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    Nucor Corp (NUE)

    Business Description

    Nucor Corporation is a leading manufacturer of steel and steel products, primarily operating in North America. The company is organized into three main segments: steel mills, steel products, and raw materials, with the steel mills segment being the largest contributor to sales . Nucor is recognized as North America's largest recycler, utilizing scrap steel as the primary raw material for its steel production . The company has developed specialized product lines such as AEOSTM high-strength steel beams, ECONIQTM net zero carbon steel, and ElcyonTM sustainable heavy gauge steel plate, catering to markets like construction, automotive, and wind energy .

    1. Steel Mills - Produces carbon and alloy steel in various forms such as sheet, bars, structural, and plate, and involves steel trading and rebar distribution businesses.
    2. Steel Products - Offers a wide range of products including steel joists and girders, steel deck, fabricated concrete reinforcing steel, cold finished steel, precision castings, metal building systems, insulated metal panels, and utility structures.
    3. Raw Materials - Involves the processing and brokerage of ferrous and nonferrous metals, as well as the production of direct reduced iron (DRI) used in steel mills.

    Q3 2024 Summary

    Initial Price$158.61July 1, 2024
    Final Price$152.71October 1, 2024
    Price Change$-5.90
    % Change-3.72%

    What went well

    • Nucor is investing in advanced nuclear technologies (NuScale and Helion) and carbon capture projects with ExxonMobil to further reduce its already best-in-class carbon footprint, positioning itself as a leader in low-carbon steel production .
    • Nucor is expanding its coated steel products capacity, adding 2 million tons of new galvanizing capacity by 2027, to meet evolving customer demand for thinner gauge and higher strength products, aiming to increase coated products to 35%-40% of its portfolio .
    • Nucor anticipates significant earnings growth from its investments in underserved markets, expecting through-cycle EBITDA at or above $6.7 billion with the addition of the West Virginia mill .

    What went wrong

    • Upcoming capacity additions in 2025 and beyond could lead to oversupply, as Nucor is adding new mills in Lexington, North Carolina, and Kingman, Arizona, which will introduce additional volumes to the market.
    • High import levels are negatively impacting domestic steel pricing and mill utilization rates. For example, rebar imports from Mexico are up 1,700% compared to 2015-2017 averages, exerting downward pressure on prices.
    • Uncertainty in key markets like offshore wind may affect demand projections, as the offshore wind supply chain in the U.S. hasn't materialized yet, and Nucor is only beginning to receive initial orders from European projects.

    Q&A Summary

    1. Brandenburg Ramp-Up
      Q: Update on Brandenburg's production and profitability?
      A: Management reported that the Brandenburg mill achieved EBITDA breakeven run rate in September, with record production and shipping volumes. They expect to sustain this performance by year-end, focusing on high-margin products like 150-inch wide plate for bridge projects and orders for Elcyon plate used in offshore wind. Customers are excited about Brandenburg's capabilities, and the mill will continue to ramp up thoughtfully.

    2. Government Initiatives Impact
      Q: Status of benefits from IRA, IIJA, and CHIPS Act?
      A: Management noted that meaningful benefits from the Infrastructure Investment and Jobs Act (IIJA) and Inflation Reduction Act (IRA) have yet to materialize in their order books. While they've seen progress with the CHIPS Act, including over $370 billion committed to semiconductor facilities, the impact from IIJA and IRA is still pending. They expect these benefits to flow through after the upcoming election, which could influence fiscal policies.

    3. Import Pressures
      Q: How are imports affecting pricing and margins?
      A: The company is experiencing pricing pressure due to high levels of imports, particularly rebar imports from Mexico, which are up 1,700% compared to 2015–2017 averages. Management applauds recent trade case findings but emphasizes the need for vigilance in trade policies to address unfair import practices.

    4. Q4 Earnings Outlook
      Q: Will margins drop below COVID levels in Q4?
      A: While anticipating a meaningful contraction in Q4 earnings, management does not expect margins to fall below COVID levels. The outlook reflects continued trends of moderation rather than a severe downturn. They also highlighted that $168 million in start-up costs affected recent results and that markets are not in a "horribly bad spot".

    5. Capital Expenditure Plans
      Q: Is CapEx expected to stay above $3 billion in 2025?
      A: Yes, CapEx is projected to remain around $3 billion in 2025 due to ongoing large capital projects. Management will provide more precise guidance during the Q4 call but indicated spending will stay at this level for the next year or two.

    6. Decarbonization Efforts
      Q: Update on decarbonization and carbon tariffs?
      A: Nucor continues to invest in low-carbon initiatives, including small modular nuclear reactors with NuScale and a carbon capture project with ExxonMobil. Management believes there's potential for carbon-based tariffs in the U.S. by 2025, which could level the playing field against higher-carbon imports.

    7. Expansion into Coated Products
      Q: Plans for coating capabilities and lighter gauge markets?
      A: The company is expanding its coated steel capabilities to serve the growing demand for lighter gauge products, aiming to increase coated products to 35–40% of their sheet business over the next several years. They are excited about recent trade case wins and are aligning new galvanizing lines with customer demands.

    8. Demand Outlook and Seasonality
      Q: Is the seasonal slowdown expected to be worse in Q4?
      A: Management anticipates a normal seasonal slowdown in Q4, with no worse impact than the previous year. The demand environment is stable, and they expect the first quarter to reflect this stability, supported by consistent order entry rates in certain segments.

    9. Steel Conversion Costs
      Q: Why are conversion costs expected to decline despite lower volumes?
      A: Conversion costs are expected to decrease slightly in Q4 due to improved utilization rates and decreasing start-up costs as new facilities ramp up. While inflation remains stable, efficiencies from higher production volumes at new mills will help stabilize costs.

    10. Plate Demand in Wind Energy
      Q: Outlook for plate demand in wind energy projects?
      A: The company is seeing increased quoting and order activity for onshore wind projects. Although the U.S. offshore wind supply chain hasn't materialized yet, they have received interest and first orders from European offshore wind producers for their Elcyon plate.

    Key Metrics

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    Executive Team

    NamePositionStart DateShort Bio
    Leon J. TopalianChair, President, and Chief Executive OfficerJanuary 2020Leon J. Topalian has served as Chair of the Board of Directors since September 2022 and as President and CEO since January 2020. He joined Nucor in 1996 as a project engineer and has held various leadership positions, including President and COO from September 2019 to December 2019 .
    Stephen D. LaxtonChief Financial Officer, Treasurer, and Executive Vice PresidentMarch 2022Stephen D. Laxton serves as CFO, Treasurer, and EVP at Nucor. He began his career at Nucor in 2003 as General Manager of Business Development and was promoted to Vice President in 2014. Before joining Nucor, he worked for Cinergy Corp. and held financial roles with Ashland, Inc., North American Stainless, and National City Bank .
    David A. SumoskiChief Operating OfficerJanuary 2021David A. Sumoski was appointed COO in January 2021. He began his career with Nucor in 1995 as an electrical supervisor and later served as Maintenance Manager. He was named Vice President in 2010 and has held various leadership roles, including Executive Vice President from 2014 to 2020 .
    Allen C. BehrExecutive Vice President of Plate and Structural ProductsMay 2020Allen C. Behr began his career with Nucor in 1996 as a Design Engineer. He has held various positions, including Engineering Manager, General Manager, and President of the Vulcraft/Verco group. He was named Executive Vice President in May 2020 .
    Brad FordExecutive Vice President of Fabricated Construction ProductsMay 2023Brad Ford serves as EVP of Fabricated Construction Products. He began his career at The David J. Joseph Company in 2001 and held various roles before joining Nucor as General Manager in 2020. He was promoted to Vice President in 2022 and most recently served as Vice President and General Manager of Nucor Steel Decatur, LLC .
    Noah HannersExecutive Vice President of Raw MaterialsJanuary 2023Noah Hanners serves as EVP of Raw Materials. He began his career with Nucor in 2011 as a Melt Shop Engineer and held roles as Shift Supervisor and Melt Shop Manager. He was promoted to Vice President in 2019 and served as Vice President and General Manager of The David J. Joseph Company from 2019 to 2022 .
    John HollatzExecutive Vice President of Bar, Engineered Bar, and Rebar FabricationMay 2022John Hollatz serves as EVP of Bar, Engineered Bar, and Rebar Fabrication Products. He began his career at Nucor in 1999 as a Design Engineer and has held various positions, including General Manager and President of the Vulcraft/Verco group. He was promoted to Vice President and General Manager in 2016 .
    Douglas J. JellisonExecutive Vice President of StrategyJanuary 2021Douglas J. Jellison serves as EVP of Strategy. He began his career at Nucor in 1990 as a Materials Manager and has held various positions, including controller and business development roles. He was promoted to Vice President in 2004 and has served as General Manager and President of several Nucor subsidiaries .
    Gregory J. MurphyExecutive Vice President of Business Services and General CounselJanuary 2021Gregory J. Murphy serves as EVP of Business Services and General Counsel. He began his career at Nucor in 2015 as Vice President and General Counsel. In 2020, he assumed additional responsibilities and was named General Counsel and Vice President of Legal, Environmental, and Public Affairs .
    Daniel R. NeedhamExecutive Vice President of CommercialMay 2022Daniel R. Needham serves as EVP of Commercial. He began his career with Nucor in 2000 as Controller and has held various roles, including General Manager and Vice President. He was promoted to Vice President and General Manager in 2019 and served as EVP of Bar, Engineered Bar, and Rebar Fabrication Products from 2021 to 2022 .
    K. Rex QueryExecutive Vice President of Sheet Products and Talent ResourcesJanuary 2021K. Rex Query serves as EVP of Sheet Products and Talent Resources. He began his career at Nucor in 1990 as a financial analyst and has held various roles, including Controller and General Manager. He was elected Vice President in 2002 and served as President of Nucor's Vulcraft/Verco group before his current role .

    Questions to Ask Management

    1. Given your planned capital expenditures of around $3 billion annually over the next few years, how confident are you that these heavy investments will generate the expected returns, especially considering potential market softness and uncertainties in demand across your key segments?
    2. With additional capacities coming online from projects like West Virginia, Lexington, and Kingman, how do you plan to prevent potential oversupply in the market, and are you considering optimizing your existing footprint or idling older capacity if demand doesn't materialize as expected?
    3. You've indicated that the impact of government initiatives like the IIJA and IRA on your order books has been less than anticipated so far; how does this affect your strategic planning, especially with potential policy changes after the upcoming election, and what measures are you taking to adjust to these uncertainties?
    4. Given the surge in imported high-emissions steel and the intense competition in coated products, particularly in lighter gauge markets, how confident are you in the success of your trade cases, and what is your strategy to enhance competitiveness in these segments if trade relief is delayed or insufficient?
    5. Regarding your investments in decarbonization efforts, nuclear energy with NuScale and Helion, and carbon capture projects, can you provide specific timelines and expected financial outcomes for these initiatives, and how do you address shareholder concerns about the uncertain returns and long-term payback periods associated with these emerging technologies?

    Share Repurchase Program

    Program DetailsProgram 1
    Approval DateMay 11, 2023
    End Date/DurationNo expiration date
    Total additional amount$4.00 billion
    Remaining authorization amount$1.42 billion
    DetailsDiscretionary program to return capital to shareholders and manage capital structure

    Past Guidance

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: Q4 2024
    • Guidance:
      1. Fourth Quarter Earnings: Expected to be lower than Q3 2024, primarily due to lower realized pricing and seasonally lower volumes in the Steel Mill segment. Steel Products segment earnings are also expected to decrease, while Raw Materials segment earnings are expected to be moderately higher .
      2. Fourth Quarter EBITDA: Anticipated to be meaningfully lower than Q3 2024 .
      3. Capital Expenditures for 2024: Approximately $3.2 billion, slightly lower than the initial estimate of $3.5 billion .
      4. Capital Expenditures for 2025: Expected to remain above historic norms due to ongoing growth-oriented expansions .
      5. Steel Products Segment: Long-term target of a 15% EBITDA margin .
      6. Capital Expenditures for 2025 and Beyond: Expected to be around $3 billion or slightly above for the next year or two .

    Q2 2024 Earnings Call

    • Issued Period: Q2 2024
    • Guided Period: Q3 2024
    • Guidance:
      1. Consolidated Earnings: Expected to be lower than Q2 2024, primarily due to lower anticipated earnings from the steel mills segment .
      2. Steel Mills Segment: Earnings expected to decline meaningfully due to lower realized pricing, especially among sheet mills .
      3. Steel Products and Raw Materials Segments: Sequential earnings expected to decline .
      4. Capital Expenditures (CapEx): Approximately $3.5 billion for the year, with elevated levels over the next couple of years .
      5. Conversion Costs: Expected to be flat quarter-on-quarter in Q3 2024 .

    Q1 2024 Earnings Call

    • Issued Period: Q1 2024
    • Guided Period: Q2 2024
    • Guidance:
      1. Consolidated Earnings: Expected to be lower than Q1 2024, with reduced earnings from the steel mill and steel products segments, partly offset by improvements in the raw materials segment .
      2. Steel Mills Segment: Slightly higher volumes expected, offset by lower realized prices .
      3. Steel Products Segment: Higher volumes and lower realized pricing expected, resulting in slightly lower earnings .
      4. Raw Materials Segment: Stable volumes and improved margins expected .
      5. Corporate Eliminations: Impact expected to differ from Q1 2024 due to volume pickups .
      6. Pricing Pressure: Expected on both mills and products .
      7. Macro Level: U.S. economy expected to show resilience, with stable near-term demand .

    Q4 2023 Earnings Call

    • Issued Period: Q4 2023
    • Guided Period: Q1 2024
    • Guidance:
      1. Capital Expenditures for 2024: Approximately $3.5 billion, with major growth projects representing two-thirds of this total .
      2. Earnings Outlook for Q1 2024: Expected to be higher than Q4 2023, due to improved performance from steel mills and raw materials segments .
      3. Brandenburg Plate Mill Production: Expected to produce about 500,000 tons in 2024 .
      4. Brandenburg Profitability: Expected to reach breakeven run rate mid-year .
      5. Cash Balance: Expected to end 2024 with a lower cash balance due to growth plans .