Nucor Case Anlaysis
- 1. Nucor Case Anlaysis By: Hardik Mishra (B08010) Kaushambi Ghosh (B08012) Pankaj Agarwal (B08020) Ritesh Chowdhary (B08026)
- 2. Agenda • Nucor Corporation • Mr. Iverson’s Concern • S.W. Analysis of Nucor • O.T. in U.S Steel Market • Decision
- 3. 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.
- 4. 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
- 5. 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
- 6. 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
- 7. 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
- 8. 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
- 9. 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