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7. What does a SWOT analysis reveal about Nucor’s situation? Does Nucor have any core or
distinctive competencies?
Nucor’s Resource Strengths and Competitive Assets
Proven capability in identifying and implementing innovative and cost-saving steel-making technologies.
So proficient is Nucor at identifying and implementing innovative and cost-saving technologies that its
capabilities here qualify as a very strong core competence and very likely a distinctive competence.
State-of-the-art plants which are kept in tip-top shape with regard to production efficiency and the latest
equipment—the company’s production facilities are among the most modern and most efficient in the
U.S. Capital expenditures at Nucor have been consistently “large” for almost two decades—see case
Exhibit 5.
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Nucor’s Resource Weaknesses and Competitive Liabilities
The economics at Nucor’s steel-making facilities was heavily dependent on favorable scrap steel prices
and adequate supplies of scrap steel (all steel producers cannot employ electric arc furnace technology
to recycle scrap metal—some producers must make steel from scratch).
Nucor’s Market Opportunities
Growing the company’s sales and market share in those product categories where it already competes
Threats to Nucor’s Well-Being
Rising prices for scrap steel (could cut Nucor’s profit margins)
Continued weak global demand for steel, due in large part to stagnant economic conditions across many
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Conclusions: Nucor is a very well managed company with a strategy and resource strengths that have
enabled it to grow competitively stronger over the past two decades.
Nucor has proven competencies in
8. Which, if any, of Nucor’s resource strengths and capabilities qualify as core or distinctive
competencies?
We see three areas where Nucor has core competencies (all of which may qualify as a distinctive competence):
Nucor has a core competence—and most probably a distinctive competence—in identifying and
9. What is your assessment of Nucor’s financial performance the past several years? How
strong is the company’s financial condition?
Students should critically review the numbers in case Exhibits 1, 2, and 3 as a basis for evaluating Nucor’s
performance and financial condition. Case Exhibit 1 clearly indicates that Nucor has been able to grow its
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Using the financial ratio information provided in Table 4.1 in Chapter 4 and carefully examining the statistics
in case Exhibits 1 and 3, students can determine the following:
Nucor’s net sales fell precipitously from $23.66 billion in 2008 to $11.19 billion in 2009 (a drop of
The company boosted its annual dividend from $1.4725 per share in 2013 to to $1.5125 in 2017—equal
to a $0.01 per share annually.
Nucor’s expense ratios during 2013-2017 were as follows:
2017 2016 2015 2014 2013
Cost of products sold as a % of net sales 87.3% 87.5% 93.2% 91.2% 92.5%
Class members should also take note of the much-improved returns on average stockholders’ equity in
2016-2017 (see case Exhibit 3) as compared to the three earlier years.
This is a good point to quiz the class on what factors are most responsible for Nucor’s overall
weaker financial performance in 2009-2017 as compared to its performance in 2004-2008.
We think class members should be able to point to three big factors:
• Sluggish global market demand for steel and steel products that accompanied the Great Recession
and the years since 2008—students should note in case Exhibit 7 that crude steel production
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• The high levels of idle production capacity that pressured many steel producers to engage in
widespread price discounting in order to boost sales volumes and revenues—such price-cutting has
resulted in Nucor having
u lower average prices per ton (see the average prices in case Exhibit 1 for 2015-2017 as compared
to 2011-2014, and also the drops in the average prices for sheet steel, structural steel, steel
10. Based on your analysis and assessment of Nucor’s situation, what issues does Nucor
management need to address?
We think it is always wise to push the class to sum up its analysis and assessment of a company’s situation
by identifying and precisely stating what issues need to be on top management’s “worry list.” Zeroing in
on exactly what strategic issues that company managers need to address—and resolve—for the company
to be more financially and competitively successful in the years ahead forces students to think strategically
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11. What recommendations would you make to John Ferriola?
The actions that students recommend should probably involve the following:
Continue to aggressively pursue the company’s longstanding low-cost provider strategy—it is clearly
the best strategy for Nucor and is well-suited for competing in the steel industry. No major changes in
Nucor’s competitive strategy are thus called for.
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Epilogue
In the first nine months of 2018, Nucor reported consolidated net earnings of $1.71 billion, or $5.35 per diluted
share, compared with consolidated net earnings of $934.8 million, or $2.90 per diluted share, in the first nine
months of 2017. Total tons shipped to outside customers in the first nine months of 2018 were 21,212,000, an
increase of 6% from the first nine months of 2017, while average sales price per ton increased 16%.
The overall operating rate at Nucor’s steel mills was 92% in the third quarter of 2018, compared to 95% in the
second quarter of 2018 and 84% in the third quarter of 2017. The overall operating rate for the first nine months
of 2018 increased to 93% as compared with 87% for the first nine months of 2017.
The average scrap and scrap substitute cost per ton used in the first nine months of 2018 was $361, an increase
of 19% from $304 in the first nine months of 2017.
In commenting on the results for the first three quarters of 2018, John Ferriola, Nucor’s Chairman, Chief
Executive Officer and President said:
The strong financial performance we have had this year continued into the third quarter, and we are on pace
for 2018 to be a record year for earnings. Our financial results are evidence that Nucor was primed and
ready for this long-awaited upturn in the steel market. Our strategic initiatives, including capital projects,
acquisitions and enhanced customer engagement, as well as our active participation in industry trade actions,
have solidified our industry leading performance. Our extensive investments have grown our peak earnings
power and enhanced our many competitive strengths.
In May 2018, Nucor announced the construction of a galvanizing line at the company’s sheet mill in Arkansas to
support Nucor’s growth into a wider and more diverse set of strategic end-market applications. The new
galvanizing line represented a $240 million investment with an annual capacity of approximately 500,000 tons;
it was expected to be operational in the first half of 2021. This project complemented a $230 million investment
currently underway to construct a specialty cold mill complex at Nucor Steel Arkansas. Nucor CEO John Ferriola
In July 2018, Nucor announced that it has purchased a minority equity position in the parent of Trion Coatings,
LLC (Trion Coatings), which was developing an environmentally friendly chrome plating technology. As part
of its investment, Nucor was working with Trion Coatings to commercialize the technology and planned soon
to begin constructing a pilot facility at Nucor Fastener in St. Joe, Indiana. Nucor held an exclusive worldwide
license agreement for the technology as applied to long steel products.
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In September 2018, Nucor’s board of directors approved an investment of $650 million to expand the production
capability of Nucor Steel Gallatin, the Company’s flat-rolled sheet steel mill located in Ghent, Kentucky. This
investment would increase the production capability from 1,600,000 tons to approximately 3,000,000 tons
annually and increase the maximum coil width to approximately 73 inches. This expansion complemented a $176
million investment currently underway to construct a hot band continuous pickle galvanizing line at Nucor
Steel Gallatin, which was expected to be operational in the first half of 2019 and would produce approximately
500,000 tons per year of galvanized hot band steel.
The following two tables highlight Nucor’s improved performance for Q3 2018 (as compared to Q3 2017) and
the first nine months of 2018 (as compared to the first nine months of 2017):
TONNAGE DATA
(In thousands)
Three Months (13 Weeks) Ended Nine Months (39 Weeks) Ended
Sept. 29,
2018
Sept. 30,
2017
Percentage
Change
Sept. 29,
2018
Sept. 30,
2017
Percentage
Change
Steel mills total shipments:
Sheet 2,733 2,617 4% 8,216 8,041 2%
Bars 2,265 2,069 9% 6,881 6,027 14%
6,293 5,872 7% 19,001 17,836 7%
Sales tons to outside customers:
Steel mills 5,031 4,698 7% 15,125 14,508 4%
Joist 136 127 7% 355 332 7%
Deck 130 119 9% 352 329 7%
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CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (Unaudited)
(In thousands, except per share data)
Three Months (13 Weeks) Ended Nine Months (39 Weeks) Ended
Sept. 29, 2018 Sept. 30, 2017 Sept. 29, 2018 Sept. 30, 2017
Net sales $ 6,742,202 $ 5,170,117 $ 18,771,395 $ 15,160,065
Costs, expenses and other:
Cost of products sold 5,452,052 4,591,153 15,588,249 13,111,226
Marketing, administrative and other
expenses 234,081 172,792 651,422 519,429
Earnings before income taxes and
noncontrolling interests 922,502 370,605 2,352,115 1,427,716
Provision for income taxes 216,215 104,500 552,101 442,239
Net earnings per share:
There were no other developments of strategic and operating significance at Nucor to report at the time this TN
was prepared.