It's lucky for David Robb that he likes a challenge, because his role as CEO at Iluka Resources is certainly providing him with one.
David Robb considers himself a perfectionist who likes a challenge.
Shareholders in Iluka Resources Ltd, who have endured three years of relative stagnation on the stock market, will be hoping these qualities prove to be a successful combination.
Mr Robb spent more than a decade at Wesfarmers Ltd, eventually heading its coal and energy division, and was viewed as one of three candidates in line for the CEO role post Michael Chaney.
Mr Robb decided to leave the conglomerate, and new chief Richard Goyder, in August 2006 to confront the big challenge at Iluka.
Iluka’s share price has barely moved during the past three years, yet it is one of the world’s biggest mineral sands producers.
Project delays, cost blow-outs and falling production at its Western Australian operations have dogged the company.
Last week, Iluka’s woes were underscored when it was booted out of the index made up of Australia’s biggest 100 companies, the S&P-ASX 100.
To get back in, and be included on the shopping lists of many big-spending fund managers, Mr Robb will need to turn the company’s fortunes around.
As he starts to make his mark, it is hard not to notice the Chaney-like focus and management style.
Like his former boss, Mr Robb is a firm believer that companies exist to serve shareholders.
Iluka has adopted a new employee incentive program, which rewards staff with a mix of cash and shares.
“Companies exist to provide returns for shareholders,” Mr Robb said.
“I think a focus on shareholders is in all companies but it is the degree of focus on it and whether you have other systems aligned to it.
“High-performing organisations are ones that are strongly aligned behind a single objective that everybody understands. Everybody understands their role and everybody understands how all of their actions have to be consistent with that objective.”
Mr Robb has also brought in a mid-term focus by introducing five-year business plans for each of Iluka operational regions – WA, Victoria’s Murray Basin, the US, and the next venture in South Australia’s Eucla Basin.
Mr Chaney was also a fan of five-year plans.
Mr Robb said many companies “fell into a trap” by having a strong focus on a budget, which had a one-year time frame.
That was exacerbated in mining companies, he said, because they usually have a “life-of-mine culture” that focused on 10 to 20 years into the future.
That meant the crucial middle ground of three to five years into the future was often not done so well, he said.
“It was clear to me when I came here that we could do that better,” Mr Robb told WA Business News.
“It would give me and the board a better basis for decision making, like making capital allocation decisions.
“If we’re going to invest I need to choose the best place to do that rather than taking them in sequence as they come up.”
Mr Robb’s focus on regional business units also led to a change in the company’s management structure.
The role of general manager of operations was cut to make way for direct reporting from Iluka’s key regions to Mr Robb.
He also recruited commercial expertise to each region as well as recruiting an old colleague, former Wesfarmers Energy chief financial officer, David McMahon.
Mr Robb said Iluka had strong functional arms but they were vertically integrated.
Switching the focus so that each area – exploration, marketing or production – was concerned with regions created better co-ordination and greater efficiencies, he said.
“I’m pleased with the work we have done on integrating the Iluka group and being able to make more informed decisions and better analysed decisions,” Mr Robb said.
“One of the great attributes of Wesfarmers is that it is a very rigorous place and you need to have the answers when the questions are asked, and certainly I’m beginning to see that same attribute here in Iluka.”
Mr Robb is optimistic that his internal management make over, coupled with the group’s bigger projects coming on stream, will deliver better returns for shareholders within 18 months.
“All of those things we said we will tackle, hopefully, we will have demonstrated to people that we can do what we say we are going to do,” he said.
“In 18 months from now we will be on the doorstep of stage two of the Murray Basin, and the Eucla project will be 18 months away from start-up rather than being seen as a great prize but a fairly distant one.”
However, making the turnaround even more complex is a high Australian dollar, which is likely to trim about $40 million from Iluka’s forecast profit of between $90 million and $100 million, if the dollar remains at its current average of US79 cents.
And while currency movements were outside his control, Mr Robb said Iluka would simply have to “work even harder on the things we can control”.
Mr Robb said his move to Iluka was about grabbing hold of a challenge, not because of lingering disappointment that colleague Richard Goyder had been appointed to fill Mr Chaney’s role.
“There’s a conventional wisdom about the fact that someone who doesn’t get the top job, by definition, has to leave or wants to leave,” Mr Robb said.
“I don’t see it that way at all. Maybe if you desperately wanted to be a CEO you may feel that way. I have a high need to achieve but that doesn’t automatically mean the only thing I want to be is a CEO of a publicly listed company, because life has a lot more to it.”
Yet, 12 months after Mr Goyder took over from Mr Chaney, Mr Robb had accepted a position within Iluka.
“Iluka has a chequered history and that is one of the things that attracted me to it,” Mr Robb said.
“It is the challenge. Can you, together with your team, change that performance and make it a more consistent achiever than it has been in the past?”
While it is early days, Mr Robb said he was feeling very positive at the moment.
“I’m a loyalist by nature. I believe in that. I want our employees’ loyalty to be rewarded and our shareholder loyalty to be rewarded.”
