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Report on

Potash Corporation of Saskatchewan Inc.

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Report on

Potash Corporation of Saskatchewan Inc.

Submitted to: Fahad Firoz

Lecturer,

Faculty of Business Administration

Southeast University

Submitted By: Sanzida Akther

Faculty of Business Administration

Southeast University

Submission Date:

Tuesday, August 26, 2014

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Abstract

The report is on Potash Corporation of Saskatchewan Inc. which is generally

known as PotashCorp. PotashCorp is known as the largest Potash producer and

third largest producer of Nitrogen and Phosphate in the world. All of the three

are topmost used chemicals in fertilizers. So naturally, PotashCorp is one of the

largest fertilizer companies of the world. The company is based on some core

values and goals which make them unique among other companies in the world.

Their goals focus on the product, the environment and also the employees and

shareholders of the corporation. Moreover it has expanded its business over

several continents which makes the company a multi-national and multi-cultural

company. It has successfully conducted business for almost six decades and

looks forward to extend its business to other areas.

The scope of the report is about the company, its history, products, services,

management; its competitors, loss profit reports and its corporate social

responsibilities.

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Table of Contents

Title Page 1

Abstract 2

Table of Contents 3

1 Introduction 4

2 Products and Services 10

3 Customers of PotashCorp 12

4 Competitors of PotashCorp 18

5 Revenue - Loss Profit Statement 22

6 Corporate Social Responsibility - Sustainability 28

7 Recommendation 35

References 36

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Introduction

Potash Corporation of Saskatchewan Inc. is a Canadian company based in

Saskatoon, Saskatchewan. It is the world's largest fertilizer company. It is the

world's largest potash producer and the third largest producers of nitrogen and

phosphate, three primary crop nutrients used to produce fertilizer.

History of PotashCorp:

The company was created by the government of Saskatchewan in 1975. On

November 2, 1989 it became a publicly traded company as the government of

Saskatchewan sold off some of its shares, selling the remaining shares in 1990.

In 1990 PotashCorp acquired Saskterra and its 40 percent interest in the Allan,

Saskatchewan potash mine from Husky Oil Ltd. for $47M. In 1993 the company

purchased the potash assets of Potash Company of America from Rio Algom for

$111.8M.

In 1995 the company purchased all outstanding shares of White Springs

Agricultural Chemicals Ltd. from Occidental Chemical Corporation for $291.5M.

The company created PCS Phosphate by purchasing all outstanding shares of

Texasgulf Inc. for $832.6M. Texasgulf’s primary asset was a vertically integrated

phosphate complex in Aurora, North Carolina.

In 1997 the company created PCS Nitrogen by acquiring all outstanding shares of

Arcadian Corporation for $563.6M and issuing eight million common shares

valued at $573.3M. The primary assets included a nitrogen complex in Trinidad

and four US facilities.

In 1998 the company purchased nine percent of the shares of Israel Chemicals

Ltd. (ICL) from the Government of Israel for $93M. The same year, the company

acquired all outstanding shares of Potash Company of Canada for $11.4M.

In 1999 the company acquired Minera Yolanda SCM, a specialty potash producer

in Chile, for $37M.

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In 2001 the company purchased approximately 48 million shares (about 18

percent) of Sociedad Quimica y Minera de Chile (SQM) for $131M. In 2002 the

company purchased five million SQM shares for $23M, raising total investment

interest to $154M. In 2003 the company acquired 26 percent of the shares of

Arab Potash Company Ltd. (APC) for $178M and brought on stream an 83,000-

metric-tonne expansion of our purified phosphoric acid plant at PCS Phosphate

Aurora, increasing its capacity to 251,000 tonnes P2O5.

In 2004 the company invested $40.6M to increase ownership interest in SQM to

25 percent and announced a two-for-one stock split of the company’s

outstanding common shares effective August 17, 2004, payable by stock

dividend. In 2005 the company purchased an initial 9.99 percent stake in

Sinofert Holdings Limited (Sinofert) for $97.4M and purchased an additional one

percent of ICL, bringing the total ownership to 10 percent. It also acquired an

additional $18.5M of APC shares, raising total ownership interest to 28 percent.

In 2006 , the company purchased an additional seven percent of SQM for

$231.5M, raising total ownership interest to 32 percent and an additional 10.01

percent of Sinofert for $126.3M, raising total ownership interest to 20 percent.

The same year, the company installed 82,000 additional tonnes of purified

phosphoric acid capacity at Aurora at a cost of $75 million.

In 2008 the company purchased an additional one percent of ICL for $116M,

raising total ownership interest to 11 percent. Purchased an additional two

percent of Sinofert for $319M, raising total ownership interest to 22 percent.

In 2010 the company purchased an additional three percent of ICL for $422M,

raising total ownership interest to 14 percent.

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Management

Jochen E. Tilk President and Chief Executive Officer

Wayne R. Brownlee Executive Vice President and Chief Financial Officer

G. David Delaney Executive Vice President and Chief Operating Officer

Stephen F. Dowdle President, PCS Sales

Mark F. Fracchia President, PCS Potash

Raef M. Sully President, PCS Nitrogen

Paul E. DeKok President, PCS Phosphate

Joseph A. Podwika Senior Vice President, General Counsel and Secretary

Robert A. Jaspar Senior Vice President, Information Technology

Lee M. Knafelc Vice President, Human Resources and Administration

Denita C. Stann Vice President, Investor and Public Relations

Rob D. Bubnick Vice President, Safety, Health and Environment

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Darryl S. Stann Vice President, Procurement

Denis A. Sirois Vice President and Corporate Controller

Daphne J. Arnason Vice President, Global Risk Management

William L. Flahr Vice President, Internal Audit

Board of Directors

Christopher M. Burley Director

Donald G. Chynoweth Director

John W. Estey Director

Gerald W. Grandey Director

C. Steven Hoffman Director

Dallas J. Howe Chair

Alice D. Laberge Director

Consuelo E. Madere Director

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Keith G. Martell Director

Jeffrey J. McCaig Director

Mary Mogford Director

Jochen E. Tilk Director

Elena Viyella De Paliza Director

PotashCorp has its Corporate Headquarters located in Canada at Saskatoon,

Saskatchewan.

Figure: Corporate Headquarters of PotashCorp (Canada)

As of December 31, 2013 PotashCorp has employed 5,787 people worldwide.

PotashCorp has offices in Canada and USA. Besides, it has facilities in Canada,

USA, Trinidad and Tobago, Chile, Israel, Jordan and China.

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A map is shown below with locations worldwide.

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Vision of PotashCorp:

The vision of PotashCorp is to play a role in the global food solution while

building long-term value for their stakeholders.

Goals:

The Value Model of PotashCorp ensures that they focus on building value for the

many stakeholders

who are important to

their enduring

success. Using this

framework, their goals

are shaped within a

broader context –

their operating

environment, key

relationships,

competitive strengths

and Core Values.

The Key organizational Goals of PotashCorp are:

1. Create superior long-term shareholder value

2. Be the supplier of choice to the markets we serve

3. Build strong relationships with and improve the socioeconomic well-being

of our communities

4. Attract and retain talented, motivated and productive employees who are

committed to our long-term goals

5. Achieve no harm to people and no damage to the environment.

Figure: Value Model of PotashCorp

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Products and Service

Potash Corp produces mainly three chemicals - Potash, Phosphate and

Nitrogen. Using these three, they produce Fertilizers, Feeds, Industrial

Chemicals, Purified Acids and Metal Finishing products for the customers.

Fertilizers Feeds Industrial Chemicals

Purified Acids

Metal Finishing

Ammonium Polyphosphate

Ammonium Polyphosphate

Ammonium Nitrate

Nitric Acid Acid Cleaner

Ammonium Polyphosphate

De-fluorinated Phosphate

Anhydrous Ammonia

Phosphoric Acid

ADDB (brightener/ fume suppressant/ transfer etch inhibitor)

Anhydrous Ammonia

De-fluorinated Phosphoric Acid

Aqua Ammonia Hydro-flusilicic Acid

DAB80 (standard/ extra brightener/ copper free / extra fume suppressant)

Aqua Ammonia Di-calcium Phosphate

Carbon Dioxide (Pipeline) Super-

phosphoric Acid

DAB85 (standard/ copper free/ extra fumes suppressant)

Diammonium Phosphate

Mono-ammonium Phosphate

Monoaluminum Phosphate

Phosbrite (standard / low copper, low sulfuric acid)

Monoammonium Phosphate

Mono-calcium / Mono-di-calcium Phosphate

Muriate of Potash

Muriate of Potash

Potassium Chloride

Pastille Urea

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Phosphogypsum Super-phosphoric Acid

Tetra-potassium Pyrophosphate

Phosphoric Acid Urea Urea

URAN

Urea

Table: Products manufactured by Potashcorp worldwide

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Customers of PotshCorp

Potash:

Potash is primarily used for fertilizer, which typically makes up approximately 90

percent of our annual potash sales volumes. Customers in Asia are the largest

buyers of standard product, using it as a direct application fertilizer and to

manufacture compound fertilizer products. The larger, more uniform granular

product is the potash of choice in more advanced agricultural markets like North

America and Brazil, where it is typically blended with other crop nutrients.

Industrial markets, where potash is used to make products such as soaps, water

softeners, de-icers, drilling muds and food products, account for the remainder

of our sales volumes.

Offshore sales typically account for approximately two-thirds of PotashCorp’s

volumes. The largest consuming offshore markets are located in Asia and Latin

America, where potash is applied on diverse crops such as grains, oilseeds, sugar

cane, fruits and vegetables.

The figure shows most shipment and supply of Potash in major areas of

business.

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Nitrogen:

Trade in both ammonia and nitrogen solutions has historically been limited

compared to urea. Ammonia transportation requires expensive pressurized

railcars and refrigerated rail and ocean vessels while nitrogen solutions – due to

lower nitrogen concentration levels – are difficult to transport economically over

long distances.

The US is the second-largest consumer of ammonia and the largest importer.

The majority of the products approximately 85 percent of sales volumes are

sold in North America with the remainder destined for offshore markets,

particularly in Latin America.

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Phosphate:

PotashCorp sells more than two-thirds of its phosphate products in North

America, where the geographic proximity to customers means they typically

benefit from reduced freight costs.

Most of th offshore sales are made to India and Latin America, which

represented approximately 32 percent of its total sales volumes in 2013. Among

its products, liquid phosphate has the most exposure to offshore markets where

more than half its sales are made, in particular to India.

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Business segment of PotashCorp for the year 2013

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Competitors of PotashCorp

Below a comparison of main three products of PotashCorp with World's Ten

Largest Fertilizer Companies is given below.

The graph shows that its Potash(KCI) production is more than all other top

companies in the world.

Competitors for Potash

The main competitors of PotashCorp for potash in North America are Agrium,

Intrepid Potash and Mosaic, as well as offshore imports into the US Gulf and East

Coast, primarily from ICL, SQM and Uralkali.

In offshore markets, the company competes against producers such as

Belaruskali, ICL, K+S, SQM and Uralkali.

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Competitors for Nitrogen

In the US market the company competes with Agrium, CF Industries and Koch,

and with imported product from suppliers in the Middle East, North Africa,

Trinidad, the former Soviet Union and China.

In the offshore market, the company competes with a broad range of offshore

and domestic producers.

Competitors for Phosphate

In the US fertilizer market, the company competes with Agrium, CF Industries,

Mosaic, Mississippi Phosphates, Simplot and offshore imports primarily from

Morocco and Russia. For industrial sales, its primary competitors are Innophos,

ICL and producers from China. In feed sales it competes with Mosaic, Simplot

and producers from China and Russia.

In the offshore market, the company competes primarily with Morocco’s OCP SA

and producers from China, Russia and Saudi Arabia.

Some graphical report showing comparetive performance of PotashCorp is

shown below.

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PotashCorp outperformed its competitors in all quality and service categories in

2013.The average customer survey score was 90 percent compared to its peer

average of 75 percent. The sales team continued to rank higher than

competitors based on its knowledge of products, customers and the industry.

In nitrogen and phosphate, product diversity allows PotashCorp to provide

customers with a variety of options to meet their needs. The company offers

some of the highest-quality feed products in the industry and are able to

produce industrial products that many of its peers cannot.

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Revenue - Loss Profit Statement

PotashCorp uses cash flow and cash flow return (both non-IFRS financial

measures) as supplemental measures to evaluate the performance of the

company’s assets in terms of the cash flow they have generated. Calculated on

the total cost basis of the company’s assets rather than on the depreciated

value, these measures reflect cash returned on the total investment outlay.

Second-Quarter Earnings Reports of Potash Corporation of Saskatchewan Inc.

published on July 24, 2014 reported second-quarter earnings of $0.56 per share

($472 million), bringing earnings for first-half 2014 to $0.95 per share ($812

million). Totals for the quarter and first six months surpassed our earnings

guidance on improving trends in each nutrient, but trailed the $0.73 per share

($643 million) and $1.37 per share ($1.2 billion) reported in the respective

periods last year.

Gross margin for the quarter of $747 million fell short of the $979 million

generated during the same period in 2013 due to weaker contributions from its

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potash and phosphate businesses. For the first six months, gross margin totaled

$1.3 billion, below the $1.8 billion earned during the comparative period last

year.

In 2013, PotashCorp delivered earnings of $2.04 per share, a result that trailed

the previous year’s earnings of $2.37 per share. Through the first half of 2013,

the results outpaced prior-year levels, primarily on the strength of global potash

shipments. However, as the year unfolded, uncertainty in the global marketplace

resulted in reduced sales volumes and lower prices. This led to gross margin of

$1.6 billion in the potash segment, 20 percent less than its total last year.

Gross Margin graphs for Potash, Nitrogen and Phosphate.

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Financial Results

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* As PotashCorp adopted IFRS with effect from January 1, 2010, our 2009

information is presented on a previous Canadian generally accepted accounting

principles (GAAP) basis.

Accordingly, information for 2009 may not be comparable to the years 2010-

2013.

** Includes impairment loss related to investment in Sinofert of $341 million or

$0.39 per share – diluted.

Source: PotashCorp

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The table shows the summary of financial performance indicators for last five

years.

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Corpoate Social Responsibility - Sustainability

Definition of CSR vary from region to region, even rom state to state. Being a

global corpotation, PotashCorp maintains sustainability by conducting several

types of practices. The 7 key focus areas are described below.

1. Safety :

Safety is considered as number one priority in PotashCorp. They are

committed to providing a healthy work environment for employees,

contractors and all others at their sites to help meet their company-wide

goal of achieving no harm to people.

Figure: Safety performance graph for the year 2013

2. Environmental Impact :

Guided by strategies and expectations outlined in our Safety, Health and

Environment (SHE) Manual, PotashCorp invests time and capital in

technology, research, stewardship initiatives and management systems

that help to:

Meet federal, state/ provincial and local regulatory requirements.

Use natural resources and energy efficiently.

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Minimize waste, air emissions, water discharges and unwanted

byproducts.

Increase recycling.

Preserve habitats and

promote natural

biodiversity in areas

affected by our

operations.

Figure: Graphs for performance in preserving environement.

3. Employee Recruitment & Development :

To meet the challenges of the growing business, Potashcorp attracts and

retains talented, motivated and productive employees who are

committed to their long-term goals. To build a sustainable, skilled and

competitive workforce, they follow the follwing guidelines:

Offer wages and compensation packages that include bonus plans,

health care and pension benefits, skills training and tuition

reimbursement.

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Provide opportunities for advancement, promoting from within

when qualified candidates are available.

Provide equal opportunity in employment, promotions, wages,

benefits and terms and conditions of employment, as detailed in

our Employee Handbook.

Provide a safe, healthy work environment.

Communicate our goals and expectations clearly, particularly in

matters regarding ethics and behavior as detailed in our Core

Values and Code of Conduct and Code of Business Conduct.

Communicate with employees through company-wide newsletters.

Exchange feedback with employees through an annual review

process.

Elicit employee feedback through engagement surveys, focus

groups, and meetings.

4. Aboriginal Engagement :

Saskatchewan's Aboriginal community — the fastest growing segment of

the province's population — is expected to double in size over the next 25

years. With an average age nearly half that of the general population of

the province, First Nations and Métis people will become an increasingly

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vital part of the Saskatchewan economy — and PotashCorp's workforce —

in years to come. To accomplish our Aboriginal engagement objectives,

PotashCorp focuses on the following areas:

Employee Aboriginal Awareness Training — Given to all employees,

this two-day training is designed to create a positive, inclusive work

environment for First Nations and Métis people at the company.

Community Relationship Building — To build trust and enhance

communication with First Nations and Métis communities in ways

that improve the company's performance on Aboriginal issues and

enhance PotashCorp's reputation.

Recruitment — To raise awareness about PotashCorp career

opportunities within Aboriginal communities — and to help educate

people to take advantage of these opportunities — through facility

tours, career fairs and joint programs with Saskatchewan higher

learning institutions and community organizations.

Procurement — To develop long-term suppliers to the potash

industry within Aboriginal communities by offering support and

skill-building opportunities to promising Saskatchewan-area

entrepreneurs.

5. Community Engagement :

Potashcorp strives to create long-term, mutually beneficial relationships

with the communities where they operate. By building trust and goodwill,

they hope to receive support for our development plans, be able to

attract talent for their operations and invest more confidently in the

company’s future. To better understand and increase positive impact on

communities, PotashCorp focuses to:

Generate economic activity, with emphasis on local spending.

Participate in community advisory panels and local meetings.

Engage in public affairs activities and public policy debates.

Administer surveys to help us understand perceptions of our

company.

Educate communities on subjects ranging from fertilizer use to

environmental impact and safety.

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Provide scholarships to eligible children of employees at all

locations

Publish newsletters and sustainability brochures for local

distribution

Support causes through corporate grants, Matching Gifts and in-

kind donations.

Figure: Community Investment and Paid Tax Graph Showing indicating dedication to society

6. Community Investment :

It is a continuing goal of PotashCorp to be a responsible member of the

communities. By supporting projects and initiatives that reflect the goals

and values of our company, the company strives to improve the quality of

life in the areas where it operates.

Areas of priority include:

Food security

Education & training

Community building

Health and wellness

Environmental stewardship

Arts and culture

Categories of giving include:

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Corporate Grants — Cash contributions made to organizations,

relief efforts, etc.

Matching Gifts — Corporate donations which double employee

donation dollars for amounts ranging from $25 to $10,000 per

employee.

In-Kind Donations — Employee volunteer time given during

business hours, plus non-cash donations and donations of

employee expertise to support a cause.

Post-Secondary Scholarships – To students at various institutions.

Figure: Community Performance graph showing people's support on the company

7. Supply Chain Management :

The business of PotashCorp relies on effective and sustainable supply

chains to meet the evolving needs of our customers. As it does with all of

the stakeholders, the company strives to create relationships with

suppliers that are built on a foundation of integrity, respect and mutual

benefit.

The company seeks the most responsible and cost-effective ways to

secure goods and services from its suppliers. By supporting local suppliers,

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PotashCorp benefits from proximity and security of supply, contributes to

local economies and helps attract additional investment to the

community.

Figure: Customer survey results

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Recommendation

PotashCorp should be careful as it works with chemicals. Any type of raw

chemical leakage in the environement is harmful for both humans and animals

as well as other living things. It should also be ready to fight any bio-hazard that

chimicals may cause. It should continue the sustainibility towards environment

and people.

They need to think about the human health because some chemicals will always

remain in soil and water. They should also consider focusing research on bio-

fertilizers which has very little impact on soil and living things. Continuous

mining of minerals also causes natural disaster like creation of unwanted sink

holes and discharging of chemicals in groundwater.

They sould also consider researching on recycleable energy and fertilizer source

for their own sake, as minerals are scarce and ultimately one day all minerals will

have been dug up.

They should also be more concious about foods nutrition not only on food

production. Their current endeavours are satisfying, but they should fund for

research for nutrion as fertilizers have a great impact on nutrition of plants

which ultimately come to human beings and other living things.

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References:

1. 2013 Annual Integrated Report of PotashCorp

2. The official website of PotashCorp : http://www.potashcorp.com/

3. Market Data of PotashCorp

4. http://www.miningwatch.ca/penobsquis-new-brunswick-residents-seek-

compensation-damages