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Rio doubles payment terms to 90 days

Suppliers to Rio Tinto face more financial pain after the global mining giant said it would double its standard payment terms to 90 days – twice as long as the average Australian business takes to pay its bills.

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The majors have the capital and cash within their treasury and don't understand the knock on effect of such moves. For example, for any on site construction works under the act they must pay 28 days, however, smaller suppliers are coerced into accepting these extended terms, ie don't accept the terms don't work. A slow payment also means suppliers are stretched as are their suppliers. Salaries remain unpaid or other commitments slip and the suppliers get a reduced credit rating. The cost of their money goes up as does the cost of everything in the supply chain, all because the majors can't manage.

Sydney
Tough situation, extended terms are becoming the norm like a virus or an epidemic. But there is of course an antidote you use to inoculate against the cash gap - invoice financing. In FMCG this kind of extension of terms dictate is the norm. I am involved in channel and partner development (outsourced) to a major company that provides invoice financing to remediate this at the lowest interest rates. So it's not all bad news.

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Total Shareholder Return as at 31/10/16

1 year TSR5 year TSR
247thRio Tinto12%-1%
354thWestpac-2%13%
374thTelstra-4%21%
389thCommonwealth Bank-7%14%
467thWoolworths-19%-1%
744 WA (and selected non WA) listed companies ranked by 1 year TSR relative to other companies with similar revenue
Source: Morningstar

Share Transactions

13/12/13
$0 Bought
13/12/13
$90k Sold
03/05/13
$1k Bought
Total value as at the date of the transaction
Source: Morningstar

Revenue

1st↑Woolworths$61,149.4m
2nd-Rio Tinto$49,225.3m
5th-Commonwealth Bank$27,005.0m
6th-Telstra$26,607.0m
7th↑Westpac$21,642.0m
77 listed non wa companies ranked by revenue.
Source: Morningstar

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