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.
Has the level of background activity atrophied his focus? Suddenly, he’s bolder. “Be careful with the use of the word focus,” he warns. “There’s no way we can’t be focused on the balance sheet, the tax, the debt, the accounts and the control systems. I sign the accounts, I go and see the investors intensively all the time. But the last couple of years in this company has been a period of the most intense corporate activity we’ve seen in my time.”
It is easy to forget that Elliott came into Rio in 1980 as a marketeer, selling uranium to nuclear power stations – “a fascinating time” – rising to become president of Rio’s Brazilian business, based in Brasilia. Prior to becoming CFO, he served as the group’s head of business evaluation, developing and appraising new business and large capital projects.
But there is no mention of finance work or accounting qualifications. Elliott is one of a handful of FTSE-100 CFOs who is not a qualified accountant and has not come up through the finance function. On this, he is vocal and defensive.
“I don’t want to beat a drum on the subject, but there are several types of CFO,” he says. “I don’t pretend to be a great expert on the minutiae of accounting standards, but I don’t feel at a disadvantage not being an accountant, either. I would even say that my background in marketing, in operations management, in strategy, helps me in the job. An accountant has a particular way of looking at things and I’ve picked up some of that – but my perspective is probably somewhat different.”
Coming through operations, while different, has proven powerful. “My time in Brazil was very important,” he says. “Motivating people in a different language, a different culture, a different environment, a different legal system and a different industrial relations system was very challenging.”
And humbling. “I had spent years sitting at the centre criticising other people’s projects,” he says. “Here I had to do it myself. I quickly realised that what these guys in operations and business units had to do was a very difficult thing. I came back from Brazil with a bit more humility and experience which, I think, helped legitimise a non-accountant’s accession CFO.”
Back to China. How does the relationship issue impact Elliott’s job as CFO? “A quarter of our revenues are from China and its influence on the other three quarters is profound,” he says. “For all sorts of reasons, we’ve got to stabilise the relationship. But I would dare to say that it’s important to China that we have a proper and harmonious trading relationship.”
After our interview, we walk past a large poster in Rio’s London office sporting a large, baffling, Chinese-language diagram of interconnecting boxes: 50 or 60 headshots of men in identical shirts and ties peer out from the end of each line. It could be a glimpse into Rio’s future: a reminder of who’s boss, and the rules of engagement that Elliott must play by.
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