Nucor Corporation · NYSE:NUE
Nucor — Investor Day (June 2019)
72 slides from Nucor's investor day presentation, Jun 20, 2019
Slide 1: 2019 Investor Day
2019 Investor Day June 20, 2019 1
Slide 2: Forward-Looking Statements
Forward-Looking Statements Certain statements made in this presentation are forward-looking statements that involve risks and uncertainties. The words “believe,” “expect,” “project,” “will,” “should,” “could” and similar expressions are intended to identify those forward-looking statements. These fo
Slide 3: Nucor Overview
Nucor Overview • North America’s most diversified steel and 2018 RESULTS steel products company 2018 Net Sales: $25 Billion • Largest steel producer in the U.S Steel Shipped: 27.9 Million Tons • 25 scrap-based steel mills with annual production capacity of 27 million tons EPS: $7.42 • North America’
Slide 4: Nucor's Track Record: Generating profits throughout the cycle
Nucor Quarterly EBITDA ($ millions) Nucor’s Track Record Generating profits throughout the cycle U.S. Capacity Utilization Rate (Quarterly Avg.) 4
Slide 5: Strategic Growth Investments
Strategic Growth Investments Completion/ Budgeted Amount Project Product Type Startup (millions of $USD) Logistical Advantages Rebar Micro Mill in Missouri Bar Q4 2019 $250 Rebar Micro Mill in Florida Bar H1 2020 $240 Nucor Steel Kankakee Midwest Merchant Bar Expansion Bar Q4 2019 $180 Moving Up the
Slide 6: Today's Agenda
Today’s Agenda Delivering Profitable Long-term Growth John Ferriola – Chairman & CEO Driving Commercial Excellence Rick Blume – VP & GM of Commercial Moving up the Value Chain at Hickman MaryEmily Slate – EVP Tubular Products Public Affairs and Trade John Bass – GM of Public Affairs Capital Allocati
Slide 7: Competitive Strengths
NUCOR COMPETITIVE STRENGTHS 7
Slide 8: Principles of Nucor's Culture
Principles of Nucor’s Culture SAFETY FIRST Teamwork Pay for Performance Continual Improvement Environmental Stewards 8
Slide 9: Safety Performance
Safety Performance TOTAL OCCUPATIONAL INJURY & ILLNESS RATES PER 100 WORKERS / 200,000 HOURS PER YEAR TOTAL DAYS AWAY, RESTRICTED & TRANSFER CASE RATES PER 100 WORKERS / 200,000 HOURS PER YEAR Source: Nucor; Bureau of Labor Statistics (BLS) 9
Slide 10: Environmental Performance
Environmental Performance GREENHOUSE GAS ENERGY (GHG) EMISSIONS INTENSITY AVERAGE METRIC TONS OF CO2 EMITTED AVERAGE GIGAJOULE PER METRIC TON FOR EVERY METRIC TON OF STEEL PRODUCED OF CRUDE STEEL PRODUCED 2018 2017 2018 2017 GLOBAL GLOBAL AVERAGE N/A 1.83 AVERAGE N/A 20.0 NUCOR NUCOR STEEL MILLS 0.9
Slide 11: Low, Highly-Variable Cost Structure
Low, Highly-Variable Cost Structure Sustainable Profitability / Highly Variable Cost Structure / Stable Margin Spread Metal Margin Spread 2010 to 2018 11
Slide 12: Strong Balance Sheet
Strong Balance Sheet Low Financial Leverage Strongest credit ratings in the sector: Baa1/A- Current liquidity of $1.4 billion in cash and an undrawn $1.5 billion credit facility maturing in 2023 No material debt maturities until 2022 12
Slide 13: Consistent Cash Generation
Consistent Cash Generation 2014-15 Downturn Operating Cash Flow Net Income $1,000 $2.5 Sales Price down $140/ton $140 $800 Metal Margin down $29/ton Price per Ton $600 $29 $2.0 $400 $111 2015 2015 2014 2014 2014 2015 $200 Billions of U.S. Dollars $1.5 $0 Sales Price Scrap Cost Metal Margin $1.0 2017
Slide 14: Diversified Across Steel and Steel Products
Diversified Across Steel and Steel Products Tubular 30% Joist & Deck 17% Rebar Fab Cold Finish 28% Bar 12% Other Metal States/Provinces with Nucor locations (Grating, Buildings Mesh, 6% Fastener) 6% 14
Slide 15: Market Leadership
Market Leadership #1 Structural Steel Merchant Bar Steel Steel Joist & Deck Steel Piling Distribution North American Cold Finish Bar Steel Metal Buildings Market Leader #2 Plate Steel Hollow Structural Section (HSS) Steel Tubing Steel Electrical Conduit Pipe North American SBQ Bar Steel Market Leade
Slide 16: Strategy for Profitable Growth
NUCOR STRATEGY FOR PROFITABLE GROWTH 16
Slide 17: Nucor's Strategy: Profitable Growth
Nucor’s Strategy – Flexible & Focused 1 Low Cost Producer Profitable Growth Five Drivers to 2 Market Leadership 3 Move Up the Value Chain 4 Expand Channels to Market 5 Commercial Excellence Leveraging Nucor’s Position of Strength 17
Slide 18: Low Cost Producer
1 Low Cost Producer Past Initiatives: Raw Materials Strategy Current Initiatives: Bar Mill Strategy • Deliberate investments to secure Nucor’s low • Carefully considered capital outlay that cost position for the long term will ensure that Nucor’s bar mills continue • Natural Gas investment program b
Slide 19: Market Leadership
2 Market Leadership Past Initiatives: Pipe & Tube Acquisitions Current Initiative: Brandenburg Plate Mill • Leading market position established by 3 • Leadership in terms of cost, quality, strategic transactions in rapid succession reliability, service and market share • Excellent strategic fit with
Slide 20: Move up the Value Chain
3 Move up the Value Chain Past Initiatives: Yamato Investments Current Initiatives: Gallatin Investments • $190 million total investments completed • 500,000 tons of new 72” wide galvanizing earlier this decade to upgrade Yamato’s capacity aimed squarely at growing capabilities have yielded excellen
Slide 21: Expand Channels to Market
4 Expand Channels to Market Downstream Steel Usage 19% 16% Steel Products Segment 8% 2006 2016 2018 21
Slide 22: Commercial Excellence
5 Commercial Excellence Investing in People and Technology 22
Slide 23: Driving Commercial Excellence
Rick Blume VP & GM of Commercial COMMERCIAL EXCELLENCE DRIVING COMMERCIAL EXCELLENCE 23
Slide 24: Commercial Evolution
Commercial Evolution Decentralized Mill-focused Sales Team Building the Commercial Basics Unifying the Sales Team Five Commercial Commandments Commercial Excellence Building the Team Building the Sales Process Executing the Commercial Strategy 24
Slide 25: Commercial Five Commandments
Building the Commercial Process Commercial Five Commandments 1. Leverage our size 2. Optimize our product diversity 3. Present a single, united front to the market 4. Earn a premium over competitors 5. Achieve higher revenue due to mix. 25
Slide 26: Building the Commercial Process
Building the Commercial Process 26
Slide 27: Building the Commercial Process: Expanding Expectations
Building the Commercial Process Expanding Expectations 27
Slide 28: Commercial Excellence
Commercial Excellence “Our vision must include the perspective seen through the eyes of our customer. Such that customers desire and choose to do business with us because they believe that doing so brings value to their company and they are willing to pay for the value”. — John Ferriola, CEO Nucor 2
Slide 29: Building the Commercial Process
Building the Commercial Process Gallup identified 3 key opportunities for focus EASE OF DOING BUSINESS CONSISTENT BUILDING STRATEGIC RELIABILITY PARTNERSHIPS Sales Team Effectiveness 29
Slide 30: "Best in Industry" Commercial Team
“Best in Industry” Commercial Team TEAM RESPONSIBILITY Commercial Directors Market-Driven Product Group Commercial Strategy Marketing and End Use Market Knowledge & Driving Digital Commercial Digitalization Strategy Division Sales Managers Responsible for Division and Product Group Sales Nucor Autom
Slide 31: Sales Team Effectiveness
Sales Team Effectiveness • Success Factor Commercial Profile • Nucor Way of Selling: Value Based • Updated Sales Compensation • Selling Deep & Executive Engagement • CRM & Other Digital Tools 31
Slide 32: Targeted Diversification
Targeted Diversification • Targeted diversification advantageous in cyclical markets • End use Market • Product • Geography • Customer • Capex investments to address strategic market/customer objectives • Not a “build it and they will come” strategy. • Value added products/services for value appreci
Slide 33: Investing in Capabilities
Investing in Capabilities Strategic Investments Commercial Objective / Diversification End Use New Mills Product Geography Downstream Cost Market Plate Steel Mill in Kentucky Rebar Micro Mills in Missouri & Florida Nucor-JFE Joint Venture Galvanizing Line in Mexico Major Upgrades / Expansions Nucor
Slide 34: Commercial Excellence: Customer Response
Commercial Excellence Customer Response 1st EAF GM Supplier of the Year - 2018 Honda Environmental Award - 2017 Volkswagen Supplier of the Year- 2017 Berlin Thyssenkrupp Supplier of the Year - 2017 34
Slide 35: The Road Forward
The Road Forward • Voice of the Customer 3.0 • Profitable Utilization of New Capabilities • Digitalization a Key Enabler • NucorNow • Enhanced EDI • Nucor.com • Knowledge Empowering Nucor (KEN) 35
Slide 36: Powerful Partnerships. Powerful Results.
POWERFUL PARTNERSHIPS. POWERFUL RESULTS.
Slide 37: Hickman, AR: Moving Up the Value Chain
MaryEmily Slate EVP – Tubular Products HICKMAN, AR MOVING UP THE VALUE CHAIN 37
Slide 38: Hickman Operations
Hickman Operations Sheet Steelmaking Complex (pre-2017) Freight Modes • Hot Mill Pickle Line 1 • Vacuum Degasser • Truck • Cold Mill • Tension Level Line • Rail (BNSF) • Galvanizing Line • Barge 38
Slide 39: Sheet Mill Group
Sheet Mill Group Nucor Sheet Mills ➢Hickman, AR ➢Decatur, AL ➢Crawfordsville, IN ➢Ghent, KY ➢Huger, SC Castrip® Sheet Mills ➢Armorel, AR ➢Crawfordsville, IN 39
Slide 40: Strategic Investments: Hickman Sheet Mill
Strategic Investments Hickman Sheet Mill Profitable Growth 1 Low Cost Producer Five Drivers to 2 Market Leadership 3 Move Up the Value Chain 4 Expand Channels to Market 5 Commercial Excellence Hickman projects support Nucor’s strategy of moving up the value chain to meet demand for high-value- added
Slide 41: Hickman Cold Mill Expansion
Hickman Cold Mill Expansion STATUS: Currently starting up • Adding a specialty cold rolling complex, utilizing existing melt capacity • Expands Nucor’s capability to produce Motor Lamination (ML), High Strength Low Alloy (HSLA) & Advanced High Nucor Arkansas Strength Steel (AHSS) products • Flexible
Slide 42: Hickman Galvanizing Line
Hickman Galvanizing Line STATUS: Mid-2021 Startup (expected) • Adding a Generation 3 Flex Galvanizing Line • Utilizes Specialty Cold Mill substrate • Annual capacity ~500,000 tons • Capable of efficiently making the widest variety of grades to support automotive’s growth and needs for stronger/light
Slide 43: Building the Mill of the Future
Building the Mill of the Future • The two CAPEX projects expand NSA’s capability to efficiently produce products beyond that of any North American mill • Added capabilities: Roll steel for Hybrid Electric motors; tool steels; high alloy steels • Will produce higher strength steels not in use today (
Slide 44: Centrally Located
Centrally Located Nucor la ar: fis ‘ [ys \ Yio | TS ~ | = —~ } ae ) / ] | | vee CHRYSLER \ ( \ | ) _ y . Mercedes-Benz —=@g=—— it | : mK TaSLA \ | | FOA \ \ bd FIAT CHRYSLER AUTOMOBILES \ marsuaisH 8 i= ov D> } f . = @ Volkswagen KIA MOTORS
Slide 45: Nucor Sheet Group Expected End Use Shipments
Nucor Sheet Group Expected End Use Shipments Current Shipment Mix Future Shipment Mix 45
Slide 46: Public Affairs: Nucor & Trade
John Bass GM of Public Affairs PUBLIC AFFAIRS NUCOR & TRADE 46
Slide 47: Nucor Public Affairs
Nucor Public Affairs 2018 ANNUAL REPORT MINCE L JONES METZ JONEE MORROW BREAN JONER BRACKLEY TJOGEPH CHRISTIAN JOSEPH DARIO JOSEPH MICHASL A JOSEPH JOM DJOW ERS UNA A KTRERE ANCRUEW® ZOVE ALAM JOYNER GAREN KYLE JOvHER JUSTIN S JUAREZ RAMON JUAREZ JM SERGIO JUAREZ J HECTOR NICOLAS AUAMEZ ACEVEDO AARO
Slide 48: Domestic Production in Decline
Domestic Production in Decline The U.S. Became a Foreign Steel Dumping Ground US Crude Steel Production One-Way Steel “Trade”: 2013 – 2017 (1973-2018) 91 mt imported from 6 trading “partners” vs. only 1.2 mt exported 160 150 1973: 151 million tons (peak) 140 130 millions of net tons 120 110 2018: 95
Slide 49: Nucor's Transition to Offense on Trade
Nucor’s Transition to Offense on Trade Our industry and nation thrives in a system of fair AND RULES-BASED trade. We all lose if we don’t fight trade cheaters and state-supported overcapacity. 49
Slide 50: Enforcing the Rules of Free Trade
Enforcing the Rules of Free Trade Trade Case Process *AD & CVD petitions are filed together, so the timelines run concurrently 50
Slide 51: Duties from Successful Trade Cases
Duties from Successful Trade Cases Trade Cases have been effective, but multiple rounds over several years needed for comprehensive coverage Hot-Rolled Cold-Rolled CORE Plate Rebar Wire Rod Australia Brazil China Austria Belarus Belarus Brazil China India Belgium China Brazil China India Italy Brazi
Slide 52: Transshipping Chinese Steel
Transshipping Chinese Steel 52
Slide 53: Section 232: A Comprehensive Solution
Section 232: A Comprehensive Solution • Goal: Reduce imports 37% to achieve 80% U.S. capacity utilization rate - minimum needed for the industry’s long-term viability • Necessary to protect our national and economic security and vital for the long- term financial health of the steel industry • Stron
Slide 54: Current Status of 232 Tariffs
Current Status of 232 Tariffs Absolute Quotas Monitoring 25% Tariff Argentina 135% avg. 2015-2017 volumes, by product Australia All Other Countries Brazil Finished: 70% avg. 2015- 2017 volumes, by product Canada Covers only Semi-Finished: 100% avg. 2015-2017 volumes 28% of all imports Mexico South K
Slide 55: Effect of Tariffs on Steel Imports into U.S.
Effect of 232 Tariffs on Steel Imports into U.S. Monthly Difference in Total Imports Year-Over-Year 1,000 March 2019 661 New 7-year high: 82.9% Capacity 403 Utilization 500 65 129 Thousands of Net Tons 0 -86 -63 -244 -340 5.35 -500 -380 -537 -495 -557 -450 million net tons -1,000 -824 fewer -1,064 i
Slide 56: 232 Product Exclusions
232 Product Exclusions Steel Exclusion Requests: 61,297 Nucor Objections: 3,809 (6.2%) Product Exclusion Request Technical 70,000 Yes Review/ Defer 60,000 Capability 16,797 50,000 File Objection 14,568 40,000 • Monitoring exclusion requests 30,000 posted by U.S. Commerce Dept. is 20,000 29,932 criti
Slide 57: Impacts of Trade Enforcement Policies
Impacts of Trade Enforcement Policies Imports’ Share of U.S. Finished Steel Market (2009-2019) 30% 29% 29% 28% 28% 27% 27% 26% 25% 26% 24% 24% 23% 23% 23% 22% 22% 21% 21% 21% 21% 20% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 YTD 57
Slide 58: Steel Sector Has Been Slower to Recover Post-2008
Steel Sector Has Been Slower to Recover Post-2008 After-Tax Profits as a Percentage of Net Sales (Annually) 10.0% Iron, Steel & Ferroalloys All Manufacturing 9.2% 8.0% 6.0% 6.6% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 58
Slide 59: China Set New Production Record in 2018
China Set New Production Record in 2018 U.S – China Raw Steel Production (2000-2018) 1,200 Almost China: >1 BILLION tons 900 produced in 2018 1,000 million MORE net tons Millions of Net Tons 800 than in 2000 600 400 17 95 Million Tons million 200 in 2018 LESS net tons than in 2000 0 2000 2001 2002 2
Slide 60: Imports Are Still a Threat Due to Overcapacity
Imports Are Still a Threat Due to Overcapacity Steelmaking Capacity 60
Slide 61: U.S.-Mexico-Canada Agreement (USMCA)
U.S.-Mexico-Canada Agreement (USMCA) • Trilateral deal with Canada and Mexico reached last September is still subject to approval by Congress • If ratified, deal should be a big WIN for steel industry in U.S. • Incentivizes use of North American steel in autos, auto parts and other products containi
Slide 62: What We Ask of Our Leaders
What We Ask of Our Leaders • Support aggressive trade enforcement • Address global steel overcapacity • Support spending to rebuild our crumbling infrastructure • Fight against over- regulation of our U.S. industrial sector • Support policies that promote abundant and affordable energy 62
Slide 63: Capital Allocation
Jim Frias EVP – Chief Financial Officer CAPITAL ALLOCATION 63
Slide 64: Capital Allocation Priorities
Capital Allocation Priorities 1. Investing In 2. Base Dividend 3. Share Profitable Growth Repurchases or Growth Commensurate Supplemental Opportunities With Earnings Dividends Nucor’s goal is to return a minimum of 40% of our earnings to shareholders, while maintaining our strong investment grade cr
Slide 65: $5.9 Billion Returned since 2009
$5.9 Billion Returned since 2009 $1,400 120% $1,200 NM 100% $1,000 80% Millions of U.S. Dollars $800 60% $600 40% $400 20% $200 $0 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Dividends Repurchases Payout Ratio 65
Slide 66: Strategic Growth Investments
Strategic Growth Investments Completion/ Budgeted Amount Project Product Type Startup (millions of $USD) Logistical Advantages Rebar Micro Mill in Missouri Bar Q4 2019 $250 Rebar Micro Mill in Florida Bar H1 2020 $240 Nucor Steel Kankakee Midwest Merchant Bar Expansion Bar Q4 2019 $180 Moving Up the
Slide 67: Why Market Leadership Matters
Why Market Leadership Matters Nucor’s Success in Structural Steel NYS II Startup Berkeley Beam Mill Startup NYS Startup 67
Slide 68: Performance Improvement Initiatives – Metal Buildings
Performance Improvement Initiatives – Metal Buildings 2500 • Industry leader with approx. Average: 1,912 30% market share 2,039 • 2,800 Authorized Builders 2000 1,942 1,903 1,919 • Business has been rightsized 1,760 Average: 1,537 to reflect market conditions 1,566 1,561 1,579 1,614 Demand (Thousand
Slide 69: Performance Improvement Initiatives - Louisiana DRI
Performance Improvement Initiatives - Louisiana DRI Nucor Steel Louisiana – Project 8000 • Startup December 2013 • Design capacity 2.5 mtpy 9000 2500 • People & Process 8000 improvements implemented 7000 2000 • Annual records set in 2018 • 1.8 million tons, Metric Tons (in Thousands) Operating Hours
Slide 70: All Markets Outlook Summary
All Markets Outlook Summary 20 of 24 Markets Are Stable or Growing Declining Stable Growing Markets Markets Markets 17 3 All Others 4 Note: Declining < 0%; Stable 0 to 2%; Growing > 2% 70
Slide 71: Our Values & Mission
John Ferriola President, CEO & Chairman NUCOR OUR VALUES & MISSION 71
Slide 72: Our Mission
Our Mission NUCoOR MISSION We will be the SAFEST WE WILL apy ewe TAKE CARE OF OUR We build PARTNERSHIPS based on INTEGRITY and TRUST with every teammate, partner and c rto ensure MUTUAL long-term success BY DELIVERING THE = HIGHEST VALUE PRODUCTS Se cak ull caomacra SERVICES, EXPERIENCES AND team in