Nucor Case Anlaysis

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 • Foundedin 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 Threatsin 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 asper 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