DBRS Releases Report on Potash Corporation of Saskatchewan Inc.

DBRS Limited (DBRS) has today released a report on Potash Corporation of Saskatchewan Inc. (PCS or the Company) that provides further detail on the September 21, 2015, confirmation of the Company’s Issuer Rating at BBB (high) as well as its Senior Unsecured Debt rating at BBB (high) and Commercial Paper rating at R-1 (low), all with Stable trends.

PCS’s status as a leading fertilizer producer is being enhanced as it nears completion of a multi-year program to expand its potash production capacity by 50%, which is expected to provide 19 million tonnes per year of nameplate capacity by 2016. The Company’s increased scale and presence in the potash market is expected to allow it to reap the benefits of potash demand growth over the next several years. Combined with its competitive nitrogen-based and solid phosphate-based businesses focused on North American markets, PCS has a solid position as a key supplier in the global food supply chain. Although potash fertilizers are in current oversupply, DBRS believes that PCS’s in-place capacity could lead to higher earnings and operating cash flows as excess potash capacity is absorbed by ongoing market growth

The Company’s key credit metrics remain solid for its rating, but have deteriorated over the last few years from strong levels in 2011 as earnings and cash flow have weakened because of declines in potash and phosphate prices. In addition, PCS announced in June 2015 that it has made a private proposal to Germany-based agricultural and industrial commodities producer, K+S AG (K+S), to negotiate a multi-billion dollar acquisition of K+S by PCS, which K+S has rejected to date. The status, including the financing of any potential acquisition, remains uncertain. Accordingly, DBRS expects that PCS will need to carefully manage expenditures for shareholder returns or acquisitions if it wishes to remain on track for improvement in its financial strength.

Notes:
The applicable methodologies are Rating Companies in the Mining Industry (September 2014), Rating Companies in the Industrial Products Industry (June 2015) and DBRS Criteria: Commercial Paper Liquidity Support for Non-Bank Issuers (April 2015), which can be found on our website under Methodologies.

The full report providing additional analytical detail is available by clicking on the link below or by contacting us at info@dbrs.com.