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Announcement:

Moody's affirms Nucor's ratings; outlook negative

18 Nov 2010

New York, November 18, 2010 -- Moody's Investors Service has affirmed Nucor Corporation's (Nucor) A2 senior unsecured and Prime-1 short term ratings. This affirmation includes the A2 and Prime-1 ratings on the revenue bonds issued by the Parish of St. James, State of Louisiana, which bonds are unconditionally guaranteed by Nucor. Moody's notes that these bonds are now being issued in two series of $300 million each, maturing in November 2040 (Series 2010A-1 and Series 2010B-1), rather than the previously announced three series of $200 million each. As a result, Moody's has withdrawn the A2 senior unsecured rating on the $200 million Series 2010A, which had a maturity date in November 2030. Nucor's rating outlook is negative.

Proceeds from the revenue bonds (Gulf Opportunity Zone Bonds) will be used to provide tax exempt financing for certain manufacturing facilities associated with Nucor's greenfield direct-reduced iron making facility located in St. James Parish, Louisiana. Total project costs are estimated at $750 million. The construction of this facility is in accordance with Nucor's strategy of achieving greater self sufficiency with respect to its iron input requirements for its steel making.

Rating Rationale

Nucor's A2 senior unsecured rating reflects the company's strong liquidity profile ($1.9 billion in cash and short-term investments at October 2, 2010) as well as its moderate leverage position as measured by its Debt/Capital ratio, which was roughly 34% as of October 2, 2010 (using Moody's standard adjustments). The rating also considers Nucor's strong operating characteristics, such as its ability to quickly adjust production to changing demand trends, together with its highly variable and low cost profile. In addition, the company's technological competencies, as evidenced by its development of innovative production processes such as Castrip, are further favorable considerations. The rating also considers the company's diverse product capabilities and end market exposures, which in more normal business cycles would mitigate weakness in any particular segment. The company's strong liquidity profile, bolstered by its substantive cash position, supports the rating

However, we expect Nucor's performance for the balance of 2010 and into 2011 to continue to reflect weak steel demand levels, particularly in the non-residential construction markets, an important end market for Nucor. Fundamental improvement in industry dynamics is expected to be gradual and utilization rates are unlikely to return to levels necessary for a strong earnings rebound until 2011.

We anticipate that industry utilization levels will fluctuate in the 60% to 70% range over the next several months, and that Nucor's capacity utilization rates will be broadly in line with those of the industry. At such levels, it is our expectation that Nucor's earnings in 2010, while much improved over the 2009 loss levels, will continue to track well below not only historic levels, but levels needed to significantly improve margins and coverage ratios. Over the near term, the company could face margin compression, due to rising scrap prices and other input costs although a better-than-anticipated price environment could mitigate the degree of cost pressure. Given the need to cover capital investment requirements, dividend payments and the increasing need for working capital investment as business conditions improve, we anticipate that Nucor could be modestly cash consumptive in 2010.

While the depth of the economic decline has resulted in the company's metrics being less robust than typically indicated for an A2 rating, we expect Nucor to evidence improving trends and continue to maintain a substantive cash position.

The negative outlook reflects the lack of clarity with respect to the sustainability of improving trends in the steel industry and the potential for the non-residential construction market to slow further than anticipated in 2010. Such would result in Nucor's performance showing an even more modest improvement than currently anticipated. Consequently, metrics more reflective of an A2 rating might not be evident until 2011.

Given expectations that performance will only gradually improve in 2010 and not evidence a solid rebound until later in 2011, a rating upgrade is unlikely over the next twelve to fifteen months.

The rating could be negatively affected should improving quarterly earnings trends not be maintained in over the next several quarters, cash flow generation turn significantly negative, or the company's liquidity position deteriorate such that its cash position reduces to around $1.2 billion. In addition, should the ratio of cash from operations less dividends to debt consistently be less than 35%, the rating could be downgraded. To the extent Nucor continues to maintain a sizeable cash position, this ratio will be viewed on a net debt basis for any cash balances over $1.2 billion.

Moody's last rating action on Nucor was November 15, 2010 when A2 and Prime-1 ratings were assigned to the Parish of St. James, State of Louisiana revenue bonds and prior to that September 16, 2010 when an A2 senior unsecured rating was assigned to the company's $600 million note issue under its well known seasoned issuer shelf. On February 23, 2010, Moody's downgraded Nucor's senior unsecured rating to A2 from A1 with a negative outlook.

The principal methodology used in rating Nucor was Moody's Global Steel Industry rating methodology published in January 2009 and available on www.moodys.com in the Ratings Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website.

Headquartered in Charlotte, North Carolina, Nucor Corporation is a leading domestic producer of carbon and alloy steel and downstream steel products including bar, beam, sheet, plate, joists, and joist girders. For the twelve months to October 2, 2010 year Nucor's total outside steel and steel product shipments were approximately 16.2 million tons and the company generated revenues of $14.9 billion.

New York
Carol Cowan
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Brian Oak
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.

Moody's affirms Nucor's ratings; outlook negative
No Related Data.
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