Grey suit, steel-rimmed glasses, fine dining paunch; an almost impenetrable blend of the best media training a £56bn mining corporation can buy and an innate corporate confidence. An hour asking the same questions of Rio Tinto chief financial officer Guy Elliott three different ways still leaves you unsure you have got a shred of insight into his life at the ore-to-diamonds giant. His opinion on who might win the General Election? “I think it’s probably not wise of me to speculate”; the percentage of his day spent on strategy versus finance? “There’s no percentage that I would give”; will Rio consider redomiciling its UK listing, as lots of other big companies have? “There are no plans to change our London listing, but at the same time we do review these things periodically…”
Perhaps there is little point in talking amid such fluidity. The issues that will seal Rio’s fate in the next few years – and therefore directly shape Elliott’s mandate – are so live that only a fortnight after we meet, a hugely controversial joint venture with the Chinese that it backed out of last year was back in the headlines, supposedly being days away from resurrection: the high-profile ‘Rio Tinto Four’ trial was finally given a date on the day Financial Director went to press.
The story here, though, is the work Elliott has done ‘transforming the balance sheet’, as the company’s mantra goes.
That transformation is, in fact, a huge deleveraging exercise. After 2007’s debt-fuelled acquisition of Canadian aluminium business Alcan, jubilation faded when it became clear the commodities markets had turned, making the deal more expensive than useful. Having been part of the team behind it, Elliott must now clear billions in debt from Rio’s balance sheet.
His sombre responses, then, may be down to fatigue. We meet on the day the business announced another stride towards said transformation with the sale of Alcan Food Packaging Americas for $1.2bn (£780m) in cash. This brings its divestments programme to the $10bn mark: almost a quarter of that arrived in 2010 from the sale of Alcan Packaging’s American, European and Asian food business, its global pharmaceuticals and tobacco operations and two Australian coal businesses. “The balance sheet has been a recent major focus for me,” he says. “It’s been intense.”
For Elliott, this work has represented something of a professional about-turn. His 30-year career with Rio has, until recently, focused on buying up companies: since Alcan, it has been all about selling them. He led rights issues in the UK and Australia (it is dual listed) last June that raised £9.75bn at exchange rates mid-March 2010 and cut 16,000 jobs from the business, halving the group’s gearing ratio to 29 percent. But the bar on its debt maturity chart for 2012 sticks out like a veritable Burj Khalifa, compared with the other Gherkin-sized bars taking it beyond 2020.
“I’ve spent my entire career on international mergers – dealing with joint venture partners, customers or governments,” he says. “I’ve spent a lot of time preparing for M&A, integrating M&A, carrying out negotiations and takeovers, buying and selling assets… I’ve lost count of the number of transactions in which I’ve been involved.”
But the China question is Rio’s top priority. The region represented 24 percent of Rio’s revenues in 2009, up from 19 percent in 2008, overtaking North America as its most lucrative. Its growth is expected to bust nine percent in 2010 and it is hungry for raw materials. But the board’s decision in 2009 to withdraw from what was to be a ground-breaking tie-up with state-controlled Chinalco – also its largest shareholder with 12 percent of the plc and 9.3 percent of the dual-listed company – almost decimated its relationship with the state. In the background, the ‘Rio Tinto Four’ will any day now stand trial in China, accused by the state of taking bribes from Chinese companies. Rio must n ow remake the relationship with China that Elliott will rely on to further the group’s ambitions.
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