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