Nucor Sees Future Growth

Nucor Corp. plans to boost production to more than 20 million tons in the coming years through acquisitions and greenfield plant projects, said Dan DiMicco, Nucor CEO at the company’s annual meeting earlier this week.

As the steel industry plumbs the bottom of its current business cycle, Charlotte, N.C-based Nucor, which generated $800 million cash from operations last year and has debt at a low 16percent of capital, has the financial firepower to forge acquisitions that would boost market share and profitability.

"We're not after fix-up jobs. We're not turnaround artists," DiMicco said, adding Nucor, the #2U.S. steelmaker, is focusing on acquisitions in its bar steel segment and specialized segments. "We'll be in excess of a 20 million ton per year producer."

The steel industry is in the midst of a shake-out, with 20 producers filing bankruptcy in the past two years and prices under intense pressure from a flood of imports, which the industry claims have been dumped illegally on the U.S. market.

Three steelmakers, including Nucor, were profitable in the first quarter 2001, but Nucor saw earnings drop55 percent to 42 cents a share. Even as steel prices fell 17 percent, Nucor set new records for production, shipments and outside sales.

"Nucor is gaining market share. That is critical for our future success," he said.

In recent weeks, Nucor power costs have eased on declining spot natural gas prices and DiMicco said the company was able to boost prices on hot-rolled steel to $300 a ton, a $20 a ton increase.

"We believe that the decline in steel prices is pretty much over," he told reporters after the meeting. "If nothing else, it's indicative of a bottom or a turnaround."

With a low debt-to-capital ratio, Nucor could make $2 billion in acquisitions and still remain below a35-40 percent debt-to-capital ratio, DiMicco said.

Along with acquisitions, Nucor is exploring greenfield opportunities, including a plant that would manufacture 320- foot long track for the railroad industry.

The company told analysts after releasing first-quarter earnings of 42 cents a share to expect similar results in the second quarter and does not forecast longer term results. Reuters.

Read an in-depth Question & Answer with DiMicco, only at RecyclingToday.com.