1. Tyler Clayton April 30, 2012FIN 5326 Equity Valuation & Analysis | Dr. Ryan Whitby | Texas Tech University

2. Company Description Largest steel recycler in North America Largest steel producer by tonnage in the United States Largest mini-mill operator in the United States 3. Company Description 58 operating facilities, primarily in the United States and Canada Total annual steelmaking capacity is 26 million tons 2009 first year since 1966 Nucor had a negative net income 4. Company Description Three (3) company segments:1. Steel mills accounts for 96% of totalrevenue2. Steel products3. Raw materials 5. Company OverviewPrice39.06 (11:15 AM Today)Market Capitalization12.47 BillionFiscal Year 2011 End DateJanuary 31, 2011Fiscal Year 2011 10-K ReleaseFebruary 28, 20122012 Q1 Filing DateApril 19, 2012Headquarters Charlotte, North CarolinaShares Outstanding317.69 MillionAverage Trading Volume (3 Month)2,798,140Institutional Ownership75%Insider Ownership 0.22%Float316.01M 6. Company OverviewBeta vs. S&P 5001.09Dividend Yield (Gross Yield) 3.70%Dividend/Share.365EPS (Trailing 12M )2.440ROA5.95%ROE11.06% 7. Ratios Nucor Website Source: Nucor 8. RatiosPrice/Book 1.65Price/Sales.62Price/Cash Flow8.68Price/Free Cash Flow22.20Price/Earnings (Trailing 12M) 16.39Price/Earnings (Forward 12M) 10.1Payout Ratio61.00% 9. DividendsSource: Bloomberg 10. Nucor Price Chart (10 Year Chart)Source: thinkorswim 11. Nucors Strengths Superior long-term fundamentals and growth prospects1. Low-cost operations2. Technological innovation electric arc furnaces, Castrip facilities3. Superior product mix4. Strong balance sheet strong cash flow, low amount of debt, high credit ratingVertical Integration through Mergers & AcquisitionsCapital InvestmentsDividends 12. Nucor Cultures Five Areas Decentralized management philosophyOnly five (5) managerial levels Supervisor/professional, department manager, division generalmanager, executive vice president, and President/CEOLess than 95 employees at corporate headquarters Performance based compensation Pay for performance: even hourly workers Employee focused Non-unionized Egalitarian benefits Senior officers do not receive traditional perks Many of Nucors programs (profit sharing, scholarshipprogram, service award programs) only available to lower-levelemployees 13. Nucor Cultures Five Areas Customer service and quality Member of U.S. Green Building Council and participant in otherelite environmental programs Technological leadershipOne of first companies to use electric arc furnaces to melt recycled steelCastrip casts sheet steel directly from molten steel with the need for heavy, expensive, and energy-consuming rollersAllows mills to be built in 1/6 the space of a mini-mill and 1/10 the cost of a traditional integrated millPilot projects in Western Australia and BrazilWhich develop low-cost sources of iron for use in its mills 14. SEGMENTATION 15. Geographic SegmentationSource: Bloomberg 16. Product Segmentation Source: Bloomberg 17. HOW STEEL IS MADE 18. Primary Materials Used: By SegmentHow Obtained Steel Mills - Ferrous Scrap Primarily acquired from various sources via DJJ brokerageservices, including from DJJ scrap processing facilities Steel Products - Steel Almost entirely acquired through Nucors steel mills segment Raw Materials - Ferrous and Nonferrous Scrap Purchased from a variety of sources 1. Manufactures and industrial plants 2. Sources which generate or recycle steelscrap, aluminum, copper, stainless steel, and othernonferrous metals 3. Scrap dealers, peddlers, auto wreckers, demolition firmsand others who generate steel which they collect from avariety of sources 19. How Steel is Made Raw Materials Used: Iron Ore Natural Gas Recycled Steel Scrap / Scrap Substitutes Coke Freight Alloys Energy 20. Production: from Raw Materials 21. Production: from Scrap Steel 22. COMPANY SEGMENTS(STEEL MILLS, STEEL PRODUCTS, RAWMATERIALS) 23. Steel Mills Products sold from steel mills are tied to capital and durable goodsspending and are affected by changes in general economicconditions Sell to end markets of automotive, heavy equipment,construction, energy and general manufacturing Sells products primarily to steel services centers, fabricators andmanufactures located United States, Canada, and Mexico 2011: approximately 86% of the production by steel mills weresold to external customers Maintains inventories to fulfill anticipated orders 24. Steel Mills Castrip facility Blytheville, Arkansas Nucor holds exclusive rights in the U.S. and Brazil Breakthrough technology which involves the direct casting of molten steel into near final shape and thickness with minimal hot or cold rolling, allowing lower investment and operating costs, reduced energy consumption and smaller scale plants that can be economically built, and lower environmental emissions Special bar quality mill Memphis, Tennessee Estimated annual capacity of 850,000 tons 25. Castrip Energy Savings Source: Nucor 26. Steel Mills Sheet Sales 2011: about 50% of sheet sales were to contract customers Should help navigate through slow economic recovery and maintain near-term profitability Sheet sales contracts permit price adjustments to reflect changes in prevailing raw material costs, typically having terms ranging from six (6) to twelve (12) months Steel contract sales outside of sheet sales were not significant 27. Steel Mills Plate, Structural, Bar Steel Plate, structural, reinforcing, and merchant bar steel come in standard sizes and grades Maintain inventory levels to meet customers expected orders Bar mill group Manufactures hot-rolled SBQ products to exacting specifications primarily servicing the automotive, energy, agriculture 28. Steel Products Source: Nucor 29. Steel Products - Overview Market for steel products are tied to capital and durable goods spending and are affected by changes in general economic conditions Sell steel joists and joist girders, and steel deck to general contractors and fabricators located throughout the United States Make products to customers specifications DO NOT maintain inventories of finished steel products 30. Steel Products Majority of contracts are firm with fixed prices Usually done on competitive basis against other suppliers Longer term supply contracts may permit Nucor to adjust prices to reflect changes in prevailing raw materials costs Sell fabricated reinforcing products only on a construction contract bid basis Used by contractors in constructing highways,bridges, reservoirs, utilities, hospitals, schools,airports, stadiums, and high-rise buildings 31. Raw Materials - Overview Goal of controlling six to seven million tons of annual capacity in high quality scrap substitutes Processes ferrous and nonferrous scrap metal for use in Nucors steel mills and for sale to various domestic and international external customers Brokers ferrous and nonferrous metals and scrap substitutes Supplies ferro-alloys Provides transportation, material handling, and other services to users of scrap metal 32. MERGERS & ACQUISTIONS 33. Recent Mergers and Acquisitions / Partnerships 2007 Harris Steel Co. Acquired by Nucor located in Canada Produces reinforcing steel (rebar) fabrication Allowed Nucor to expand its presence in the type of steel usedto build bridges, highways, and other infrastructure projects Capacity more than doubled since Nucor purchase (770,00tons up to1,563,000 tons) 2007 Magnatrax Acquired by Nucor - created Nucor Buildings Group Done to bolster its share in the pre-engineered metal buildingsystems market Magnatrax was made up of four brands: American BuildingsCompany, Gulf State Manufactures, Kirby BuildingSystems, and CBC Steel Buildings 34. Recent Mergers and Acquisitions / Partnerships 2008 - David J. Joseph Company (DJJ) Acquired by Nucor DJJ was one of the largest scrapbrokerages Processing of ferrous and nonferrous metals Primary raw material used by Nucors electric arcfurnace steel mills Brokers ferrous and nonferrous metals, pig iron, hotbriquetted iron (HBI) and direct reduced iron (DRI) Q1 2012 acquired three (3) metal recyclingcompanies, providing additional annual capacity of275,000 tons 35. Recent Mergers and Acquisitions / Partnerships 2008 - Duferco S.A., Duferdofin Nucor S.r.1. International company operating in Italy Operates a 1M tons-per-year steel melt shop with a bloom billetcaster and three (3) rolling mills 2010 - Mitsui & Co. Formed agreement to form NuMit LCC Nucor owns a 50% economic and voting interest Nutmitt LCC Owns 100% equity interest in Steel Technologies LLC Steel Technologies operates 25 sheet processing facilities located throughout United States, Canada, and Mexico 36. FUTURE GROWTH POTENTIAL 37. Capacity Utilization in U.S. By Segments Steel Mills Q1 2012: 79% (Industry rate of 78%) 2011: 75% 2010: 70% 2009: 52% 2008: 81% 2007: 87% Steel Products 2011: 57% 2010: 54% Raw materials 2011: 70% 2010: 69% 38. Going Forward : Nucor Future Growth Direct reduced iron (DRI) facility In Louisiana Received air quality permit in 2011 from the LouisianaDepartment of Environmental Quality for facility to bebuilt Allows for construction of two plants with a combined annual DRI production of 5,500,000 tons Broke ground on first plant in March 2011 Scheduled to start-up in mid-2013 39. Going Forward : Nucor Future Growth International Growth Australia, Brazil Technology Advancements Strong cash flow and balance sheet should provide opportunities and flexibility for continued future growth 40. Future Growth - Capital Spending in NonresidentialConstruction Market in United States Large driver of Nucor sales within UnitedStates Industrial and commercial sectors Capital spending on infrastructure that ispublicly funded such asroads, bridges, schools, prisons, and hospitals Nucor heavily impacted by strength of sales toautomotive companies Negatively impacting by Japanese earthquake andtsunami in March 2011 41. EFFECT OF STEEL PRICE ONNUCOR 42. Steel Price Index (2006 Current)Source: Bloomberg 43. Nucor Price (2006 Current) Source: Bloomberg 44. Scrap Prices Based on changes in global supply/demand Which is based on changes in globalsupply/demand for steel products Late 2003 Q3 2008 sharp rise in price of scrap steel Large rise in demand for scrap steel: domestic and internationally Nucor surcharge tied to market indices tied to steel scrap and other raw materials 45. PRODUCERS/CONSUMERS OF NUCORSTEEL(SUPPLY CHAIN) 46. Supply Chain Source: Bloomberg 47. Suppliers to Nucor% of Suppliers Revenue - 2011 1. Cliffs Natural Resources 7.09% 2. AMG Advanced 3.35% 3. Precision Cast parts 0.56% 4. Praxair Inc. 0.14% Diversified Supplier Base - not reliant on single supplier Supplier Code of Conduct 48. Consumers of Nucor ProductsNucors % of revenue derived - 20111. Deere & Co. 3.94%2. Caterpillar 3.13 %3. Nissan 2.90%4. Tenaris 2.73%5. Bayer Motor 1.75%6. Whirlpool - 0.91%7. Electrolux 0.30%8. Evraz 0.55%Diversified Consumer Base - Not reliant on single consumer for revenue 49. PORTERS FIVE FORCES 50. Rivalry Among Existing CompetitorsHIGH Cost competitive Many current players Lack of product differentiation Must form relationships with buyers 51. Threat of New EntrantsLOW Large Barriers to Entry Capital Intensive Already high level of competition Many current players Little product differentiation Price competitive Regulation and Environmental Laws 52. SubstitutesLOW For the most part, no other metalcan offer equal benefits per cost compared to steel Aluminum: most potential substitute, but does not offer strength of steal 53. Supplier Power Need for raw material No substitute for scrap metal MEDIUMand iron ore Size of Nucor will help due to purchase in bulk from suppliers 54. Buyer Power Lack of product differentiation HIGH Overcapacity Competition from steel importsto United States Critical to form strong relationships withlarge buyers, such as automobile industry andlarge scale construction companies 55. RISKS 56. Factors Effecting Future Business /Sales Global / U.S. economy Uncertainties surrounding severe economic downturn in construction markets and excess world capacity for steel production Pressure from imports Challenging legality of imports from China Changes in law or government regulationsaffecting environmental compliance That may result in greater regulation of greenhouse gas emissions, which could increase Nucors energy costs, capital expenditures, and operating costs 57. Macro Environment / Risk Factors Cyclical industry Commodity prices / Cost of raw materials Especially scrap steel Changes in availability and cost ofelectricity and natural gas Subject to volatile market conditions 58. COMPETITORS 59. Competitors - Domestic North American Competitors 1. United States Steel Corp 1. Integrated steel producer of flat-rolled and tubularproducts with major production operations in NorthAmerica and Europe 2. Market Cap: 3.67B 2. Schnitzer Steel Industries 1. Recycler of ferrous and non ferrous scrap metal 2. 43 operating facilities throughout 14 states 3. Market Cap: 1.15B 3. Steel Dynamics 1. Steel producer and metals recycler in the United States 2. Market Cap: 3.08B 60. Nucor International Locations 61. Competitors - InternationalInternational Competitors1.ArcelorMittal 1.Global steel producer that produces range of finished and semi-finished products 2.North America, South America, Europe, Asia, Africa 3.Flat products, including sheet and plate, long products, including bars, rods, and stainless steel products 4.10% of worlds steel output 5.Market Cap: 29.55B2.POSCO 1.Korea 2.Integrated steel producer of hot rolled steels, steel plates, wire rods, cold rolled steels, electrical steels, etc3.Gerdau SA 1.Brazil leading steel producer in Brazil (also operations in other areas of South America, as well as North America and Europe) 2.Produce long steel and flat steel items mainly through the process of fabrication in electrical furnaces from scrap metal and purchased pig iron, as well as through blast furnace 62. U.S. Steel (X) Price (2006 Current)Source: Bloomberg 63. Steel Dynamics (STLD) Price (2006 Current)Source: Bloomberg 64. Arcelormittal (MT) Price (2006 Current) Source: Bloomberg 65. Valuation vs. PeersSource: Bloomberg 66. Revenue Comparison vs. Peers Source: Bloomberg 67. Capital Structure vs. Peers Source: Bloomberg 68. FINANCIALSFollowing Financials Charts Sources: Nucor and Bloomberg 69. Balance Sheet - Q1 2012 70. Balance Sheet Assets (Annual)Common Sized and Growth % 71. Balance Sheet Liabilities and Equity (Annual)Common Sized and Growth % 72. 2012 Q1 - Income Statement 73. Income Statement (Annual)Common Sized and Growth % 74. 2012 Q1 Cash Flows 75. Statement of Cash Flows (Annual) 76. Net Sales Year Over Year 77. Net Sales Product Mix 78. Net Earnings / ROE 79. Analyst Recommendations 80. Earnings Surprise - Quarter 81. Earnings Surprise - Annual 82. NUCOR (NUE) STOCK EVALUATION 83. Nucor Beta vs. S&P 500 Source: Bloomberg 84. Price Charts (6 Months)Source: Bloomberg 85. Price Charts (2 Years) Source: Bloomberg 86. 6 Months vs. Competitors Source: Yahoo Finance 87. 2 Years vs. CompetitorsSource: Yahoo Finance 88. 5 Years vs. CompetitorsSource: Yahoo Finance 89. VALUATION 90. Credit Rating Highest credit rating for any metals and mining company in North America Investment grade rating Moodys A2 S&P - A 91. Credit Profile Source: Bloomberg 92. Bloomberg Default Risk - Industry Source: Bloomberg 93. Capital StructureSource: Bloomberg 94. Nucor Country and Equity Risk PremiumSource: Bloomberg 95. From 2012 Q1 Results Company Expectations GoingForward Sold order entry rates 2011 started strong with increase volume and price recovery Construction market stabilizing Increases in backlogs and in order entry rate in Harris rebar and building systems Improvement in orders of pre-engineered metal buildings Which usually improve before joist business Sign of jobs in this area picking up more jobs seen in this area for some time 96. Valuation - DCF Forecasted Revenue through 2017 (5 Year Investment Period), finding FCF for each year Projected growth of around 9.5% over this period Perpetual growth of 2.5% Adjusted WACC Treasury Rates (1, 2, 3, 5 Year), Adjusted Risk Free, Market Risk Premium MV per share = $49.32 97. Buy Vertically Integrated: Growth Through M&A Growing International Presence Advanced Technology Better able to adapt to potential increases of input and energy costs Favorable Economic Growth Ahead Strong Dividend Yield: 12 Month Yield of 3.24%