitment for
mining of nitrates which is in effect until 2005, an acid
storage agreement that is in effect until 2004 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             |         | June 30, 2003  |  | June 30, 2003
|                          
|                          
|Syndicated Credit Facility |  | $                  | 650.0   |                |  | $             |        |  |  | $ | 418.6 | 
|Lines of Credit            |  |                    | 122.1   |                |  |               |        |  |  |   | 108.0 | 
|Commercial Paper           |  |                    | 500.0   |                |  |               | 231.4   |  |  |   | 268.6 | 
|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. The
amount available is the total committed amount less the amount
of commercial paper outstanding. The lines of credit are also
renewable annually and the amount available is reduced by
outstanding letters of credit. Both the syndicated credit
facility and the lines 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 of less than 3.5:1,
tangible net worth greater than $1,250.0 million and debt
of subsidiaries less than $250.0 million. The company was
in compliance with these covenants at June 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 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 June 30, 2003 was $93.2 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.

20



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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
June 30, 2003 were $78.1 million (2002 
$80.0 million). On a year-to-date basis, these sales were
$141.8 million (2002  $139.2 million).
Sales to Canpotex are at prevailing market prices and are
settled on normal trade terms. PCS Yumbes purchases potash from
SQM at prevailing market prices. Purchases for second-quarter
2003 were $2.5 million (2002 
$3.2 million). Year-to-date purchases were
$2.7 million (2002  $6.5 million). PCS
Yumbes also entered into a contract with SQM in 2002 to sell it
8,000 tonnes of potassium nitrate per month at an arms
length negotiated price through to December 2003. Sales to SQM
for the quarter ended June 30, 2003 were $4.9 million
(there were no such sales in second-quarter 2002). Year-to-date
sales were $9.9 million (there were no such sales in
first-half 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 respects
from US GAAP. These differences are explained and quantified in
Note 8 of the unaudited 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 to the unaudited
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. There
was no significant change in the second quarter of 2003 to the
measurement of asset impairment or environmental liabilities,
the two estimates that the company considers most important
based on the degree of uncertainty and the likelihood of a
material impact if the company used a different estimate.

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.

21



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OUTLOOK

World corn prices have recently fallen as China
has been exporting corn and US futures markets have factored in
a bumper crop. Nonetheless, world grain inventories remain low
and global consumption is expected to outstrip production for
the fifth consecutive year. In each of the last four years,
Chinas grain production has not met its consumption
requirements, so with its newly reduced inventories it could
easily change from being an exporter to a net importer. This
could rapidly escalate grain prices. Another driving factor
would be production problems anywhere in the world, which could
compound the already tight grain inventory situation.

Regardless of the current low grain prices,
fertilizer prices have stabilized as North American potash, DAP
and urea inventories remain below their five-year average. Good
second-half offshore sales volumes in potash should continue to
support pricing. Brazil could take record volumes this year. In
addition, the high percentage of shut-down ammonia capacity in
the US (around 45 percent) should keep supply and demand
tight and prices firm in that nutrient.

The companys higher DAP production and
industrial acid capacity should continue to provide increased
volume on a year-over-year basis. Continued competition in feed
is expected to keep that business under pressure. All phosphate
products are expected to benefit from the lower rock costs
already achieved and from projected lower sulfur costs.

The 2003 gas futures contracts that were
liquidated during the first quarter will continue to provide
earnings to the nitrogen business but to a lesser extent as
fewer contracts had been in place for the second half of 2003.
As of June 30, 2003, the company was 81 percent hedged
at $3.27 per MMBtu for August through December of 2003 subject
to collared profits.

The Canadian dollar exchange rate will continue
to affect the companys earnings. The company expects the
Canadian dollar to weaken during the third quarter to 1.4000 and
then remain essentially flat for the remainder of the year. If
this occurs, the full year effect of the strengthening Canadian
dollar would then be $0.61 per share, of which almost
60 percent is currency translation loss. The company
believes it can earn in the range of $1.50 per share this year
with $0.25 to $0.35 in the third quarter.

These 2003 earnings would generate annual cash
provided by operating activities of approximately
$385 million. Capital expenditures, which have also been
affected by the strengthening Canadian dollar, should be
approximately $160 million for the year. Outstanding shares
are expected to be 52.3 million.

Foreign exchange continues to be volatile. In the
trading range of $1.40 for the Canadian dollar relative to the
US dollar, there will be an effect of approximately
$1.8 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 net income
is affected more than cash flow.

As previously announced, the company has been
selected as the preferred bidder in connection with the sale of
a 26% interest in Arab Potash Company. The outcome of
negotiations concerning the matter cannot be predicted at
this time.

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 June 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

22



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##### Table of Contents



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 June 30, 2003, the companys estimated
derivative commodity instruments market risk exposure was
$24.5 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 June 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 June 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 June 30, 2003 that has materially affected, or is
reasonably likely to materially affect, the companys
internal control over financial reporting.

23



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##### Table of Contents






PART II.     OTHER
INFORMATION






ITEM 4. SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS




|    |                                                                                                                                                                                                    
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | On May 8, 2003, the company held an annual
    meeting (the Meeting) of its shareholders.                                                                                                        
|   
|(b) | At the Meeting, the companys shareholders
    voted upon each of the following proposed director nominees with
    the results of the voting set forth opposite the name of each
    such nominee.

|                          |  |     |            |          |  |  |           | 
|------------------------- |  | --- | ---------- | -------- |  |  | --------- | 
|                          |  | FOR |            | WITHHELD
|                          |  |     |            |         
|Frederick J. Blesi        |  |     | 39,430,492 |          |  |  | 64,187    | 
|William J. Doyle          |  |     | 39,382,758 |          |  |  | 111,921   | 
|John W. Estey             |  |     | 39,198,879 |          |  |  | 295,800   | 
|Wade Fetzer III           |  |     | 38,465,221 |          |  |  | 1,029,458 | 
|Dallas J. Howe            |  |     | 39,476,717 |          |  |  | 17,962    | 
|Alice D. Laberge          |  |     | 39,198,356 |          |  |  | 296,323   | 
|Jeffrey J. McCaig         |  |     | 39,431,172 |          |  |  | 63,507    | 
|Mary Mogford              |  |     | 39,475,090 |          |  |  | 19,589    | 
|Paul J. Schoenhals        |  |     | 39,475,562 |          |  |  | 19,117    | 
|E. Robert Stromberg, Q.C. |  |     | 39,381,185 |          |  |  | 113,494   | 
|Jack G. Vicq              |  |     | 39,477,535 |          |  |  | 17,144    | 
|Elena Viyella de Paliza   |  |     | 39,244,455 |          |  |  | 250,224   | 



|    |                                                                                                                                                                                                                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(c) | The Companys shareholders also voted upon
    the appointment of the firm of Deloitte & Touche LLP, the
    present auditors, as the Companys auditors, to hold office
    until the next annual meeting of the Companys
    shareholders; the results of the vote were: 39,254,299 shares
    for, 156,473 shares against and 39,958 shares withheld.




ITEM 5. OTHER
INFORMATION

None.




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) |                         |  | 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(c) |                         |  | 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).   

24



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|        |      |                         |  |                                                                                                                                                                                                                                              
|------- | ---- | ----------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |                        
|Number  |      | Description of Document
|        |      |                        
|       
|        | 4(d) |                         |  | 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(e) |                         |  | 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(f) |                         |  | 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.
|       
|        | 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
    Exhibit 10(f) 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).                           

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|        |       |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------- | ----- | ----------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                        
|Number  |       | Description of Document
|        |       |                        
|       
|        | 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.                                              
|       
|        | 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) |                         |  | 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).                                                                                                                                                                                                                                                           

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|        |        |                         |  |                                                                                                                                                                                                                                                                                                                                                  
|------- | ------ | ----------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |                        
|Number  |        | Description of Document
|        |        |                        
|       
|        | 10(t)  |                         |  | 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(u)  |                         |  | 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(v)  |                         |  | 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(w)  |                         |  | Short-Term Incentive Plan of the registrant
    effective January 2000, incorporated by reference to
    Exhibit 10(z) to the registrants report on
    Form 10-Q for the quarterly period ended March 31,
    2000 (the First Quarter 2000 Form 10-Q).                                                                                       
|       
|        | 10(x)  |                         |  | 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(y)  |                         |  | Long-Term Incentive Plan of the registrant,
    effective January 2003, incorporated by reference to
    Exhibit 10(y) to the 2002 Form 10-K.                                                                                                                                                                                                    
|       
|        | 10(z)  |                         |  | 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.                                                                                                                                       
|       
|        | 10(aa) |                         |  | 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(bb) |                         |  | 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(cc) |                         |  | 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(dd) |                         |  | 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(ee) |                         |  | 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(ff) |                         |  | 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(gg) |                         |  | 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(hh) |                         |  | Chief Executive Officer Medical and Dental Plan,
    incorporated by reference to Exhibit 10(jj) to the 2000
    Form 10-K.                                                                                                                                                                                                                      
|       
|        | 10(ii) |                         |  | 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.                                                                          

27



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##### Table of Contents



|        |        |                         |  |                                                                                                                                                                                                                                                                                                                              
|------- | ------ | ----------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |                        
|Number  |        | Description of Document
|        |        |                        
|       
|        | 10(jj) |                         |  | 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(kk) |                         |  | 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(ll) |                         |  | 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 April 23, 2003, the company filed a
current report on Form 8-K, which included as an exhibit
the companys news release concerning its financial results
for the first quarter of 2003.

On May 7, 2003, the company filed a current
report on Form 8-K, which included as an exhibit a letter
from Deloitte & Touche LLP regarding an accounting
change described in the first quarter 2003 report on
Form 10-Q.

28



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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.    

August 7, 2003

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

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

August 7, 2003

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

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

29



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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) |                         |  | 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(c) |                         |  | 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).   





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##### Table of Contents



|        |      |                         |  |                                                                                                                                                                                                                                              
|------- | ---- | ----------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |      |                        
|Number  |      | Description of Document
|        |      |                        
|       
|        | 4(d) |                         |  | 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(e) |                         |  | 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(f) |                         |  | 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.
|       
|        | 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
    Exhibit 10(f) 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).                           





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##### Table of Contents



|        |       |                         |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|------- | ----- | ----------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |                        
|Number  |       | Description of Document
|        |       |                        
|       
|        | 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.                                              
|       
|        | 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) |                         |  | 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).                                                                                                                                                                                                                                                           





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##### Table of Contents



|        |        |                         |  |                                                                                                                                                                                                                                                                                                                                                  
|------- | ------ | ----------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |                        
|Number  |        | Description of Document
|        |        |                        
|       
|        | 10(t)  |                         |  | 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(u)  |                         |  | 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(v)  |                         |  | 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(w)  |                         |  | Short-Term Incentive Plan of the registrant
    effective January 2000, incorporated by reference to
    Exhibit 10(z) to the registrants report on
    Form 10-Q for the quarterly period ended March 31,
    2000 (the First Quarter 2000 Form 10-Q).                                                                                       
|       
|        | 10(x)  |                         |  | 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(y)  |                         |  | Long-Term Incentive Plan of the registrant,
    effective January 2003, incorporated by reference to
    Exhibit 10(y) to the 2002 Form 10-K.                                                                                                                                                                                                    
|       
|        | 10(z)  |                         |  | 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.                                                                                                                                       
|       
|        | 10(aa) |                         |  | 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(bb) |                         |  | 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(cc) |                         |  | 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(dd) |                         |  | 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(ee) |                         |  | 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(ff) |                         |  | 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(gg) |                         |  | 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(hh) |                         |  | Chief Executive Officer Medical and Dental Plan,
    incorporated by reference to Exhibit 10(jj) to the 2000
    Form 10-K.                                                                                                                                                                                                                      
|       
|        | 10(ii) |                         |  | 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.                                                                          





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##### Table of Contents



|        |        |                         |  |                                                                                                                                                                                                                                                                                                                              
|------- | ------ | ----------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |        |                        
|Number  |        | Description of Document
|        |        |                        
|       
|        | 10(jj) |                         |  | 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(kk) |                         |  | 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(ll) |                         |  | 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.