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Announcement:

Moody's affirms Nucor's ratings (sr. unsec A1); stable outlook

19 May 2008
Moody's affirms Nucor's ratings (sr. unsec A1); stable outlook

Approximately $1.9 billion in debt affirmed

New York, May 19, 2008 -- Moody's Investors Service affirmed Nucor's A1 senior unsecured rating and its Prime-1 short-term rating. The affirmation follows Nucor's announcement of a common stock offering of 25 million shares and the company's intention, in the near term, to raise up to $1 billion in the debt capital markets, subject to market conditions. Proceeds will be used for general corporate purposes including to fund strategic growth initiatives, both organic and by acquisition. The rating outlook is stable.

Nucor's A1 rating reflects the company's strong operating characteristics, low cost profile and technological competencies, as evidenced by its development of innovative production processes such as Castrip. The rating also acknowledges the company's consistently strong cash flow generation ability, solid debt protection metrics, and low leverage position, which, while having increased recently, has been a hallmark of Nucor's financial management policies. Despite the increased level of debt at Nucor, the rating considers the increased equity base, following the common stock issuance, which will support the company's growth initiatives and minimize the amount of incremental debt that would otherwise be necessary.

Nucor is raising capital to help finance several recent and new investments. Since 2007, Nucor has made a number of acquisitions to support its objectives of increased downstream business and greater self-sufficiency in metallic inputs. Harris Steel Group, acquired in 2007 for $1.2 billion, and David J. Joseph, acquired in April 2008 for $1.4 billion, form the platforms for continued growth in the downstream and raw material segments, respectively. The company has already made a number of smaller acquisitions that build on these platforms. In addition, last week Nucor announced three ventures that would move it in new directions. It announced its participation in two joint ventures in southern Europe, which are Nucor's first sizable investments in Europe. The first is a 50:50 joint venture with Duferco S.A. for the production and distribution of beams in Italy (Nucor is paying approximately $658 million for the 50% equity investment). The second announcement was an MOU for a joint venture (with Nucor having a 34% interest) with Greek steel producer Sidenor, formed for the production and distribution of long steel products and plate. Nucor sees both joint ventures as giving it entry into attractive markets and having a good fit with its technical and commercial expertise. The third announcement was the news that Nucor had applied for permits to construct a port and blast furnace facility in Louisiana to produce approximately 3 million tons per year of pig iron. If this proceeds, the cost will be approximately $2 billion for the first phase.

While these growth-related investments, including Harris and David J. Joseph, are expected to provide good incremental revenues and earnings, as well as decrease reliance on the North American steel market, they represent a departure from Nucor's historical investment strategy, a move into new products and geographies, and an aggregate investment greater than $5 billion. In addition, higher capital expenditures, in the range of $800 million, are indicated for 2008 as the company completes several organic growth expansions such as the new SBQ mill and the new sheet steel galvanizing facility. Although Nucor's balance sheet was underleveraged, given the revenue base and cash generation capacity of the company, debt, as of March 31, 2008, has more than doubled since September 2007. The increased debt levels have somewhat reduced its financial flexibility at its current rating category for additional debt-financed acquisitions. However, its A1 senior unsecured rating would accommodate a further $1 billion in debt based on Moody's expectation for continued good operating cash flow generation and the benefits to be derived going forward from the announced investments. The execution of Nucor's growth plans and the financing of same will remain key considerations in its rating and outlook.

Given Nucor's operational strengths and solid financial position, Moody's expects the company to continue to perform well through the cyclical downturns inherent to the steel industry without undue deterioration of its key financial ratios. However, the rating also recognizes the cyclicality of the steel industry, the company's increasing financial leverage position as a result of recent growth-related capital spending and acquisitions, and the competitive threat from imports, which could disrupt domestic pricing. Nucor's exposure to the commercial construction industry, which is itself characterized by cyclicality, is also considered, although the company's position in the energy and infrastructure markets helps to soften this exposure. While Nucor's renewed focus on growth through acquisitions is acknowledged, the company's continued prudent approach to financing this growth and the strategic benefits to be derived are supporting factors to the rating.

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 trailing twelve months ended March 31, 2008, Nucor shipped approximately 23 million tons and generated revenues of $17.8 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
Steven Oman
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

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