Rating Action: Moody's assigns Baa1 ratings to Nucor Corporation's proposed senior notesGlobal Credit Research - 02 Mar 2022New York, March 02, 2022 -- Moody's Investors Service, ("Moody's") assigned a Baa1 rating to Nucor Corporation's ("Nucor") proposed senior unsecured notes. The company plans to offer senior notes across 10-year and 30-year maturities. The proceeds, along with cash on hand if necessary, will be used to redeem its $600 million 4.125% notes due September 2022 and $500 million 4.0% notes due August 2023.Assignments:..Issuer: Nucor Corporation....Senior Unsecured Notes, Assigned Baa1RATINGS RATIONALENucor Corporation's Baa1 senior unsecured rating considers the company's broad domestic footprint, diversified product mix, efforts to move up the value chain to enhance profitability and its leading or strong positions in each of the markets it serves. Nucor's electric arc furnace (EAF) model and variable cost structure provides the flexibility to adjust production levels to demand changes more easily than integrated producers and contributes to a lower cost position and less carbon emissions. Nucor's low leverage and strong interest coverage, as well as its excellent liquidity position also support its rating. The company's rating is constrained by the historical volatility of the domestic steel sector, its limited geographic diversity and the likelihood that steel prices and metal spreads will settle at a materially weaker level than that achieved in 2021.Nucor produced record high earnings in 2021 with adjusted EBITDA slightly above $10.0 billion as it benefited from materially higher steel prices and demand and very wide metal spreads. It only generated $2.4 billion in adjusted EBITDA in 2020 when the coronavirus weighed heavily on its operating performance. The robust operating results enabled the company to generate about $4 billion in free cash flow despite investing around $2 billion in working capital and $1.6 billion in capital investments in new and expanded steel capacity. The company used all its free cash flow and a small portion of its cash balance to fund acquisitions and shareholder returns. It paid $1.4 billion to acquire Cornerstone Building Brands, Inc.' insulated metal panels (IMP) business and Hannibal Industries, Inc., which is a provider of racking systems to the e-commerce, industrial, food storage and retail sectors. Nucor also spent $3.3 billion on share repurchases and $483.5 million on dividends, but still ended the year with $2.6 billion in cash and short-term investments.We anticipate that Nucor's operating results will materially weaken in 2022 with adjusted EBITDA down about 15% to around $8.5 billion - $9.0 billion as steel prices decline and metal spreads contract. However, its operating performance will remain historically robust as steel prices and metal spreads remain historically high supported by healthy end market demand and as it benefits from the EBITDA contribution of recent acquisitions and investments in expanded capacity. It should generate strong free cash flow despite continued elevated capital spending and is likely to spend a material portion of its free cash on share repurchases since it has a publicly stated policy of returning a minimum of 40% of net earnings to stockholders, while maintaining a debt-to-capital ratio that supports a strong investment grade credit rating. On December 2, 2021, Nucor's Board of Directors approved a new $4.0 billion share repurchase program and terminated any previously authorized share repurchase programs. As of December 31, 2021, Nucor had approximately $3.8 billion remaining available for repurchases under this program.If Nucor generates around $8.75 billion of adjusted EBITDA and utilizes all its free cash on acquisitions and share repurchases and does not reduce its outstanding debt, then its leverage ratio will remain below 1.0x and its interest coverage will be above 50.0x. While these metrics will be very strong for the company's Baa1 senior unsecured rating, they are expected to materially weaken when steel prices and metal spreads return to a more sustainable level as significant additional capacity comes online. Also, Nucor's upside ratings potential is constrained by the volatility of steel prices, its reliance on cyclical end markets and its limited geographic diversity versus most higher rated entities.Nucor's excellent liquidity position provides strong support to the company's overall credit profile. Nucor's Prime-2 short-term debt rating is supported by unrestricted cash and short-term investments of $2.6 billion as of December 2021 and an undrawn $1.75 billion senior unsecured revolving credit facility that expires in November 2026. In November 2021, Nucor amended and restated its revolving credit facility to increase the borrowing capacity from $1.50 billion to $1.75 billion and to extend its maturity date to November 5, 2026. Nucor's history of maintaining strong cash balances has supported its credit profile through trough periods in the domestic steel sector.The stable outlook reflects our expectation that Nucor's operating performance will remain historically strong in 2022 and result in credit metrics that are robust for its Baa1 senior unsecured rating, but will return to a level that is more commensurate with the rating over the next 18 - 24 months as steel prices and metal spreads trend towards historical levels.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSGiven the company's limited geographic diversity and the volatility inherent in the domestic steel sector and potential for wide swings in profitability and debt protection metrics, upward rating pressure could be limited. A rating upgrade could be possible should Nucor be able to evidence the ability to sustain EBIT margins of at least 13%, debt/EBITDA of less than 2x, consistently generate free cash flow and maintain an excellent liquidity position. Additionally, clarity on the company's financial policies with respect to its capital structure, level of absolute debt as well as acquisition appetite will also be considered.The rating could come under pressure for a downgrade should EBIT margins be sustained at less than 10%, leverage (debt/EBITDA) breaches 2.5x on a sustained basis or liquidity contracts materially with cash balances dropping below $1 billion.Headquartered in Charlotte, North Carolina, Nucor Corporation operates through three business segments: Steel Mills (66% of LTM revenue), Steel Products (27%) and Raw Materials (7%). The company operates electric arc furnace mini-mills that utilize steel scrap as a primary raw material. Its sheet mills also require higher quality iron units to produce value added products, some of which is provided by its two DRI plants located in Trinidad and Louisiana with a combined capacity of 4.5 million metric tons. It is a leading domestic producer of carbon and alloy steel and steel products including bar, beam, sheet, plate, joists, joist girders, hollow structural sections and electrical conduit. Through its subsidiary, The David J. Joseph Company, Nucor is also a leading scrap company, brokering and processing ferrous and nonferrous scrap metals among other products. It shipped about 25 million tons of steel and steel products and generated revenue of $36.5 billion during the trailing 12 months ended December 31, 2021.The principal methodology used in these ratings was Steel published in November 2021 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1296098. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1288235.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Michael Corelli, CFA Senior Vice President Corporate Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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