Agrium (AGU) 40-F 2003 FY Annual report (Canada)

Page 57

Financial statements
and notes

Management’s report to the shareholders

The audited consolidated financial statements and all information contained in this annual report are the responsibility of management and the audited consolidated financial statements are approved by the Board of Directors of the Corporation. The financial statements have been prepared by management in accordance with accounting principles generally accepted in Canada and, where appropriate, reflect management’s best estimates and judgments based on currently available information. The Corporation has established an internal audit program and accounting and reporting systems supported by internal controls designed to safeguard assets from loss or unauthorized use and ensure the accuracy of the financial records. The financial information presented throughout this annual report is consistent with the financial statements. KPMG LLP, an independent firm of chartered accountants, has been appointed by the shareholders as external auditors of the Corporation. The Auditors’ Report to the Shareholders, which describes the scope of their examination and expresses their opinion, is presented below.

The Audit Committee of the Board of Directors, whose members are unrelated and independent of management, meets at least four times a year with management, the internal auditors and the external auditors to oversee the discharge of the responsibilities of the respective parties. The Audit Committee reviews the independence of the external auditors, pre-approves audit and permitted non-audit services and reviews the consolidated financial statements and other financial disclosure documents before they are presented to the Board for approval.

Michael M. Wilson	Bruce G. Waterman
President & Chief Executive Officer Calgary, Canada February 11, 2004	Senior Vice President, Finance & Chief Financial Officer

Auditors’ report	We have audited the consolidated balance sheets of Agrium Inc. as at December 31, 2003 and 2002, and the consolidated statements of operations and retained earnings and cash flows for each of the years in the three-year period ended December 31, 2003. These financial statements are the responsibility of the Corporation’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
	We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
	In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Corporation as at December 31, 2003 and 2002, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2003, in accordance with Canadian generally accepted accounting principles.
	KPMG LLP
	Chartered Accountants Calgary, Canada February 11, 2004

Financial statements and notes Page 58

Consolidated statements of operations
and retained earnings

Years ended December 31	2003			2002			2001
(millions of U.S. dollars, except per share amounts)
Sales		2,630			2,198			2,174
Direct freight		131			115			111
Net sales		2,499			2,083			2,063
Cost of product		1,760			1,564			1,516
Gross profit		739			519			547
Expenses
Selling, general and administrative		286			246			268
Depreciation and amortization		140			148			141
Asset impairment(note 8)		235			–			–
Royalties and other taxes		17			19			22
Other expenses and Argentine charges(note 3)		40			42			85
Earnings before interest expense and income taxes		21			64			31
Interest on long-term debt		58			59			55
Other interest		5			9			19
Loss before income taxes		(42	)		(4	)		(43	)
Current income taxes (recovery)(note 4)		22			(21	)		28
Future income taxes (reduction)(note 4)		(43	)		17			(26	)
Income taxes		(21	)		(4	)		2
Net loss		(21	)		–			(45	)
Retained earnings – beginning of year		191			245			315
Change in accounting policy(note 2)		–			(29	)		–
Common share dividends declared		(14	)		(14	)		(13	)
Preferred securities charges		(11	)		(11	)		(12	)
Retained earnings – end of year		145			191			245
Loss per share(note 5)
Basic and diluted		(0.25	)		(0.08	)		(0.49	)
See accompanying notes.

Page 59

Consolidated statements of cash flows

Years ended December 31	2003			2002			2001
(millions of U.S. dollars, except per share amounts)
Operating
Net loss		(21	)		–			(45	)
Items not affecting cash
Depreciation and amortization		140			148			141
Asset impairment(note 8)		235			–			–
Foreign exchange and Argentine charges		(8	)		14			20
Future income taxes (reduction)(note 4)		(43	)		17			(26	)
Net changes in non-cash working capital
Accounts receivable		(98	)		1			52
Inventories		12			43			(66	)
Prepaid expenses		(25	)		(4	)		(2	)
Accounts payable and accrued liabilities		12			19			(27	)
Income and other taxes payable		(15	)		(14	)		40
Cash provided by operating activities		189			224			87
Investing
Capital expenditures		(99	)		(52	)		(164	)
Acquisition		–			–			(19	)
Decrease (increase) in other assets		3			2			(32	)
Proceeds from disposal of assets and investments		12			9			3
Net change in non-cash working capital		26			9			27
Other		7			3			(15	)
Cash used in investing activities		(51	)		(29	)		(200	)
Financing
Common shares		6			108			1
Bank indebtedness repayment		(1	)		(211	)		(97	)
Long-term debt issue (repayment)		(27	)		(9	)		267
Common share dividends paid		(14	)		(14	)		(13	)
Preferred securities charges paid		(11	)		(11	)		(12	)
Cash provided by (used in) financing activities		(47	)		(137	)		146
Increase in cash and cash equivalents		91			58			33
Cash and cash equivalents – beginning of year		109			51			18
Cash and cash equivalents – end of year		200			109			51
Dividends per common share for the year		0.11			0.11			0.11
Supplemental cash flow disclosure
Interest paid		61			67			72
Income taxes paid (received)		30			(6	)		(2	)
See accompanying notes.

Financial statements and notes Page 60

Consolidated balance sheets

As at December 31		2003				2002
(millions of U.S. dollars)					Restated (note 2)
ASSETS
Current assets
Cash and cash equivalents			200				109
Accounts receivable(note 6)			314				187
Inventories(note 7)			368				353
Prepaid expenses			60				35
			942				684
Capital assets(note 8)			1,260				1,422
Other assets(note 9)			71				85
			2,273				2,191
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Bank indebtedness(note 10)			–				1
Accounts payable and accrued liabilities(note 11)			404				340
Current portion of long-term debt(note 12)			121				25
			525				366
Long-term debt(note 12)
Recourse debt			503				604
Non-recourse debt			111				132
			614				736
Other liabilities(note 13)			181				160
Future income taxes(note 4)			132				165
			1,452				1,427
Shareholders’ equity
Share capital(note 16)
Authorized: unlimited common shares and preferred securities
Issued and outstanding:
Common shares:	2003 – 127 million (2002 – 126 million)		490				484
Preferred securities:	eight percent redeemable: 2003 – seven million (2002 – seven million)		172				171
	six percent convertible, redeemable: 2003 – two million (2002 – two million)		50				50
Contributed surplus			1				–
Retained earnings			145				191
Cumulative translation adjustment			(37	)			(132	)
			821				764
Commitments(note 18)
Contingencies(note 19)
			2,273				2,191
See accompanying notes.

APPROVED BY THE BOARD:

Director	Director

Page 61

Notes to the consolidated
financial statements

1. ACCOUNTING POLICIES

Principles of consolidation and preparation of financial statements
These consolidated financial statements are prepared and reported in U.S. dollars in accordance with accounting principles generally accepted in Canada (Canadian GAAP) and, except as outlined in note 23, are in accordance with accounting principles generally accepted in the United States (U.S. GAAP).

The consolidated financial statements include the accounts of the Corporation and its subsidiaries and the Corporation’s proportionate share of revenues, expenses, assets and liabilities of Profertil S.A. (see note 22). Intercompany transactions and balances are eliminated.

The underlying financial records contain amounts based on informed estimates and best judgments of management. Certain comparative figures have been reclassified to conform to the current year’s presentation.

Cash and cash equivalents
Cash equivalents consist primarily of short-term investments with an original maturity of three months or less and are stated at cost, which approximates fair value.

Inventories
Wholesale inventories, consisting primarily of fertilizers, operating supplies and raw materials, include both direct and indirect production costs and freight to transport the product from the production facility to the final warehouse facility. Fertilizers include the Corporation’s completed product as well as work in process. Operating supplies include catalysts used in the Wholesale production process, materials used for maintenance and repairs and other supplies. Wholesale inventory is valued at the lower of weighted average cost and net realizable value.

Retail inventories are recorded at the lower of purchased cost and net realizable value and include the cost of delivery to move the product to the respective farm centre.

Capital assets
Capital assets are recorded at cost and include the cost of replacements and betterments. Cost is defined as expenditures incurred up to the commencement of commercial production.

Depreciation is calculated using the straight-line method based on the estimated service lives of the respective assets, ranging from three to 25 years.

Management reviews capital assets on an ongoing basis to determine if circumstances indicate impairment in the carrying value or changes in the estimated useful life of the asset. If an impairment has occurred, an impairment charge is recognized as an asset impairment expense in the amount that the carrying value of the asset exceeds its fair value. Where the estimated useful life changes, depreciation is adjusted prospectively.

Facility costs
Costs incurred during the shutdown of a production facility for periodic scheduled maintenance (a turnaround) are deferred and charged to production costs on a straight-line basis over the period until the next scheduled turnaround, generally one to four years. Unamortized costs that will be charged to production costs within one year of the balance sheet date are included in prepaid expenses, and all other costs are included in other assets. Costs incurred during an extended facility shut down, due to market conditions or facility failure, are charged to other expense.

Other assets
Other assets include value-added tax, long-term receivables, deferred financing costs and investments in associated companies.

Value-added tax assets relate to South America operations and are accumulated on the balance sheet as costs are incurred and are recovered against future value-added taxes collected by the Corporation and due to the government.

Financial statements and notes Page 62

Notes to the consolidated
financial statements

Investments in companies where the Corporation has the ability to exercise significant influence, which is generally evidenced by ownership of between 20 percent and 50 percent of the equity, are carried on the equity basis of accounting. The Corporation’s share of earnings is included in other income. Investments where the Corporation does not exercise significant influence are accounted for using the cost method.

Employee future benefits
The Corporation maintains both defined benefit and defined contribution pension plans in Canada and in the United States, which are both contributory and non-contributory with regard to participants. The majority of employees are members of defined contribution pension plans. The Corporation also maintains certain contributory health care plans and life insurance benefits for retired employees. Benefits from defined benefit plans are based on either years of service and compensation or a rated amount for each year of service. The pension plan and post-retirement benefit costs are determined annually by independent actuaries and include current service costs and a provision for the amortization of prior service costs.

The Corporation has additional non-contributory defined benefit and defined contribution plans for senior management, which provide supplementary pension benefits.

Employee future benefits are funded by the Corporation and obligations are determined using the projected benefit method of actuarial valuation prorated over the projected length of employee service. Employee future benefit costs for current service are charged to earnings in the year incurred. Past service costs, experience gains or losses and the effects of changes in plan assumptions are amortized on a straight-line basis over the expected average remaining service life of the relevant employee group. Contributions by the Corporation to defined contribution employee future benefit plans are expensed as incurred.

Environmental remediation
Environmental costs that relate to current operations may be expensed or capitalized. Expenditures that relate to existing conditions caused by past operations, and that do not contribute to current or future revenue generation, are expensed. Environmental costs are capitalized if the costs extend the life of the property, increase its capacity and/or mitigate or prevent contamination from future operations. Costs are recorded when environmental remediation efforts are probable and the costs can be reasonably estimated based on current law and existing technologies. Estimated costs are based on management’s best estimate of undiscounted future costs.

Asset retirement obligations
The Corporation recognizes asset retirement obligations in the period in which they are incurred if a reasonable estimate of fair value can be determined. The liability is measured at fair value and is adjusted to its present value in subsequent periods through accretion expense. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset.

Future income taxes
Future income taxes are recognized for differences between the carrying values of assets and liabilities and their respective income tax bases. Future income tax assets and liabilities are measured using substantively enacted income tax rates expected to apply to taxable income in the years in which temporary differences are expected to be reversed or settled. The effect on future income tax assets and liabilities of a change in rates is included in earnings in the period during which the change is considered substantively enacted. Future income tax assets are recorded in the financial statements if realization is considered more likely than not.

Revenue recognition
Revenue is recognized when the product is delivered to the customer or when the risks and rewards of ownership are otherwise transferred to the customer. Transportation costs are recovered from the customer through product or service pricing.

Stock-based compensation
The Corporation has several stock-based compensation plans, which are described in note 17. Beginning in 2003, the fair value of stock options and performance share units (PSUs) are expensed over the vesting period. For stock options issued prior to 2003, pro-forma disclosure of the effect on net earnings (loss) and earnings (loss) per share had the fair value been expensed is provided. The liability for stock options that have been expensed is recorded in contributed surplus until the options are exercised. Deferred Share Units (DSUs) to directors and Stock Appreciation Rights (SARs) to employees are expensed to cost of product or selling, general and administration expense when DSUs are issued or SARs thresholds are achieved.

Page 63

Notes to the consolidated
financial statements

Derivative financial instruments
Derivative financial instruments are used by the Corporation to manage its exposure to commodity price and foreign exchange rate fluctuations. The Corporation enters into natural gas options and swaps to manage exposure to changes in cash flows related to fluctuation in the market prices for natural gas consumed in operations. The Corporation enters into forward exchange contracts and foreign currency options to manage exposure to changes in cash flows in its Canadian operations related to changes in the Canadian/U.S. dollar exchange rate.

These derivative contracts are initiated within the guidelines of the Corporation’s risk management and hedging policies, which require specific authorization for approval and commitment of contracts. The Corporation formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking the hedge transaction.

Hedge accounting is used when there is a high degree of correlation between changes in value of the derivative instrument and the cash flows of the hedged item. The Corporation assesses, both at inception of the hedge and on a quarterly basis, whether the derivatives that are used in hedging transactions are highly correlated to the cash flows of the hedged item. Changes in time value are excluded from the assessment of the hedge correlation.

Derivative contracts accounted for as hedges are not recognized in the consolidated balance sheets. Gains or losses on these contracts, including realized gains and losses on hedging derivative contracts settled prior to maturity, are recognized when the related hedge transaction is recognized. Any portion of the gains or losses that is not highly correlated to the cash flows of the hedged item is recognized in other expenses each period. If correlation ceases, the Corporation discontinues hedge accounting and the gain or loss previously deferred is carried forward and recognized when the hedged transaction is recognized. Any future changes in the market value of the derivative contract are recognized in other expenses in the period of change.

Derivative contracts that do not qualify as hedges are marked to market. Any changes in the market value of the derivative contracts are recorded in other expenses when those changes occur. The fair value of these instruments is recorded as accounts receivable or payable.

Foreign currency translation
The Corporation’s Canadian operations are considered self-sustaining and are translated into U.S. dollars using the current rate method. Under this method, assets and liabilities are translated at period-end exchange rates and items included in the statements of operations and retained earnings and cash flows are translated at the rates in effect at the time of the transaction. The gain or loss on translation is charged to cumulative translation adjustment in shareholders’ equity.

The Corporation’s South America operations are considered integrated and are translated into U.S. dollars using the temporal method. Under this method, monetary assets and liabilities are translated at year-end exchange rates and items included on the statements of operations and cash flows are translated at rates in effect at the time of the transaction. Non-monetary assets and liabilities are translated at historical rates. The gain or loss on translation is charged to the statement of operations as other expense. While South America Wholesale has always been integrated, prior to October 1, 2003, South America Retail was considered self-sustaining and translated into U.S. dollars using the current rate method. Foreign currency translation of South America Retail operations was prospectively changed from the current rate method due to a significant change in economic facts and circumstances. The functional currency changed from the Argentine peso to U.S. dollars. The circumstances supporting the change include the transacting of sales in U.S. dollars and the reduction in banking restrictions in Argentina. From the effective date of change, the exchange gains and losses deferred in the cumulative translation adjustment remain unless there is a return in the Corporation’s investment. The non-monetary balance sheet values at October 1, 2003, became the historic values going forward.

The increase in the cumulative translation adjustment of $95-million (2002 – $33-million decrease) comprises of unrealized currency translation adjustments that arise on the translation to U.S. dollars of assets and liabilities of the Corporation’s self-sustaining operations.

Financial statements and notes Page 64

Notes to the consolidated
financial statements

2. CHANGES IN ACCOUNTING POLICIES

Stock-based compensation
In the fourth quarter of 2003, the Corporation expensed stock options on a prospective basis effective January 1, 2003. Prospective adoption requires that the fair value of compensation cost related to stock options granted in 2003 be expensed in the financial statements over the vesting period. For stock options granted prior to 2003, the Corporation will continue to provide pro forma disclosure of the effect on net earnings (loss) and earnings (loss) per share had the fair value been expensed.

Asset retirement obligations
Effective January 1, 2003, the Corporation early-adopted the new Canadian accounting standard for asset retirement obligations. Previously, when the cost of site restoration exceeded the salvage value of the asset, the Corporation accrued for site restoration costs systematically to the expected settlement amount in the year the obligation was anticipated to settle. Under the new accounting policy, the Corporation recognizes asset retirement obligations in the period in which they are incurred if a reasonable estimate of fair value can be determined. The liability is measured at discounted fair value and is adjusted to its present value in subsequent periods as accretion expense is recorded. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset, and the asset is depreciated over the asset’s estimated useful life. The change in accounting policy was recorded retroactively. The effect of adoption on the balance sheet as at January 1, 2003 and 2002, is presented below as increases (decreases):

	2003			2002
Asset retirement cost, included in capital assets		28			28
Accumulated depreciation on capital assets		6			4
Asset retirement obligations, included in other liabilities		28			28
Accumulated accretion of asset retirement obligations, included in other liabilities		7			5
Site restoration and reclamation, formerly included in other liabilities		(15	)		(9	)
Long-term future income tax liabilities		2			–
Opening retained earnings		–			–

Prior period consolidated balance sheets have been restated.

Site restoration and reclamation expense recorded under the accounting policy for prior periods approximated the depreciation and accretion expense under the retroactive application of the new accounting policy. As a result, prior period statements of operations were not restated.

Goodwill and other intangible assets
Effective January 1, 2002, the Corporation adopted the new accounting standard for goodwill. This standard requires that goodwill be subject to an annual impairment test rather than being amortized. In 2002, the Corporation completed the transitional impairment test using a discounted cash flow method for the reporting unit that includes goodwill. The results of the test indicated that goodwill recorded in the Corporation’s phosphate business, which was included in the reportable segment entitled “North America Wholesale”, was impaired. The amount of the impairment represented the entire goodwill balance of $45-million ($29-million net of tax). The resulting impairment loss was recognized as a change in accounting policy and charged to retained earnings as of January 1, 2002.

Page 65

Notes to the consolidated
financial statements

3. OTHER EXPENSES AND ARGENTINE CHARGES

	2003			2002			2001
Interest		(5	)		–			(10	)
Facility costs		10			8			15
Performance incentives		9			–			–
Environmental remediation and accretion of asset retirement obligation		6			10			8
Foreign exchange and Argentine charges (a)		(8	)		14			20
U.S. dollar forced conversion (b)		–			(10	)		29
Other		28			20			23
		40			42			85

(a)

The Corporation translates foreign exchange gains (losses) arising on U.S. dollar working capital items in Canadian and South American self-sustaining subsidiaries. Translation also includes foreign exchange gains (losses) arising on the translation of integrated subsidiaries.

(b)

At December 31, 2001, a charge was recorded against working capital and was made up primarily of accounts receivable in South America Retail. This reflected the anticipated impact of the contract index law, legislating conversion of all U.S. dollar debts to Argentine pesos on a one-to-one basis, representing forced conversion of a portion of the Corporation’s U.S. dollar assets in Argentina. During 2002, South America Retail collected receivables at rates better than anticipated and recovered $10-million of the $29-million charge recorded at December 31, 2001.

4. INCOME TAXES

The major factors that caused variations from the expected combined Canadian federal and provincial statutory income tax rates were the following:

	2003			2002			2001
Earnings (loss) before income taxes
Canadian		66			(35	)		(22	)
Foreign		(108	)		31			(21	)
		(42	)		(4	)		(43	)
Statutory rate (%)		42			43			44
Income taxes at statutory rates		(18	)		(2	)		(19	)
Recognition of previously unrecognized tax assets		(13	)		(4	)		(4	)
Differences in foreign tax rates		(5	)		(10	)		(10	)
Manufacturing and processing allowance		(5	)		6			5
Resource royalties and allowances		6			1			4
Foreign exchange gains relating to Canadian and Argentine operations		9			–			–
Argentine charges		–			2			22
Other		5			3			4
Income taxes		(21	)		(4	)		2
Current
Canadian		(2	)		(4	)		26
Foreign		24			(17	)		2
		22			(21	)		28
Future
Canadian		43			–			(33	)
Foreign		(86	)		17			7
		(43	)		17			(26	)
		(21	)		(4	)		2

Financial statements and notes Page 66

Notes to the consolidated
financial statements

The significant components of future income tax liabilities and assets at December 31 are as follows:

	2003			2002
Future income tax liabilities				Restated (note 2)
Depreciation and amortization		190			252
Partnership deferral		60			24
Other		39			24
Total future income tax liabilities		289			300
Future income tax assets
Loss carry forwards expiring through 2011		101			111
Asset retirement obligation and environmental liabilities		44			39
Receivable allowances and accrued liabilities		21			17
Employee future benefits		16			15
Other		16			18
Future income tax assets before valuation allowance		198			200
Valuation allowance		(41	)		(65	)
Total future income tax assets, net of valuation allowance		157			135
Net future income tax liabilities		132			165

5. LOSS PER SHARE

The following table summarizes the computation of net loss per share:

	2003			2002			2001
Numerator
Net loss		(21	)		–			(45	)
Preferred securities charges (a)		(11	)		(11	)		(12	)
Numerator for basic loss per share		(32	)		(11	)		(57	)
Preferred securities charges (a)		–			–			–
Numerator for diluted loss per share		(32	)		(11	)		(57	)
Denominator
Weighted average denominator for basic loss per share		126			123			115
Dilutive instruments (b)
Stock options (c)		–			–			–
Preferred securities converted to common shares
$175-million, eight percent (d)		–			–			–
$50-million, six percent (e)		–			–			–
Denominator for diluted loss per share		126			123			115
Basic loss per share		(0.25	)		(0.08	)		(0.49	)
Diluted loss per share		(0.25	)		(0.08	)		(0.49	)

(a)

Under Canadian GAAP the preferred securities (note 16) are considered equity instruments. The preferred securities charges that have been charged to retained earnings are deducted from net earnings (loss) for the computation of basic earnings (loss) per share. For diluted earnings (loss) per share, these preferred securities charges are added back when the impact of the equity instrument is dilutive to basic earnings (loss) per share.

(b)

For diluted earnings (loss) per share, these dilutive instruments are added back only when the impact of the instrument is dilutive to basic earnings (loss) per share.

Page 67

Notes to the consolidated
financial statements

(c)	Stock options, using the treasury stock method, with an average share price less than or equal to the average share price during the year are considered dilutive and potential common share equivalents are considered outstanding. At December 31, 2003, there were nine million antidilutive stock options (2002 – nine million; 2001 – eight million) that could be dilutive in the future.
(d)	This series of preferred securities is redeemable at the option of the Corporation. The redemption price may be paid by delivering common shares as disclosed in note 16. At December 31, 2003, there were seven million antidilutive preferred securities (2002 – seven million; 2001 – seven million) that could be dilutive in the future.
(e)	This series of preferred securities is convertible to common shares as disclosed in note 16. At December 31, 2003, there were two million antidilutive preferred securities (2002 – two million; 2001 – two million) that were converted to common shares in January 2004.

6. ACCOUNTS RECEIVABLE

	2003			2002
Trade accounts		297			180
Allowance for doubtful accounts		(16	)		(20	)
Rebates and other non-trade accounts		25			25
Income and other taxes		7			–
Other		1			2
		314			187

On an ongoing basis, certain of the Corporation’s U.S. subsidiaries sell their accounts receivable balances to a subsidiary of the Corporation. The subsidiary has an agreement to sell to a financial institution, on an ongoing basis, an undivided percentage interest in this designated pool of receivables, on a non-recourse basis, in an amount not to exceed $125-million. The Corporation has granted a security interest to the financial institution for the sold receivables. The fees and expenses are calculated based on the receivables sold and the prevailing commercial paper rate. The agreement expires in December 2007 and may be terminated earlier by either Agrium with proper notice or the financial institution provided certain conditions are met.

Servicing of the receivables sold is performed by a U.S. subsidiary of the Corporation which charges a fee of two percent of the pool balances. At December 31, 2003, the accounts receivable balances sold were $-nil (2002 – $114-million).

Average monthly receivables sold, fees and expenses incurred on this program for the years ended December 31, were as follows:

	2003		2002		2001
Average monthly receivables sold		50		98		98
Fees and expenses paid		1		3		4

7. INVENTORIES

	2003		2002
North America Wholesale
Fertilizers		98		110
Operating supplies		72		67
Raw materials		25		24
		195		201
North America Retail
Fertilizers		63		47
Chemicals		76		70
Other		15		15
		154		132
South America Wholesale		7		7
South America Retail		12		13
		368		353

Financial statements and notes Page 68

Notes to the consolidated
financial statements

8. CAPITAL ASSETS

							2002
	2003						Restated (note 2)
			Accumulated						Accumulated
			Depreciation		Net				Depreciation		Net
			and		Book				and		Book
	Cost		Amortization		Value		Cost		Amortization		Value
Land		28		–		28		28		–		28
Buildings and improvements		308		157		151		305		132		173
Machinery and equipment		2,020		1,020		1,000		2,035		871		1,164
Other		110		29		81		81		24		57
		2,466		1,206		1,260		2,449		1,027		1,422

In the fourth quarter of 2003, the Corporation’s Kenai, Alaska, nitrogen facility in the North America Wholesale business unit was determined to be impaired in the amount of $235-million ($140-million net of tax). The asset impairment was calculated as the difference between the carrying amount and the fair value of the Alaskan nitrogen facility. The impairment loss was proportionately allocated to reduce the cost base of the asset categories above.

9. OTHER ASSETS

	2003		2002
South America value-added tax and other costs		34		49
Long-term receivables		9		10
Long-term investments		12		13
Other		16		13
		71		85

10. BANK INDEBTEDNESS

Agrium Inc.
The Corporation has a $225-million, 364-day syndicated revolving credit facility due in May 2004. This facility contains a 1.5-year term-out provision exercisable at the Corporation’s option. Under this option the Corporation can convert the facility into a term lending arrangement following expiration of the 364-day revolving period. Agrium U.S. Inc., a subsidiary of the Corporation, guarantees this facility. Interest rates are at either LIBOR plus a spread, bankers’ acceptance rate plus a spread or a base rate established by the bank plus variable spreads, at the election of the Corporation. The loan agreements require the Corporation to maintain certain financial ratios and other covenants.

Agrium U.S. Inc.
The Corporation’s wholly owned subsidiary, Agrium U.S. Inc., has a base revolving credit facility of up to $56-million, which expires December 4, 2004. This facility is guaranteed by the Corporation and requires the Corporation to maintain certain financial ratios and other covenants.

Profertil S.A.
Profertil has access to limited short-term borrowings from Argentine financial institutions at prevailing interest rates, based on LIBOR, to fund working capital requirements.

Page 69

Notes to the consolidated
financial statements

11. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

	2003		2002
Trade		161		172
Accrued liabilities		229		152
Accrued interest payable		14		16
		404		340

12. LONG-TERM DEBT

	2003		2002
Recourse debt
Unsecured
6.86% senior notes due December 29, 2004 to 2007 (a)(c)		60		75
7.06% senior notes due December 29, 2004 to 2010 (b)(c)		100		100
7% debentures due February 1, 2004 (c)		75		75
7.7% debentures due February 1, 2017 (c)		100		100
7.8% debentures due February 1, 2027 (c)		125		125
8.25% debentures due February 15, 2011 (c)		125		125
Secured
Profertil S.A. – other		3		5
Other		20		16
		608		621
Principal repayments due within one year		105		17
		503		604
Non-recourse debt
Secured
Profertil S.A. (d)		127		140
Principal repayments due within one year		16		8
		111		132

(a)	The notes have four remaining equal annual principal repayments, with the next repayment due December 29, 2004. These notes are guaranteed by Agrium U.S. Inc. and require the Corporation to maintain certain financial ratios and other covenants.
(b)	The notes have seven equal annual principal repayments commencing December 29, 2004. These notes are guaranteed by Agrium U.S. Inc. and require the Corporation to maintain certain financial ratios and other covenants.
(c)	These notes and debentures require the Corporation to meet certain financial ratios and other covenants.
(d)	The Corporation’s share of amounts outstanding under the credit agreement at December 31, 2003, is $127-million of which $15-million is repayable within one year. At December 31, 2003, amounts outstanding under the credit agreement are broken into tranches of $115-million, $73-million and $64-million, of which the Corporation’s share is 50 percent. The two smaller tranches accrue interest at the LIBOR rate plus a spread. The $115-million tranche accrues interest at a fixed rate. Principal plus accrued interest is repayable in 14 semi-annual installments. The facility matures December 31, 2010.
	This facility became non-recourse to Profertil partners once completion guarantees on the facility had been released in 2001. The Corporation has pledged its shares in Profertil to the bank as security in the event of default. The joint venture partners have also entered into an agreement that limits the transfer of the ownership interests in Profertil for a period of six years commencing from the completion date, which was November 30, 2001.

Financial statements and notes Page 70

Notes to the consolidated
financial statements

13. OTHER LIABILITIES

	2003		2002
			Restated (note 2)
Asset retirement obligations (notes 2 and 14)		43		35
Environmental remediation		87		79
Employee future benefits (note 15)
Pensions		13		14
Other post-retirement benefits		31		26
Other		7		6
		181		160

14. ASSET RETIREMENT OBLIGATIONS

The Corporation recognizes asset retirement obligations associated with nitrogen, phosphate and potash production facilities, marketing and distribution facilities and phosphate and potash mine assets. These obligations generally relate to dismantlement and site restoration.

A reconciliation between the opening and closing asset retirement obligation balances is provided below:

	2003		2002
			Restated (note 2)
Balance, beginning of year		35		33
Foreign exchange translation		5		–
Accretion, included in other expense		3		2
Balance, end of year		43		35

The Corporation estimates that the undiscounted cash flow required to settle the asset retirement obligation is approximately $180-million, which will be settled between 2004 and 2080.

Page 71

Notes to the consolidated
financial statements

15. EMPLOYEE FUTURE BENEFITS

The Corporation’s disclosures for employee future benefits for the year ended December 31, 2003, are measured with information from September 30, 2003.

Obligations and assets
The change in accumulated benefit obligations and change in plan assets for the defined benefit pension and post-retirement benefit plans are as follows:

	Defined Benefit									Post-retirement
	Pension Plans									Benefit Plans
	2003			2002			2001			2003			2002			2001
Change in benefit obligations
Balance, beginning of year		105			96			81			31			23			23
Foreign exchange on Canadian obligations		10			–			(4	)		2			–			–
Interest and service cost		12			11			9			5			4			3
Actuarial loss (gain)		7			3			5			3			5			(2	)
Curtailment		(2	)		–			–			–			–			–
Transfer from CAI Retirement Plan(a)		–			–			10			–			–			–
Benefits paid		(5	)		(5	)		(5	)		(1	)		(1	)		(1	)
Balance, end of year		127			105			96			40			31			23
Change in plan assets
Fair value, beginning of year		67			76			78			–			–			–
Foreign exchange on Canadian assets		9			–			(3	)		–			–			–
Actual return on plan assets		8			(4	)		(6	)		–			–			–
Employer contributions		9			–			2			–			–			–
Transfer from CAI Retirement Plan(a)		–			–			10			–			–			–
Benefits paid		(5	)		(5	)		(5	)		–			–			–
Fair value, end of year		88			67			76			–			–			–
Unfunded status		39			38			20			40			31			23
Unrecognized net loss		(28	)		(26	)		(12	)		(8	)		(5	)		–
Unrecognized prior service cost		–			–			–			(1	)		–			–
Accrued employee future benefits		11			12			8			31			26			23
Other assets – prepaid employee future benefits		(2	)		(2	)		(2	)		–			–			–
Other liabilities – pensions(note 13)		13			14			10			31			26			23
		11			12			8			31			26			23

(a) The assets and liabilities attributable to benefits accrued prior to May 1, 1993, under the Cominco American Incorporated (CAI) Retirement Plan, were transferred to the Corporation in 2001. These assets and liabilities were part of the spin-off of the fertilizer assets that formed the initial public offering to create the Corporation in 1993.

The accumulated benefit obligation at December 31, 2003, is $111-million ($85-million and $80-million for 2002 and 2001 respectively). The estimated aggregate expected contribution to fund the Corporation’s defined benefit plans for the next fiscal year is $8-million to $12-million.

Financial statements and notes Page 72

Notes to the consolidated
financial statements

Expense
The components of net employee future benefits expense for the Corporation’s pension and post-retirement benefit plans are computed actuarially as follows:

	2003			2002			2001
Defined benefit pension plans
Service cost for benefits earned during the year		5			4			3
Interest cost on projected benefit obligations		7			7			6
Expected return on plan assets		(6	)		(6	)		(5	)
Net amortization and deferral		1			1			–
Net expense		7			6			4
Post-retirement benefit plans
Service cost for benefits earned during the year		3			2			1
Interest cost on projected benefit obligations		2			2			2
Net expense		5			4			3
Defined contribution pension plans		10			7			7
Total expense		22			17			14

Assumptions
Significant actuarial assumptions used in calculating the future benefits obligation and the net employee future benefits expense were as follows:

	Future Benefits Obligation						Future Benefits Expense
(percent)	2003		2002		2001		2003		2002		2001
Defined benefit pension plans
Discount rate		6		7		7		7		7		7
Long-term rate of return on assets		8		8		8		8		8		8
Rate of increase in compensation levels		3		4		5		3		4		5
Post-retirement benefit plans
Discount rate		6		7		7		6		7		7
Health care cost trend rate		12		8		8		12		8		8

The Corporation’s assumption for the long-term rate of return on assets is based on the long-term expectations of inflation, together with the expected long-term real return for each asset class, weighted in accordance with the stated investment policy for the plan. Expectations of real returns and inflation are based on a combination of current market conditions, historical capital market data and future expectations.

Page 73

Notes to the consolidated
financial statements

A one-percentage point change in the assumed health care cost trend rate would have the following effects:

	One Percentage		One Percentage
	Point Increase		Point Decrease
Effect on accumulated post retirement benefit obligation as of December 31, 2003		5		(4	)
Effect on total of service and interest cost		1		(1	)

Asset allocation and investment strategy
Defined benefit pension plan asset allocation at December 31, 2003 and 2002, and target allocation for 2004 are as follows:

	Target
(percent)	Allocation		Plan Assets
Asset categories		2004		2003	2002
Equity securities(a)		44 – 69		58	59
Debt securities		28 – 53		40	35
Cash and other		0 – 13		2	6

(a) Equity securities held by the plans do not include any of the Corporation’s common shares.

The Corporation’s investment strategy for all defined benefit plans is consistent with the 2004 target allocation of plan assets.

16. SHARE CAPITAL

	2003					2002					2001
	Number					Number					Number
	of Shares					of Shares					of Shares
	(millions		)	Amount		(millions		)	Amount		(millions		)	Amount
Common shares
Issued and outstanding, beginning of year		126			484		115			376		115			375
Shares issued, net of issuance costs		–			–		11			106		–			–
Issued on exercise of stock options		1			6		–			2		–			1
Issued and outstanding, end of year		127			490		126			484		115			376
Preferred securities
Issued and outstanding, beginning of year		9			221		9			221		9			221
Amortization of issuance costs		–			1		–			–		–			–
Issued and outstanding, end of year		9			222		9			221		9			221
Total		136			712		135			705		124			597

In March 2002, the Corporation issued 11.2 million common shares at $9.85 per common share. The total proceeds from the issue, net of expenses, were $106-million, and were used to pay down bank indebtedness. Concurrent with this financing, the Corporation’s revolving credit facilities were reduced from $375-million to $281-million and certain related covenants were amended.

Financial statements and notes Page 74

Notes to the consolidated
financial statements

As at December 31, 2003, the Corporation has two classes of preferred securities issued and outstanding:

(a) $175-million, unsecured eight percent redeemable preferred securities due June 30, 2047
The charges on these securities are payable quarterly in arrears and the Corporation has the right to defer the charges for up to 20 consecutive quarterly periods, subject to certain restrictions. The preferred securities are redeemable at the option of the Corporation, in whole or in part, on or after April 22, 2003, at the principal amount plus accrued and unpaid securities charges (the redemption price) to the date of redemption. The Corporation may, at its option, pay the redemption price or any deferred charges in cash or by issuing common shares and using the proceeds to pay the redemption price or deferred charges.

(b) $50-million, unsecured six percent convertible redeemable preferred securities due September 30, 2030
On December 17, 2003, the Corporation issued a redemption notice on the outstanding $50-million six percent convertible redeemable preferred securities. The holders of the securities had the right to elect conversion of the securities into common shares at a price of $11.9677 per share for a maximum issuance of an additional 4.18 million common shares or accept redemption. The redemption price was 103 percent of the principal amount, plus accrued and unpaid securities charges.

Subsequent to December 31, 2003, all holders of the securities elected to convert the securities into common shares at the stated conversion price.

17. STOCK-BASED COMPENSATION

The Corporation offers stock options, SARs and PSUs to certain employees and DSUs to directors as part of compensation for services rendered.

Stock options
The Corporation has a stock option plan under which the Board of Directors may grant options to officers and employees to acquire common shares. At December 31, 2003, the Board of Directors was authorized to grant options on up to 10 million common shares (2002 – 11 million; 2001 – nine million) on which nine million options (2002 – nine million; 2001 – eight million) had been granted at market value. An option’s maximum term is 10 years. Options are granted throughout the year and vest and become exercisable equally over a four-year period, commencing one year after the grant date. Officers of the Corporation can receive options on the basis of one option for each common share acquired by the officer in the open market, to a maximum of 100,000 options per officer, with the exercise price of each option equal to the purchase price paid for the original share. These options lapse if the officer does not hold 100 percent of the purchased shares on the first anniversary date, 75 percent on the second anniversary date, 50 percent on the third anniversary date and 25 percent on the fourth anniversary date.

Stock option transactions for the respective years were as follows:

	2003						2002						2001
				Weighted Avg.						Weighted Avg.						Weighted Avg.
	Options			Exercise			Options			Exercise			Options			Exercise
	Outstanding			Price			Outstanding			Price			Outstanding			Price
	(millions		)	(C$		)	(millions		)	(C$		)	(millions		)	(C$		)
Outstanding, beginning of year		9			16.21			8			16.20			7			15.52
Granted		1			15.59			1			15.89			1			20.21
Exercised		(1	)		13.19			–			10.82			–			13.05
Cancelled		–			18.25			–			18.52			–			18.52
Outstanding, end of year		9			16.31			9			16.21			8			16.20
Exercisable, end of year		6			16.37			6			16.34			5			16.44

Page 75

Notes to the consolidated
financial statements

As disclosed in note 2, the Corporation began prospectively expensing the fair value of stock options granted in 2003 over their vesting period. In accordance with the prospective method of adoption, the Corporation will continue to record no compensation expense for stock options granted prior to January 1, 2003, and will continue to provide pro forma disclosure of the effect on net loss and loss per share had the fair value been expensed as follows:

	2003						2002						2001
(millions of U.S. dollars, except per share amounts)	As Reported			Pro forma			As Reported			Pro forma			As Reported			Pro forma
Net loss		(21	)		(26	)		–			(6	)		(45	)		(51	)
Loss per common share
Basic		(0.25	)		(0.29	)		(0.08	)		(0.14	)		(0.49	)		(0.54	)
Diluted		(0.25	)		(0.29	)		(0.08	)		(0.14	)		(0.49	)		(0.54	)

In 2003, the Corporation recognized a total compensation expense of $1-million for stock options granted in 2003.

The fair value of all options have been estimated using a Black Scholes option pricing model and based on the following assumptions:

	2003		2002		2001
Dividend yield (%)		1		1		1
Expected stock price volatility (%)		32		30		38
Risk-free interest rate (%)		4		5		6
Expected life of the options (years)		7		7		7

The weighted average fair value price per share of options granted in the years indicated was as follows: 2003 – C$6.34; 2002 – C$7.87; and 2001 – C$11.25.

The following table summarizes stock options outstanding and exercisable under the plan at December 31, 2003:

	Options Outstanding									Options Exercisable
Range of	Number			Weighted Avg.			Weighted Avg.			Number			Weighted Avg.
Exercise	Outstanding			Remaining			Exercise			Exercisable			Exercise
Prices	at Year End			Contractual Life			Price			at Year End			Price
(C$)	(millions		)	(years		)	(C$		)	(millions		)	(C$		)
Less than 11.86		1			5			11.37			1			11.25
11.86 to 15.85		3			7			13.97			1			12.73
15.86 to 20.15		4			5			17.84			3			18.45
20.16 to 22.15		1			6			20.59			1			20.63
8.75 to 22.15		9			6			16.31			6			16.37

Stock Appreciation Rights
The Corporation has SARs under which all regular employees hired prior to May 5, 2003, are eligible to participate. The plan provides for cash awards based on the appreciation of the Corporation’s common share price over a five-year term ending May 4, 2004. SARs grants were made on May 5, 1999, to all regular employees at that date, with further grants for employees hired after that date on subsequent May 5 anniversaries up to May 5, 2003. The issuance price of the SARs was based on the closing price of the Corporation’s shares on the New York Stock Exchange (NYSE) on the day preceding the relevant grant date.

Financial statements and notes Page 76

Notes to the consolidated
financial statements

No further grants will be made under this program subsequent to May 5, 2003. The total number of SARs grants outstanding and their issuance price are as follows:

	2003				2002				2001
	SARs				SARs				SARs
	Outstanding		Weighted Avg.		Outstanding		Weighted Avg.		Outstanding		Weighted Avg.
	(millions)		Issue Price		(millions)		Issue Price		(millions)		Issue Price
Outstanding, beginning of year		2		9.53		2		9.51		1		9.01
Granted		–		11.42		–		9.66		1		11.36
Cancelled		–		9.47		–		9.41		–		–
Outstanding, end of year		2		9.94		2		9.53		2		9.51

Twenty-five percent of the SARs vest and are to be paid out upon attainment of four pre-determined price hurdles of $15.00, $22.50, $33.75 and $50.00. In order to satisfy the vesting requirement, the average closing price on the NYSE over a period of 20 trading days is required to equal or exceed the relevant hurdle price. The first vesting point was reached on November 14, 2003, and eligible employees were paid 25 percent of the value of their SARs based on the difference between the issuance price of their rights and $15.00.

The total expense for SARs in 2003 was $3-million. A potential additional expense of $5-million would be incurred if the share price reaches $22.50, $10-million if the share price reaches $33.75 and $17-million if the share price reaches $50 prior to May 5, 2004.

Director’s Deferred Share Unit Plans
The Corporation has two DSU Plans. Under the first plan, directors can elect to have a portion or all of their director’s fees paid in DSUs. The number of DSUs issued is calculated by dividing the director’s fees by the fair market value of the Corporation’s common shares on the date that the fees become payable.

Effective May 2002, the Corporation also implemented a DSU Plan for directors permitting grants at the discretion of the Board of Directors. Under this plan, a specified number of DSUs may be granted to each director upon the approval of the Board of Directors.

Under both plans, the DSUs are fully vested upon being granted but are not paid until a director’s departure from the Board. The issue amount and subsequent changes in the common share price in relation to the DSU’s issue price are recorded as compensation expense and included in selling, general and administrative expenses.

As of December 31, 2003, the fair value of the DSUs outstanding was $1-million (2002 – less than $1-million).

Performance Share Unit Plan
Effective October 2003, a new PSU Plan was approved whereby executive officers and other eligible managers may receive grants of PSUs. The value of each PSU will be based on the value of the Corporation’s common shares on the NYSE. When cash dividends are paid on the common shares of the Corporation, additional PSUs of equivalent value are credited to the designated employee’s account.

PSUs vest on the third anniversary of the grant date, based upon the relative ranking of the Corporation’s total shareholder return over a three-year performance cycle, compared against the total shareholder return over the same period of a peer group of companies. Pay-out ranges between 50 percent of the original PSUs granted, up to 150 percent of the original PSUs granted dependent on total shareholder return over the three-year period. On vesting, the value of PSUs will be payable to the holders in cash. No common shares are issuable to holders of PSUs.

As of December 31, 2003, the fair value of the PSUs outstanding was less than $1-million.

Page 77

Notes to the consolidated
financial statements

18.  COMMITMENTS

	2004		2005		2006		2007		2008
Cost of product
Operating lease commitments		41		24		18		15		13
Natural gas commitments – North America		508		52		33		11		7
Power, sulphuric acid and other payments		34		23		23		22		21
Profertil natural gas and other		26		30		30		30		30
		609		129		104		78		71
Other
Long-term debt and capital lease repayments		121		49		51		54		38
Total		730		178		155		132		109

The operating lease commitments consist primarily of short-term leases for rail cars and contractual commitments at distribution facilities in North America Wholesale, vehicles and application equipment in North America Retail and office equipment and property leases throughout the Corporation’s operations. The commitments represent the minimum payments in each of the next five years under each agreement. Operating lease payments expensed in 2003 were $39-million (2002 – $28-million; 2001 – $23-million).

The Corporation has entered into a number of agreements with suppliers to guarantee supply of raw materials required in the production processes at its wholesale facilities. Among these are fixed base-price natural gas agreements at the Kenai, Alaska, and Profertil facilities and a co-generation power contract for the Carseland facility, which are included in the commitments, based on the minimum obligations under these contracts. Additionally, the Corporation’s minimum commitments for North American natural gas purchases not under fixed base-price contracts are calculated using the prevailing New York Mercantile Exchange (NYMEX) forward prices at December 31, 2003, adjusted for transportation differentials to each production facility.

The Alaskan nitrogen facility has a natural gas purchase contract with a supplier that expires on the earlier of July 1, 2009, and the satisfaction of the supplier’s delivery obligations thereunder. The delivery price formula is based on a fixed price that is adjusted by the previous year’s average spot U.S. Gulf Coast ammonia price with the adjustment being made on July 1 each year.

The Corporation entered into a power co-generation agreement for its Carseland facility in 2001 that expires December 31, 2021. The minimum commitment under this agreement is to purchase 60 megawatts of power per hour (MWh) for the first 10 years of the agreement and 20 MWh for the remainder of the term. The price for the power is based on a fixed charge adjusted for inflation and a variable charge based on the cost of natural gas, which is provided to the facility for power generation.

Profertil has three firm supply, U.S. dollar denominated natural gas purchase contracts expiring in 2012. Repsol-YPF, our joint venture partner in Profertil, supplies 50 percent of this gas. These contracts, although they are denominated in U.S. dollars, are paid in pesos.

In December 2003, Profertil signed a 10-year U.S. dollar denominated contract with Repsol-YPF for the purchase of additional natural gas. Prices have been set for the period to December 31, 2006.

Financial statements and notes Page 78

Notes to the consolidated
financial statements

19.  CONTINGENCIES

Contingent purchase price – Kenai, Alaska, nitrogen facility
As part of the cost of the Alaskan nitrogen facility and related U.S. West Coast assets acquisition, the Corporation granted to Union Oil Company of California (Unocal) a right to receive an Earn-out payment pursuant to which Unocal is entitled to receive a payment for each of the six years following the September 30, 2000, closing of the acquisition. The payment is equal to 35 percent of the amount by which certain industry-recognized price commodity indices for ammonia and urea exceed certain forecasted prices for such commodities based on production or capacity volumes of the Alaskan production facilities acquired from Unocal.

At December 31, 2003, the Corporation’s financial statements included an accrual for the estimated amount due to Unocal under this arrangement. This amount is included in accounts payable and accrued liabilities and is recorded as part of the cost to acquire the Alaskan nitrogen facility and related U.S. West Coast assets included in capital assets.

The Corporation has withheld payment of Earn-out amounts which are under dispute. While the Corporation has accrued an amount that reflects an estimate of the disputed Earn-out obligation calculated on actual production, it believes that no amount is payable to Unocal in the event that Unocal fails to meet its obligations under the Alaskan gas contract. The parties also disagree on the calculation of the Earn-out based on different views of the application of a reference price adjustment factor as well as the calculation of the Earn-out based on capacity or actual production, and accordingly, additional Earn-out payments may become due if we are ultimately unsuccessful in the litigation.

On June 10, 2002, the Corporation filed a lawsuit against Unocal seeking compensatory damages and restitution, punitive damages and certain declaratory relief relating to gas supply, the Earn-out and environmental matters. Unocal contemporaneously filed suit against the Corporation claiming damages for breach of contract for non-payment of the Earn-out.

Environmental remediation
The Corporation has contingent environmental liabilities arising out of existing and discontinued operations in respect of which the Corporation has and continues to estimate the costs likely to be incurred in connection with such liabilities. Such contingent environmental liabilities differ from asset retirement obligations and accrued environmental liabilities in that the contingent environmental liabilities are not determinable, the conditions which may give rise to the expenditures are uncertain, and the future expectations of the applicable regulatory authorities are not known. The potential costs that may arise in connection with such liabilities are not included in our provisions until the source and nature of the obligation becomes clear and is reasonably estimable.

Litigation
The outcome of the Unocal dispute is uncertain, and the amounts that may be involved in the event of any determination adverse to the Corporation are not determinable at this time.

The Corporation, in the normal course of business, is also subject to other legal proceedings being brought against it and its subsidiaries. The amounts involved in such legal proceedings are not reasonably estimable, due to uncertainty as to the final outcome, and management does not believe these proceedings in aggregate will have a material adverse effect on the Corporation’s consolidated financial position or results of operations, with the following exceptions.

A personal injury claim against a subsidiary of the Corporation for a material amount was filed in the fourth quarter of 2003. In addition, there are two class action lawsuits against a subsidiary of the Corporation for unspecified damages relating to chemical application. The Corporation is investigating these lawsuits but at this time the potential exposure is indeterminable.

Page 79

Notes to the consolidated
financial statements

20.  FINANCIAL INSTRUMENTS

Balance sheet financial instruments
The Corporation’s financial instruments recognized in the consolidated balance sheets consist of cash and cash equivalents, accounts receivable, derivative contracts not accounted for as hedges, substantially all current liabilities (except for income taxes payable and future income taxes payable), long-term debt and preferred securities.

The estimated fair values of recognized financial instruments have been determined based on the Corporation’s assessment of available market information and appropriate valuation methodologies; however, these estimates may not necessarily be indicative of the amounts that could be realized or settled in a current market transaction. The fair values of cash and cash equivalents, accounts receivable and current liabilities approximate their carrying amounts due to the short-term maturity of these instruments.

The following table summarizes estimated fair value information about the Corporation’s long-term debt, preferred securities and derivative contracts not accounted for as hedges as at December 31:

Fair value and carrying amount of balance sheet financial instruments

	2003						2002
	Carrying			Fair			Carrying			Fair
	Amount			Value			Amount			Value
Unsecured long-term debt (a)		585			697			600			650
Preferred securities (a)		222			244			221			210
Derivative financial instruments
Foreign currency option and forward contracts (b)		–			–			–			–
Natural gas swap and option contracts (b)		(1	)		(1	)		(1	)		(1	)

(a)	The estimated fair value of unsecured long-term debt, including the current portion, and preferred securities is based on the quoted market price of these or similar issues or by discounting cash flows at the rate offered to the corporation for debt and securities of the same remaining maturities.
(b)	The fair values of derivative instruments have been estimated using applicable market rates. These fair values approximate the amount that the Corporation would receive or pay if the instruments were closed out at these dates.

At December 31, 2003, the Corporation had entered into natural gas swap contracts that did not qualify for hedge accounting. The swap contracts represented a notional amount of seven million MMBtu of natural gas (2002 – 16 million MMBtu) with maturities in 2004 and 2005. During 2003, net realized and unrealized losses of $5-million on natural gas swap and option contracts (2002 – $5-million; 2001 – $-nil) that did not qualify for hedge accounting were recorded in other expense.

At December 31, 2003, the Corporation had entered into foreign currency option contracts that did not qualify for hedge accounting. The option contracts represented an underlying amount of C$20-million expiring at various dates in 2004 at exercise prices ranging from C$1.3243 to C$1.3292. During 2003, 2002 and 2001, net realized and unrealized gains of less than $1-million that did not qualify for hedge accounting were recorded in other expense.

Unrecognized derivative financial instruments
The Corporation also enters certain derivative financial instruments, which qualify for hedge accounting and are not recognized in the consolidated balance sheets, as follows:

Natural gas supply hedges
The Corporation purchases substantially all of its natural gas requirements through indexed price contracts with suppliers other than gas supply agreements for its facilities in Alaska and Argentina. The Corporation periodically enters into natural gas swap and option contracts to protect its future earnings and cash flows from the potential adverse impact of rising natural gas prices in the indexed contracts.

The natural gas swap and option contracts do not require the payment of significant net premiums prior to settlement. On settlement, these contracts result in cash receipts or payments by the Corporation for the difference between the contract and market rates for the applicable dollars and volumes hedged during the contract term. Such cash receipts or payments offset corresponding decreases or increases in the Corporation’s natural gas supply costs. Amounts received or paid on settlement are recognized in inventory in the same period as the hedged transaction, and then included in the cost of product when the related inventory is sold.

Financial statements and notes Page 80

Notes to the consolidated
financial statements

At December 31, 2003, the Corporation had entered into natural gas option contracts which qualified for hedge accounting with an underlying amount of two million MMBtu of natural gas, maturities in 2004 and exercise prices ranging from $6/MMBtu to $7/MMBtu. The Corporation had entered into natural gas swap contracts that qualified for hedge accounting as at December 31, 2003. The notional amount of the natural gas swap contracts outstanding was four million MMBtu with maturities in 2004 and 2005.

During 2003, net realized gains of $12-million on qualifying natural gas derivative contracts (2002 – $37-million net losses) were allocated to inventory. At December 31, 2003, less than $1-million of net realized gains (2002 – $1-million net realized losses) remain in inventory, until the related inventory sells. During 2003, $11-million of net realized gains (2002 – $47-million net realized losses; 2001 – $70-million net realized gains) were recorded as a component of cost of product.

Foreign exchange hedges
The Corporation enters into foreign currency option and forward contracts to fix the exchange rate or a range of exchange rates used to convert a portion of the Canadian operation’s U.S. dollar denominated revenues into Canadian dollars. These revenues are converted into Canadian dollars for purposes of paying the Canadian operation’s Canadian dollar denominated operating costs.

The foreign currency option and forward contracts do not require the payment of significant net premiums prior to settlement. On settlement, these contracts result in cash receipts or payments by the Corporation for the difference between the contract and market rates for the applicable dollars hedged during the contract term. Such cash receipts or payments are recognized in the statement of operations.

At December 31, 2003, the Corporation had entered into foreign currency options that qualified for hedge accounting. The underlying amount of the options was C$40-million with exercise prices ranging from C$1.3243 to C$1.3292 and expiring at various dates in 2004. During 2003, net realized gains on foreign currency options and forward contracts of $7-million (2002 – net realized gains of less than $1-million; 2001 – net realized losses of less than $1-million) were recorded in the statement of operations.

Fair values of unrecognized financial instruments
The fair values of derivative financial instruments that qualify for hedge accounting are the estimated amount that the Corporation would receive (pay) to terminate the contracts. Such amounts were as follows at December 31:

	2003			2002		2001
	Fair			Fair		Fair
	Value			Value		Value
Natural gas swap and option contracts		(1	)		7		(21	)
Foreign currency option and forward contracts		–			–		–

Commodity contracts
The Corporation enters into commodity contracts, including contracts with fixed or adjustable pricing terms, as a normal course of business. The contracts outstanding at December 31, 2003, are disclosed in note 18. No amounts are recognized in the financial statements related to these contracts until such time as the associated volumes are received.

Counterparty credit risk
Wholesale in both North America and South America sell mainly to large agribusinesses representing a small number of customers. Letters of credit and credit insurance are used to mitigate risk where appropriate.

Retail in both North and South America serve large customer bases dispersed over wide geographic areas in both the United States and Argentina. This geographic diversity, coupled with a concentration of effort on the large financially stable entities, mitigates risk.

The Corporation may be exposed to certain losses in the event that counterparties to the derivative financial instruments are unable to meet the terms of the contracts. The Corporation’s credit exposure is limited to those counterparties holding derivative contracts with positive fair values at the reporting date. The Corporation manages this counterparty credit risk by entering into agreements only with investment grade counterparties in accordance with established counterparty credit approval practices.

Page 81

Notes to the consolidated
financial statements

21.  SEGMENTATION

The Corporation’s activities are divided geographically and then by functional area into five reportable segments. The segments include four primary operating segments and a fifth non-operating segment for corporate and inter-segment eliminations. The four operating segments are North America Wholesale, North America Retail, South America Wholesale and South America Retail. Wholesale comprises the production and sales of the three primary nutrients: nitrogen, phosphate and potash. Retail comprises the sale of fertilizers, chemicals, seed, custom application services and agronomic consulting. Net sales between segments and countries are accounted for at prices that approximate fair market value.

Segmented net sales, expenses, net working capital, capital assets, total assets and capital expenditures

			North America						South America
2003			Wholesale			Retail			Wholesale		Retail		Other			Total
Net sales		– external customers		1,377			923			107		92		–			2,499
		– internal customers		88			–			9		–		(97	)		–
Total net sales				1,465			923			116		92		(97	)		2,499
Cost of product				1,106			642			34		75		(97	)		1,760
Gross profit				359			281			82		17		–			739
Expenses
	Selling, general and administrative			35			208			4		14		25			286
	Depreciation and amortization			99			18			15		1		7			140
	Asset impairment			235			–			–		–		–			235
	Royalties and other taxes			11			5			–		–		1			17
	Other expenses and Argentine charges			28			(14	)		–		–		26			40
Earnings (loss) before interest expense and income taxes				(49	)		64			63		2		(59	)		21
Net working capital				465			176			30		43		(297	)		417
Capital assets				896			88			238		7		31			1,260
Total assets				1,553			401			324		70		(75	)		2,273
Capital expenditures				73			12			3		1		10			99

Financial statements and notes Page 82

Notes to the consolidated
financial statements

			North America					South America
2002Restated (note 2)			Wholesale		Retail			Wholesale			Retail			Other			Total
Net sales		– external customers		1,094		849			60			80			–			2,083
		– internal customers		78		–			4			–			(82	)		–
Total net sales				1,172		849			64			80			(82	)		2,083
Cost of product				976		593			28			50			(83	)		1,564
Gross profit				196		256			36			30			1			519
Expenses
	Selling, general and administrative			24		191			4			8			19			246
	Depreciation and amortization			102		20			18			1			7			148
	Royalties and other taxes			13		5			–			–			1			19
	Other expenses and Argentine charges			17		(12	)		16			(4	)		25			42
Earnings (loss) before interest expense and income taxes				40		52			(2	)		25			(51	)		64
Net working capital				310		71			(23	)		47			(87	)		318
Capital assets				1,054		96			248			6			18			1,422
Total assets				1,537		326			314			64			(50	)		2,191
Capital expenditures				41		10			–			–			1			52

			North America					South America
2001Restated (note 2)			Wholesale		Retail			Wholesale			Retail			Other			Total
Net sales		– external customers		1,086		831			63			83			–			2,063
		– internal customers		74		–			8			–			(82	)	–
Total net sales				1,160		831			71			83			(82	)		2,063
Cost of product				925		574			43			58			(84	)		1,516
Gross profit				235		257			28			25			2			547
Expenses
	Selling, general and administrative			33		193			7			16			19			268
	Depreciation and amortization			96		20			13			5			7			141
	Royalties and other taxes			16		5			–			–			1			22
	Other expenses and Argentine charges			26		(12	)		26			30			15			85
Earnings (loss) before interest expense and income taxes				64		51			(18	)		(26	)		(40	)		31
Net working capital				267		37			(30	)		45			(196	)		123
Capital assets				1,111		106			262			15			24			1,518
Total assets				1,649		316			346			73			14			2,398
Capital expenditures				126		14			18			3			3			164

Page 83

Notes to the consolidated
financial statements

Net sales and gross profit by business segment and product line

	2003								2002								2001
	Net			Cost of			Gross		Net			Cost of			Gross		Net			Cost of			Gross
	Sales			Product			Profit		Sales			Product			Profit		Sales			Product			Profit
North America Wholesale
Nitrogen
Ammonia		382			286			96		242			222			20		323			239			84
Urea		423			323			100		330			292			38		304			253			51
Other		168			136			32		140			135			5		150			135			15
		973			745			228		712			649			63		777			627			150
Phosphate		261			217			44		239			202			37		179			173			6
Potash		160			99			61		158			91			67		138			80			58
Sulphate and other products		71			45			26		63			34			29		66			45			21
		1,465			1,106			359		1,172			976			196		1,160			925			235
North America Retail
Fertilizers		402			292			110		366			265			101		386			278			108
Chemicals		399			288			111		361			266			95		336			245			91
Other products and services		122			62			60		122			62			60		109			51			58
		923			642			281		849			593			256		831			574			257
South America Wholesale
Nitrogen		111			31			80		61			26			35		68			41			27
Other products and services		5			3			2		3			2			1		3			2			1
		116			34			82		64			28			36		71			43			28
South America Retail
Fertilizers		66			59			7		53			31			22		57			38			19
Other products and services		26			16			10		27			19			8		26			20			6
		92			75			17		80			50			30		83			58			25
Other – inter-segment eliminations		(97	)		(97	)		–		(82	)		(83	)		1		(82	)		(84	)		2
Total		2,499			1,760			739		2,083			1,564			519		2,063			1,516			547

Net sales by market destination and assets by country

	2003						2002 Restated (note 2)						2001 Restated (note 2)
	Net		Capital				Net		Capital				Net		Capital
	Sales		Assets		Goodwill		Sales		Assets		Goodwill		Sales		Assets		Goodwill
Canada		580		641		–		403		537		–		383		552		–
United States		1,557		374		–		1,425		630		–		1,385		690		45
Argentina		162		245		–		118		255		–		121		276		–
Other		200		–		–		137		–		–		174		–		–
		2,499		1,260		–		2,083		1,422		–		2,063		1,518		45

Financial statements and notes Page 84

Notes to the consolidated
financial statements

22.  PROFERTIL

The Corporation has a 50 percent ownership interest in Profertil S.A. (Profertil), a joint venture with Repsol-YPF S.A. This investment is recorded as “South America Wholesale” operating segment in note 21. A contractual agreement exists between the Corporation and the joint venture partner, which establishes joint control over Profertil, and therefore the Corporation’s interest is accounted for using the proportionate consolidation method.

A summary of the Corporation’s 50 percent interest in the joint venture at December 31 is as follows:

Balance Sheets	2003			2002
Assets
Cash and cash equivalents		44			18
Accounts receivable		18			5
Inventories and prepaid expenses		8			7
Capital assets		238			248
Other assets		18			36
		326			314
Liabilities
Accounts payable and current portion of long-term debt		39			52
Income and other taxes		2			1
Long-term debt(note 12)		114			135
Future income taxes		(2	)		(3	)
		153			185
Proportionate share of net assets of joint venture		173			129

Statement of Operations	2003		2002			2001
Net sales		116		64			71
Cost of product		34		28			43
Gross profit		82		36			28
Selling, general and administrative expenses		4		4			7
Depreciation		15		18			13
Other expenses and Argentine charges		–		16			26
Earnings (loss) before interest expense and income taxes		63		(2	)		(18	)
Interest expense		16		15			16
Income taxes		4		–			(4	)
Proportionate share of net earnings (loss) of joint venture		43		(17	)		(30	)

Statement of Cash Flows	2003			2002			2001
Operating activities		25			27			(6	)
Investing activities		17			(5	)		(39	)
Financing activities		(15	)		(17	)		58
Proportionate share of increase in cash of joint venture		27			5			13

Consolidated retained earnings of the Corporation include losses from Profertil in the amount of $6-million for the year ended December 31, 2003 (2002 – $49-million).

Commitments presented in note 18 include the Corporation’s 50 percent share in the commitments of Profertil.

Page 85

Notes to the consolidated
financial statements

23. DIFFERENCES BETWEEN ACCOUNTING PRINCIPLES GENERALLY ACCEPTED IN CANADA AND THE UNITED STATES

The Corporation’s consolidated financial statements are prepared in accordance with Canadian GAAP. These principles differ in certain respects from those applicable under U.S. GAAP. If U.S. GAAP were applied, the net loss in each year would be adjusted as follows:

Consolidated Statements of Operations	2003			2002			2001
Net loss based on Canadian GAAP		(21	)		–			(45	)
Adjustments
Preferred securities charges, net of tax (a)		(11	)		(11	)		(12	)
Deferred tax on foreign exchange translation of preferred securities (a)		(5	)		–			–
Other		(1	)		1			–
Net loss before cumulative effect of change in accounting policy		(38	)		(10	)		(57	)
Cumulative effect of change in accounting policy, net of tax (e)		–			(29	)		–
Net loss based on U.S. GAAP		(38	)		(39	)		(57	)
Basic and diluted loss per common share based on U.S. GAAP
Loss before cumulative effect of change in accounting policy		(0.30	)		(0.08	)		(0.49	)
Net loss per share		(0.30	)		(0.31	)		(0.49	)

U.S. GAAP requires the disclosure of a statement of comprehensive income. Comprehensive income generally includes net earnings plus the results of certain shareholders’ equity changes not reflected in the statement of operations.

Consolidated Statements of Comprehensive Income	2003			2002			2001
Net loss based on U.S. GAAP		(38	)		(39	)		(57	)
Change in foreign currency translation adjustment (d)		95			(32	)		(56	)
Change in minimum pension liability adjustment, net of tax (c)		(4	)		(6	)		–
Change in unrealized gains (losses) on derivative instruments, net of tax (b)		(5	)		35			75
Change in realized gains (losses) on derivative instruments included in inventory, net of tax (b)		2			5			(7	)
Cumulative effect of change in accounting policy, net of tax (b)		–			–			(105	)
Comprehensive income (loss) based on U.S. GAAP		50			(37	)		(150	)

The cumulative effect of these adjustments on shareholders’ equity of the Corporation is as follows:

	2003			2002
Shareholders’ equity based on Canadian GAAP		821			764
Preferred securities (a)		(222	)		(221	)
Deferred tax on foreign exchange translation of preferred securities (a)		(5	)		–
Unrealized gains (losses) on derivative instruments, net of tax (b)		(1	)		5
Realized gains (losses) on derivative instruments included in inventory, net of tax (b)		1			(1	)
Additional minimum pension liability, net of tax (c)		(10	)		(6	)
Other		(3	)		(4	)
Shareholders’ equity based on U.S. GAAP		581			537

Financial statements and notes Page 86

Notes to the consolidated
financial statements

Description of significant differences

(a)	Preferred securities – Under Canadian GAAP, the preferred securities are classified as shareholders’ equity and the related annual carrying charges are recorded as a distribution from retained earnings. Under U.S. GAAP, the $175-million preferred securities would be classified as long-term debt, the $50-million preferred securities would be classified as the current portion of long-term debt and the related carrying charges would be recognized as interest expense. Temporary differences arising as a result of the foreign exchange translation of the long-term debt would be recognized as deferred income tax expense. Under U.S. GAAP, in the statement of cash flows, cash flows under the heading “financing” would have increased by $17-million (2002 – $17-million; 2001 – $17-million) and cash flows under the heading “operating” would have decreased by $17-million (2002 – $17-million; 2001 – $17-million).
(b)	Derivative instruments and hedging activities – The Corporation accounts for its derivative instruments under Canadian GAAP as described in note 20. Under U.S. GAAP, generally all derivative instruments must be recognized as assets or liabilities on the balance sheet and measured at fair value. Any portion of the change in fair value of a derivative instrument that qualifies as a cash flow hedge is initially included in the determination of comprehensive income. The gain or loss is subsequently included in earnings in the same period as the hedged item. Any portion of the change in fair value of a derivative instrument that does not qualify for hedge accounting is recognized in earnings immediately.
(c)	Unfunded employee benefits – Under U.S. GAAP an additional minimum liability is recognized if the unfunded employee benefits Accumulated Benefit Obligation exceeds the accrued benefit obligation that is recorded in the balance sheet. This additional liability is recorded as a reduction to other comprehensive income.
(d)	Foreign currency translation adjustment – Under Canadian GAAP, foreign exchange gains and losses on translation of self-sustaining foreign operations are included as a separate component of shareholders’ equity referred to as cumulative translation adjustment. Under U.S. GAAP, such foreign currency translation gains and losses are recorded as comprehensive income.
(e)	Change in accounting policies – Effective January 1, 2002, the Corporation adopted a new standard under each of Canadian GAAP and U.S. GAAP for Goodwill and Other Intangible Assets. The Canadian standard mirrors the U.S. standard except that, under U.S. GAAP, the goodwill impairment calculated on initial adoption of the new policy was charged against earnings in the current period. Under Canadian GAAP, the transitional adoption of the policy was recorded against opening balance of retained earnings in the period of adoption.
(f)	Joint ventures – Under U.S. GAAP, ownership in a joint venture where the venturer does not own more than 50 percent and have a significant influence over the operating activities of the joint venture is to be accounted for using the equity method. Under Canadian GAAP, joint ventures are proportionately consolidated. Net assets and earnings of the Corporation would be the same under either method. Note 22 provides the details of the joint venture as included under Canadian GAAP.

Page 87

Subsidiaries &
Board committees

PRINCIPAL SUBSIDIARIES
& ASSOCIATED COMPANIES

	COUNTRY OF		OWNERSHIP
	OPERATION		(percent)
AGRIUM, a general partnership	Canada			100
Agrium U.S. Inc.		U.S.		100
Agrium Nitrogen Company		U.S.		100
Nu-West Industries, Inc.		U.S.		100
Crop Production Services, Inc.		U.S.		100
Western Farm Service, Inc.		U.S.		100
Agroservicios Pampeanos S.A.	Argentina			100
Profertil S.A.	Argentina			50
Canpotex Limited	International			33⅓
Viridian Inc.	Canada			100
Viridian Fertilizers Limited	Canada			100

BOARD COMMITTEES

Audit Committee
Harry G. SchaeferFCA,Chair, Ralph S. Cunningham,
Susan A. Henry, Frank W. Proto, Victor J. ZaleschukCA

The Audit Committee has oversight responsibilities for our accounting and financial reporting processes, the quality and integrity of our financial statements and the effectiveness of our internal controls. The financial statements are the responsibility of management, and the external auditors express an independent opinion on the annual consolidated financial statements, which are then approved by the Board. The Audit Committee is directly responsible for the retention and oversight of the work of the external auditors, who report directly to the Audit Committee. The Audit Committee has a specific Charter that explicitly mandates direct communication with our internal and external auditors independently of management, ongoing review of our external auditors, including recommendations to the Board of the appointment (subject to shareholder approval) and termination of the external auditors, the scope of the audit and audit plans of the internal and external auditors, pre-approval of audit and permitted non-audit services and the role, independence and fees of the external auditors. In addition, the Committee is responsible for overseeing management reporting, internal controls and management information, and reviewing financial risk management issues. This Committee reviews our audited consolidated financial statements and selected corporate disclosure documents, including management’s discussion and analysis contained in our annual report, the annual information form, prospectuses and offering documents, and other major shareholder communications containing significant financial information before they are approved by the Board. It is also responsible for approval of our interim quarterly financial statements and reviews issues relating to legal and regulatory responsibilities to ensure compliance.

The Audit Committee has established procedures for (a) the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters and (b) the confidential, anonymous submissions by our employees of concerns regarding questionable accounting or auditing matters.

The Audit Committee is also required to review its Charter on an annual basis and recommend any appropriate changes to the Board. This Committee met on eight occasions in 2003.

Corporate Governance & Nominating Committee
Frank W. King,Chair, Neil Carragher, D. Grant Devine,
Harry G. SchaeferFCA, T. Don Stacy

The Corporate Governance & Nominating Committee (the CG&N Committee) is responsible to assist the Board in fulfilling its responsibilities with respect to the continuing review and development of our corporate governance system, including our Corporate Governance Guidelines, Code of Business Conduct and Ethics for directors, officers and employees, the Charter for our Board of Directors, as well as Terms of Reference for our Board Chair, the Chief Executive Officer and individual directors. The CG&N Committee is also responsible for the review and recommendation to the Board of our reports on compliance with the governance guidelines, recommendations and requirements of any applicable regulator or securities exchange. The CG&N Committee reviews and recommends compensation for Board and Committee service as well as oversees the administration of the DSU Plans. This Committee is also responsible for the annual evaluations of the overall performance of the Board, the Board Chair, the Committees and individual directors pursuant to an evaluation system that is designed to provide directors with an opportunity each year to examine how the Board is operating and to make suggestions for improvement. The CG&N Committee monitors the relationship between management and the Board to ensure that the Board is able to, and in fact does, function independently of management. This Committee also assists the Board in identifying and recommending qualified individuals to become Board members, provides recommendations as to the size, composition, operation and effectiveness of the Board and its Committees, and identifies and makes recommendations respecting the appointment of members to the Board Committees. The CG&N Committee also develops and implements an orientation and ongoing education program for directors and ensures that Board Committees and individual directors can engage outside advisors. The CG&N Committee is also required to review its Charter on an annual basis and recommend any appropriate changes to the Board. This Committee met on four occasions in 2003.

Subsidiaries & Board committees Page 88

Human Resources & Compensation Committee
Ralph S. Cunningham,Chair, Neil Carragher, G. Woody MacLaren, T. Don Stacy, Victor J. ZaleschukCA

The Human Resources & Compensation Committee (the HR&C Committee) is established to assist the Board in fulfilling its responsibilities relating to matters of human resources and compensation, and to establish a plan of continuity and development of senior management. The HR&C Committee has responsibility for overseeing the evaluation of management, reviewing and making recommendations to the Board regarding the appointment of and the compensation arrangements for our executives (including salaries, incentives, equity-based compensation and benefits), as well as reviewing the annual salary policies and programs relating to employees. The Committee also approves the investment objectives and policies of, and any material changes, in our pension plans. The Committee reviews and approves the use of corporate goals and objectives that are relevant to the compensation of our Chief Executive Officer and reviews the performance of the Chief Executive Officer in light of those goals and objectives in order to determine and, together with the other independent directors, approve his compensation. The HR&C Committee reviews our management resources and plans to ensure that we properly provide for appropriate succession plans for executives. The HR&C Committee is also required to review its Charter on an annual basis and recommend any appropriate changes to the Board. This Committee met on five occasions in 2003.

Environment, Health & Safety Committee
D. Grant Devine,Chair, Susan A. Henry, Frank W. King,
G. Woody MacLaren, Frank W. Proto

The Environment, Health & Safety Committee (the EH&S Committee) is responsible to assist the Board in fulfilling its oversight responsibilities relating to environment, health and safety. The EH&S Committee annually reviews and recommends to the Board for approval our Environment, Health & Safety Policy. The Committee monitors environmental, health and safety performance, compliance with legal and regulatory requirements, as well as applicable industry standards relating to environmental, health and safety matters, and reviews the strategies and methods used to improve our environmental, health and safety performance. This Committee also reviews our environmental, health and safety performance goals, management systems implementation, EH&S audit programs and plans, and the status of our remediation projects and provisions. It is the practice of the Committee to arrange at least one visit annually for our Board members to one of our facilities, which includes orientation sessions to personally acquaint members of the Committee and the Board with personnel and operations at our facilities. The Committee also reviews the methods of communicating our environmental, health and safety policies and procedures throughout the organization. The EH&S Committee meets separately with the Director, Environment, Health & Safety and reports to the

Board on such meetings. The EH&S Committee is also required to review its Charter on an annual basis and recommend any appropriate changes to the Board. This Committee met on five occasions in 2003. In addition, we have a corporate environment, health and safety committee comprising members of senior management and chaired by the Senior Vice President, North America Retail, which is responsible for ensuring that we conduct our activities and operate our facilities in an environmentally responsible manner and maintain the integrity of our health and safety policies. We also have established a company-wide Safety Council to review, enhance and ensure a sustained focus on best safety practices throughout the organization.

Officers of the Company

Frank W. Proto
Board Chair

John M. Van Brunt
Board Vice Chair

Michael M. Wilson
President & Chief Executive Officer

Garnet K. Amundson
Vice President & Controller

Dorothy E.A. Bower
Vice President, Strategic Development & Planning

Patrick J. Freeman
Vice President & Treasurer

Richard L. Gearheard
Senior Vice President, North America Retail

James M. Grossett
Vice President, Human Resources

William C. McClung
Vice President, Manufacturing

Leslie A. O’Donoghue
Vice President, General Counsel & Corporate Secretary

Robert J. Rennie
Vice President, Corporate Affairs/South America

Christopher W. Tworek
Vice President, Supply Management

Bruce G. Waterman
Senior Vice President, Finance & Chief Financial Officer

Ron A. Wilkinson
Vice President, Operations & Technology

John D. Yokley
Senior Vice President, Marketing & Distribution

Financial highlights Supplementary financial,
performance and other data Page 89

The supplementary financial and performance data set out on pages 89-94 below contains certain financial information and other items that are not measures of our

EARNINGS (LOSS) AND OPERATING CASH FLOWS(millions of U.S. dollars, except per share amounts and ratios)

	Q1			Q2			Q3			Q4			2003			Q1			Q2			Q3			Q4			2002			2001			2000			1999
Net sales		372			929			561			637			2,499			318			792			466			507			2,083			2,063			1,873			1,716
Cost of product		261			677			389			433			1,760			247			619			333			365			1,564			1,516			1,326			1,227
Gross profit		111			252			172			204			739			71			173			133			142			519			547			547			489
Gross profit (%)		30			27			31			32			30			22			22			29			28			25			27			29			28
Expenses
Selling, general and administrative		59			74			71			82			286			52			67			64			63			246			268			253			245
Depreciation and amortization		32			35			34			39			140			34			32			42			40			148			141			107			93
Asset impairment		–			–			–			235			235			–			–			–			–			–			–			–			–
Royalties and other taxes		5			4			4			4			17			6			3			5			5			19			22			19			15
Other expenses and Argentine charges		10			9			9			12			40			15			16			3			8			42			85			5			5
Earnings (loss) before interest expense and income taxes		5			130			54			(168	)		21			(36	)		55			19			26			64			31			163			131
Interest		15			18			15			15			63			19			16			17			16			68			74			37			37
Earnings (loss) before income taxes		(10	)		112			39			(183	)		(42	)		(55	)		39			2			10			(4	)		(43	)		126			94
Income taxes (recovery)		(4	)		43			14			(74	)		(21	)		(19	)		16			1			(2	)		(4	)		2			44			32
Net earnings (loss)		(6	)		69			25			(109	)		(21	)		(36	)		23			1			12			–			(45	)		82			62
Add (deduct)
Depreciation and amortization		32			35			34			39			140			34			32			42			40			148			141			107			93
Asset impairment		–			–			–			235			235			–			–			–			–			–			–			–			–
Foreign exchange and Argentine charges		(2	)		(6	)		3			(3	)		(8	)		12			7			(3	)		(2	)		14			20			–			–
Future income taxes (recovery)		(4	)		14			8			(61	)		(43	)		(11	)		15			–			13			17			(26	)		35			(28	)
Net change in non-cash working capital		17			(76	)		(23	)		(32	)		(114	)		3			(2	)		(12	)		56			45			(3	)		32			33
Cash provided by operating activities		37			36			47			69			189			2			75			28			119			224			87			256			160
EBITDA		37			165			88			106			396			(2	)		87			61			66			212			172			270			224
Capital expenditures		9			22			36			32			99			5			3			15			29			52			164			179			234
Basic earnings (loss) per share		(0.07	)		0.53			0.18			(0.89	)		(0.25	)		(0.33	)		0.16			(0.01	)		0.07			(0.08	)		(0.49	)		0.65			0.47
Diluted earnings (loss) per share		(0.07	)		0.47			0.17			(0.89	)		(0.25	)		(0.33	)		0.15			(0.01	)		0.07			(0.08	)		(0.49	)		0.62			0.46
CONSOLIDATED BALANCE SHEETS(millions of U.S. dollars)
		Q1			Q2			Q3			Q4			2003			Q1			Q2			Q3			Q4			2002			2001			2000			1999
ASSETS
Current asset
Cash and cash equivalents		136			152			171			200			200			8			32			21			109			109			51			18			104
Accounts receivable		198			287			271			314			314			184			243			216			187			187			218			303			268
Inventories		545			405			385			368			368			507			352			336			353			353			400			347			256
Prepaid expenses		29			26			41			60			60			46			14			30			35			35			34			20			15
		908			870			868			942			942			745			641			603			684			684			703			688			643
Capital assets(a)		1,436			1,472			1,476			1,260			1,260			1,486			1,482			1,428			1,422			1,422			1,518			1,498			1,164
Other assets		87			90			85			71			71			111			99			93			85			85			132			150			115
Goodwill		–			–			–			–			–			45			45			–			–			–			45			49			52
		2,431			2,432			2,429			2,273			2,273			2,387			2,267			2,124			2,191			2,191			2,398			2,385			1,974
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Bank indebtedness		2			–			–			–			–			74			10			21			1			1			211			308			179
Accounts payable and accrued liabilities		537			411			383			404			404			453			348			275			340			340			362			370			289
Current portion of long-term debt		101			104			104			121			121			6			7			7			25			25			7			1			1
		640			515			487			525			525			533			365			303			366			366			580			679			469
Long-term debt
Recourse debt		530			533			532			503			503			619			623			620			604			604			621			507			497
Non-recourse debt		132			124			125			111			111			141			137			131			132			132			141			–			–
		662			657			657			614			614			760			760			751			736			736			762			507			497
Other liabilities(a)		169			177			174			181			181			163			166			162			160			160			151			134			91
Future income taxes(a)		166			187			194			132			132			150			168			149			165			165			162			197			164
		1,637			1,536			1,512			1,452			1,452			1,606			1,459			1,365			1,427			1,427			1,655			1,517			1,221
Shareholders’ equity
Share capital
Common shares		485			485			485			490			490			482			484			484			484			484			376			375			347
Preferred securities		221			222			222			222			222			221			221			221			221			221			221			221			171
Contributed surplus		–			–			–			1			1			–			–			–			–			–			–			–			–
Retained earnings		182			242			264			145			145			206			220			189			191			191			245			315			255
Cumulative translation adjustment		(94	)		(53	)		(54	)		(37	)		(37	)		(128	)		(117	)		(135	)		(132	)		(132	)		(99	)		(43	)		(20	)
		794			896			917			821			821			781			808			759			764			764			743			868			753
		2,431			2,432			2,429			2,273			2,273			2,387			2,267			2,124			2,191			2,191			2,398			2,385			1,974

(a) Data has been restated to record the effect of adoption of the accounting standard for asset retirement obligations.

Segmented financial
information Supplementary financial,
performance and other data Page 90

SEGMENTED FINANCIAL RESULTS(millions of U.S. dollars, except ratios)

				2003
				North America						South America
				Wholesale			Retail			Wholesale			Retail			Other			Total
Net sales					1,465			923			116			92			(97	)		2,499
Cost of product					1,106			642			34			75			(97	)		1,760
Gross profit					359			281			82			17			–			739
Gross profit (%)					25			30			71			18			–			30
Expenses
Selling, general and administrative					35			208			4			14			25			286
Depreciation and amortization					99			18			15			1			7			140
Asset impairment					235			–			–			–			–			235
Royalties and other taxes					11			5			–			–			1			17
Other expenses and Argentine charges					28			(14	)		–			–			26			40
Earnings (loss) before interest expense and income taxes					(49	)		64			63			2			(59	)		21
Interest																				63
Earnings (loss) before income taxes																				(42	)
Income taxes (recovery)																				(21	)
Net earnings (loss)																				(21	)
Capital expenditures					73			12			3			1			10			99
NET SALES AND GROSS PROFIT BY BUSINESS SEGMENT AND PRODUCT LINE(millions of U.S. dollars, except margin per tonne amounts, ratios, inventory and sales tonnes)
	2003
	Net			Cost of			Gross			Gross			Sales			Margin			Inventory
	Sales			Sales			Profit			Profit (%		)	Tonnes(a		)	($/Tonne		)	Tonnes(a		)
North America Wholesale
Nitrogen
Ammonia		382			286			96			25			1,555			62			176
Urea		423			323			100			24			2,220			45			128
Other		168			136			32			19			981			33			129
		973			745			228			23			4,756			48			433
Phosphate		261			217			44			17			1,090			40			51
Potash		160			99			61			38			1,662			37			188
Sulphate and other products		71			45			26			37			400			65			115
		1,465			1,106			359			25			7,908			45			787
North America Retail
Fertilizers		402			292			110			27
Chemicals		399			288			111			28
Other products and services		122			62			60			49
		923			642			281			30
South America Wholesale
Nitrogen		111			31			80			72			634			126			43
Other products and services		5			3			2			40
		116			34			82			71
South America Retail
Fertilizers		66			59			7			11
Other products and services		26			16			10			38
		92			75			17			18
Other		(97	)		(97	)		–			–
Total		2,499			1,760			739			30
(a)   000s of tonnes
NET SALES AND GROSS PROFIT BY MARKET DESTINATION(millions of U.S. dollars, except margin per tonne amounts, ratios and sales tonnes)
	2003
	Net			Cost of			Gross			Gross			Sales			Margin
	Sales			Sales			Profit			Profit (%		)	Tonnes(a		)	($/Tonne		)
North America
Nitrogen		775			621			154			20			3,501			44
Phosphate		261			217			44			17			1,090			40
Potash		117			78			39			33			1,092			36
Sulphate and other products		60			36			24			40			298			–
North America Retail		923			642			281			30			–			–
Other		(88	)		(88	)		–			–			–			–
		2,048			1,506			542			26			5,981
International
Nitrogen		309			155			154			50			1,889			82
Potash		43			21			22			51			570			39
Sulphate and other products		15			12			3			20			102			–
South America Retail		92			75			17			18			–			–
Other		(8	)		(9	)		1			13			–			–
		451			254			197			44			2,561			–
Total		2,499			1,760			739			30			8,542			–
(a)   000s of tonnes

Supplementary financial,
performance and other data Page 91

SEGMENTED FINANCIAL RESULTS(millions of U.S. dollars, except ratios)

				2002																					2001
				North America						South America															North America						South America
				Wholesale			Retail			Wholesale			Retail			Other			Total						Wholesale			Retail			Wholesale			Retail			Other			Total
Net sales					1,172			849			64			80			(82	)		2,083						1,160			831			71			83			(82	)		2,063
Cost of product					976			593			28			50			(83	)		1,564						925			574			43			58			(84	)		1,516
Gross profit					196			256			36			30			1			519						235			257			28			25			2			547
Gross profit (%)					17			30			56			38			(1	)		25						20			31			39			30			(2	)		27
Expenses
Selling, general and administrative					24			191			4			8			19			246						33			193			7			16			19			268
Depreciation and amortization					102			20			18			1			7			148						96			20			13			5			7			141
Asset impairment					–			–			–			–			–			–						–			–			–			–			–			–
Royalties and other taxes					13			5			–			–			1			19						16			5			–			–			1			22
Other expenses and Argentine charges					17			(12	)		16			(4	)		25			42						26			(12	)		26			30			15			85
Earnings (loss) before interest expense and income taxes					40			52			(2	)		25			(51	)		64						64			51			(18	)		(26	)		(40	)		31
Interest																				68																					74
Earnings (loss) before income taxes																				(4	)																				(43	)
Income taxes (recovery)																				(4	)																				2
Net earnings (loss)																				–																					(45	)
Capital expenditures					41			10			–			–			1			52						126			14			18			3			3			164
NET SALES AND GROSS PROFIT BY BUSINESS SEGMENT AND PRODUCT LINE(millions of U.S. dollars, except margin per tonne amounts, ratios, inventory and sales tonnes)
	2002																					2001
	Net			Cost of			Gross			Gross			Sales			Margin			Inventory			Net			Cost of			Gross			Gross			Sales			Margin			Inventory
	Sales			Sales			Profit			Profit (%		)	Tonnes(a		)	($/Tonne		)	Tonnes(a		)	Sales			Sales			Profit			Profit (%		)	Tonnes(a		)	($/Tonne		)	Tonnes(a		)
North America Wholesale
Nitrogen
Ammonia		242			222			20			8			1,543			13			240			323			239			84			26			1,610			52			329
Urea		330			292			38			12			2,517			15			141			304			253			51			17			2,063			25			311
Other		140			135			5			4			1,099			5			219			150			135			15			10			977			15			227
		712			649			63			9			5,159			12			600			777			627			150			19			4,650			32			867
Phosphate		239			202			37			15			1,129			33			82			179			173			6			3			869			7			144
Potash		158			91			67			42			1,598			42			195			138			80			58			42			1,357			43			273
Sulphate and other products		63			34			29			46			397			73			136			66			45			21			32			428			49			97
		1,172			976			196			17			8,283			24			1,013			1,160			925			235			20			7,304			32			1,381
North America Retail
Fertilizers		366			265			101			28												386			278			108			28
Chemicals		361			266			95			26												336			245			91			27
Other products and services		122			62			60			49												109			51			58			53
		849			593			256			30												831			574			257			31
South America Wholesale
Nitrogen		61			26			35			57			517			68			61			68			41			27			40			508			53			32
Other products and services		3			2			1			33												3			2			1			33
		64			28			36			56												71			43			28			39
South America Retail
Fertilizers		53			31			22			42												57			38			19			33
Other products and services		27			19			8			30												26			20			6			23
		80			50			30			38												83			58			25			30
Other		(82	)		(83	)		1			(1	)											(82	)		(84	)		2			(2	)
Total		2,083			1,564			519			25												2,063			1,516			547			27
(a)   000s of tonnes
NET SALES AND GROSS PROFIT BY MARKET DESTINATION(millions of U.S. dollars, except margin per tonne amounts, ratios and sales tonnes)
	2002																					2001
	Net			Cost of			Gross			Gross			Sales			Margin						Net			Cost of			Gross			Gross			Sales			Margin
	Sales			Sales			Profit			Profit (%		)	Tonnes(a		)	($/Tonne		)				Sales			Sales			Profit			Profit (%		)	Tonnes(a		)	($/Tonne		)
North America
Nitrogen		567			516			51			9			3,786			13						606			494			112			18			3,295			34
Phosphate		239			202			37			15			1,129			33						179			173			6			3			869			7
Potash		118			74			44			37			1,110			40						98			64			34			35			887			38
Sulphate and other products		55			28			27			49			317			–						60			41			19			32			358			–
North America Retail		849			593			256			30			–			–						831			574			257			31			–			–
Other		(78	)		(79	)		1			(1	)		–			–						(74	)		(76	)		2			(3	)		–			–
		1,750			1,334			416			24			6,342			–						1,700			1,270			430			25			5,409			–
International
Nitrogen		206			159			47			23			1,890			25						239			174			65			27			1,863			35
Potash		40			17			23			58			488			47						40			16			24			60			470			51
Sulphate and other products		11			8			3			27			80			–						9			6			3			33			70			–
South America Retail		80			50			30			38			–			–						83			58			25			30			–			–
Other		(4	)		(4	)		–			–			–			–						(8	)		(8	)		–			–			–			–
		333			230			103			31			2,458			–						363			246			117			32			2,403			–
Total		2,083			1,564			519			25			8,800			–						2,063			1,516			547			27			7,812			–
(a)   000s of tonnes

Performance Supplementary financial,
performance and other data Page 92

KEY RATIOS(millions of U.S. dollars, except per share amounts and ratios)

	2003			2002			2001			2000		1999
Data
Net sales		2,499			2,083			2,063			1,873		1,716
EBITDA		396			212			172			270		224
EBIT		21			64			31			163		131
Interest		63			68			74			37		37
Net earnings (loss)		(21	)		–			(45	)		82		62
Cash flow from operations		189			224			87			256		160
Working capital		417			318			123			9		174
Total assets		2,273			2,191			2,398			2,385		1,974
Total debt (bank indebtedness + long-term debt)		735			762			980			816		677
Shareholders’ equity		821			764			743			868		753
Enterprise value		2,609			2,078			2,148			2,641		1,503
Average shares outstanding – basic		126			123			115			112		113
Year-end shares outstanding		127			126			115			115		112
Year-end shares outstanding – diluted		127			126			115			132		133
Closing share price U.S.		16.46			11.31			10.60			14.63		7.88
Number of employees		4,667			4,829			4,988			4,958		4,536
North America Wholesale		1,985			2,104			2,230			2,208		1,765
North America Retail		2,229			2,202			2,206			2,271		2,347
Corporate		250			267			263			234		218
South America		203			256			289			245		206
Value Ratios (:1 except per share amounts)
EBITDA per share		3.14			1.72			1.50			2.41		1.98
Price to earnings ratio (P/E)		–			–			–			23		17
Price to cash flow (P/CF)		11			6			14			6		6
Enterprise value to EBITDA		7			10			12			10		7
Price to book value		3.5			2.6			2.3			2.6		1.5
Shareholders’ equity to total assets		0.4			0.4			0.3			0.4		0.4
Book value per common share		4.75			4.31			4.54			5.63		5.20
Liquidity Ratios
Quick ratio		1.1			0.9			0.5			0.5		0.8
Current ratio		1.8			1.9			1.2			1.0		1.4
Working capital to sales		0.2			0.2			0.1			0.0		0.1
Sales to total assets		1.1			1.0			0.9			0.8		0.9
Total asset turnover		1.1			0.9			0.9			0.9		0.9
Profitability Ratios
Return on average invested capital (%)		1			3			0			7		7
Return on average common shareholders’ equity (%)		(5	)		(2	)		(10	)		12		10
Debt Ratios (:1 except percentages)
Debt-to-debt plus equity (%)		47			50			57			48		47
EBIT interest coverage		0.3			0.9			0.4			4.4		3.5
EBITDA interest coverage		6.3			3.1			2.3			7.3		6.1

DEFINITIONS

Quick ratio	=		current asset – inventories current liabilities
Return on average common shareholders’ equity	=	net income (loss) – preferred security charges average common shareholders’ equity
EBIT interest coverage	=		EBIT interest expense
EBITA interest coverage	=		EBITDA interest expense
Enterprise value	=	(total debt at book value, excluding preferred shares – cash) + (diluted shares outstanding × closing share price)
Current ratio	=		current assets current liabilities
EBIT	=	earnings (loss) before interest expense and income taxes
EBITDA	=	earnings (loss) before interest expense, income taxes, depreciation, amortization and asset impairment
Debt-to-debt-plus-equity	=	long-term debt + bank indebtedness long-term debt + shareholders’ equity + bank indebtedness
Return on average invested capital	=		EBIT after income taxes average invested capital

Capital stock and
trading history Supplementary financial,
performance and other data Page 93

COMMON SHARE DATA(millions, except per share amounts and where otherwise noted)

	Q1			Q2		Q3		Q4			2003			2002			2001			2000		1999
Basic earnings (loss) per share		(0.07	)		0.53		0.18		(0.89	)		(0.25	)		(0.08	)		(0.49	)		0.65		0.47
Diluted earnings (loss) per share		(0.07	)		0.47		0.17		(0.89	)		(0.25	)		(0.08	)		(0.49	)		0.62		0.46
Weighted average common shares outstanding		126			126		126		126			126			123			115			112		113
Period end common shares outstanding		126			126		126		127			127			126			115			115		112
Weighted average diluted shares outstanding		126			147		146		126			126			123			115			132		133
Period end diluted shares outstanding		126			147		145		127			127			126			115			134		134
Canadian trading volume		27			28		23		44			122			105			91			90		66
U.S. trading volume		18			23		21		27			89			75			77			40		38
Total trading volume		45			51		44		71			211			180			168			130		104
Average share price C$		16.04			15.76		16.17		19.99			17.00			15.40			17.18			14.29		13.28
Closing share price C$		15.75			14.75		17.17		21.39			21.39			17.70			16.85			21.65		11.20
High share price C$		18.18			16.90		17.90		21.47			21.47			17.85			21.00			21.95		15.75
Low share price C$		14.35			14.28		14.62		16.88			14.28			12.66			14.00			10.00		11.20
Market capitalization C$		1,985			1,859		2,163		2,717			2,717			2,230			1,938			2,490		1,254
Average share price U.S.$		10.63			11.28		11.72		15.14			12.21			9.81			11.11			9.62		8.93
Closing share price U.S.$		10.75			10.96		12.56		16.46			16.46			11.31			10.60			14.63		7.88
High share price U.S.$		11.65			12.21		13.10		16.48			16.48			11.42			13.94			14.69		10.63
Low share price U.S.$		9.54			10.57		10.62		12.50			9.54			8.02			9.00			6.75		7.50
Market capitalization U.S.$		1,355			1,381		1,593		2,090			2,090			1,425			1,219			1,682		883
Dividends per share U.S.$		0.0¢			5.5¢		0.0¢		5.5¢			11¢			11¢			11¢			11¢		11¢

DEBT RATING

	Senior Unsecured	Preferred
as at December 31, 2003	Notes and Debentures	Security
Moody’s Investors Service	Baa2	Baa3
Dominion Bond Rating Service	BBB	Pfd – 3Y
Standard & Poor’s	BBB	BB+

General information Supplementary financial,
performance and other data Page 94

ANNUAL PRODUCTION CAPACITY BY PRODUCT GROUP(000s of tonnes)

	Nitrogen		Phosphate		Potash		Sulphate		Micronutrients
Borger, Texas		442
Carseland, Alberta		860
Conda, Idaho				590
Ft. Saskatchewan, Alberta		650
Homestead, Nebraska		190
Joffre, Alberta		480
Kenai, Alaska		1,740
Kennewick, Washington		545
Profertil, Argentina (a)		585
Redwater, Alberta		1,365		680				300
Reese, Michigan										27
Standard/Granum, Alberta		120
Vanscoy, Saskatchewan						1,790
West Sacramento, California		185
Total		7,162		1,270		1,790		300		27

(a) Represents 50% Profertil S.A. production

NUTRIENT TONNES

Metric tonne	2204.6 pounds or 1,000 kilograms, used for offshore sales.
Nutrient tonne	Measures the nutrient content of potassium, phosphate and nitrogen nutrients; consists of Nitrogen N tonnes, Phosphate P2O5 tonnes and Potash K2O tonnes.
Product tonne	Standard measure of the weights of all types of nitrogen, phosphate and potash products.

PRODUCTION FACTORS

Ammonia (82% N)	production of 1 tonne of ammonia requires:
		n	32-38 MMBtu of natural gas
Urea (46% N)	production of 1 tonne of urea requires:
		n	0.58 tonnes of ammonia
		n	0.76 tonnes of carbon dioxide
Ammonium Nitrate (34% N)	production of 1 tonne of 34% N ammonium nitrate requires:
		n	0.21 tonnes of ammonia
		n	0.78 tonnes of nitric acid
				1 tonne of nitric acid requires:
				0.226 tonnes of ammonia
UAN (32% N)	production of 1 tonne of UAN requires:
		n	0.44 tonnes of ammonium nitrate
		n	0.35 tonnes of urea
MAP (monoammonium phosphate)	production of 1 tonne of MAP requires:
		n	0.15 tonnes of ammonia
		n	1.35 tonnes of 40% P2O5 phosphoric acid
				1 tonne of 40% P2O5 acid requires:
				1.32 tonnes of phosphate rock
				1.12 tonnes of sulphuric acid