Vladislav Soloviov, CFO of Russian aluminium giant, Rusal

You probably have a mental picture of what the Russian aluminium industry looks like: big, dirty, old plant and machinery, unmotivated workers, rank inefficiency.

Think again. The picture on this page is of Vladislav Soloviov, the chief financial officer of Rusal, the larger member of Russia’s aluminium duopoly and the third largest primary aluminium producer in the world after Alcoa and Alcan. With revenues of $5.4bn, the company is proving an attractive proposition to international bank syndicates, which have lent the group hundreds of millions of dollars. An IPO on the London Stock Exchange is being mooted, if not actively pursued at present.

And while, as a privately owned business – Chelsea owner Roman Abramovich used to have a large stake – Rusal doesn’t reveal its bottom line, Soloviov says that its profit margins are not less than those of other players in the world aluminium industry His ambitious aim is to make Rusal the number one player in terms of sheer size as well as efficiency and productivity.

There is one thing more striking than the fact that Soloviov is just 32 years old, and that is the fact that he was a remarkably youthful 27 when he first joined the company as director of the accounting department at a company that more or less didn’t even exist at that time. Rusal was created in 2000 out of the merger of two aluminium businesses which, between them, owned a number of disparate mines and smelters and other assets that had changed hands several times – sometimes violently – since the collapse of the Soviet Union.

Only one of those companies had anything that could possibly be described as an accounting department. The other had nothing. Soloviov, then still in his twenties but with a degree from the State Academy of Management under his belt, had to create a finance department virtually from scratch.

“There wasn’t budgeting, there wasn’t planning, there wasn’t finance at all,” he recalls “There weren’t the financial programmes, there wasn’t an accounting system, there wasn’t a managerial system. But within three months we created that: we established a system, we prepared the first business plan for the year 2001; for the year 2000 we didn’t have a business plan, we just worked through the plans for each month. It was very difficult.”

The problems that that sort of anarchy causes can barely be imagined. “There were a lot of problems with cash,” Soloviov says. “We faced a lot of problems with that – every day. But after the first year we established a quite good managerial system.” Within three years of Soloviov’s arrival at Rusal he had initiated the installation of SAP R/3, a project that is now nearly complete. The transformation in the company’s cash management skills has been extraordinary. “I don’t remember the last time we sat together and said, ‘We don’t have the money,’” he says.

“It was really difficult because it was different teams,” he says of the merger. Then he corrects himself: “There weren’t teams at all – but there still existed people from [the two groups]. It was a very painful process the first year because we did not have the people, we did not have the resource.” Two main things had to be done: get new people and change the culture of the business.

Soloviov had a very straightforward way to change the culture in a business that had not previously been used to thinking in terms of budgeting or accountability. “We explained to them from the very beginning that without planning and accounting we can’t build any strategy because we do not understand what’s going to happen tomorrow. And we explained to our functional departments – like the sales department, the purchasing department for our smelters – if you would like to have the money on time, please give us your forecast about purchasing and about sales. This is a very good strength: to have the money in one hand and explain that you don’t get it if you don’t give us a good forecast If you have a good forecast, you will have the money – that’s how we convinced them.”

Soloviov recruited a lot of people who had experience working in western companies and understood how the business and its finance department should work. Finding them wasn’t easy, but it was easier than trying to change and educate those already in place, he says. Now, though, the company is more able to devote a lot of money to training and development. Most of the key people on his team have the ACCA accountancy qualification and, for all his clutch of business school degrees, Soloviov himself is a student member and has passed six of the 12 exams.

The finance department that Soloviov now heads is responsible for budgeting and planning, treasury, corporate finance, tax, insurance and IT. It produces (but doesn’t publish) accounts under US GAAP and uses international financial reporting standards Russian GAAP is about to be dropped other than for tax purposes.

Soloviov himself is not only CFO but also chairman of the construction committee, so he has to know a lot about how to build a smelter. Soloviov explains that, with a growth and expansion programme as ambitious as Rusal’s, construction is a big part of the strategy “I have to be there and I have to understand how it works. I have to understand, do we have the right people there or not?” Indeed, Soloviov can wax lyrical about the smelting technology that Rusal is developing that he says will give the group a significant capital expenditure cost advantage over almost all its foreign competitors.

But Soloviov has achieved all this while having to learn how to do it. While he had experience in the Russian tax department and as an auditor, he had never been part of a project of this magnitude before. “I was very experienced in accounting because I was an auditor, and in planning and budgeting processes as well. But I didn’t have experience of being a real financial director. For me, it was also a painful and difficult process to educate myself to understand how it works. Of course, a lot of mistakes were made – but I think there weren’t any crucial mistakes.”

What sort of mistakes? “Dealing with people – that’s the main thing,” he says. “You have to choose the right people at the right time. That’s the first one. And the second one: you have to understand what your people are doing better than they do. If you don’t understand what they’re doing and just hire them and say, ‘Okay, do it,’ it’s a way to fail.”

Soloviov adds to his list of lessons learned: “You have to educate yourself as much as possible and always understand what’s happening; you have to understand what your competitors are doing, how the market has changed, how they have developed competitive advantage. And as a financial director you have to be the right hand of your CEO because you have to participate in mergers, acquisitions and strategy.”

On the financing side, Rusal not only raised $575m in a syndicated loan led by the likes of ABN Amro, BNP Paribas and Citigroup, it also raised $75m more than it was initially looking for as the offering was oversubscribed. It’s a refinancing deal designed to secure cheaper, longer-dated funding. Soloviov says that the score of (predominantly European) banks in the syndicate are very confident in Rusal’s financial reporting and corporate governance, and their main questions relate to the company’s forecasts for aluminium prices, group revenue and so on.

“We have a set of covenants, of course,” Soloviov explains, “but in terms of organisational structure we are absolutely transparent: they have our financials, they have annual discussions with the management. They don’t have any specific concerns about our organisational structure or corporate governance.”

Even more ambitious is that Soloviov needs upwards of $8bn over the coming years to finance the expansion programme. The bulk will come from project finance which, once the individual smelter or mill projects are constructed, will be ringfenced from the rest of the group, reducing the cost of borrowing.

Soloviov insists that while doing an IPO in London in the next year or so is an obvious option, it isn’t something the company is actively planning or working towards. The group now has a single shareholder, an investment group called Basic Element owned by Russian billionaire Oleg Deripaska. He shows no sign of wanting to liquidate any part of his holding, and Soloviov says Rusal has enough resources to finance any acquisitions without having to issue shares to do so.

As it is, Soloviov doesn’t see any acquisition targets on the horizon. A merger is a different story, however, and he even points to BHP Billiton – currently ranked fourth in the aluminium industry behind Rusal – as a possible partner. But he adds: “A merger is much more difficult than an acquisition because you have to marry your culture.”

There’s still a gangland feel to press stories about Russian industry. A decade ago there were a dozen or more murders as rival gangs battled for control of the aluminium industry. It was a scary time (“Not only in aluminium – trust me,”) although Soloviov wasn’t in the business back then. He adds that the people who were in the business in the mid-1990s simply aren’t around any more.

Just a few weeks ago, however, The Sunday Times reported a court case involving a former joint venture partner, with the other side levelling seemingly wild accusations against Rusal’s owner, Deripaska, of fraud and even kidnapping – allegations dismissed as “crazy” by a spokesman for Deripaska.

Corruption remains a problem in Russia. Soloviov doesn’t shy away from the issue, although he is clearly uncomfortable at any thought of being tarred with the same brush.

“Everybody knows about corruption,” he says. “I don’t know how we can struggle against this. Maybe by increasing the salaries of the people who work in the government But I don’t think this will be a barrier for us,” he says with regard to the risk that investors will be wary of dealing with the company.

While Vladimir Putin’s government is trying to take a tough stance against corruption, Soloviov insists that business itself is trying to eradicate the disease “because we can’t work in such an environment”.

So how, then, would Soloviov summarise the things that FDs of British companies ought to be most aware of when dealing with Russian businesses, whether as customers, suppliers or joint venture partners?

“You will be surprised, but there are not that many differences between Russian and British corporations,” he says. “As more cross-border transactions are occurring on a regular basis, Russian corporations are increasingly adopting international best practices in their business dealings. This tendency transcends all areas – from operational structure and financial reporting to corporate citizenship and sustainable development. In fact, what I have personally been hearing from many of our business partners representing large international banks and companies is that they are amazed by the high level of sophistication that Russian businesses offer today. Yes, we are relatively new to the international business arena, but we are learning fast and we are learning from the best.”