Nucor Case Anlaysis

Nucor Case Anlaysis By: Hardik Mishra (B08010) Kaushambi Ghosh (B08012) Pankaj Agarwal (B08020) Ritesh Chowdhary (B08026)

Agenda • • • • •

Nucor Corporation Mr. Iverson’s Concern S.W. Analysis of Nucor O.T. in U.S Steel Market Decision

Nucor Corporation • Founded in 1904 – by Ransom Eli Olds • Started as a motor car manufacturer under the name “REO” • Changed its name to Nuclear Corporation of America Inc. after selling its Car business to Bohl Alluminium & Brass company and subsequently buying a nuclear services company. • The company then transformed itself into a conglomerate acquiring semiconductor, steel joists (Vulcraft Corporation), air-conditioning ducts etc. units. • Then ultimately becoming NUCOR – largest operator of mini mills.

Mr. Iverson’s Concern • • • •

Commit to a new steel mill Viability of CSP technology in long run To be a leader or a follower Resource Constraint

Strengths of Nucor • Administration  Flat hierarchy  Knowledge to set up steel plants economically and operate them efficiently

• Employee Relations    

Equality Empowerment Performance based compensation Lower attrition rates

Strengths of Nucor • Operations  Commendable and highly trained work force  Strategically Located Plants  Continuous adoption of new technology  Low ordering costs for buyer

• Financial     

Debt to equity ratio is 0.18 Market to book ratio is 2.05 Assured sales of 33% internally Lower attrition rates Tight Cost Control

Weaknesses of Nucor • • • • • • •

Plants were not able to fulfil orders at times Low end products Limited openings for growth due to impossibility to diversify Non providence of discounts for preferred customers- loss of a differentiating platform against competitors and imports Environmental issues Too much dependence on the US Economy They don’t do their own R&D

Opportunities and Threats in US Steel Market • Opportunities  Adoption of continuous casting technologies by the price followers can drive down costs by 15 %.  Reduce premium to compete with mini mills and imports.  Presence of many players can give opportunity for inorganic growth.

• Threats    

Fast Growing Imports Increasing Labour Costs Rising Debt to Equity Ratios Some sectors which are dependent on steel have a slow growth rate like steel

Decision • Criteria as per Company policy to decide on capital project – Previous Capital Expenditure allow 100% commitment to the project under evaluation – 25% ROA required within five year of plant start up – Investments on equipments with longer paybacks will be accepted if capacity increases than for those that reduced costs – Restricting debt equity ratio to less than 30% and not issuing new stock