Nucor Sees Downturn as an Opportunity for Growth

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Researched by Industrial Info Resources (Sugar Land, Texas)--Steel manufacturer Nucor Corporation (NYSE:NUE) (Charlotte, North Carolina) recently released earnings for the fourth quarter and fiscal year 2008, which ended December 31, 2008. While the company's net income for the year exceeded all previous records, the quarterly income suffered an incredible year-over-year drop.

Nucor's net income for the year was $1.83 billion, an increase of 24.5% from the $1.47 billion earned in 2007. The company's previous net-earnings record was $1.76 billion in the 2006 fiscal year. Nucor operates in two business segments: Steel Mills and Steel Products. The overall tonnage produced in both segments fell, but high steel prices early in 2008 helped increase profits.

The record-breaking earnings were certainly not helped by Nucor's net earnings in the last quarter of the year, which fell more than 70% from 4Q07, moving from $364.8 million to $105.9 million in 2008. In a conference call regarding the earnings, Nucor's Chief Financial Officer, Terry Lisenby, discussed the economic shift that occurred in the fourth quarter. "Fourth quarter 2008 net income of $106 million declined dramatically from the pace established in the first nine months of this year, where our quarterly earnings averaged $575 million," said Lisenby. "Fourth quarter net income also decreased 71% from year-ago quarterly net income of $365 million. The abrupt reversal in all of our markets resulting from a global financial crisis is unlike anything experienced in our careers." Nucor's steel mill utilization rate in the fourth quarter was 48%, down from a rate of more than 91% for the first nine months of 2008.

CEO Dan DiMicco seemed optimistic about the chance of growth for Nucor during the downturn and discussed the company's previous acquisitions made during economically lean times. "Nucor has a long history of taking advantage of economic downturns to grow stronger and expand our long-term earnings power," he said. "It is worth noting that a healthy portion of the profits realized over the past five years has been generated by assets we built, acquired and improved during the last economic downturn experienced during the 2001 to 2003 time period. These highly successful growth initiatives include our entry into the plate market, our acquisition of Auburn Steel, Birmingham Steel and Trico Steel assets.

Industrial Info, as part of its North American Industrial Database is currently monitoring $5.2 billion of projects belonging to Nucor. Nucor's most ambitious project involves the construction of a grassroot steel mill and cogeneration power plant in Convent, Louisiana. The project is still in the planning and permitting stages, but is scheduled to consist of three phases of construction and will require an estimated $4 billion of investment.

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