Klöckner & Co - Roadshow Presentation September, 2007
Nucor Final Project V8
1. Nucor Steel NYSE: NUE Investment Recommendation: Good in the face of bad. Great when things get good. Team C: Date: December 2, 2008 Nana Kwesi Brobey Carl Cheng Dana R. Malach Sehnaz Oner Tiffany H. Robertson Heath Waldorf
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5. Ratio Analysis of Nucor Quick Ratio (MRQ) 2.02 Current Ratio (MRQ) 2.44 Long Term Debt to Equity (MRQ) 37.74 Total Debt to Equity (MRQ) 40.13 Return on Equity (ROE) per share 29.38 Return on Assets (ROA) 18.27 Return on Invested Capital (ROIC) 22.04
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10. Ratio Analysis: NUE vs. Competitors Within the Steel Sector, Nucor clearly provides better returns on equity, assets, and investment than competitors. Nucor Steel Dynamics US Steel ArcelorMittal Revenue 16.56B 4.38B 16.87B 105.21B EBITDA 3.02B 823.79M 1.72B 21.13B Current Ratio 2.44 1.54 1.89 1.44 Quick Ratio 8.87 9 5.21 9.85 ROE 29.38 28.08 17.79 21.09 ROA 18.27 15.91 12.94 11.84 ROIC 22.04 16.43 13.41 14.01
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15. Appendix A: Cash Flow Forecast 12/31/2011 12/31/2010 12/31/2009 12/31/2008 12/31/2007 12/31/2006 12/31/2005 12/31/2004 12/31/2003 Net Income (Loss) 1,224.36 1,288.80 1,516.23 1,783.80 1,471.95 1,757.68 1,310.28 1,121.49 62.78 Depreciation/Amortization 381.51 401.59 472.45 555.83 427.56 363.94 375.05 383.31 364.11 Net Incr (Decr) in Assets/Liab. (225.11) (155.25) (115.00) (100.00) -202.47 -83.99 357.63 -574.26 -26.12 Cash Flow from Disc. Operations n/a n/a n/a n/a n/a n/a n/a n/a n/a Other Adjustments-Net n/a n/a n/a n/a 238.27 213.61 93.65 99.19 93.84 Net Cash Flow from Operations 1,380.75 1,535.13 1,873.68 2,239.63 1,935.31 2,251.23 2,136.62 1,029.72 494.62 in millions of USD
16. Nucor – 1 Year Chart Nucor vs. S&P 500 1 Year Chart Nucor vs. S&P 500 5 Year Chart Nucor – 5 Year Chart Weekly Appendix B: Stock Charts
Nucor steel gained an upper hand with a strong cash management at the time of global credit crises. Having the ready cash at the time where global enterprise leaders dried their liquid resources presents an advantage and opportunity to invest in highly profitable projects. Therefore Nucor must maintain and progress its strong cash position by closely managing the ROI on each investment while keeping an overall P/L balances in check. Higher Earnings - delivering record second quarter earnings of $581 million and a record first half earnings of $991 million. This performance also set a new quarterly earnings record for Nucor of any quarter, breaking previous record of $522 million earned in the third quarter of 2006 by 11.3%. Higher Costs- December 2007 to June 2008, our monthly scrap and scrap substitutes usage cost increased by $223 per ton. It increased by $66 per ton from December 2007 to March 2008, and then increased by another $157 per ton from March to June of this year. Cash Invested in international Markets mainly in developing countries of Europe. These geographies are Balkans, Turkey, Greece and Bulgaria.
1. Revenue: The amount brought into the business activities 2. With high EBITDA Nucor can be said to adequately cover their debt payments. Earnings Before interest, Taxes, Depreciation, and Amortization. An approximate measure of a company’s operating cash flow based on data from the company’s Interest, Taxes, Depreciation and Amortization. 3. Current Ratio: An indication of a company’s ability to meet short-term debt obligations; the higher the ratio, the more liquid the company is. Current ratio is equal to current assts divided by current liabilities. 4. Quick Ratio : The quick ratio measures a company's ability to meet its short-term obligations with its most liquid assets. The reason why we looked at both Current and Quick ratio is because, with quick ratio it exclude inventory as some companies have difficulty turning their inventory into cash. 5. ROE: We needed to measure ROE to fine out the company’s profitability and also how much profit generated by the money shareholders invested. 6. ROA: Profitability in relationship with total assets. We can also have an idea how efficient management is in using assets generated earnings. 7. ROIC: This helped us to assess the company’s efficiency at allocating the capital under its control to profitable investments.
Stock price of a company is mainly driven by key success factors of Return on Equity, Profitability and Dividends paid to the shareholders. The chart above demonstrates Nucor’s stock performance for the year 2008 benchmarked against its competitors. Competitors are US steel, Steel Dynamics and ArcelorMittal make up the sector along with Nucor. The sector overall has a players that follow the same exact behavioral characteristics overall. All the companies were in close match to each other with tight competition among themselves until march 2008. In April 2008 US Steel stock performance leaving the entire industry behind. Although the upward and downward movement of the stock price for the industry players were same, US steel continued to keep a considerable outperformance until the end of September 2008. In September 2008 the entire industry took a downstream move with overall credit crises in America and global cash shortages that affected the Profit and Loss statements of companies. Nucor performed a secondary back in the spring priced at $74 a share. Current price is in the low $30's. Therefore they were extremely successful in raising that much more money for future operations. Although this downward move was not industry specific companies with stronger cash flow gained competitive advantage as opposed to counterparts with higher dept to equity ratios. It was that specific cash positioning of Nucor steel and higher profitability as well as leaner operations driven by only 75 managers and 20,000 workers raised an outcome of better performing stock. Nucor steel continued to follow the industry trend but at a upper hand with a stock performance that is drastically better than the rest.
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